TIDMBB90
RNS Number : 7879N
Lewis(John) PLC
12 September 2013
Unaudited condensed Interim Financial Statements for the half
year ended 27 July 2013
Thursday 12 September 2013
John Lewis plc
Interim results for the half year ended 27 July 2013
"Strong first-half trading performance"
Chairman's Statement
The Partnership has had a strong first half with sales up 7.3%
and profit before exceptionals up by 3.9%, slightly ahead of our
expectations due to a good trading performance in both
businesses.
I am particularly pleased that both Waitrose and John Lewis
again increased their market shares significantly during the first
half. Year-on-year, we grew our customer numbers by 6%, helped
especially by initiatives such as myWaitrose and our market leading
omni-channel offer in John Lewis.
We are committed as a Partnership to developing our business for
the long term, building the capabilities of our Partners and being
innovative in products and services for our customers. As part of
this, we have made further encouraging progress in what I referred
to in March as our "quiet revolution" - the investment and
restructuring in areas of our retail operations, supply chain, IT
and support functions. That has included rolling out 'My
Performance', a new online system that ensures every Partner has an
individual personal development plan. We also moved johnlewis.com
successfully onto a new platform, opened a new Waitrose
distribution centre in Leyland and announced a new John Lewis
distribution centre in Milton Keynes.
There are some fundamental changes taking place in retail and
the range and scale of these investments demonstrate our
determination to take full advantage of the market opportunities
that they bring.
Outlook 2013/14
As expected, the market has shown signs of improvement. After
six weeks of the second half, Partnership gross sales are 5.3%
higher than last year. Waitrose gross sales have increased by 4.8%
(4.4% like-for-like, excluding petrol) and John Lewis gross sales
are 6.2% higher than last year (5.1% like-for-like).
Looking ahead, I'm encouraged by progress this year and am
confident of the plans we have in place for Christmas. Despite a
strong second half last year, both during the Olympics and at
Christmas, I expect us to trade positively in the second half.
Financial Results
In the first six months of the year the Partnership traded
strongly and achieved robust growth in sales and profit before
exceptionals. Both Waitrose and John Lewis grew sales well ahead of
their respective markets, increasing their market shares.
Partnership gross sales (inc VAT) were GBP4.73bn, an increase of
GBP323.2m, or 7.3%, on last year. Revenue, which is adjusted for
sale or return sales and excludes VAT, was GBP4.22bn, up by
GBP293.2m, or 7.5%.
Following a recent review of the Partnership's holiday pay
policy, an exceptional cost of GBP47.3m was recognised in the first
half, being expected costs of GBP40.0m for payments to Partners and
associated expenses, and GBP7.3m for an increase in future pensions
liabilities.
Profit before tax and exceptional item was GBP116.8m, an
increase of GBP4.4m, or 3.9%, on last year.
WAITROSE
Gross sales in the first half were up by 7.8% to GBP3.02bn and
like-for-like sales grew by 6.9%. A large proportion of this uplift
is attributable to strong volume growth. Operating profit grew
ahead of sales, slightly exceeding our expectations for the first
half, up by 12.8% to GBP160.2m.
Waitrose has outperformed the market for over four years and our
market share now stands at 4.9 per cent, 0.3 per cent higher than a
year ago. Outstanding value combined with quality, trusted
provenance, high standards of service and innovative marketing led
to a strong overall performance.
As part of our strong focus on value, we continue to offer
sharper pricing through essential Waitrose, more promotions, Brand
Price Match with Tesco on all branded lines (excluding promotions)
and consistent price matching with Sainsbury's on thousands of
every day branded items.
Customer transactions grew by 9.3% in the first half. There are
more than 5.1m customer visits each week and over 2.5m customers
now hold a myWaitrose card. Carefully targeted and personalised
offers and deals, together with free tea and coffee and regular
discounts on every day staples, have helped strengthen our customer
relationships and drive volume.
Product innovation also continued across the business and
launches in the first half included the Heston from Waitrose
Barbecue range, Seriously from Waitrose desserts and chocolate bars
and fresh additions to Menu from Waitrose ready meals. A
particularly exciting development has been the introduction of our
gardening range with new brand ambassador Alan Titchmarsh. We now
have outdoor gardening pods in 44 branches showcasing our new
horticulture products and together with a dedicated website,
Waitrosegarden.com, we offer more than 5,000 gardening lines.
Horticulture is proving particularly popular with Waitrose
customers and sales of our new ranges are exceeding our
expectations.
The shopping experience is also being enhanced by the services
offered at our new concierge-style welcome desks. We now have these
in 40 branches and by the year end expect these to have been
introduced into 91 branches in total. We are currently trialling
services such as flower wrapping and dry cleaning, and will
continue to develop these and other initiatives that underline our
commitment to service. For example, shoppers will be able to browse
our full assortment and click and collect their groceries or
products from johnlewis.com using iPads available at these
desks.
We opened four new branches (two core, two convenience) in the
first half and relocated one branch. We plan to open a further six
core branches and three convenience stores in the second half. This
autumn will see Waitrose reach the significant milestone of our
300th shop, in Helensburgh, near Glasgow. We now have 56
convenience shops, including our 19 Welcome Break branches. During
the half year we renewed our successful franchise partnership with
Welcome Break for a further 10 years and also began providing food
and snacks on Eurostar services to and from Europe.
Waitrose.com performed strongly with sales up 40.6% and we
continue to invest in our online business. Investment in the
capacity for our branches to fulfil Waitrose.com orders has
resulted in a 40% increase in online delivery slots nationwide. We
plan to open a second dark store to support the London area and we
expect this to be up and running by the second half of 2014, more
than doubling our capacity to handle online orders in the
capital.
To support our growth in the north of England and Scotland, our
purpose-built distribution centre in Leyland, Lancashire opened in
July. This 360,000 square foot warehouse is currently servicing 35
branches but has the capacity to support up to 100 branches in the
longer term. In the half year we welcomed the first 185 Partners in
Leyland and a further 500 to new branches.
JOHN LEWIS
The first half of 2013 has seen John Lewis build on last year's
performance to deliver a gross sales increase of 6.6% to GBP1.71bn.
Operating profit before restructuring costs was up 9.9% to
GBP50.1m, reflecting the robust sales performance and a strong
focus on controlling costs. Restructuring costs in the first half
were GBP15.4m for streamlining our department store management
structures and a new distribution infrastructure, both of which
demonstrate our commitment to long-term efficiency in a
fast-changing sector. Operating profit including these costs was
down 23.9% to GBP34.7m.
John Lewis has significantly outperformed the market with
like-for-like sales up 5.1% against the BRC's 1.7%. Sales growth
both in shops (+3.4%) and online (+17.1%) reflects our position as
Britain's leading omni-channel retailer. Our growth was fuelled by
market share gains across each of our categories, which was
particularly pleasing as last half year benefitted from a number of
significant one-off events, including the digital switchover and
Jubilee.
-- In Electricals and Home Technology (EHT), a focus on
innovation delivered a record market share of 7.6% and a sales
increase of 15.7%.
-- In Fashion, growth of 4.2% was boosted by the strength of our
own-brand collections: John Lewis & Co was presented at Men's
Fashion Week and we announced that Somerset by Alice Temperley will
expand into lingerie and childrenswear.
-- In Home, our strong market position was enhanced with the
growth of HOUSE which is now our biggest brand in Home. We have
recently launched "Any Shape, Any Fabric", where customers can
choose from over 112,000 upholstery combinations. This key
initiative is led by our Lancashire factory, Herbert Parkinson, and
further supports our commitment to increase sales of UK-made
products by 15% by 2015.
johnlewis.com passed the significant milestone of GBP1bn annual
online sales on a rolling 52 week basis - a full year ahead of
target. In line with our ambition to stay at the forefront of
e-commerce, we have made a significant investment in a new web
platform which went live during the first half. Over 40% of traffic
now comes from mobile phones or tablets. In July we relaunched our
transactional mobile app and since then sales via the app have
grown quickly and we are preparing for what we anticipate will be
the UK's first "mobile Christmas". With convenience and
availability playing a critical role in customer choice, we
announced the opening of a second distribution centre in Milton
Keynes as well as a trial to enable customers to pick up purchases
in 1,500 Collect Plus locations.
In recognition of the evolving role of our shops, we have
focused on creating an increasingly inspirational shopping
experience. The first Little Waitrose at John Lewis in Watford
opened in June, four more Kuoni travel concessions opening this
autumn and upcoming partnerships with hospitality brands are all
part of our ambition to redefine the 21st century department store.
We are building new shops in Ashford, York and Birmingham, and have
announced plans to open in Oxford as well as in Heathrow Terminal
2. Ongoing refurbishment of existing shops continues with the
introduction of Beauty and Fashion into a remodelled John Lewis
High Wycombe.
Our efforts were recognised by customers and peers with John
Lewis receiving Which?'s Best Retailer, Oracle Retail Week's
Retailer of the Year, and Customer Service awards from Verdict and
the Institute of Customer Service. In addition, more than 1,000 of
our Partners achieved accredited qualifications as part of the
'University of John Lewis'.
PARTNERSHIP SERVICES and CORPORATE
Corporate and other includes the operating costs for our
Corporate offices, Partnership Services, transformation programmes
and certain pension operating costs. Year-on-year these costs
increased by GBP9.1m to GBP32.7m with this being entirely due to
the increase in pension operating costs resulting from changes in
financial assumptions. Corporate and Partnership Services net
operating costs were both down year-on-year.
The first half saw the introduction of My Performance, a new
online system to ensure every Partner has an annual appraisal
linked to a personal development plan. The new format aims to give
Partners more control over their own development and progression,
and therefore improve overall business performance.
Partnership Services, the Partnership's business services
division, continued to make a significant contribution to our
efficiency during the first half, driving benefits through better
procurement of not-for-resale goods and services and continued
efficiencies in processing operations. The division's scope has
also expanded to include IT Application Development and Support,
Personnel Policy Advice, Occupational Health, Resourcing and
Pensions Administration. These areas will benefit from Partnership
Services' process management and improvement expertise as we move
forward.
Investment in the future
Capital spending in the first six months of the year was
GBP167.8m, an increase of GBP5.4m (3.3%). We expect an acceleration
in capital spending in the second half of the year.
Waitrose invested GBP101.0m, mainly on new branch openings and
the new Leyland regional distribution centre, together with
investment in supply chain systems to drive productivity and a
number of retail systems improvements to aid efficiency and enhance
the flexibility of our offer.
John Lewis invested GBP53.2m, with the mix of investment
continuing to reflect the business strategy of investing in new
shops for the future, refurbishing key regional shops and investing
in the IT and distribution infrastructure to support omni-channel
trading.
In addition, GBP13.6m was invested centrally, mainly in
maintaining and modernising our IT platforms and head office
buildings.
Pensions
At this half year the Partnership has adopted 'IAS 19 revised',
which changes the basis on which pension finance costs are
recognised in the income statement. Consequently the comparative
income statement for 2012/13 has been restated with an increase in
operating profit of GBP0.5m, an increase in finance costs of
GBP33.6m and therefore a decrease in profit before tax of
GBP33.1m.
The pensions service cost before exceptional item was GBP84.0m,
an increase of GBP15.8m or 23.2% on the prior year, reflecting
changes to financial assumptions and growth in scheme
membership.
The pension finance costs for the half year were GBP17.7m, an
increase of GBP3.2m or 22.1% on the restated prior year finance
costs.
The total accounting pension deficit at 27 July 2013 was
GBP908.6m, an increase of GBP86.5m (10.5%) since 26 January 2013.
Net of deferred tax, the deficit was GBP748.2m. The accounting
valuation of pension fund liabilities increased by GBP177.3m (4.7%)
to GBP3,973.3m, while pension fund assets increased by GBP90.8m
(3.1%) to GBP3,064.7m.
Our pension scheme review, announced in March, is now well
underway and is expected to conclude towards the end of 2014, after
consultation with Partners.
Financing
Net finance costs on borrowings and investments decreased by
GBP0.6m (2.1%) to GBP28.5m. After including the financing elements
of pensions, together with long service leave and other non-cash
fair value adjustments, net finance costs decreased by GBP6.2m
(12.0%) to GBP45.4m.
At 27 July 2013, net debt was GBP393.9m, an increase of
GBP109.0m (38.3%) in the half year but GBP108.6m (21.6%) lower than
28 July 2012.
Corporate Social Responsibility
Corporate Social Responsibility is an integral part of how the
Partnership does business and we continue to innovate to reduce our
environmental impact. We are the only UK retailer to have any shops
rated as "Outstanding" by BREEAM (Building Research Establishment
Environmental Assessment Method), our transport team continues to
work with leading academic institutions to decrease our
transport-related emissions and we are pioneering "closed-loop"
solutions for plastic waste.
Our focus on securing long-term sustainable supply chains has
helped Waitrose achieve the ambitious target of 100% certified
sustainable palm oil in its own brand products and we are now
focusing on a similar approach for soya ingredients. The John Lewis
Foundation has been working with cotton growers in India to help
them practice more sustainable farming methods and is this year
funding educational programmes in supplier communities in India.
This year we are again offering thousands of work placements to
young people from the UK and the Golden Jubilee Trust - our
flagship volunteering programme - continues to support Partners who
are donating time to UK charities. Five years ago Waitrose launched
Community Matters - our "green token" scheme - which has supported
over 40,000 local good causes chosen by customers and this scheme
has now been rolled out to all John Lewis shops.
Further information
John Lewis Partnership
Andrew Moys, Director of Communications 07525 272377
Citigate Dewe Rogerson
Simon Rigby / Nicola Swift 020 7638 9571
John Lewis
Peter Cross, Director, Communications 07764 697674
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
39 John Lewis shops across the UK (30 department stores and 9 John
Lewis at home), johnlewis.com, 257 Waitrose supermarkets, 37
Waitrose convenience stores, waitrose.com and business to business
contracts in the UK and abroad. The business has annual gross sales
of over GBP9.5bn. It is the UK's largest example of worker
co-ownership where all 85,500 staff are Partners in the
business.
Waitrose - Waitrose has 294 shops in the UK and Channel Islands
and is consistently achieving sales growth significantly ahead of
the market both in its branches and its online grocery service,
Waitrose.com*. 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 and its popular myWaitrose card, 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. Waitrose is the holder of the Good
Housekeeping Favourite Supermarket award, was Best Food and Grocery
Retailer in Verdict's Consumer Satisfaction Awards and gained the
title of Best Supermarket in the Which? supermarket satisfaction
survey. (www.waitrose.com)
*Kantar World panel
John Lewis - John Lewis, 'Retailer of the Year 2013' (1) , 'The
Nation's Best Retailer' (2) and 'Best Retailer 2013' (3), 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.
(1) Oracle Retail Week Awards 2013
(2) Verdict Consumer Satisfaction Awards 2013
(3) Which? Awards 2013
John Lewis plc Interim Report 2013
Consolidated income statement
for the half year ended 27 July 2013
Half year Half year
to to Year to
27 July 26 January
2013 28 July 2012 2013
(restated) (restated)
GBPm GBPm GBPm
------------------------------------- ---------- ------------- ------------
Gross sales 4,729.1 4,405.9 9,541.3
------------------------------------- ---------- ------------- ------------
Revenue 4,218.8 3,925.6 8,465.5
Cost of sales (2,832.5) (2,635.4) (5,640.1)
------------------------------------- ---------- ------------- ------------
Gross profit 1,386.3 1,290.2 2,825.4
Other operating income 34.9 30.7 64.1
Operating expenses (1,259.0) (1,156.9) (2,438.8)
------------------------------------- ---------- ------------- ------------
Operating profit before exceptional
item 162.2 164.0 450.7
Exceptional item (47.3) - -
------------------------------------- ---------- ------------- ------------
Operating profit 114.9 164.0 450.7
Finance costs (47.3) (53.9) (110.1)
Finance income 1.9 2.3 1.9
------------------------------------- ---------- ------------- ------------
Profit before Partnership
Bonus and tax 69.5 112.4 342.5
Partnership Bonus - - (210.8)
------------------------------------- ---------- ------------- ------------
Profit before tax 69.5 112.4 131.7
Taxation (15.3) (26.7) (30.9)
------------------------------------- ---------- ------------- ------------
Profit for the period 54.2 85.7 100.8
------------------------------------- ---------- ------------- ------------
Profit before tax and exceptional
item 116.8 112.4 131.7
----------------------------------- ------ ------ ------
Consolidated statement of comprehensive income / (expense)
for the half year ended 27 July 2013
Half year Half year
to to Year to
27 July 26 January
2013 28 July 2012 2013
(restated) (restated)
GBPm GBPm GBPm
-------------------------------------- ---------- ------------- ------------
Profit for the period 54.2 85.7 100.8
Other comprehensive income/
(expense):
Items that will not be reclassified
to profit or loss:
Actuarial loss on defined
benefit
pension schemes (41.0) (174.0) (260.0)
Movement of deferred tax on
pension schemes 2.8 36.1 13.3
Movement of current tax on
pension schemes - - 34.6
Items that may be reclassified
subsequently to profit or
loss:
Net gain/(loss) on cash flow
hedges 1.0 (2.2) 3.7
-------------------------------------- ---------- ------------- ------------
Total comprehensive income/(expense)
for the period 17.0 (54.4) (107.6)
-------------------------------------- ---------- ------------- ------------
Consolidated balance sheet
as at 27 July 2013
26 January
27 July 2013 28 July 2012 2013
GBPm GBPm GBPm
---------------------------------- ------------- ------------- -----------
Non-current assets
Intangible assets 222.6 178.6 213.7
Property, plant and equipment 3,826.3 3,794.2 3,820.9
Trade and other receivables 61.4 48.5 55.8
Deferred tax asset 39.6 22.5 25.6
---------------------------------- ------------- ------------- -----------
4,149.9 4,043.8 4,116.0
---------------------------------- ------------- ------------- -----------
Current assets
Inventories 510.1 463.3 514.0
Trade and other receivables 214.4 215.5 191.9
Current tax receivable - - 3.1
Derivative financial instruments 5.0 3.5 4.2
Cash and cash equivalents 434.5 433.5 534.4
---------------------------------- ------------- ------------- -----------
1,164.0 1,115.8 1,247.6
---------------------------------- ------------- ------------- -----------
Total assets 5,313.9 5,159.6 5,363.6
---------------------------------- ------------- ------------- -----------
Current liabilities
Borrowings and overdrafts (167.3) (175.0) (156.3)
Trade and other payables (1,232.7) (1,080.6) (1,451.3)
Current tax payable (29.2) (37.9) -
Finance lease liabilities (3.2) (1.8) (3.0)
Provisions (133.0) (88.4) (110.0)
Derivative financial instruments (0.7) (4.0) (0.6)
---------------------------------- ------------- ------------- -----------
(1,566.1) (1,387.7) (1,721.2)
---------------------------------- ------------- ------------- -----------
Non-current liabilities
Borrowings (628.2) (727.2) (627.7)
Trade and other payables (126.9) (96.2) (119.3)
Finance lease liabilities (34.0) (31.5) (35.9)
Provisions (132.0) (125.9) (136.2)
Retirement benefit obligations (908.6) (836.7) (822.1)
(1,829.7) (1,817.5) (1,741.2)
---------------------------------- ------------- ------------- -----------
Total liabilities (3,395.8) (3,205.2) (3,462.4)
---------------------------------- ------------- ------------- -----------
Net assets 1,918.1 1,954.4 1,901.2
---------------------------------- ------------- ------------- -----------
Equity
Share capital 6.7 6.7 6.7
Share premium 0.3 0.3 0.3
Other reserves 6.3 (0.6) 5.3
Retained earnings 1,904.8 1,948.0 1,888.9
Total equity 1,918.1 1,954.4 1,901.2
---------------------------------- ------------- ------------- -----------
Consolidated statement of changes in equity
for the half year ended 27 July 2013
Share Share Capital Hedging Retained Total
capital Premium reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------------------------- -------- -------- -------- -------- --------- --------
Balance at 28 January
2012
(restated) 6.7 0.3 1.4 0.2 2,000.3 2,008.9
Profit for the period - - - - 85.7 85.7
Actuarial loss on defined
benefit pension schemes - - - - (174.0) (174.0)
Tax on above items
recognised in equity - - - - 36.1 36.1
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
------------------------------------------------------- -------- -------- -------- -------- --------- --------
Balance at 28 January
2012 (restated) 6.7 0.3 1.4 0.2 2,000.3 2,008.9
Profit for the period - - - - 100.8 100.8
Actuarial loss on defined
benefit pension schemes - - - - (260.0) (260.0)
Tax on above items
recognised in equity - - - - 47.9 47.9
Fair value gains on
cash flow hedges - - - 0.3 - 0.3
- transfers to inventories - - - 3.4 - 3.4
Dividends (0.1) (0.1)
------------------------------------------------------- -------- -------- -------- -------- --------- --------
Balance at 26 January
2013 6.7 0.3 1.4 3.9 1,888.9 1,901.2
Profit for the period - - - - 54.2 54.2
Actuarial loss on defined
benefit pension schemes - - - - (41.0) (41.0)
Tax on above items
recognised in equity - - - - 2.8 2.8
Fair value losses on
cash flow hedges - - - (2.0) - (2.0)
- transfers to inventories - - - 2.9 - 2.9
* transfers to property, plant and equipment - - - 0.1 - 0.1
Dividends (0.1) (0.1)
------------------------------------------------------- -------- -------- -------- -------- --------- --------
Balance at 27 July
2013 6.7 0.3 1.4 4.9 1,904.8 1,918.1
------------------------------------------------------- -------- -------- -------- -------- --------- --------
Statement of consolidated cash flows
for the half year ended 27 July 2013
Half year Half year
to to Year to
26 January
27 July 2013 28 July 2012 2013
GBPm GBPm GBPm
------------------------------------- ------------- ------------- -----------
Cash generated from operations 285.4 370.1 991.1
Net taxation (paid)/received 5.7 (16.5) (52.9)
Partnership bonus paid (210.5) (164.2) (164.3)
Additional contribution to
the Pension Scheme - - (125.0)
Finance costs paid (1.4) (1.0) (4.9)
Net cash generated from operating
activities 79.2 188.4 644.0
------------------------------------- ------------- ------------- -----------
Cash flows from investing
activities
Purchase of property, plant
and equipment (131.1) (113.3) (261.5)
Purchase of intangible assets (34.5) (39.5) (96.5)
Proceeds from sale of property,
plant and equipment 1.8 1.4 1.9
Finance income received 0.9 0.9 1.9
Net cash used in investing
activities (162.9) (150.5) (354.2)
------------------------------------- ------------- ------------- -----------
Cash flows from financing
activities
Finance costs paid in respect
of bonds (25.6) (27.4) (56.8)
Payment of capital element
of finance leases (1.6) (0.6) (3.5)
Payments to preference shareholders - (0.1) (0.1)
Cash outflow from borrowings - (142.0) (242.0)
Net cash used in financing
activities (27.2) (170.1) (302.4)
------------------------------------- ------------- ------------- -----------
Decrease in net cash and cash
equivalents (110.9) (132.2) (12.6)
Net cash and cash equivalents
at beginning of period 478.1 490.7 490.7
------------------------------------- ------------- ------------- -----------
Net cash and cash equivalents
at end of period 367.2 358.5 478.1
------------------------------------- ------------- ------------- -----------
Net cash and cash equivalents
comprise:
Cash 115.7 121.1 120.0
Short term investments 318.8 312.4 414.4
Bank overdraft (67.3) (75.0) (56.3)
367.2 358.5 478.1
------------------------------------- ------------- ------------- -----------
Notes to the financial statements
1 Basis of preparation
These condensed set of interim financial statements were
approved by the Board on 11 September 2013. The condensed set of
interim financial statements are unaudited, but have been reviewed
by the auditors and their review report is set out on pages 22 to
23, and do not comprise statutory accounts within the meaning of
Section 434 of the Companies Act 2006. The comparative information
for the half year to or as at 28 July 2012 has not been audited or
reviewed in accordance with the International Standard on Review
Engagements 2410.
The results for the half year to 27 July 2013 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 Partnership's published financial statements for the year
ended 26 January 2013 have been reported on by the Partnership's
auditors and filed with the Registrar of Companies. The report of
the auditors was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 of
the Companies Act 2006.
These condensed set of interim financial statements for the half
year ended 27 July 2013 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority (previously the Financial Services Authority) and with
IAS 34 'Interim Financial Reporting', as adopted by the European
Union. The condensed set of interim financial statements should be
read in conjunction with the Annual Report and Accounts for the
year ended 26 January 2013, which have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted
by the European Union.
Going concern
The Directors, after reviewing the Partnership's operating
budgets, investment 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. Accordingly, the Directors are satisfied that
it is appropriate to adopt the going concern basis in preparing the
condensed set of interim financial statements.
2 Accounting policies
The Partnership's results for the half year to 27 July 2013 have
been prepared on a basis consistent with the Partnership's
accounting policies published in the financial statements for the
year ended 26 January 2013, except as set out below.
The Partnership has adopted IAS 19 'Employee benefits' (Revised
2011), which amends the accounting for employee benefits. The
adoption of the revised standard has been applied on a
retrospective basis, and consequently the relevant charges or
income in the consolidated income statement and the consolidated
statement of comprehensive income/ (expense) for the period to 28
July 2012 and 26 January 2013 have been restated.
As a result of the change, the expected return on pension scheme
assets and the interest cost on pension scheme liabilities are
replaced with a net interest expense calculated by applying the
discount rate to the net defined benefit asset or liability. This
has increased finance costs but has had no impact on equity.
Administration costs of pension funds are now recognised as an
expense when the administration services are performed.
2 Accounting policies (continued)
For year to 26 January 2013, the effect of the restatement is
that the net finance income recognised in respect of the defined
benefit retirement schemes of GBP38.2m has become a net finance
cost of GBP29.1m. Additionally, operating profit has increased by
GBP1.0m.
For the period to 28 July 2012, the effect of the restatement is
that the net finance income recognised in respect of the defined
benefit retirement schemes of GBP19.1m has become a net finance
cost of GBP14.5m. Additionally, operating profit has increased by
GBP0.5m.
The Partnership has adopted the amendment to IAS 1 'Presentation
of financial statements' and IFRS 13 'Fair value measurement' which
have affected disclosures only.
3 Risks and uncertainties
The principal and other significant risks and uncertainties
affecting the Partnership were identified as part of the Business
Review, set out on pages 25 to 28 of the John Lewis Annual Report
and Accounts 2013, a copy of which is available on the
Partnership's website www.johnlewispartnership.co.uk.
The Partnership adopts a disciplined and proactive approach in
identifying and mitigating risks, in order to safeguard the
Partnership. In summary, the Partnership has identified the
following key risks, which are unchanged from year end:
-- economic risk: the exposure to any economic downturn in the UK
-- financial risk: the failure to generate sufficient funds for
our business needs and mitigate any adverse financial impacts
-- pensions risk: the risk of not meeting our pension obligation
-- Partner trust and engagement: the risk of erosion of trust
and commitment of Partners to the business
-- managing change risk: the failure to manage change effectively
-- competitor pricing: the risk of margin erosion due to the
pricing strategies of our competitors
-- business interruption: the potential interruption to our
business from IT failures or breaches of information security
-- talent management: the failure to develop and retain talent
-- reputation risk: the loss of confidence in the Partnership amongst our stakeholders
-- health and safety risk: the potential for causing harm to people or property
-- input cost inflation: the risk of increases in costs for
products and raw materials which we are not able to pass on
-- legislative and regulatory requirements: the risk of
non-compliance with UK laws and regulations
In the view of the Board, the key risks and uncertainties remain
relevant for the second half of the financial year.
4 Exceptional item
On 22 August 2013, the Partnership made an announcement
regarding holiday pay payments. Following a recent review of the
Partnership's holiday pay policy, it became clear that Partners who
receive certain additions to pay, such as premiums for working on
Sunday or bank holidays, had not been paid correctly under the
Working Time Regulations legislation. The Partnership Board
therefore decided to make one-off additional payments to those
affected.
An exceptional charge has been recorded in the period to 27 July
2013 totalling GBP47.3m. This reflects the expected costs of
GBP40.0m for payments to Partners and associated expenses for
holiday pay dating back to 2006 which had not been calculated
correctly. Future pensions liabilities have also increased by
GBP7.3m as a result.
5 Segmental reporting
The Partnership's operating segments have been identified as
Waitrose, John Lewis and Corporate and other. Corporate and other
includes the operating costs for our Corporate offices, Partnership
Services, transformation programmes and certain pension operating
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, and before the exceptional item.
Waitrose's business is not subject to highly seasonal
fluctuations although there is an increase in trading in the fourth
quarter sales 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 27 July 2013
Gross sales 3,023.7 1,705.4 - 4,729.1
Adjustment for sale or
return sales - (66.7) - (66.7)
Value added tax (176.1) (267.5) - (443.6)
--------------------------- --------- ----------- ----------- --------
Revenue 2,847.6 1,371.2 - 4,218.8
--------------------------- --------- ----------- ----------- --------
Operating profit before
exceptional item 160.2 34.7 (32.7) 162.2
Exceptional item - - (47.3) (47.3)
--------------------------- --------- ----------- ----------- --------
Operating profit 160.2 34.7 (80.0) 114.9
Finance costs - - (47.3) (47.3)
Finance income - - 1.9 1.9
--------------------------- --------- ----------- ----------- --------
Profit before tax 160.2 34.7 (125.4) 69.5
--------------------------- --------- ----------- ----------- --------
Corporate
Waitrose John Lewis and other Group
GBPm GBPm GBPm GBPm
--------------------------- --------- ----------- ----------- --------
Half year to 28 July 2012
(restated)
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 142.0 45.6 (23.6) 164.0
Finance costs - - (53.9) (53.9)
Finance income - - 2.3 2.3
--------------------------- --------- ----------- ----------- --------
Profit before tax 142.0 45.6 (75.2) 112.4
--------------------------- --------- ----------- ----------- --------
Corporate
Waitrose John Lewis and other Group
GBPm GBPm GBPm GBPm
------------------------- --------- ----------- ----------- ----------
Year to 26 January 2013
(restated)
Gross sales 5,763.9 3,777.4 - 9,541.3
Adjustment for sale or
return sales - (134.6) - (134.6)
Value added tax (347.8) (593.4) - (941.2)
------------------------- --------- ----------- ----------- ----------
Revenue 5,416.1 3,049.4 - 8,465.5
------------------------- --------- ----------- ----------- ----------
Operating profit 292.3 216.7 (58.3) 450.7
Finance costs - - (110.1) (110.1)
Finance income - - 1.9 1.9
Partnership bonus - - (210.8) (210.8)
------------------------- --------- ----------- ----------- ----------
Profit before tax 292.3 216.7 (377.3) 131.7
------------------------- --------- ----------- ----------- ----------
Corporate
Waitrose John Lewis and other Group
GBPm GBPm GBPm GBPm
------------------------- --------- ----------- ----------- ----------
27 July 2013
Segment assets 2,680.7 1,772.3 860.9 5,313.9
Segment liabilities (618.3) (593.7) (2,183.8) (3,395.8)
------------------------- --------- ----------- ----------- ----------
Net assets 2,062.4 1,178.6 (1,322.9) 1,918.1
------------------------- --------- ----------- ----------- ----------
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
------------------------- --------- ----------- ----------- ----------
26 January 2013
Segment assets 2,624.7 1,770.2 968.7 5,363.6
Segment liabilities (553.7) (648.1) (2,260.6) (3,462.4)
------------------------- --------- ----------- ----------- ----------
Net assets 2,071.0 1,122.1 (1,291.9) 1,901.2
------------------------- --------- ----------- ----------- ----------
6 Net finance costs
Half year Half year
to to Year to
26 January
27 July 2013 28 July 2012 2012
(restated) (restated)
GBPm GBPm GBPm
------------------------------------ ------------- ------------- -----------
Finance costs
Total finance costs in respect
of borrowings 29.3 30.0 60.0
Fair value measurements and
other 0.3 0.4 0.6
Net finance costs arising on
defined benefit
retirement and other employee
benefit schemes 17.7 23.5 49.5
------------------------------------ ------------- ------------- -----------
Total finance costs 47.3 53.9 110.1
------------------------------------ ------------- ------------- -----------
Finance income
Total finance income in respect
of investments (0.8) (0.9) (1.9)
Fair value measurements and
other (0.1) (1.4) -
Net finance income arising on
other employee
benefit schemes (1.0) - -
Total finance income (1.9) (2.3) (1.9)
------------------------------------ ------------- ------------- -----------
Net finance costs 45.4 51.6 108.2
------------------------------------ ------------- ------------- -----------
Half year Half year
to to Year to
26 January
27 July 2013 28 July 2012 2012
(restated) (restated)
GBPm GBPm GBPm
------------------------------------ ------------- ------------- -----------
Total finance costs in respect
of borrowings 29.3 30.0 60.0
Total finance income in respect
of investments (0.8) (0.9) (1.9)
------------------------------------ ------------- ------------- -----------
Net finance costs in respect
of borrowings and
investments 28.5 29.1 58.1
Fair value measurements and
other 0.2 (1.0) 0.6
Net finance costs arising on
defined benefit
retirement schemes 17.7 14.5 29.1
Net finance (income)/costs arising
on other
employee benefit schemes (1.0) 9.0 20.4
------------------------------------ ------------- ------------- -----------
Net finance costs 45.4 51.6 108.2
------------------------------------ ------------- ------------- -----------
7 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 25 January 2014 is 22.0% (the estimated effective tax
rate for the period to 28 July 2012 was 23.8%). The decrease on
last year is mainly due to the reduction in the main rate of
corporation tax for the year to 25 January 2014 and the impact of
substantially enacted changes to the main rate of corporation tax
on deferred tax balances in future years.
8 Capital expenditure
Property, Total capital
plant and Intangible expenditure
equipment assets
GBPm GBPm GBPm
------------------------------- ----------- ----------- --------------
Net book values at 26 January
2013 3,820.9 213.7 4,034.6
Additions 133.3 34.5 167.8
Depreciation and amortisation (126.3) (23.2) (149.5)
Disposals (1.6) (2.4) (4.0)
------------------------------- ----------- ----------- --------------
Net book values at 27 July
2013 3,826.3 222.6 4,048.9
------------------------------- ----------- ----------- --------------
Intangible assets primarily relate to internally developed IT
systems.
9 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 reflect the assets and liabilities of
the scheme as at 27 July 2013.
Scheme assets are stated at market value at 27 July 2013.
The following financial assumptions have been used:
Half year Half year
to to Year to
28 July 26 January
27 July 2013 2012 2012
GBPm GBPm GBPm
----------------------------------- ------------- ---------- -----------
Discount rate 4.55% 4.35% 4.60%
Future retail price inflation
(RPI) 3.30% 2.50% 3.20%
Future consumer price inflation
(CPI) 2.40% 1.80% 2.30%
Increase in earnings 3.80% 3.00% 3.70%
Increase in pensions - in payment 3.10% 2.30% 3.00%
Increase in pensions - deferred 2.40% 1.80% 2.30%
----------------------------------- ------------- ---------- -----------
The movement in the defined benefit liability in the period is
as follows:
Half year Half year
to to Year to
28 July 26 January
27 July 2013 2012 2012
(restated) (restated)
GBPm GBPm GBPm
----------------------------------- ------------- ----------- -----------
Net defined benefit liability
at beginning of period (822.1) (638.1) (638.1)
Operating cost (85.2) (64.0) (128.0)
Interest cost on liabilities (86.3) (77.4) (154.8)
Interest income on assets 68.6 62.9 125.7
Contributions 57.4 53.9 233.1
Total losses recognised in equity (41.0) (174.0) (260.0)
----------------------------------- ------------- ----------- -----------
Net defined benefit liability
at end of period (908.6) (836.7) (822.1)
----------------------------------- ------------- ----------- -----------
10 Reconciliation of profit before tax to cash generated from operations
Half year Half year
to to Year to
28 July 26 January
27 July 2013 2012 2012
(restated) (restated)
GBPm GBPm GBPm
------------------------------------ ------------- ----------- -----------
Profit before tax 69.5 112.4 131.7
Amortisation of intangible
assets 23.2 21.1 41.9
Depreciation 126.3 125.0 255.1
Net finance costs 45.4 51.6 108.2
Partnership Bonus - - 210.8
Loss on disposal of tangible
and intangible assets 2.3 4.8 6.1
Decrease/(increase) in inventories 3.9 1.9 (48.8)
(Increase)/decrease in receivables (28.3) 0.4 16.7
(Decrease)/increase in payables (4.5) 43.5 229.9
Increase in retirement benefit
obligations 27.8 10.2 19.9
Increase/(decrease) in provisions 19.8 (0.8) 19.6
------------------------------------ ------------- ----------- -----------
Cash generated from operations 285.4 370.1 991.1
------------------------------------ ------------- ----------- -----------
11 Analysis of net debt
Other
26 January Cash flow non-cash 27 July
2013 movements 2013
GBPm GBPm GBPm GBPm
---------------------------------- ------------- ------------ ----------- ----------
Current assets
Cash and cash equivalents 534.4 (99.9) - 434.5
Derivative financial instruments 4.2 - 0.8 5.0
538.6 (99.9) 0.8 439.5
---------------------------------- ------------- ------------ ----------- ----------
Current liabilities
Borrowings and overdrafts (156.3) (11.0) - (167.3)
Finance leases (3.0) 1.6 (1.8) (3.2)
Derivative financial instruments (0.6) - (0.1) (0.7)
---------------------------------- ------------- ------------ ----------- ----------
(159.9) (9.4) (1.9) (171.2)
---------------------------------- ------------- ------------ ----------- ----------
Non-current liabilities
Borrowings (633.4) - (0.2) (633.6)
Unamortised bond transaction
costs 5.7 - (0.3) 5.4
Finance leases (35.9) - 1.9 (34.0)
(663.6) - 1.4 (662.2)
---------------------------------- ------------- ------------ ----------- ----------
Total net debt (284.9) (109.3) 0.3 (393.9)
---------------------------------- ------------- ------------ ----------- ----------
11 Analysis of net debt (continued)
Reconciliation of net cash flow to net debt
Half year Half year
to to Year to
26 January
27 July 2013 28 July 2012 2013
GBPm GBPm GBPm
---------------------------- ------------- ------------- -----------
Decrease in cash in the
period (110.9) (132.2) (12.6)
Cash (inflow)/outflow from
movement in
debt and lease financing 1.6 142.6 245.5
---------------------------- ------------- ------------- -----------
Movement in debt for the
period (109.3) 10.4 232.9
Opening net debt (284.9) (504.8) (504.8)
Non-cash movements 0.3 (8.1) (13.0)
---------------------------- ------------- ------------- -----------
Closing net debt (393.9) (502.5) (284.9)
---------------------------- ------------- ------------- -----------
12 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 condensed set of 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 26 January
2013. During the half year to 27 July 2013, 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 26 January 2013.
Valuation techniques and assumptions applied in determining fair
values of each class of asset or liability are consistent with
those used as at 26 January 2013 and reflect the current economic
environment.
Fair value estimation
The different levels per the IFRS 13 fair value hierarchy have
been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for
identical assets or liabilities
Level 2: Inputs other than quoted prices included within level 1
that are observable for the asset or liability, either directly
(that is, as prices) or indirectly (that is, derived from
prices)
Level 3: Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs)
During the half year to 27 July 2013, there have been no
transfers between any levels of the IFRS 13 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.
The fair value of the derivative financial instruments held by
the Partnership are classified as level 2 under the IFRS 13 fair
value hierarchy, as all significant inputs to the valuation model
used are based on observable market data. At 27 July 2013, the net
carrying value of derivative financial instruments was GBP4.3m,
asset (26 January 2013: GBP3.6m, asset; 28 July 2012: GBP0.5m,
liability).
The fair value of a derivative financial instrument represents
the difference between the value of the outstanding contracts at
their contracted rates and a valuation calculated using the forward
rates of exchange and interest rates prevailing at the balance
sheet date.
12 Management of financial risks(continued)
The following table compares the Partnership's liabilities held
at amortised cost, where there is a difference between carrying
value (CV) and fair value (FV):
27 July 2013 28 July 2012 26 January 2013
GBPm GBPm GBPm
CV FV CV FV CV FV
----------------------- ------- ------ ------- ------ -------- --------
Financial liabilities
Listed bonds 669.6 809.4 669.0 827.2 669.3 826.8
Preference stock 0.4 0.4 0.4 0.4 0.4 0.4
----------------------- ------- ------ ------- ------ -------- --------
The fair values of the Partnership's listed bonds and preference
stock have been determined by reference to market price
quotations.
For other financial liabilities, there are no material
differences between carrying value and fair value.
13 Capital commitments
At 27 July 2013 contracts had been entered into for future
capital expenditure of GBP23.3m (2012: GBP35.8m).
14 Related party transactions
There have been no material changes to the principal
subsidiaries listed in the Annual Report and Accounts for the year
ended 26 January 2013. All related party transactions arise during
the ordinary course of business. There were no material changes in
the transactions or balances during the half year ended 27 July
2013.
15 Events after the balance sheet date
Other than the matter disclosed in note 4, there have been no
other events after the balance sheet date requiring disclosure.
Statement of directors' responsibilities
The directors confirm that these condensed set of interim
financial statements have been prepared in accordance with IAS 34
'Interim Financial Reporting', as adopted by the European Union and
that the interim management report includes a fair review of the
information required by the Disclosure and Transparency Rules (DTR)
paragraphs DTR 4.2.7R and DTR 4.2.8R, namely:
-- an indication of important events that have occurred during
the half year and their impact on the condensed set of interim
financial statements, and a description of the principal risks and
uncertainties for the remaining half of the financial year; and
-- material related-party transactions in the half year and any
material changes in the related-party transactions described in the
last annual report.
For and by Order of the Board
Charlie Mayfield, Chairman
Helen Weir, Finance Director
11 September 2013
Independent review report to John Lewis plc
Introduction
We have been engaged by the company to review the condensed set
of interim financial statements in the interim report for the half
year ended 27 July 2013, which comprises the consolidated income
statement, the consolidated statement of comprehensive
income/(expense), the consolidated balance sheet, the consolidated
statement of changes in equity, the consolidated statement of cash
flows and the related notes to the condensed set of interim
financial statements. We have read the other information contained
in the interim report and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of interim financial
statements.
Directors' responsibilities
The interim report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the interim report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of interim financial statements
included in this interim report has been prepared in accordance
with International Accounting Standard 34, "Interim Financial
Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of interim financial statements in the interim
report based on our review. This report, including the conclusion,
has been prepared for and only for the company for the purpose of
the Disclosure and Transparency Rules of the Financial Conduct
Authority and for no other purpose. We do not, in producing this
report, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior consent in
writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' ('ISRE 2410') issued by the Auditing Practices Board
for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures. A review is substantially
less in scope than an audit conducted in accordance with
International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of interim financial
statements in the interim report for the half year ended 27 July
2013 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Other matters
The accompanying condensed set of interim financial statements
includes comparative information as required by International
Accounting Standard 34, 'Interim financial reporting'. The
comparative information for the half year to or as at 28 July 2012
has not been audited or reviewed in accordance with ISRE 2410.
PricewaterhouseCoopers LLP
Chartered Accountants
London
11 September 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFSFMFFDSELU
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