SHOP HARRY POTTER | SHOP KNITWEAR | ||
Never the Same
Again
ROBUST PERFORMANCE IN
UNPRECEDENTED TIMES
HALF YEAR RESULTS
4 November 2020
1
NEVER THE SAME AGAIN
AGENDA
STEVE ROWE
CHIEF EXECUTIVE
ROBUST PERFORMANCE IN UNPRECEDENTED TIMES
NEVER THE SAME AGAIN ACCELERATING TRANSFORMATION
M&S Foodhall Notting Hill
NEVER THE SAME AGAIN
DECISIVELY SHIFTING TOWARDS ONLINE
Robust performance in unprecedented times
- Remarkable efforts of colleagues in the face of extraordinary challenges
- Strong Food performance mitigating hospitality and franchise closures
- Exceptional growth and profitability of Ocado Retail
- Improving C&H performance post lockdown. Online market share growth and strong sell through of surplus stock
- Net debt reduced and substantial available liquidity
Never the Same Again accelerating transformation
- Central leadership streamlined and strengthened; support centre costs reduced
- M&S on Ocado delivered: Strong customer response and synergies on track
- Store estate for the future: Streamlining of store costs and improved productivity enabled by technology
- Sparks loyalty programme relaunched and grown, helping to drive over 1.5m app downloads
- Building on investment in data and digital with the launch of MS2 to step change online growth opportunity in C&H
3 | M&S COLLECTION |
Ribbed Crew Neck Button Front Cardigan, £22.50 | |
EOIN TONGE
CHIEF FINANCE OFFICER
M&S Eclipse Maidstone
NEVER THE SAME AGAIN
HALF YEAR FINANCIALS AT A GLANCE
£4.1bn | £(17.4)m | £(87.6)m | ||||||||
-15.8% | - | - | ||||||||
Group revenue | Loss before tax | Loss before tax | ||||||||
& adjusting items | ||||||||||
£77.6m | £3.91bn | £1.40bn | ||
233% | reduced 2.9% | reduced 4.4% | ||
Free cashflow | Net debt | Net financial debt | ||
5 | GOODMOVE |
Go Train Colour Block Gym Leggings, £29.50 | |
NEVER THE SAME AGAIN
FOOD PERFORMANCE
REVENUE
% | Q1 | Q2 | H1 |
Total | -2.1 | 1.6 | -0.3 |
LFL | 2.0 | 3.4 | 2.7 |
LFL (ex. hospitality) | 6.7 | 6.5 | 6.6 |
OPERATING PROFIT
19/20 £M | 92.2 |
Gross profit | (25.5) |
Store staffing | 8.8 |
Other store costs | 32.7 |
Distribution and | (16.9) |
warehousing | |
Central costs | 18.4 |
20/21 £M | 109.7 |
MARGIN
3.2%
MARGIN
3.9%
6
NEVER THE SAME AGAIN
OCADO CONTRIBUTION TO M&S
SHARE OF PROFIT
£M | |
Revenue | 1,167.7 |
EBITDA before exceptional items | 89.1 |
Exceptional items | 28.5 |
Operating profit | 100.5 |
Profit after tax | 77.6 |
M&S 50% share of profit after tax | 38.8 |
7
NEVER THE SAME AGAIN
CLOTHING & HOME PERFORMANCE
REVENUE
% | Q1 | Q2 | H1 |
Total | -61.5 | -21.3 | -40.8 |
Stores | -83.8 | -39.5 | -61.1 |
Online | 21.5 | 46.4 | 34.3 |
LFL | -59.3 | -21.2 | -39.3 |
OPERATING LOSS
MARGIN | |||
19/20 £M | 109.6 | 7.1% | |
Gross profit | (389.1) | ||
Store staffing | 80.0 | ||
Other store costs | 54.7 | ||
Distribution and | (5.7) | ||
warehousing | |||
Central costs | 43.0 | MARGIN | |
20/21 £M | (107.5) | (11.7%) | |
8 | 3 for 2 (2-7Yrs) |
Rainbow Unicorn Cat Print Dress, £7.00 | |
NEVER THE SAME AGAIN
PROFIT BRIDGE
£M
176
39
Adjusting items Includes:
Restructuring costs £(92.1)m
Attributable to Covid-19 £49.4m
(217) | |||||||||||||
14 | |||||||||||||
(17) | |||||||||||||
(36) | (11) | ||||||||||||
(70) | (88) | ||||||||||||
Adjusted | Food | Ocado | Clothing International | M&S | Net | Adjusted | Adjusting | Loss | |||||
PBT | & Home | Bank | finance | Loss Before | items | Before Tax | |||||||
19/20 | cost | Tax | 20/21 | ||||||||||
20/21 | |||||||||||||
OPERATING PROFIT | |||||||||||||
9 | M&S Foodhall Notting Hill |
NEVER THE SAME AGAIN
CAPITAL EXPENDITURE BEFORE DISPOSALS
£M
International | 122 |
4 | |
Supply chain | 19 |
International
Property maintenance | 28 |
Clothing
& Home 16
2
£54m
UK store remodelling | 23 |
New UK stores | |
16 | |
IT & M&S.com | 32 |
19/20 |
54
2
10
5
4
9
24
20/21
H1 20/21
36 Food
10
NEVER THE SAME AGAIN
CASH FLOW AND REDUCTION IN NET DEBT
£M
368
75
(36) | LEASE DEBT | |||||||||||||
Decrease in lease obligations | £78m | |||||||||||||
(129) | New lease commitments | £(12)m | ||||||||||||
Other | £(12)m | |||||||||||||
WORKING CAPITAL | ||||||||||||||
Decrease in stock | £8m | (133) | 54 | 119 | ||||||||||
Decrease in receivables | £28m | |||||||||||||
Increase in payables | £39m | (38) | ||||||||||||
(23) | 65 | |||||||||||||
(19) | ||||||||||||||
Adjusted | Cash lease | Working | DB pension | Capex | Financial | Other3 | Adjusting | Decrease | Decrease | Decrease | ||||
EBITDA | payment1 | capital | funding | and | Interest and | items | in financial | in lease | in total | |||||
disposals2 | taxation | debt | debt | net debt |
11
1 Cash lease payments includes £78m decrease in lease obligations and £52m interest 2 Includes cash payments of £77m in relation to prior year capital accrual
3 Other includes reversal of Ocado income offset by completion of investment in Ocado, employee related share transactions and settlement of derivatives
NEVER THE SAME AGAIN
SUBSTANTIAL CASH AND UNDRAWN FACILITIES
Undrawn £1.1bn RCF with significant relaxation/waiver of covenants
Additional £300m CCFF facility available
Cash balances of £286m at the half year end
Limited bond refinancing in near term
12
£1.39bn
Cash
£286m
Undrawn RCF
£1.1bn
Cash & Available
Facilities*
*Available facilities number excludes CCFF
£1.43bn
2021
2023
2025
2027
2037
Debt
M&S COLLECTION
Zebra Print Belted Midi Shirt Dress, £39.50
NEVER THE SAME AGAIN
LOOKING FORWARD
First half results demonstrate resilience of business, positioned for recovery through Never the Same Again
Recent trading similar to end of Q2. Well set up through second lockdown, with C&H store sales decline likely mitigated by online growth and reduced costs
Focus on trading effectively and making it easy for customers to shop
Well set up for managing Brexit
Plan for disciplined recovery and strengthened balance sheet
13 | ONLINE ONLY |
Unisex Pure Cotton Polo Shirt, £3.00 - £6.00 | |
STEVE ROWE
CHIEF EXECUTIVE OFFICER
M&S Eclipse Maidstone
NEVER THE SAME AGAIN
OUR PRIORITIES
Faster Food | Capture | Simplify | Turbocharge | Store estate | ||||
growth with | value in Food | range and | growth at | for the new | ||||
Ocado Retail | supply chain | value in C&H | M&S.com | world | ||||
15
NEVER THE SAME AGAIN
FASTER FOOD GROWTH - M&S FOOD
Strong underlying performance - H1 LFL +6.6% ex-hospitality
Value perception continues to improve driven by further expansion of Remarksable lines
Strong increase in strategic growth areas including meat, fish & poultry, grocery and frozen
IMPROVING VALUE PERCEPTION
Net Promoter Score
70%
65%
60%
55%
50%
Oct '18 | Mar '19 | Sep '19 | Mar '20 | Sep '20 |
STRENGTH IN CORE CATEGORIES
Broadening appeal through over 750 new lines both at M&S and on Ocado.com
Renewal stores performing well with format implemented across new stores
% change
Meat, fish, poultry & deli | +16 |
Produce & flowers | +5 |
Beers, wines & spirits | +22 |
Grocery & household | +46 |
Frozen | +41 |
Total | +12 |
Q2 vs last year
% change
Food-on-the-move | -41 |
Hospitality | -65 |
Bakery, cakes & biscuits | - |
Total | -27 |
16 | M&S Foodhall Notting Hill |
NEVER THE SAME AGAIN
FASTER FOOD GROWTH - SUCCESSFUL OCADO LAUNCH
Successful launch of M&S products on Ocado.com
Full M&S Food range and selected Clothing
- Home lines available offering Ocado customers more choice and better value
Substantial new product development in organic, grocery, Remarksable value and homecare
Heavy demand for M&S range, sales
FOOD NPD LINES INCLUDE
GROCERY | ORGANIC | REMARKSABLE | HOMECARE | |||
132 90 77 62
M&S ON OCADO - WINNING IN FRESH
M&S % of Ocado category sales 1 Sept - 28 Oct
participation over 25% at Ocado driven by key categories
M&S synergies on track - over £15m anticipated in current year
68%
51%
46% 45% 41%
24%
Chilled | Fish | Vegetables | Meat | Poultry | Frozen |
Prepared | & Stir Fry | ||||
Foods |
17
NEVER THE SAME AGAIN
FASTER FOOD GROWTH - NEXT WAVE OF OCADO GROWTH
Exceptional period of growth for Ocado Retail in H1with sales up 47.9%
Step change in online penetration and market growth rate since M&S's original investment
Substantial pools of available demand - just beginning to tap into M&S customer base shopping online elsewhere
Now investing in increase of 40% in CFC capacity for 2021
Accelerating planned investment beyond 2021 to drive growth
STEP CHANGE IN ONLINE MARKET
% of Food market online
12.5%
7.6%
2019 | 2020 |
Kantar: 12 w/e 4 October, relates to grocery sales eaten at home only
ADDING 40% MORE CAPACITY IN 2021
Orders per week 000's | ||||
Purfleet | 85k | |||
Andover | 60k | |||
Bristol | ||||
30k | ||||
175 | 655* | |||
450 | 30 |
May 20 | Erith growth | Capacity | 2021 available |
capacity 2021 | opening 2021 | capacity |
18 | * Excludes zoom sites |
NEVER THE SAME AGAIN
CAPTURE VALUE AND LOWER COST IN FOOD SUPPLY CHAIN
Substantial opportunity to capture value and lower cost in end to end supply chain
LOWERING COST PROGRAMME - H1 20/21
Benefit Share by Project Type (£M)
4 3
Product Specification
Lowering cost by working with suppliers delivered over £30m in H1 following c£100m in 2019/20, offsetting inflation entirely
Vangarde programme optimising store and depot process now in 159 stores; completes in 2021
First phase delivery in Vangarde of 1.8% sales uplift driven by improved 'ready to trade' position
Tackling availability and smoothing stock flow with new depot in Milton Keynes operational adding 30% ambient capacity ahead of peak
Procurement Efficiency | |||
10 | Packaging Specification | ||
16 | Manufacturing Efficiency | ||
Raw Material Procurement | |||
4 | 3 | Other | |
VANGARDE PROGRAMME PROCESS CHANGES
Enhanced | Improved | Depot | Optimised | New store | Customer | |||||||
supplier | deliveries | operating | experience | |||||||||
allocation | segregation | |||||||||||
intake | into store | model | & benefits | |||||||||
19
NEVER THE SAME AGAIN
SIMPLIFY RANGE AND MOVE TO TRUSTED VALUE IN C&H
M&S.COM SHIFTED TO CASUAL AND HOME
C&H ahead of plan in sales and stock
Encouraging performance given city centre stores and strength in formal categories
% change | Online | Stores |
Casual | +40 | -37 |
Kids | +83 | -31 |
Lingerie & essentials | +87 | -37 |
Home & beauty | +27 | -33 |
Total | +54 | -36 |
Q2 vs last year
% change | Online | Stores |
Formal | -16 | -54 |
Holiday | -34 | -50 |
Shoes & accessories | -20 | -55 |
Outerwear | -5 | -46 |
Total | -17 | -54 |
Further simplifying range - options for AW down 30% in just two years
Removal of blanket promotions such as
'Friends & Family' as we move to trusted value
New store tech and supply chain improvements to lower costs
OPTION COUNT DOWN 30% OVER 2YRS
Womenswear | Lingerie | Menswear | Kidswear | ||
AW18/19 | AW20/21 | ||||
20 | HARRY POTTER™ |
Velvet Glitter Dress (6-16 Yrs), £20.00 | |
NEVER THE SAME AGAIN
TURBOCHARGE GROWTH AT M&S.COM - H1 PERFORMANCE
Extraordinary period for M&S.com with growth online across all businesses
Strong growth in traffic and lower returns more than offset lower in-store furniture orders
Rapid implementation of Covid measures and investment enabled 47% increase in singles despatch online
Solid market share growth, up 40bps to 5.7% with M&S now #2 online clothing retailer
Growth supported by over 1.5m app downloads since Sparks relaunch
STRONG TRAFFIC GROWTH
YoY % contribution to sales growth
3533
27(5)
(12)
Traffic Conversion AOV | Online | Instore | Returns Orders |
orders | orders | Post | |
Returns |
GROWTH IN DONINGTON DESPATCH
Singles
80%
60%
40%
20% | ||
0% | ||
Jan Feb Mar Apr May Jun | Jul Aug Sep | |
-20% | ||
-40% |
21
NEVER THE SAME AGAIN
TURBOCHARGE GROWTH AT M&S.COM - LAUNCHING MS2
The crisis has highlighted the opportunity for M&S to accelerate change to win online
Investments in platform, data, loyalty and proposition over the last three years enabled strong growth in H1
'MS2' is M&S's vehicle to win in C&H online - bringing together online, data and digital capabilities in one business unit
MS2 will have greater flexibility on product, presentation and pricing, including brand partnerships, and an international focus
Leveraging the newly created customer data lake and relaunched Sparks programme
Starting with digital 'test and learn' stores it will create a seamless omnichannel shopping experience
AMBITION TO CREATE A TRULY DIGITAL OPERATION
ONLINE ONLY
Online Focused Range | Loyalty and Data | |
Including Brands | ||
Rapid Fulfilment | Digital Stores | |
22
NEVER THE SAME AGAIN
STORE ESTATE REINVENTED FOR THE NEW WORLD
Covid has re-confirmed our strategy to rotate and modernise the estate
Benefits of new stores with good access and parking more than offsets impact of closures
Focus on reducing costs and releasing cash from the Group's asset base to manage liability
Re-gearing of leases starting to contribute with 34% reduction across 11 stores
Partnership with Microsoft enabling effective communication and flexible working
Anticipate annualised productivity savings from restructuring of c.£115m
SHAPE OF CHAIN PERFORMANCE
FOOD | CLOTHING & HOME | ||||||||||||||||||
% change | % change | % change | % change | ||||||||||||||||
Simply Food | +19 | High Street | -14 | Retail Parks | -25 | High Street | -39 | ||||||||||||
Retail Parks | +13 | Shopping centre | -13 | Outlets | -26 | Shopping centre | -46 | ||||||||||||
Franchise petrol | +9 | City centre | -29 | Food stores | -30 | City centre | -53 | ||||||||||||
M&S.com | +119 | Franchise Travel | -75 | Total | -25 | Total | -45 | ||||||||||||
Total | +18 | Total | -26 | ||||||||||||||||
Q2 vs last year | |||||||||||||||||||
ROTATING THE STORE ESTATE | |||||||||||||||||||
£222m | £228m | ||||||||||||||||||
Sales | Sales | ||||||||||||||||||
£6m | £29m | ||||||||||||||||||
Profit | Profit | ||||||||||||||||||
23 Closures | 2.9% | 19 | 12.8% | ||||||||||||||||
Margin | Openings | Margin | |||||||||||||||||
Stores closed and opened over past 19 months. Compares anticipated future annual contribution of closure stores with projected contribution including recapture at maturity of new store
23
NEVER THE SAME AGAIN
WELL SET UP FOR A UNIQUE PEAK
Prioritising colleague health and wellbeing
Giving customers the confidence to shop
Offering new digital tools to make shopping easier
Increasing online distribution capacity to ensure delivery
Product with magic & sparkle to keep Christmas special
24
NEVER THE SAME AGAIN
RECAP - ACCELERATED TRANSFORMATION ACROSS M&S
Robust performance in a period like no other: Strong Food growth and Ocado contribution, C&H recovering with stock well managed
Decisive steps forward in the Never the Same Again programme to accelerate transformation
Successfully delivered the full M&S range onto Ocado and are investing to fuel its future growth
Supported by technology investment we will deliver a more productive store operation next year and beyond
Launching MS2 to bring together our online digital and data capabilities to turbocharge growth at M&S.com
Well prepared to deliver for customers over a unique peak
25
Appendix
26
NEVER THE SAME AGAIN
QUARTERLY SALES PERFORMANCE
% change to LY | H1 | Q1 | Q2 |
Food | -0.3 | -2.1 | 1.6 |
Food LFL | 2.7 | 2.0 | 3.4 |
Clothing & Home | -40.8 | -61.5 | -21.3 |
Clothing & Home LFL | -39.3 | -59.3 | -21.2 |
Total UK Sales | -14.6 | -22.6 | -6.6 |
Total UK LFL | -12.3 | -19.2 | -5.6 |
International | -24.7 | -40.7 | -9.2 |
Group Adjusted Revenue* | -15.5 | -24.3 | -6.9 |
Memo | |||
M&S.com | 38.8 | 32.4 | 45.0 |
Clothing & Home.com | 34.3 | 21.5 | 46.4 |
Food LFL ex Hospitality | 6.6 | 6.7 | 6.5 |
*at constant currency
27 | Stormwear™ |
Lightweight Padded Jacket (2-16 Yrs), £16.00 | |
NEVER THE SAME AGAIN
DEPRECIATION AND AMORTISATION
H1 20/21 | |||||
£M | Food | C&H | Intl | Other | Group |
Group Adjusted operating profit | 110 | (108) | 20 | 40 | 62 |
Depreciation | |||||
Tangible asset | 58 | 86 | 7 | - | 151 |
Right of use asset | 41 | 32 | 12 | - | 85 |
Amortisation | 29 | 38 | 3 | - | 70 |
Write off & disposal costs | 1 | 3 | (5) | - | - |
Depreciation & Amortisation | 130 | 159 | 17 | - | 306 |
Underlying EBITDA | 239 | 52 | 37 | 40 | 368 |
Interest payable on leases | 26 | 30 | 7 | - | 62 |
Total Group depreciation & amortisation includes amounts within adjusting items of £12.5m
28 | M&S Eclipse Maidstone |
NEVER THE SAME AGAIN
ADJUSTING ITEMS
£m | |
Strategic programmes - Organisation | (92.1) |
Directly attributable to Covid-19 | 49.4 |
Sparks loyalty programme transition | (15.3) |
Strategic programme - UK store estate | (2.9) |
M&S Bank charges | (1.4) |
Other | (7.9) |
Total adjusting items | (70.2) |
29 | M&S COLLECTION |
Herringbone Belted Longline Coat, £99.00 | |
NEVER THE SAME AGAIN
LEASE LIABILITIES BREAKDOWN
International | |||
Non Property | |||
222 | |||
36 | |||
Office, | |||
Warehouse | 467 | 1027 | Full Line |
& Other | £2,508m | ||
HY 20/21
756
Simply Food
30
NEVER THE SAME AGAIN
STORES AND SELLING SPACE
UK | Selling space (m sq ft) | Sept 20 | Mar 20 | Openings | Closures | Change |
Shopping Centre | 1.5 | 16 | 16 | 0 | 0 | 0 |
Retail Park | 4.2 | 73 | 70 | 3 | 0 | 3 |
High Street - large | 5.4 | 81 | 81 | 0 | 0 | 0 |
High Street | 2.4 | 86 | 89 | 0 | (3) | (3) |
Full line total | 13.5 | 256 | 256 | 3 | (3) | 0 |
Outlets | 0.4 | 32 | 32 | 0 | 0 | 0 |
Simply Food | 2.5 | 313 | 310 | 5 | (2) | 3 |
Simply Food franchise | 0.6 | 435 | 440 | 0 | (5) | (5) |
UK stores | 16.9 | 1,036 | 1,038 | 8 | (10) | (2) |
C&H | 10.4 | |||||
Food | 6.5 | |||||
International | Sept 20 | Mar 20 | Openings | Closures | Change | |
Owned/JV | 1.8 | 154 | 152 | 3 | (1) | 2 |
Franchise | 3.3 | 326 | 329 | 7 | (10) | (3) |
International stores | 5.1 | 480 | 481 | 10 | (11) | (1) |
31
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Disclaimer
Marks & Spencer Group plc published this content on 04 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 November 2020 09:44:42 UTC