17th Sep 2009 07:15
John Lewis plc
Unaudited condensed Interim Financial Statements for the half year to 1 August 2009
Strict Embargo: 7:15am17 September 2009
BUILDING MOMENTUM AS RECESSION EASES
Chairman's statement
By the beginning of this year we had adjusted to the severe recessionary conditions and anticipated that 2009 would be another very difficult trading year. The economic environment has turned out to be better than we originally expected and although conditions remain challenging, we have seen an encouraging response to the steps we have taken to reposition the Partnership to the new retail environment.
In the first half of the year we have speeded up the pursuit of profitable growth opportunities, accelerated our brand development and strengthened customer trust, while controlling costs tightly and managing our cash efficiently. These initiatives and confident trading by our 69,000 Partners are reflected in today's results.
In every area of our business we have generated considerable forward momentum, which will reap rewards for Partners in the future. This is evident in our ambitious investment in multi-channel, new online concepts, new shops and formats, new products and increased collaboration between John Lewis and Waitrose in every aspect of our business.
As the retail landscape undergoes rapid change and we see technology accelerating change in how people shop, the Partnership is well placed to meet customers' heightened expectations and to gain market share.
Financial results
The Partnership reported gross sales of £3.39bn for the first half of the year, an increase of £114.0m, or 3.5% on last year.
Operating profit, before property profits, was £126.2m, an increase of £0.3m, or 0.2% on last year, representing an operating profit margin of 3.73% (2008/09 3.85%).
Including property profits, operating profit decreased by £4.0m, or 3.1% on last year, representing an operating profit margin of 3.73% (2008/09 3.98%).
Profit before Partnership Bonus and tax was £87.0m, a decrease of £21.0m, or 19.4%, on last year, driven by net finance costs which were £39.2m, £17.0m, or 76.6% higher than last year.
We have changed the presentation of pension and long leave costs, with comparative periods restated accordingly, to bring us into line with common practice. Operating profit continues to include the cost of providing pension and long leave benefits for existing Partners. The financing element, which depends on the external markets and can change materially from one year to the next, particularly in volatile markets, has increased by £15.6m to £20.4m and is now included within financing costs.
During the first half we invested about £100m in Partner benefits, such as pension, long leave, shopping discount, catering subsidy and leisure spending, including costs for our new holiday centre at Bala Lake in Wales and Partners in Sport.
Capital expenditure
Capital spending was £281.5m with Waitrose investing £198.2m, mainly on new stores, and John Lewis investing £68.5m, mostly on the new stores in Cardiff and Poole, the new Distribution Centre at Magna Park, Milton Keynes, and improvements to our multi-channel offering. £14.8m of expenditure was incurred centrally in efficiency projects including the new Oracle finance systems, investment in the clubs, and renewing and maintaining our IT infrastructure.
Financing
Cash generated from operations was £295.2m, 10.4% better than last year's £267.4m. Our focus has been on tight cost control and effective cash and working capital management.
At the end of the first half, net debt rose £136.8m to £539.1m, reflecting the increased capital investment during the year, including the purchase of 13 ex Somerfield stores, which leaves the Partnership with substantial headroom on our facilities which total £1.275bn. We remain well within the limits allowed by our bank and bond covenants.
We saw an increase in underlying finance costs on net borrowings, which were £20.3m, £4.1m, or 25.3% higher than last year. The increase mainly reflects the interest payable on the £275m Bond that was issued in April 2009.
Trading performance
Waitrose
Waitrose delivered a very strong performance, mainly as a result of the introduction of the new essential Waitrose range, the successful conversion of the Somerfield-acquired stores and free delivery driving rapid online growth. Gross sales were up by £149.8m, 7.4% to £2.18bn. Like-for-like sales grew 1.8%, excluding petrol. We have built momentum in the growth in like-for-like food sales, up 0.6% in Q1 and 3.4% in Q2 - up 2.0% for the half.
Operating profit, before exceptional items, property profits, launch and other one-off costs, grew by £21.4m, or 20.1%, to £127.8m. Store opening costs of £8.0m were incurred in the first half and £12.0m was invested in the launch of the essential Waitrose range.
Complementing the launch of essential Waitrose for everyday staples, which broadened the appeal of Waitrose, was the successful launch of the new 'Seriously' brand of indulgent food products. This got off to a positive start and reinforced the Waitrose position as the top premium food retailer, which will now be further strengthened by 'Duchy Originals from Waitrose'. These two new initiatives form the bedrock of Waitrose top tier strategy.
In April, Waitrose became the first UK supermarket to abolish delivery charges for online shopping with WaitroseDeliver, currently available in 113 Waitrose branches. This move has contributed to a 84% increase in orders, with sales up 77%.
We increased our space by 4% with the opening of 15 new and acquired shops and the opening of the first 2 Waitrose shops in Welcome Break service stations, creating 1,500 new jobs. The trial of our new convenience and market town formats have been encouraging, as has our second shop in Dubai.
Customers responded well to Waitrose's support for the 'End of the Line' campaign which underlined our commitment to selling only sustainable species of fish. We also launched a new range of homeware products on Waitrose.com in collaboration with John Lewis and this development has made a promising start.
We invested £14.0m in price and promotions including the essential Waitrose range and customers responded positively with promotional participation up from 18% to 22%, an increase of 4% on the prior half year. Efficiency and productivity improved, as all costs including wastage were well controlled.
Taken together, these developments ensure Waitrose is relevant and increasingly accessible to more and more customers, giving them the confidence that they can come to Waitrose for the most comprehensive everyday to gourmet food range in the UK.
Thanks to the efforts and support of our Partners we are making good progress with significant structural initiatives including our End to End Supply Chain and Head Office reviews. These actions will help Waitrose to continue to deliver growth.
John Lewis
Trade held up well considering the challenging economic environment and improved as the half progressed. Gross sales were down £35.8m, 2.9%, to £1.21bn. Like-for-like sales were down 4.7%. Operating profit, excluding property profit, was down £20.1m, or 49.0% to £20.9m, still significantly better than expected. The first half of the year represents a small part of our annual profit and was impacted by lower sales of 6.7% in established shops, resulting in lower gross profit despite good cost control. This, together with higher costs for the new Liverpool and Leicester department stores, Magna Park pre-opening expenses, higher energy costs, and £3.4m of investment in change and growth initiatives contributed to a lower operating profit.
Operating profit, before exceptional items, property profits, opening and other one-off costs, was £33.9m, down £14.0m or 29.3%.
Our online offer is prospering with strong sales in John Lewis Direct, up 11.6% to £151.5m, helped by an increase in the number of lines available and the positive performance of our new services including 'Click and Collect' and Express delivery. We have ambitious plans for its accelerated development. We launched our new online fashion website at the beginning of September which will build to 100,000 lines in the second half, and we are trialling 'Click and Collect' with Waitrose.
We saw total sales growth of 2.2% in Fashion, offset by a decline of 2.5% in Electrical and Home Technology and 8.1% in Home, the area of our trade most directly affected by the housing market. In Fashion and Electricals we continued to win market share. All areas were underpinned by an excellent operational performance with record availability and further public acclaim for our service standards in winning the Which? and Institute of Customer Service awards.
Gross margin held up well despite continued price competition. Our commitment to 'Never Knowingly Undersold' is absolute. Indeed we are strengthening our price position by launching a new value range of products, improving our price matching process and extending the offer to include an emphasis on quality and service as key differentiators.
Our plans for the long term strengthening of the division are on course. As part of our £22.0m refurbishment programme in Bluewater we opened our second 'John Lewis Foodhall from Waitrose' in August which has been very well received by customers. We will open our new store in Cardiff in September and our new 'at home' format in Poole in October. Construction is also well under way on our new branch at the Olympic site in Stratford, which is scheduled to open in 2011. In June we opened our new distribution centre at Magna Park, Milton Keynes, which is already operating well. We have also launched our new magazine Edition.
Most importantly for Partners we continue to navigate the difficult decisions around 'Branch of the Future' and the Stevenage closure with great care. Taken together, these and the growth programmes position us well to serve our customers in the multi-channel future.
Greenbee
Greenbee continues to build scale with sales in the first half up 47.0% on last year, driven largely by growth in our Home, Car and Pet Insurance products and supported by broader marketing activity. We continue to look for ways to improve the online experience for customers and deliver improved conversion rates. Our Travel offer continues to be strengthened with Wine Tours and Gourmet Breaks, in collaboration with the Waitrose buying team, launched this month.
Corporate Social Responsibility
Being a responsible business is core to our DNA and sustainability is at the heart of our business agenda.
Our Corporate Social Responsibility framework is built around reducing our environmental impact and promoting good environmental practice; dealing fairly with our suppliers and selling responsibly sourced, quality products; making a positive contribution to the communities where we do business; and providing worthwhile and satisfying employment in a successful business.
2009/10 outlook
The second half has started well for the Partnership. After six weeks, Partnership sales are up 6.2% on last year. Waitrose sales increased by 11.3% and John Lewis sales are 1.3% lower.
However, we expect trading conditions for the remainder of 2009, and into 2010, to continue to be difficult.
We will maintain the momentum in our plans and the ambitious pace of change. In the second half of the year we expect to invest a further £189.0m (first half £278.2m) in strengthening the business and creating a platform for growth. We remain committed to offering outstanding service and competitive pricing, and will continue to invest in existing and new shops and formats, develop our multi-channel offer and improve the efficiency of our business.
Charlie Mayfield
Chairman
Where this interim report contains forward-looking statements, these are made by the directors in good faith based on the information available to them up to the time of their approval of this report. These statements should be treated with caution due to the inherent uncertainties underlying any such forward-looking information.
Further information
John Lewis Partnership
Susan Donovan, Director of Communications 020 7592 6292
Citigate Dewe Rogerson
Simon Rigby / George Cazenove 020 7638 9571
John Lewis
Helen Dickinson, Head of Press and PR 020 7592 6274
Louise Cooper, Press and Public Relations Manager, Corporate 020 7592 6223
Waitrose
Christine Watts, Head of Communications 07946 581520
Gill Smith, Senior PR Manager, Corporate 07887 898133
Notes to editors
The John Lewis Partnership - The John Lewis Partnership operates 27 department stores across the UK, johnlewis.com, 215 Waitrose supermarkets and Greenbee.com, a direct services company. The business has an annual turnover of over £6.9bn. It is the UK's largest example of worker co-ownership where all 69,000 staff are Partners in the business.
John Lewis - John Lewis, 'Britain's favourite retailer 2008'* typically stocks more than 350,000 separate lines. The website stocks over 70,000 lines focused on the best of fashion, beauty, home and giftware and electrical items including online exclusives. johnlewis.com is consistently ranked one of the top online shopping destinations in the UK. (www.johnlewis.com)
* Verdict consumer satisfaction index, January 2009
Waitrose - Waitrose has 215 branches dedicated to offering high quality fresh food, value and customer service. Combining the convenience of a supermarket with the expertise of a specialist shop, Waitrose has this year been voted 'Britain's favourite supermarket' by Which? Magazine, Good Housekeeping Magazine and viewers of BBC Watchdog.† (www.waitrose.com)
† Which? Survey, January 2009; BBC Watchdog viewer survey, February 2009; Good Housekeeping Awards, February 2009
Greenbee.com - Greenbee.com offers a range of financial, travel and leisure services selected by the John Lewis Partnership. These include home, travel, pet, wedding and event and car insurance products, life cover and a phone and broadband package, along with travel offers and the latest theatre, event, music and sport tickets. (www.greenbee.com)
John Lewis plc Interim Report 2009
Consolidated income statement
for the half year ended 1 August 2009
|
Half year to |
Half year to |
Year to |
|
|
1 August 2009 |
26 July 2008 |
31 January 2009 |
|
|
Restated |
Restated |
||
|
Continuing operations |
£m |
£m |
£m |
|
Gross sales |
3,387.1 |
3,273.1 |
6,967.5 |
|
Revenue |
3,099.2 |
2,940.5 |
6,267.2 |
|
Cost of sales |
(2,108.1) |
(1,985.2) |
(4,195.4) |
|
Gross profit |
991.1 |
955.3 |
2,071.8 |
|
Other operating income |
27.6 |
22.8 |
45.9 |
|
Operating expenses |
(892.5) |
(847.9) |
(1,796.5) |
|
Operating profit |
126.2 |
130.2 |
321.2 |
|
Finance costs |
(47.3) |
(26.4) |
(53.5) |
|
Finance income |
8.1 |
4.2 |
11.3 |
|
Exceptional gain in respect of associate |
- |
- |
127.4 |
|
Profit before Partnership bonus and tax |
87.0 |
108.0 |
406.4 |
|
Partnership bonus |
- |
- |
(125.4) |
|
Profit before tax |
87.0 |
108.0 |
281.0 |
|
Taxation |
(29.3) |
(32.2) |
(47.7) |
|
Profit for the period |
57.7 |
75.8 |
233.3 |
The presentation of prior half year results has been restated in respect of the financing element of pension costs and the presentation of prior half year and prior full year results has been restated in respect of the financing element of long service leave costs, as explained in note 2.
Consolidated statement of comprehensive (expense)/income
for the half year ended 1 August 2009
|
Half year to |
Half year to |
Year to |
|
|
1 August 2009 |
26 July 2008 |
31 January 2009 |
|
|
|
£m |
£m |
£m |
|
Profit for the period |
57.7 |
75.8 |
233.3 |
|
Other comprehensive (expense) / income: |
|||
|
Actuarial loss on defined benefit pension schemes |
(191.9) |
(152.5) |
(280.1) |
|
Movement of deferred tax on pension schemes |
53.7 |
42.7 |
78.5 |
|
Net (loss)/gain on cash flow hedges |
(9.6) |
0.1 |
7.0 |
|
Total comprehensive (expense) / income for the period |
(90.1) |
(33.9) |
38.7 |
Consolidated balance sheet
as at 1 August 2009
|
1 August 2009 |
26 July 2008 |
31 January 2009 |
|
|
|
£m |
£m |
£m |
|
Non-current assets |
|||
|
Intangible assets |
93.2 |
74.1 |
85.1 |
|
Property, plant and equipment |
3,340.4 |
3,086.7 |
3,176.8 |
|
Trade and other receivables |
46.5 |
31.0 |
44.4 |
|
Deferred tax asset |
71.2 |
6.9 |
21.7 |
|
|
3,551.3 |
3,198.7 |
3,328.0 |
|
Current assets |
|||
|
Inventories |
344.3 |
343.6 |
352.3 |
|
Trade and other receivables |
146.7 |
163.7 |
138.9 |
|
Derivative financial instruments |
18.2 |
1.8 |
23.4 |
|
Cash and cash equivalents |
333.1 |
111.2 |
197.6 |
|
|
842.3 |
620.3 |
712.2 |
|
Total assets |
4,393.6 |
3,819.0 |
4,040.2 |
|
Current liabilities |
|||
|
Borrowings and overdrafts |
(63.8) |
(139.7) |
(75.8) |
|
Trade and other payables |
(684.6) |
(647.5) |
(733.9) |
|
Current tax payable |
(26.7) |
(36.1) |
(17.9) |
|
Finance lease liabilities |
(0.6) |
(0.5) |
(0.6) |
|
Provisions |
(71.8) |
(59.6) |
(70.7) |
|
Derivative financial instruments |
(2.8) |
(0.3) |
- |
|
|
(850.3) |
(883.7) |
(898.9) |
|
Non-current liabilities |
|||
|
Borrowings |
(794.4) |
(403.1) |
(517.7) |
|
Trade and other payables |
(50.4) |
(45.0) |
(48.1) |
|
Finance lease liabilities |
(28.8) |
(29.6) |
(29.2) |
|
Provisions |
(105.3) |
(96.6) |
(93.8) |
|
Retirement benefit obligations |
(932.0) |
(711.0) |
(730.0) |
|
(1,910.9) |
(1,285.3) |
(1,418.8) |
|
|
Total liabilities |
(2,761.2) |
(2,169.0) |
(2,317.7) |
|
Net assets |
1,632.4 |
1,650.0 |
1,722.5 |
|
Equity |
|||
|
Share capital |
6.7 |
6.7 |
6.7 |
|
Share premium |
0.3 |
0.3 |
0.3 |
|
Other reserves |
(0.5) |
2.2 |
9.1 |
|
Retained earnings |
1,625.9 |
1,640.8 |
1,706.4 |
|
Total equity |
1,632.4 |
1,650.0 |
1,722.5 |
Consolidated statement of changes in equity
for the half year ended 1 August 2009
|
Share |
Share |
Capital |
Hedging |
Retained |
Total |
|
|
capital |
premium |
reserve |
reserve |
earnings |
equity |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
|
Balance at 26 January 2008 |
6.7 |
0.3 |
1.4 |
0.7 |
1,674.8 |
1,683.9 |
|
Profit for the period |
- |
- |
- |
- |
75.8 |
75.8 |
|
Actuarial loss on defined benefit pension schemes |
- |
- |
- |
- |
(152.5) |
(152.5) |
|
Tax on above items recognised in equity |
- |
- |
- |
- |
42.7 |
42.7 |
|
Fair value losses on cash flow hedges |
- |
- |
- |
(1.0) |
- |
(1.0) |
|
- transfers to inventories |
- |
- |
- |
1.1 |
- |
1.1 |
|
Balance at 26 July 2008 |
6.7 |
0.3 |
1.4 |
0.8 |
1,640.8 |
1,650.0 |
|
Balance at 26 January 2008 |
6.7 |
0.3 |
1.4 |
0.7 |
1,674.8 |
1,683.9 |
|
Profit for the period |
- |
- |
- |
- |
233.3 |
233.3 |
|
Actuarial loss on defined benefit pension schemes |
- |
- |
- |
- |
(280.1) |
(280.1) |
|
Tax on above items recognised in equity |
- |
- |
- |
- |
78.5 |
78.5 |
|
Fair value gains on cash flow hedges |
- |
- |
- |
11.6 |
- |
11.6 |
|
- transfers to property, plant and equipment |
- |
- |
- |
(0.7) |
- |
(0.7) |
|
- transfers to inventories |
- |
- |
- |
(3.9) |
- |
(3.9) |
|
Dividends |
- |
- |
- |
- |
(0.1) |
(0.1) |
|
Balance at 31 January 2009 |
6.7 |
0.3 |
1.4 |
7.7 |
1,706.4 |
1,722.5 |
|
Profit for the period |
- |
- |
- |
- |
57.7 |
57.7 |
|
Actuarial loss on defined benefit pension schemes |
- |
- |
- |
- |
(191.9) |
(191.9) |
|
Tax on above items recognised in equity |
- |
- |
- |
- |
53.7 |
53.7 |
|
Fair value losses on cash flow hedges |
- |
- |
- |
(7.9) |
- |
(7.9) |
|
- transfers to property, plant and equipment |
- |
- |
- |
(1.3) |
- |
(1.3) |
|
- transfers to inventories |
- |
- |
- |
(0.4) |
- |
(0.4) |
|
Balance at 1 August 2009 |
6.7 |
0.3 |
1.4 |
(1.9) |
1,625.9 |
1,632.4 |
Statement of consolidated cash flows
for the half year ended 1 August 2009
|
Half year to |
Half year to |
Year to |
|
|
1 August 2009 |
26 July 2008 |
31 January 2009 |
|
|
£m |
£m |
£m |
|
|
Cash generated from operations |
295.2 |
267.4 |
598.7 |
|
Net taxation (paid)/received |
(16.4) |
4.7 |
(8.1) |
|
Partnership bonus paid |
(124.3) |
(181.8) |
(181.7) |
|
Finance costs paid |
(6.5) |
(4.9) |
(19.2) |
|
Net cash generated from operating activities |
148.0 |
85.4 |
389.7 |
|
Cash flows from investing activities |
|||
|
Purchase of property, plant and equipment |
(258.5) |
(153.2) |
(363.7) |
|
Purchase of intangible assets |
(19.7) |
(17.2) |
(39.2) |
|
Proceeds from sale of property, plant and equipment |
0.4 |
8.3 |
9.0 |
|
Finance income received |
2.8 |
4.9 |
12.6 |
|
Net cash used in investing activities |
(275.0) |
(157.2) |
(381.3) |
|
Cash flows from financing activities |
|||
|
Finance costs paid in respect of bonds |
- |
(19.1) |
(48.7) |
|
Payment of capital element of finance leases |
(0.4) |
(0.7) |
(1.0) |
|
Payments to preference shareholders |
(0.1) |
(0.1) |
(0.1) |
|
Cash inflow from borrowings |
275.0 |
75.0 |
100.0 |
|
Net cash generated from financing activities |
274.5 |
55.1 |
50.2 |
|
Increase/(decrease) in net cash and cash equivalents |
147.5 |
(16.7) |
58.6 |
|
Net cash and cash equivalents at beginning of period |
121.8 |
63.2 |
63.2 |
|
Cash and cash equivalents at end of period |
269.3 |
46.5 |
121.8 |
|
Cash and cash equivalents comprise: |
|||
|
Cash |
66.1 |
64.3 |
66.6 |
|
Short term deposits |
267.0 |
46.9 |
131.0 |
|
Bank overdraft |
(63.8) |
(64.7) |
(75.8) |
|
|
269.3 |
46.5 |
121.8 |
Notes to the financial statements
1 Basis of preparation
These interim financial statements were approved by the Board on 16 September 2009. They are unaudited, and do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.
The results for the half year to 1 August 2009 have been prepared using the discrete period approach, considering the half year as an accounting period in isolation. The tax charge is based on the effective rate estimated for the full year, which has been applied to the profits in the first half year.
The group's published financial statements for the year ended 31 January 2009 have been reported on by the group's auditors and filed with the Registrar of Companies. The report of the auditors was unqualified and did not contain any statement under Section 237 of the Companies Act 1985.
This condensed consolidated interim financial information for the half year ended 1 August 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 January 2009, which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union.
2 Accounting policies
The group's results for the half year to 1 August 2009 have been prepared on a basis consistent with the group's accounting policies published in the financial statements for the year ended 31 January 2009, except as set out below. These accounting policies reflect International Financial Reporting Standards (IFRS) and interpretations that are expected to be applicable to the group for its 2009/10 financial statements. It is possible that there will be changes to these standards and interpretations before the end of the group's 2009/10 financial year, which might require adjustments to this information before it is included in the financial statements for the year ended 30 January 2010.
The following standards were adopted by the group from 1 February 2009:
IAS 1 (revised) 'Presentation of Financial Statements', requires that the group presents one performance statement ('statement of comprehensive income') or two statements ('income statement' and 'statement of comprehensive income'). The group has elected to present two statements: an 'income statement' and a 'statement of comprehensive income'. IAS 1 now also requires a 'statement of changes in equity' as a primary statement. The interim financial statements have been prepared under the revised disclosure requirements.
IFRS 8 'Operating Segments', requires segmental reporting to be on the same basis as internal management reporting. This standard has had no impact on the group's profit for the period or equity. Disclosures have been amended as detailed in note 4.
For the year ended 31 January 2009, the group changed its accounting policy in respect of the financing elements of the pensions charge to include them in finance costs. This treatment of the financing elements of pension costs will provide more meaningful information in respect of business performance. For the half year ended 1 August 2009, this change in accounting policy has decreased operating expenses and increased finance costs by £12.2m. The results for the prior half year ended 26 July 2008 have been restated accordingly, resulting in reduced operating expenses and increased finance costs of £3.0m. Net assets and equity are unaffected by this change in accounting policy.
The group has a scheme to provide up to six months paid leave after 25 years service. The cost of providing the benefits under the scheme is determined actuarially. The financing elements of these costs were previously recognised in operating expenses. However, for the half year ended 1 August 2009, the group has changed its accounting policy in respect of the financing elements of long service leave to include them in finance costs. This treatment of the financing elements of long service costs will provide more meaningful information in respect of business performance. For the half year ended 1 August 2009, this change in accounting policy has decreased operating expenses and increased finance costs by £8.2m. The prior half year and prior full year have been restated accordingly, resulting in reduced operating expenses and increased finance costs of £1.8m for the half year ended 26 July 2008 and increased operating expenses and increased interest income of £0.2m for the year ended 31 January 2009. Net assets and equity are unaffected by this change in accounting policy.
3 Risks and uncertainties
The principal risks and uncertainties affecting the group were identified as part of the Business Review, set out on pages 23 to 25 of the John Lewis Annual Report and Accounts 2009, a copy of which is available on the group's website www.johnlewispartnership.co.uk. These risks remain relevant for the second half of the current financial year and comprise: economic; regulatory and political; financial and treasury; pensions; fraud and compliance; operational; health and safety; and business continuity and disaster recovery.
4 Segmental reporting
From 1 February 2009, the group has adopted IFRS 8 'Operating Segments'. This standard replaces IAS 14 'Segment Reporting'. Comparative segmental information has been restated accordingly.
IFRS 8 introduces a 'management approach' to identifying reportable operating segments. An operating segment is defined as a business activity whose operating results are reviewed by the chief operating decision maker ('CODM') and for which discrete information is available. The group's CODM is the Partnership Board.
The group's operating segments have been identified as John Lewis, Waitrose and Corporate and other. Corporate and other includes corporate and shared services overheads, finance transformation costs and Greenbee operations. The operating profit of each segment is after charging relevant corporate and shared service costs based on the business segments' usage of corporate facilities and services.
|
|
John Lewis |
Waitrose |
Corporate and other |
Group |
|
£m |
£m |
£m |
£m |
|
|
Half year to 1 August 2009 |
|
|
|
|
|
Gross sales |
1,208.9 |
2,178.2 |
- |
3,387.1 |
|
Adjustment for sale or return sales |
(40.4) |
- |
- |
(40.4) |
|
Value added tax |
(147.3) |
(100.2) |
- |
(247.5) |
|
Revenue |
1,021.2 |
2,078.0 |
- |
3,099.2 |
|
|
|
|
|
|
|
Operating profit/(loss) excluding property profits |
20.9 |
121.1 |
(15.8) |
126.2 |
|
Property profits |
- |
- |
- |
- |
|
Operating profit/(loss) |
20.9 |
121.1 |
(15.8) |
126.2 |
|
Finance costs |
- |
- |
(47.3) |
(47.3) |
|
Finance income |
- |
- |
8.1 |
8.1 |
|
Profit/(loss) before tax |
20.9 |
121.1 |
(55.0) |
87.0 |
|
Half year to 26 July 2008 - Restated |
|
|
|
|
|
Gross sales |
1,244.7 |
2,028.4 |
- |
3,273.1 |
|
Adjustment for sale or return sales |
(51.7) |
- |
- |
(51.7) |
|
Value added tax |
(173.5) |
(107.4) |
- |
(280.9) |
|
Revenue |
1,019.5 |
1,921.0 |
- |
2,940.5 |
|
|
|
|
|
|
|
Operating profit/(loss) excluding property profits |
41.0 |
102.0 |
(17.1) |
125.9 |
|
Property profits |
1.6 |
2.7 |
- |
4.3 |
|
Operating profit/(loss) |
42.6 |
104.7 |
(17.1) |
130.2 |
|
Finance costs |
- |
- |
(26.4) |
(26.4) |
|
Finance income |
- |
- |
4.2 |
4.2 |
|
Profit/(loss) before tax |
42.6 |
104.7 |
(39.3) |
108.0 |
4 Segmental reporting (continued)
|
John Lewis |
Waitrose |
Corporate and other |
Group |
|
|
£m |
£m |
£m |
£m |
|
|
Year to 31 January 2009 - Restated |
|
|
|
|
|
Gross sales |
2,811.1 |
4,156.4 |
- |
6,967.5 |
|
Adjustment for sale or return sales |
(109.0) |
- |
- |
(109.0) |
|
Value added tax |
(375.0) |
(216.3) |
- |
(591.3) |
|
Revenue |
2,327.1 |
3,940.1 |
- |
6,267.2 |
|
|
|
|
|
|
|
Operating profit/(loss) excluding property profits |
144.3 |
211.5 |
(39.2) |
316.6 |
|
Property profits |
1.6 |
3.0 |
- |
4.6 |
|
Operating profit/(loss) |
145.9 |
214.5 |
(39.2) |
321.2 |
|
Finance costs |
- |
- |
(53.5) |
(53.5) |
|
Finance income |
- |
- |
11.3 |
11.3 |
|
Exceptional gain in respect of associate |
- |
- |
127.4 |
127.4 |
|
Partnership bonus |
- |
- |
(125.4) |
(125.4) |
|
Profit/(loss) before tax |
145.9 |
214.5 |
(79.4) |
281.0 |
|
1 August 2009 |
|
|
|
|
|
Segment assets |
1,545.7 |
2,255.6 |
592.3 |
4,393.6 |
|
Segment liabilities |
(311.5) |
(483.5) |
(1,966.2) |
(2,761.2) |
|
Net assets |
1,234.2 |
1,772.1 |
(1,373.9) |
1,632.4 |
|
26 July 2008 |
||||
|
Segment assets |
1,506.6 |
1,987.4 |
325.0 |
3,819.0 |
|
Segment liabilities |
(329.3) |
(407.3) |
(1,432.4) |
(2,169.0) |
|
Net assets |
1,177.3 |
1,580.1 |
(1,107.4) |
1,650.0 |
|
31 January 2009 |
|
|
|
|
|
Segment assets |
1,516.6 |
2,123.2 |
400.4 |
4,040.2 |
|
Segment liabilities |
(330.4) |
(419.2) |
(1,568.1) |
(2,317.7) |
|
Net assets |
1,186.2 |
1,704.0 |
(1,167.7) |
1,722.5 |
The presentation of prior half year results has been restated in respect of the financing element of pension costs and the presentation of prior half year and prior full year results has been restated in respect of the financing element of other employee benefit schemes (long service leave), as explained in note 2.
5 Net finance costs
|
Half year to |
Half year to |
Year to |
|
|
1 August 2009 |
26 July 2008 |
31 January 2009 |
|
|
Restated |
Restated |
||
|
|
£m |
£m |
£m |
|
Finance costs |
|||
|
Total finance costs in respect of borrowings |
26.9 |
20.1 |
44.8 |
|
Fair value measurements and other |
- |
1.5 |
3.3 |
|
Net finance costs arising on defined benefit retirement schemes |
12.2 |
3.0 |
5.4 |
|
Net finance costs arising on other employee benefit schemes |
8.2 |
1.8 |
- |
|
Total finance costs |
47.3 |
26.4 |
53.5 |
|
Finance income |
|||
|
Total finance income in respect of investments |
(6.6) |
(3.9) |
(11.1) |
|
Fair value measurements and other |
(1.5) |
(0.3) |
- |
|
Net finance income arising on other employee benefit schemes |
- |
- |
(0.2) |
|
Total finance income |
(8.1) |
(4.2) |
(11.3) |
|
Net finance costs |
39.2 |
22.2 |
42.2 |
|
Half year to |
Half year to |
Year to |
|
|
1 August 2009 |
26 July 2008 |
31 January 2009 |
|
|
Restated |
Restated |
||
|
£m |
£m |
£m |
|
|
Total finance costs in respect of borrowings |
26.9 |
20.1 |
44.8 |
|
Total finance income in respect of investments |
(6.6) |
(3.9) |
(11.1) |
|
Net finance costs in respect of borrowings and investments |
20.3 |
16.2 |
33.7 |
|
Fair value measurements and other |
(1.5) |
1.2 |
3.3 |
|
Net finance costs arising on defined benefit retirement schemes |
12.2 |
3.0 |
5.4 |
|
Net finance costs arising on other employee benefit schemes |
8.2 |
1.8 |
(0.2) |
|
Net finance costs |
39.2 |
22.2 |
42.2 |
Prior half year net finance costs have been restated to include the financing element of pension costs and prior half year and prior full year net finance costs have been amended to include the financing element of other employee benefit schemes (long service leave), as explained in note 2.
6 Income taxes
Income tax expense is recognised based on management's best estimate of the full year effective tax rate based on estimated full year profits. The estimated full year effective tax rate for the year to 30 January 2010 is 34% (the estimated tax rate for the period to 26 July 2008 was 30%). The increase on last year is mainly because last year's tax charge was reduced by one-off deferred tax credits relating to properties.
7 Capital expenditure
|
Property, plant and equipment |
Intangible assets |
|
|
|
£m |
£m |
|
Net book values at 31 January 2009 |
3,176.8 |
85.1 |
|
Additions |
261.8 |
19.7 |
|
Disposals |
(1.1) |
- |
|
Depreciation and amortisation |
(97.1) |
(11.6) |
|
Net book values at 1 August 2009 |
3,340.4 |
93.2 |
Property, plant and equipment additions include £49.5m in respect of store development in John Lewis and £181.9m in respect of store acquisitions and development in Waitrose.
Intangible assets additions primarily relate to internally developed IT systems.
8 Reconciliation of profit before tax to cash generated from operations
|
Half year to |
Half year to |
Year to |
|
|
1 August 2009 |
26 July 2008 |
31 January 2009 |
|
|
Restated |
Restated |
||
|
£m |
£m |
£m |
|
|
Profit before tax |
87.0 |
108.0 |
281.0 |
|
Amortisation of intangible assets |
11.6 |
10.0 |
21.0 |
|
Depreciation |
97.1 |
85.5 |
181.1 |
|
Net finance costs |
39.2 |
22.2 |
42.2 |
|
Partnership bonus provision |
- |
- |
125.4 |
|
Profit on disposal of associate |
- |
- |
(127.4) |
|
Loss/(profit) on disposal of property, plant and equipment |
0.7 |
(2.8) |
0.6 |
|
Decrease/(increase) in inventories |
8.0 |
1.3 |
(7.4) |
|
(Increase)/decrease in receivables |
(5.6) |
47.1 |
75.7 |
|
Increase/(decrease) in payables |
54.9 |
(7.8) |
(25.9) |
|
(Decrease)/increase in retirement benefit obligations |
(2.1) |
1.5 |
18.2 |
|
Increase in provisions |
4.4 |
2.4 |
14.2 |
|
Cash generated from operations |
295.2 |
267.4 |
598.7 |
Prior half year figures have been restated in respect of the financing element of pension costs and prior half year and prior full year figures have been restated in respect of the financing element of long service leave costs, as explained in note 2.
9 Analysis of net debt
|
|
31 January 2009 |
Cash flow |
Other non-cash movements |
1 August 2009 |
|
|
£m |
£m |
£m |
£m |
|
Current assets |
||||
|
Cash and cash equivalents |
197.6 |
135.5 |
- |
333.1 |
|
Derivative financial instruments |
23.4 |
- |
(5.2) |
18.2 |
|
|
221.0 |
135.5 |
(5.2) |
351.3 |
|
Current liabilities |
||||
|
Bank overdrafts |
(75.8) |
12.0 |
- |
(63.8) |
|
Finance leases |
(0.6) |
0.4 |
(0.4) |
(0.6) |
|
Derivative financial instruments |
- |
- |
(2.8) |
(2.8) |
|
|
(76.4) |
12.4 |
(3.2) |
(67.2) |
|
Non-current liabilities |
||||
|
Borrowings |
(502.3) |
(275.0) |
- |
(777.3) |
|
Fair value adjustment for hedged risk on bonds |
(15.4) |
- |
(1.7) |
(17.1) |
|
Finance leases |
(29.2) |
- |
0.4 |
(28.8) |
|
|
(546.9) |
(275.0) |
(1.3) |
(823.2) |
|
Total net debt |
(402.3) |
(127.1) |
(9.7) |
(539.1) |
Reconciliation of net cash flow to net debt
|
Half year to |
Half year to |
Year to |
|
|
1 August 2009 |
26 July 2008 |
31 January 2009 |
|
|
Restated |
|||
|
£m |
£m |
£m |
|
|
Increase/(decrease) in cash in the period |
147.5 |
(16.7) |
58.6 |
|
Cash inflow from increase in debt and lease financing |
(274.6) |
(74.3) |
(99.0) |
|
Movement in debt for the period |
(127.1) |
(91.0) |
(40.4) |
|
Opening net debt |
(402.3) |
(368.5) |
(368.5) |
|
Non-cash movements |
(9.7) |
(0.7) |
6.6 |
|
Closing net debt |
(539.1) |
(460.2) |
(402.3) |
The measurement of net debt for the half year to 26 July 2008 has been revised to include derivative financial instruments and finance lease payables, in line with note 32 of the Annual Report and Accounts for the year ended 31 January 2009.
10 Capital commitments
At 1 August 2009 contracts had been entered into for future capital expenditure of £89.5m (2008: £26.8m).
11 Related party transactions
During the period John Lewis plc entered into transactions with other group companies in respect of the supply of goods for resale and associated services £9.4m (2008: £11.5m), purchase of goods for resale £13.5m (2008: £11.4m), the supply of IT and related services £17.8m (2008: £17.3m), and the hire of vehicles £5.0m (2008: £8.8m).
In addition, John Lewis plc settled other transactions on behalf of group companies for administrative convenience, such as payroll and supplier settlement. All such transactions were charged at cost to the relevant group company. It is not practical to quantify these recharges.
Statement of directors' responsibilities
The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules (DTR) of the Financial Services Authority, paragraphs DTR 4.2.7 and DTR 4.2.8.
For and by Order of the Board
Charlie Mayfield, Chairman
Marisa Cassoni, Finance Director
16 September 2009
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