TIDM45GD
RNS Number : 3780M
Lewis(John) PLC
14 September 2023
These results are for John Lewis plc only and do not represent
the results for John Lewis Partnership plc which can be found on
the John Lewis Partnership website or at
www.johnlewispartnership.co.uk/financials.html
JOHN LEWIS PLC UNAUDITED INTERIM RESULTS FOR THE 26 WEEKSED 29
JULY 2023
14 September 2023
JOHN LEWIS PLC UNAUDITED INTERIM RESULTS FOR THE 26 WEEKSED 29
JULY 2023
-- John Lewis Group reports improved financial performance for the half year
-- Losses before tax and exceptional items fell from GBP66.8m
([1]) to GBP54.5m (an 18% improvement)
-- Losses before tax narrowed by 43% from GBP99.2m to GBP56.2m
-- Strong balance sheet: liquidity of GBP1.3bn, pension scheme valuation confirmed a surplus
-- Cash generated from operations was GBP93.8m, GBP77.4m better than last year
-- Group sales ([2]) topped GBP5.8bn in the half, up 2% year-on-year
-- 600,000 new customers to reach 21.4 million
-- Transformation progressing: efficiency savings of GBP31.2m, over GBP100m expected by year end
-- Customers are spending more on themselves (beauty, fashion
and dining in) but holding back on technology and big ticket home
items
-- Waitrose trading operating profit improved from GBP431.7m to
GBP504.4m; John Lewis trading operating profit fell back from
GBP295.0m to GBP277.1m
-- Economic outlook uncertain, but improvement in full year financial results expected
-- Owing to inflationary pressures the Partnership Plan will
take two additional years to deliver - in 2027/28 rather than
2025/26
-- Three million meals donated to communities in need;
supporting young people with care experience
The John Lewis plc reports an improved performance for the half
year, narrowing losses before tax by 43% to GBP56.2m. Before tax
and exceptionals, losses fell to GBP54.5m (GBP66.8m a year
earlier), an 18% improvement.
Liquidity was strong at GBP1.3bn (GBP1.5bn a year earlier) with
borrowings unchanged at GBP650m. Cash generated from operations was
GBP93.8m, GBP77.4m better than last year. We invested GBP196.9m in
our transformation. After investments and financing activities, we
had an outflow of cash in the first half of GBP232.4m, an
improvement of GBP238.4m compared to last year. The Group generates
most of its cash in the second half.
Total sales were GBP5.8bn, up 2% year-on-year; revenue ([3]) was
up 3%. 600,000 more customers shopped with us in the half, taking
the total number of Group customers to 21.4 million.
PARTNERSHIP PLAN
Last year the Partnership was hit hard by inflation, which was
at its highest since 1980, increasing our costs by GBP179m. This
additional cost has sharpened our focus on the Partnership's
long-standing productivity challenge. For context, between 2000 and
2019, Partner numbers (on a full time equivalent basis) rose by
24,300 to 60,800 to support a rapid growth in stores and online.
Profits remained broadly flat during this period, squeezing profit
per Partner. A combination of inflationary pressures and greater
than expected investment requirements for our transformation means
it will take a further two years to deliver the Partnership Plan -
to 2027/28 rather than to 2025/26.
As set out in our end year results in March, the Plan has been
significantly adapted to give greater weight to productivity and
efficiency under our Lean Simple Fast programme. The Plan will now
achieve an additional GBP600m of efficiencies over its life (with
GBP308m already achieved through to March this year).
GBP31.2m has been realised in the first half through a
combination of process simplification, margin efficiencies (Group's
overall margin rate improved by 0.15 percentage points on the year)
and supplier negotiations.
Our plans are on track to scale efficiencies in the second half,
delivering over GBP100m benefit by the end of the year. We are also
investing to modernise technology and data through new partnerships
with Google Cloud and dunnhumby; and progressing build to rent and
expanding financial services building on the strength of our retail
brands.
Waitrose
Waitrose sales were up 4% to GBP3.7bn. Sales growth was driven
by average item price up 9%, with volumes down 5%.
As the half progressed we saw improving volume trends, with good
momentum going into the second half. GBP100m is being invested in
price cuts to ease cost of living pressures on our customers: the
'New Lower Prices' campaign drove product sales growth of 12% and
volumes up 13% year-on-year. The second half sees the third tranche
of price cuts and a major new launch - the Japan Meny range.
Availability ([4]) closed the half at 96.1% (from 93.6% last
year). This was despite an IT incident, which reduced profit in the
half by GBP11.6m.
Waitrose is responding to the slow down in dining out with ten
new 'dining in' deals, leading to a tripling in sales. The new GBP5
lunchtime meal deal has started strongly in its first week with
'food to go' sales up 34% year-on-year. We are continuing to make
progress in bringing Waitrose to new customers through expanded
collaborations with Dobbies, Shell, Deliveroo and, since July,
UberEats.
Waitrose remains as committed as ever to quality and high
ethical standards, even with cost of living pressures: our
customers demand it. Compassion in World Farming recognised
Waitrose as the best retailer for animal welfare.
John Lewis
John Lewis sales were GBP2.1bn, down 2%. On the one hand,
customers continued to spend on themselves: fashion was up 3% and
beauty was up 2% - partly driven by 50 new brands including JoJo
Maman Bébé and Le Specs. The second half will see further launches
including Vivere, an exclusive with Savannah Miller.
On the other hand, customers were more cautious about 'big
ticket' items in Home and Tech (down 5% and 4% respectively); in
effect it's been a case of 'more loafers and fewer sofas'. Interest
bearing credit is now available online and will be available in
store from mid-October - ahead of peak - to help customers spread
the cost.
The balance between store and online purchases remained broadly
unchanged: at 43% and 57% respectively. Shop sales improved by 2%
driven by increased footfall while online declined 4% owing to
weaker conversion. Customers were drawn to shops for personal
styling appointments (up 27%), beauty services (up 23%) and nursery
consultations (up 17%). Customer service remains an area of
significant focus: more than 5,700 Partners attended our training
academy in the first half.
Partnership Values
We also take seriously our obligations to our Partners and
communities. Over three million meals were donated to those in
need. Around 1,200 Partners have been taking part in
apprenticeships during the half. Of over 100 young people with
experience of the care system who took part in our employability
programmes, we're pleased that 19 found jobs in the Group.
OUTLOOK
While the economic outlook and consumer sentiment remain
uncertain, on the back of stronger Waitrose trading and further
efficiency savings in the second half, we expect an improved full
year financial performance compared to a GBP68.9m loss before tax,
Partnership Bonus and exceptionals last year. We typically make
most of our profit in the last three months of the year so a
successful peak is always critical.
Our strategy of financial prudence means we expect to maintain
strong liquidity through the second half, and achieve an improved
Debt ratio by year end. Key terms of the three-yearly pension
valuation have been agreed, resulting in a surplus. We expect to
complete the valuation in the second half with GBP10.0m annual
deficit repair payments no longer required.
Our priorities for investment remain to modernise the business,
improve customer service and do more for Partner pay, where we can.
These demands are significant and take precedence over the
Partnership Bonus.
Sharon White, Chairman of the Partnership , said: "The
Partnership is a unique model that has been tested and come through
stronger many times in our 100-year history. While change is never
easy - and there is a long road ahead - there are reasons for
optimism. Performance is improving. More customers are shopping
with us. Trust in the brands and support for the Partnership model
remain high."
Nish Kankiwala, Chief Executive of the Partnership , said: "Our
transformation to modernise our business is well under way, and I
want to thank our Partners for their efforts to give customers
great service, quality and value when they shop with us in store or
online. There are no brands better placed than Waitrose and John
Lewis to provide customers with what they need right now - to help
them feel good and eat well."
UNDERSTANDING OUR FINANCIAL PERFORMANCE
Financial summary
The first half loss before tax, Partnership Bonus and
exceptional items (LBTBE) was GBP54.5m, 18% better than the
GBP66.8m ([5]) loss in the first half of 2022/23. Our loss before
tax but after exceptional items was GBP56.2m, compared to a loss
before tax of GBP99.2m in the prior half year, a 43%
improvement.
Total Group sales were GBP5.8bn in the half, up 2% year-on-year,
with Waitrose up 4% and John Lewis down 2%. The Group's revenue was
up 3%, with Waitrose up 5% and John Lewis down 3%.
Waitrose John Lewis
% vs % vs
2023/24 2022/23 22/23 2023/24 2022/23 22/23
------- ------- ------ ------- -------
Total trading Sales
(GBPm) 3,721.6 3,583.4 4% 2,098.3 2,136.4 (2)%
Total trading Sales
LFL 3,721.6 3,572.8 4% 2,098.3 2,136.4 (2)%
Revenue (GBPm) 3,480.2 3,311.3 5% 1,592.6 1,636.7 (3)%
Trading operating
profit (GBPm) 504.4 431.7 17% 277.1 295.0 (6)%
Trading operating
profit (%) 14% 12% 13% 14%
--------------------- ------- ------- ------ ------- ------- ------
Year-on-year movement in Group LBTBE
The chart below outlines the key movements in our GBP12.3m
improvement in LBTBE in the first half compared to last year.
Commentary against each component is included below the chart.
-- Restatement of HY Impairment to Exceptionals - Impairment
charges reported within operating costs in the first half of last
year have been reclassified to exceptional items, consistent with
their treatment in the Group's Annual Report and Accounts for the
52 weeks to 28 January 2023. More detail is provided in note 1 to
the interim consolidated financial statements.
-- Waitrose Trading operating profit - Improved by GBP72.7m due
principally to 4% increase in sales, with average item price up 9%
driven by food supply inflation, volumes down 5%; GBP9.7m of
additional Lean Simple Fast savings and lower operating costs as we
deliver productivity improvements across our shops and supply
chain.
-- John Lewis Trading operating profit - Declined by GBP17.9m
due principally to 2% decrease in sales; offset by GBP9.4m of Lean
Simple Fast savings, lower operating costs as we flexed our
resources to match the lower volumes and improved labour
productivity across our supply chain.
-- Property costs inflation - GBP22.8m increase in costs of
running our estate compared to last year, principally driven by
inflation in utility costs.
-- Transformation costs - Higher investment in the Partnership
Plan transformation, leading to an additional GBP21.4m of non
recurring costs.
-- Other movements - GBP1.7m comprising a combination of Lean
Simple Fast saving across other operating costs, offset by
inflationary cost increases.
Lean Simple Fast (our efficiency programme)
When we launched the Partnership Plan we set ourselves an
efficiency target of GBP300m over the first two years, which we
achieved. The changing economic environment requires us to adapt
and we now have a clear pathway to triple the scale of our
productivity improvements to GBP900m by January 2026, through
improvements that not only support our financial sustainability,
but also provide better shopping experiences for our customers.
We delivered a further GBP31.2m of new savings in the half:
-- GBP5.5m of Margin improvements - through improved efficiency
across our value chain. Examples include the implementation of
digital scanning technology to reduce wastage in citrus fruits, and
improving efficiency across packaging across multiple lines
including potatoes and fish to reduce cost and overheads. These
changes are not only improving our costs and enhancing margins they
are delivering better value for our customers;
-- GBP10.0m of Simplification efficiencies - through operating
model changes across our Technology teams and shops and further
process efficiencies in our Waitrose shops;
-- GBP15.7m of Other supplier negotiations across our goods not
for resale (GNFR) supplier and property cost base.
The impact of the efficiency improvements above split as follows
across our business; GBP9.7m in Waitrose Trading Operating Profit,
GBP9.4m in John Lewis Trading Operating Profit and GBP12.1m in
other operating costs.
In aggregate, since the start of the Lean Simple Fast programme,
we have delivered GBP327m. In the second half we expect to see our
benefits accelerate. We will see further benefits driven from our
negotiations across GNFR and Cost of Goods Sold (COGS) spend as
volumes increase and we are able to leverage the lower costs. We
will see further benefits from improving ranging and planning
across our stores, delivering better availability and easier to
understand price points for our customers. We will also start to
see benefits from our investments in automation at our John Lewis
distribution centre at Fenny Lock, delivered in time for our peak
trading period.
Cash, liquidity & Debt ratio
Our Total liquidity at the half year end remains strong at
GBP1.3bn, including GBP0.9bn cash and short-term investments, and
undrawn committed bank facilities of GBP0.4bn. Total liquidity has
dropped by GBP138.9m since year end, consistent with the normal
cyclicality of our cash flow. Holding strong cash balances remains
an important priority for the Group, it allows us to invest with
confidence in our Partnership Plan and to meet our obligations,
despite a difficult economic backdrop.
We carry GBP1.9bn of Total net debts: including GBP1.8bn of
property leases, an accounting pension deficit of GBP140.1m (after
deferred tax) and GBP650.0m of gross financial borrowings. Our
gross financial borrowings remain unchanged. Our Debt ratio - which
compares Total net debts to Adjusted cash flow - was 4.4x at the
end of last year. We do not update our Debt ratio at the half year
due to the seasonality of our annual performance. However, we
anticipate our January 2024 Debt ratio to reduce driven by an
improvement in financial performance.
Pensions
Technical provisions valuation - We have agreed the key terms of
the triennial pension valuation as at 31 March 2022, which shows a
technical provisions surplus of GBP320m as at the valuation date
(compared with a deficit of GBP58m at the March 2019 valuation).
This means that no deficit contributions will be required ahead of
the next triennial valuation in 2025. The technical provisions
surplus as at 31 March 2023 is estimated to be GBP84m.
Accounting valuation - At January 2023, we had an accounting
pension deficit before deferred tax of GBP101.9m (GBP100.2m after
deferred tax). At the half year, this has increased to GBP155.1m
(GBP140.1m after deferred tax). Note that the accounting valuation
has no implication for the Group in terms of cash contributions
that might need to be made to the scheme. The technical provisions
basis does, as is set out above.
Notes
A glossary of financial and non-financial terms is included on
pages 29 to 33 of the John Lewis Partnership interim results.
ENQUIRIES
Media and Analysts
Chris Wynn, Partner & Director of Communications, 07980
242019, chris.wynn@johnlewis.co.uk
Parveen Johal, Partner & Senior Communications Manager,
07768 568644, parveen.johal@johnlewis.co.uk
Debt investors: Lynn Lochhead, Partner & Head of Treasury,
investor.relations@johnlewis.co.uk
Consolidated income statement for the 26 weeks to 29 July 2023
(unaudited)
26 weeks 26 weeks 52 weeks
to to to
29 July 30 July 28 January
Notes 2023 2022* 2023
GBPm GBPm GBPm
----- --------------------------------------- --------- --------- -----------
5, 6 Revenue 5,072.8 4,948.0 10,534.0
Cost of sales (3,507.8) (3,423.7) (7,280.8)
----- --------------------------------------- --------- --------- -----------
Gross profit 1,565.0 1,524.3 3,253.2
Other operating income 59.5 59.6 126.8
Operating and administrative expenses (1,637.2) (1,642.8) (3,532.1)
--------------------------------------- --------- --------- -----------
of which:
4 Exceptional items (net) (1.7) (32.4) (156.5)
Partnership Bonus - - -
--------------------------------------- --------- --------- -----------
Share of profit/(loss) of joint venture
(net of tax) 0.2 (0.2) 1.2
----- --------------------------------------- --------- --------- -----------
5 Operating loss (12.5) (59.1) (150.9)
7 Finance costs (70.4) (70.9) (139.7)
7 Finance income 26.7 30.8 65.2
----- --------------------------------------- --------- --------- -----------
Loss before tax (56.2) (99.2) (225.4)
Taxation (5.9) 20.2 35.0
----- --------------------------------------- --------- --------- -----------
Loss for the period (62.1) (79.0) (190.4)
----- --------------------------------------- --------- --------- -----------
Loss before Partnership Bonus, tax and
5 exceptional items (54.5) (66.8) (68.9)
----- --------------------------------------- --------- --------- -----------
*Restated - see note 1 for details
Consolidated statement of comprehensive income for the 26 weeks
to 29 July 2023 (unaudited)
26 weeks 26 weeks 52 weeks
to to to
29 July 30 July 28 January
Notes 2023 2022 2023
GBPm GBPm GBPm
----- -------------------------------------------------- -------- -------- -----------
Loss for the period (62.1) (79.0) (190.4)
----- -------------------------------------------------- -------- -------- -----------
Other comprehensive (expense)/income:
Items that will not be reclassified to profit
or loss:
Remeasurement of defined benefit pension
11 scheme (55.7) 161.3 (599.5)
Movement in deferred tax on pension scheme 13.9 (46.8) 147.2
Movement in current tax on pension scheme - - 2.0
Items that may be reclassified subsequently
to profit or loss:
Fair value (loss)/gain on cash flow hedges (12.2) 32.7 36.7
Cash flow hedge (gain)/loss reclassified
and reported in the consolidated income statement (0.2) (2.7) (10.2)
Movement in deferred tax on cash flow hedges 4.7 - (1.9)
Gain/(loss) on foreign currency 0.8 (0.2) -
----- -------------------------------------------------- -------- -------- -----------
Other comprehensive (expense)/income for
the period (48.7) 144.3 (425.7)
----- -------------------------------------------------- -------- -------- -----------
Total comprehensive (expense)/income for
the period (110.8) 65.3 (616.1)
----- -------------------------------------------------- -------- -------- -----------
Consolidated balance sheet as at 29 July 2023 (unaudited)
Notes 29 July 28 January
2023 30 July 2022 2023
-----
GBPm GBPm GBPm
----- ---------------------------------------- --------- ------------ ----------
Non-current assets
9 Intangible assets 423.3 440.9 441.8
9 Property, plant and equipment 2,813.8 2,891.3 2,883.3
9 Right-of-use assets 1,277.3 1,405.0 1,319.5
Trade and other receivables 18.3 15.2 16.9
13 Derivative financial instruments 1.0 5.9 1.6
Investment in and loans to joint venture 5.6 4.2 5.6
Deferred tax asset 20.7 - 5.7
11 Retirement benefit surplus - 658.1 -
----- ---------------------------------------- --------- ------------ ----------
4,560.0 5,420.6 4,674.4
----- ---------------------------------------- --------- ------------ ----------
Current assets
Inventories 712.1 722.7 701.7
Trade and other receivables 340.2 342.5 344.1
Current tax receivable 10.1 5.3 16.3
13 Derivative financial instruments 2.0 24.9 11.3
Assets held for sale 0.9 - -
Short-term investments 93.8 110.3 0.3
Cash and cash equivalents 805.7 944.6 1,038.1
----- ---------------------------------------- --------- ------------ ----------
1,964.8 2,150.3 2,111.8
----- ---------------------------------------- --------- ------------ ----------
Total assets 6,524.8 7,570.9 6,786.2
----- ---------------------------------------- --------- ------------ ----------
Current liabilities
13 Borrowings and overdrafts (50.0) - (50.0)
Trade and other payables (1,609.4) (1,684.4) (1,768.9)
Current tax payable (2.0) - -
13 Lease liabilities (143.5) (160.4) (148.5)
10 Provisions (101.0) (99.5) (102.3)
13 Derivative financial instruments (15.1) (4.5) (4.0)
----- ---------------------------------------- --------- ------------ ----------
(1,921.0) (1,948.8) (2,073.7)
----- ---------------------------------------- --------- ------------ ----------
Non-current liabilities
13 Borrowings (587.1) (639.7) (587.8)
Trade and other payables (28.0) (28.0) (28.3)
13 Lease liabilities (1,706.4) (1,778.9) (1,754.7)
10 Provisions (125.8) (152.6) (122.9)
13 Derivative financial instruments (8.6) (4.1) (8.8)
11 Retirement benefit obligations (155.1) (15.7) (101.9)
Deferred tax liability (5.2) (202.8) (5.1)
----- ---------------------------------------- --------- ------------ ----------
(2,616.2) (2,821.8) (2,609.5)
----- ---------------------------------------- --------- ------------ ----------
Total liabilities (4,537.2) (4,770.6) (4,683.2)
----- ---------------------------------------- --------- ------------ ----------
Net assets 1,987.6 2,800.3 2,103.0
----- ---------------------------------------- --------- ------------ ----------
Equity
Share capital 6.7 6.7 6.7
Share premium 0.3 0.3 0.3
Other reserves (7.7) 25.4 3.8
Retained earnings 1,988.3 2,767.9 2,092.2
----- ---------------------------------------- --------- ------------ ----------
Total equity 1,987.6 2,800.3 2,103.0
----- ---------------------------------------- --------- ------------ ----------
Consolidated statement of changes in equity for the 26 weeks to
29 July 2023 (unaudited)
Share Share Capital Hedging Foreign Retained Total
capital premium reserve reserve currency earnings equity
translation
reserve
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Balance at 29 January
2022 6.7 0.3 1.4 (0.5) 0.4 2,732.4 2,740.7
Loss for the period - - - - - (79.0) (79.0)
Remeasurement of defined
11 benefit pension scheme - - - - - 161.3 161.3
Fair value gain on cash
flow hedges - - - 32.7 - - 32.7
Cash flow hedge gain reclassified
and reported in the consolidated
income statement - - - (2.7) - - (2.7)
Tax on above items recognised
in equity - - - - - (46.8) (46.8)
Loss on currency translations - - - - (0.2) - (0.2)
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Total comprehensive income/(expense)
for the period - - - 30.0 (0.2) 35.5 65.3
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Transfers to inventories - - - (5.7) - - (5.7)
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Balance at 30 July 2022 6.7 0.3 1.4 23.8 0.2 2,767.9 2,800.3
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Balance at 29 January
2022 6.7 0.3 1.4 (0.5) 0.4 2,732.4 2,740.7
Loss for the year - - - - - (190.4) (190.4)
Remeasurement of defined
benefit
11 pension scheme - - - - - (599.5) (599.5)
Fair value gain on cash
flow hedges - - - 36.7 - - 36.7
Cash flow hedge gain reclassified
and reported in the consolidated
income statement - - - (10.2) - - (10.2)
Tax on above items recognised
in equity - - - (1.9) - 149.2 147.3
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Total comprehensive income/(expense)
for the period - - - 24.6 - (640.7) (616.1)
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Reclassification - - - - (0.5) 0.5 -
Transfers to inventories - - - (21.6) - - (21.6)
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Balance at 28 January
2023 6.7 0.3 1.4 2.5 (0.1) 2,092.2 2,103.0
Loss for the period - - - - - (62.1) (62.1)
Remeasurement of defined
11 benefit pension scheme - - - - - (55.7) (55.7)
Fair value loss on cash
flow hedges - - - (12.2) - - (12.2)
Cash flow hedge loss reclassified
and reported in the consolidated
income statement - - - (0.2) - - (0.2)
Tax on above items recognised
in equity - - - 4.7 - 13.9 18.6
Gain on currency translations - - - - 0.8 - 0.8
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Total comprehensive (expense)/income
for the period - - - (7.7) 0.8 (103.9) (110.8)
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Transfers to inventories - - - (4.6) - - (4.6)
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Balance at 29 July 2023 6.7 0.3 1.4 (9.8) 0.7 1,988.3 1,987.6
----- ------------------------------------ -------- -------- -------- -------- ------------ --------- -------
Consolidated statement of cash flows for the 26 weeks to 29 July
2023 (unaudited)
26 weeks
to 52 weeks to
29 July 26 weeks to 28 January
Notes 2023 30 July 2022 2023
GBPm GBPm GBPm
----- ------------------------------------------- -------- ------------- -----------
Cash generated from operations before
12 Partnership Bonus 93.8 16.4 342.2
Net taxation received/(paid) 6.5 (7.0) (9.7)
Pension deficit reduction payments (5.0) (5.0) (10.0)
Finance costs paid (49.4) (48.9) (96.3)
----- ------------------------------------------- -------- ------------- -----------
Net cash generated from/(used in) operating
activities before Partnership Bonus 45.9 (44.5) 226.2
----- ------------------------------------------- -------- ------------- -----------
Partnership Bonus paid - (46.1) (46.2)
Net cash generated from/(used in) operating
activities after Partnership Bonus 45.9 (90.6) 180.0
----- ------------------------------------------- -------- ------------- -----------
Cash flows from investing activities
Purchase of property, plant and equipment (68.2) (91.8) (222.8)
Purchase of intangible assets (62.1) (61.6) (128.6)
Proceeds from sale of property, plant
and equipment and intangible assets 14.3 1.1 2.0
Finance income received 16.2 2.8 11.6
Cash (outflow)/inflow from short-term
investments (93.5) (15.0) 95.0
----- ------------------------------------------- -------- ------------- -----------
Net cash used in investing activities (193.3) (164.5) (242.8)
----- ------------------------------------------- -------- ------------- -----------
Cash flows from financing activities
Finance costs paid in respect of bonds - - (31.1)
Finance costs paid in respect of financial
instruments (4.6) (2.9) (0.5)
Payment of capital element of leases (80.4) (62.8) (132.9)
Cash outflow from borrowings - (150.0) (150.0)
----- ------------------------------------------- -------- ------------- -----------
Net cash used in financing activities (85.0) (215.7) (314.5)
----- ------------------------------------------- -------- ------------- -----------
Decrease in net cash and cash equivalents (232.4) (470.8) (377.3)
Net cash and cash equivalents at beginning
of the period 1,038.1 1,415.4 1,415.4
----- ------------------------------------------- -------- ------------- -----------
Net cash and cash equivalents at end
of the period 805.7 944.6 1,038.1
----- ------------------------------------------- -------- ------------- -----------
Net cash and cash equivalents comprise:
Cash at bank and in hand 143.8 158.1 162.9
Short-term deposits 661.9 786.5 875.2
----- ------------------------------------------- -------- ------------- -----------
805.7 944.6 1,038.1
----- ------------------------------------------- -------- ------------- -----------
Notes to the financial statements (unaudited)
1 Basis of preparation
This condensed set of interim financial statements was approved
by the Board on 13 September 2023. The condensed set of interim
financial statements do not comprise statutory accounts within the
meaning of Section 434 of the Companies Act 2006. The condensed set
of interim financial statements is unaudited and has not been
reviewed by the auditor. The comparative information for the 26
weeks to, or as at, 30 July 2022 has not been audited or
reviewed.
The results for the 26 weeks to 29 July 2023 have been prepared
using the discrete period approach, considering the interim period
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 loss in the 26 weeks to 29 July 2023.
The Group's published financial statements for the 52 weeks to
28 January 2023 have been reported on by the Group's auditor and
filed with the Registrar of Companies. The report of the auditor
was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under section 498 of the
Companies Act 2006.
This condensed set of interim financial statements for the 26
weeks ended 29 July 2023 has been prepared in accordance with
UK-adopted IAS 34 'Interim Financial Reporting'. The condensed set
of interim financial statements should be read in conjunction with
the Annual Report and Accounts for the 52 weeks to 28 January 2023,
which have been prepared in accordance with UK-adopted
International Financial Reporting Standards (UK-adopted IFRS).
Changes to significant accounting policies are described in note
2.
Restatement of the comparative information for the 26 weeks to
30 July 2022
The consolidated income statement for the 26 week period to 30
July 2022 has been restated. Store impairment charges of GBP(25.6)m
have been reclassified into exceptional items having originally
been recorded in operating and administrative expenses. This
reflects that all store impairment charges were presented as
exceptional items for the 52 weeks to 28 January 2023, as they met
the Group's accounting policy to be disclosed in exceptional items.
To ensure consistent treatment, the impairment charges recognised
in the first half of the financial year were reclassified to
exceptional items. There is no change to operating profit or profit
before tax, but this has the effect of changing the Group's PBTBE
from a reported loss of GBP(92.4)m to a restated loss of
GBP(66.8)m. The corresponding information in notes 4 and 5 have
been restated accordingly.
Going concern
In determining the appropriate basis of preparation of the
condensed set of interim financial statements for the period ended
29 July 2023, the Directors are required to consider whether the
Group can continue in operational existence for a period of at
least 12 months from the approval of these financial statements.
The Board has concluded that it is appropriate to adopt the going
concern basis, having undertaken a rigorous assessment of the
financial forecasts with specific consideration to the trading
position of the Group, for the reasons set out below.
As at 29 July 2023, the Group had total assets less current
liabilities of GBP4.6bn and net assets of GBP2.0bn. Total liquidity
as at that date remains strong at GBP1.3bn, made up of cash and
cash equivalents, short-term investments and an undrawn syndicated
credit facility of GBP0.4bn.
The Directors have modelled a severe but plausible downside
scenario ('severe downside scenario') to cover the going concern
assessment period, being for the 12 month period ending September
2024. In addition, the Directors have modelled a further period to
January 2025 in order to ensure that the entire trading year is
considered as this aligns with our bond covenants. For the purposes
of the going concern assessment, it is assumed that all Group
borrowings are repaid at their maturity date and that no further
refinancing or funding is undertaken. The severe downside scenario
represents an increasingly severe but plausible scenario which
reflects a worsening economic environment and under delivery of the
Partnership Plan.
1 Basis of preparation (continued)
In this severe downside scenario, Waitrose and John Lewis remain
operational both in store and online, albeit with sales and margin
pulled back from current trading levels due to poor trading
environment throughout the assessment period resulting in a
reduction in sales, as well as a reduction in margin across both
brands and a higher impairment charge, a decrease in pension scheme
assets and under-delivery of key activities of the Partnership
Plan. The impact of the severe downside adjustments has been
reviewed against the Group's projected cash position and financial
covenants. Should these adjustments occur simultaneously,
mitigating actions would be required to ensure that the Group
remains liquid and financially viable.
The severe downside model has a significant adverse impact on
sales, margin, costs and cash flow. In response, the Directors have
identified available mitigations in the going concern assessment
period, all within management's control, to reduce costs and
optimise the Group's cash flow, liquidity and covenant headroom.
The majority of these mitigations would only be triggered in the
event of the severe downside scenario materialising. Mitigating
actions include, but are not limited to: reducing capital and
investment expenditure through postponing or pausing projects and
change activity; deferring or cancelling discretionary spend
including discretionary Partner benefits; and reducing marketing
spend.
The Group has a syndicated credit facility of GBP420m maturing
in 2026. The credit facility is undrawn at the balance sheet date
and has not been drawn at any point since it was acquired. The
severe downside scenario modelled indicates that without mitigating
actions a number of the Group's financial covenants would breach at
the next balance sheet date due to the reduction in profits and net
assets modelled. Post mitigating actions, there would be no
breaches of financial covenants and the cash low point under such a
scenario would be GBP709m, with further mitigations available.
The severe downside detailed above is deemed by the Directors to
provide a severe but plausible stress test on our ability to adopt
the going concern basis. This includes a significant reduction in
2023/24 performance and reduced trading performance across both
brands, resulting in a pre-mitigation cash reduction to forecast.
We have made our assessment based on our best view of the severe
but plausible downside scenario that we might face. If outcomes are
unexpectedly significantly worse, the Directors would need to
consider what additional mitigating actions are needed, for
example, accessing the value of our asset base to support
liquidity.
Consequently, the Directors have concluded that the Group will
have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the
condensed set of interim financial statements and therefore have
prepared the financial statements on a going concern basis.
2 Accounting policies
The Group's results for the 26 weeks to 29 July 2023 have been
prepared on a basis consistent with the Group's accounting policies
published in the financial statements for the 52 weeks to 28
January 2023.
A number of amendments to, and the interpretation of, existing
accounting standards became effective during the period, none of
which have had a significant impact on the condensed interim
financial statements.
3 Risks and uncertainties
The Group has a formal risk identification process, which
includes a rigorous analysis of internal and external risks within
leadership teams, at the Executive Team, Audit and Risk Committee,
Ethics and Sustainability Committee and the Partnership Board. The
principal risks and uncertainties affecting the Group were reported
in the Strategic Report, set out on pages 42 to 50 of the John
Lewis Partnership Annual Report and Accounts 2023, a copy of which
is available on the Partnership's website
www.johnlewispartnership.co.uk . There have been no changes to the
Group's risk profile in the first half of this financial year.
Our principal risks are:
-- Insufficient Profit to Achieve Our Purpose: Risk that we
won't make sufficient profit to achieve our Purpose; the impact of
which would be a combination of reduced competitiveness and
ultimately commercial failure, loss of Partner faith and democratic
vitality due to lack of suitable Partner rewards endangering our
Partnership model, and inability to maintain our distinctive
character;
-- Change Delivery: Change does not realise the desired benefits
and drives unforeseen cost and consequences;
-- Information Security: Loss of key customer, Partner and/or
commercially sensitive data leading to financial, regulatory,
legal, operational and reputational issues;
-- Regulatory Non-compliance: Failure to comply with key regulatory requirements;
-- Proposition: Failure to deliver profitable, market-leading
propositions to inspire our customers and maintain competitive
advantage;
-- Partner Differentiation: The responsibilities and benefits of
membership are not sufficiently felt and experienced by Partners
and/or do not drive a distinctive and better business in service of
our purpose;
-- Customer Experience: Customers do not receive differentiated,
excellent customer service across touchpoints;
-- Partner Wellbeing: Partners' sense of wellbeing is threatened
by societal and organisational uncertainty and change;
-- Ethics and Sustainability: Failure to live up to our ethics and sustainability ambition;
-- Strategic Resilience: Failure of our strategy to respond to
changes in the external environment.
The economic outlook and consumer sentiment remain uncertain
which may affect the pace or outcome of our Plan delivery.
Monitoring of operational resilience risk will also be included in
risk reporting going forward.
4 Exceptional items
26 weeks to 26 weeks to 52 weeks to
29 July 2023 30 July 2022 28 January 2023
Operating Taxation Operating Taxation Operating Taxation
(expenses)/ (charge)/ (expenses)/ credit/ (expenses)/ credit/
income credit income* (charge)* income (charge)
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------- ------------ ---------- ------------ ---------- ------------ ---------
Strategic restructuring
and redundancy programmes
Lean Simple Fast (5.0) 1.2 - - - -
Physical estate 0.3 (0.3) (4.7) (0.3) (14.1) 0.5
Shop operations 0.4 (0.1) (2.2) (0.5) (2.2) 0.4
Central operations reviews 0.6 (0.1) 0.1 - (0.2) -
----------------------------- ------------ ---------- ------------ ---------- ------------ ---------
(3.7) 0.7 (6.8) (0.8) (16.5) 0.9
----------------------------- ------------ ---------- ------------ ---------- ------------ ---------
Store impairments - Waitrose - - (20.9) 3.4 (131.7) 13.6
Store impairments - John
Lewis 2.0 (0.5) (4.7) 0.2 18.4 (4.3)
----------------------------- ------------ ---------- ------------ ---------- ------------ ---------
Cost of living payment - - - - (26.7) 5.1
----------------------------- ------------ ---------- ------------ ---------- ------------ ---------
(1.7) 0.2 (32.4) 2.8 (156.5) 15.3
----------------------------- ------------ ---------- ------------ ---------- ------------ ---------
*Restated - see note 1 for details
Strategic restructuring and redundancy programmes
Since January 2023, the Group has embarked on a number of
initiatives within the Lean Simple Fast transformation programme
whilst progressing transformation projects announced in previous
years across our physical estate, shop operations and central
operations.
The costs incurred over the life of the change programmes
outlined are significant in value and, given the level of change,
they are significant in nature, therefore the Group considers them
exceptional items to provide a more meaningful view of the Group's
underlying business performance. The financial impacts of these
programmes are detailed below.
Lean Simple Fast: In 2022/23, the Group commenced a
transformational programme of lean simple fast activity which is a
key pillar of the Partnership Plan. Due to the scale, pace and
transformative nature of these initiatives, the associated
redundancy costs have been recognised as exceptional charges.
GBP(5.0)m of costs have been recognised related to a number of
redundancy projects announced in the first half of this year,
including the closure of the Group's fitted kitchen and bathroom
offerings, the outsourcing of fitted flooring services and a
restructure of our Customer teams.
Physical estate: Since 2017, we have been working on our
programme of rebalancing our existing estate; this includes
ensuring that the size and shape of our physical estate is
delivering on both our customer proposition, and financial returns.
With the launch of the Partnership Plan, and the acceleration of
change we have seen in customer shopping behaviour, we have
refocused on the need to ensure our stores reflect how our
customers want to shop - 'right space, right place' - and as a
result we anticipate these changes will extend to 2027/28.
A net credit of GBP0.3m was recognised for the 26 week period to
29 July 2023 (30 July 2022: GBP(4.7)m charge) comprising
adjustments to provisions booked in prior years of GBP0.8m credit,
offset by losses on disposal of assets of GBP0.5m.
Shop operations and Central operations reviews: A net credit of
GBP1.0m was recognised (30 July 2022: GBP(2.1)m charge) following
the review of provisions booked in prior years for the Head Office
Transformation programme (GBP0.6m) and Shop Leadership
Transformation programme (GBP0.4m).
Store impairment
A GBP2.0m release of an impairment provision was recognised
following a renegotiation of the rental agreement for a John Lewis
store.
The comparative information for the 26 weeks to 30 July 22 has
been restated to reflect the store impairment charges of GBP(20.9)m
for John Lewis and GBP(4.7)m for Waitrose which were previously
included in operating expenses. See note 1 for further details.
5 Segmental reporting
The Group's reporting segments are determined based on the
internal financial reporting to the chief operating decision-maker
(CODM) and is split by the business activities of its brands (John
Lewis and Waitrose). The Executive Team reviews the operating
performance for each brand (John Lewis and Waitrose) in the Group,
using non-GAAP measures known as Total trading sales and Trading
operating profit (TOP).
Total trading sales represents the full customer sales value
including VAT as reported weekly to the Executive Team, before
adjustments for sale or return sales and other accounting
adjustments.
TOP is based on operating profit, but excludes centrally managed
costs. These centrally managed costs are outside of the direct
influence and control of the brands and are reviewed by the
Executive Team at a Group level in aggregate. TOP is used to assess
the performance of the John Lewis and Waitrose brands and determine
the allocation of resources to those segments.
The Waitrose business is not subject to highly seasonal
fluctuations although there is an increase in trading in the fourth
quarter of the year. There is a more marked increase in the fourth
quarter for the John Lewis business.
Waitrose John Lewis Group
GBPm GBPm GBPm
------------------------------------------------ -------- ---------- -------
26 weeks to 29 July 2023
Total trading sales 3,721.6 2,098.3 5,819.9
Value added tax (214.4) (340.4) (554.8)
Sale or return and other accounting adjustments (27.0) (165.3) (192.3)
------------------------------------------------ -------- ---------- -------
Revenue 3,480.2 1,592.6 5,072.8
------------------------------------------------ -------- ---------- -------
Trading operating profit(1) 504.4 277.1 781.5
------------------------------------------------ -------- ---------- -------
Other operating and administrative expenses(2) (794.0)
------------------------------------------------ -------- ---------- -------
of which:
Exceptional items (net) (1.7)
Partnership Bonus -
------------------------------------------------ -------- ---------- -------
Operating loss (12.5)
Finance costs (70.4)
Finance income 26.7
------------------------------------------------ -------- ---------- -------
Loss before tax (56.2)
------------------------------------------------ -------- ---------- -------
Loss before tax, Partnership Bonus and
exceptional items (54.5)
------------------------------------------------ -------- ---------- -------
(1) Included in Trading operating profit is other operating
income of which GBP55.5m (split between operating segments:
GBP34.9m John Lewis and GBP20.6m Waitrose) represents further
income from external customers. This is reported to the CODM
separately as part of other income and expenses.
(2) Included in Other operating and administrative expenses is
GBP251.1m of depreciation and amortisation.
5 Segmental reporting (continued)
Waitrose John Lewis Group
GBPm GBPm GBPm
------------------------------------------------ -------- ---------- -------
26 weeks to 30 July 2022(1)
Total trading sales 3,583.4 2,136.4 5,719.8
Value added tax (208.5) (346.9) (555.4)
Sale or return and other accounting adjustments (63.6) (152.8) (216.4)
------------------------------------------------ -------- ---------- -------
Revenue 3,311.3 1,636.7 4,948.0
------------------------------------------------ -------- ---------- -------
Trading operating profit(2) 431.7 295.0 726.7
------------------------------------------------ -------- ---------- -------
Other operating and administrative expenses(3) (785.8)
------------------------------------------------ -------- ---------- -------
of which:
Exceptional items (net) (32.4)
Partnership Bonus -
------------------------------------------------ -------- ---------- -------
Operating loss (59.1)
Finance costs (70.9)
Finance income 30.8
------------------------------------------------ -------- ---------- -------
Loss before tax (99.2)
------------------------------------------------ -------- ---------- -------
Loss before tax, Partnership Bonus and
exceptional items (66.8)
------------------------------------------------ -------- ---------- -------
(1) Restated - see note 1 for details
(2) Included in Trading operating profit is other operating
income of which GBP55.7m (split between operating segments:
GBP35.7m John Lewis and GBP20.0m Waitrose) represents further
income from external customers. This is reported to the CODM
separately as part of other income and expenses.
(3) Included in Other operating and administrative expenses is
GBP243.5m of depreciation and amortisation.
Waitrose John Lewis Group
GBPm GBPm GBPm
------------------------------------------------ -------- ---------- ---------
52 weeks to 28 January 2023
Total trading sales 7,311.9 4,938.3 12,250.2
Value added tax (424.5) (800.2) (1,224.7)
Sale or return and other accounting adjustments (137.3) (354.2) (491.5)
------------------------------------------------ -------- ---------- ---------
Revenue 6,750.1 3,783.9 10,534.0
------------------------------------------------ -------- ---------- ---------
Trading operating profit(1) 894.3 675.6 1,569.9
------------------------------------------------ -------- ---------- ---------
Other operating and administrative expenses(2) (1,720.8)
------------------------------------------------ -------- ---------- ---------
of which:
Exceptional items (net) (156.5)
Partnership Bonus -
------------------------------------------------ -------- ---------- ---------
Operating loss (150.9)
Finance costs (139.7)
Finance income 65.2
------------------------------------------------ -------- ---------- ---------
Loss before tax (225.4)
------------------------------------------------ -------- ---------- ---------
Loss before tax, Partnership Bonus and
exceptional items (68.9)
------------------------------------------------ -------- ---------- ---------
(1) Included in Trading operating profit is other operating
income of which GBP118.9m (split between operating segments:
GBP37.3m Waitrose and GBP81.6m John Lewis) represents further
income from external customers. This is reported to the CODM
separately as part of other income and expenses.
(2) Included in Other operating and administrative expenses is
GBP487.2m of depreciation and amortisation.
6 Revenue
Disaggregation of revenue from contracts with customers
The revenue recognition policy is unchanged from that described
in the Annual Report and Accounts for the 52 weeks to 28 January
2023.
We analyse our revenue between goods and services. Goods are
split into four major product lines: Grocery, Home, Fashion and
Technology. Services comprise free service guarantees on selected
goods. This presentation is consistent with how our Executive Team
reviews performance. In line with our five year Partnership Plan,
we expect our service offering to increase in the coming year and,
as such, will keep this reporting under review including the
classification of commission income from other services as other
income rather than revenue.
26 weeks 26 weeks 52 weeks
to to to
29 July 30 July 28 January
2023 2022 2023
GBPm GBPm GBPm
-------------------- -------- -------- -----------
Major product lines
-------------------- -------- -------- -----------
Goods
- Grocery 3,468.3 3,298.6 6,726.2
- Home 450.9 485.2 1,061.3
- Fashion 528.3 526.3 1,218.4
- Technology(1) 563.5 599.3 1,397.5
-------------------- -------- -------- -----------
Services
- Free warranty(1) 8.4 8.8 17.8
-------------------- -------- -------- -----------
Other revenue 53.4 29.8 112.8
-------------------- -------- -------- -----------
5,072.8 4,948.0 10,534.0
-------------------- -------- -------- -----------
(1) The balances for the 26 week period ended 30 July 2022 have
been adjusted to reflect the split of revenue between Technology
and Free warranty.
7 Net finance costs
26 weeks 26 weeks 52 weeks
to to to
29 July 30 July 28 January
2023 2022 2023
GBPm GBPm GBPm
--------------------------------------- -------- -------- -----------
Finance costs
Finance costs in respect of borrowings
and lease liabilities(1) (67.4) (68.2) (134.5)
Fair value measurements and other (0.8) (2.7) (5.2)
Net finance costs arising on defined
benefit retirement scheme (2.2) - -
--------------------------------------- -------- -------- -----------
Total finance costs (70.4) (70.9) (139.7)
--------------------------------------- -------- -------- -----------
Finance income
Finance income in respect of cash and
short-term investments(2) 20.0 6.8 20.7
Fair value measurements and other 1.5 2.1 4.7
Net finance income arising on defined
benefit retirement scheme - 5.4 39.8
Net finance income arising on other
employee benefit schemes 5.2 16.5 -
--------------------------------------- -------- -------- -----------
Total finance income 26.7 30.8 65.2
--------------------------------------- -------- -------- -----------
Net finance costs (43.7) (40.1) (74.5)
--------------------------------------- -------- -------- -----------
(1) Finance costs in respect of borrowings and lease liabilities
include interest payable on interest rate swaps of GBP4.7m (July
2022: GBP2.9m; January 2023: GBP6.6m) and lease liabilities of
GBP44.9m (July 2022: GBP46.3m; January 2023: GBP91.8m).
(2) Finance income in respect of cash and short-term investments
includes interest receivable on interest rate swaps of GBP3.1m
(July 2022: GBP3.1m; January 2023: GBP6.1m).
Capitalised borrowing costs totalled GBP1.7m (July 2022:
GBP0.1m; January 2023: GBP1.4m) of which GBP0.9m (July 2022:
GBP0.1m; January 2023: GBP0.3m) were capitalised within intangible
assets and GBP0.8m (July 2022: GBPnil; January 2023: GBP1.1m) were
capitalised within property, plant and equipment.
8 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 excluding any discrete items. The tax charge on
discrete items at half year is calculated separately. The effective
tax rate for the 26 weeks to 29 July 2023 is higher than would be
expected for the full year. This is as a result of a significant
number of discrete items expected at the full year.
9 Property, plant and equipment, Intangible assets and Right-of-use assets
Property, Intangible Right-of-use Total
plant and assets assets
equipment
GBPm GBPm GBPm GBPm
--------------------------------- ---------- ---------- ------------ -------
Net book value at 28 January
2023 2,883.3 441.8 1,319.5 4,644.6
Additions(1) 49.3 62.0 27.1 138.4
Depreciation and amortisation(2) (103.7) (77.2) (68.2) (249.1)
Disposals and write-offs (14.2) (3.3) (1.1) (18.6)
Transfers to assets held
for sale (0.9) - - (0.9)
--------------------------------- ---------- ---------- ------------ -------
Net book value at 29 July
2023 2,813.8 423.3 1,277.3 4,514.4
--------------------------------- ---------- ---------- ------------ -------
(1) For the period ended 29 July 2023, additions for the year
include the non-cash capital expenditure accrual on property, plant
and equipment of GBP13.1m (January 2023: GBP34.8m) and intangible
assets of GBP1.8m (January 2023: GBP2.8m).
(2) For the period ended 29 July 2023, depreciation and
amortisation includes an impairment release of GBP2.0m to
right-of-use assets (January 2023: GBP69.4m charge), GBPnil to land
and buildings (January 2023: GBP46.6m charge), and GBPnil to
fixtures and fittings (January 2023: GBP5.2m charge).
Intangible assets primarily relate to internally developed
computer software.
Right-of-use assets are recognised in relation to the Group's
leases, representing the economic benefits of the Group's right to
use the underlying leased assets. The Group's lease portfolio
principally comprised of property leases of land and buildings in
relation to Waitrose and John Lewis stores, distribution centres
and head offices. The Group also holds a number of vehicle and
equipment leases and service agreements deemed to meet the
definition of a lease under IFRS 16.
In accordance with IAS 36, the Group reviews its property,
plant, intangible assets and right-of-use assets for impairment at
least annually or whenever events or circumstances indicate that
the value on the balance sheet may not be recoverable. The
impairment review methodology is unchanged from that described in
the Annual Report and Accounts for the 52 weeks to 28 January
2023.
For the 26 weeks to 29 July 2023 an assessment was completed to
identify if there were any indicators for impairment of tangible
assets or cash-generating units (CGUs). Management considered
financial performance as well as macroeconomic factors. A GBP2.0m
release of an impairment provision was recognised following a
renegotiation of the rental agreement for a John Lewis store.
10 Provisions
Long Customer Insurance Reorganisation Other Total
leave refunds claims
GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------- -------- --------- -------------- ------ -------
At 28 January 2023 (121.2) (22.8) (24.4) (10.8) (46.0) (225.2)
------------------- ------- -------- --------- -------------- ------ -------
Charged to income
statement (3.4) (26.8) (8.2) (5.8) (4.4) (48.6)
Released to income
statement 7.7 - - 2.9 2.2 12.8
Utilised 3.6 22.8 3.3 4.4 0.1 34.2
------------------- ------- -------- --------- -------------- ------ -------
At 29 July 2023 (113.3) (26.8) (29.3) (9.3) (48.1) (226.8)
------------------- ------- -------- --------- -------------- ------ -------
Of which:
Current (35.4) (26.8) (9.3) (9.3) (20.2) (101.0)
Non-current (77.9) - (20.0) - (27.9) (125.8)
------------------- ------- -------- --------- -------------- ------ -------
The Group has a long leave scheme, open to all Partners, which
provides up to six months paid leave after 25 years' service. There
is no proportional entitlement for shorter periods of service. The
provision for the liabilities under the scheme is assessed on an
actuarial basis, reflecting Partners' expected service profiles,
salary growth, National Insurance and overtime earnings
assumptions. The discount rate applied differs from the discount
rate used for the Group's retirement benefit obligations (note 11)
as it reflects a rate appropriate to the shorter duration of the
long leave liability so as to accrue the cost over Partners'
service periods.
Provisions for customer refunds reflect the Group's expected
liability for returns of goods sold, based on experience of rates
of return.
Provisions for insurance claims are in respect of the Group's
employer's public and vehicle third-party liability insurances. The
provisions are based on reserves held in the Group's captive
insurance company, JLP Insurance Limited. These reserves are
established using independent actuarial assessments wherever
possible, or a reasonable assessment based on past claims
experience.
Provisions held for reorganisation relate to strategic
restructuring and redundancy programmes; principally in relation to
the Lean Simple Fast transformation programme, the ongoing review
of the Group's physical estate, and the prior year shop management
reorganisation.
Other provisions primarily include property-related costs
including dilapidations provisions.
11 Retirement benefit obligations
The pension scheme operated by the Group is the John Lewis
Partnership Trust for Pensions. The scheme includes a defined
benefit section, providing pensions and death benefits to members.
All contributions to the defined benefit section of the scheme are
funded by the Group. The defined benefit section of the scheme
closed to new members and future accrual on 1 April 2020 and all
active members of the scheme moved to become deferred members.
The scheme also includes a defined contribution section.
Contributions to the defined contribution section of the scheme are
made by both Partners and the Group.
Pension commitments recognised in these financial statements
have been calculated based on the most recently completed actuarial
valuations, as at 31 March 2022, which have been updated by the
actuaries to reflect the assets and liabilities of the scheme as at
29 July 2023. We have agreed the key terms of the triennial pension
valuation as at March 2022, which shows a technical provisions
surplus of GBP320m as at the valuation date (compared with a
deficit of GBP58m at the March 2019 valuation). This means that no
deficit contributions will be required ahead of the next triennial
valuation in 2025. The technical provisions surplus as at March
2023 is estimated to be GBP84m.
Scheme assets are stated at market value at 29 July 2023.
The following financial assumptions have been used:
29 July 30 July 28 January
2023 2022 2023
------------------------------------ ------- ------- ----------
Discount rate 5.35% 3.60% 4.65%
Future retail price inflation (RPI) 3.00% 3.00% 3.00%
Future consumer price inflation
(CPI) 2.60% 2.55% 2.60%
Increase in pensions - in payment
Pre-April 1997 1.85% 1.85% 1.85%
April 1997 - April 2016 2.85% 2.85% 2.85%
Post-April 2016 1.85% 1.85% 1.85%
Increase in pensions - deferred 2.60% 2.55% 2.60%
------------------------------------- ------- ------- ----------
The movement in the net defined benefit surplus/(liability) in
the period is as follows:
26 weeks 52 weeks
to to
26 weeks to 30 July 28 January
29 July 2023 2022 2023
GBPm GBPm GBPm
----------------------------------------------- ------------- -------- -----------
Net defined benefit (liability)/asset
at beginning of period (101.9) 473.5 473.5
Operating cost/Pension expense (2.0) (4.6) (9.4)
Interest cost on pension liabilities (102.0) (76.5) (153.0)
Interest income on assets 99.8 82.0 164.1
Contributions 6.7 6.7 22.4
Total (losses)/gains recognised
in equity (55.7) 161.3 (599.5)
----------------------------------------------- ------------- -------- -----------
Net defined benefit (liability)/asset
at end of period (155.1) 642.4 (101.9)
----------------------------------------------- ------------- -------- -----------
of which:
Total funded defined benefit (liability)/asset
at end of period (142.1) 658.1 (88.1)
Defined benefit obligation for
unfunded arrangements (13.0) (15.7) (13.8)
----------------------------------------------- ------------- -------- -----------
11 Retirement benefit obligations (continued)
The post-retirement mortality assumptions used in valuing the
pension liabilities were based on the 'S3' (28 January 2023: 'S3';
30 July 2022: 'S2 Light') series standard tables. Based on scheme
experience, the probability of death at each age was multiplied by
112% for males and 95% for females who were non pensioners and 103%
for males and 92% for females who were pensioners (28 January 2023:
118% for males and 100% for females who were non pensioners and
109% for males and 97% for females who were pensioners; 30 July
2022: 127% for males and 106% for females who were non pensioners
and 130% for males and 109% for females who were pensioners).
Future improvements in life expectancy have been allowed for in
line with the latest CMI model projections subject to a long-term
trend of 1.25% (28 January 2023: 1.25%; 30 July 2022: 1.25%). The
average life expectancies assumed were as follows:
28 January
29 July 2023 30 July 2022 2023
Men Women Men Women Men Women
Average life expectancy for a
65 year old (in years) 21.2 24.0 20.9 23.3 21.3 24.0
Average life expectancy at age
65, for a 50 year old (in years) 21.4 24.8 21.9 24.6 21.6 24.9
---------------------------------- ------ ------ ------ ------ ----- -----
12 Reconciliation of loss before tax to cash generated from operations before Partnership Bonus
26 weeks 26 weeks 52 weeks
to to to
29 July 30 July 28 January
2023 2022 2023
GBPm GBPm GBPm
------------------------------------------ -------- -------- -----------
Loss before tax (56.2) (99.2) (225.4)
Amortisation and write offs of intangible
assets(1) 80.5 65.8 133.4
Depreciation(1) 175.7 206.0 476.9
Share of (profit)/loss of joint venture
(net of tax) (0.2) 0.2 (1.2)
Net finance costs 43.7 40.1 74.5
Fair value losses on derivative financial
instruments - 0.1 0.1
Profit on disposal of property, plant
and equipment and intangible assets (1.9) (2.6) (3.1)
(Increase)/decrease in inventories (7.2) (70.0) (48.5)
Decrease/(increase) in receivables 9.4 (2.5) (12.7)
(Decrease)/increase in payables (155.1) (91.0) (1.0)
Increase/(decrease) in retirement benefit
obligations 0.3 2.9 (3.1)
Increase/(decrease) in provisions 4.8 (33.4) (47.7)
------------------------------------------ -------- -------- -----------
Cash generated from operations before
Partnership Bonus 93.8 16.4 342.2
------------------------------------------ -------- -------- -----------
(1) Includes net impairment charges
13 Analysis of net debt
28 January Cash flow Other non- 29 July
2023 cash movements 2023
GBPm GBPm GBPm GBPm
--------------------------------- ---------- --------- --------------- ---------
Non-current assets
Derivative financial instruments 1.6 - (0.6) 1.0
--------------------------------- ---------- --------- --------------- ---------
1.6 - (0.6) 1.0
--------------------------------- ---------- --------- --------------- ---------
Current assets
Cash and cash equivalents 1,038.1 (232.4) - 805.7
Short-term investments 0.3 93.5 - 93.8
Derivative financial instruments 11.3 (8.5) (0.8) 2.0
--------------------------------- ---------- --------- --------------- ---------
1,049.7 (147.4) (0.8) 901.5
--------------------------------- ---------- --------- --------------- ---------
Current liabilities
Borrowings and overdrafts (50.0) - - (50.0)
Lease liabilities (148.5) 125.5 (120.5) (143.5)
Derivative financial instruments (4.0) 2.1 (13.2) (15.1)
--------------------------------- ---------- --------- --------------- ---------
(202.5) 127.6 (133.7) (208.6)
--------------------------------- ---------- --------- --------------- ---------
Non-current liabilities
Borrowings (600.0) - - (600.0)
Unamortised bond transaction
costs 6.0 - (0.5) 5.5
Fair value adjustment for
hedged element on bonds 6.2 - 1.2 7.4
Lease liabilities (1,754.7) - 48.3 (1,706.4)
Derivative financial instruments (8.8) - 0.2 (8.6)
--------------------------------- ---------- --------- --------------- ---------
(2,351.3) - 49.2 (2,302.1)
--------------------------------- ---------- --------- --------------- ---------
Total net debt (1,502.5) (19.8) (85.9) (1,608.2)
--------------------------------- ---------- --------- --------------- ---------
Reconciliation of net cash flow
to net debt
------------------------------------- --------- ------------- -----------
26 weeks 26 weeks 52 weeks
to to to
29 July 30 July 2022 28 January
2023 2023
GBPm GBPm GBPm
------------------------------------- --------- ------------- -----------
(Decrease)/increase in net cash and
cash equivalents in the period (232.4) (470.8) (377.3)
Cash outflow/(inflow) from movement
in short-term investments 93.5 15.0 (95.0)
Cash outflow/(inflow) from borrowing - 150.0 150.0
Cash outflow from movement in other
net debt items 119.1 105.5 194.9
------------------------------------- --------- ------------- -----------
Cash movement in net debt for the
period (19.8) (200.3) (127.4)
Opening net debt (1,502.5) (1,270.7) (1,270.7)
Non-cash movements in net debt for
the period (85.9) (30.9) (104.4)
------------------------------------- --------- ------------- -----------
Closing net debt (1,608.2) (1,501.9) (1,502.5)
------------------------------------- --------- ------------- -----------
14 Management of financial risks
The principal financial risks to which the Group is exposed are
capital and long-term funding risk, liquidity risk, interest rate
risk, foreign currency risk, credit risk, and energy risk.
This condensed set of interim financial statements does not
include all risk management information and disclosures required in
the annual financial statements and should be read in conjunction
with the Annual Report and Accounts for the 52 weeks to 28 January
2023. During the 26 weeks to 29 July 2023, the Group has continued
to apply the financial risk management process and policies as
detailed in the Annual Report and Accounts for the 52 weeks to 28
January 2023.
Valuation techniques and assumptions applied in determining the
fair value of each class of asset or liability are consistent with
those used as at 28 January 2023 and reflect the current economic
environment.
Fair value estimation
The different levels per the IFRS 13 fair value hierarchy have
been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices);
Level 3: Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
During the 26 weeks to 29 July 2023, there have been no
transfers between any levels of the IFRS 13 fair value hierarchy
and there were no reclassifications of financial assets as a result
of a change in the purpose or use of those assets.
The fair value of a derivative financial instrument represents
the difference between the value of the outstanding contracts at
their contracted rates and a valuation calculated using the forward
rates of exchange and interest rates prevailing at the balance
sheet date. The fair value of the derivative financial instruments
held by the Group are classified as Level 2 under the IFRS 13 fair
value hierarchy, as all significant inputs to the valuation model
used are based on observable market data and are not traded in an
active market. At 29 July 2023, the net fair value of derivative
financial instruments was a liability of GBP20.7m, liability (28
January 2023: GBP0.1m, asset; 30 July 2022: GBP22.2m, asset).
The following table compares the Group's liabilities held at
amortised cost, where there is a difference between carrying value
(CV) and fair value (FV):
29 July 2023 30 July 2022 28 January 2023
GBPm GBPm GBPm GBPm GBPm GBPm
CV FV CV FV CV FV
---------------------- ------- ------- ------- ------- -------- -------
Financial liabilities
Listed bonds (594.5) (476.1) (593.4) (542.4) (594.0) (482.3)
---------------------- ------- ------- ------- ------- -------- -------
The fair values of the Group's listed bonds have been determined
by reference to market price quotations and classified as Level 1
under the IFRS 13 fair value hierarchy. For other financial assets
and liabilities, there are no material differences between carrying
value and fair value.
15 Capital commitments
At 29 July 2023, contracts had been entered into for future
capital expenditure of GBP48.5m (28 January 2023: GBP37.2m; 30 July
2022: GBP64.7m) of which GBP36.6m (28 January 2023: GBP32.8m; 30
July 2022: GBP51.8m) relates to property, plant and equipment and
GBP11.9m (28 January 2023: GBP4.4m; 30 July 2022: GBP12.9m) relates
to intangible assets.
16 Related party transactions
There have been no material changes to the principal
subsidiaries listed in the Annual Report and Accounts for the 52
weeks to 28 January 2023. All related party transactions arise
during the ordinary course of business. There were no material
changes in the transactions or balances during the 26 weeks to 29
July 2023.
17 Subsequent events
There are no disclosable subsequent events.
Statement of Directors' responsibilities
The Directors confirm that to the best of their knowledge the
condensed set of interim financial statements has been prepared in
accordance with UK-adopted IAS 34 Interim Financial Reporting.
On 1 May 2023 Nish Kankiwala was appointed to the Board of
Directors. There have been no further changes to the directors of
John Lewis plc from those listed in the Group's 2023 Annual Report
and Accounts.
For and by order of the Board.
Sharon White , Chairman
Bérangère Michel , Executive Director, Finance
13 September 2023
([1]) The previously reported loss before tax, Partnership Bonus
and exceptional items of GBP92.4m for the half year to July 2022
has been restated per note 1 of the interim consolidated financial
statements
([2]) All references to sales are Total trading sales which
includes VAT, sale or return and other non-cash accounting
adjustments
([3]) Revenue is Total trading sales, less VAT, sale or return
and other non-cash accounting adjustments
([4]) Measured as the number of products that are in stock, and
available for purchase divided by the total number of products we
offer
([5]) The reported loss before tax, Partnership Bonus and
exceptional items of GBP92.4m for the half year to July 2022 has
been restated per note 1 of the interim consolidated financial
statements
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END
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