TIDMBB90
RNS Number : 1782O
Lewis(John) PLC
14 September 2011
John Lewis plc
Unaudited condensed Interim Financial Statements for the half
year ended 30 July 2011
Strict Embargo: 7:00am
14 September 2011
INVESTING FOR GROWTH
Chairman's statement
The Partnership has made good progress in the first half. Sales
grew strongly and, as expected, profits were lower than in the same
period in 2010 as we accelerated investment in our growth plans.
Our capital expenditure increased by GBP99m to GBP254m in the first
half. Sales in both Waitrose and John Lewis grew well ahead of
their respective markets. Waitrose has now been the fastest growing
supermarket for over two years and in John Lewis we gained market
share in our three key areas of electrical and home technology
(EHT), fashion and home. We have often said we are a business with
a long-term outlook. Our sales momentum today has much to do with
decisions taken to invest during similarly difficult market
conditions in 2008 and 2009. Our profit performance in the first
half reflects not only the extremely challenging trading
conditions, particularly in John Lewis, but also the significant
investments we are making to accelerate growth and to seize the
opportunities created by the structural shifts in how customers are
shopping. We accelerated our opening of new shops, with 16 new
shops versus 9 last year, an increase of 220,000 square feet of new
space. We also accelerated our spending on systems and supply chain
to increase our capacity to serve customers in the new ways they
want to shop. In Waitrose we relaunched our online platform and
will soon open a new customer fulfilment centre in Acton to support
deliveries within the M25 and in John Lewis we added extra capacity
for in-house picking and delivery of customer orders. In the
convenience market, we continued the roll-out of Little Waitrose
with 8 more shops and 12 more planned in the second half, 2 more
John Lewis at home shops planned for the second half and we will
extend our popular Click and Collect service to 116 locations from
next month. In the face of increasing pressure on household budgets
we increased our focus on offering value across all our ranges. In
Waitrose we absorbed the majority of inflation within our prices,
and in John Lewis, 'Never Knowingly Undersold' meant we met our
promise to offer the best value both on the high street and online
compared to 'bricks and mortar' competitors.
Financial Results
The Partnership delivered gross sales of GBP4.05bn for the first
half of the year, an increase of GBP244.0m or 6.4% on last year,
but operating profit at GBP111.5m, was down GBP33.7m or 23.2% on
last year. Together these represent an operating profit margin of
2.75% (2010/11 3.81%). Profit before tax was GBP91.2m, a decrease
of GBP20.0m, or 18.0%, on last year.
Planned investment in our customer offer, in service and
efficiency and in future growth, together with a highly competitive
trading environment, combined to hold back profit delivery.
Trading Performance
Waitrose
Waitrose achieved another period of industry-leading sales
growth and we have now outperformed the market for over two years.
We were voted Which? Supermarket of the Year - fitting recognition
of the commitment by 49,000 Partners to give customers the best
possible service, products and shopping environment.
Gross sales were up 8.7% (GBP209.7m) to GBP2.63bn and food only
like-for-like sales grew by 4.0%. Sales growth continued throughout
the half, with like-for-like sales up 4.7% in Q1 and 3.4% in Q2.
Operating profit reduced by GBP17.6m (13.8%) to GBP110.2m.
Compared to last year, 300,000 more customers shopped at
Waitrose each week and market share increased by 0.2% to 4.1%.
Planned investment in our customer offer, in service and
efficiency and in future growth held back profit delivery.
We pursued our multichannel strategy with the launch of a new
technology platform in March and saw a 26.8% increase in sales. The
service was renamed Waitrose.com and a nationwide marketing
campaign highlighted the emphasis on high service standards from
Waitrose Partners. The restriction on trading within the M25 came
to an end and to support the expected high volumes in London we
plan to open a fulfilment centre in Acton, West London, this
autumn.
Our online service is complemented by convenience branches for
fresh food top-ups, and Waitrose now has a total of 21 shops in
this format. We plan to open a further 12 by the end of this year
and intend that there should be more than 300 in our estate by the
end of the decade.
At the end of July Waitrose had 259 shops, having opened eight
supermarkets in the past six months, including the five acquired in
the Channel Islands, and eight convenience stores. In addition, our
flagship Canary Wharf branch underwent a GBP15m refurbishment - the
biggest ever undertaken by Waitrose - and recently relaunched as
the first Food, Fashion & Home shop. A further 20 shops,
including convenience, are planned to open in the second half of
the year.
With the rapid pace of growth and the development of different
formats and channels, we have invested in the period in new, more
flexible management structures in all our branches. Following a
pilot last year, this significant move was implemented smoothly and
is already bringing the benefit of greater efficiency and increased
opportunities for managers and Partners.
Waitrose welcomed 2,400 Partners into new jobs.
Gearing for growth led to the purchase of a new 300,000 sq ft
warehouse in Milton Keynes in March 2011. We have also announced
our intention to open a new distribution centre in Chorley to
support our expansion in the north of England and Scotland.
We continued to invest in value, quality and innovation.
Essential Waitrose is now a GBP1bn per annum brand, giving
customers value through entry-level prices with no compromise on
quality or standards. The Brand Price Match promise, launched in
November 2010, has over a thousand branded lines price-matched to
Tesco. Over one thousand promotions in our branches every week have
increased our promotional participation to 27%, up 3.3 percentage
points on the same time last year.
Quality and innovation are at the heart of the brand. Our two
brand ambassadors, Delia Smith and Heston Blumenthal, bring the
Waitrose passion for good food and cooking to life in
advertisements, publications and online.
We have built a best-in-class food development team and invested
in new products, introducing 3,500 new lines this year. Two
important launches took place in the first six months of this year:
Good to Go, a range of 150 food products to be eaten on the move,
and LOVE Life, a range of 270 delicious and nutritionally balanced
products. The Menu From Waitrose; Seriously From Waitrose; Duchy
From Waitrose and Heston From Waitrose brands form a market-beating
unmatchable top tier.
The drive to bring Waitrose to more people in more places
continued through strategic partnerships. Four more Waitrose
outlets have opened at Welcome Break service stations, taking the
total to 16 since May 2009. In the continuing trial, Waitrose food
is sold in 34 Boots stores. We have also announced a new
two-location pilot with Shell, starting this month in Watford and
Kensington Gardens.
John Lewis
John Lewis continued to outperform the general market,
consistently beating competitors. This achievement is a result of
customers appreciating an innovative product offer, quality
merchandise at every price point, ease of shopping through the
multi-channel operation and the excellent customer service for
which we are renowned.
Gross sales were up 2.5% at GBP1.42bn and like-for-like sales
were up 1.0%. Operating profit fell by 54.5% to GBP15.8m.
Profits were impacted by our commitment to 'Never Knowingly
Undersold' as well as a highly competitive trading environment.
John Lewis continues our strategy to grow the business efficiently
and invest for the long term.
Despite challenging trading conditions John Lewis won share in
each of our three markets, and notably in Electricals. Home has
inevitably been adversely affected by the housing market but is
continuing to perform well. Home sales grew by 0.6%, Fashion by a
very creditable 4.2% and Electricals and Home Technology (EHT),
trading in a very competitive marketplace, grew sales by 3.8%.
Our very successful multichannel and online operations have been
at the heart of John Lewis' performance. All three John Lewis
markets were instrumental in driving sales in this area, with
johnlewis.com outperforming its market and seeing 27.2% growth.
This has been achieved through increasing the number of products
and brands sold online, investing in distribution and developing
the 'Click and Collect' option which allows customers the choice of
picking up their online purchases from all 32 John Lewis and 24
Waitrose shops. As this facility has proved to be so popular, from
next month the number of collection outlets will more than double
to 116, including collection points in 84 Waitrose branches, with
more being planned.
Johnlewis.com already accounts for 19% of total John Lewis
sales. There is considerable opportunity for growth in the online
operation, and our expectation is that johnlewis.com will be
achieving sales of GBP1bn by 2014. This will be bolstered by the
new online international operation which began delivering abroad in
June and is now live in 33 countries.
We have continued to invest in all areas of the business. New
concepts are being introduced across all branches, to ensure our
shops remain appealing destinations in the internet age. These
include a Beauty Retreat concept, recently launched at John Lewis
Cheadle, and new concepts for Home and Technology as launched at
John Lewis Stratford City. Designer collaborations, such as those
with Osman Yousefzada and Clements Ribeiro in fashion and Bethan
Grey in home are being introduced and at the same time private
label collections such as the 'John Lewis & Co' classic
menswear range and collaborations with emerging designers such as
Ptolemy Mann and James Joyce in home are adding an extra dimension
to the 'newness' on offer to John Lewis customers.
We continue our strategy to grow our selling space. We have just
opened our exciting new John Lewis Stratford City shop, and in the
next month two more at home shops will open in Chester and
Tamworth. We are also exploring the opportunity to introduce
full-line flexible format department stores in key locations in the
UK. The first of these will be trialled in Exeter from autumn next
year. At the same time John Lewis continues to work with developers
to explore potential new locations for full-line flagship shops
such as the one recently announced in Birmingham city centre.
Over 1,000 new Partners will be recruited to John Lewis to
support our second half openings.
John Lewis' reputation for outstanding quality, value and
service was again this year recognised by Verdict, awarding it
'Britain's favourite retailer' in 2011 for the eighth time in the
award's 12 years.
Capital Expenditure
Capital investment in the first six months of the year was
GBP253.8m. In Waitrose we invested GBP149.5m, primarily on
transforming five branches acquired last year from Sandpiper CI,
which opened in the Channel Islands this year, nine new and
acquired branches and eight convenience stores. In John Lewis we
invested GBP75.7m primarily on the new store at Stratford, two new
at home stores, and refurbishments at Reading, Cheadle and Peter
Jones.
In addition, GBP28.6m was invested centrally, mainly in
internally developed systems which support the growth and
efficiency plans of Waitrose and John Lewis.
Financing
Cash generated from operations during the period was GBP253.8m.
We remain committed to our focus on efficient cash, working capital
and credit risk management.
On 7 March, we launched an innovative financing product, the
John Lewis Partnership Bond which offered a competitive fixed
return to investors, 4.5% plus 2% in John Lewis Partnership gift
vouchers. This was well received and the gross proceeds were
GBP57.8m. At the end of the first six months net debt was
GBP688.6m. The Partnership balance sheet remains strong with
substantial capacity to increase our borrowings should we wish to,
and we remain well within the limits of the financial covenants in
our bank facilities and bonds.
Our net finance costs fell by GBP13.7m (40.3%) to GBP20.3m.
Finance costs on borrowings have increased by GBP5.2m, reflecting a
net increase of GBP142m in our Bonds, together with the launch of
the Retail Bond of GBP57.8m. Last year we paid a premium of GBP9.2m
on the partial buyback of the 2012 Bond. These costs have been
partly offset by a net credit on pension and long leave financing
costs of GBP9.4m, compared to a charge of GBP1.7m last year.
Pensions
The triennial actuarial valuation of our main non-contributory
defined benefit final salary pension scheme as at 31 March 2010
resulted in a surplus of GBP83m, which we estimate has grown to
GBP112m at 30 July 2011. The triennial actuarial valuation is the
basis on which the Partnership manages and funds the pension
liability. The pension scheme adopts a prudent but active
investment strategy and the Board is comfortable with the current
funding level.
The total accounting pension deficit at 30 July 2011, which
assumes more cautious investment returns than the actuarial basis
of valuation, increased by GBP65.3m (15.8%) to GBP479.3m. The
accounting valuation of pension fund liabilities increased by
GBP145.0m (5.0%) to GBP3,025.0m, while pension fund assets
increased by GBP79.7m (3.2%) to GBP2,545.7m. Net of deferred tax
the deficit was GBP381.8m.
The Pension Fund took the opportunity in February to sell its
remaining stake in Ocado for GBP150.5m, an uplift of GBP23m on the
January 2011 value.
Corporate Social Responsibility
The Partnership values its relationships with its Partners,
customers, suppliers, the environment and the wider communityand
has renewed its commitment to Social Responsibility at divisional
level with the launch of the 'Waitrose Way' in Waitrose and
'Bringing Quality to Life' in John Lewis.
The 'Waitrose Way' covers four areas that resonate with our
customers: Championing British, Living Well, Treading Lightly and
Treating People Fairly, while in John Lewis 'Bringing Quality to
Life' has three main areas of focus: A Better Way of Doing
Business, Encouraging Sustainable Living and Community Links.
These represent a fresh approach that demonstrates the
Partnership's commitment to Social Responsibility while making our
approach more visible and simpler for customers and Partners to
understand and for our Partners to explain.
2011/12 Outlook
After six weeks, Partnership gross sales are 7.4% higher than
last year. Waitrose gross sales have increased by 10.0% (3.9%
like-for-like) and John Lewis gross sales are 3.2% higher than last
year (1.9% like-for-like).
Trading conditions are set to remain challenging through the
rest of this year and into 2012. There are huge changes taking
place in the way people shop as a result of technology reaching
every part of our lives, and there is an ever greater demand for
convenience and value. We are not simply waiting for the recovery,
but instead we have increased the pace of investment and innovation
across the Partnership putting us in the best possible position to
seize the opportunity created by a rapidly changing retail
environment. Our momentum is strong and I am confident we will
build on that in the second half.
Charlie Mayfield
Chairman
Where this interim report contains forward-looking statements,
these are made by the directors in good faith based on the
information available to them up to the time of their approval of
this report. These statements should be treated with caution due to
the inherent uncertainties underlying any such forward-looking
information.
Further information
John Lewis Partnership
Andrew Moys, Director of Communications 020 7592 6292
Citigate Dewe Rogerson
Simon Rigby / Justin Griffiths 020 7638 9571
John Lewis
Helen Dickinson, Head of Communications 020 7592 6274 /
07785 952567
Amy Shields, Senior Manager, Corporate, Digital & Branch PR
020 7592 6452 /
07525 273077
Waitrose
Christine Watts, Communications Director 07764 676414
John Gregson, Senior PR Manager, Corporate 07525 271618
Notes to editors
The John Lewis Partnership - The John Lewis Partnership operates
33 John Lewis shops across the UK (29 department stores and four
John Lewis at home), johnlewis.com and 264 Waitrose supermarkets.
The business has annual gross sales of over GBP8.2bn. It is the
UK's largest example of worker co-ownership where all 76,500 staff
are Partners in the business.
Waitrose - Waitrose, Britain's favourite supermarket*, has 264
shops in the UK and Channel Islands and is consistently achieving
sales growth significantly ahead of the market.**. Its strong
performance has been driven by the success of the essential
Waitrose range, Brand Price Match, an unmatchable top tier of
products and free delivery driving rapid online growth, as well as
a long term commitment to sourcing the UK's finest local and
regional foods. Waitrose combines the convenience of a supermarket
with the expertise and service of a specialist shop - dedicated to
offering quality food that has been responsibly sourced combined
with high standards of customer service. www.waitrose.com
* Which? Annual Supermarket Satisfaction Survey, Telegraph
Magazine Shop Awards - Best for Food & Drink; Good Housekeeping
Awards; Verdict Consumer Satisfaction Awards - Most Loved Food
Retailer, ** Kantar Worldpanel
You can follow Waitrose on the following social media
channels:
www.facebook.com/waitrose
www.twitter.com/waitroseuk
www.twitter.com/waitrosewine
www.youtube.com/waitrose
John Lewis - John Lewis, 'Britain's favourite retailer 2010'*
and 'Multiple Department Store of the Year 2010' ** typically
stocks more than 350,000 separate lines in its department stores.
The website stocks over 150,000 products focused on the best of
fashion, beauty, home and giftware and electrical items including
online exclusives. johnlewis.com is consistently ranked one of the
top online shopping destinations in the UK. (www.johnlewis.com ).
John Lewis Insurance offers a range of comprehensive insurance
products - home, car, wedding and event, travel and pet insurance
and life cover - delivering the usual values of expertise, trust
and customer service expected from the John Lewis brand.
* Verdict consumer satisfaction index, January 2011
** The Drapers Awards for fashion retail, November 2010
You can follow John Lewis on the following social media
channels:
www.johnlewis.com/twitter
www.johnlewis.com/facebook
www.johnlewis.com/youtube
John Lewis plc Interim Report 2011
Consolidated income statement
for the half year ended 30 July 2011
Half year Half year
to to Year to
29 January
30 July 2011 31 July 2010 2011
Continuing operations GBPm GBPm GBPm
--------------------------- ------------- ------------- -----------
Gross sales 4,052.1 3,808.1 8,206.3
--------------------------- ------------- ------------- -----------
Revenue 3,615.9 3,431.8 7,361.8
Cost of sales (2,439.9) (2,303.6) (4,878.7)
--------------------------- ------------- ------------- -----------
Gross profit 1,176.0 1,128.2 2,483.1
Other operating income 29.4 34.3 53.7
Operating expenses (1,093.9) (1,017.3) (2,107.5)
--------------------------- ------------- ------------- -----------
Operating profit 111.5 145.2 429.3
Finance costs (36.9) (36.3) (67.8)
Finance income 16.6 2.3 6.1
Profit before Partnership
bonus and tax 91.2 111.2 367.6
Partnership bonus - - (194.5)
--------------------------- ------------- ------------- -----------
Profit before tax 91.2 111.2 173.1
Taxation (23.4) (35.9) (45.6)
--------------------------- ------------- ------------- -----------
Profit for the period 67.8 75.3 127.5
--------------------------- ------------- ------------- -----------
Consolidated statement of comprehensive income/(expense)
for the half year ended 30 July 2011
Half year Half year
to to Year to
29 January
30 July 2011 31 July 2010 2011
GBPm GBPm GBPm
--------------------------- ------------- ------------- -----------
Profit for the period 67.8 75.3 127.5
Other comprehensive
income/(expense):
Actuarial (loss)/gain on
defined benefit pension
schemes (87.5) 181.8 338.7
Movement of deferred tax
on
pension schemes 20.7 (94.3) (141.4)
Movement of current tax
on
pension schemes - 43.4 42.0
Net (loss)/gain on cash
flow hedges (1.0) (1.4) 1.6
--------------------------- ------------- ------------- -----------
Total comprehensive
(expense)/income for the
period - 204.8 368.4
--------------------------- ------------- ------------- -----------
Consolidated balance sheet
as at 30 July 2011
29 January
30 July 2011 31 July 2010 2011
GBPm GBPm GBPm
---------------------------------- ------------- ------------- -----------
Non-current assets
Intangible assets 141.4 95.3 111.4
Property, plant and equipment 3,710.3 3,423.9 3,622.6
Trade and other receivables 40.5 41.9 41.4
3,892.2 3,561.1 3,775.4
---------------------------------- ------------- ------------- -----------
Current assets
Inventories 427.0 382.2 422.0
Trade and other receivables 192.5 174.9 210.7
Current tax receivable - 16.6 17.1
Derivative financial instruments 5.0 11.8 8.6
Cash and cash equivalents 404.7 435.6 512.7
1,029.2 1,021.1 1,171.1
---------------------------------- ------------- ------------- -----------
Total assets 4,921.4 4,582.2 4,946.5
---------------------------------- ------------- ------------- -----------
Current liabilities
Borrowings and overdrafts (238.8) (101.2) (165.3)
Trade and other payables (914.8) (751.4) (1,087.5)
Current tax payable (12.5) - -
Finance lease liabilities (0.9) (0.6) (0.8)
Provisions (83.1) (73.9) (85.0)
Derivative financial instruments (2.2) (3.7) (1.0)
(1,252.3) (930.8) (1,339.6)
---------------------------------- ------------- ------------- -----------
Non-current liabilities
Borrowings (828.8) (922.5) (819.2)
Trade and other payables (74.3) (51.6) (65.6)
Finance lease liabilities (27.6) (27.5) (28.0)
Provisions (117.8) (121.8) (112.9)
Deferred tax liabilities (68.9) (51.1) (94.7)
Retirement benefit obligations (479.3) (567.9) (414.0)
(1,596.7) (1,742.4) (1,534.4)
---------------------------------- ------------- ------------- -----------
Total liabilities (2,849.0) (2,673.2) (2,874.0)
Net assets 2,072.4 1,909.0 2,072.5
---------------------------------- ------------- ------------- -----------
Equity
Share capital 6.7 6.7 6.7
Share Premium 0.3 0.3 0.3
Other reserves 0.4 (1.6) 1.4
Retained earnings 2,065.0 1,903.6 2,064.1
Total equity 2,072.4 1,909.0 2,072.5
---------------------------------- ------------- ------------- -----------
Consolidated statement of changes in equity
for the half year ended 30 July 2011
Share Share Capital Hedging Retained Total
capital premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
----------------- -------- -------- -------- -------- --------- --------
Balance at 30
January 2010 6.7 0.3 1.4 (1.6) 1,697.4 1,704.2
Profit for the
period - - - - 75.3 75.3
Actuarial gain
on defined
benefit pension
schemes - - - - 181.8 181.8
Tax on above
items
recognised in
equity - - - - (50.9) (50.9)
Fair value
losses on cash
flow hedges - - - (1.5) - (1.5)
- transfers to
inventories - - - 0.1 - 0.1
Balance at 31
July 2010 6.7 0.3 1.4 (3.0) 1,903.6 1,909.0
----------------- -------- -------- -------- -------- --------- --------
Balance at 30
January 2010 6.7 0.3 1.4 (1.6) 1,697.4 1,704.2
Profit for the
period - - - - 127.5 127.5
Actuarial gain
on defined
benefit pension
schemes - - - - 338.7 338.7
Tax on above
items
recognised in
equity - - - - (99.4) (99.4)
Fair value
losses on cash
flow hedges - - - (1.1) - (1.1)
- transfers to
inventories - - - 2.7 - 2.7
Dividends - - - - (0.1) (0.1)
----------------- -------- -------- -------- -------- --------- --------
Balance at 29
January 2011 6.7 0.3 1.4 - 2,064.1 2,072.5
Profit for the
period - - - - 67.8 67.8
Actuarial loss
on defined
benefit pension
schemes - - - - (87.5) (87.5)
Tax on above
items
recognised in
equity - - - - 20.7 20.7
Fair value
losses on cash
flow hedges - - - (1.2) - (1.2)
- transfers to
inventories - - - 0.2 - 0.2
Dividends - - - - (0.1) (0.1)
----------------- -------- -------- -------- -------- --------- --------
Balance at 30
July 2011 6.7 0.3 1.4 (1.0) 2,065.0 2,072.4
----------------- -------- -------- -------- -------- --------- --------
Statement of consolidated cash flows
for the half year ended 30 July 2011
Half year Half year
to to Year to
29 January
30 July 2011 31 July 2010 2011
GBPm GBPm GBPm
--------------------------------- ------------- ------------- -----------
Cash generated from operations 253.8 275.3 757.4
Net taxation received/(paid) 1.1 (12.0) (27.1)
Partnership bonus paid (194.5) (151.2) (151.2)
Special contribution to
the Pension
Scheme - (150.0) (150.0)
Finance costs paid (1.3) (0.2) (2.0)
Net cash generated from/(used
in) operating activities 59.1 (38.1) 427.1
--------------------------------- ------------- ------------- -----------
Cash flows from investing
activities
Purchase of property, plant
and
equipment (184.6) (139.2) (447.9)
Purchase of intangible
assets (44.9) (16.3) (43.5)
Proceeds from sale of property,
plant
and equipment 0.3 0.4 3.7
Finance income received 1.4 2.1 3.0
Net cash used in investing
activities (227.8) (153.0) (484.7)
--------------------------------- ------------- ------------- -----------
Cash flows from financing
activities
Finance costs paid in respect
of borrowings (25.1) (56.8) (76.7)
Payment of capital element
of
finance leases (0.3) (0.3) (0.4)
Payments to preference
shareholders (0.1) (0.1) (0.1)
Cash inflow from borrowings 54.7 138.3 137.8
Net cash generated from
financing activities 29.2 81.1 60.6
--------------------------------- ------------- ------------- -----------
(Decrease)/increase in
net cash and
cash equivalents (139.5) (110.0) 3.0
Net cash and cash equivalents
at
beginning of period 447.4 444.4 444.4
Net cash and cash equivalents
at end of period 307.9 334.4 447.4
--------------------------------- ------------- ------------- -----------
Net cash and cash equivalents
comprise:
Cash 115.7 76.6 84.2
Short term deposits 289.0 359.0 428.5
Bank overdraft (96.8) (101.2) (65.3)
--------------------------------- ------------- ------------- -----------
307.9 334.4 447.4
--------------------------------- ------------- ------------- -----------
Notes to the financial statements
1 Basis of preparation
These interim financial statements were approved by the Board on
13 September 2011. They are unaudited, and do not comprise
statutory accounts within the meaning of Section 434 of the
Companies Act 2006.
The results for the half year to 30 July 2011 have been prepared
using the discrete period approach, considering the half year as an
accounting period in isolation. The tax charge is based on the
effective rate estimated for the full year, which has been applied
to the profits in the first half year.
The group's published financial statements for the year ended 29
January 2011 have been reported on by the group's auditors and
filed with the Registrar of Companies. The report of the auditors
was unqualified and did not contain any statement under Chapter 3
of Part 16 of the Companies Act 2006.
This condensed consolidated interim financial information for
the half year ended 30 July 2011 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial
Services Authority and with IAS 34, 'Interim Financial Reporting',
as adopted by the European Union. The condensed consolidated
interim financial information should be read in conjunction with
the annual financial statements for the year ended 29 January 2011,
which have been prepared in
accordance with International Financial Reporting Standards
(IFRS) as adopted by the European Union.
The Directors, after reviewing the group's operating budgets,
investments plans and financing arrangements, consider that the
company and group have, at the date of this report, sufficient
financing available for the estimated requirements for the
foreseeable future and, accordingly, the Directors are satisfied
that it is appropriate to adopt the going concern basis in
preparing the interim financial statements.
2 Accounting policies
The group's results for the half year to 30 July 2011 have been
prepared on a basis consistent with the group's accounting policies
published in the financial statements for the year ended 29 January
2011.
These accounting policies reflect IFRS and interpretations that
are expected to be applicable to the group for its 2011/12
financial statements. It is possible that there will be changes to
these standards and interpretations before the end of the group's
2011/12 financial year, which might require adjustments to this
information before it is included in the financial statements for
the year ended 28 January 2012.
3 Risks and uncertainties
The principal and other significant risks and uncertainties
affecting the group were identified as part of the Business Review,
set out on pages 24 to 26 of the John Lewis Annual Report and
Accounts 2011, a copy of which is available on the group's website
www.johnlewispartnership.co.uk. These risks remain relevant for the
second half of the current financial year and comprise: economic;
financial; pensions; input cost inflation; human resources;
customer offer; health and safety; business continuity and disaster
recovery; regulatory; political; fraud; compliance; and
operational.
4 Segmental reporting
The group's operating segments have been identified as Waitrose,
John Lewis and Corporate and other. Corporate and other principally
includes corporate and shared services overheads, transformation
costs and the new Partnership Services division setup costs. The
operating profit of each segment is reported after charging
relevant corporate and shared service costs based on the business
segments' usage of corporate and shared service facilities and
services.
Waitrose's 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.
Corporate
Waitrose John Lewis and other Group
GBPm GBPm GBPm GBPm
---------------------------- --------- ----------- ----------- --------
Half year to 30 July 2011
Gross sales 2,633.1 1,419.0 - 4,052.1
Adjustment for sale or
return sales - (56.5) - (56.5)
Value added tax (158.2) (221.5) - (379.7)
---------------------------- --------- ----------- ----------- --------
Revenue 2,474.9 1,141.0 - 3,615.9
---------------------------- --------- ----------- ----------- --------
Operating profit excluding
property profits 110.2 15.8 (14.5) 111.5
Property profits - - - -
---------------------------- --------- ----------- ----------- --------
Operating profit 110.2 15.8 (14.5) 111.5
Finance costs - - (36.9) (36.9)
Finance income - - 16.6 16.6
---------------------------- --------- ----------- ----------- --------
Profit before tax 110.2 15.8 (34.8) 91.2
---------------------------- --------- ----------- ----------- --------
Half year to 30 July 2010
Gross sales 2,423.4 1,384.7 - 3,808.1
Adjustment for sale or
return sales - (51.0) - (51.0)
Value added tax (132.1) (193.2) - (325.3)
---------------------------- --------- ----------- ----------- --------
Revenue 2,291.3 1,140.5 - 3,431.8
---------------------------- --------- ----------- ----------- --------
Operating profit excluding
property profits 127.8 34.7 (17.3) 145.2
Property profits - - - -
---------------------------- --------- ----------- ----------- --------
Operating profit 127.8 34.7 (17.3) 145.2
Finance costs - - (36.3) (36.3)
Finance income - - 2.3 2.3
---------------------------- --------- ----------- ----------- --------
Profit before tax 127.8 34.7 (51.3) 111.2
---------------------------- --------- ----------- ----------- --------
The comparatives have been re-presented in respect of John Lewis
Insurance operations to be on a consistent basis to the current
year.
Corporate
Waitrose John Lewis and other Group
GBPm GBPm GBPm GBPm
---------------------------- --------- ----------- ----------- ----------
Year to 29 January 2011
Gross sales 4,974.6 3,231.7 - 8,206.3
Adjustment for sale or
return sales - (116.0) - (116.0)
Value added tax (274.7) (453.8) - (728.5)
---------------------------- --------- ----------- ----------- ----------
Revenue 4,699.9 2,661.9 - 7,361.8
---------------------------- --------- ----------- ----------- ----------
Operating profit excluding
property profits 273.0 198.4 (44.0) 427.4
Property profits 1.9 - - 1.9
---------------------------- --------- ----------- ----------- ----------
Operating profit 274.9 198.4 (44.0) 429.3
Finance costs - - (67.8) (67.8)
Finance income - - 6.1 6.1
Partnership bonus - - (194.5) (194.5)
---------------------------- --------- ----------- ----------- ----------
Profit before tax 274.9 198.4 (300.2) 173.1
---------------------------- --------- ----------- ----------- ----------
30 July 2011
Segment assets 2,619.3 1,643.6 658.5 4,921.4
Segment liabilities (522.2) (459.2) (1,867.6) (2,849.0)
---------------------------- --------- ----------- ----------- ----------
Net assets 2,097.1 1,184.4 (1,209.1) 2,072.4
---------------------------- --------- ----------- ----------- ----------
31 July 2010
Segment assets 2,312.7 1,539.6 729.9 4,582.2
Segment liabilities (461.9) (387.2) (1,824.1) (2,673.2)
---------------------------- --------- ----------- ----------- ----------
Net assets 1,850.8 1,152.4 (1,094.2) 1,909.0
---------------------------- --------- ----------- ----------- ----------
29 January 2011
Segment assets 2,520.2 1,597.9 828.4 4,946.5
Segment liabilities (490.8) (467.7) (1,915.5) (2,874.0)
---------------------------- --------- ----------- ----------- ----------
Net assets 2,029.4 1,130.2 (1,087.1) 2,072.5
---------------------------- --------- ----------- ----------- ----------
The comparatives have been re-presented in respect of John Lewis
Insurance operations to be on a consistent basis to the current
year.
5 Net finance costs
Half year Half year
to to Year to
29 January
30 July 2011 31 July 2010 2011
GBPm GBPm GBPm
--------------------------------- ------------- ------------- -----------
Finance costs
Total finance costs in
respect
of borrowings 30.2 25.0 53.8
Premium paid on bond redemption - 9.2 9.2
Fair value measurements
and other 0.9 0.2 0.1
Net finance costs arising
on other
employee benefit schemes 5.8 1.9 4.7
--------------------------------- ------------- ------------- -----------
Total finance costs 36.9 36.3 67.8
--------------------------------- ------------- ------------- -----------
Finance income
Total finance income in
respect
of investments (1.3) (1.1) (2.7)
Fair value measurements
and other (0.1) (1.0) (0.9)
Net finance income arising
on defined
benefit retirement schemes (15.2) (0.2) (2.5)
Total finance income (16.6) (2.3) (6.1)
--------------------------------- ------------- ------------- -----------
Net finance costs 20.3 34.0 61.7
--------------------------------- ------------- ------------- -----------
Half year Half year
to to Year to
29 January
30 July 2011 31 July 2010 2011
GBPm GBPm GBPm
--------------------------------- ------------- ------------- -----------
Total finance costs in
respect
of borrowings 30.2 25.0 53.8
Premium paid on bond redemption - 9.2 9.2
Total finance income in
respect
of investments (1.3) (1.1) (2.7)
--------------------------------- ------------- ------------- -----------
Net finance costs in respect
of
borrowings and investments 28.9 33.1 60.3
Fair value measurements
and other 0.8 (0.8) (0.8)
Net finance income arising
on
defined benefit retirement
schemes (15.2) (0.2) (2.5)
Net finance costs arising
on other
employee benefit schemes 5.8 1.9 4.7
--------------------------------- ------------- ------------- -----------
Net finance costs 20.3 34.0 61.7
--------------------------------- ------------- ------------- -----------
6 Income taxes
Income tax expense is recognised based on management's best
estimate of the full year effective tax rate based on estimated
full year profits. The estimated full year effective tax rate for
the year to 28 January 2012 is 25.7% (the estimated tax rate for
the period to 31 July 2010 was 32.3%). The decrease on last year is
mainly because of the reduction in the main rate of corporation tax
for the year to 28 January 2012 and the impact of substantially
enacted changes to the main rate of corporation tax on deferred tax
balances.
7 Capital expenditure
Property, plant
and equipment Intangible assets
GBPm GBPm
------------------------------- ---------------- ------------------
Net book values at 29 January
2011 3,622.6 111.4
Additions 208.9 44.9
Disposals - -
Depreciation and amortisation (121.2) (14.9)
------------------------------- ---------------- ------------------
Net book values at 30 July
2011 3,710.3 141.4
------------------------------- ---------------- ------------------
Property, plant and equipment additions include GBP116.7m in
respect of store acquisitions and development in Waitrose and
GBP52.6m in respect of store development in John Lewis.
Intangible assets additions primarily relate to internally
developed IT systems.
8 Reconciliation of profit before tax to cash generated from
operations
Half year Half year
to to Year to
29 January
30 July 2011 31 July 2010 2011
GBPm GBPm GBPm
-------------------------------- ------------- ------------- -----------
Profit before tax 91.2 111.2 173.1
Amortisation of intangible
assets 14.9 13.0 24.0
Depreciation 121.2 105.4 215.5
Net finance costs 20.3 34.0 61.7
Partnership bonus provision - - 194.5
(Profit)/loss on disposal
of tangible
and intangible assets (0.3) 0.3 (1.0)
(Increase)/decrease in
inventories (5.0) 16.8 (23.0)
Decrease/(increase) in
receivables 18.9 (7.2) (42.5)
Increase/(decrease) in
payables 2.4 (2.4) 146.1
(Decrease)/increase in
retirement
benefit obligations (6.9) (4.8) 0.6
(Decrease)/increase in
provisions (2.9) 9.0 8.4
-------------------------------- ------------- ------------- -----------
Cash generated from operations 253.8 275.3 757.4
-------------------------------- ------------- ------------- -----------
9 Analysis of net debt
Other
29 January non-cash 30 July
2011 Cash flow movements 2011
GBPm GBPm GBPm GBPm
------------------------------ ----------- ---------- ----------- --------
Current assets
Cash and cash equivalents 512.7 (108.0) - 404.7
Derivative financial
instruments 8.6 - (3.6) 5.0
521.3 (108.0) (3.6) 409.7
------------------------------ ----------- ---------- ----------- --------
Current liabilities
Bank overdrafts (165.3) (31.5) (42.0) (238.8)
Finance leases (0.8) 0.3 (0.4) (0.9)
Derivative financial
instruments (1.0) - (1.2) (2.2)
------------------------------ ----------- ---------- ----------- --------
(167.1) (31.2) (43.6) (241.9)
------------------------------ ----------- ---------- ----------- --------
Non-current liabilities
Borrowings (819.3) (55.3) 42.0 (832.6)
Unamortised bond transaction
costs 6.3 0.6 (0.3) 6.6
Fair value adjustment for
hedged
risk on bonds (6.2) - 3.4 (2.8)
Finance leases (28.0) - 0.4 (27.6)
(847.2) (54.7) 45.5 (856.4)
------------------------------ ----------- ---------- ----------- --------
Total net debt (493.0) (193.9) (1.7) (688.6)
------------------------------ ----------- ---------- ----------- --------
Reconciliation of net cash flow to net debt
Half year Half year
to to Year to
30 July 2011 31 July 2010 30 January 2010
GBPm GBPm GBPm
--------------------------- ------------- ------------- ----------------
(Decrease)/increase in
cash in
the period (139.5) (110.0) 3.0
Cash inflow from increase
in debt
and lease financing (54.4) (138.0) (137.4)
--------------------------- ------------- ------------- ----------------
Movement in debt for the
period (193.9) (248.0) (134.4)
Opening net debt (493.0) (360.8) (360.8)
Non-cash movements (1.7) 0.6 2.2
--------------------------- ------------- ------------- ----------------
Closing net debt (688.6) (608.2) (493.0)
--------------------------- ------------- ------------- ----------------
10 Management of financial risks
The principal financial risks to which the Partnership is
exposed are liquidity risk, interest rate risk, foreign currency
risk, credit risk, capital risk and energy risk.
These interim financial statements do 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 year ended 29 January 2011.
During the half year to 30 July 2011, the group has continued to
apply the financial risk management process and policies as
detailed in the Annual Report and Accounts for the year ended 29
January 2011.
Valuation techniques and assumptions applied in determining fair
values of each class of asset or liability are consistent with
those used as at 29 January 2011 and reflect the current economic
environment.
During the half year to 30 July 2011 there have been no
transfers between any levels of the IFRS 7 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.
11 Capital commitments
At 30 July 2011 contracts had been entered into for future
capital expenditure of GBP80.8m (2010: GBP63.1m).
12 Related party transactions
During the period John Lewis plc entered into transactions with
other group companies in respect of the supply of goods for resale
and associated services GBP10.6m (2010: GBP12.2m), purchase of
goods for resale GBP17.0m (2010: GBP17.9m), the supply of IT and
related services GBP22.3m (2010: GBP18.6m), the supply of
administrative and other shared services GBP12.2m (2010: GBP9.7m)
and the hire of vehicles GBP6.6m (2010: GBP5.8m).
In addition, John Lewis plc settled other transactions on behalf
of group companies for administrative convenience, such as payroll
and supplier settlement. All such transactions were charged at cost
to the relevant group company. It is not practical to quantify
these recharges.
Statement of directors' responsibilities
The directors confirm that this condensed set of financial
statements has been prepared in accordance with IAS 34 as adopted
by the European Union, and that the interim management report
herein includes a fair review of the information required by the
Disclosure and Transparency Rules (DTR) of the Financial Services
Authority, paragraphs DTR 4.2.7R and DTR 4.2.8R.
For and by Order of the Board
Charlie Mayfield, Chairman
Marisa Cassoni, Finance Director
13 September 2011
This information is provided by RNS
The company news service from the London Stock Exchange
END
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