TIDMBD45
RNS Number : 6242B
Lewis(John)Partnership PLC
06 March 2014
John Lewis Partnership
Unaudited results for 52 weeks to 25 January 2014
[This does not constitute a preliminary announcement]
Strict Stock Exchange Embargo, 9.25am
Thursday 6 March 2014
John Lewis Partnership plc
Results for the 52 weeks ended 25 January 2014
Innovation and investment drive strong sales and profit
performance
Financial Summary
Waitrose John Lewis(1) Partnership
GBPm Change GBPm Change GBPm Change
% % %
------ ------- ------- ------- ------- -------
Gross sales 6,112 6.0% 4,060 7.5% 10,172 6.6%
LFL sales(2) 5.1% 6.4%
Revenue 5,754 6.2% 3,274 7.4% 9,028 6.6%
Operating profit
before exceptional
item 310.1 6.1% 226.1 4.3% 470.9 3.9%
Exceptional item(3) (47.3) n/a
Operating profit 310.1 6.1% 226.1 4.3% 423.6 (6.6)%
PBT(4) before
exceptional item 376.4 9.6%
PBT(4) 329.1 (4.1)%
--------------------- ------ ------- ------- ------- ------- -------
(1) John Lewis operating profit before restructuring costs of GBP240.5m, up GBP23.8m (11.0%)
(2) Waitrose like-for-like sales excludes petrol
(3) Exceptional item of GBP47.3m following review of holiday pay policy
(4) Profit before Partnership Bonus and tax for 2012/13 has been
restated for IAS 19 revised, reducing profit before Partnership
Bonus and tax by GBP66.3m.
Financial Highlights
-- Gross sales exceed GBP10bn for the Partnership, GBP6bn for
Waitrose and GBP4bn for John Lewis
-- Revenue exceeds GBP9bn for the Partnership, with Waitrose
GBP5.75bn and John Lewis GBP3.27bn
-- Profit before Partnership Bonus, tax and exceptional item up
by almost 10%; down by 4% after the exceptional item
-- Partnership Bonus of GBP202.5m; 15% of salary (equal to nearly 8 weeks' pay)
-- Net debt of GBP485.8m, up GBP113.9m (30.6%)
-- Pension deficit of GBP1,003.4m, up GBP181.3m (22.1%)
Operational Highlights
Waitrose
-- 13 new branches (including five little Waitrose)
-- Total online services gross sales of GBP262m; Waitrose.com grocery gross sales up 41.4%
-- More than 5.6m customer visits each week
-- myWaitrose cardholders now account for 68% of sales
-- 56 months of market outperformance
John Lewis
-- johnlewis.com gross sales of GBP1,142m, up GBP184m (19.2%)
-- Click & collect grown by 57%
-- Significant market share gains across all three categories
-- New 'at home' store at Ashford and strong store pipeline
-- GBP97m 'Magna 2' distribution centre on track
Partnership
-- Net 6,300 new jobs created, a 7.4% increase in Partners
-- Invested GBP584m in benefits to our Partners, including
Partnership Bonus, pensions, Partner discount, catering subsidy,
long service leave, leisure spending and the running of our five
holiday centres
-- GBP85m additional cash contribution to final salary pension scheme in January 2014
Charlie Mayfield, Chairman of John Lewis Partnership,
commented:
"This has been another good year for the Partnership. Both
Waitrose and John Lewis increased market share for the fifth
consecutive year, profit before exceptionals has grown by almost
10% and, for the first time, we have achieved sales of over GBP10
billion. As a result of our performance, I am delighted that 91,000
Partners will receive a Bonus of 15%, equivalent to nearly 8 weeks'
pay. The Bonus reflects the balance of a strong trading year, but
also the increased costs of pension provision. The exceptional
costs of GBP47m, relating to holiday pay premiums (announced in
August), did not affect the bonus percentage.
Our ownership by Partners has played a key role in these
results. There are fundamental changes taking place in retail,
especially in customer attitudes towards value, convenience and
personalisation. For several years we have been adapting our
business to take advantage of these changes. That has required high
levels of investment, organisational change and new capabilities.
The level of change has at times been challenging, but Partners
have understood and embraced the need for their business to
continue to develop.
As a result we have been able to make important progress in
several areas. Innovation in product and service continues to be
vital in today's market and there have been great examples of that
in Waitrose and John Lewis. We have improved our omni-channel offer
significantly with new online platforms for both brands and
expansion of the hugely popular Click & collect service. We
have also introduced greater personalisation to the relationship
with customers, particularly with myWaitrose. To deliver all of
this we continue to make improvements to branch structures and are
giving greater emphasis to the importance of our leadership teams
creating opportunities for individual Partners."
Outlook 2014/15
The current year has started well. We have good trading
momentum, with gross sales up 5.3% versus last year after five
weeks. Waitrose gross sales have increased by 5.1% (3.7%
like-for-like, excluding petrol) and John Lewis gross sales are
5.7% higher than last year (5.3% like-for-like).
There are more encouraging signs for the economy as a whole and,
although this has not yet come through as a significant increase in
consumer spending, I am cautiously optimistic that we will see
improvements this year. I am confident that however quickly the UK
economy emerges from this prolonged period of slow growth, the
Partnership is well positioned to continue to strengthen its
competitive position and to grow market share in both Waitrose and
John Lewis.
Financial Results
In 2013/14 the Partnership traded well, delivering good 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 GBP10.17bn, an increase
of GBP630.2m, or 6.6%, on last year. Revenue, which is adjusted for
sale or return sales and excludes VAT, was GBP9.03bn, up by
GBP562.3m or 6.6%.
Partnership operating profit was GBP423.6m, down GBP29.8m, or
6.6% on last year. This includes an exceptional cost of GBP47.3m
following a review of the Partnership's holiday pay policy during
the year. Excluding the exceptional item, operating profit was
GBP470.9m, an increase of GBP17.5m or 3.9%.
The exceptional item comprises costs of GBP39.3m for payments to
Partners and associated expenses, and GBP8.0m for an increase in
future pension liabilities.
Profit before Partnership Bonus and tax was GBP329.1m, down by
GBP14.2m, or 4.1% on last year with the decline wholly attributable
to the exceptional item. Excluding this it was GBP376.4m, up by
GBP33.1m or 9.6%.
These results reflect the collective hard work of our Partners
who, as co-owners, each receive the same percentage of annual pay
as Partnership Bonus. Partners will share GBP202.5m in profit,
which represents 15% of pay or the equivalent of nearly 8 weeks'
pay.
Waitrose
The shaping of the modern Waitrose continued apace throughout
the year. Gross sales for the year were up 6.0% to GBP6.11bn and
like-for-like sales grew by 5.1%, with a large proportion of this
uplift attributable to volume growth. Operating profit was up by
6.1% to GBP310.1m.
The myWaitrose card is allowing us to deepen relationships with
our customers, we are growing our online business and, through more
services and hospitality, we are creating additional reasons to
visit our branches. Our customer service, high quality products,
breadth of range and value offer continue to resonate with
customers and Waitrose has now outperformed the market for 56
months in a row. As a result, our market share(6) increased by 0.2
per cent over the year.
Customer transactions grew by 9.6% and there are now more than
5.6m customer visits each week. More than 4.1m customers now have a
myWaitrose card and 68% of sales are to cardholders. As well as the
benefits that customers already receive, myWaitrose became even
more appealing in October when we increased the number of price
promotions on branded products. In addition to Brand Price Match
(where we match Tesco prices on branded goods excluding
promotions), myWaitrose customers now receive an extra 10% discount
on hundreds of lines.
Waitrose.com performed strongly with grocery gross sales up
41.4%. We continued to invest in our online business, improving the
shopping experience with a new look for the site, making it more
tablet-friendly, and easier to register, navigate and search for
products. In the year we nearly doubled the capacity of our
branches to fulfil online orders. We will have the capacity to
realise further potential for our online business in the London
area when our second dark storeopens in Coulsdon later this
year.
Customers increasingly expect to be able to move smoothly
between channels and during the year 57% of all John Lewis Click
& collect orders were picked up from Waitrose branches,
amounting to 2.5m collections. We are exploring more ways to
integrate our channels and are trialling drive-through collections
in five shops. We began a pilot for collection lockers last
July.
We opened 13 new branches and relocated two others in the year,
which brought the total number of shops at the end of the year to
305. We now have 42 little Waitrose shops in total, five of which
were opened last year.
We carried out major refurbishments of 11 branches and now have
concierge-style welcome desks in 112 shops. These give a focal
point for our existing services as well as the opportunity to try
out new offerings in the future. We continue to develop our
hospitality offer with cafés in more than 100 of our branches and
are trialling concepts, such as new-look bakery and wine
departments and grazing areas in our Kingston and Cambridge
branches.
In the year ahead we plan to open 38 new branches, including 23
little Waitrose shops, as well as relocating two branches. We
closed our Dartford branch at the end of its lease in February.
Innovation, superb quality and high standards of provenance are
at the heart of our products, from essential Waitrose to Duchy from
Waitrose. We launched over 4,000 products during the year and
expect to sustain this pace in 2014. In addition, April 2013 saw
the debut of the Waitrose flower garden range and
Waitrosegarden.com, offering 6,000 gardening products in total.
John Lewis
John Lewis gross sales grew strongly throughout the year,
increasing by 7.5% in total and passing the GBP4bn mark for the
first time. Total like-for-like sales grew by 6.4%. Operating
profit before restructuring costs was up 11.0% to GBP240.5m.
Restructuring costs were GBP14.4m for streamlining our department
store management structures and the future closure of our Park
Royal distribution centre, as part of our programme to upgrade our
distribution infrastructure. Both of these will improve long-term
efficiency. Operating profit including these costs was up 4.3% to
GBP226.1m.
Sales growth was shared across the categories:
-- Home (+2.3%): We made significant progress in our ambition to
be the UK's largest home retailer through new initiatives such as
Any Shape, Any Fabric and the maturation of our HOUSE range.
-- Fashion (+5.0%): We expanded our Kin fashion lifestyle brand
with new accessories and babywear collections, as well as building
on the success of our fashion labels, Somerset by Alice Temperley
and John Lewis & Co.
-- Electricals and Home Technology (EHT) (+15.5%): We were
Samsung's retailer of choice to debut their new OLED televisions,
and were exclusive stockists of Nest when the product launched in
the UK.
Omni-channel capability and innovation has been key to our
success. We have seen growth in both shops and online, with shops
significantly outperforming the high street and johnlewis.com up
19.2% to GBP1.1bn, achieved while launching a new web platform in
the first half. Click & collect has grown strongly, up 57%,
with the convenience of being able to pick up from Waitrose being
particularly appreciated. Collect+ was successfully launched in
September. Mobile also grew rapidly this year, and visits from
phones and tablets now account for 50% of traffic to
johnlewis.com.
We continued to build the value and trust our customers expect
of us through our commitment to be 'Never Knowingly Undersold', and
our guarantees were improved further this year through Guaranteed
Guarantees, to give a minimum of two years' cover on any electrical
item. The my John Lewis membership card was also launched with
500,000 members joining in just four months. Our 'The Bear and the
Hare' Christmas advertising campaign was also a huge success, with
over 12 million views on YouTube.
Behind the scenes, we have invested significantly in our support
infrastructure. Our new GBP97m distribution centre will begin
operations in 2015 alongside our existing Magna Park site in Milton
Keynes, further enhancing our fulfilment capability.
Shop developments continue to be a strong focus of our growth
strategy. 2013 saw the full refurbishment of our High Wycombe shop,
and we have an active pipeline of new sites. In 2013 we opened an
'at home' shop in Ashford and this year we will open a full line
flexible format shop in York, and our smallest shop to date at
Heathrow's Terminal 2. We have announced future sites in
Birmingham, Leeds, Westfield White City, Oxford, Chelmsford,
Horsham, and Basingstoke. New catering partnerships with Joe &
the Juice and Hotel Chocolat's Cocoa Bar Café were launched,
alongside the first little Waitrose within a John Lewis shop at
Watford.
We continue to exploit new technology including equipping our
Partners with transactional tablets, and we are the first major
department store to use Google to map the inside of our Oxford
Street shop.
Partnership Services and Corporate
Partnership Services and Corporate includes the operating costs
for our Corporate offices, Partnership Services, transformation
programmes and certain pension operating costs. Corporate and
Partnership Services net operating costs, including the costs of
transformation programmes, were down year-on-year by GBP12.0m or
16.2%. However, overall costs increased by GBP9.7m to GBP65.3m due
to the increase in pension operating costs resulting from changes
in financial assumptions.
Partnership Services has grown significantly since 2009 with the
division now providing business services for IT, Financial
Processing, Procurement, Personnel, Partnership Health and Pensions
administration. The division has made significant progress in
improving the productivity of its most established operations, with
Financial Processing of invoices almost 30% more efficient than the
previous year.
In the year, the division has also delivered and supported a
number of key projects including the launch of a Partnership-wide
health service and the transfer in of Personnel policy and
administrative tasks, as well as the rollout of the Personnel
Transformation Programme (PTP). Following its completion in May
2014, PTP will provide our Partners with a consistent way of
working and our line managers with more efficient processes, and
will give us much deeper insight into Partner performance.
In 2014/15 Partnership Services will focus on stabilising the
new systems and services it has taken on - particularly in IT and
Personnel. New processes need to be bedded in to allow us to gain
the full benefits of the investments we have made.
Investment in the future
Capital investment in 2013/14 was GBP533.1m, an increase of
GBP156.2m (41.4%) on the previous year. This includes GBP55.8m on
freehold properties.
The majority of our spend continues to be in our store base,
either on new stores or the refurbishment of existing ones.
However, to enhance the agility and robustness of our systems and
infrastructure, we have also significantly increased our capital
investment in distribution and IT in the year.
Investment in Waitrose was GBP316.6m, up GBP118.4m (59.7%) on
the previous year, and in John Lewis investment was GBP174.8m, up
GBP30.5m (21.1%).
We expect the higher level of capital investment to continue in
2014/15, as our employee-owned model allows us to invest for the
long term.
Pensions
The Partnership has adopted 'IAS 19 revised' in the year, which
changes the way in which pension 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
GBP1.0m and an increase in finance costs of GBP67.3m. Profit before
tax therefore has decreased by GBP66.3m.
The pension operating cost before exceptional item was
GBP167.7m, an increase of GBP30.7m or 22.4% on the prior year,
reflecting changes to financial assumptions and growth in scheme
membership. Pension finance costs were GBP35.3m, an increase of
GBP6.2m or 21.3% on the restated prior year pension finance costs,
reflecting a higher accounting pension deficit at the beginning of
the year than at the beginning of the previous year. As a result,
total pension costs before exceptional item were GBP203.0m, an
increase of GBP36.9m or 22.2%. The exceptional item includes
GBP8.0m for an increase in future pension liabilities, resulting in
total pension costs of GBP211.0m.
The total accounting pension deficit at 25 January 2014 was
GBP1,003.4m, an increase of GBP181.3m (22.1%). Net of deferred tax,
the deficit was GBP820.3m. The accounting valuation of pension fund
liabilities increased by GBP422.2m (11.1%) to GBP4,218.2m, while
pension fund assets increased by GBP240.9m (8.1%) to GBP3,214.8m,
including an GBP85m one-off cash contribution made by the
Partnership in January 2014.
The triennial actuarial valuation of our non-contributory
defined benefit final salary scheme as at 31 March 2013 has
concluded with a deficit of GBP840m. We have agreed to increase the
ongoing contribution rate to 16.4% of members' gross taxable pay,
up from 12.2%, and put in place a plan to eliminate the deficit
over a 10 year period through the one-off contribution made in
January 2014 and annual deficit reduction contributions of GBP44m.
The balance of the deficit is expected to be met by investment
returns on the scheme's assets.
The pension is one of the most important benefits offered to
Partners, but also accounts for the greatest single investment made
each year by the Partnership. We are undertaking a review of the
pension scheme to ensure that it can remain fair to Partners and
sustainable from a business perspective. A draft proposal was
published earlier this year to move to a DB/DC hybrid scheme, where
future pension risk is shared between Partners and the Partnership.
Partners remain at the centre of the review as co-owners of the
business and have the opportunity to share their views. The
proposal will be further developed over the course of 2014, with a
decision expected to be agreed by Partnership Council and the
Partnership Board towards the end of the year.
Financing
Net finance costs on borrowings and investments decreased by
GBP1.2m (2.0%) to GBP58.8m. After including the financing elements
of pensions and long service leave and non-cash fair value
adjustments, net finance costs decreased by GBP15.6m (14.2%) to
GBP94.5m.
At 25 January 2014, net debt was GBP485.8m, an increase of
GBP113.9m (30.6%). In January 2014 we repaid a GBP100m bond from
available cash and agreed a new GBP150m short term bilateral
borrowing facility, which was undrawn at year end.
Sustainability
This year has seen us continue to lower the environmental impact
across our estate, in our products and in our supply chains. We
have also invested Partner time in community activities and in
encouraging customers to live more sustainable lives.
-- Our new Waitrose branch in Chipping Sodbury is 40% more
carbon efficient than the equivalent existing shop.
-- John Lewis launched a trial Energy Efficiency Service -
selling heating systems and insulation, solar panels and home
energy control devices - and we are participating in a trial with
the Department for Energy and Climate Change (DECC) to give
customers information on the lifetime electricity running costs of
laundry products.
-- We were highly praised by WWF in its 'Palm Oil Buyers
Scorecard' for our leading efforts in sourcing segregated
sustainable palm oil.
-- At John Lewis we are developing a sustainable fibre guide to
help buying Partners make more sustainable purchasing
decisions.
-- Partners continued to invest their time and skills in the
local community - through the continued work of the Golden Jubilee
Trust, and through the launch of dedicated programmes at Waitrose
and John Lewis that support local schools in the curriculum.
-- Through the 'Waitrose Way' commitments, Waitrose continued to
encourage customers to make small changes in the way they shop and
live.
We recognise that managing sustainability issues across our
complex and growing business is only going to become more
challenging and so, for 2014/15, we are adopting a pan-Partnership
process to update our views of the issues that are most material to
our business, allowing us to prioritise and then plan and invest
accordingly.
Further information
John Lewis Partnership
Andrew Moys, Director of Communications 07525 272377
Neil Spring, Senior Communications Manager 07890 777464
Citigate Dewe Rogerson
Simon Rigby / Jos Bieneman 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
40 John Lewis shops across the UK (30 department stores and 10 John
Lewis at home), johnlewis.com, 304 Waitrose shops, waitrose.com and
business to business contracts in the UK and abroad. The business
has annual gross sales of over GBP10bn. It is the UK's largest
example of worker co-ownership where all 91,000 staff are Partners
in the business.
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 250,000 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
You can follow John Lewis on the following social media
channels:
www.johnlewis.com/twitter
www.johnlewis.com/facebook
www.johnlewis.com/youtube.
Waitrose - Waitrose, Britain's favourite supermarket*, has 304
shops in the UK and Channel Islands and has consistently achieved
sales growth significantly ahead of the market**. Its strong
performance has been driven by the success of the essential
Waitrose range, Brand Price Match, the success of the myWaitrose
card and free delivery for online shopping, 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. (www.waitrose.com)
* Favourite Food & Grocery Retailer at Verdict's annual
Consumer Satisfaction Awards; Favourite Supermarket at Good
Housekeeping Awards
** Kantar Worldpanel
John Lewis Partnership plc
UNAUDITED RESULTS FOR THE 52 WEEKS TO 25 JANUARY 2014
2013/14 2012/13 Change
Restated1
GBPm GBPm %
GROSS SALES (including
VAT)
Waitrose 6,111.9 5,763.9 6.0
John Lewis 4,059.6 3,777.4 7.5
Gross sales 10,171.5 9,541.3 6.6
-------------------------------------------- ----------------- --------- ----------- -------
REVENUE
Waitrose 5,753.7 5,416.1 6.2
John Lewis 3,274.1 3,049.4 7.4
Revenue 9,027.8 8,465.5 6.6
------------------------------------------------------------- --------- ----------- -------
OPERATING PROFIT
Waitrose 310.1 292.3 6.1
John Lewis 226.1 216.7 4.3
------------------------------------------------------------- --------- ----------- -------
536.2
11 509.0 5.3
Partnership Services and
Corporate 2 (65.3) (55.6) (17.4)
Operating profit before exceptional
item 470.9 453.4 3.9
Exceptional item (47.3) - -
-------------------------------------------- ---- ---- --- --------- ----------- -------
Operating profit 423.6 453.4 (6.6)
Net finance costs (94.5) (110.1) 14.2
-------------------------------------------- ----------------- --------- ----------- -------
Profit before Partnership Bonus and
tax 329.1 343.3 (4.1)
Partnership Bonus (202.5) (210.8) 3.9
-------------------------------------------- ----------------- --------- -------
Profit before tax 126.6 132.5 (4.5)
-------------------------------------------- ----------------- --------- ----------- -------
Profit before Partnership Bonus,
tax and exceptional item 376.4 343.3 9.6
-------------------------------------------- ----------------- --------- ----------- -------
Notes
1. 2012/13 has been restated for IAS 19 revised, decreasing profit
before Partnership Bonus and tax by GBP66.3m.
2. Partnership Services and Corporate includes the operating costs
for our Corporate offices, Partnership Services, transformation programmes
and certain pension operating costs. Corporate and Partnership Services
net operating costs were down year-on-year by GBP12.0m or 16.2%. However,
overall costs increased by GBP9.7m or 17.4% due to the year-on-year
increase in pension operating costs resulting from changes in financial
assumptions.
3. This statement does not constitute a preliminary announcement.
These results are subject to audit. The Annual Report & Accounts for
2013/14 will be published in April 2014.
======================================================================================================
This information is provided by RNS
The company news service from the London Stock Exchange
END
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