Marks And Spencer Group Plc · LSE:MKS
Marks And Spencer — Q4 2021 Earnings Presentation
39 slides from Marks And Spencer's earnings presentation, Nov 26, 2021
Slide 1: Never the Same Again: Forging a Reshaped M&S
Never the Same Again FORGING A RESHAPED M&S FULL YEAR RESULTS 26 MAY 2021 1
Slide 2: M&S Emerges Reshaped from Covid Year
A RESHAPED M&S M&S EMERGES RESHAPED FROM COVID YEAR A RESILIENT FINANCIAL PERFORMANCE FORGING A RESHAPED M&S STEVE ROWE CHIEF EXECUTIVE 2
Slide 3: M&S Emerges Reshaped from Covid Year
A RESHAPED M&S M&S EMERGES RESHAPED FROM COVID YEAR Adjusted profit before tax, strong focus on cash preservation and healthy reduction in net debt Strong underlying Food growth; substantial Ocado Retail contribution – M&S achieving c.50% of fresh category sales Clothing & Home and International hea
Slide 4: Addressing Our Deep-Seated Issues
FACING FACTS ADDRESSING OUR DEEP-SEATED ISSUES 1 Complex corporate culture and structure 2 Behind the curve in digital 3 More to do on style and value in Clothing & Home 4 Underperformance in Food 5 High cost retailer with inefficient supply chain 6 Store estate not fit for the future 4
Slide 5: Fixing the Basics: The Transformation So Far
A RESHAPED M&S FIXING THE BASICS: THE TRANSFORMATION SO FAR 1 Simplified structure and greater accountability 2 Substantial increase in digital and data capability 3 Shifted to trusted value and more contemporary styling in C&H Accountable businesses with P&L Technology transformation and Incr
Slide 6: Eoin Tonge, Chief Finance Officer
EOIN TONGE CHIEF FINANCE OFFICER M&S Hedge End
Slide 7: Full Year Financials at a Glance
A RESHAPED M&S FULL YEAR FINANCIALS AT A GLANCE £9.0bn £41.6m £(201.2)m -11.9% -89.7% - Profit before tax Group revenue & adjusting items Loss before tax £296.4m £3.52bn £1.11bn +44.1% reduced 10.9% reduced 20.1% Net debt Free cashflow Net debt excluding leases Note: P&L metrics on 52 week basis, ca
Slide 8: Food Performance
A RESHAPED M&S FOOD PERFORMANCE CATEGORY MIX % change to 19/20 % change to 19/20 Frozen +36 Hospitality -81 REVENUE Grocery & household +27 Food-on-the-move -47 Beers, wines & spirits +25 Bakery -7 % change to 19/20 Q4 FY Meat, fish, poultry, deli +13 Prepared meals -5 Produce & flowers +8 Confectio
Slide 9: Food LFL Performance
A RESHAPED M&S FOOD LFL PERFORMANCE FOOD LFL EX HOSPITALITY AND FRANCHISE (% VS 19/20) 40% +5.9% +4.7% +2.8% 20% 0% -20% -40% FOOD LFL (% VS 19/20) 40% 20% +0.2% -2.4% -2.6% 0% -20% -40% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar LOCKDOWN 1 LOCKDOWN 2 LOCKDOWN 3 Lockdown 1 = weeks 1-11; Lockdow
Slide 10: Food Operating Profit Bridge
A RESHAPED M&S FOOD OPERATING PROFIT BRIDGE 19/20 £m 236.7 19/20 £m 236.7 Gross profit (60.7) Hospitality/franchise gross profit (154.0) Store staffing 30.8 Core categories gross profit 93.3 Other store costs 56.3 Direct Covid costs (69.0) Distribution and (46.8) 101.0 warehousing Government support
Slide 11: Ocado Contribution to M&S
A RESHAPED M&S OCADO CONTRIBUTION TO M&S SHARE OF PROFIT £m 52 w/e 28 Feb 2021 Revenue 2,353.2 EBITDA before exceptional items 189.9 Exceptional items 50.5 Operating profit 204.2 Profit after tax 156.8 M&S 50% share of profit after tax 78.4 Memo: M&S Sales on Ocado.com 319.1 11
Slide 12: Clothing & Home
A RESHAPED M&S CLOTHING & HOME CATEGORY MIX BY CHANNEL % change to 19/20 Online Stores % change to 19/20 Online Stores REVENUE Lingerie and essentials +121 -54 Formal -15 -72 % change to 19/20 Q4 FY Kids +78 -43 Holiday -31 -72 Casual +61 -56 Shoes and +3 -68 accessories Total -18.7 -31.5 Home & bea
Slide 13: Clothing & Home Channel Performance
A RESHAPED M&S CLOTHING & HOME CHANNEL PERFORMANCE ONLINE (% VS 19/20) 160% 120% 80% 40% 0% -40% STORES (% VS 19/20) 0% -20% -40% -60% -80% -100% Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar LOCKDOWN 1 LOCKDOWN 2 LOCKDOWN 3 Lockdown 1 = weeks 1-11; Lockdown 2 = weeks 33-35; Lockdown 3 = weeks 41-
Slide 14: Clothing & Home Operating Profit Bridge
A RESHAPED M&S CLOTHING & HOME OPERATING PROFIT BRIDGE 19/20 £m 223.9 19/20 £m 223.9 Gross profit (611.7) Stores gross profit (841.2) Store staffing 147.6 Online gross profit 229.5 Other store costs 109.3 Direct Covid costs (18.7) Distribution and warehousing (43.2) Government support 196.4 Central
Slide 15: International
A RESHAPED M&S INTERNATIONAL RETAIL SALES BY MARKET AND CHANNEL % change to 19/201 Total Online Stores RETAIL SALES Kuwait +20 +322 +12 % change to 19/201 Q4 FY Saudi Arabia +13 +1002 +6 Jersey +1 +71 +1 Total -2.4 -18.0 Guernsey -1 - -1 Zalando +1002 +1002 - Clothing & Home 2.2 -22.2 % change to 19
Slide 16: International Operating Profit
A RESHAPED M&S INTERNATIONAL OPERATING PROFIT 19/20 £m 110.7 19/20 £m 110.7 Gross profit (87.9) Stores gross profit (131.3) Store staffing 14.0 Online gross profit 43.4 Other store costs 16.4 Online growth costs (23.6) Distribution and (11.7) Government support 13.1 warehousing Central costs 3.6 Oth
Slide 17: Profit Bridge
A RESHAPED M&S PROFIT BRIDGE £m 76 403 (23) (353) 20 42 (66) (15) (243) (201) Adjusted Food Ocado Clothing International M&S Net Adjusted Adjusting Loss PBT & Home Bank finance PBT items Before Tax 19/20 cost 20/21 20/21 OPERATING PROFIT 17 M&S Southampton
Slide 18: Adjusting Items
A RESHAPED M&S ADJUSTING ITEMS 52wks ended 27 Mar 21 53wks ended 3 Apr 21 £m £m Strategic programmes Organisation (116.9) (133.7) UK store estate (95.2) (95.3) Other (5.8) (5.8) Directly attributable to Covid 90.8 90.8 Mell Square closing June 2021 Intangible asset impairments (79.9) (79.9) Sparks (
Slide 19: Cash Flow and Reduction in Net Debt
A RESHAPED M&S CASH FLOW AND REDUCTION IN NET DEBT £m 825 268 LEASE DEBT (37) Decrease in lease obligations £184m New lease commitments £(48)m Other £20m (317) (204) 156 435 (82) WORKING CAPITAL (54) Increase in payables £160m 279 Decrease in stock £41m (120) Decrease in receivables £67m Adjusted Ca
Slide 20: Substantial Cash and Undrawn Facilities
A RESHAPED M&S SUBSTANTIAL CASH AND UNDRAWN FACILITIES Undrawn £1.1bn RCF with further recent relaxation of covenants £2.89bn >£1.5bn headroom 2023, £1,100m RCF Cash balances of £674m at year end 2021, £164m 2023, £300m £1.11bn 2025, £400m Re-financed 2021 bond maturity in Bonds November 2026, £300m
Slide 21: Outlook for 2021/22
A RESHAPED M&S OUTLOOK FOR 2021/22 UK costs normalise to levels broadly consistent with 2019/20 Capital Allocation Model Normalisation of Ocado economics Invest in transformation Ongoing disruption in international markets Recover balance sheet metrics consistent with investment grade Brexit related
Slide 22: Steve Rowe, Chief Executive
Est. 1984 ; i STEVE ROWE CHIEF EXECUTIVE
Slide 23: A Reshaped M&S Emerging from the Pandemic Period
A RESHAPED M&S A RESHAPED M&S EMERGING FROM THE PANDEMIC PERIOD A strong A successful An omni-channel Accelerated INTERNATIONAL FOOD business transition to CLOTHING & HOME rotation of the business focused on positioned for growth M&S product on business driven STORE ESTATE major partnerships OCADO R
Slide 24: M&S Food with Broader Appeal
A RESHAPED M&S M&S FOOD WITH BROADER APPEAL FOOD NPD OVER 1900 LINES INCLUDING FOOD ON PROTECTING THE MAGIC OF M&S FOOD GROCERY ORGANIC THE MOVE HOMECARE Focusing NPD on areas of broader appeal such as organic, plant-based and family 215 95 65 119 DELIVERING GREAT VALUE OVER 70% HEALTH ‘Remarksable’
Slide 25: M&S Food with Broader Appeal
A RESHAPED M&S M&S FOOD WITH BROADER APPEAL CONVENIENCE PRODUCTS RECOVERING Performance vs 19/20 PIVOTING MARKETING TOWARDS DIGITAL 17% 11% High impact brand-building leveraging social content & personalisation through Sparks -5% -20% -30% -47% FOTM FOTM Prepared meals Retail Parks ex franchise ex f
Slide 26: Successful Transition to M&S Food on Ocado Retail
A RESHAPED M&S SUCCESSFUL TRANSITION TO M&S FOOD ON OCADO RETAIL PENETRATION OF M&S PRODUCTS ON OCADO BROUGHT THE BEST TOGETHER M&S Food with Ocado technology, range 36% CHRISTMAS and service 34% 32% SUCCESSFUL SWITCHOVER COMPLETED 30% 28% c.750 new lines developed for Ocado launch. Now over 25% of
Slide 27: Reshaped Omni Channel Clothing & Home
A RESHAPED M&S RESHAPED OMNI CHANNEL CLOTHING & HOME PLANNING OPTION COUNT DOWN c.25% BY AW21 STRENGTHENED PRODUCT ENGINE No. of options (‘000s) Deeper buying into core ranges with option 4 count a third lower than AW18. Launched brands at M&S with initial group of over 2 20 partners 0 Womenswear Me
Slide 28: MS2: Driving Omni-Channel Growth
A RESHAPED M&S MS2: DRIVING OMNI-CHANNEL GROWTH SUBSTANTIAL OPPORTUNITY IN AVAILABILITY Online availability IMPROVING THE ONLINE OFFER 87% 86% 86% Increasing availability from 76% in 20/21. 84% Online only ranges including ‘test and repeat’ 79% 76% lines and curated range of brands 2018/19 2019/20 2
Slide 29: Accelerated Rotation of Store Estate
A RESHAPED M&S ACCELERATED ROTATION OF STORE ESTATE No. of full-line stores INCREASED NEED FOR STORE ROTATION Good progress prior to pandemic with 59 255 full line stores, many in declining locations already closed New Food c.45 Rotate Close 110 c.30 180 New c.15 GREAT TIME TO OPEN NEW SPACE Core 80
Slide 30: Strong Economics of Rotation
A RESHAPED M&S STRONG ECONOMICS OF ROTATION 17/18 £14.3m Sales 19/20 £1.1m* Profit £39.0m (12.3)% Sales LFL KETTERING £4.8m* Profit +6.5% RUSHDEN LAKES LFL 17/18 £24.2m Sales £2.5m* Profit (7.0)% LFL NORTHAMPTON *Cash contribution 30
Slide 31: Funding Enabled by Redevelopment of Assets
A RESHAPED M&S FUNDING ENABLED BY REDEVELOPMENT OF ASSETS 31
Slide 32: International Focused on Partnerships and Online
A RESHAPED M&S INTERNATIONAL FOCUSED ON PARTNERSHIPS AND ONLINE DIGITAL SHOWROOM FOR RANGE CURATION AMBITIOUS PLANS FOR ONLINE GROWTH Partnerships with marketplaces expanding Localised fulfilment; stores and future hubs Broadening distribution; new country sites MODERNISING OPERATIONS PARTNERS Inves
Slide 33: Recap: Reshaped M&S Positioned for Recovery
A RESHAPED M&S RECAP: RESHAPED M&S POSITIONED FOR RECOVERY Food: Strong underlying growth; positioned to recover in hospitality, expand in convenience and on Ocado Retail Resilient performance, optimistic as emerge from Covid year C&H and International: New range and online capability gaining tracti
Slide 34: Appendices
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Slide 35: Additional Costs Associated with Brexit
A RESHAPED M&S ADDITIONAL COSTS ASSOCIATED WITH BREXIT GROUP BREXIT IMPACTS £m 20/21 21/22 Admin costs (14.0) (29) Tariffs (2.1) (13-18) Total (16.1) (42-47) PRODUCTS JOURNEY Farm or Factory Labelling Delivery Product Vet Pick Vet Export Paperwork Vehicle Sailing / Movement Clear EU Import Stock on
Slide 36: Quarterly Sales Performance
A RESHAPED M&S QUARTERLY SALES PERFORMANCE % change to 19/20 Q1 Q2 Q3 Q4 FY Food -2.1 1.6 2.2 -4.4 -0.6 Food LFL 2.0 3.4 2.6 -2.7 1.3 Clothing & Home -61.5 -21.3 -25.1 -18.7 -31.5 Clothing & Home LFL -59.3 -21.2 -24.1 -15.5 -29.8 Total UK Sales -22.6 -6.6 -8.2 -8.5 -11.3 Total UK LFL -19.2 -5.6 -7.6
Slide 37: Depreciation and Amortisation
A RESHAPED M&S DEPRECIATION AND AMORTISATION FY 20/21 (53 weeks) £m Food C&H Intl Other Group Group Adjusted operating profit 229 (131) 44 80 222 Depreciation Tangible asset 113 165 13 - 291 Right of use asset 84 64 25 - 172 Amortisation 56 74 7 - 136 Write off & disposal costs 11 6 (13) - 4 Depreci
Slide 38: Finance Lease Breakdown
A RESHAPED M&S FINANCE LEASE BREAKDOWN International 202 Office, Warehouse 494 983 Full Line & Other £2,406m FY 20/21 727 Simply Food 38
Slide 39: Stores and Selling Space
A RESHAPED M&S STORES AND SELLING SPACE NUMBER OF STORES UK Selling space (m sq ft) Mar 21 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 2.3 84 89 0 (5) (5) Full line total 13.4 254 256 3 (5) (2) Outlets 0.
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