6th Mar 2008 09:30
Lewis(John) PLC06 March 2008 Unaudited results for year to 26 January 2008(This does not constitute a preliminary announcement)Strict Stock Exchange Embargo, 9.30amThursday 6 March 2008 John Lewis Partnership plc Results for the year ended 26 January 2008 "A successful year for the Partnership" Group • Group sales up £400.5m, 6.3%, to £6.8bn• Operating profit (excluding property profits) up £58.6m, 17.1%, to £402.0m; including property, operating profits up £55.8m, 15.7%, to £411.1m• Profit before Partnership Bonus and tax up £59.7m, 18.7%, to £379.8m• Partnership Bonus payment of £181.1m; up £27m (increase of 18%); 20% of salary (equal to more than 10 weeks' pay)• Return on Invested Capital of 8.5%• Group sales for 5 weeks to 1 March up 6% John Lewis • Sales up £148.9m, 5.6%, to £2.8bn• Operating profit (excluding property profits) up £20.3m, 12.0%, to £189.9m; including property, operating profits up £12.0m, 6.7%, to £190.4m• Like-for-like sales up 5.0%• John Lewis Direct sales up £82.8m, 44.6% to £268.1m• Market share up 0.5% to 19.3%• Operating margin up 38 basis points to 6.8% (excluding property profits) Waitrose • Sales up £251.6m, 6.8% to just under £4.0bn• Operating profit (excluding property profits) up £38.3m, 22.0%, to £212.1m; including property, operating profits up £43.8m, 24.8%, to £220.7m• Like-for-like growth of 3.6% (excluding petrol)• Market share level at 3.9%• Operating margin up 67 basis points to 5.4% (excluding property profits) Charlie Mayfield, Chairman of John Lewis Partnership, commented: "The Partnership has had a successful year in a challenging trading environment.The key to our success is the commitment of our Partners who consistentlydeliver the customer service and professionalism that underpins our reputationfor value, choice, quality and honesty. While we expect trading conditions to continue to be challenging in the yearahead, we are confident that the diversity of our business and our Partnershipmodel makes us resilient and able to perform well even in the most testingmarket conditions. We are committed to the growth plans for our business and Iam confident that we can deliver our long term plans." A successful year for the Partnership The Partnership has had another successful year. Sales from continuingoperations were up 6.3% to £6.8bn. The Group's profit before tax and PartnershipBonus increased by 18.7% to £379.8m. Profit as a percentage of sales increasedfrom 5.0% to 5.6%. It is the enterprise, experience and professionalism of our 69,000 Partners, whoown the business, that lies behind this success. It is their motivation andefforts to improve what we do every day that inspires customers' confidence inour reputation for value, choice, service and honesty. Today Partners reap thebenefit of their year's work, with every Partner receiving a Partnership Bonusworth 20% of salary, the equivalent of 10 weeks' pay. That amounts to a totaldistribution of £181.1m. Both Waitrose and John Lewis performed strongly, growing overall market shareand strengthening our position in key product categories. We offered moreinnovative and inspiring products, invested in building Partners' skills andimproved the service experience for customers. Growth was also achieved byinvesting in new and refurbished shops, strengthening our online presence,increasing capacity and automation in distribution and building awareness of theJohn Lewis and Waitrose brands among customers. Our ambition is to win and sustain our reputation with customers forwell-differentiated products and service excellence. Our standing was boosted byWaitrose and John Lewis being awarded the top two places, for the third year ina row, in the independent Verdict and Which? consumer satisfaction surveys. Looking to the future, we are planning to grow our businesses and reach morecustomers. Our investment will be in new shops, in the development of our onlinebusiness and in the systems and infrastructure needed to support a largerbusiness. We expect the number of Partners in the business to increase by 16,000to 85,000 over the next five years to support our growth. The Partnership was pleased to note that following its groceries marketinvestigation, the Competition Commission is considering the introduction of acompetition test in planning decisions. We will continue to consult with theCompetition Commission as it develops the test which could help to increasechoice in the future for customers. As we grow, sustainability will continue to be at the forefront of our agenda.We already source all our electricity requirements from sustainable supplies andare investing £55m over five years in our supermarkets to increase ourefficiency, as well as investing in an energy reduction programme in ourdepartment stores. New shops are around 20% more efficient than thoseconstructed five years ago and they are now all built in line with ourSustainable Construction Framework. For our Partners, in 2007 we invested more than £140m in our final salarynon-contributory pension scheme and other benefits. We are hoping to be able toannounce the purchase of a new holiday centre for Partners soon. During 2007,there were 40,000 visits by Partners and their dependents to our existing fourleisure centres. We are also planning to invest up to £1m a year between thisautumn and 2012 in Partners in Sport, a wide-ranging programme to enablePartners to play sport, gain sports coaching qualifications and live healthierlifestyles. John Lewis John Lewis sales grew 5.6% (5.0% like-for-like), to £2.8bn. Operating profitgrew by 12.0% to £189.9m, after its share of corporate costs and pensions, butexcluding property profits of £0.5m (last year: £8.8m). Operating profit marginimproved by 38 basis points, while branch costs were well maintained. Includingproperty gains, operating profit increased by 6.7% to £190.4m. Sales growth exceeded the market and we increased market share of the departmentstore sector by 0.5% to 19.3%, continuing our 6 year trend. Growth came fromacross the business and was well balanced across all three product categories,with Electrical and Home Technology up 6.0%, Home up 5.5% and Fashion up 4.6%.John Lewis topped the rankings in all the categories in which we compete,including Fashion, Electrical and Home, in both independent surveys from Verdictand Which? John Lewis Direct again grew strongly, with sales up 44.6%, well ahead of thefast growing on-line market. John Lewis Cambridge opened successfully in earlyNovember, with sales exceeding expectations, recording an 80% increase inDecember and January versus Robert Sayle, our temporary shop in Cambridge. Themajor refurbishment of John Lewis Oxford Street was completed in October withthe opening of the new foodhall in conjunction with Waitrose. Sales have grownstrongly and are maintaining that momentum. Other branches that performedparticularly well included our three shops in Scotland - Edinburgh, Glasgow andAberdeen - while Kingston, Southampton and Knight & Lee in Southsea led the wayin the South. Sales growth slowed in the second half of the year against tougher economicconditions, dropping back to 5.2% in the second half year compared with 6.1% inthe first half. There were strong performances in many areas, particularly furniture, kitchens,men's and women's fashions and beauty. Sales of John Lewis branded merchandisereached over 30% of the total for the first time, with strong contributions fromboth Home and Fashion. We continue to improve our offer, rolling out new formatsin menswear, cookshop, and lighting while selectively investing in beauty andcatering. We also focused on improving shop floor service, availability, callcentres and enhancing our delivery service. The sale to Apex Textiles Limited of our manufacturing operations, Stead McAlpin& J H Birtwistle, resulted in a £9.4m charge for discontinued operations topre-tax profits. Waitrose Waitrose sales grew 6.8% (3.6% like-for-like, excluding petrol) to just under£4.0bn. Operating profit grew by 22.0% to £212.1m, after its share of corporatecosts and pensions, but excluding property profits of £8.6m (last year: £3.1m).Including property gains, operating profit increased by 24.8% to £220.7m. Waitrose sales have grown by 47% in four years with our market share increasingeach year to our current level of 3.9%. Our share of the UK organics marketstands at over 18%, while our market share for Fairtrade items is 8.6%, with anassociated increase in sales in this area of 16.3% year on year, significantlyin excess of growth in the overall Fairtrade market. Product quality is key to our success. Waitrose products won 13 out of the 18 QIndustry Awards, where products are 'blind tasted'. Another notable success wasour own-label champagne, which was one of only two products to achieve a topfive star rating in a taste test of 146 labels by Decanter Magazine, eclipsingmany illustrious brands. Our animal welfare credentials were recognised by theRSPCA with the title of Supermarket of the Year in the RSPCA Good BusinessAwards. Our achievements in product quality are directly related to our long-termrelationships with farmers and suppliers and our commitment to support BritishFarming. In the face of challenges like foot-and-mouth disease and bluetongue,our supply chain was robust with excellent availability. Our dairy farmers wereable to invest in their business at a rate that was double the national average,while new base level payments, offering a minimum payment for beef and lambproducers, protected our farmers against market volatility. Distinctive service also played a key part in driving sales. We increased thenumber of specialists in meat, fish and wine in our shops to over 800, with afurther 190 in training. This success was confirmed by Waitrose being ranked ascustomers' favourite grocer by both Which? and Verdict independent surveys. Further expansion has taken place this last year with acquisitions at Harborneand Christchurch, and the opening of new shops in Cheadle Hulme, Rickmansworth,and two relocations, in Windsor and from Birch Hill to Sandhurst, bothincreasing our selling space. We have also redesigned our Marylebone and John Barnes (Finchley Road) shopswith an improved layout and product range to better meet the needs of Londonshoppers. Waitrose.com, our online presence, has been refreshed and relaunched. Despite this rapid pace of development, we have continued to invest in price. Inspite of this investment, operating profit before property gains increasedsignificantly by 22.0%, or £38.3m, compared with 2006/07. Greenbee Our Greenbee operation shows encouraging growth, with clear evidence of itspotential to create scale in key areas, such as home insurance where our renewalrates have been very strong. Ocado Ocado continued to grow its sales and develop its business during the year.Including sales through Ocado, we believe that Waitrose's share of the onlinegrocery market is approaching 20%. Our shareholding in Ocado is 24.1%. There isno impact from this shareholding on the Partnership's profits. The book profitfrom Ocado's successful fundraising early in the year is entirely offset by ourshare of Ocado's trading losses, which were £7.1m for this year and £0.9mbrought forward from last year. Capital expenditure Capital spending in 2007-08 was £364m, compared with £393m in the previous yearwhen Waitrose made store acquisitions from Morrisons. John Lewis substantiallyincreased its capital investment with expenditure on Oxford Street, includingthe new foodhall and the relocation of our Cambridge store. Capital was alsocommitted to the relocation of our shop in Liverpool and to our new shop inLeicester, which will open in May and September 2008 respectively, and todistribution centres at Magna Park (John Lewis) and Aylesford (Waitrose). Ourgearing ratio increased slightly to 21.2% with year-end net debt increasing by£47m. This was due to a £72m prepayment of a major part of the 2008-09 pensioncontribution just before the year end. Excluding this payment, the Partnershipgenerated almost £620m in operating cash flow for the year and gearing wouldhave fallen to 16.9%. Interest cover improved from 5.7 to 7.3. Partnership Benefits The Partnership Bonus announced today amounts to a distribution of £181m. Takentogether with the pension charge of £83m and other benefits of £60m, thatamounts to over £320m returned to Partners. Our BonusSave scheme, which was introduced last year, attracted a good take-upfrom Partners and this option will be available again this year, allowingPartners to invest some of their bonus in a tax-efficient manner. Outlook There was a general slowdown in the housing market in the second half of theyear, which depressed sales of large purchases in the home market and this trendhas continued into the new financial year. Sales for the first five weeks of theyear to 1 March are up 2% in John Lewis while at Waitrose, which tends to beless affected by a downturn in consumer confidence, sales are up 8%. We expect trading conditions to be very challenging this year as consumerscontinue to respond to concerns about the housing market, higher food and energycosts and tighter credit conditions. However, we believe that the diversity of our business across the home andgrocery sectors and the benefits of our Partnership model make us resilient andable to perform well even in testing market conditions. We have the confidenceto pursue our ambitious growth and investment plans for the long term. -ends- For further information: John Lewis PartnershipSusan Donovan, Director of Communications 020 7592 6292 Citigate Dewe RogersonSimon Rigby / George Cazenove 020 7638 9571 John LewisHelen Dickinson, Head of Press and PR 020 7592 6274Louise Thomson, Press and Public Relations Manager, Corporate 020 7592 6223 WaitroseDara Grogan, Head of Communications 07764 676351Gill Smith, Senior PR Manager, Corporate 07887 898133 Notes to editors The John Lewis Partnership - The John Lewis Partnership operates 26 departmentstores across the UK, John Lewis Direct - a website and catalogue business, 187Waitrose supermarkets and Greenbee.com, a direct services company. The businesshas an annual turnover of over £6.8bn. It is the UK's largest example of workerco-ownership where all 69,000 staff are Partners in the business. (www.johnlewispartnership.co.uk) John Lewis - John Lewis, 'Britain's favourite retailer 2007'* typically stocksmore than 350,000 separate lines. The website stocks more than 30,000 linesfocused on the best of home and giftware and is consistently ranked one of thetop online shopping destinations in the UK. (www.johnlewis.com) Waitrose - Waitrose, named 'Britain's favourite supermarket'* combines theconvenience of a supermarket with the expertise and service of a specialistshop. It offers fresh and frozen foods, wines and groceries as well asdelicatessen, cheese, fresh fish, meat, patisserie and hot-food counters.Waitrose is dedicated to offering quality food that has been responsibly sourcedcombined with high standards of customer service. (www.waitrose.com) Greenbee.com - Greenbee.com offers a range of financial, travel and leisureservices selected by the John Lewis Partnership. Specialist home and petinsurance, life cover and a phone and broadband package have recently been addedto the home, travel and wedding and event insurance products. Other servicesinclude travel packages, event tickets, and an online art and antiquesdirectory. (www.greenbee.com) * Verdict consumer satisfaction index, January 2008. John Lewis Partnership plc UNAUDITED RESULTS FOR THE YEAR TO 26 JANUARY 2008 2007/08 2006/07 Change £m £m % ---- ---- --- --- CONTINUING OPERATIONS --- --- --- --- --- --- --- --- SALES John Lewis 2,812.7 2,663.8 5.6 Waitrose 3,950.1 3,698.5 6.8 ---------------------- ------ ------ --- ------- -------- ------- Total Gross Sales 6,762.8 6,362.3 6.3 Adjustment for sale or return (103.0) (100.7) sales Value added tax (637.4) (575.4) ------------- ----------- ------ ------ --- ------- -------- ------- Revenue 6,022.4 5,686.2 5.9 ------------- ----------- ------ ------ --- ------- -------- ------- OPERATING PROFITS John Lewis 190.4 178.4 6.7 Waitrose 220.7 176.9 24.8 ------------- ----------- ------ ------ --- ------- -------- ------- Operating profit 411.1 355.3 15.7 Net finance costs (31.3) (35.2) 11.1 Associate company (Ocado) - - -------------------------- ------ --- ------- -------- ------- Profit before Partnership bonus and 379.8 320.1 18.7 tax Partnership bonus (181.1) (154.1) (17.5) ---------------------- ------ ------ --- ------- -------- ------- Profit before tax 198.7 166.0 19.7 ---------------------- ------ ------ --- ------- -------- ------- Notes 1. In addition, there is a loss from discontinued operations of £9.4m (2006/07: loss £2.0m) before tax. This will be disclosed in the Annual Report and Accounts. The 2006 /07 comparative figures have been restated as shown below: Discontinued As published operations As restated Operating £m £m £m profits John Lewis 177.4 (1.0) 178.4 Waitrose 176.9 0.0 176.9 ------- -------- --- ------- Operating 354.3 (1.0) 355.3 profits Net finance (35.1) 0.1 (35.2) costs ------- -------- --- ------- Profit before 319.2 (0.9) 320.1 Partnership bonus and tax Partnership (155.2) (1.1) (154.1) bonus ------- -------- --- ------- Profit before 164.0 (2.0) 166.0 tax ------- -------- --- ------- 2. Property gains are included in the operating profits shown above and are as follows: Property Operating profit % change gains excluding property ------- ---------- gains -------------- 2007/08 2006/07 2007/08 2006/07 £m £m £m £m John Lewis 0.5 8.8 189.9 169.6 12.0% Waitrose 8.6 3.1 212.1 173.8 22.0% ------ ------ ------- -------- ------- 9.1 11.9 402.0 343.4 17.1% ------ ------ ------- -------- ------- 3. This statement does not constitute a preliminary announcement. These results are subject to audit. The Annual Report and Accounts for 2007/08 will be published in April. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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