Marks And Spencer Group Plc · LSE:MKS
Marks And Spencer — FY2018/19 Earnings Presentation
37 slides from Marks And Spencer's earnings presentation, May 22, 2019
Slide 1: Restoring the Basics: Bigger, Bolder, Faster – Final Results
RESTORING THE BASICS BIGGER BOLDER FASTER FINAL RESULTS 22 MAY 2019
Slide 2: Restoring the Basics – Archie Norman, Chairman
RESTORING THE BASICS BIGGER, BOLDER, FASTER ARCHIE NORMAN CHAIRMAN
Slide 3: Restoring the Basics – Steve Rowe, Chief Executive
RESTORING THE BASICS BIGGER, BOLDER, FASTER STEVE ROWE CHIEF EXECUTIVE
Slide 4: Restoring the Basics stays crucial to our transformation plan
BIGGER, BOLDER, FASTER RESTORING THE BASICS STAYS CRUCIAL TO OUR TRANSFORMATION PLAN STEP THREE STEP TWO MAKING SHAPING M&S SPECIAL STEP ONE THE FUTURE RESTORING THE BASICS 2018 2019 2020 2021 2022
Slide 5: Still completely focused on our business priorities
BIGGER, BOLDER, FASTER AND WE ARE STILL COMPLETELY FOCUSED ON OUR BUSINESS PRIORITIES Leadership 1 Accountable 2 3 Transformation Businesses Digital First Style and Value 4 Magic Again 5 Rebuilding Profitable Growth 6 in Clothing in Food in International Store Estate Fit 7 Modernised 8 Cost Savings
Slide 6: Now more confident we can accelerate our pace of change
BIGGER, BOLDER, FASTER BUT NOW MORE CONFIDENT THAT WE CAN ACCELERATE OUR PACE OF CHANGE ▪ Good progress on fixing the basics ▪ New dynamic created by accountable leaders listening to the “voice of the stores” ▪ Showing ourselves what happens when we get the digital basics right – womenswear sales up
Slide 7: Restoring the Basics – Humphrey Singer, CFO
RESTORING THE BASICS BIGGER, BOLDER, FASTER HUMPHREY SINGER CHIEF FINANCE OFFICER
Slide 8: Financials at a glance
BIGGER, BOLDER, FASTER FINANCIALS AT A GLANCE Group revenue Profit before tax Free cash flow & adjusting items before adjusting items £10.4bn £523.2m £729.4m -3.0% -9.9% 25.2% Profit before tax Net debt Final dividend £84.6m £1.55bn 7.1p NEW 26.6% -15.3% -40% PER UNA Tiered Floral Print Maxi Shirt D
Slide 9: Food performance
BIGGER, BOLDER, FASTER FOOD PERFORMANCE Revenue Gross margin Q4 FY FY 2017/181 31.2% Total -0.8% -0.6% Buying margin -15bps LFL -1.5% -2.3% Waste - LFL (excluding Easter) 0.4% -1.5% FY 2018/19 31.1% 1 Prior year has been restated for the reclassification of cards & gift wrap from C&H to Food.
Slide 10: Clothing & Home performance
BIGGER, BOLDER, FASTER CLOTHING & HOME PERFORMANCE Revenue Gross margin Q4 FY FY 2017/182 56.9% Total -3.9% -3.6% Buying margin -20bps LFL -1.3% -1.6% Discounting 40bps M&S.com 0.2% 5.0% FY 2018/19 57.1% 2 Prior year has been restated for the reclassification of cards & gift wrap NEW UK C&H online1
Slide 11: Operating costs
BIGGER, BOLDER, FASTER OPERATING COSTS £m Cost drivers -2.4% -4.2% 4.9% 2.3% -0.5% 3,450 FY (26) 4 3,410 Net space, volume and -0.2% 27 channel shift (3) Inflation 1.7% (42) Cost savings -3.0% Other 0.3% Year-on-year -1.2% FY Store Other Distri- Marketing Central FY 17/18 staffing store bution & cos
Slide 12: International performance
BIGGER, BOLDER, FASTER INTERNATIONAL PERFORMANCE Operating profit £m Total 135.2 Revenue 127.0 Q4 FY Franchise 86.1 72.2 Revenue1 1.8% -13.4% Adjusted revenue2 3.0% 1.1% 1 Constant currency. 2 Constant currency, excluding exit markets and Hong Kong. Owned retained 53.1 52.7 Owned exit3 -4.0 2.1 FY 1
Slide 13: Profit bridge
BIGGER, BOLDER, FASTER PROFIT BRIDGE £m 580.9 (20) 41 12 523.2 (13) (8) (69) Food C&H Sales £(11)m Sales £(76)m Margin rate £(9)m Margin rate £7m 84.6 (439) Adjusted Food gross C&H gross UK operating M&S Bank International Net finance Adjusted Adjusting Profit PBT profit profit costs cost PBT items
Slide 14: Adjusting items
BIGGER, BOLDER, FASTER ADJUSTING ITEMS £m Strategic programmes UK store estate (222.1) Organisation (51.8) Operational transformation (16.4) IT restructure (15.6) UK logistics (14.3) Changes to pay and pensions (6.2) International closures (5.3) M&S Bank charges (20.9) UK store impairments & other p
Slide 15: Capital expenditure before disposals
BIGGER, BOLDER, FASTER CAPITAL EXPENDITURE BEFORE DISPOSALS £m £299m International 12 £283m Supply chain 24 11 UK store environment 27 49 Growth 26 26% Property maintenance 73 69 £283m New UK stores 72 FY 18/19 35% 40 Other* 39% Efficiency IT & M&S.com 92 88 *Investments in essential asset replaceme
Slide 16: Reduction in net debt
BIGGER, BOLDER, FASTER REDUCTION IN NET DEBT £m 59 545 (38) (265) 12 729 (185) 601 584 (145) 2 282 (304) Adjusted Depreciation Working DB Capex Interest Other Free Adjusting Free cash Dividends Other Reduction operating and capital pension and and cash flow items1 flow movements in net profit amorti
Slide 17: Balance sheet
BIGGER, BOLDER, FASTER BALANCE SHEET ▪ Substantial debt repayment and pension obligation to fund ▪ Steps to build a stronger balance sheet and retain investment grade metrics DEBT MATURITY PROFILE (£M) – Reset annual dividend by 40% to a sustainable level 400 400 – £600m rights issue 300 300 – Limit
Slide 18: IFRS 16 - Overview
BIGGER, BOLDER, FASTER IFRS 16 - OVERVIEW ▪ Effective for FY 19/20 ▪ Adopted fully retrospective approach ▪ No impact on our turnaround plans, economics or cash Illustrative KPI Summary Pre IFRS 16 Change Post IFRS 16 for FY 18-19 (£m) PBT before adjusting items1 523 (10) 513 PBT1 85 10 95 Net Debt2
Slide 19: IFRS 16 – Impact on balance sheet
BIGGER, BOLDER, FASTER IFRS 16 – IMPACT ON BALANCE SHEET As at 30 March 191 2,681 1,900 2,381 (200) 200 400 (2,600) NEW March 19 Recognise "New" Derecognise IAS 17 Derecognise Recognise right of Impairment March 19 net net assets Lease liability working capital onerous lease use asset assets post M&
Slide 20: Guidance 2019/20
BIGGER, BOLDER, FASTER GUIDANCE 2019/20 Food Space contribution (%) c. -1 Gross margin change (bps) -25bps to +25bps Clothing & Home Space contribution (%) c. -3 Gross margin change (bps) -25bps to +25bps UK operating costs (%) 0 to -1 Tax rate (%) c. 23 PER UNA Capital expenditure (£m) 350 to 400 L
Slide 21: Rights issue
BIGGER, BOLDER, FASTER RIGHTS ISSUE ▪ Raising approximately £601.3 million gross proceeds ▪ Standby underwritten since 27 February 2019 and now fully underwritten ▪ 1 new share for every 5 existing shares ▪ Issue price 185 pence per new ordinary share ▪ Issue price represents a discount of approxima
Slide 22: Restoring the Basics – Steve Rowe, Chief Executive
RESTORING THE BASICS BIGGER, BOLDER, FASTER STEVE ROWE CHIEF EXECUTIVE
Slide 23: Transforming our leadership
BIGGER, BOLDER, FASTER TRANSFORMING OUR LEADERSHIP WHAT’S HAPPENED ▪ Two thirds of our leadership teams are new ▪ Increasing the pace of decision taking ▪ Bringing back the “voice of the store” ▪ Freeing up store managers to trade WHAT’S PLANNED ▪ Building out leadership in Food, C&H, Property and B
Slide 24: Creating accountable businesses
BIGGER, BOLDER, FASTER CREATING ACCOUNTABLE BUSINESSES WHAT’S HAPPENED CLOTHING ▪ Created family of M&S businesses aligned by brand & HOME values, stores, data, loyalty and IT ▪ Changing trading rhythm in each business ▪ Food and C&H with end-to-end accountability ▪ Streamlined corporate functions F
Slide 25: Digital first now real, no longer aspirational
BIGGER, BOLDER, FASTER DIGITAL FIRST NOW REAL, NO LONGER ASPIRATIONAL WHAT’S HAPPENED ▪ UK C&H online sales up 9.8% THE .COM PURCHASE FUNNEL Year-on-year improvements in click through ▪ Online now 22% of UK C&H sales ▪ Top quartile amongst our peers on page load speed Visit the ▪ Rebuilt womenswear
Slide 26: Progress in C&H impeded by operating challenges
BIGGER, BOLDER, FASTER PROGRESS IN C&H IMPEDED BY OPERATING CHALLENGES WHAT’S HAPPENED ▪ Encouraging signs in core programmes STOCK COVER YEAR END INVENTORY Weeks 100 = March 2017-18 – Slimmer fits successfully launched across men's and womenswear – Denim launch in February saw 20% sales uplift DOWN
Slide 27: Further change to achieve style & value
BIGGER, BOLDER, FASTER FURTHER CHANGE TO ACHIEVE STYLE & VALUE WHAT’S PLANNED ▪ New range planning processes and size ratio tools RESHAPING THE DENIM & JEGGINGS BUY ▪ Stronger focus on best-selling lines 100,000 ▪ More marked reduction in options and range duplication ▪ Already reshaped and narrowed
Slide 28: Retaining the magic but adding value in Food
BIGGER, BOLDER, FASTER RETAINING THE MAGIC BUT ADDING VALUE IN FOOD WHAT’S HAPPENED REDUCTION IN PROMOTIONAL PARTICIPATION % of food sales on promotion ▪ Move away from a promotion-driven to a regular price business – Removed nearly 70% of multibuys – Promotional participation down over 10 percentag
Slide 29: Retaining the magic but adding value in Food (planned)
BIGGER, BOLDER, FASTER RETAINING THE MAGIC BUT ADDING VALUE IN FOOD WHAT’S PLANNED TRANSACTIONS YOY 12 Week Rolling Average 6.0% ▪ Continue investing behind a clear pricing architecture – New Lower Price, Great Value Every Day, and 4.0% Family Pack 2.0% ▪ Establish a Food Buying Academy – ongoing co
Slide 30: Building profitable growth at scale in International
BIGGER, BOLDER, FASTER BUILDING PROFITABLE GROWTH AT SCALE IN INTERNATIONAL WHAT’S HAPPENED IMPACT OF MARKET RIGHT PRICING Percentage performance in 52 weeks since launch ▪ Completed rollout of market right pricing INDONESIA CYPRUS ▪ Opened 37 new stores and refurbished 56 24% 16% ▪ Strengthened rel
Slide 31: Creating a fit for the future store estate
BIGGER, BOLDER, FASTER CREATING A FIT FOR THE FUTURE STORE ESTATE WHAT’S HAPPENED ▪ Recognised the reality of M&S’s bricks and mortar RESHAPING THE STORE ESTATE 2019-24 challenge Estimated number of stores ▪ Closure programme being implemented with stable recapture rates ▪ Identified what shape of e
Slide 32: Modernising our Food and C&H supply chains
BIGGER, BOLDER, FASTER MODERNISING OUR FOOD AND C&H SUPPLY CHAINS WHAT’S HAPPENED FREEING UP COLLEAGUE HOURS Vangarde store trial ▪ Improved Food productivity at Vangarde store in York Other Customer Facing ▪ Working more closely with GIST, our 3PL provider 10% 6% 33% Tilling Waste ▪ Continued move
Slide 33: Achieve cost savings of at least £350m
BIGGER, BOLDER, FASTER ACHIEVE COST SAVINGS OF AT LEAST £350M WHAT’S HAPPENED 19/20 COST SAVINGS BY AREA Excluding store closures ▪ Savings of c. £100m in FY18/19, in addition to operating Other Retail Efficiencies cost of stores which have closed ▪ Savings from retail management restructure, IT tra
Slide 34: Ocado JV will be transformative for M&S Food
BIGGER, BOLDER, FASTER OCADO JV WILL BE TRANSFORMATIVE FOR M&S FOOD ▪ JV to benefit from access to M&S’s brand, products and ONLINE FASTEST GROWING CHANNEL 2018-2023 customer database by September 2020 at the latest Change in value (%) ▪ JV will have significant cost advantage over store-based Onlin
Slide 35: Still completely focused on our business priorities
BIGGER, BOLDER, FASTER AND WE ARE STILL COMPLETELY FOCUSED ON OUR BUSINESS PRIORITIES Leadership 1 Accountable 2 3 Transformation Businesses Digital First Style and Value 4 Magic Again 5 Rebuilding Profitable Growth 6 in Clothing in Food in International Store Estate Fit 7 Modernised 8 Cost Savings
Slide 36: Appendix
M&S EST. 1884 APPENDIX
Slide 37: Stores and space
STORES AND SPACE UK Mar 19 Mar 18 Openings Closures Change Shopping Centre 16 16 0 0 0 Retail Park 70 70 1 (1) 0 High Street – large 82 86 0 (4) (4) High Street 107 128 0 (21) (21) Outlets 34 39 0 (5) (5) Simply Food owned 301 286 24 (9) 15 Simply Food franchise 433 410 24 (1) 23 Add back downsize t
Marks and Spencer Group — FY2018/19 Earnings Presentation on 6ix