TIDMBB90
RNS Number : 1376M
Lewis(John) PLC
13 September 2012
John Lewis plc
Unaudited condensed Interim Financial Statements for the half
year ended 28 July 2012
Strict Embargo: 7:00am
13 September 2012
John Lewis plc
Interim results for the half year ended 28 July 2012
"An encouraging trading performance with robust sales and profit
recovery"
Chairman's Statement
The Partnership has delivered strong growth in the first half
with gross sales up by 8.7% and profit before tax up by almost 60%.
Waitrose increased gross sales by 6.6% and operating profit by
almost 29%. John Lewis, where profits are often more volatile in
the first half, grew gross sales by nearly 13% and operating profit
more than doubled. Both Waitrose and John Lewis increased their
market shares.
Three key factors lie behind these excellent results.
Firstly, we benefited from the more favourable conditions
created by a number of one-off events, such as the Diamond Jubilee,
the lead up to the London 2012 Olympic and Paralympic Games and the
anniversary of the VAT increase which depressed sales last
year.
Secondly, our trading teams performed particularly well, with
clearly differentiated products backed by outstanding service. In
Waitrose we launched more products than ever before and extended
the Brand Price Match. In John Lewis we took market share in all
categories and launched a series of innovative design
collaborations.
And thirdly, we saw an acceleration in sales and profit from the
longstanding focus we have had on developing our multi-channel
operations and from improving the efficiency of our business.
Multichannel sales made a vital contribution across both John Lewis
and Waitrose and we extended the reach and appeal of our offer with
the extension of Click & collect to most Waitrose shops. We
also saw the benefits of changes made in the branch operations in
both Waitrose and John Lewis, and an increasing contribution to
greater efficiency from our Partnership Services division.
2012/13 Outlook
Consumer demand remains fragile, but has stabilised and we
continue to see opportunities to grow market share. We have seen a
good start to the second half. After 6 weeks, Partnership gross
sales are 10.3% higher than last year. Waitrose gross sales have
increased by 8.7% (4.5% like-for-like) and John Lewis gross sales
are 13.1% higher than last year (8.5% like-for-like).
Our rate of growth will remain positive but will be slower in
the second half and, with further investment planned in that period
to strengthen our business for the longer term, the rapid rate of
profit increase is not expected to be carried through to the full
year. This is consistent with our long term commitment to building
the Partnership for the future.
Financial Results
In the first six months of the year the Partnership has traded
strongly in a tough market, and achieved robust sales and profit
growth. Both Waitrose and John Lewis grew sales ahead of their
respective markets, increasing their market share.
The Partnership grew sales strongly with gross sales of
GBP4.4bn, an increase of GBP354m, or 8.7%, on last year and revenue
of GBP3.9bn, up by GBP310m or 8.6%. Operating profit was GBP163.5m,
an increase of GBP52.0m, or 46.6% on last year, as a result of
improved gross margin and good cost control. Operating profit
margin increased by 1.1% to 4.2%. Profit before tax was GBP145.5m,
an increase of GBP54.3m, or 59.5%, on last year.
Waitrose
Waitrose's gross sales grew strongly, up 6.6% (GBP172.8m) to
GBP2.8bn underpinned by like-for-like sales growth of 2.2% and new
branch openings this half year and in the second half of last year.
Operating profit grew by 28.9% to GBP142.0m. A number of
investments in the future strength of the business have been made
over the last couple of years, including convenience, Waitrose.com
and in the Channel Islands. The positive impact of these, along
with increased efficiency and the benefits of growth, are seen in
this profit performance which in turn provides a platform for
further increases in investment in the second half.
Waitrose's market share increased by 0.2% to 4.6% and has
consistently outperformed the market over the last three years. In
April, Waitrose was voted Favourite Food & Grocery retailer at
Verdict's annual Consumer Satisfaction Awards and in May won Good
Housekeeping's 'Favourite Supermarket' Award for the fifth year
running.
A tight focus on efficiency and managing costs, together with
continued sales growth, gave us the opportunity to extend our Brand
Price Match in May this year. Prices on branded grocery products
are now identical to Tesco's, excluding promotions. This important
move - together with at least 1,000 promotions each week and the
continuing strength and range development of essential Waitrose -
reinforces the value offer for customers.
Product innovation and quality underpinned by service and value
is pivotal to our success. This year reflects the highest-ever rate
of product innovation, with 2,700 new and improved products
launched in the first half and a further 2,200 planned in the
second half.
We continued to extend the reach of Waitrose within the UK. Four
new supermarkets and six Little Waitrose convenience branches were
opened in the half. This brings the total estate to 282 shops,
including 34 convenience shops, at the end of July. Waitrose is
also now present in 17 Welcome Break motorway services, having
recently opened at Fleet North. In the second half, we have already
opened new shops in Bedford and Alton, with seven more openings
planned this financial year, including two more convenience
shops.
The investment made in Waitrose.com continues to bear fruit with
online sales growing by 50%. Deliveries are available from 147
branches and from our customer fulfilment centre in Acton, West
London. During the first half of the year, Waitrose.com continued
to be the fastest growing major UK online grocery retailer,
according to Kantar Worldpanel data.
John Lewis
John Lewis' gross sales grew strongly, up 12.8% (GBP181.0m) to
GBP1.6bn underpinned by strong growth from Electricals and Home
Technology (EHT) and multichannel sales. Like-for-like sales grew
by 9.2%. Operating profit grew by 188.6% to GBP45.6m.
We made significant market share gains in each of our three main
categories. Sales in EHT were ahead by 31.8%, Home increased by
6.2% and Fashion saw good growth of 7.2%. A series of events,
including the Diamond Jubilee, helped drive sales, with John Lewis'
role as the 'Official Department Store of the London 2012 Olympic
and Paralympic Games' having a positive impact in the run up to the
Games. The strong growth in EHT was supported by customer
confidence in our price matching position, particularly during the
digital switchover in London, and the product expertise of our
Partners, and when compared to last year when the increase in VAT
in January 2011 dampened sales. In April, John Lewis was voted
'Best Electrical Retailer' at Verdict's annual awards.
Product innovation, brand partnerships with suppliers such as
with Apple, and our continued commitment to being Never Knowingly
Undersold contributed to our market share gains. The John Lewis
brand continues to be strengthened through design collaborations
with designers such as Alice Temperley in Fashion and 15 design
'luminaries' in our Home 'Design Collective' - including Bethan
Grey, Matthew Hilton and Sebastian Conran. In addition, our new
own-brand 'House', offers affordable style in home accessories
enabling us to meet the needs of even more customers.
johnlewis.com had another strong half and is a significant
contributor to our success, growing sales by over 40% and now
accounts for 24% of total John Lewis sales. Our multi-channel
operation continues to go from strength-to-strength, with customers
appreciating the ease of shopping across a variety of channels from
smartphones to in-store internet kiosks.
'Click & collect' continues to be extremely popular.
Customers can now pick up online purchases made before 7pm, the
next afternoon after 2pm from all 37 John Lewis and 194 Waitrose
branches. Year on year, the Click & collect service has grown
by 114%, with purchases collected at Waitrose outlets accounting
for 34% of sales.
We also continued the expansion of our selling space, opening
two new 'at home' branches in Newbury and Chichester. Next month a
new format full-line department store will open in Exeter, with a
John Lewis 'pop-up' shop trading on the main high street for six
weeks before the opening to give shoppers a preview of our product
range. In November, a new 'at home' branch will open in Ipswich,
sharing the same entrance, atrium and mezzanine cafe with a new
Waitrose.
Partnership Services and Corporate
Partnership Services, our newly established business support
division, made good progress driving efficiency gains in the half.
We are achieving encouraging improvements in the efficiency of
process operations, with a productivity improvement of 7% in
accounts payable and 3% in payroll. We have also seen benefits in
working capital, and significant savings through better procurement
of goods not for resale.
A number of significant central transformation programmes are
underway, principally within our Personnel and IT functions. The
programmes are designed to increase both the efficiency and
effectiveness of our support functions. The costs of these
programmes are the primary factor behind the year on year increase
in Corporate costs. This trend is expected to continue into the
second half of the year.
Looking ahead, recent investments in our contact centre will
help Partners and suppliers with simpler access to expert Partners
and faster resolution of queries. In the second half, we will
transfer our central IT function to Partnership Services, as a part
of developing efficient and effective business support services at
scale.
Investment in the future
Capital spending in the first six months of the year was
GBP162.4m, a decrease of GBP91.4m (36.0%). Year on year this
reduction largely reflects lower capital expenditure in Waitrose,
as in 2011 there were more branch openings, including the five in
the Channel Islands, and a major branch refurbishment programme,
including Canary Wharf, was weighted towards the first half.
Waitrose invested GBP79.9m, mainly on new branches opening this
year together with two extensions and investment in the
implementation of a new warehouse management system to drive
productivity in our supply chain, and also a number of retail
systems improvements to aid efficiency and enhance the flexibility
of our offer.
John Lewis invested GBP67.0m, with the mix of investment
continuing to reflect the business strategy of opening new space,
refurbishing key regional shops and investing in the IT and
distribution infrastructure to support multichannel trading.
In addition, GBP15.5m was invested centrally, mainly in
maintaining and modernising our IT platforms and head office
buildings.
Financing
Net finance costs on borrowings and investments increased by
GBP0.2m (0.7%) to GBP29.1m. After including the financing elements
of pensions and long service leave and non-cash fair value
adjustments, net finance costs decreased by GBP2.3m (11.3%) to
GBP18.0m.
At 28 July 2012, net debt was GBP502.5m, a decrease of GBP2.3m
(0.5%) in the half year and GBP186.1m (27.0%) better than 30 July
2011. During the half year we repaid bonds of GBP142m from
available cash. The Partnership balance sheet is strong with
substantial capacity to increase our borrowings should we wish to.
We also remain well within the limits of the financial covenants in
our bank facilities and bonds.
Pensions
Included within operating profit, the accounting charge for
pensions was GBP68.7m, up GBP7.1m or 11.5% on the prior year
reflecting the change in the financial assumptions and growth in
scheme membership.
The total accounting pension deficit at July 2012 increased by
GBP198.6m (31.1%) to GBP836.7m. Net of deferred tax the deficit was
GBP665.2m. The accounting valuation of pension fund liabilities
increased by GBP242.0m (7.6%) to GBP3,417.0m, while pension fund
assets increased by GBP43.4m (1.7%) to GBP2,580.3m.
On the current actuarial cash funding basis, we estimate that
our defined benefit final salary schemes ended the half year with a
small deficit of approximately GBP30m. In addition there are
approximately GBP10m of unfunded pension liabilities. The next
formal valuations of the schemes will be in March 2013.
Corporate Social Responsibility
In March 2012, the Corporate Research Foundation certified the
Partnership as one of Britain's Top Employers for our outstanding
working conditions.
Community Matters, the famous "green token" scheme that has
donated more than GBP11m to over 32,000 charities, was honoured in
January with a Big Society Award; and our involvement with our
local communities was further extended through Partner
Volunteering. This will contribute approximately 75,000 paid hours
each year by our business to the benefit of our local communities.
Community Matters was extended to all John Lewis shops in May this
year, and our community rooms initiative has been extended across
the majority of our shops providing space for use by local
charities and community groups, free of charge.
As recognised by Business in the Community's Award for
Excellence 2012, the Partnership continues to invest in low carbon
distribution. In March, we were awarded Gold in the Transport for
London Fleet Operators Recognition Scheme.
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 07525 272377
Citigate Dewe Rogerson
Simon Rigby / Nicola Swift 020 7638 9571
John Lewis
Helen Dickinson, Head of Communications 07785 952567
Louise Cooper, Senior Manager, Corporate, Digital & Branch PR 07808 574117
Waitrose
Christine Watts, Communications Director 07764 676414
Gill Smith, Senior Manager, Corporate PR 07887 898133
Notes to editors
The John Lewis Partnership - The John Lewis Partnership operates
37 John Lewis shops across the UK (29 department stores and eight
John Lewis at home), johnlewis.com and 284 Waitrose supermarkets.
The business has annual gross sales of over GBP8.7bn. It is the
UK's largest example of worker co-ownership where all 80,000 staff
are Partners in the business.
Waitrose - Waitrose, Britain's favourite supermarket*, has 284
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 for online shopping, as well as a long
term commitment to sourcing the UK's finest local and regional
foods. Waitrose own-label ranges accounts for 54% of sales.
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, Favourite Food
& Grocery Retailer at Verdict's annual Consumer Satisfaction
Awards; Favourite Supermarket at Good Housekeeping Awards
** Kantar Worldpanel
John Lewis - John Lewis, 'Britain's favourite electricals
retailer 2012'* and 'Best Multichannel Retailer 2011' **, typically
stocks more than 350,000 separate lines in its department stores.
The website stocks over 200,000 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. John Lewis
is proud to have been the official department store provider to the
London 2012 Olympic and Paralympic Games.
* Verdict Consumer Satisfaction Index, April 2012
** Ecommerce Awards for Excellence 2011
John Lewis plc Interim Report 2012
Consolidated income statement
for the half year ended 28 July 2012
Half year Half year
to to Year to
28 January
28 July 2012 30 July 2011 2012
Continuing operations GBPm GBPm GBPm
--------------------------- ------------- ------------- ------------
Gross sales 4,405.9 4,052.1 8,729.5
--------------------------- ------------- ------------- ------------
Revenue 3,925.6 3,615.9 7,758.6
Cost of sales (2,635.4) (2,439.9) (5,166.5)
--------------------------- ------------- ------------- ------------
Gross profit 1,290.2 1,176.0 2,592.1
Other operating income 30.7 29.4 59.6
Operating expenses (1,157.4) (1,093.9) (2,260.7)
--------------------------- ------------- ------------- ------------
Operating profit 163.5 111.5 391.0
Finance costs (39.4) (36.9) (70.5)
Finance income 21.4 16.6 32.8
Profit before Partnership
bonus and tax 145.5 91.2 353.3
Partnership bonus - - (165.2)
--------------------------- ------------- ------------- ------------
Profit before tax 145.5 91.2 188.1
Taxation (34.6) (23.4) (51.9)
--------------------------- ------------- ------------- ------------
Profit for the period 110.9 67.8 136.2
--------------------------- ------------- ------------- ------------
Consolidated statement of comprehensive expense
for the half year ended 28 July 2012
Half year Half year
to to Year to
28 January
28 July 2012 30 July 2011 2012
GBPm GBPm GBPm
------------------------------ ------------- ------------- -----------
Profit for the period 110.9 67.8 136.2
Other comprehensive expense:
Actuarial loss on defined
benefit
pension schemes (207.1) (87.5) (254.8)
Movement of deferred tax
on
pension schemes 44.0 20.7 48.4
Movement of current tax
on
pension schemes - - 6.5
Net (loss)/gain on cash
flow hedges (2.2) (1.0) 0.2
------------------------------ ------------- ------------- -----------
Total comprehensive expense
for the period (54.4) - (63.5)
------------------------------ ------------- ------------- -----------
Consolidated balance sheet
as at 28 July 2012
28 January
28 July 2012 30 July 2011 2012
GBPm GBPm GBPm
---------------------------------- ------------- ------------- -----------
Non-current assets
Intangible assets 178.6 141.4 164.3
Property, plant and equipment 3,794.2 3,710.3 3,798.4
Trade and other receivables* 48.5 48.5 51.3
Deferred tax asset 22.5 - -
---------------------------------- ------------- ------------- -----------
4,043.8 3,900.2 4,014.0
---------------------------------- ------------- ------------- -----------
Current assets
Inventories 463.3 427.0 465.2
Trade and other receivables* 215.5 184.5 232.2
Derivative financial instruments 3.5 5.0 2.7
Cash and cash equivalents 433.5 404.7 550.8
1,115.8 1,021.2 1,250.9
---------------------------------- ------------- ------------- -----------
Total assets 5,159.6 4,921.4 5,245.9
---------------------------------- ------------- ------------- -----------
Current liabilities
Borrowings and overdrafts (175.0) (238.8) (302.1)
Trade and other payables (1,080.6) (914.8) (1,207.3)
Current tax payable (37.9) (12.5) (9.2)
Finance lease liabilities (1.8) (0.9) (0.6)
Provisions (88.4) (83.1) (90.6)
Derivative financial instruments (4.0) (2.2) (2.5)
(1,387.7) (1,252.3) (1,612.3)
---------------------------------- ------------- ------------- -----------
Non-current liabilities
Borrowings (727.2) (828.8) (726.7)
Trade and other payables (96.2) (74.3) (85.8)
Finance lease liabilities (31.5) (27.6) (26.4)
Provisions (125.9) (117.8) (115.6)
Deferred tax liabilities - (68.9) (32.1)
Retirement benefit obligations (836.7) (479.3) (638.1)
(1,817.5) (1,596.7) (1,624.7)
---------------------------------- ------------- ------------- -----------
Total liabilities (3,205.2) (2,849.0) (3,237.0)
Net assets 1,954.4 2,072.4 2,008.9
---------------------------------- ------------- ------------- -----------
Equity
Share capital 6.7 6.7 6.7
Share premium 0.3 0.3 0.3
Other reserves (0.6) 0.4 1.6
Retained earnings 1,948.0 2,065.0 2,000.3
---------------------------------- ------------- ------------- -----------
Total equity 1,954.4 2,072.4 2,008.9
---------------------------------- ------------- ------------- -----------
*The comparatives have been re-presented in respect of current
and non-current trade and other receivables as explained in note
1.
Consolidated statement of changes in equity
for the half year ended 28 July 2012
Share Share Capital Hedging Retained Total
capital Premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- --------------- -------- -------- -------- --------- --------
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
-------------------------------- --------------- -------- -------- -------- --------- --------
Balance at 29 January
2011 6.7 0.3 1.4 - 2,064.1 2,072.5
Profit for the period - - - - 136.2 136.2
Actuarial loss on defined
benefit pension schemes - - - - (254.8) (254.8)
Tax on above items recognised
in equity - - - - 54.9 54.9
Fair value gains on
cash flow hedges - - - 0.4 - 0.4
- transfers to inventories - - - (0.2) - (0.2)
Dividends - - - - (0.1) (0.1)
-------------------------------- --------------- -------- -------- -------- --------- --------
Balance at 28 January
2012 6.7 0.3 1.4 0.2 2,000.3 2,008.9
Profit for the period - - - - 110.9 110.9
Actuarial loss on defined
benefit pension schemes - - - - (207.1) (207.1)
Tax on above items recognised
in equity - - - - 44.0 44.0
Fair value losses on
cash flow hedges - - - (1.0) - (1.0)
- transfers to inventories - - - (1.2) - (1.2)
Dividends - - - - (0.1) (0.1)
-------------------------------- --------------- -------- -------- -------- --------- --------
Balance at 28 July 2012 6.7 0.3 1.4 (2.0) 1,948.0 1,954.4
-------------------------------- --------------- -------- -------- -------- --------- --------
Statement of consolidated cash flows
for the half year ended 28 July 2012
Half year Half year
to to Year to
28 January
28 July 2012 30 July 2011 2012
GBPm GBPm GBPm
--------------------------------- ------------- ------------- -----------
Cash generated from operations 370.1 253.8 774.0
Net taxation (paid)/received (16.5) 1.1 (33.2)
Partnership bonus paid (164.2) (194.5) (194.5)
Finance costs paid (1.0) (1.3) (2.3)
Net cash generated from
operating activities 188.4 59.1 544.0
--------------------------------- ------------- ------------- -----------
Cash flows from investing
activities
Purchase of property, plant
and
equipment (113.3) (184.6) (425.7)
Purchase of intangible
assets (39.5) (44.9) (88.4)
Proceeds from sale of property,
plant and equipment 1.4 0.3 11.8
Finance income received 0.9 1.4 2.4
Net cash used in investing
activities (150.5) (227.8) (499.9)
--------------------------------- ------------- ------------- -----------
Cash flows from financing
activities
Finance costs paid in respect
of
bonds (27.4) (25.1) (54.7)
Payment of capital element
of
finance leases (0.6) (0.3) (0.7)
Payments to preference
shareholders (0.1) (0.1) (0.1)
Cash (outflow)/inflow from
borrowings (142.0) 54.7 54.7
Net cash (used in)/ generated
from financing activities (170.1) 29.2 (0.8)
--------------------------------- ------------- ------------- -----------
(Decrease)/increase in
net cash and
cash equivalents (132.2) (139.5) 43.3
Net cash and cash equivalents
at
beginning of period 490.7 447.4 447.4
Net cash and cash equivalents
at
end of period 358.5 307.9 490.7
--------------------------------- ------------- ------------- -----------
Net cash and cash equivalents
comprise:
Cash 121.1 115.7 83.6
Short term investments 312.4 289.0 467.2
Bank overdraft (75.0) (96.8) (60.1)
--------------------------------- ------------- ------------- -----------
358.5 307.9 490.7
--------------------------------- ------------- ------------- -----------
Notes to the financial statements
1 Basis of preparation
These interim financial statements were approved by the Board on
12 September 2012. 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 28 July 2012 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 comparatives have been re-presented in respect of the split
of receivables on credit sale agreements for the Partnership's car
finance scheme for partners between current trade and other
receivables and non-current trade and other receivables, to be on a
consistent basis to the current half year. For the year ended 28
January 2012 and the half year ended 30 July 2011, GBP9.5m and
GBP8.0m has been reported in non-current trade and other
receivables respectively. These were previously reported in current
trade and other receivables.
The group's published financial statements for the year ended 28
January 2012 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 28 July 2012 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 28 January 2012,
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 28 July 2012 have been
prepared on a basis consistent with the group's accounting policies
published in the financial statements for the year ended 28 January
2012.
These accounting policies reflect IFRS and interpretations that
are expected to be applicable to the group for its 2012/13
financial statements. It is possible that there will be changes to
these standards and interpretations before the end of the group's
2012/13 financial year, which might require adjustments to this
information before it is included in the financial statements for
the year ended 26 January 2013.
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 23 to 25 of the John Lewis Annual Report and
Accounts 2012, 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 the most significant
risks for the period are the impact of continuing difficult
economic conditions on customer spending and competitive
pressures.
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 Partnership Services. 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 28 July 2012
Gross sales 2,805.9 1,600.0 - 4,405.9
Adjustment for sale or
return sales - (61.0) - (61.0)
Value added tax (168.4) (250.9) - (419.3)
---------------------------- --------- ----------- ----------- --------
Revenue 2,637.5 1,288.1 - 3,925.6
---------------------------- --------- ----------- ----------- --------
Operating profit excluding
property profits 142.0 45.6 (24.1) 163.5
Property profits - - - -
---------------------------- --------- ----------- ----------- --------
Operating profit 142.0 45.6 (24.1) 163.5
Finance costs - - (39.4) (39.4)
Finance income - - 21.4 21.4
---------------------------- --------- ----------- ----------- --------
Profit before tax 142.0 45.6 (42.1) 145.5
---------------------------- --------- ----------- ----------- --------
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
---------------------------- --------- ----------- ----------- --------
Corporate
Waitrose John Lewis and other Group
GBPm GBPm GBPm GBPm
---------------------------- --------- ----------- ----------- ----------
Year to 28 January 2012
Gross sales 5,400.4 3,329.1 - 8,729.5
Adjustment for sale or
return sales - (120.7) - (120.7)
Value added tax (328.1) (522.1) - (850.2)
---------------------------- --------- ----------- ----------- ----------
Revenue 5,072.3 2,686.3 - 7,758.6
---------------------------- --------- ----------- ----------- ----------
Operating profit excluding
property profits 260.6 156.4 (27.5) 389.5
Property profits - 1.5 - 1.5
---------------------------- --------- ----------- ----------- ----------
Operating profit 260.6 157.9 (27.5) 391.0
Finance costs - - (70.5) (70.5)
Finance income - - 32.8 32.8
Partnership bonus - - (165.2) (165.2)
---------------------------- --------- ----------- ----------- ----------
Profit before tax 260.6 157.9 (230.4) 188.1
---------------------------- --------- ----------- ----------- ----------
Corporate
Waitrose John Lewis and other Group
GBPm GBPm GBPm GBPm
---------------------------- --------- ----------- ----------- ----------
28 July 2012
Segment assets 2,722.3 1,677.5 759.8 5,159.6
Segment liabilities (660.9) (523.1) (2,021.2) (3,205.2)
---------------------------- --------- ----------- ----------- ----------
Net assets 2,061.4 1,154.4 (1,261.4) 1,954.4
---------------------------- --------- ----------- ----------- ----------
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
---------------------------- --------- ----------- ----------- ----------
28 January 2012
Segment assets 2,713.9 1,648.5 883.5 5,245.9
Segment liabilities (591.6) (538.8) (2,106.6) (3,237.0)
---------------------------- --------- ----------- ----------- ----------
Net assets 2,122.3 1,109.7 (1,223.1) 2,008.9
---------------------------- --------- ----------- ----------- ----------
5 Net finance costs
Half year Half year
to to Year to
28 January
28 July 2012 30 July 2011 2012
GBPm GBPm GBPm
-------------------------------- ------------- ------------- -----------
Finance costs
Total finance costs in
respect
of borrowings 30.0 30.2 60.9
Fair value measurements
and other 0.4 0.9 3.1
Net finance costs arising
on other
employee benefit schemes 9.0 5.8 6.5
-------------------------------- ------------- ------------- -----------
Total finance costs 39.4 36.9 70.5
-------------------------------- ------------- ------------- -----------
Finance income
Total finance income in
respect
of investments (0.9) (1.3) (2.4)
Fair value measurements
and other (1.4) (0.1) (0.1)
Net finance income arising
on defined benefit retirement
schemes (19.1) (15.2) (30.3)
Total finance income (21.4) (16.6) (32.8)
-------------------------------- ------------- ------------- -----------
Net finance costs 18.0 20.3 37.7
-------------------------------- ------------- ------------- -----------
Half year Half year
to to Year to
28 January
28 July 2012 30 July 2011 2012
GBPm GBPm GBPm
-------------------------------- ------------- ------------- -----------
Total finance costs in
respect
of borrowings 30.0 30.2 60.9
Total finance income in
respect
of investments (0.9) (1.3) (2.4)
-------------------------------- ------------- ------------- -----------
Net finance costs in respect
of
borrowings and investments 29.1 28.9 58.5
Fair value measurements
and other (1.0) 0.8 3.0
Net finance income arising
on
defined benefit retirement
schemes (19.1) (15.2) (30.3)
Net finance costs arising
on other
employee benefit schemes 9.0 5.8 6.5
-------------------------------- ------------- ------------- -----------
Net finance costs 18.0 20.3 37.7
-------------------------------- ------------- ------------- -----------
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 26 January 2013 is 28.4% (the estimated tax rate for
the period to 30 July 2011 was 30.4%). The decrease on last year is
mainly because of the reduction in the main rate of corporation tax
for the year to 26 January 2013 and the impact of substantially
enacted changes to the main rate of corporation tax on deferred tax
balances.
7 Capital expenditure
Property, Total capital
plant and Intangible expenditure
equipment assets
GBPm GBPm GBPm
------------------------------- ----------- ----------- --------------
Net book values at 28 January
2012 3,798.4 164.3 3,962.7
Additions 122.9 39.5 162.4
Disposals (2.1) (4.1) (6.2)
Depreciation and amortisation (125.0) (21.1) (146.1)
------------------------------- ----------- ----------- --------------
Net book values at 28 July
2012 3,794.2 178.6 3,972.8
------------------------------- ----------- ----------- --------------
Property, plant and equipment additions include GBP55.8m in
respect of store acquisitions and development in Waitrose and
GBP42.5m in respect of store development in John Lewis.
Intangible assets additions primarily relate to internally
developed IT systems.
8 Retirement benefit obligations
The principal pension scheme operated by the Partnership is a
defined benefit scheme, providing benefits based on the final
pensionable pay.
Pension commitments have been calculated based on the most
recent actuarial valuations, as at 31 March 2010, which have been
updated by the actuaries to assess the assets and liabilities of
the scheme as at 28 July 2012.
Scheme assets are stated at market value at 28 July 2012. The
following financial assumptions have been used:
Half year Half year
to to Year to
28 January
28 July 2012 30 July 2011 2012
GBPm GBPm GBPm
--------------------------------- ------------- ------------- -----------
Discount rate 4.35% 5.40% 4.95%
Future retail price inflation
(RPI) 2.50% 3.30% 2.80%
Future consumer price inflation
(CPI) 1.80% 2.30% 2.00%
Increase in earnings 3.00% 3.80% 3.30%
Increase in pensions - in
payment 2.30% 3.10% 2.60%
Increase in pensions - deferred 1.80% 2.30% 2.00%
--------------------------------- ------------- ------------- -----------
The movement in the defined benefit liability in the period is
as follows:
Half year Half year
to to Year to
28 January
28 July 2012 30 July 2011 2012
GBPm GBPm GBPm
------------------------------- ------------- ------------- -----------
Net defined benefit liability
at beginning of period (638.1) (414.0) (414.0)
Operating cost (64.5) (58.7) (117.4)
Interest cost on liabilities (77.4) (80.1) (160.2)
Expected return on assets 96.5 95.3 190.5
Contributions 53.9 65.7 117.8
Total losses recognised in
equity (207.1) (87.5) (254.8)
------------------------------- ------------- ------------- -----------
Net defined benefit liability
at end of period (836.7) (479.3) (638.1)
------------------------------- ------------- ------------- -----------
9 Reconciliation of profit before tax to cash generated from operations
Half year Half year
to to Year to
28 January
28 July 2012 30 July 2011 2012
GBPm GBPm GBPm
-------------------------------- ------------- ------------- -----------
Profit before tax 145.5 91.2 188.1
Amortisation of intangible
assets 21.1 14.9 32.3
Depreciation 125.0 121.2 241.0
Net finance costs 18.0 20.3 37.7
Partnership bonus - - 165.2
Loss/(profit) on disposal
of tangible
and intangible assets 4.8 (0.3) 3.9
Decrease/(increase) in
inventories 1.9 (5.0) (43.2)
Decrease/(increase) in
receivables 0.4 18.9 (12.6)
Increase in payables 43.5 2.4 160.3
Increase/(decrease) in
retirement
benefit obligations 10.7 (6.9) (0.4)
(Decrease)/increase in
provisions (0.8) (2.9) 1.7
-------------------------------- ------------- ------------- -----------
Cash generated from operations 370.1 253.8 774.0
-------------------------------- ------------- ------------- -----------
10 Analysis of net debt
Other
28 January non-cash 28 July
2012 Cash flow movements 2012
GBPm GBPm GBPm GBPm
---------------------------------- ------------- ------------ ----------- ----------
Current assets
Cash and cash equivalents 550.8 (117.3) - 433.5
Derivative financial instruments 2.7 - 0.8 3.5
553.5 (117.3) 0.8 437.0
---------------------------------- ------------- ------------ ----------- ----------
Current liabilities
Borrowings and overdrafts (302.1) 127.1 - (175.0)
Finance leases (0.6) 0.6 (1.8) (1.8)
Derivative financial instruments (2.5) - (1.5) (4.0)
---------------------------------- ------------- ------------ ----------- ----------
(305.2) 127.7 (3.3) (180.8)
---------------------------------- ------------- ------------ ----------- ----------
Non-current liabilities
Borrowings (732.9) - (0.3) (733.2)
Unamortised bond transaction
costs 6.2 - (0.2) 6.0
Fair value adjustment
for hedged
risk on bonds - - - -
Finance leases (26.4) - (5.1) (31.5)
(753.1) - (5.6) (758.7)
---------------------------------- ------------- ------------ ----------- ----------
Total net debt (504.8) 10.4 (8.1) (502.5)
---------------------------------- ------------- ------------ ----------- ----------
Reconciliation of net cash flow to net debt
Half year Half year
to to Year to
28 July 2012 30 July 2011 30 January 2012
GBPm GBPm GBPm
----------------------------- ------------- ------------- ----------------
(Decrease)/increase in
cash in
the period (132.2) (139.5) 43.3
Cash outflow/(inflow) from
movement in debt and lease
financing 142.6 (54.4) (54.0)
----------------------------- ------------- ------------- ----------------
Movement in debt for the
period 10.4 (193.9) (10.7)
Opening net debt (504.8) (493.0) (493.0)
Non-cash movements (8.1) (1.7) (1.1)
----------------------------- ------------- ------------- ----------------
Closing net debt (502.5) (688.6) (504.8)
----------------------------- ------------- ------------- ----------------
11 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, energy risk and insurable
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 28 January 2012.
During the half year to 28 July 2012, the Partnership has continued
to apply the financial risk management process and policies as
detailed in the Annual Report and Accounts for the year ended 28
January 2012.
Valuation techniques and assumptions applied in determining fair
values of each class of asset or liability are consistent with
those used as at 28 January 2012 and reflect the current economic
environment.
During the half year to 28 July 2012 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.
12 Capital commitments
At 28 July 2012 contracts had been entered into for future
capital expenditure of GBP35.8m (2011: GBP80.8m).
13 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 GBP6.9m (2011: GBP10.6m), purchase of goods
for resale GBP23.6m (2011: GBP17.0m), the supply of IT and related
services GBPnil (2011: GBP22.3m), the supply of administrative and
other shared services GBP12.7m (2011: GBP12.2m) and the hire of
vehicles GBP7.8m (2011: GBP6.6m). 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
Helen Weir, Finance Director
12 September 2012
This information is provided by RNS
The company news service from the London Stock Exchange
END
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