10th Mar 2005 09:36
Lewis(John) PLC10 March 2005 John Lewis plc Unaudited estimated results for the year ended 29 January 2005 "Celebrating a landmark year" • Group sales ahead 6% to £5.3 billion • Like for like sales up 3% • Trading profit up 12% at £324 million* • Profit before tax up 24% to £216 million • Waitrose sales up 10% (+3% like for like) to £3 billion and profits* up 10% to £193m • John Lewis sales up 1% (+3% like for like) to £2.4 billion and profits* up 8% to £212m • Record year of investment totalling £539m, includes £337m spent on acquiring and converting 19 stores from Morrison and completion of £100m Peter Jones refurbishment • £106 million to be distributed in Partnership Bonus, an increase of 21% on the amount paid last year. Bonus rate of 14% equivalent to more than 7 weeks' pay * Trading profit defined as profit from trading activities before exceptionalitems, pensions and the transferred store card activities. Divisional tradingprofits are also before corporate and shared service costs. Sir Stuart Hampson, Chairman of John Lewis Partnership, commented: "The Partnership marked its 75th anniversary in fine style with good sales andprofit growth and specific highlights in the opening of the refurbished PeterJones and the acquisition of 19 stores from Morrison. Despite trading for oneless week, sales were up 6% and trading profit up 12%, a clear confirmation thatin a shifting retail environment John Lewis and Waitrose remain two of the UK'sstrongest retail brands. "Our positive relationships with suppliers continued to provide quality,innovation and value in our product ranges and the higher increase in profitsreflects gross margin improvement, good cost control and productivity gains inboth divisions. "Looking ahead, five weeks into our new financial year is too early to bedrawing conclusions, but what is clear is that our two divisions are currentlyfacing very different trading conditions. Waitrose continues to power ahead,with sales in the first 5 weeks 20% ahead of last year. The non-food sector hasso far proved more challenging, with John Lewis sales 1% behind last year,although we believe we are holding our own against our competitors." 2004 Results John Lewis Partnership announces its estimated results for the year to 29January 2005. The Partnership marked its 75th anniversary in fine style. Salesat £5.3 billion were 6% ahead of 2003 and trading profit before the accountcard, exceptional items and pensions increased 12% to £324m. Profit before taxrose to £216m - an increase of 24% achieved in 52 weeks against last year's 53.Setting aside property profits and other exceptional items, the two divisionsmade almost exactly equal contributions to that total, a clear confirmation thatin a shifting retail environment John Lewis and Waitrose remain two of the UK'sstrongest retail brands. Excluding new branches and taking a matched 52 week period produced alike-for-like sales increase of 3%. The higher increase in profits reflects goodcost control and productivity gains in both divisions. Our positiverelationships with John Lewis and Waitrose suppliers continues to providequality, innovation and value in our product ranges as well as valuable gains ingross margin in both divisions. In recognition of the strong performance, the Board has decided that £106mshould be distributed as Partnership Bonus at a rate of 14% (equivalent to morethan 7 weeks pay). This, together with the £81m investment in our pension schememeans that our 63,000 Partners will share £187m from our successful trading in2004 - a fitting way to celebrate a landmark year in the Partnership's history. John Lewis Sales for the John Lewis division totalled £2.4bn - 1% ahead of the 53 weekfigure last year and 3% on a like-for-like basis. In the first half we facedsofter comparisons as 2003 sales were affected by both the Iraq war and theimpact of the Congestion Charge in Central London. The slow pace of the secondhalf was a concern for all retailers in the run up to Christmas, but ourconfidence to avoid early discounting was rewarded by pre-Christmas salescomparing favourably with our competitors and by strong Clearance trading. The completion of the Peter Jones refurbishment in June proved a high point forthe Division, and its appeal as a shopping destination is seen in sales runningat +16%. Noteworthy increases also came from Cribbs Causeway, Cheadle, Solihull,Edinburgh and Glasgow. Robert Sayle has started its three year 'decamp' totemporary space before moving to a new store in Cambridge's new Grand Arcadeshopping scheme in 2007. The strength and reputation of the John Lewis brand underpins our ability tooperate successfully as a multi-channel retailer. Our e-commerce operation, JohnLewis Direct, recorded a year-on-year sales increase of 75%, bringing it up toour original target of matching a medium-sized department store - but with everysign of substantial further growth to come. The high quality catalogues producedto support the Direct business undoubtedly also benefit sales in our shops. Wealso continue to build on our Gift List operation, where the width and value ofour assortment and the convenience offered have made us the leading service inthis market. We have begun to see encouraging results from the new focus in our buying teams.Our own-brand business is gaining in authority and appeal, and the brandedcollections have benefited from clearer presentation and promotion, as exampledby the successful launch of The Fashion Floor. Performance of men's formalwearand casualwear was equally strong, while the increasing popularity offlat-screen televisions, MP3 players and digital radios kept up the pace inaudio/tv. Positive customer response to new ranges gives encouragement for theyear ahead, as does the 1.4 percentage point gain in gross margin. The John Lewis division has tackled a number of reorganisation projects inrecent years, and the benefits of a leaner cost structure are beginning to showthrough in greater operating efficiency and productivity gains. A much improvedwastage result also made a valuable contribution to the divisional profit line. Our manufacturing branches continued to face a difficult market for textiles.While reorganisation has secured significant cost savings, sales growth hasproved more difficult. We have therefore written down the value of our assets atStead McAlpin and JH Birtwistle by a further £7m. The Cadogan Gardens houses no longer required by Peter Jones were sold, yieldinga property profit of £8m. Excluding property and other exceptional items, the John Lewis division producedan 8% improvement in divisional profit to £212m, and, after allocation ofcorporate costs and pensions, net divisional profit improved by 9% to £121m. Looking ahead, we have a strong pipeline of new shops, with firm proposalsannounced for Cardiff, Leicester, Portsmouth and Sprucefield (Northern Ireland)and our involvement as a key participant in the proposed redevelopment ofCrawley. Waitrose As we celebrated the 100th anniversary of the first Waitrose shop, attention wasfocused on the conversion and integration of the 19 shops acquired fromMorrison's, following their purchase of Safeway, carried out with impressivespeed and professionalism. Sales growth was accelerated markedly by these newshops, which represent a 20% increase in our selling space, and customers inthese new regions have shown their enthusiasm for the Waitrose difference. Wealso opened a further four new shops (Newbury, Sanderstead, Wandsworth andKensington High Street), relocated our Newmarket branch and completed threemajor extensions. In the week before Christmas Waitrose took £100m for the first time in its 100year history, and the year's total sales reached £3bn, a 10% advance (+3%like-for-like). The distinctiveness of Waitrose continues to be underlined by the strengtheningof our own brand ranges, with successful launches of new lines such as CooksIngredients and the Easy range of ready-to-cook meat, poultry and fish dishes,together with the relaunch of Perfectly Balanced. In four of the former Safewaybranches we have also had the space to extend our non-food offer by introducing1,600 new lines, the majority of which were sourced with the help of John Lewisbuyers. We have been well supported by our suppliers throughout this expansion,showing innovation and commitment to Waitrose's quality position within themarket. The benefits of scale and reduced distribution costs have enabled us toinvest in lower prices to combat intense competition in Known Value Items, whilestill improving our landed gross margin by 0.4 of a percentage point. External recognition has been shown by a string of awards, including 'Britain'sfavourite supermarket' from Good Housekeeping and 'healthiest supermarket' fromthe National Consumer Council. Good control of branch operating costs and welcome productivity gains havecarried through to net margin, but they have been balanced by the inevitable,heavy burden of pre-opening expenses totalling some £6m for the year, a £4mincrease on 2003/04. Property profits from the sale and leaseback of the Brinklow distribution centreand sale of the Henley cinema amounted to £13m. Excluding property gains, Waitrose's divisional profit increased by 10% to£193m. The growth in Waitrose's scale means that it now takes a larger share ofcorporate costs and pensions, and this led to a 5% increase in net divisionaltrading profit (before property gains) to £121m. Capital expenditure Capital spending in 2004/05 reached a record £539m. The lion's share, £440m,went to Waitrose, reflecting the £337m spent on acquiring and converting theSafeway stores and also new store openings in the period. £77m was spent in JohnLewis and £22m on Corporate assets. Ocado Ocado has continued to make major progress in combining a high reputation forreliability with the quality of Waitrose products. Weekly deliveries havereached 28,000, and expansion is under way in the West Midlands and the NorthWest. Growth of the business was financed with major new equity and bank loanfinancing, including a further £9m loan from the Partnership at the beginning ofthe year. The new equity funding has led to the Partnership stake falling from35.6 per cent a year ago to 32.5 per cent, but we have loans which can beconverted into shares to take this up to 40 per cent. Ocado also passed an important milestone in that it now makes enough grossmargin per order to cover its picking and delivery costs, and further growth indeliveries this year will take them towards break-even. The Partnership'saccounting share of Ocado's losses (including £0.9m of interest) reduced to £14mcompared with £16m last year. Interest Costs and Customer Accounts The transfer of our store card operations to HSBC bank in 2003 removed the needto finance customer credit through our balance sheet, which in turn made thefinancing of Waitrose's expansion relatively straightforward. Despite a year ofrecord investment, our net interest bill increased by just 5% to £29m in 2004/05compared with £28m in 2003/04. We were again in the unusual position ofdepositing cash for most of the year. Our new partnership card, which was launched in June, has already become wellestablished as the payment card of choice for a significant proportion of ourcustomers. After several years of decline, the number of active users of ourcards is rising, and significantly more of our sales are now paid for using oneof our cards than happened in 2003. We have issued over £5m in reward vouchersto date, helping to drive footfall into our shops, and we look forward tocontinued growth this year in our partnership with HSBC. Partner Numbers and Pay The total number of Partners employed at the end of the year was 63,100 (4,000more than a year earlier). The split is now 43% John Lewis, 56% Waitrose and 1%for Corporate. The average numbers of full-time equivalent Partners employedduring the course of 2004 was 21,400 for John Lewis and 18,600 for Waitrose. Ourtotal pay bill was £714m, a 4% increase. Pension costs We are now the only large retail employer to continue to offer anon-contributory final salary pension scheme, and comparisons of our resultswith others need therefore to take account of the costs of our scheme and thebenefits it brings to Partners. The charge for pensions rose to £81m, a 13%increase on the previous year. In the Autumn we received the Scheme Actuary's report following a triennialreview of its finances. His recommendation, which was accepted by the Board, isthat we can continue with an acceptable level of funding by retaining ourcontribution at 10% of the total pay bill. Community activity Charitable donations amounted to some £2m in the year, with substantial furthercontributions made in terms of Partner time and support. Our branches haveincreased their commitment to local community and educational initiatives, whileat national level the Partnership has added its weight in support of the 2012London Olympic bid. Profit before tax The best measure of the continuing progress of the business is at the tradingprofit level - before exceptional items, pensions and the consequences of thetransfer of the account card operation. On this measure the Partnership advancedto £324m a 12% increase on last year - an encouraging advance given that we weretrading for one less week and the high pre-opening costs carried within thatfigure by Waitrose. At the profit before tax level, the Partnership took a majorstep forward, again despite one less week, with a 24 % increase to £216m. Partnership Bonus The Board has decided to allocate £106m to Partnership Bonus at a rate of 14%(equivalent to over 7 weeks pay). This is a 21% increase on the amount paid lastyear. Despite this increased payout, £71m will be retained for reinvestment inthe business, some £9m more than last year. The year ahead Looking ahead, five weeks into our new financial year is too early to be drawingany conclusions, but what is clear is that our two divisions are currentlyfacing very different trading conditions. Waitrose continues to power ahead, with sales in the first 5 weeks 20% ahead oflast year, and showing a 5% lead on a like-for-like basis. During 2005 we areset to benefit from growing sales at our newly opened branches and we also lookforward to openings at Droitwich, Hersham and Lichfield, along with relocationsat Wallingford and West Ealing. The non-food sector has so far proved more challenging, with John Lewis sales 1%behind last year - reflecting, we believe, a similar position to ourcompetitors. Despite this, we are seeing a good response to new products in ourassortment and to the quality and value of our own brand ranges. Our focus onimproving the efficiency of our operations also continues. We are also excitedthat, after several years with no new department stores we are nearing theopening of John Lewis Trafford in May. It is a great shop, in an excellentlocation and will help consolidate our presence in the North West. JOHN LEWIS plc Estimated results for the year to 29 January 2005 2004/05 2004/05 2004/05 2003/04 2003/04 2003/04 Before Before exceptional Exceptional exceptional Exceptional items items Year items items Year Change £m £m £m £m £m £m %---------------- -------- -------- ------- ------- ------- ------- ------Gross salesJohn Lewis 2,378.4 - 2,378.4 2,355.6 - 2,355.6 1Waitrose 2,955.2 - 2,955.2 2,691.2 - 2,691.2 10---------------- -------- -------- ------- ------- ------- ------- ------ 5,333.6 - 5,333.6 5,046.8 - 5,046.8 6Adjustment forsale or returnsales (89.2) - (89.2) (76.9) - (76.9)Value addedtax (486.9) - (486.9) (470.4) - (470.4)---------------- -------- -------- ------- ------- ------- ------- ------Turnover 4,757.5 - 4,757.5 4,499.5 - 4,499.5---------------- -------- -------- ------- ------- ------- ------- ------Trading profitfrom ongoingoperations 324.1 (10.1) 314.0 289.4 (12.8) 276.6 14Account cardprofit/(loss) (1.6) - (1.6) 7.6 - 7.6Pension costs (80.6) - (80.6) (71.4) - (71.4)---------------- -------- -------- ------- ------- ------- ------- ------Trading profit 241.9 (10.1) 231.8 225.6 (12.8) 212.8 9Share ofoperating lossof associate (12.9) - (12.9) (15.2) - (15.2)---------------- -------- -------- ------- ------- ------- ------- ------Totaloperatingprofit 229.0 (10.1) 218.9 210.4 (12.8) 197.6 11Exceptionalgain ondisposal ofaccount cardoperation - 5.4 5.4 - 4.3 4.3Exceptionalgain onpropertydisposals - 21.2 21.2 - - -Share ofinterestcharges ofassociate (0.9) - (0.9) (0.8) - (0.8)Net interestpayable (28.9) - (28.9) (30.3) 2.7 (27.6)---------------- -------- -------- ------- ------- ------- ------- ------Profit beforePartnershipbonus andtaxation 199.2 16.5 215.7 179.3 (5.8) 173.5 24Partnershipbonus (105.8) - (105.8) (87.3) - (87.3)---------------- -------- -------- ------- ------- ------- ------- ------Profit onordinaryactivitiesbeforetaxation 93.4 16.5 109.9 92.0 (5.8) 86.2Tax on profiton ordinaryactivities (40.3) 1.4 (38.9) (37.0) 12.5 (24.5)---------------- -------- -------- ------- ------- ------- ------- ------Profit for theperiod 53.1 17.9 71.0 55.0 6.7 61.7Dividends -including nonequityinterests (0.3) - (0.3) (0.2) - (0.2)---------------- -------- -------- ------- ------- ------- ------- ------Profitretained 52.8 17.9 70.7 54.8 6.7 61.5---------------- -------- -------- ------- ------- ------- ------- ------ Note: These results are estimated - the audited results for 2004/05 will beannounced in April when the Report & Accounts have been approved by the Board. For further information: John Lewis PartnershipHelen Dickinson, Head of Press & PR Tel: 020 7592 6274 Helen Megaw, Corporate Press Manager Tel: 020 7592 6223 Hogarth PartnershipJames Longfield/Georgina Briscoe Tel: 020 7357 9477 Notes to Editors The John Lewis Partnership (www.johnlewispartnership.co.uk) is one of the UK'stop ten retail businesses with 26 John Lewis department stores and over 166Waitrose supermarkets. It is also the country's largest example of workerco-ownership with all 63,000 staff being Partners in the business. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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