TIDMBB90
RNS Number : 8807J
Lewis(John) PLC
15 September 2016
John Lewis plc
Unaudited condensed Interim Financial Statements for the half
year ended 30 July 2016
Strict Stock Exchange Embargo, 7.00am
Thursday 15 September 2016
Taking charge of our future
Financial Summary
Waitrose John Lewis Group
GBPm YoY GBPm YoY GBPm YoY
change change change
-------- -------- -------- -------- -------- --------
Gross sales(1) 3,250.6 2.2% 2,023.7 4.5% 5,274.3 3.1%
LFL sales(2) (1.0)% 3.1%
Revenue 3,064.4 2.2% 1,607.0 3.8% 4,671.4 2.7%
Operating
profit before
exceptional
items(3) 121.3 (10.5)% 32.4 (31.2)% 138.7 (4.3)%
Operating
profit(3) 96.3 (28.9)% 32.4 (31.2)% 113.7 (58.3)%
PBT before
exceptional
items(3) 82.4 (14.8)%
PBT(3) 57.4 (74.5)%
Net debt 442.7 20.7%
----------------- -------- -------- -------- -------- ------------ --------
Sir Charlie Mayfield, Chairman of John Lewis Partnership,
commented:
"We have grown gross sales and market share across both Waitrose
and John Lewis, but our profits are down. This reflects market
conditions and, in particular, steps we are taking to adapt the
Group for the future. These are not as a consequence of the EU
referendum result, which has had little quantifiable impact on
sales so far. Instead there are far reaching changes taking place
in society, in retail and in the workplace that have much greater
implications.
Our ownership structure makes it especially important that we
manage the Partnership carefully and thoughtfully for the long term
and our plans anticipate the impact of these bigger changes.
Evidence of that is already showing within these results and will
become increasingly evident as we implement our long-term
strategy."
Key points
-- Solid gross sales growth of 3.1% with increased market shares(4) and rising customer numbers in challenging
markets
-- PBT before exceptional items down 14.8% to GBP82.4m as we respond to the deep structural changes in the retail
market. Our commitment to competitive pricing, excellent service, maintaining pay differentials and investing for
the long term have held back profits. We expect these pressures to continue through this year and next
-- Exceptional charge of GBP25.0m for the write-down of property assets no longer intended to be developed and
related costs, following a strategic review (2015/16: income of GBP128.0m following the sale of the Clearings
building)
-- Net debt of GBP442.7m, GBP115.4m (20.7%) lower than 1 August 2015 and consistent with our strategy of
strengthening our balance sheet. Increase in net debt since January 2016 of GBP176.7m (66.4%)
-- Accounting pension deficit of GBP1,453.7m, GBP512.1m (54.4%) higher than January 2016, reflecting a significant
decrease in the real discount rate used to value the liabilities due to historically low bond yields. Net of
deferred tax, the deficit was GBP1,209.1m
(1) Gross sales includes sale or return sales and VAT
(2) Waitrose like-for-like sales excludes petrol
(3) Includes property profits of GBP0.5m in Waitrose (2014/15: GBPnil)
(4) Kantar 12 week Grocery data for Waitrose / BRC for John Lewis
Chairman's overview
In the first half of the year, the Group's gross sales grew 3.1%
to GBP5.27bn. Waitrose gross sales grew 2.2% and John Lewis gross
sales by 4.5%, with both brands growing market share and customer
numbers. PBT before exceptionals was down by 14.8% with lower
operating profits in Waitrose and John Lewis and higher financing
costs for our long leave scheme, partly offset by reduced pension
operating costs.
Our first half profits are always lower and often more volatile
than in the second half which typically accounts for at least
two-thirds of our annual profits. We have also decided to
prioritise a number of key areas of investment including in IT, our
distribution network and in pay, as well as making a shift towards
our existing stores in Waitrose which has resulted in exceptional
property asset write-downs. These decisions form part of our
strategy to get ahead of the significant changes that are affecting
the wider retail market and we are confident they will position us
well for the future.
Our focus further into the future is reflected in every aspect
of the Group's strategy, which was launched internally last year
and described in detail in our Annual Report. It has three main
themes.
The first is to strengthen our financial position, both to
increase the resilience of our balance sheet to market shocks and
to build our financial firepower to invest in new growth in the
future. In the last six months we have taken a number of steps in
this direction. In April 2016 we implemented changes to our pension
benefit, agreed in 2015, which will reduce the Group's future risk
exposure. We will also reduce capital expenditure to approximately
GBP460m this year, 7% lower than last year, as part of our planned
reduction in net debt, which has improved by 21% since last year.
We also continue to make progress with the priority we have placed
on improving productivity.
Secondly, we have anticipated the significant changes in how
customers are choosing to shop and we are renewing our focus on
strengthening the appeal of our two well-loved brands. This
includes continuing with a greater proportion of investment in IT
and our supply chain - both are critical to improving service and
convenience. We are also increasing our focus on innovation.
Examples this half include the launch of the Waitrose 1 premium
range and a new own-brand luxury womenswear label, Modern Rarity,
in John Lewis. We are also developing a series of initiatives to
explore new growth opportunities and will make further
announcements on these in due course.
Thirdly, we are committed to creating better jobs, for better
performing Partners, on better pay. We intend to ensure Partners'
pay remains well above the National Living Wage on average, and in
this year's pay review in March, rates increased by 5.1% on average
for our lowest paid Partners. Additional annualised pay costs for
our lowest paid Partners will be GBP33m greater as a result,
whereas had we simply complied with the National Living Wage, costs
would have been only GBP3m higher than last year. However, higher
pay depends on better productivity and greater contribution and we
anticipate that this will mean we will have fewer Partners over
time as compared to today. We are developing comprehensive plans to
enhance job design, progression pathways and development
support.
Outlook 2016/17
For the first six weeks of the second half, Group gross sales
are up 3.8%. Waitrose gross sales have increased by 5.0% (1.4%
like-for-like, excluding petrol) and John Lewis gross sales are
2.0% higher than last year (0.7% like-for-like). While we expect to
trade well compared to the market, the structural changes in retail
will not ease.
Our PBT before exceptional items is down 14.8% in the first half
as we respond to the changes in the retail market. Our commitment
to competitive pricing, excellent service, increasing pay and
investing for the long term have held back profits. We expect the
trading pressures to continue through this year and next. The EU
referendum result has had little quantifiable impact on sales in
the first half, but the uncertainty of leaving the EU will remain
and the full impact of this change is yet to become clear.
Financial Results
In the first six months of the year, the Group delivered solid
gross sales growth with both Waitrose and John Lewis increasing
their market shares and customer numbers. Group gross sales (inc
VAT) were GBP5.27bn, an increase of GBP157.7m, or 3.1%, on last
year. Revenue, which is adjusted for sale or return sales and
excludes VAT, was GBP4.67bn, up by GBP124.2m or 2.7%.
Group operating profit was GBP113.7m, down GBP159.2m, or 58.3%
on last year. This includes an exceptional charge of GBP25.0m in
Waitrose for the write-down of property assets no longer intended
to be developed and related costs, following a strategic review
re-prioritising future investment spend towards existing stores
(2015/16: income of GBP128.0m following the sale of the Clearings
building). Excluding the exceptional items, operating profit was
GBP138.7m, down GBP6.2m or 4.3% on last year.
Profit before tax was GBP57.4m, down by GBP167.3m, or 74.5% on
last year. Excluding the exceptional items it was GBP82.4m, down by
GBP14.3m or 14.8%.
Waitrose
In a market that remains challenging, we grew gross sales,
market share and customer numbers. Gross sales increased by 2.2% to
GBP3.25bn, while like-for-like sales decreased by 1.0%. Online
grocery sales grew by 4.3%. Our share of the market(5) was up to
5.2% and we had, on average, 250,000 more customer transactions a
week compared to last year.
Operating profit before exceptional items was down 10.5% to
GBP121.3m, impacted not only by the market conditions but also
increases in pay to maintain differentials, investment in IT and
higher supply chain costs following the transition to our new
National Distribution Centre operation.
Including the exceptional item of GBP25.0m for the write-down of
property assets that we now no longer intend to develop and related
costs, operating profit was down 28.9% to GBP96.3m.
We opened seven new branches in the first half of the year, five
core supermarkets and two convenience branches, and we closed one
convenience branch. In the second half and beyond our Modern
Waitrose strategy continues as we plan to increase both the depth
and pace of investment in our existing stores. This will enable us
to get the best value from our estate and to put even greater focus
on what sets Waitrose apart: high quality and high service. As we
shift the focus of our investment towards our existing branches the
rate of new space growth will slow.
Hospitality sales grew by 7.1% and we now have 121 cafes, 81
bakery grazing areas, seven wine bars and nine juice bars in our
branches. As customers' shopping and eating patterns change
hospitality will play a big part in our branch programme; our next
step will be to trial new concepts in our shops at Barbican,
Chandlers Ford and Twyford during the second half.
We will continue to innovate with high quality, high provenance
products. A highlight of the first half of this year was the launch
of the Waitrose 1 premium range which underlines our leadership in
this area and brings together in one brand the very best of
Waitrose. The sales uplift in products in this range has been
encouraging, up 19.4% on last year.
We now have 6.4 million myWaitrose cardholders, an increase of
7.5% in the last six months, with customers continuing to respond
positively to the range of offers and rewards.
Overseas, we already export Waitrose products to 58 countries. A
new export deal with Alibaba Group has given us the opportunity to
export to China for the first time; and a partnership with online
retailer, British Corner Shop, means that people in more than 100
countries are now able to buy over 2,000 Waitrose product
lines.
(5) Kantar 12 week Grocery data
John Lewis
In a retail industry under pressure in the face of
transformational change, John Lewis has continued to outperform,
delivering solid gross sales of GBP2.02bn, up 4.5%, with strong
like-for-like sales growth of 3.1% as we prepare for the critical
sales and profit driving second half.
Despite growing sales, operating profit fell by 31.2% to
GBP32.4m, with more than half of this decline due to transitioning
costs in our distribution network as we temporarily maintain legacy
sites to smooth the transition to Magna Park, and increases in pay
to maintain differentials. The balance of the reduction reflects
the continued shift to online and a market dynamic of competitive
pricing, both of which we expect to continue into the second
half.
Against this backdrop we remain committed to delivering our
strategy and the first half saw record capital investment in the
essentials of omnichannel trading as we go into our most important
peak trading period.
The role of fulfilment is underscored by the state-of-the-art,
industry-leading campus at Magna Park we will open in September,
part of a GBP150 million investment which will streamline our
network to become more productive and deliver better service to our
customers.
Across our product areas, we increased gross sales and market
share and invested in our in-house design capability to build our
unique combination of own-brand collections and the best brands on
the high street.
-- EHT was up 8.4%, driven by our computing and tablet category, up 8.7%, mobile phones and our industry-first Smart
Home concept in Oxford Street.
-- Fashion performed well in a declining market with sales up 2.8%, with womenswear up 4.0% and menswear up 4.9%,
boosted by our collaboration with vlogger Jim Chapman. Beauty was up 4.0%, and we are investing in refurbishments
of our beauty halls. We were the first high street outlet to sell online brands Finery and Selfish Mother.
-- Sales in Home were up 3.7%, as we continue to build towards a GBP1bn own brand business in the category. Sales
were driven by furniture, up 6.8%, with beds up 13.7%. Outdoor living had a record half, up 14.0%. Our roll-out
of West Elm continued and is now in 7 shops.
Our strategy for shops continues to be anchored in convenience
and experience - giving our customers a reason to visit shops and
inspiring them when they are there. While sales through this
channel were down 1.0%, 65.5% of our merchandise sales come from
branches and three-quarters of our customers buy in shops.
This year we will open in two new locations; in Leeds, our most
services and experience led branch to date, and in Chelmsford, our
first shop in Essex. Both will feature new concepts as well as our
full in-store service offer across interior design, personal
styling and technical advice.
Online sales represented 34.5% of total merchandise sales, up
from 30.6% last year. Because our customers continue to value the
convenience of digital and mobile shopping to complete their
purchases, we have fully integrated our desktop, mobile and app,
and have introduced services such as the Personal Style Edit and
'Find Similar'.
Overseas we are continuing to roll out our wholesale model with
shop-in-shops in Australia and Ireland opening next year, taking
our total international locations to 29, and we have increased the
number of countries where johnlewis.com delivers to 40.
Despite unpredictable customer sentiment and long-term
structural challenges faced by the retail industry, we are
confident that our ongoing investments and our omnichannel strategy
will position us to outperform the market in the critical second
half where the majority of our sales and profit are delivered.
Partnership Services Group
Partnership Services and Group includes the operating costs for
our Group offices and shared services, the costs for
pan-Partnership initiatives and transformation programmes, and
certain pension operating costs. Partnership Services and Group net
operating costs increased by GBP3.2m or 19.6%, principally
reflecting additional costs supporting initiatives to either drive
sales growth through new business opportunities or to reduce costs
through increased productivity. However, overall costs decreased by
GBP22.7m to GBP15.0m, due to the decrease in pension operating
costs.
Investment in the future
Capital investment in the first half of the year was GBP200.5m,
a decrease of GBP37.4m (15.7%) on the previous year. Investment in
Waitrose was GBP76.1m, down GBP38.7m (33.7%) on the previous year,
and in John Lewis investment was GBP115.7m, up GBP6.5m (6.0%).
We have continued to focus our investment in IT and
distribution, which now represents 55% of our total capital
investment, up from 48% last year. In addition, we have decided to
prioritise future investment in Waitrose in our existing shops
ahead of new space.
Pensions
The pension operating cost was GBP96.4m, a decrease of GBP26.0m
or 21.2% on the prior year costs, reflecting the impact of our move
to a hybrid pension scheme combining defined benefit and defined
contribution pensions from April 2016, as well as an increase in
the real discount rate used to determine the cost to 0.70% at the
beginning of the year from 0.35% at the beginning of the previous
year. Pension finance costs were GBP14.8m, a decrease of GBP3.7m or
20.0% on the prior year, reflecting a reduction due to a lower
accounting pension deficit at the beginning of the year than at the
beginning of the previous year. As a result, total pension costs
were GBP111.2m, a decrease of GBP29.7m or 21.1% on the prior
year.
In February 2016, given the Group's strong liquidity position,
we made a cash contribution of GBP137.0m to the pension scheme to
prepay approximately 10 months of contributions. As a result, in
the first half of the year, total cash contributions to the pension
scheme totalled GBP139.3m, an increase of GBP56.5m or 68.2%. We are
currently undertaking a triennial actuarial valuation as at 31
March 2016, our first since the changes to our pension benefit,
which will determine our ongoing contribution rate. The valuation
should conclude by December 2016.
The total accounting pension deficit at 30 July 2016 was
GBP1,453.7m, an increase of GBP512.1m (54.4%) since 30 January
2016. Net of deferred tax, the deficit was GBP1,209.1m. Pension
fund assets increased by GBP551.9m (13.1%) to GBP4,750.3m. However,
the accounting valuation of pension fund liabilities increased by
GBP1,064.0m (20.7%) to GBP6,204.0m, mainly reflecting a decrease in
the real discount rate used to value the liabilities to -0.25% at
July 2016 compared to 0.70% at January 2016, due to historically
low bond yields. If this market driven rate persists at these
levels to the end of January 2017, it will result in a significant
increase in our pension operating costs for the next financial
year, the year ending 27 January 2018.
Our deficit has increased by GBP512.1m over the last 6 months,
driven by the steep reduction in interest rates. We are unusual in
having an open defined benefit scheme, which means that it is a
long term liability - our average duration is around 20 years - and
that allows us to target higher returns than the average pension
fund. We agree cash funding with the Trustee based on that long
term funding commitment. Our open defined benefit pension scheme is
an important part of the total reward that Partners receive, and as
a co-owned business we have more flexibility in the balance between
pay, pension and distribution of profits than many other
organisations.
Financing
At 30 July 2016, net debt was GBP442.7m, GBP115.4m (20.7%) lower
than 1 August 2015, reflecting our focus on cash generation and the
reduction in capital investment. Net debt is GBP176.7m (66.4%)
higher than January 2016.
Net finance costs on borrowings and investments decreased by
GBP1.8m (5.9%) to GBP28.6m, mainly reflecting reduced finance costs
following the repayment of the Partnership Bond in April 2016.
After including the financing elements of pensions and long service
leave and non-cash fair value adjustments, net finance costs
increased by GBP8.1m (16.8%) to GBP56.3m, impacted by higher long
leave financing costs arising from volatility in market driven
assumptions.
Sustainability
We continue to embed sustainability in our business,
understanding that being a responsible business has wide-reaching
implications and underpins our long-term success. This year,
Waitrose became the first retailer to announce a deadline to switch
all branded canned tuna to more sustainable fishing methods.
Recognising the threat from plastics to marine ecosystems, Waitrose
is phasing out microbeads from all cosmetics, and cotton bud stems
will soon be replaced with biodegradable paper. John Lewis is
providing training to suppliers in the requirements of the Modern
Slavery Act and has launched a supply chain mapping-tool in order
to help suppliers identify sustainable sources of wood and
paper.
Enquiries
For further information please contact:
Citigate Dewe Rogerson
Simon Rigby / Jos Bieneman 020 7638 9571
John Lewis Partnership
Simon Fowler, Director of Communications 07710 398460
Katie Robson, Group Senior External Communications Manager 07764
675608
John Lewis
Peter Cross, Director, Communications 07764 697674
Gillian Taylor, Head of External Communications 07919 057931
Waitrose
Christine Watts, Communications Director 07764 676414
Graeme Buck, Head of Communications 07703 379561
Debt investors
Alan Drew, Group Head of Treasury 07525 582955
Lynn Lochhead, Assistant Group Treasurer 07834 770684
Notes to editors
The John Lewis Partnership - The John Lewis Partnership operates
46 John Lewis shops across the UK, johnlewis.com, 349 Waitrose
shops, waitrose.com and business to business contracts in the UK
and abroad. The business has annual gross sales of over GBP11bn. It
is the UK's largest example of an employee-owned business where all
88,900 staff are Partners in the business.
Waitrose - winner of the Best Supermarket(1) and Best Food
Retailer(2) awards - currently has 349 shops in England, Scotland,
Wales and the Channel Islands, including 60 convenience branches,
and another 27 shops at Welcome Break locations. It 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 also exports its products to 58 countries
worldwide and has eight shops which operate under licence in the
Middle East. Waitrose's omnichannel business includes the online
grocery service, Waitrose.com, as well as specialist online shops
including waitrosecellar.com for wine, and waitrosekitchen.com for
cookware, utensils and kitchen gadgets.
(1) Which? Customer Survey
(2) Verdict Customer Satisfaction Awards
John Lewis - John Lewis operates 46 John Lewis shops across the
UK (32 department stores, 12 John Lewis at home and shops at St
Pancras International and Heathrow Terminal 2) as well as
johnlewis.com. John Lewis, 'Best In-Store Experience 2016', 'Best
Clothing Retailer 2016', 'Best Electricals Retailer 2016', 'Best
Furniture Retailer 2016' and 'Best Homewares Retailer 2016' and
'Best Click & Collect Retailer 2016'(3), typically stocks more
than 350,000 separate lines in its department stores across
fashion, home and technology. Johnlewis.com stocks over 280,000
products, and is consistently ranked one of the top online shopping
destinations in the UK. John Lewis Insurance offers a range of
comprehensive insurance products - home, car, wedding and event,
travel and pet insurance and life cover - delivering the values of
expertise, trust and customer service expected from the John Lewis
brand.
(3) Verdict Consumer Satisfaction Awards 2016
You can follow John Lewis on the following social media
channels:
www.johnlewis.com/twitter
www.johnlewis.com/facebook
www.johnlewis.com/youtube
Where this interim report contains forward-looking statement
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
inherent uncertainties underlying any such forward-looking
information.
Consolidated income statement
for the half year ended 30 July 2016
Notes Half year to 30 July 2016 Half year to 1 August 2015 Year to
30 January 2016
GBPm GBPm GBPm
------ ---------------------------------- -------------------------- --------------------------- -----------------
5 Gross sales 5,274.3 5,116.6 11,018.8
------ ---------------------------------- -------------------------- --------------------------- -----------------
5 Revenue 4,671.4 4,547.2 9,748.8
Cost of sales (3,095.4) (3,012.9) (6,442.1)
------ ---------------------------------- -------------------------- --------------------------- -----------------
Gross profit 1,576.0 1,534.3 3,306.7
Other operating income 46.4 47.2 85.2
Operating expenses before
exceptional item (1,483.7) (1,436.6) (2,992.5)
------ ---------------------------------- -------------------------- --------------------------- -----------------
5 Operating profit before 138.7 144.9 399.4
exceptional item
4 Exceptional item (25.0) 128.0 129.3
------ ---------------------------------- -------------------------- --------------------------- -----------------
5 Operating profit 113.7 272.9 528.7
6 Finance costs (57.8) (49.4) (99.5)
6 Finance income 1.5 1.2 4.2
Profit before Partnership Bonus
and tax 57.4 224.7 433.4
Partnership Bonus - - (145.0)
------ ---------------------------------- -------------------------- --------------------------- -----------------
Profit before tax 57.4 224.7 288.4
7 Taxation (15.0) (51.7) (66.0)
------ ---------------------------------- -------------------------- --------------------------- -----------------
Profit for the period 42.4 173.0 222.4
------ ---------------------------------- -------------------------- --------------------------- -----------------
5 Profit before Partnership Bonus, tax and exceptional item 82.4 96.7 304.1
--- ----------------------------------------------------------- ----- ----- ------
Consolidated statement of comprehensive income/(expense)
for the half year ended 30 July 2016
Notes Half year to 30 July 2016 Half year to 1 August 2015 Year to
30 January 2016
GBPm GBPm GBPm
------- --------------------------------- -------------------------- --------------------------- -----------------
Profit for the period 42.4 173.0 222.4
Other comprehensive
(expense)/income:
Items that will not be
reclassified to profit or loss:
10 Remeasurement of defined (564.0) 144.6 411.1
benefit pension schemes
7 Movement in deferred tax on 101.5 (28.9) (94.6)
pension schemes
Items that may be reclassified
subsequently to profit or loss:
Net gain/(loss) on cash flow hedges 14.0 (7.5) 7.9
7 Movement in deferred tax on (2.7) 1.5 (1.4)
cash flow hedges
(Loss)/gain on currency translations (0.4) 0.2 0.1
----------------------------------------- -------------------------- --------------------------- -----------------
Other comprehensive (expense)/income for
the period (451.6) 109.9 323.1
----------------------------------------- -------------------------- --------------------------- -----------------
Total comprehensive (expense)/income for
the period (409.2) 282.9 545.5
----------------------------------------- -------------------------- --------------------------- -----------------
Consolidated balance sheet
as at 30 July 2016
Notes 30 July 2016 1 August 2015 30 January 2016
GBPm GBPm GBPm
------ --------------------------------- ------------- -------------- ----------------
Non-current assets
8 Intangible assets 402.1 363.1 388.4
8 Property, plant and equipment 4,146.3 4,153.1 4,189.3
Trade and other receivables 64.6 65.8 65.7
Deferred tax asset 133.6 81.3 33.6
------ --------------------------------- ------------- -------------- ----------------
4,746.6 4,663.3 4,677.0
------ --------------------------------- ------------- -------------- ----------------
Current assets
Inventories 589.6 552.8 621.9
Trade and other receivables 258.0 228.5 223.7
13 Derivative financial instruments 25.6 3.9 11.5
9 Assets held for sale 6.8 9.3 -
Short-term investments 25.0 - 10.0
Cash and cash equivalents 403.8 401.0 667.4
------ --------------------------------- ------------- -------------- ----------------
1,308.8 1,195.5 1,534.5
------ --------------------------------- ------------- -------------- ----------------
Total assets 6,055.4 5,858.8 6,211.5
------ --------------------------------- ------------- -------------- ----------------
Current liabilities
12 Borrowings and overdrafts (0.3) (57.4) (57.7)
Trade and other payables (1,523.6) (1,462.4) (1,725.4)
Current tax payable (17.6) (17.3) (26.8)
12 Finance lease liabilities (1.5) (3.2) (2.6)
Provisions (118.3) (107.1) (141.6)
13 Derivative financial instruments (3.5) (8.7) (2.3)
------ --------------------------------- ------------- -------------- ----------------
(1,664.8) (1,656.1) (1,956.4)
------ --------------------------------- ------------- -------------- ----------------
Non-current liabilities
12 Borrowings (867.9) (867.1) (867.6)
Trade and other payables (218.1) (185.8) (209.3)
12 Finance lease liabilities (23.9) (26.6) (24.7)
Provisions (172.5) (165.7) (148.2)
10 Retirement benefit obligations (1,453.7) (1,156.4) (941.6)
(2,736.1) (2,401.6) (2,191.4)
------ --------------------------------- ------------- -------------- ----------------
Total liabilities (4,400.9) (4,057.7) (4,147.8)
------ --------------------------------- ------------- -------------- ----------------
Net assets 1,654.5 1,801.1 2,063.7
------ --------------------------------- ------------- -------------- ----------------
Equity
Share capital 6.7 6.7 6.7
Share premium 0.3 0.3 0.3
Other reserves 21.3 (2.0) 10.4
Retained earnings 1,626.2 1,796.1 2,046.3
Total equity 1,654.5 1,801.1 2,063.7
------ --------------------------------- ------------- -------------- ----------------
Consolidated statement of changes in equity
for the half year ended 30 July 2016
Notes Share Share Capital Hedging Foreign Retained Total
capital premium reserve reserve currency earnings equity
translation
reserve
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------- --------------------------------- ------------ -------- -------- -------- ------------ --------- --------
Balance at 31 January 2015 6.7 0.3 1.4 2.4 - 1,507.4 1,518.2
Profit for the period - - - - - 173.0 173.0
10 Remeasurement of defined benefit - - - - - 144.6 144.6
pension schemes
Fair value losses on cash flow hedges - - - (4.7) - - (4.7)
- transfers to inventories - - - (1.9) - - (1.9)
* transfers to property, plant a
nd equipment - - - (0.9) - - (0.9)
Tax on above items recognised in equity - - - 1.5 - (28.9) (27.4)
Gain on currency translations - - - - 0.2 - 0.2
Balance at 1 August 2015 6.7 0.3 1.4 (3.6) 0.2 1,796.1 1,801.1
----------------------------------------- ------------ -------- -------- -------- ------------ --------- --------
Balance at 31 January 2015 6.7 0.3 1.4 2.4 - 1,507.4 1,518.2
Profit for the year - - - - - 222.4 222.4
10 Remeasurement of defined benefit - - - - - 411.1 411.1
pension schemes
Fair value gains on cash flow hedges - - - 9.7 - - 9.7
- transfers to inventories - - - (0.2) - - (0.2)
- transfers to property, plant and
equipment - - - (1.6) - - (1.6)
Tax on above items recognised in equity - - - (1.4) - (94.6) (96.0)
Gain on currency translations - - - - 0.1 - 0.1
----------------------------------------- ------------ -------- -------- -------- ------------ --------- --------
Balance at 30 January 2016 6.7 0.3 1.4 8.9 0.1 2,046.3 2,063.7
Profit for the period - - - - - 42.4 42.4
10 Remeasurement of defined benefit - - - - - (564.0) (564.0)
pension schemes
Fair value gain on cash flow hedges - - - 21.1 - - 21.1
- transfers to inventories - - - (7.5) - - (7.5)
- transfers to property, plant and
equipment - - - 0.4 - - 0.4
Tax on above items recognised in equity - - - (2.7) - 101.5 98.8
Loss on currency translations - - - - (0.4) - (0.4)
Balance at 30 July 2016 6.7 0.3 1.4 20.2 (0.3) 1,626.2 1,654.5
----------------------------------------- ------------ -------- -------- -------- ------------ --------- --------
Consolidated statement of cash flows
for the half year ended 30 July 2016
Notes Half year to 30 July 2016 Half year to Year to
1 August 2015 30 January 2016
GBPm GBPm GBPm
------ ---------------------------------------------- -------------------------- --------------- -----------------
11 Cash generated from operations 203.7 341.7 915.7
Net taxation paid (25.3) - (26.4)
Partnership Bonus paid (144.5) (156.0) (156.1)
Finance costs paid (0.6) (2.4) (2.9)
Net cash generated from operating activities 33.3 183.3 730.3
------ ---------------------------------------------- -------------------------- --------------- -----------------
Cash flows from investing activities
Purchase of property, plant and equipment (131.2) (166.8) (347.4)
Purchase of intangible assets (69.3) (71.1) (146.4)
Proceeds from sale of property, plant and
equipment and intangible assets 1.9 144.6 163.8
Finance income received 1.1 0.5 1.4
Cash outflow from investments (15.0) - (10.0)
Net cash used in investing activities (212.5) (92.8) (338.6)
------ ---------------------------------------------- -------------------------- --------------- -----------------
Cash flows from financing activities
Finance costs paid in respect of bonds (24.9) (25.0) (57.2)
Payment of capital element of finance leases (1.9) (1.5) (4.0)
Payments to preference shareholders - - (0.1)
Cash outflow from borrowings (57.8) - -
Net cash used in financing activities (84.6) (26.5) (61.3)
------ ---------------------------------------------- -------------------------- --------------- -----------------
(Decrease)/increase in net cash and cash
equivalents (263.8) 64.0 330.4
Net cash and cash equivalents at beginning of
period 667.3 336.9 336.9
------ ---------------------------------------------- -------------------------- --------------- -----------------
Net cash and cash equivalents at end of
period 403.5 400.9 667.3
------ ---------------------------------------------- -------------------------- --------------- -----------------
Net cash and cash equivalents comprise:
Cash at bank and in hand 117.0 89.7 89.1
Short-term deposits 286.8 311.3 578.3
Bank overdraft (0.3) (0.1) (0.1)
403.5 400.9 667.3
------ ---------------------------------------------- -------------------------- --------------- -----------------
Notes to the financial statements
1 Basis of preparation
This condensed set of interim financial statements was approved
by the Board on 14 September 2016. The condensed set of interim
financial statements is unaudited, but has been reviewed by the
auditors and their review report is set out on pages 24 to 25. They
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 1 August 2015 has not been audited, but has
been reviewed in accordance with the International Standard on
Review Engagements (UK and Ireland) 2410.
The results for the half year to 30 July 2016 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 Group's published financial statements for the year ended 30
January 2016 has been reported on by the Group'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.
This condensed set of interim financial statements for the half
year ended 30 July 2016 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Conduct
Authority and 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 30 January 2016, which has been
prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
Going concern
Having reviewed the Group's principal risks, operating budgets,
investment plans and financing arrangements, the Directors are
satisfied that it is appropriate to adopt the going concern basis
in preparing the condensed set of interim financial statements.
Supplier income
Within trade receivables is accrued rebate income of GBP18.6m
(30 January 2016: GBP7.8m, 1 August 2015: GBP18.1m). During the
interim period, supplier income was received in line with estimates
recorded at 30 January 2016. There has been no change in the
criteria used to recognise supplier income, though at the half year
specific judgement is required to estimate the amount that will be
received from suppliers in relation to annual agreements. These
judgements have been based on management's best estimates of full
year purchases using the latest information available.
2 Accounting policies
The Group's results for the half year to 30 July 2016 have been
prepared on a basis consistent with the Group's accounting policies
published in the financial statements for the year ended 30 January
2016.
3 Risks and uncertainties
The principal and other significant risks and uncertainties
affecting the Group were identified as part of the Group Strategic
Report, set out on page 8 of the John Lewis plc Annual Report and
Accounts 2016, a copy of which is available on the Partnership's
website www.johnlewispartnership.co.uk.
The Partnership has a formal risk identification process, which
includes a rigorous analysis of internal and external risks both at
a Divisional Board and Partnership Board level. The Partnership has
identified the following key risks, which are unchanged from year
end and remain relevant for the second half of the financial
year.
-- Competition: competitor actions put pressure on market value, our margin and threaten our volumes in the retail
grocery sector. The growth of online business models in the general merchandise sector, mean customers focus more
on value for money and less on loyalty;
-- Information security: a breach of Partner or customer data due to the external threat to cause disruption or
access sensitive data, and a need to respond to the pace of technological development;
-- Pension obligations: changes in the real discount rate causes significant volatility in our pension fund
liabilities and could cause a breach in our banking covenants. In addition, it would lead to increased pension
operating costs;
-- Efficiency: in response to the need to offer exceptional value, we have developed programmes to optimise our
efficiency and productivity. These may suffer from issues with planning, governance, funding and competing
resources;
-- Operating model strain: increasing external pressures such as the ongoing move to online and increased spend on
IT (depreciation) create strain on our operating model;
-- Change delivery: the complex nature and scale of interdependencies of the change programmes may affect ability to
implement programmes/projects to time, budget and quality, ability to manage, and ability to embed the change
into the business and realise the benefits;
-- Economic environment: external economic pressures, due to the impact of government policy, a static economy and a
lack of pay increases, reduce our customers' spending power and harm our suppliers' financial resilience.
4 Exceptional item
At 30 July 2016, the Group recognised an exceptional charge of
GBP25.0m in Waitrose for the write-down of property assets that are
now no longer intend to be developed and related costs following a
strategic review. GBP21.6m relates to the impairment of strategic
land holdings and GBP3.4m to abortive property project costs. The
tax charge in relation to the exceptional item has been recognised
based on management's best estimate of the full year effective tax
rate.
On 16 April 2015, the Group disposed of a property which was
previously held for sale. The profit on disposal of GBP129.3m has
been recorded as exceptional operating income in the period to 30
January 2016 (GBP128.0m in the period to 1 August 2015). A tax
charge of GBP25.1m was recognised on the exceptional item in the
period to 30 January 2016 (GBP27.4m in the period to 1 August
2015).
5 Segmental reporting
The Group's three reporting segments are Waitrose, John Lewis
and Partnership Services and Group. Partnership Services and Group
includes the operating costs for our Group offices and shared
services, the costs for transformation programmes and certain
pension operating costs. The operating profit of each segment is
reported after charging relevant Partnership Services and Group
costs based on the business segments' usage of these 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 of the year. There is a more marked increase in the fourth
quarter for the John Lewis business.
Waitrose John Partnership Total
Lewis Services
and Group
GBPm GBPm GBPm GBPm
----------------------- --------- -------- ------------ --------
Half year to 30 July
2016
Gross sales 3,250.6 2,023.7 - 5,274.3
Adjustment for sale
or return sales - (106.7) - (106.7)
Value added tax (186.2) (310.0) - (496.2)
----------------------- --------- -------- ------------ --------
Revenue 3,064.4 1,607.0 - 4,671.4
----------------------- --------- -------- ------------ --------
Operating profit
before exceptional
item and profit on
sale of property 120.8 32.4 (15.0) 138.2
Profit on sale of
property 0.5 - - 0.5
----------------------- --------- -------- ------------ --------
Operating profit
before exceptional
item 121.3 32.4 (15.0) 138.7
Exceptional item (25.0) - - (25.0)
----------------------- --------- -------- ------------ --------
Operating profit 96.3 32.4 (15.0) 113.7
Finance costs (57.8)
Finance income 1.5
Profit before tax 57.4
Taxation (15.0)
----------------------- --------- -------- ------------ --------
Profit for the period 42.4
----------------------- --------- -------- ------------ --------
Profit before tax
and exceptional item 82.4
-------------------------- -----
5 Segmental reporting (continued)
Waitrose John Partnership Total
Lewis Services
and Group
GBPm GBPm GBPm GBPm
----------------------- --------- -------- ------------ --------
Half year to 1 August
2015
Gross sales 3,180.8 1,935.8 - 5,116.6
Adjustment for sale
or return sales - (85.4) - (85.4)
Value added tax (182.1) (301.9) - (484.0)
----------------------- --------- -------- ------------ --------
Revenue 2,998.7 1,548.5 - 4,547.2
----------------------- --------- -------- ------------ --------
Operating profit
before exceptional
item and profit on
sale of property 135.5 47.1 (37.7) 144.9
Profit on sale of - - - -
property
----------------------- --------- -------- ------------ --------
Operating profit
before exceptional
item 135.5 47.1 (37.7) 144.9
Exceptional item - - 128.0 128.0
----------------------- --------- -------- ------------ --------
Operating profit 135.5 47.1 90.3 272.9
Finance costs (49.4)
Finance income 1.2
----------------------- --------- -------- ------------ --------
Profit before tax 224.7
Taxation (51.7)
----------------------- --------- -------- ------------ --------
Profit for the period 173.0
----------------------- --------- -------- ------------ --------
Profit before tax
and exceptional item 96.7
-------------------------- -----
5 Segmental reporting (continued)
Waitrose John Partnership Total
Lewis Services
and Group
GBPm GBPm GBPm GBPm
--------------------------- --------- -------- ------------ ----------
Year to 30 January
2016
Gross sales 6,461.4 4,557.4 - 11,018.8
Adjustment for sale
or return sales - (181.9) - (181.9)
Value added tax (375.4) (712.7) - (1,088.1)
--------------------------- --------- -------- ------------ ----------
Revenue 6,086.0 3,662.8 - 9,748.8
--------------------------- --------- -------- ------------ ----------
Operating profit
before exceptional
item and profit on
sale of property 232.6 248.7 (83.4) 397.9
Profit on sale of
property - 1.5 - 1.5
--------------------------- --------- -------- ------------ ----------
Operating profit
before exceptional
item 232.6 250.2 (83.4) 399.4
Exceptional item - - 129.3 129.3
--------------------------- --------- -------- ------------ ----------
Operating profit 232.6 250.2 45.9 528.7
Finance costs (99.5)
Finance income 4.2
--------------------------- --------- -------- ------------ ----------
Profit before Partnership
Bonus and tax 433.4
Partnership Bonus (145.0)
--------------------------- --------- -------- ------------ ----------
Profit before tax 288.4
Taxation (66.0)
--------------------------- --------- -------- ------------ ----------
Profit for the period 222.4
--------------------------- --------- -------- ------------ ----------
Profit before Partnership
Bonus, tax and exceptional
item 304.1
-------------------------------- ------
30 July 2016
Segment assets 2,955.9 2,096.8 1,002.7 6,055.4
Segment liabilities (777.4) (790.1) (2,833.4) (4,400.9)
-------------------------- -------- -------- ---------- ----------
Net assets/(liabilities) 2,178.5 1,306.7 (1,830.7) 1,654.5
-------------------------- -------- -------- ---------- ----------
1 August 2015
Segment assets 2,983.4 1,987.1 888.3 5,858.8
Segment liabilities (770.8) (727.8) (2,559.1) (4,057.7)
-------------------------- -------- -------- ---------- ----------
Net assets/(liabilities) 2,212.6 1,259.3 (1,670.8) 1,801.1
30 January 2016
Segment assets 2,998.8 2,049.1 1,163.6 6,211.5
Segment liabilities (742.6) (876.8) (2,528.4) (4,147.8)
-------------------------- -------- -------- ---------- ----------
Net assets/(liabilities) 2,256.2 1,172.3 (1,364.8) 2,063.7
-------------------------- -------- -------- ---------- ----------
6 Net finance costs
Half year Half year Year to
to 30 to 30 January
July 2016 1 August 2016
2015
GBPm GBPm GBPm
------------------------------- ----------- ---------- ------------
Finance costs
Finance costs in respect
of borrowings (29.4) (30.8) (61.5)
Fair value measurements
and other (2.4) (0.1) (1.1)
Net finance costs arising
on defined benefit and
other employee benefit
schemes (26.0) (18.5) (36.9)
------------------------------- ----------- ---------- ------------
Total finance costs (57.8) (49.4) (99.5)
------------------------------- ----------- ---------- ------------
Finance income
Finance income in respect
of cash and short-term
investments 0.8 0.4 1.5
Fair value measurements
and other 0.7 0.7 0.4
Net finance income on
other employee benefit
schemes - 0.1 2.3
------------------------------- ----------- ---------- ------------
Total finance income 1.5 1.2 4.2
------------------------------- ----------- ---------- ------------
Net finance costs (56.3) (48.2) (95.3)
------------------------------- ----------- ---------- ------------
Half year Half year Year to
to to 30 January
30 July 1 August 2016
2016 2015
GBPm GBPm GBPm
------------------------------- ----------- ---------- ------------
Finance costs in respect
of borrowings (29.4) (30.8) (61.5)
Finance income in respect
of cash and short-term
investments 0.8 0.4 1.5
------------------------------- ----------- ---------- ------------
Net finance costs in respect
of borrowings and short-term
investments (28.6) (30.4) (60.0)
Fair value measurements
and other (1.7) 0.6 (0.7)
Net finance costs arising
on defined benefit and
other employee benefit
schemes (26.0) (18.5) (36.9)
Net finance income arising
on other employee benefit
schemes - 0.1 2.3
------------------------------- ----------- ---------- ------------
Net finance costs (56.3) (48.2) (95.3)
------------------------------- ----------- ---------- ------------
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.
Legislation to reduce the standard rate of corporation tax from
18% to 17% from 1 April 2020 was included in the Finance Bill 2016
and substantively enacted on 6 September 2016. The legislation was
not substantively enacted by the balance sheet date and therefore
not included in this interim consolidated financial
information.
8 Property, plant and equipment and intangible assets
Property, Intangible Total
plant and assets
equipment
GBPm GBPm GBPm
------------------------------- ----------- ----------- --------
Net book value at 30
January 2016 4,189.3 388.4 4,577.7
Additions 140.9 69.3 210.2
Depreciation and amortisation
* (171.9) (55.0) (226.9)
Disposals and write-offs (5.2) (0.6) (5.8)
Transfers to assets
held for sale (6.8) - (6.8)
Net book value at 30
July 2016 4,146.3 402.1 4,548.4
------------------------------- ----------- ----------- --------
* Depreciation and amortisation charge for the period ending 30
July 2016 includes an impairment charge of GBP30.3m (GBP26.9m land
and buildings, and GBP3.4m intangible assets).
Intangible assets primarily relate to internally developed
computer software.
The impairment review methodology is unchanged from that
described in the Annual Report and Accounts for the year ended 30
January 2016.
Key assumptions in the calculations are the discount rate,
long-term growth rate and expected sales performance and branch
costs. The discount rate is based on the Group's pre-tax weighted
average cost of capital of 8% to 9% (January 2016: 9% to 10%).
9 Assets held for sale
At 30 July 2016, two property assets were recorded as held for
sale totalling GBP6.8m. One property is expected to be disposed of
within 12 months (GBP6.4m) and the other was disposed of in August
2016 (GBP0.4m).
At 1 August 2015, one property asset was recorded as held for
sale totalling GBP9.3m, which was disposed of in October 2015.
10 Retirement benefit obligations
The principal pension scheme operated by the Group is the John
Lewis Partnership Trust for Pensions. The scheme includes a funded
final salary defined benefit pension scheme, providing pension and
death benefits to members, and is open to new members. All
contributions to the defined benefit section of the scheme are
funded by the Group. The pension scheme also includes a defined
contribution section. Contributions to the defined contribution
section of the scheme are made by both Partners and the
Partnership.
Pension commitments have been calculated based on the most
recent actuarial valuations, as at 31 March 2013, which have been
updated by the actuaries to reflect the assets and liabilities of
the scheme as at 30 July 2016. The next triennial actuarial
valuation of the scheme will take place as at 31 March 2016.
Scheme assets are stated at market value at 30 July 2016.
The following financial assumptions have been used:
Half year Half year Year to
to to 30 January
30 July 1 August 2016
2016 2015
Discount rate 2.45% 3.65% 3.70%
Future retail price inflation
(RPI) 2.70% 3.25% 3.00%
Future consumer price
inflation (CPI) 1.70% 2.25% 2.00%
Increase in earnings 3.17% 3.75% 3.54%
Increase in pensions
- in payment
Pre-April 2016 2.60% 3.00% 2.85%
Post-April 2016 1.45% - 1.60%
Increase in pensions
- deferred 1.70% 2.25% 2.00%
------------------------------- ---------- ---------- ------------
The movement in the defined benefit liability in the period is
as follows:
Half year Half year Year to
to to 30 January
30 July 1 August 2016
2016 2015
GBPm GBPm GBPm
------------------------------ ---------- ---------- ------------
Net defined benefit
liability at beginning
of period (941.6) (1,249.3) (1,249.3)
Operating cost (72.6) (116.0) (232.5)
Interest cost on liabilities (94.4) (82.7) (165.2)
Interest income on assets 79.6 64.2 128.3
Contributions 139.3 82.8 166.0
Total (losses)/gains
recognised in equity (564.0) 144.6 411.1
------------------------------ ---------- ---------- ------------
Net defined benefit
liability at end of
period (1,453.7) (1,156.4) (941.6)
------------------------------ ---------- ---------- ------------
The post-retirement mortality assumptions used in valuing the
pension liabilities were based on the 'S2 Light' (Jan 2016 'S1
Light') series standard tables. Based on scheme experience, the
probability of death at each age was multiplied by 127% for males
and 106% for females (Jan 2016: 127% for males and 114% for
females). Future improvements in life expectancy have been allowed
for in line with the standard CMI model projections subject to a
long-term trend of 1.25% (Jan 2016: 1.25%).
The average life expectancies were as follows:
30 July 2016 30 January 2016
Men Women Men Women
----------------------------------------------------------------- ------ ------- -------- --------
Average life expectancy for a 65 year old (in years) 21.5 24.0 22.3 24.4
Average life expectancy at age 65, for a 50 year old (in years) 22.7 25.4 23.6 25.8
----------------------------------------------------------------- ------ ------- -------- --------
11 Reconciliation of profit before tax to cash generated from operations
Half year Half year Year to
to to 30 January
30 July 1 August 2016
2016 2015
GBPm GBPm GBPm
--------------------------------- ---------- ---------- ------------
Profit before tax 57.4 224.7 288.4
Amortisation of intangible
assets 55.0 42.7 91.2
Depreciation 171.9 140.1 286.0
Net finance costs 56.3 48.2 95.3
Partnership Bonus - - 145.0
Fair value (gain)/loss
on derivative financial
instruments (1.0) 0.6 0.7
Loss/(profit) on disposal
and write-offs of property,
plant and equipment and
intangible assets 3.8 (126.6) (124.8)
Decrease/(increase) in
inventories 32.3 27.9 (41.2)
Increase in receivables (33.6) (23.5) (18.9)
(Decrease)/increase in
payables (61.5) (30.4) 103.5
(Decrease)/increase in
retirement benefit obligations (66.7) 33.2 66.6
(Decrease)/increase in
provisions (10.2) 4.8 23.9
--------------------------------- ---------- ---------- ------------
Cash generated from operations 203.7 341.7 915.7
--------------------------------- ---------- ---------- ------------
12 Analysis of net debt
30 January Cash Other 30 July
2016 flow non-cash 2016
movements
GBPm GBPm GBPm GBPm
--------------------------- ----------- -------- ----------- --------
Current assets
Cash and cash equivalents 667.4 (263.6) - 403.8
Short term investments 10.0 15.0 - 25.0
Derivative financial
instruments 11.5 - 14.1 25.6
688.9 (248.6) 14.1 454.4
--------------------------- ----------- -------- ----------- --------
Current liabilities
Borrowings and overdrafts (57.8) 57.6 (0.1) (0.3)
Unamortised bond
transaction costs 0.1 - (0.1) -
Finance leases (2.6) 1.9 (0.8) (1.5)
Derivative financial
instruments (2.3) - (1.2) (3.5)
--------------------------- ----------- -------- ----------- --------
(62.6) 59.5 (2.2) (5.3)
--------------------------- ----------- -------- ----------- --------
Non-current liabilities
Borrowings (877.3) - 0.1 (877.2)
Unamortised bond
transaction costs 9.7 - (0.4) 9.3
Finance leases (24.7) - 0.8 (23.9)
(892.3) - 0.5 (891.8)
--------------------------- ----------- -------- ----------- --------
Total net debt (266.0) (189.1) 12.4 (442.7)
--------------------------- ----------- -------- ----------- --------
12 Analysis of net debt (continued)
Reconciliation of net cash flow to net debt
Half year Half year Year to
to to 30 January
30 July 1 August 2016
2016 2015
GBPm GBPm GBPm
------------------------- ---------- ---------- ------------
(Decrease)/increase
in net cash and cash
equivalents in the
period (263.8) 64.0 330.4
Cash outflow from
movement in debt
and lease financing 59.7 1.5 4.0
Cash outflow from
short-term investments 15.0 - 10.0
------------------------- ---------- ---------- ------------
Movement in debt
for the period (189.1) 65.5 344.4
Opening net debt (266.0) (615.2) (615.2)
Non-cash movements 12.4 (8.4) 4.8
------------------------- ---------- ---------- ------------
Closing net debt (442.7) (558.1) (266.0)
------------------------- ---------- ---------- ------------
13 Management of financial risks
The principal financial risks to which the Group is exposed are
capital and long term funding risk, liquidity risk, interest rate
risk, foreign currency risk, credit risk, and energy risk.
This condensed set of interim financial statements does 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 30 January
2016. During the half year to 30 July 2016, the Group has continued
to apply the financial risk management process and policies as
detailed in the Annual Report and Accounts for the year ended 30
January 2016.
Valuation techniques and assumptions applied in determining the
fair value of each class of asset or liability are consistent with
those used as at 30 January 2016 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 30 July 2016, 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 Group 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 and are not traded in an active
market.
13 Management of financial risks (continued)
At 30 July 2016, the net fair value of derivative financial
instruments was GBP22.1m, asset (30 January 2016: GBP9.2m, asset; 1
August 2015: GBP4.8m, 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.
The following table compares the Group's liabilities held at
amortised cost, where there is a difference between carrying value
(CV) and fair value (FV):
30 July 2016 1 August 2015 30 January
2016
GBPm GBPm GBPm GBPm GBPm GBPm
CV FV CV FV CV FV
-------------- -------- ---------- -------- -------- -------- --------
Financial
liabilities
Listed bonds (865.7) (1,006.9) (864.8) (996.9) (865.3) (980.2)
Preference
stock (2.3) (2.0) (2.3) (2.1) (2.3) (2.1)
-------------- -------- ---------- -------- -------- -------- --------
The fair value of the Group's listed bonds and preference stock
have been determined by reference to market price quotations and
classified as Level 1 under the IFRS 13 fair value hierarchy.
For other financial assets and liabilities, there are no
material differences between carrying value and fair value.
14 Capital commitments
At 30 July 2016 contracts had been entered into for future
capital expenditure of GBP36.2m (30 January 2016: GBP30.3m; 1
August 2015: GBP38.8m) of which GBP31.9m (30 January 2016:
GBP26.5m; 1 August 2015: GBP34.7m) relates to property, plant and
equipment and GBP4.3m (30 January 2016: GBP3.8m; 1 August 2015:
GBP4.1m) relates to intangible assets.
15 Related party transactions
There have been no material changes to the principal
subsidiaries listed in the Annual Report and Accounts for the year
ended 30 January 2016. 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 30 July
2016.
16 Events after the balance sheet date
On 8 September 2016, John Lewis plc announced that it is
proposing, subject to shareholder approval, to repay its 5%
Cumulative Preference Stock and 7% Cumulative Preference Stock in
accordance with their respective terms.
Assuming the proposals are approved by shareholders and
following the repayment, the Company will no longer have any listed
Cumulative Preference Stock.
Statement of Directors' responsibilities
The Directors confirm that this condensed set of interim
financial statements has 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.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
For and by Order of the Board
Sir Charlie Mayfield, Chairman
Patrick Lewis, Group Finance Director
14 September 2016
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 half-yearly financial report
for the 26 weeks ended 30 July 2016 which comprises the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated statement of changes in equity, the
condensed consolidated statement of cash flows and the related
explanatory notes. We have read the other information contained in
the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of interim financial
statements.
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA"). Our review
has been undertaken so that we might state to the Company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The annual financial statements of the group are prepared in
accordance with IFRSs as adopted by the EU. The condensed set of
interim financial statements included in this half-yearly financial
report has been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of interim financial statements in the
half-yearly financial report based on our review.
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 issued by the Auditing Practices Board for use in the
UK. 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.
Independent review report to John Lewis plc (continued)
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 half-yearly financial report for John Lewis plc
for the 26 weeks ended 30 July 2016 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU
and the DTR of the UK FCA.
Michael Maloney
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
14 September 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SFMFWLFMSEDU
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