RNS Number:4964P
Lewis(John) PLC
06 March 2008
Unaudited results for year to 26 January 2008
(This does not constitute a preliminary announcement)
Strict Stock Exchange Embargo, 9.30am
Thursday 6 March 2008
John Lewis Partnership plc
Results for the year ended 26 January 2008
"A successful year for the Partnership"
Group
* Group sales up �400.5m, 6.3%, to �6.8bn
* Operating profit (excluding property profits) up �58.6m, 17.1%, to
�402.0m; including property, operating profits up �55.8m, 15.7%, to �411.1m
* Profit before Partnership Bonus and tax up �59.7m, 18.7%, to �379.8m
* Partnership Bonus payment of �181.1m; up �27m (increase of 18%); 20% of
salary (equal to more than 10 weeks' pay)
* Return on Invested Capital of 8.5%
* Group sales for 5 weeks to 1 March up 6%
John Lewis
* Sales up �148.9m, 5.6%, to �2.8bn
* Operating profit (excluding property profits) up �20.3m, 12.0%, to
�189.9m; including property, operating profits up �12.0m, 6.7%, to �190.4m
* Like-for-like sales up 5.0%
* John Lewis Direct sales up �82.8m, 44.6% to �268.1m
* Market share up 0.5% to 19.3%
* Operating margin up 38 basis points to 6.8% (excluding property
profits)
Waitrose
* Sales up �251.6m, 6.8% to just under �4.0bn
* Operating profit (excluding property profits) up �38.3m, 22.0%, to
�212.1m; including property, operating profits up �43.8m, 24.8%, to �220.7m
* Like-for-like growth of 3.6% (excluding petrol)
* Market share level at 3.9%
* Operating margin up 67 basis points to 5.4% (excluding property
profits)
Charlie Mayfield, Chairman of John Lewis Partnership, commented:
"The Partnership has had a successful year in a challenging trading environment.
The key to our success is the commitment of our Partners who consistently
deliver the customer service and professionalism that underpins our reputation
for value, choice, quality and honesty.
While we expect trading conditions to continue to be challenging in the year
ahead, we are confident that the diversity of our business and our Partnership
model makes us resilient and able to perform well even in the most testing
market conditions. We are committed to the growth plans for our business and I
am confident that we can deliver our long term plans."
A successful year for the Partnership
The Partnership has had another successful year. Sales from continuing
operations were up 6.3% to �6.8bn. The Group's profit before tax and Partnership
Bonus increased by 18.7% to �379.8m. Profit as a percentage of sales increased
from 5.0% to 5.6%.
It is the enterprise, experience and professionalism of our 69,000 Partners, who
own the business, that lies behind this success. It is their motivation and
efforts to improve what we do every day that inspires customers' confidence in
our reputation for value, choice, service and honesty. Today Partners reap the
benefit of their year's work, with every Partner receiving a Partnership Bonus
worth 20% of salary, the equivalent of 10 weeks' pay. That amounts to a total
distribution of �181.1m.
Both Waitrose and John Lewis performed strongly, growing overall market share
and strengthening our position in key product categories. We offered more
innovative and inspiring products, invested in building Partners' skills and
improved the service experience for customers. Growth was also achieved by
investing in new and refurbished shops, strengthening our online presence,
increasing capacity and automation in distribution and building awareness of the
John Lewis and Waitrose brands among customers.
Our ambition is to win and sustain our reputation with customers for
well-differentiated products and service excellence. Our standing was boosted by
Waitrose and John Lewis being awarded the top two places, for the third year in
a row, in the independent Verdict and Which? consumer satisfaction surveys.
Looking to the future, we are planning to grow our businesses and reach more
customers. Our investment will be in new shops, in the development of our online
business and in the systems and infrastructure needed to support a larger
business. We expect the number of Partners in the business to increase by 16,000
to 85,000 over the next five years to support our growth.
The Partnership was pleased to note that following its groceries market
investigation, the Competition Commission is considering the introduction of a
competition test in planning decisions. We will continue to consult with the
Competition Commission as it develops the test which could help to increase
choice in the future for customers.
As we grow, sustainability will continue to be at the forefront of our agenda.
We already source all our electricity requirements from sustainable supplies and
are investing �55m over five years in our supermarkets to increase our
efficiency, as well as investing in an energy reduction programme in our
department stores. New shops are around 20% more efficient than those
constructed five years ago and they are now all built in line with our
Sustainable Construction Framework.
For our Partners, in 2007 we invested more than �140m in our final salary
non-contributory pension scheme and other benefits. We are hoping to be able to
announce the purchase of a new holiday centre for Partners soon. During 2007,
there were 40,000 visits by Partners and their dependents to our existing four
leisure centres. We are also planning to invest up to �1m a year between this
autumn and 2012 in Partners in Sport, a wide-ranging programme to enable
Partners to play sport, gain sports coaching qualifications and live healthier
lifestyles.
John Lewis
John Lewis sales grew 5.6% (5.0% like-for-like), to �2.8bn. Operating profit
grew by 12.0% to �189.9m, after its share of corporate costs and pensions, but
excluding property profits of �0.5m (last year: �8.8m). Operating profit margin
improved by 38 basis points, while branch costs were well maintained. Including
property gains, operating profit increased by 6.7% to �190.4m.
Sales growth exceeded the market and we increased market share of the department
store sector by 0.5% to 19.3%, continuing our 6 year trend. Growth came from
across the business and was well balanced across all three product categories,
with Electrical and Home Technology up 6.0%, Home up 5.5% and Fashion up 4.6%.
John Lewis topped the rankings in all the categories in which we compete,
including Fashion, Electrical and Home, in both independent surveys from Verdict
and Which?
John Lewis Direct again grew strongly, with sales up 44.6%, well ahead of the
fast growing on-line market. John Lewis Cambridge opened successfully in early
November, with sales exceeding expectations, recording an 80% increase in
December and January versus Robert Sayle, our temporary shop in Cambridge. The
major refurbishment of John Lewis Oxford Street was completed in October with
the opening of the new foodhall in conjunction with Waitrose. Sales have grown
strongly and are maintaining that momentum. Other branches that performed
particularly well included our three shops in Scotland - Edinburgh, Glasgow and
Aberdeen - while Kingston, Southampton and Knight & Lee in Southsea led the way
in the South.
Sales growth slowed in the second half of the year against tougher economic
conditions, dropping back to 5.2% in the second half year compared with 6.1% in
the first half.
There were strong performances in many areas, particularly furniture, kitchens,
men's and women's fashions and beauty. Sales of John Lewis branded merchandise
reached over 30% of the total for the first time, with strong contributions from
both Home and Fashion. We continue to improve our offer, rolling out new formats
in menswear, cookshop, and lighting while selectively investing in beauty and
catering. We also focused on improving shop floor service, availability, call
centres and enhancing our delivery service.
The sale to Apex Textiles Limited of our manufacturing operations, Stead McAlpin
& J H Birtwistle, resulted in a �9.4m charge for discontinued operations to
pre-tax profits.
Waitrose
Waitrose sales grew 6.8% (3.6% like-for-like, excluding petrol) to just under
�4.0bn. Operating profit grew by 22.0% to �212.1m, after its share of corporate
costs and pensions, but excluding property profits of �8.6m (last year: �3.1m).
Including property gains, operating profit increased by 24.8% to �220.7m.
Waitrose sales have grown by 47% in four years with our market share increasing
each year to our current level of 3.9%. Our share of the UK organics market
stands at over 18%, while our market share for Fairtrade items is 8.6%, with an
associated increase in sales in this area of 16.3% year on year, significantly
in excess of growth in the overall Fairtrade market.
Product quality is key to our success. Waitrose products won 13 out of the 18 Q
Industry Awards, where products are 'blind tasted'. Another notable success was
our own-label champagne, which was one of only two products to achieve a top
five star rating in a taste test of 146 labels by Decanter Magazine, eclipsing
many illustrious brands. Our animal welfare credentials were recognised by the
RSPCA with the title of Supermarket of the Year in the RSPCA Good Business
Awards.
Our achievements in product quality are directly related to our long-term
relationships with farmers and suppliers and our commitment to support British
Farming. In the face of challenges like foot-and-mouth disease and bluetongue,
our supply chain was robust with excellent availability. Our dairy farmers were
able to invest in their business at a rate that was double the national average,
while new base level payments, offering a minimum payment for beef and lamb
producers, protected our farmers against market volatility.
Distinctive service also played a key part in driving sales. We increased the
number of specialists in meat, fish and wine in our shops to over 800, with a
further 190 in training. This success was confirmed by Waitrose being ranked as
customers' favourite grocer by both Which? and Verdict independent surveys.
Further expansion has taken place this last year with acquisitions at Harborne
and Christchurch, and the opening of new shops in Cheadle Hulme, Rickmansworth,
and two relocations, in Windsor and from Birch Hill to Sandhurst, both
increasing our selling space.
We have also redesigned our Marylebone and John Barnes (Finchley Road) shops
with an improved layout and product range to better meet the needs of London
shoppers. Waitrose.com, our online presence, has been refreshed and relaunched.
Despite this rapid pace of development, we have continued to invest in price. In
spite of this investment, operating profit before property gains increased
significantly by 22.0%, or �38.3m, compared with 2006/07.
Greenbee
Our Greenbee operation shows encouraging growth, with clear evidence of its
potential to create scale in key areas, such as home insurance where our renewal
rates have been very strong.
Ocado
Ocado continued to grow its sales and develop its business during the year.
Including sales through Ocado, we believe that Waitrose's share of the online
grocery market is approaching 20%. Our shareholding in Ocado is 24.1%. There is
no impact from this shareholding on the Partnership's profits. The book profit
from Ocado's successful fundraising early in the year is entirely offset by our
share of Ocado's trading losses, which were �7.1m for this year and �0.9m
brought forward from last year.
Capital expenditure
Capital spending in 2007-08 was �364m, compared with �393m in the previous year
when Waitrose made store acquisitions from Morrisons. John Lewis substantially
increased its capital investment with expenditure on Oxford Street, including
the new foodhall and the relocation of our Cambridge store. Capital was also
committed to the relocation of our shop in Liverpool and to our new shop in
Leicester, which will open in May and September 2008 respectively, and to
distribution centres at Magna Park (John Lewis) and Aylesford (Waitrose). Our
gearing ratio increased slightly to 21.2% with year-end net debt increasing by
�47m. This was due to a �72m prepayment of a major part of the 2008-09 pension
contribution just before the year end. Excluding this payment, the Partnership
generated almost �620m in operating cash flow for the year and gearing would
have fallen to 16.9%. Interest cover improved from 5.7 to 7.3.
Partnership Benefits
The Partnership Bonus announced today amounts to a distribution of �181m. Taken
together with the pension charge of �83m and other benefits of �60m, that
amounts to over �320m returned to Partners.
Our BonusSave scheme, which was introduced last year, attracted a good take-up
from Partners and this option will be available again this year, allowing
Partners to invest some of their bonus in a tax-efficient manner.
Outlook
There was a general slowdown in the housing market in the second half of the
year, which depressed sales of large purchases in the home market and this trend
has continued into the new financial year. Sales for the first five weeks of the
year to 1 March are up 2% in John Lewis while at Waitrose, which tends to be
less affected by a downturn in consumer confidence, sales are up 8%.
We expect trading conditions to be very challenging this year as consumers
continue to respond to concerns about the housing market, higher food and energy
costs and tighter credit conditions.
However, we believe that the diversity of our business across the home and
grocery sectors and the benefits of our Partnership model make us resilient and
able to perform well even in testing market conditions. We have the confidence
to pursue our ambitious growth and investment plans for the long term.
-ends-
For further information:
John Lewis Partnership
Susan Donovan, Director of Communications 020 7592 6292
Citigate Dewe Rogerson
Simon Rigby / George Cazenove 020 7638 9571
John Lewis
Helen Dickinson, Head of Press and PR 020 7592 6274
Louise Thomson, Press and Public Relations Manager, Corporate 020 7592 6223
Waitrose
Dara Grogan, Head of Communications 07764 676351
Gill Smith, Senior PR Manager, Corporate 07887 898133
Notes to editors
The John Lewis Partnership - The John Lewis Partnership operates 26 department
stores across the UK, John Lewis Direct - a website and catalogue business, 187
Waitrose supermarkets and Greenbee.com, a direct services company. The business
has an annual turnover of over �6.8bn. It is the UK's largest example of worker
co-ownership where all 69,000 staff are Partners in the business. (
www.johnlewispartnership.co.uk)
John Lewis - John Lewis, 'Britain's favourite retailer 2007'* typically stocks
more than 350,000 separate lines. The website stocks more than 30,000 lines
focused on the best of home and giftware and is consistently ranked one of the
top online shopping destinations in the UK. (www.johnlewis.com)
Waitrose - Waitrose, named 'Britain's favourite supermarket'* combines the
convenience of a supermarket with the expertise and service of a specialist
shop. It offers fresh and frozen foods, wines and groceries as well as
delicatessen, cheese, fresh fish, meat, patisserie and hot-food counters.
Waitrose is dedicated to offering quality food that has been responsibly sourced
combined with high standards of customer service. (www.waitrose.com)
Greenbee.com - Greenbee.com offers a range of financial, travel and leisure
services selected by the John Lewis Partnership. Specialist home and pet
insurance, life cover and a phone and broadband package have recently been added
to the home, travel and wedding and event insurance products. Other services
include travel packages, event tickets, and an online art and antiques
directory. (www.greenbee.com)
* Verdict consumer satisfaction index, January 2008.
John Lewis Partnership plc
UNAUDITED RESULTS FOR THE YEAR TO 26 JANUARY 2008
2007/08 2006/07 Change
�m �m %
---- ---- --- ---
CONTINUING OPERATIONS
--- --- --- ---
--- --- --- ---
SALES
John Lewis 2,812.7 2,663.8 5.6
Waitrose 3,950.1 3,698.5 6.8
---------------------- ------ ------ --- ------- -------- -------
Total Gross Sales 6,762.8 6,362.3 6.3
Adjustment for sale or return (103.0) (100.7)
sales
Value added tax (637.4) (575.4)
------------- ----------- ------ ------ --- ------- -------- -------
Revenue 6,022.4 5,686.2 5.9
------------- ----------- ------ ------ --- ------- -------- -------
OPERATING PROFITS
John Lewis 190.4 178.4 6.7
Waitrose 220.7 176.9 24.8
------------- ----------- ------ ------ --- ------- -------- -------
Operating profit 411.1 355.3 15.7
Net finance costs (31.3) (35.2) 11.1
Associate company (Ocado) - -
-------------------------- ------ --- ------- -------- -------
Profit before Partnership bonus and 379.8 320.1 18.7
tax
Partnership bonus (181.1) (154.1) (17.5)
---------------------- ------ ------ --- ------- -------- -------
Profit before tax 198.7 166.0 19.7
---------------------- ------ ------ --- ------- -------- -------
Notes
1. In addition, there is a loss from discontinued operations of �9.4m (2006/07: loss
�2.0m) before tax. This will be disclosed in the Annual Report and Accounts. The 2006
/07 comparative figures have been restated as shown below:
Discontinued
As published operations As restated
Operating �m �m �m
profits
John Lewis 177.4 (1.0) 178.4
Waitrose 176.9 0.0 176.9
------- -------- --- -------
Operating 354.3 (1.0) 355.3
profits
Net finance (35.1) 0.1 (35.2)
costs ------- -------- --- -------
Profit before 319.2 (0.9) 320.1
Partnership bonus and
tax
Partnership (155.2) (1.1) (154.1)
bonus ------- -------- --- -------
Profit before 164.0 (2.0) 166.0
tax ------- -------- --- -------
2. Property gains are included in the operating profits shown above and are as
follows:
Property Operating profit % change
gains excluding property -------
---------- gains
--------------
2007/08 2006/07 2007/08 2006/07
�m �m �m �m
John Lewis 0.5 8.8 189.9 169.6 12.0%
Waitrose 8.6 3.1 212.1 173.8 22.0%
------ ------ ------- -------- -------
9.1 11.9 402.0 343.4 17.1%
------ ------ ------- -------- -------
3. This statement does not constitute a preliminary announcement. These results are
subject to audit. The Annual Report and Accounts for 2007/08 will be published in
April.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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