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Shaping the
FUTURE
The next phase of M&S’ transformation
STRONGER TEAM, STRONGER BUSINESS,
STRONGER BALANCE SHEET
Marks and Spencer Group plc
Annual Report & Financial Statements 2022
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AT A GLANCE
M&S IS A LEADING
BRITISH RETAILER,
WITH A UNIQUE
HERITAGE AND STRONG
BRAND VALUES.
We operate as a family of businesses, selling high-quality,
great-value, own-brand products and services, alongside
a carefully selected range of third-party brands.
We do this through a network of 1,487 stores and
98 websites globally, and together, across our stores,
support centres, warehouses and supply chain, our 65,000
colleagues serve over 30 million customers each year.
FOOD
p10
CLOTHING
& HOME
p16
Marks and Spencer Group plc
INTERNATIONAL
p24
PEOPLE
& CULTURE
p26
Cover
Inside M&S Stevenage,
a strong example of
how we’re modernising
our store estate to be
fit for the future.
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Group overview
Group revenue
Group profit before tax
Percentage of UK Clothing
& Home sales online
£10.9bn
(19/20: +6.9%)
£391.7m
(19/20: +482.9%)
34%
(19/20: 23%)
Basic earnings per share
APM Group profit before tax and
Group: Net promoter score1
adjusting items
15.7p
(19/20: 1.3p)
£522.9m
(19/20: +29.7%)
+29
(new metric)
No dividend paid for 21/22
APM Net debt excluding
lease liabilities
Digital: Net promoter score1
£420m (19/20: -71.2%)
+5
(new metric)
APM
Alternative performance measures
The report provides alternative
performance measures (“APMs”) which
are not defined or specified under the
requirements of UK-adopted International
Accounting Standards. We believe these
APMs provide readers with important
additional information on our business.
We have included a glossary on
pages 192 to 197 which provides a
comprehensive list of the APMs that
we use, including an explanation of how
they are calculated, why we use them
and how they can be reconciled to a
statutory measure where relevant.
APM Adjusted earnings
per share
Stores: Net promoter score1
21.7p
(19/20: +29.9%)
+81
(20/21: 81)
Year-on-year comparison
The impact of Covid-19 in 2020/21 renders comparisons to the prior year less meaningful.
To aid understanding, throughout this document we are showing the 52 weeks to
28 March 2020 as the comparative period, unless stated otherwise.
Net promoter score
This year we launched a new Voice of the Customer programme, including Net Promoter
Scores (NPS), which established a new measurement framework. This includes several new
measures, including a M&S Group NPS metric, which for the first time provides a total view
of our customers and a new Digital NPS metric, which tracks customer sentiment across
M&S.com and our app. We will continue to benchmark our performance against the new
framework in future reports.
Strategic report
Governance
Financial statements
02 Chairman’s letter
05 Chief Executive’s statement
07 The next phase of transformation
09 Business model
26 People & culture
30 Sustainability
Non-financial
31
information statement
32 Engagement & decision-making
35 Key performance indicators
36 Financial review
45 Risk management
47 Principal risks and uncertainties
All references to sales, a new APM, throughout this
document are statutory revenue plus the gross value
of consignment sales excluding VAT.
56 Chairman’s governance overview
58 Leadership and oversight
Board composition and
59
meeting attendance
60 Our Board
63 Board activities
65 Board review
66 Nomination Committee report
70 ESG Committee report
78 Audit Committee report
85 Remuneration overview
89 Remuneration in context
91 Summary of Remuneration Policy
95 Remuneration report
108 Other disclosures
113
Independent auditor’s report
124 Consolidated financial statements
130 Notes to the financial statements
183 Company financial statements
185 Notes to the Company
financial statements
190 Group financial record
192 Glossary
198 Notice of Annual
General Meeting
210 Shareholder information1
212
Index
1. Shareholder information forms part of the
Directors’ Report.
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Annual Report & Financial Statements 2022
01
STRATEGIC REPORT
CHAIRMAN’S LETTER
‘‘
WE HAVE A VERY DYNAMIC NEW
LEADERSHIP TEAM TAKING OVER FROM
STEVE ROWE, OUR LONGSTANDING
CHIEF EXECUTIVE. THEIR MANDATE IS
NOW TO RESHAPE M&S AS A GROWTH
BUSINESS CAPABLE OF EXPLOITING
THE POWER OF OUR GLOBAL BRAND.
Archie Norman, Chairman
’’
new regulatory pressures notably on
food content and store layout. In the
next eight months we expect the
strongest reduction in consumer
real income for decades.
The test of the quality of a business is not
whether it encounters storms, but how
resilient it is to ride them out. Of course,
a dramatic reduction in real income will
impact our profits. But with the changes
we have made, M&S is in much stronger
shape and we start from a rising trend
in sales. We have moved to a faster,
less hierarchical, more commercial
organisation and culture. We are more
digital and geared to an omni-channel
future, with Clothing & Home online sales
penetration double that at the outset of
our transformation and the Ocado joint
venture well positioned for growth.
Dear shareholder,
Marks and Spencer ends the 2022 financial
year at an inflection point in its history.
Not only have we emerged from the
pandemic a stronger business, but we are
also at the end of the “fixing the basics”
phase of our transformation. And we
have a very dynamic new leadership
team taking over from Steve Rowe,
our longstanding Chief Executive.
Their mandate is now to reshape M&S
as a growth business capable of exploiting
the power of our global brand.
I want to be clear that on doing so we are
not declaring victory. Whilst we can now
see more than glimpses of the potential
in both Clothing & Home and Food,
there are many aspects of both main
businesses that require improvement,
but the strategy is now clear, and
our results this year have exceeded
most expectations. Steve Rowe, in his
remarkable tenure as Chief Executive
grasped many of the nettles and
addressed the underlying drift of previous
decades. The change in leadership is
not likely to herald a change of direction
but rather a significant acceleration
and a bolder approach to investment
and growth.
However, with M&S, life is never plain
sailing. On top of the transformation
programme, the last four years have seen
the businesses buffeted by a series of
external shocks, Brexit, the pandemic,
and the invasion of Ukraine. We live in
an era of hyper-active government
and expect increases in tax on profits
and employment this year, alongside
Look Behind the Label
As part of our Plan A reset in
September, we relaunched the
iconic Look Behind the Label
campaign, inviting customers to
find out more about the action
M&S is taking to do right by
the planet.
Alongside this, customers were
encouraged to visit our new hub
through social channels, where
we set out everyday actions
customers can take to help
reduce their carbon footprint.
02
Marks and Spencer Group plc
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Our international franchises are in good
shape and we are rapidly growing our
“global” online business. Both our main UK
businesses have achieved market share
growth in recent months and are well
placed on value.
We have strong new store formats
and a good pipeline of store relocations
and rebuilds. Our balance sheet is
commercially stronger than at any
recent time.
So, our approach to the likely consumer
recession will be unwavering. Our ambition
is to become a growth business. M&S was
founded in 1884 and we are striving to
build a great business for the next
100 years. We expect to increase our
investment in digital, technology and
the store estate in the year ahead.
For that reason and because of the
macroeconomic uncertainty, we are
reserving our position on future dividend
payments. There will come a time
to review the return of capital for
shareholders, but it is not now.
I believe that the role of the Board in a
transformation is not just to oversee good
governance. It is to be the guardian of the
strategy and values of the business, and
the debating partner of the executive, and
to be available to provide impartial advice
to accelerate the transformation.
A good Board is an engaged Board.
In the last year with the pandemic, the
succession of leadership and other
issues, we have had a stable team, robust
discussion and great engagement.
This year, Andy Halford, who has
now served nine years, will hand over
Chairmanship of the Audit Committee
to Evelyn Bourke and we expect to
appoint a successor to his role as
Senior Independent Director (SID).
Most importantly, Steve Rowe is leaving
us after spending almost all his career
at M&S, starting on the shop floor and
rising to Chief Executive, leading the
business through the last six years.
He has been heart and soul M&S and
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goes with the thanks and affection of
everyone in the business. He has helped
us plan the succession to Stuart Machin as
Chief Executive and Katie Bickerstaffe as
Co-Chief Executive alongside Eoin Tonge
as Group CFO & Chief Strategy Officer.
They represent a very strong and
balanced team with the experience
and energy to drive the next phase of
change – “shaping the future”.
Finally, M&S is a unique employee brand
and the principles of equal respect,
engagement and care of our colleagues
run deep in our history. This year has been
a testing one for everyone. Next year will
be different but also challenging. We are
deeply grateful to all our colleagues for
their commitment, loyalty and hard work.
Archie Norman Chairman
Forward
THINKING
1,000+
Number of colleagues upskilled
through our data academies
Boosting our digital
& data skills
To consistently deliver great products
and services to our customers,
we need to be forward thinking
and data driven.
Having the right skills, capabilities and culture
across the business to harness the insights we
generate isn’t just a nice-to-have – it’s a necessity
for our transformation. Which is why we’ve been
investing in the skills of our teams, with over 1,000
colleagues from across the business having been
upskilled through our data skills pathway, which
we launched in 2018 with retail’s first ever data
academy in partnership with Decoded. Today
we have four separate streams, including our
most recently launched L7 Data Science & AI
apprenticeship, all equipping our teams with the
tools and skills they need to stay one step ahead
of our customers. We want to establish our
reputation as a data led organisation – and these
programmes are a big part of how we’re doing that.
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Annual Report & Financial Statements 2022
03
STRATEGIC REPORT
COMPLETION OF THE FIRST PHASE
OF TRANSFORMATION
Four years ago, in a presentation entitled “Facing the Facts”, we set out why change was needed at
M&S to arrest decline. Our results this year demonstrate the extent of change delivered.
Fixing the basics
Food
M&S Food is now the top-performing
UK food business in the sector based
on like-for-like sales over 12 months,
driven by record quality and improved
value perception.
Brand appeal
Our brand perception was
weakening, and customers
questioned the relevance
of M&S, but our efforts
to broaden the appeal of
our ranges has resulted in
improvements on almost
all customer metrics.
MS15958~182446_FOO_1000x1500.indd 1
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14/12/2021 07:54
Simplified our
clothing range by
c.20%
Clothing & Home
Customers told us clothing had become confusing to shop
and growing option counts were leading to lower rates of sale.
Options have now been reduced by 20%, and we’ve backed
our bestselling lines and improved style credentials to deliver
growth in key categories.
Taking M&S
Food online
Four years ago, M&S Food had no online
capability, but our 50% investment in
Ocado Retail in 2019 has taken our full
food range online for the first time.
Growing M&S.com
We have nearly doubled our Clothing &
Home online penetration from 18% to
34% and driven a focus on M&S app
downloads to reach 4m users.
The nascent ‘Brands at
M&S’ offer has been
established, giving
customers more reasons
to visit M&S.com.
Faster online fulfilment
Castle Donington struggled
to cope with demand and
fulfilment speeds lagged
the market, but outputs
have now doubled and
delivery service and speeds
are competitive again.
Digital-first
loyalty
In 2020 Sparks relaunched
as a digital-first loyalty
scheme – and has doubled
customer numbers in less
than two years to over
15 million members.
Tackling our legacy
store estate
Our legacy store base was ageing, with no
track record of closures or adaptation to how
our customers want to shop today. We now
have a programme of store rotation underway
to create a store estate fit for the future.
Trusted
value
In 2018, c.30% of Food
and c.35% of Clothing &
Home stock was sold at
discount, eroding
customer trust. Today,
this has reduced to
c.15% and c.18%
respectively, rebuilding
belief that the first price
is the right price.
A family of
accountable
businesses
The slow and hierarchal
corporate structure has
been restructured into a
family of accountable
businesses, with leaders
who are close to the
front line and make
decisions based on
insight and data.
Store renewals
40
Sparks
customers
15m
#1
Nonetheless, there
remains much to do as
we embark on our new
“shaping the future” stage,
and three important
infrastructure challenges
remain which can still
impact the pace of
change and recovery:
#2
#3
Although we have materially
changed our digital footprint, some
of our core technology systems
need investment. Most notably in
Clothing & Home, where range
planning and supply chain tracking
can be significantly improved to
drive more efficient trading.
Our supply chains require further
investment, with the opportunity
in Clothing & Home to reduce
single picking, improve capacity,
reduce costs and improve store
operations as a result. In Food we
need improved operations with
Gist and to invest in and reshape
the network.
The full-line store estate remains
aged compared to competition, and
there is much still to do. Clothing &
Home store sales are running more
than 25% below four years ago, yet we
have had less than a 10% reduction in
space since then. The imperative to
reduce space and rotate to newer
better stores remains.
04
Marks and Spencer Group plc
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CHIEF EXECUTIVE’S STATEMENT
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STRONG PERFORMANCE DELIVERED
BY A MORE RESILIENT M&S
A strong all-round performance combined
with the benefits of the transformation
delivered an encouraging performance
across M&S. Profit before tax and adjusting
items for the period was £522.9m (2019/20:
£403.1m). Statutory profit before tax was
£391.7m (2019/20: £67.2m). The recovery of
profit combined with a focus on working
capital and tightly controlled capital
expenditure generated substantial free
cash flow and a sharp reduction in
net debt. Results included £59.8m of
UK business rates relief and a net rates
charge of £139.7m in the period.
M&S Food now a high-performing
business with market share growth
M&S Food delivered sales growth of 10.1%.
Combined with an improving margin mix
in H2 and the benefits of the “lowering
cost” programme, this supported a strong
increase in operating profit before
adjusting items. We were encouraged
by the core sales performance and the
resilience of larger basket sizes, even as
we saw a gradual recovery in the franchise
travel and hospitality businesses in H2.
Value and quality perception indicators
are robust. The strength of performance
in new channels (Ocado and Costa Coffee)
reinforces our belief in the long-term
potential to grow the business.
’’
‘‘
WHAT IS IMPORTANT ABOUT THESE
RESULTS IS NOT JUST THE RESTORATION
OF PROFIT AND STRONG CASH FLOW,
IT IS THAT THEY DEMONSTRATE M&S
HAS FUNDAMENTALLY CHANGED.
Steve Rowe, Chief Executive
Ocado Retail transitioning to
strong capacity growth post
pandemic reversion
As expected, Ocado Retail saw a
normalisation of basket sizes and the
shape of trade, resulting in a 4% decline
in revenue and a reduced contribution
to Group results after exceptional costs
including the Erith fire. At the same time,
we are investing in new capacity despite
the backdrop of well-understood industry
cost pressures, demonstrating our
confidence in Ocado Retail. This has the
potential to grow the business by over
50% when fully ramped up. With the
M&S brand consistently over 25% of the
average Ocado basket, we believe there is
substantial further synergy potential for
the two businesses to exploit.
Clothing & Home on track for a more
profitable model capable of growth
Clothing & Home delivered 3.8% sales
growth, driven by online sales. We shifted
to trusted value, reducing option count by
c.20% over three years, which resulted in
good growth in core categories and a
reduction of stock into sale. Operating
profit before adjusting items grew
strongly, reflecting the improved full-price
mix. MS2 made multiple improvements
to the online offer and service, with
around 11% of orders fulfilled from store.
We have successfully grown the Sparks
programme to 15m members and app
users to over 4m, and have begun to
personalise customer experience. The
nascent brands platform now has around
40 clothing brand partnerships, own or
invested brands.
Ukraine response: Thank you to
our customers and colleagues
From the outset of the invasion, our priority was to act with pace and provide
meaningful support to the people of Ukraine. We moved quickly to get behind UNICEF
UK’s Ukraine Appeal with a corporate donation and pledged to double donations from
customers who selected UNICEF UK as their Sparks charity. However, in response to
the escalating humanitarian crisis, we announced a further £1.5m support package;
including a kickstart donation of £500,000 to UNHCR, the UN Refugee Agency,
and 12,000 items of winter clothing – to be distributed to those in need.
We made it possible for colleagues and customers to
show their support too, activating giving at till-points
and on M&S.com, allocating £500,000 to match
colleague fundraising and doubling Sparks donations
on an ongoing basis. Across the entire M&S Family,
the response has been incredible with £1.7m donated
by customers, made possible through till-point and
M&S.com donations for UNICEF UK on an ongoing
basis, as well as over £115k raised through colleague
fundraising events across stores and support centres.
Annual Report & Financial Statements 2022
05
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STRATEGIC REPORT
CHIEF EXECUTIVE’S STATEMENT
CONTINUED
Building store rotation pipeline driving
exit from legacy stores
We are now developing a growing pipeline
of store relocations, moving to modern
well-located sites, in the renewal format
with omni-channel capability. We aim to
fund the exit costs of the legacy estate
through an increasingly active asset
management and disposal programme.
We have a pipeline of c.15 new full-line
stores over the next three years and
c.40 new Food stores, many in the larger
renewal format with click-and-collect
services for Clothing & Home. The 10 new
stores opened last year traded 11% ahead
of sales plan and are on track to generate
a payback of the net capital invested in
just 1.5 years. New store performance
gives us encouragement wherever
possible to accelerate rotation.
International absorbing Brexit-related
costs, but emerging global
strategy encouraging
The International business, together with
our partners, generated 4% retail sales
growth. This included a solid performance
in the Middle East and online retail
sales more than doubling to over £250m
through growth in markets with a store
presence and global platforms. Operating
profit before adjusting items reflected the
combined effects of EU border costs and
tariffs of £29.6m and an estimated trading
impact in the region of £15m. While we
have provided for the £31m cost of fully
exiting Russia and business disruption
in Ukraine, and will incur a loss of
contribution, we are also exploring
multiple opportunities for further growth,
including through the Reliance joint
venture in India.
Extending and expressing our
sustainability lead
During the year we reset Plan A with a
singular focus on cutting our carbon
footprint by one third by 2025 and
becoming a fully net zero business by
2040. As an own-brand retailer, M&S is very
well positioned to work with its supplier
partners to find better ways of doing
things. We developed a multi-stakeholder
plan spanning customers, colleagues and
suppliers to deliver on this target. We also
agreed a new £850m revolving credit
facility linked to the delivery of the net
zero roadmap.
A stronger M&S
When I took over the reins at M&S six years
ago, I committed to tackle the underlying
issues that had eroded the strength of
the business and build the foundations for
future growth. For me, what is important
about these results is not just the
restoration of profit and strong cash flow;
it is that they demonstrate that M&S has
fundamentally changed. While there is
much more to do, the business has moved
beyond proving its relevance and has the
opportunity for substantial future growth.
It has been my privilege to be the steward
and shopkeeper of this fantastic business
and extraordinary brand at such an
important stage in its history. The changes
we have delivered are down to the
commitment and hard work of colleagues
across the business and I am delighted to
hand the baton on to Stuart, Katie and
Eoin to lead the next phase.
Steve Rowe Chief Executive
Read about our strategic priorities in the following chapters
M&S FOOD
high-performing
business and
market share
growth
OCADO
transitioning to
strong capacity
growth post
pandemic reversion
CLOTHING &
HOME on track for
a more profitable
model capable
of growth
p10
p15
p16
Building STORE
ROTATION pipeline,
driving exit from
legacy stores
p22
INTERNATIONAL
absorbing Brexit
related costs,
but embryonic
global strategy
encouraging
p24
06
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THE NEXT PHASE OF
TRANSFORMATION
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As we enter the next phase of the
transformation, we maintain our ambition
to create a business capable of
sustainable growth in sales, market share
and profit. With improved profitability
and cash conversion, and financial net
debt under a third of 2019/20 levels, the
business is resilient to the macroeconomic
headwinds while having flexibility to invest
in our transformation priorities.
MACROECONOMIC HEADWINDS
IMPACT ON PERFORMANCE
AND EXPECTATIONS
There is substantial inflation in both
cost of goods sold and operating costs
including fuel, power, building materials
and maintenance. Food cost inflation is
being driven not just by global supply
issues but also labour shortages, border-
and customs-related costs, and in some
cases reduction in UK capacity by growers
and producers. In Clothing & Home,
factory cost prices, transport and
freight costs, combined with continued
supply issues in China, are driving
similar pressures.
Consequently, customers’ spending
capacity is under pressure. We expect
these pressures to increase as the year
progresses. We are therefore planning
for an adverse impact on volumes due
to price inflation, slowing the rate of
sales growth.
LATEST UPDATE AND GUIDANCE
FOR 2022/23
Overall trading in the first six weeks of
the financial year has been ahead of the
comparable periods in 2021/22, including
the period from April 12, 2021 when
non-essential retail reopened, with a
particularly strong performance in
Clothing & Home and growth in the total
Food business continuing to outperform
the overall market.
While encouraging, we expect the impact
of declining real incomes to sharpen in
the second half and endure for at least
the remainder of the financial year. There
is no current sign of inflation abating,
although we believe the rate of cost
growth will subside by the third quarter.
However, we believe that our market
positioning and business strategy will help
us mitigate the effects as:
– Our stronger value perception in both
businesses will provide protection from
customer downtrading;
– Our large share in ‘for tonight’ shopping
in Food provides resilience compared
with the core grocery market;
– As travel, leisure events and weddings
return, we expect to see a revival of the
demand that receded in the past couple
of years;
– Some of our customers, while not
immune to the pressure, have a degree
of cushion from the higher savings ratio
recorded during the pandemic;
– The experience of the past two years
has illustrated the earnings balance
provided by both Food and Clothing &
Home and trading through stores,
online and international channels.
In addition, we are taking specific steps to
support performance in this environment
and offset inflation. In Clothing & Home
we are taking a more flexible approach to
trading and currently retain a substantial
proportion of open to buy for H2. We are
also starting to develop the strategic
supplier programme. We expect further
benefits from the ‘lowering cost’
programme in Food and are continuing
to drive digital-led efficiencies in
stores and simplify ways of working
in support centres.
This year the business will not receive
business rates relief and International will
not have the profit contribution from
Russia. As we invest in capacity growth
at Ocado Retail, we anticipate a minimal
contribution of share of net income to
group results. Consequently, we start
2022/23 from a lower adjusted profit
base. The business is now much better
positioned and had an encouraging start
to the year. However, given the increasing
cost pressures and consumer uncertainty,
we do not currently expect to progress
from this lower profit base in 2022/23.
INCREASING THE PACE OF CHANGE
AND INVESTING IN GROWTH
Despite the near-term challenges, the
business is better set up both financially
and operationally for the medium-term.
The combined opportunities to both
improve the infrastructure and invest in
growth mean that we expect to continue
to increase our investment rate, albeit
subject to careful assessment and even
stricter financial discipline given
heightened uncertainty. As a result, and
taking into account inflationary pressures,
we anticipate capital expenditure will
increase to around £400m in the coming
year (2021/22 £300.2m excluding property
acquisitions and disposals). The areas of
focus and opportunity are as follows:
– Technology investment to drive the
digital transformation of M&S and
systems improvement to support
more responsive trading.
– Supply chain investment to create a
quicker, more efficient operation
and pave the way to a modern,
automated network.
– Multiple opportunities for growth in
the store estate, including investment
in renewal, larger-format Food stores,
rotation to modern, accessible full-line
stores, and growth through franchise
partnerships.
Our capital allocation decisions will
continue to be guided by our ambition
to grow the business while sustaining
balance sheet metrics consistent with
investment grade. The Board will consider
the scale and timing of a resumption of
dividend payments at the year end.
Financial Review
‘‘
Despite the near-term
challenges, the business
is better set up both
financially and operationally
to invest for the future.
Read our full Financial Review
on p36
’’
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STRATEGIC REPORT
THE NEXT PHASE OF TRANSFORMATION
CONTINUED
We are confident about the future potential of M&S, but we
know we need to go further and faster in this next phase of
transformation to reposition for growth. The new leadership team
will set out their plans in more detail later in the year, but the
following detail sets out their clear areas of focus to protect the
magic of M&S, whilst modernising the parts where we currently
lag, so that we can drive growth.
STEP ONE
FIXING
THE BASICS
STEP TWO
SHAPING
THE FUTURE
STEP THREE
MAKING
M&S SPECIAL
Joined the Board on
25 May 2022
– The most important priority is to build on the strength of
the M&S brand and product. We will offer style in Clothing,
Home and Beauty, great taste in Food and underpin that
with our commitment to trusted value. Alongside this we
will raise the bar in categories where we have opportunity
to grow market share.
– We will offer our customers a truly seamless experience across
all our channels wherever we trade around the world, using
our data and insight to improve personalisation capability.
– We will offer our customers curated choice. Building our core
M&S product, whilst opening up our channels to partners
that complement and enhance the range.
– ‘Do the right thing’ is an M&S value but it reflects a behaviour
that’s deep in the culture and we will put it into action
and better connect our ambitious net zero plans to our
commercial strategy.
– Alongside this, we need to modernise the key enablers that
will unlock growth potential at M&S. This means:
· Modernising and focusing our store estate
· Simplifying and future proofing our supply chains
· Building more responsive and agile systems to improve
visibility and insight
‘‘
Under Steve’s leadership M&S has changed, while
holding true to its values. I feel very fortunate to
be leading the next chapter in M&S’ story with two
fantastic partners in Katie and Eoin. Thanks to the
changes made – we are facing into the market wide
inflationary pressures from a much more resilient
position. We are confident in our ability to trade
the business and – at the same time – increasing
the pace of change and investing behind our
long-term growth. Effectively managing for
today and building the M&S for the future. This
means a simpler, faster M&S with a laser focus
on execution, so that we can be a great place for
our colleagues to work and a great place for our
customers to shop.
Stuart Machin Chief Executive Officer
Having led the first phase of transformation in our
respective areas, the new leadership team brings
the ability to accelerate change, whilst providing
the breadth and continuity the business needs.
Like in any retailer, we will always have a to-do list,
but M&S benefits from an extraordinary brand,
exceptional customer insight and fantastic
committed colleagues, and we now have the
right foundations in place to reposition the
business for growth both in the UK and globally.
Katie Bickerstaffe Co-Chief Executive Officer
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’’
BUSINESS MODEL
T H E GROUP
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OUR CUSTOMERS
M&S serves nearly 30 million customers
every year from across the UK. Our Food,
Clothing & Home and other retail
businesses are focused on developing
products and services to make us more
relevant, more often, to our customers
and beyond, who we reach through a
channel network of 1,487 stores and
online services in the UK and over
100 international markets.
Number of customers served
in 21/22
30 million
OUR COLLEAGUES
We employ c.65,000 colleagues across
our stores, support centres, logistics
operations and international teams.
They demonstrate extraordinary passion
for the business, deliver outstanding
customer service and bring extensive
technical skills and expertise in areas such
as sourcing, fit and product development.
O F A C C OUNTABLE BUSIN
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M I L
F A
C H ANNELS
C u s tomers
Food
Clothing
& Home
MS2
Stores
Property
Colleag u e s
Services:
Bank and
Energy
Ocado
International
A FAMILY OF ACCOUNTABLE BUSINESSES
OCADO
M&S operates a family of parallel businesses, each led by its own integrated
management team, with functional accountability for their divisions, including
marketing, supply chain and finance. We predominantly sell own-brand products,
manufactured and marketed exclusively under the M&S brand, with quality,
innovation and trusted value at their core.
M&S holds a 50% investment in Ocado Retail,
a relationship between M&S and Ocado Group
plc. Since September 2020, the M&S Food range
and selected Clothing & Home products have
been available for customers to shop on the
Ocado platform, giving the Group access to
the UK’s fastest-growing grocery sales channel.
Food
Services
Through M&S Bank (operated by HSBC),
we provide a range of financial services
– with a focus on credit card and
payment solutions that create a
rewarding shopping experience.
M&S Energy is a competitive fully
renewable energy source provider
(operated by Octopus).
Property
We have an active Property
Development team to maximise
the value of our property
assets through investment and
development opportunities.
MS2
MS2 brings together our data and online
teams to invert the conventional model where
M&S.com had been run as an extension of
the stores business and enables them to take
advantage of the online growth opportunity.
M&S Food sells sustainably sourced
products of exceptional quality and
value through five main categories:
Protein, deli and dairy; Produce;
Ambient and in-store bakery;
Meals, dessert and frozen; Hospitality
and Food-on-the-move.
Clothing & Home
M&S sells stylish, quality, sustainably
sourced own-brand clothing and
homeware through our principal
product departments: Womenswear,
Menswear, Lingerie, Kidswear
and Home.
International
M&S exports the best of M&S Food
and Clothing & Home around the
world in selected target markets.
Customers purchase our products
through a network of mainly
partner-led businesses or through
online-only channels.
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Annual Report & Financial Statements 2022
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STRATEGIC REPORT
FOOD
B I G G E R , B E T T E R , F R E S H E R
Financial highlights
UK Food revenue
£6.6bn
Operating profit before
adjusting items
(19/20: +10.1%)
£277.8m
(19/20: +17.4%)
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Operating profit before adjusting items
of £277.8m, as compared to £236.7m
in 2019/20, reflected sales growth and
the lowering cost programme, partly
offset by increasing supply chain cost
pressures in H2 and Brexit-related costs
in Northern Ireland.
PERFORMANCE UNDERPINNED
BY IMPROVEMENT IN QUALITY
AND VALUE
The outperformance of the M&S Food
range over the past four years has
delivered improved customer perceptions
for both value and quality, and good core
sales growth. Market share has grown
from 3.4% to 3.6% over three years.
The consistently strong core sales
performance throughout 2021/22,
supported by good market conditions,
is evident in the category sales mix, with
growth in core areas such as produce,
meat and grocery. This was driven by
larger basket sizes, which began to
normalise through the year as the
effects of Covid reduced.
U n d e r s t a n d i n g
o u r c u s t o m e r s
T he objective for M&S Food is to
“protect the magic” by investing
in our unique focus on own-brand
innovation and fresh, easy-to-cook
food, while “modernising the rest” of the
infrastructure supporting it. By extending
reach of the brand into bigger, new-format
stores and growing new channels
(Ocado Retail, Costa Coffee), we see
the potential for substantial growth.
M&S Food delivered sales growth of
10.1% vs 2019/20 and in H2 continued to
be the best-performing UK grocery chain
(Source: Kantar 12 weeks ended 20 March
2022). This was despite continuing adverse
Covid-related headwinds and the absence
of online grocery sales, which are reported
separately through Ocado Retail.
Sales grew 14.7% after adjusting for the
Covid-related impact on the hospitality
and franchise businesses. H2 saw a
gradual recovery of stores in city
centres and the franchise travel business
compared to H1.
MARKET CONTEXT
The grocery market shrank -4.4% compared to the prior year for the 52 weeks ended 17 April 2022,
declining to £127bn (Source: Kantar).
What customers bought
Our aim is to offer every customer shopping with M&S Food a bigger
and fresher range of delicious food to choose from, at everyday value
they can trust. Throughout the year we’ve seen customers purchase
more products from our core grocery and produce ranges – like our
78p bananas, 60p Vitamin D-enriched bread or £1 100% British eggs –
in higher volume, driving bigger baskets.
Sales vs 2019/20 (%)
Frozen
Beers, wines & spirits
Grocery & household
Meat, fish, poultry, deli, dairy
Bakery
Produce & flowers
Total
Sales vs 2019/20 (%)
Food-on-the-move
Hospitality
Total
H1
40
30
33
20
13
14
20
H1
-18
-53
-30
H2
18
17
9
14
18
12
14
H2
-4
-27
-12
FY
27
23
20
17
15
13
17
FY
-11
-40
-21
Where customers shopped
With M&S available on Ocado and Costa, along with the growing
number of bigger, better, new-format Foodhalls in retail parks, the
breadth of channels in which customers can shop for their favourite
M&S products has grown. This year, as the impact of the pandemic
on locations such as city centres, high streets and travel locations
reduced, we’ve seen customers gradually returning, but with Simply
Food and retail park locations remaining the main destination of
choice for M&S customers.
Sales vs 2019/20 (%)
Simply Food
Retail parks
Franchise fuel
Total
Sales vs 2019/20 (%)
High street
City centre
Franchise travel (rail/air/roadside)
Total
H1
27
23
13
25
H1
-10
-18
-49
-18
H2
18
20
8
18
H2
-6
-10
-29
-10
FY
23
22
11
21
FY
-8
-14
-39
-14
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STRATEGIC REPORT
FOOD
CONTINUED
Growth was supported by a substantial
programme of product innovation,
with over 1,350 new lines over the
past year, including summer barbecue
ranges, extensions to our market-leading
Plant Kitchen offer, and an expanded
“Dine In” programme.
In a climate of increasing price awareness,
“Remarksable Value” and “Fresh Market
Specials” ranges have been relaunched,
offering products with an M&S quality
differential at everyday low prices. Around
one in four M&S baskets now include one
of these lines. Overall, value perception
has improved by five points since March
2019, ahead of the market, and quality
perception is at the highest level in over
five years.
The Food renewal format creates
larger stores with the efficiency of a
supermarket and the ‘soul’ of a fresh food
market. This has now been implemented in
40 stores, enabling customers to access
more of the M&S range. Annualised sales
in Food stores which have been fully
renewed have been strong, on average
up over 10% vs control stores.
In the second half, we launched a ground-
breaking partnership with Costa Coffee,
making available around 30 M&S food-on-
the-move products in c.2,500 coffee
shops. These include new lunch options,
hot meal boxes and children’s food. Early
sales are in line with our expectations.
MORE TO DO ON SUPPLY CHAIN,
WASTE AND AVAILABILITY
The M&S Food supply chain remains less
efficient and, we believe, higher cost to
serve than our competitors. This is a result
of a complex store and logistics network,
a high level of chilled product mix and
a costly supply chain contract with
our partners, Gist. Alongside this, our
forecasting, ordering and stock allocation
systems are dated and are in the process
of being upgraded.
Over the past two years we have
implemented the “Vangarde” trading
model across the full Food estate,
creating more efficient processes for
stock management and replenishment
of stores, which has helped to sustain
availability through the supply chain
disruption of last year. However, waste
and stock loss remain above target levels.
In the next stage we will roll out new
forecasting, ordering, and space, range
and display systems to better match
catalogue and product display to
customer demand, with the objective of
realising a substantial reduction in food
waste. The increasing store rationalisation
programme is also helping to create a
network of conforming stores which are
lower cost to serve.
Rewards you’ll
LOVE
Can I App it? Yes you can!
To promote the benefits of the
M&S app and encourage more
customers to download and
start using it, we ran a two
week app-focused campaign
in March, including our first
ever Sparks TV advert.
As more customers turn to shopping with us
digitally, we’ve been building our quick and
easy digital shopping experiences – such as
scan & shop and digital click & collect – which,
alongside our Sparks rewards scheme, are all
hosted in the M&S app. Not only is this the
easiest and most rewarding experience for
customers but it also builds our omni-channel
capabilities and offers flexibility for customers
so that they can choose how they shop with
us. The result of the campaign was over half
a million app downloads across March and
monthly active app users reaching new levels.
12
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M&S Food Renewal
Central to the strategy of M&S
Food is modernising how we
bring delicious, great-quality
ranges to customers; with our
Food store renewal programme
a key driver of this.
The renewal programme takes existing M&S
stores and invests in them to meet varying
requirements so that they offer the efficiency
of a supermarket and the ‘soul’ of a fresh food
market, showcasing the quality, value and
freshness of its ranges. These stores have
increased produce, bakery, ambient, grocery
and frozen ranges, as well as innovative
concepts like Fill Your Own, Wine Tasting,
Ceramic Pizza Ovens or new-look M&S Cafes
– all laid out in an inspiring and aesthetically-
pleasing format. M&S has renewed 40 stores
so far across the UK, delivering a bigger, better
and fresher experience for customers across
Food, such as our Woking store seen right, with
more in the pipeline for the year ahead.
40Stores renewed
Fit for the
FUTURE
Quality perception1
Customer ratings of M&S Food products
on quality were level on last year (Source:
YouGov) and remain at their highest point
in five years.
LEVEL
(20/21: +3ppt)
Availability
Our Vangarde trading model has improved
processes for stock management and
replenishment of stores, and helped to
sustain availability through the supply
chain disruption of last year.
95% (20/21: 95.5%)
Strategic KPIs
Value for money perception1
Customer perception of M&S Food
representing value for money remained
level this year, following last year’s +3ppt
increase (Source: YouGov). Our focus
on offering M&S quality products at
everyday value – such as the relaunch of
our “Remarksable Value” range this year –
have driven increases in value perceptions
ahead of the market.
LEVEL
(20/21: +3ppt)
1. Reset quality and value perception scores tracking independent data which future reports will be benchmarked against.
Annual Report & Financial Statements 2022
13
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STRATEGIC REPORT
FOOD
CONTINUED
British Select
Farmers
We’ve continued to showcase our British Select
Farmers, who deliver the exceptional quality,
value, and freshness we’re famous for, through
our Fresh Market Update customer campaign.
This multimedia and TV campaign helps
strengthen customer perceptions of our
quality and value.
New
PARTNERSHIPS
Costa Coffee
This March, M&S and Costa
Coffee launched an exciting
partnership to bring together
two of the nation’s favourite
high street brands.
A range of around 30 delicious M&S Food
classics, including sandwiches, children’s
food and products from our Plant Kitchen
and Made Without ranges, are now available
in c.2,500 Costa Coffee stores and
Drive-Thru lanes across the UK. The
collaboration brings M&S’ delicious
Food-on-the-move to the nation’s largest
chain of coffee shops, taking our trusted
value offer to a wider audience. So far,
customers have reacted brilliantly to the
tie-in, with sales performing strongly.
14
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OCADO
TRANSITIONING TO STRONG CAPACITY GROWTH
POST PANDEMIC REVERSION
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Our ambition is to grow Ocado Retail over
the next five years to achieve a market-
leading national position in online food
retailing and a brilliant showcase for the
M&S brand and range. Doing so means
building on the competitive advantages in
quality, value and service that the Ocado
platform combined with M&S Food can
achieve. We will deliver growth through
rapid expansion of customer fulfilment
centres (“CFCs”) alongside our immediacy
proposition, Zoom.
Following a successful switchover to
M&S supply, Ocado Retail delivered an
exceptional performance during the
lockdown periods in 2020/21. As expected,
2021/22 saw a reduction in average basket
size to c.£123 in Q4 (2020/21: c.£145) and
increasingly normalised demand across
the week. At the same time, with a
substantially larger industry growth
opportunity than we envisaged when
we acquired 50% of Ocado Retail, we are
investing in an ambitious capacity roll-out
plan, with new CFCs coming on stream
against a backdrop of well-understood
industry-wide cost pressures.
Ocado Retail delivered revenue of
£2,248.8m, down 4.4% compared to
2020/21, and EBITDA before exceptional
items of £104.8m as compared to
£189.9m in 2020/21. We recorded a Group
share of net income of £13.9m, after a
£7.2m share of net exceptional costs.
2021/22
Q1
Q2
Q3
Q4
M&S financial quarter
TARGETING GROWTH IN ACTIVE
CUSTOMERS AS PANDEMIC
CONDITIONS NORMALISE
Ocado Retail delivered good growth in
active customers through the year, with
an acceleration in the final quarter
compared with the prior year, as new
CFCs came on stream. Order growth and
average basket size reflected the return of
customer behaviours towards pre-Covid
levels as restrictions reduced and there
was a return to more in-office working.
As a result, revenue declined, but
substantially outperformed the online
grocery market (Source: Kantar 12 weeks
ended 20 March 2022).
NEAR-TERM MARGINS REFLECTING
A HIGHER PERCENTAGE OF
IMMATURE CAPACITY
Near-term margins reflect the higher
percentage of immature capacity as well
as the peaks and troughs associated
with normalised trading. Following a
period of more limited capacity owing
to a fire, Erith CFC was fully reopened in
December 2021. During 2021 we also
opened two new CFCs in Purfleet and
Andover, which were operating at around
half of their end-game capacities by Q4.
Some one-off costs, associated with the
fire at the Erith distribution centre and
technology platform transition, have
impacted the M&S share of profit.
Alongside the opening of Bicester in 2022
and Luton in 2023, we have plans to reach
capacity for over 700,000 orders per
week based on pre-Covid basket sizes,
representing growth of over 50% when
fully ramped.
SUBSTANTIAL FURTHER POTENTIAL
FOR THE JOINT VENTURE
The M&S brand is consistently over 25%
of Ocado Retail’s sales, and this has
generated substantial buying gains for
both M&S Food and Ocado Retail. We
believe there is additional unexploited
potential to make better use of the
M&S brand, data capabilities, and cross-
marketing as the businesses work even
more closely together. Towards the end
of our coming financial year, we are also
planning to re-platform from the legacy
operating system to the “Ocado Smart
Platform”. This represents a major
technology switchover and will provide
Ocado Retail with a website and ordering
capability that when fully developed we
believe will be market-leading.
375
338
383
Average
orders per
week (k)
Retail
revenue
618.4
(£m ex VAT)
Notes: Retail revenue comprises revenues from
Ocado.com and Ocado Zoom and excludes revenues
from Fetch in current and prior periods. Average orders
per week refers to results of Ocado.com.
517.5 547.8 564.7
367
M&S Food online
Our partnership with Ocado Retail
brings together our unbeatable quality
and Ocado’s industry-leading customer
service. We’re investing in growing capacity
at Ocado Retail and believe there is
potential for our two businesses to
work even more closely together.
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Annual Report & Financial Statements 2022
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STRATEGIC REPORT
Number one full-price
activewear range
We launched our activewear range Goodmove in January
2020 and have grown it to be our biggest in-house
womenswear sub-brand. It’s a credible competitor in
the growing activewear market and a truly relevant offer
for our customers – covering every area of activewear
from performance items (pictured) to a growing yoga
range. With health & wellness more important than ever
for our customers, we continue to market the trusted
value of the product and the market-leading innovations
within the range, such as our new Extra High Impact
Sports Bra (£28), with pioneering cup technology and
front adjusting velcro straps. We sell 1.6 million
Goodmove items annually – with 5,000 of our £25
Go Move “squat proof” leggings sold every month, and
are the market leader for full-price women’s activewear.
CLOTHING
& HOME
Everyday style and value
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T he objective of Clothing & Home is
to create a contemporary M&S range
bought in greater depth, alongside a
family of internal and external partner
brands providing broader choices to
our customers. We are at the very early
stages of transitioning to an omni-channel
business backed by exceptional data
and highly personalised customer
relationships, and a more sustainable,
profitable model is starting to emerge.
Clothing & Home delivered sales growth
of 3.8% vs 2019/20, with three consecutive
quarters of underlying growth. Online
sales were up 55.6%, with strong growth
throughout the year outperforming
pure-play peers and gaining 60bps of
market share (Source: Kantar 52 weeks
to 3 April 2022). Store sales declined
11.2%, with performance continuing to
be impacted by legacy high street and
city centre stores, although there was
some improvement in H2.
Operating profit before adjusting items
of £330.7m, as compared to £223.9m
in 2019/20, reflected the benefits of sales
growth combined with an increased
full-price sales mix.
RESHAPING THE “PRODUCT ENGINE”
TO DRIVE SHAPE OF BUY AND
REDUCE CLEARANCE
The Clothing & Home offer has been
reshaped over the past three years
around trading principles focused on
contemporary style, simple accessible
product, and greater depth of buy. Overall
option count has reduced by c.20% on
2018/19. Alongside the product change,
there has been a successful shift to
trusted value and everyday low price.
As a result of these actions, discounted
sales have reduced and stock into the
clearance sale was down 34% on two
years ago, enabling a simpler, more
profitable operation. These changes are
beginning to be reflected in improved
customer style perceptions and are
generating increased confidence in
the new approach within the core
product teams.
Blanket promotions, which often obscured
inconsistent pricing and reduced trust,
have largely been removed. The pricing
architecture is clearer, offering value on
entry price points in products such as
women’s jeggings, men’s denim and the
recently introduced “Remarksable Value”
label in our Home ranges. As we have
shifted to a trusted value approach,
we have seen an improvement in value
perception, which is now market-leading.
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UK Clothing & Home revenue
£3.3bn(19/20: +3.8%)
Operating profit before
adjusting items
£330.7m
(19/20: +47.7%)
U n d e rs t a n d i n g
o u r c u s t o m e rs
MARKET CONTEXT
The clothing market increased by 25% year on year for the 52 weeks to 4 April 2021 to a total
value of £33.1bn (Source: Kantar).
What customers bought
In Clothing & Home, our aim is to offer everyday, sustainably sourced
products that are relevant to how our customers are living and working
– at trusted value. In the first half of the year we saw customers
continue to purchase casual and activewear, a trend representative
of the pandemic – before other categories such as formalwear began
to return later in the year.
Sales vs 2019/20 (%)
Women’s denim
Women’s casual tops
Women’s knitwear
Men’s casual
Kids daywear
Lingerie
Soft furnishings
Sales vs 2019/20 (%)
Women’s formal
Women’s holiday
Men’s formal
Men’s footwear
H1
8
10
15
1
21
0
23
H1
-33
-35
-35
-9
H2
27
30
7
13
27
9
12
H2
-20
26
-20
6
FY
17
17
9
7
24
5
16
FY
-26
-24
-28
-1
Where customers shopped
As well as great products, our customers are always searching for
easy and inspirational shopping experiences, and we’re aiming to
deliver this by building an omni-channel business where our stores
and M&S.com combine seamlessly together. Over the course of the
year we saw customers gradually returning to Clothing & Home stores;
however, M&S.com remained the most popular shopping channel for
our customers.
Sales vs 2019/20 (%)
Retail park
Outlet
Shopping centre
High street
City centre
Q1
-2
-10
-26
-24
-37
Q2
3
1
-16
-22
-28
Q3
3
3
-12
-20
-19
Q4
24
26
15
-5
3
FY
5
3
-12
-19
-22
Total C&H stores
-21.2 -14.3 -10.9
5.6
-11.2
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Nothing
Neutral About It
The new neutrals offer is a clear and
simple proposition for all women –
more colours, more sizes and more
choice within neutral (also known as
nude) bras & knickers. This new range
gives customers the freedom to
complement or contrast their skin
tone. Customers can opt for a size,
style and colour that makes them
look good and feel great.
STRATEGIC REPORT
CLOTHING & HOME
CONTINUED
– Menswear was impacted in the
pandemic by its high formal and
office-wear shares. We saw good
growth in jersey, knitwear and
underwear, although following
reopening availability in formal
categories was below target.
– Kidswear’s increased focus on
daywear has combined with growth
in schoolwear to deliver double-digit
sales growth. The growth of M&S Kids
provides an important entry point to
the brand for family-age customers.
– Home ranges have been reshaped, with
pricing realigned to the market in areas
such as bed linen, lighting and curtains.
Furniture ranges are being upgraded
and losses have reduced.
STRONG PERFORMANCE IN CORE
CATEGORIES AND IMPROVING
STYLE PERCEPTION
As expected, category performance over
the two pandemic years has been greatest
in core casual categories, sleepwear and
soft furnishings. Following the reopening
of the economy in July 2021, the slow
return to offices, combined with
greater mobility, has led to a gradual
improvement in formal ranges,
elements of footwear and holiday.
– Womenswear has driven good growth
in the “big three” departments of denim,
knitwear and casual tops. A focus on
simple, repeatable styles in dresses,
supported by popular collaborations
with brands such as Ghost, has resulted
in a very strong performance. The
Goodmove activewear brand has
grown to over £65m in two years.
– Lingerie has seen a recovery over the
past year in core areas such as sleep,
underwear and bras. A focus on sharper
value through multi-packs at opening
price points has combined with new
stretch offers such as “Boutique” and
the launch of the “Neutrals” range.
Strategic KPIs
Clothing & Home space
Progress has been made in addressing the
legacy of our full-line store estate; however,
there is much still to do to convert stores
to a new more efficient, shoppable format
and support our growth towards an
omni-channel customer offer.
-1.0%
20/21
21/22
10.3m sq ft
10.2m sq ft
Value for money perception1
The percentage point increase in customers
rating M&S Clothing & Home products
highly on value for money (Source: YouGov).
Our successful shift to trusted value and
everyday low prices and the replacement of
widespread promotions with clear pricing of
our products, has improved our score by a
further percentage point and means we
remain the market leader on value for money
perception by customers.
(20/21: +3)
+1
Quality perception1
Customers continued to rate M&S Clothing
& Home products highly on quality (Source:
YouGov). Although no change year on year
in our score, we continue to be clear #1 in the
market on product quality as a result of the
reshaping of our product engine to focus on
contemporary style combined with simple
and accessible products.
LEVEL
(20/21: +1)
1. Reset quality and value perception scores tracking independent data which future reports will be benchmarked against.
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Nobody’s Child
Our Brands at M&S strategy has
continued to gain momentum. In
November, we evolved our partnership
with affordable, eco-conscious fashion
brand Nobody’s Child by investing a
27% stake in the business.
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Bringing back
strong brands
In March 2020 we launched
our “Brands at M&S” platform,
and today we sell over 40
complementary and curated
brands on M&S.com.
From Sosander to Smiggle, we operate a range
of models, including exclusive collaborations
and brands we own, like Jaeger (Spring/Summer
collection pictured), or have a minority stake in,
like Nobody’s Child. During the year, brands
represented c.3.5% of our online sales and
were shopped by over a million customers.
Customers who buy brands not only on average
spend double but return to purchase again
10 days sooner. “Brands at M&S” will continue
to be online first, maximising the advantage
our store network brings for seamless delivery
and collection, but we’ve begun a number
of exciting in-store trials with brands including
Early Learning Centre (now in 10 stores) and
SeaSalt (in 20 stores).
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Annual Report & Financial Statements 2022
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STRATEGIC REPORT
CLOTHING & HOME
CONTINUED
MS2 DRIVING
OMNI-CHANNEL GROWTH
MS2 had a successful year, with strong
online sales growth at an adjusted
operating profit margin competitive
with store sales. The MS2 organisation
brings together the data, digital and
online teams across M&S. Its aim is to
prioritise the best online offer, acting with
the speed of a pure-play while leveraging
the store estate to drive advantages in
reach and fulfilment to deliver better
customer service.
– A programme of front-end digital
development to inspire customers
has included upgraded imagery,
increased user-generated content,
“shop the look” features and
“hotspotting” of product benefits.
– We have introduced over 60 digital
hubs in stores, enabling rapid
click-and-collect and rolled out
paper-free returns.
– Online availability through omni-
channel fulfilment now exceeds store
availability, with an increasing number
of “online-only” products and use of the
channel to trial “test and repeat” ranges.
The online commercial teams are fully
involved in category planning.
– During the year, c.11% of online
orders were satisfied through in-store
fulfilment. The ability to sell through
stock in the store network has increased
customer convenience, improved stock
turn and helped drive customer
availability to c.90%, compared with
c.75% through the online distribution
centre alone.
– The cut-off for next-day delivery
remains below our target level but is
now market-competitive.
Over the past three years we have built
the foundations of a more personalised,
customer-focused digital offer. We have
created a single customer data platform
alongside our enterprise data platform,
“BEAM”, which continues to consolidate
our data in one place.
The relaunched Sparks programme has
grown to over 15m members, of which
close to 9m are active, and we are working
on the next generation of improvements
to the offer. We have grown app users to
over 4m and expect to launch Sparks
Pay, offering customers an integrated
payment and credit proposition including
loyalty rewards through Sparks and the
M&S app.
Over the past year we began to
personalise the customer experience
through our website, app and customer
relationship management programme,
and around 8% of M&S.com sales are now
being driven by personalisation. Although
still at an early stage, we have developed a
bespoke in-house solution to deepen
relationships with customers and drive
future growth. The goal is to build
personalisation at scale to move from
a targeted promotions model to one
where the range, interactions and product
presentation are relevant to the individual
customer, making M&S a more engaging
and easier place to shop.
Sparks and data provide the gateway
to delivery of further services, notably
the shift to a digital proposition for M&S
Bank customers including credit, loyalty
rewards and payment.
NASCENT PLATFORM OF
BRANDS ESTABLISHED
M&S has a strong and trusted brand which
attracts customers to our platforms as
the second largest UK online clothing
retailer (Source: Kantar 52 weeks ending
3 April) with the largest omni-channel
footprint. This, combined with our 15m
Sparks card holders, credit card and
customer data engine, creates the scope
to bring other brands onto our platform,
A very social
experiment
Over 600 M&S stores now have
their own social media accounts
on Facebook and TikTok.
Set up during the pandemic as a way to communicate
with local customers about availability of essential items
and opening hours, these accounts have evolved into a
highly effective and engaging way for M&S stores to reach
local customers and communities. Content updates on
new products and services are attracting a collective
3+ million views a week. Our stores are also driving
perception change on TikTok, with over 51 million views
of our dedicated hashtag and M&S Romford leading
the charge with their viral videos.
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providing broader choice and
personalisation for the M&S customer
and substantial new revenue streams.
– In the last year we have established a
series of pilots with a combination of
around 40 clothing brand partnerships,
own or invested brands. This has
included the purchase and relaunch
of Jaeger, as a contemporary British
brand, a 27% shareholding in Nobody’s
Child and the majority acquisition of
activewear brand curator, The Sports
Edit, which brings new capabilities,
customers and brands to the Group.
– These brand partnerships bring
broader choice, premium price points
and additional expertise to M&S.
In total, third-party brands across
Clothing, Home and Beauty, including
Jaeger, generated c.£100m of orders
in 2021/22.
– In establishing the operation, we have
made early investment in the initial
capacity required for ordering and
business development. At this stage,
the business trades through a wholesale
or commission model, with product
flowing through the M&S distribution
network. We expect to evolve the model
to add dropship capability, enabling
the sale and fulfilment of orders from
partner stock.
IMPROVING PERFORMANCE
THROUGH ADDRESSING
LEGACY ISSUES
Despite the far-reaching developments
and progress in the product engine, the
Clothing & Home business requires further
development in legacy systems, supply
chain and stores to enable a more
responsive business with faster speed
to market, an improved returns process,
lower stock levels and a lower cost
to operate.
In the current system, less effective
systems configuration and interface
makes planning and tracking slow and
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labour intensive. Teams have limited
visibility to create accurate channel
plans, and stock journeys from port to
customer via multiple stock holding and
consolidation points are lengthy and can
be hard to track. The reconfiguration of
systems is likely to take a number of years
to implement.
The supply chain picking model can
be slow and high cost to operate,
resulting in a risk of trapped stock.
The opportunity is to reconfigure the
network to support our omni-channel
needs better. In addition, the returns
channel remains slow, creating excess
handling cost and margin loss. We have
already identified multiple ways of
reducing this; for instance preparing
returns for resale in the store of return
or nearby stores to enable further
The Sports Edit
In March, we announced a new investment in
the fast-growing brand platform The Sports
Edit, which offers new and innovative brands.
Our investment reflects our strategic focus
on activewear, and in May we made our
market-leading activewear brand Goodmove
available on the platform.
improvements in omni-channel
availability.
So, the pattern and rhythm of product
flow will be further reshaped over the
next few years. This reshaping will be
underpinned by a commitment
to fewer, deeper strategic supplier
relationships to support a faster,
more flexible sourcing model which
has already proved comparatively
resilient during the pandemic.
Digital net promoter score
+5
Traffic (visits per week)
13.3m (20/21: 13.5m)
Percentage of UK Clothing
& Home sales online
34% (19/20: 23%)
Annual Report & Financial Statements 2022
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STRATEGIC REPORT
STORES & PROPERTY
ACCELERATED ROTATION OF THE ESTATE
The step change in online participation
and further shift of trade away from high
street and city centre stores during the
pandemic has increased the imperative to
reduce Clothing & Home trading space.
Last year we set out the objective of the
M&S store rotation programme to create a
modernised estate of c.180 full-line stores
and a growing programme of larger, more
inspirational Food stores. We aim to fund
the exit costs of the legacy estate through
an increasingly active asset management
and freehold disposal programme, which
we expect to release at least £200m of
cash proceeds.
DEVELOPING PROFITABLE
ROTATION PIPELINE FOR FULL-LINE
AND FOOD STORES
So far in the transformation, we have
made significant progress in closing
68 legacy full-line stores and 19 smaller
Food stores. We have also created a
bigger Food store format which can
serve more of the family shop and offer
click-and-collect services for Clothing &
Home, and opened 13 new, more efficient
full-line stores.
We are now developing a growing pipeline
of store relocations, moving from
old multi-floor buildings, often with
challenged fabric and poor access and
car parking, to modern, well-located sites
wherever possible in the renewal format
with omni-channel capability. Moving away
from town centres is not our only focus,
but we recognise that in an omni-channel
world, ease of shopping and fast access
is critical to competitiveness, and in many
cases we believe the town centre locations
have lost impetus as a result of failed local
authority or government policy. As a
result, a high proportion, but not all, of
our relocations are to the edge of town.
Combined with the relocation programme,
we are targeting an overall reduction
in Clothing & Home space reflecting
the rapid growth of online and our exit
from the long tail of low sales density
stores that deliver a small proportion
of total profit.
The full-line store pipeline already has
around 15 new stores planned over the
next three years, including seven former
Debenhams sites, and we expect this to
build further. This will help enable a further
32 store closures. Examples include:
– In Leamington Spa, the recent closure
of related town centre stores and
relocation to a full-line edge-of-town
former Debenhams to create a full-line
proposition is expected to pay back the
net capital of £7.0m invested in the new
site in 3.5 years.
– The relocation of Thurrock from the
back of an underperforming centre with
no accessible parking to the former
Debenhams site by the bus station with
extensive parking is expected to cost a
net £8.4m and to pay back in 2 years.
– The announced closure of the legacy
four-floor town centre store at
Colchester and opening of a new
modern store in the retail park on the
edge of town will cost a net £7.3m,
resulting in an estimated payback of
3.2 years.
To accelerate the estate’s rotation, we are
focused on driving the recapture of
Clothing & Home sales from existing
legacy sites either to new stores, to
alternative stores or online and are
trialling a number of new initiatives to
increase this.
To also help enable the full-line store
rotation, and to drive access to new
areas of growth, we currently anticipate
opening c.40 new Food stores in
the next three years, largely in the
12,000-15,000 sq ft renewal format.
These stores generate higher
productivity and good cash paybacks.
ENCOURAGING RESULTS FROM RECENT OPENINGS
Of the 10 M&S stores opened in 2020/21*, sales are averaging c.11% above plan,
with paybacks of around 1.5 years.
Average annual sales (£m)
Average capex (£m)
Average payback (years)
10 stores opened in 2020/21
Foodhall
Full-line
Performance
plan Performance Performance
Vs original
14.3
3.7
1.5
11%
-2%
-44%
12.3
2.2
1.5
18.8
7.3
1.5
* 2020/21 store openings are shown above rather than 2021/22, as these have 12 months of sales data to allow a full
financial review.
Strategic KPIs
Transactions (average per week)
9.7m (20/21: +39%)
Footfall (average per week)
14.1m (20/21: +45%)
Stores net promoter score
+81(20/21: 81)
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Clothing
renewals
Modern stores in convenient
locations are at the heart of
our store strategy, such as
our 75,000 sq ft new full-line
store in Stevenage, which
brings elements of our
renewal format into Clothing
& Home for the first time.
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Changing the way we
connect with customers
We have a unique combination of
nationwide stores and a broad-reaching
online platform, giving us a competitive
advantage and the ability to offer
seamless and convenient experiences to
customers, however they want to shop.
Not only is this better for customers, but dual channel
shoppers spend twice as much as those shopping
only in store. In-store fulfilment is a big part of our
advantage, leveraging the store estate to become a
critical part of our supply chain network. To meet
demand in the pandemic, we scaled up our in-store
pick model to cover more than 200 locations; at the
height of the Covid-19 crisis, these operations were
fulfilling over 20% of online demand. This acted as the
catalyst for further growth, and today all our clothing
stores are set up to be micro-fulfilment centres
collectively picking over 50% of customers’ online
orders. So if a customer is picking up a new Goodmove
top in their local store, there’s a strong chance the
local team have also fulfilled that order, which as well
as being efficient, is a nice personalised touch.
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Annual Report & Financial Statements 2022
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STRATEGIC REPORT
INTERNATIONAL
BUILDING OUR GLOBAL REACH THROUGH
STRONG PARTNERSHIPS AND ONLINE GROWTH
International Revenue
£937.2m
(19/20: -0.8%)
Operating profit before adjusting items
£73.6m
(19/20: -33.5%)
Net promoter score
86 (20/21: 85)
International websites
(20/21: 98* restated)
98
Our objective is to create a growing
International business through strong
partnerships and a multi-platform online
business with global reach.
International sales grew 1.7% at constant
currency, reflecting the continuing
rebound in activity through the year
and sustained growth in online sales
both in markets with a store presence
and through global marketplaces.
Operating profit before adjusting items
of £73.6m (2019/20: £110.7m) included
costs and tariffs of £29.6m and an
estimated trading impact in the region of
£15m due to ongoing EU border issues,
largely related to the Republic of Ireland
following Brexit.
Building a great service for
our international partners
SOLID GROWTH IN THE MIDDLE
EAST, INDIA AND GLOBAL ONLINE
Together with our partners, we generated
4% growth in retail sales in 2021/22. This
included a particularly good performance
in the Middle East region, with growth
in domestic demand. In Asia, we saw a
substantial bounce back in India following
lockdown in Q1, which was partly offset by
continuing restrictions in some markets.
Sales in Europe reflected strength in
Clothing & Home sales in the Republic of
Ireland, partly offset by the impact of
EU-related border issues on the Food
business. Over the past two years, online
retail sales of M&S and our partners have
grown by 152% and now total £251m.
Following the expansion into an additional
46 territories in March 2021, we now trade
in 105 markets.
Performance vs
2019/20 (%)
Europe
Middle East
Asia
Total retail
sales
Performance vs
2019/20 (%)
Stores
Online
Total retail
sales
H1
4.2
9.5
-23.6
H2
7.4
28.0
9.9
FY
5.8
18.6
-6.6
-2.7
11.2
4.3
H1
-13.1
165.7
H2
1.5
141.1
FY
-5.7
152.2
-2.7
11.2
4.3
Alongside growing online channels, we’re
expanding our global reach by building a
strong, efficient business with partners in
select target markets. We’re focused on making
it as easy as possible for partners to order,
ship and sell M&S products in their markets,
and as part of this, in May 2021 we launched
a new UK hub specifically for distribution of
international orders. This means that products
from our largest sourcing regions are no longer
required to be sourced from out of the UK
network and re-routed to partners. Since the
go-live in May, the UK hub has processed
over 7 million singles from the UK network;
we've improved the visibility and stock
presentation of orders to make it easier to
track and process, and reduced our lead times,
meaning M&S products will be landing on the
shelves even quicker for customers across our
partner markets.
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ADAPTING TO GEO-POLITICAL
SHOCKS: BREXIT & RUSSIA/UKRAINE
During the year, the business faced
the dual headwinds of the impact of
EU border issues and the ending of
shipments to our franchise partner in
Russia as a result of the war in Ukraine.
To mitigate EU border costs, we exited
the high street franchise Food operation
in France and ceased exporting chilled
food to the Czech business. We continue
to absorb material administration-related
cost headwinds on Food exports
to Ireland, because of certification,
declarations and the complexity of
segregation in warehouses, none of
which benefit customers. We expect to
be able to mitigate these costs further
through increased local sourcing and
by automating processes. In our Clothing
& Home operation, we are planning to
open a new “EU hub” in Croatia, enabling
the direct flow of stock into market
to fulfil orders for our partners,
including marketplaces.
The M&S businesses in Russia and Ukraine
have been operated by a licence holder
and franchise partner and in 2021/22
generated retail sales of £102.5m and a
contribution to profit before adjusting
items of £5.2m. M&S is a values-led
business; therefore, as a result of the
invasion of Ukraine, we ceased shipments
to Russia on 3 March 2022. Subsequently,
we have made the decision to fully
exit our Russian franchise and we have
recognised a charge of £31m in adjusting
items, representing our full exit costs from
Russia and business disruption in Ukraine.
Unfortunately, our Ukrainian business has
also been partially closed as a result of
war impacts, and we are working with our
partner to reopen as and when possible.
EXPLOITING GLOBAL GROWTH
OPPORTUNITIES IN INDIA, THE
REPUBLIC OF IRELAND AND ONLINE
Our joint venture partnership with
Reliance Retail in India opened six new
stores, closed nine mostly smaller-format
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stores and refurbished or expanded a
further six. The business is exploring
multiple options for future growth,
including ambitious plans to grow space,
with around 10 new store openings per
year and expansions in key existing
locations, as well as leveraging the
dedicated Indian website and pursuing
growth through third-party marketplaces.
During the year we also developed and
grew in-store fulfilment of Clothing &
Home online orders in key markets such
as the Republic of Ireland. In addition, the
partnership with Zalando has delivered
substantial growth over the past year, and
we expect to broaden the range available
as we develop additional capabilities.
New openings
New International store openings
include our comprehensive
13,000 sq ft new store in the
Dubai Hills Mall.
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Annual Report & Financial Statements 2022
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STRATEGIC REPORT
PEOPLE & CULTURE
drive ownership, pace and commerciality.
Our People Plan has six key aims:
#1 Transforming our organisational design to
#2 Becoming a data enabled and
#3 Creating a team of empowered,
responsive and commercial leaders
who are close to the front line.
digitally focused business.
#4 Putting the store voice back at the
centre of the business and amplifying
the voice of the customer.
data-driven and focused on performance.
#5 Creating a culture of plain speaking:
#6 Building an involving, engaging culture
where everyone can get on.
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#1
#2
Four years ago, we set out the
unvarnished truths about the state of
the business and why far-reaching change
was needed to arrest decline. Central
to this was addressing the hierarchical,
slow-moving, overly corporate and
top-heavy culture that had stalled
previous transformation strategies.
We were clear that our aim was to draw
on the foundations on which M&S was
built and apply them in a modern setting
to create the most engaging, involving
place to work in UK retail – an organisation
that was data-driven, digitally-enabled,
empowered and fast-moving,
underpinned by a flat structure built
around the trading business units that
drives a closeness to the front line and
the customer.
At the beginning of the financial year,
Stuart Machin and Katie Bickerstaffe were
appointed Co-Chief Operating Officers
(COOs), sharing operational oversight of
the business, to accelerate the pace of
change across the core businesses. This
has driven real momentum behind our
key strategic priorities, for example on
store rotation with an accelerated closure,
relocation and renewal programme and
accelerating online growth through MS2.
It has also accelerated the breadth and
pace of change in our culture, as the
executive team took direct ownership of
the People Plan and we have made some
progress against our priorities:
Transforming our organisational
design to drive ownership, pace
and commerciality
The key change over the past year
has been the appointment of the two
Co-COOs and the galvanising effect they
have had across the core businesses, as
can be seen in our preliminary results.
Across the business, the move to more
flexible, agile working has been further
embedded, underpinned by clear
frameworks and our market-leading
partnership with Microsoft. Adoption of
TEAMS is now at 93% across the business,
with 9.5 million interactions every month:
9 million chat messages, 280,000 video
calls and 120,000 online meetings, as well
as 240 streamed events.
In stores, work has begun to modernise
our approach to flexibility. For store
management teams we have introduced
job sharing, moved from shift patterns to
hours-based matrices and are trialling new
work patterns such as nine-day fortnights.
For customer assistants, we will be piloting
a new provider to make it easier for store
teams to book and change shifts through
a mobile-compatible digital platform
accessed through TEAMS. This will also
mean store managers can manage shifts
through their electronic devices on the
shop floor.
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Becoming a data enabled and
digitally focused business
If we want to be a truly omni-channel
business and maximise our competitive
advantage, our colleagues need the right
skills and capabilities, enabled by the right
systems and technologies, underpinned
by a digital first culture. Progress this
year includes:
Skills & Capabilities
In January the “Product Academy” was
launched, an £11m investment in face-to-
face training to help our store teams
perform and sell better, delivered to
25,000 colleagues. This includes “selling
through every channel” to increase
colleague confidence and capability in
utilising our growing number of digital
tools and in selling products and services
available online rather than in store. In
December we launched the first ever Data
Science and AI apprenticeship in retail,
offering a 15-month Level 7 course for 10
colleagues through our “BEAM Academy”
digital and data learning hub. Over the
past year, 14,000 learning sessions have
been undertaken through the Academy –
ranging from longer-term courses to
bite-sized sessions.
The right systems & technologies
The first phase of MyHR – the cloud-based
digital people system – was launched in
September, focused on performance
management and talent management
across the colleague lifecycle. While there
were bumps in the road and we continue
to respond to colleague feedback, it was a
relatively smooth process and is a key part
of moving to a manager-and-colleague-
led self-service model.
Colleague representation measurements1
Total employees1
Female
45,484
Male
20,726
Total senior managers1
Female
69 (20/21: 57)
Male
92 (20/21: 79)
Total Board1,2
Female
5 (20/21: 4)
Male
6 (20/21: 6)
66,210
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1. Colleague measurements compared to
20/21 to illustrate year-on-year progress.
2. As at publication date.
Senior managers from
ethnic minorities
6.8%
(20/21: 8%)
While we made progress in attracting
talent from diverse backgrounds, internal
progression for this group remained broadly
static impacting overall representation
among senior managers. We’re taking action
to increase representation by opening
accessible attraction routes and working
with our business-wide diversity networks.
Engagement
62%
Over 50,000 colleagues participated in our
Your Voice colleague survey, giving the
business insights into how engaged colleagues
are feeling in their roles at M&S. Following
a reset of our survey provider, we cannot
accurately compare against last year’s score
of 82% but this will be the benchmark score
we measure against in future reports.
Gender pay gap
12.5%
(20/21:
12.5%* restated)
Our gender pay gap, the average
difference in hourly earnings between
our male and female colleagues,
remained level on the year. We’ve made
progress in the representation of women
in leadership roles across the business,
with women in more than 50% of our
senior management roles. We remain
committed to reducing the gap further
through action such as expanding
talent pathways to further raise the
representation and reward of women
across the business.
* Our reporting coverage has been updated and
will include an additional colleague shift pattern
in our distribution centre, so we’ve restated
previous years to give the truest comparison
going forward.
Annual Report & Financial Statements 2022
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have been established, connecting our
top sellers with buying teams. These meet
regularly to discuss what is and isn’t
working and take action.
Our colleague suggestion programme,
“Suggest to Steve”, has been reinvigorated
since moving to a digital platform, with an
increase in suggestions of over 100% on
the prior year. Steve Rowe has surprised
colleagues with winning ideas with a
“Steve Rowe hello”, and “Dragon’s Den”
events have taken place in stores across
the country, with colleagues pitching
against each other. The business has put
over 600 ideas into action since launching
four years ago.
We also launched our new “Voice of the
Customer” digital platform, “Make your
Marks”, which houses all of our customer
feedback, received across all channels,
from online to stores, in one place. This
helps colleagues to make data-driven
decisions based on exactly what our
customers need and want.
#5
Creating a culture of plain
speaking: data-driven and focused
on performance
In the past year, Stuart Machin has led
a reset of performance management
focused on robust goal setting. This is
linked to transformation priorities and
open and honest conversations through
the year to track performance, enabled by
the MyHR system. Every single salaried
colleague had an end-of-year rating
recorded in the system, enabling far
better visibility of performance data to
ensure fairness and transparency. In stores
we reset expectations for our customer
assistants and have continued to drive
quarterly check-ins on progress, with
data showing that 84% of colleagues
are now having regular check-ins with
their manager.
STRATEGIC REPORT
#3
We have continued to use TEAMS as a
gateway to different services, utilising its
high adoption rates. We have fully digitised
the operational communications that go
out to stores through the TEAMS platform.
They are now personalised to be more
relevant to colleagues, albeit there is
still work to do on making these
communications succinct and engaging.
The revamped colleague survey and
CEO suggestion scheme are also fully
digitised and accessed through TEAMS,
which has driven increased participation.
Creating a team of empowered,
responsive and commercial leaders
who are close to the front line
Improving talent planning and driving
a high-performance culture has been
a real area of focus for the executive
team over the past year. As a result,
while we continue to be a destination
for world-class talent, for the first time
since beginning the transformation
we have promoted more people into
senior leadership roles than we have
hired externally.
Standardising expectations has improved,
with the introduction of a leadership
framework and model of potential to give
clarity to what great leadership looks like
at M&S. However, there is still not a regular
cadence of leadership engagement or
development to build “one M&S leadership
team”. In addition, while listening groups
are now an established practice at M&S
and the “Christmas Elfers” scheme – where
support centre colleagues help stores
over the peak period – was the biggest
to date, the reality is that programmes
to connect leaders to the front line have
stalled in the past year.
#4
Putting the store voice back at the
centre of the business and amplifying
the voice of the customer
In September we established the “Store
Voice Feedback” network, allowing stores
to send feedback directly to the
leadership, including the CEO. This is
coupled with a weekly call every Monday
morning in which the store managers
challenge the business on all issues stores
are grappling with. This is followed every
Monday afternoon by a call to store
managers setting out the priorities of the
week but also responding to challenges
raised through the feedback call. In
addition, “Buyers and Sellers” networks
In terms of equipment, headsets for store
teams are being trialled in 25 stores so
that colleagues can talk to each other
on the move using TEAMS, cutting time
and helping colleagues spend more time
with customers.
There remains more work to do to ensure
a consistent quality of WiFi across the
estate, particularly as we expand our
omni-channel capabilities.
Digital-first culture
Our BEAM Academy has engaged over
100,000 colleagues through events during
the year, including 3,000 colleagues at
our biggest-ever annual “Digifest”, 450
colleagues participating in the digital
and data hackathon and 900 regularly
attending the “DigiMeetUp” sessions.
To target colleagues of the future, we
also sponsored “Hack the Burgh” –
Scotland’s biggest student hackathon.
To foster digital innovation, "Ignite" – our
external innovation and partnerships
function – met over 500 start-ups,
launched 19 new trials and established
two new partnership with start-ups,
building on our existing work with
True and Founders Factory.
However, having directly asked colleagues
their views on our progress in creating
a digital-first business, the feedback
is clear. While colleagues understand
the importance of digital and data
transformation and of growing the Sparks
digital loyalty programme, they do not yet
believe that data is used enough to inform
decision-making or that we have invested
enough in the tools and capabilities to
enable them to do their job better.
Competitive reward
We’ve invested in our remarkable people
by increasing our hourly rate of pay.
Every store colleague across the UK
now earns at least £10 an hour, as part
of our competitive reward package.
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– which has doubled to c.10,000. In a “world
first”, we are engaging our alumni as
mentors for current colleagues, and we
are delighted that Steve Rowe – perhaps
our most famous alumnus – will be the
community’s president.
MOVING FROM FIXING THE
BASICS TO THE NEXT PHASE
OF TRANSFORMATION
Perhaps the most significant change to
our people and culture is the handing of
the baton from Steve Rowe to the new
leadership team. On 25 May Stuart Machin
will become CEO, Katie Bickerstaffe
Co-CEO and Eoin Tonge Group CFO &
Chief Strategy Officer. Bringing these
three leaders together will provide the
stability, pace and bandwidth required to
accelerate the pace of change as M&S
enters the “shaping the future” phase.
Key to this is upping the pace of change
and becoming a business that moves
away from a linear transformation
programme to an organisation that is
continually changing, evolving and
experimenting. In many ways it means
more fully executing the priorities we have
had for our people and culture for the
past four years. Breaking down hierarchies,
really listening and – critically – acting on
what colleagues and customers are
saying. Making M&S a place where every
single colleague feels they belong and
can grow their career at a business they
trust to do the right thing. Killing sacred
cows and becoming a truly data-led,
digitally enabled business focused on
outcomes, not inputs.
Stuart has taken immediate “Day One”
steps to listen and act on what colleagues
are saying. The CEO suggestion scheme
has been reset and expanded, so anyone
can make a suggestion, ask a question, or
bring an issue “Straight to Stuart”, and he
and the leadership team will address it and
respond within 48 hours. In addition, Stuart
and the executive team will lead from the
front when it comes to being “one M&S
team” close to the front line and the
customer. They will be running a store for
a week at least once a year, and every
support centre colleague will be expected
to spend a minimum of five days a year
with colleagues serving customers, either
in stores or e-commerce distribution.
New technology
By investing in new technology –
including digital headsets –
we’re helping our store colleagues
deliver seamless experiences for
our customers.
Annual Report & Financial Statements 2022
29
lower socio-economic background. We are
piloting a RISE – Recognising In-Store
Experience – programme, opening up
support centre opportunities for store
colleagues, and will expand it in the
coming year. 427 young people
participated in the “Marks and Start”
programme for those furthest away
from work, with 81% offered work at
the end of it, and we have delivered
the government-backed Kickstart
programme, giving 358 young people a
six-month placement and offering 80%
of participants work at the end of it.
Building an involving, engaging culture
Over 50,000 colleagues participated in our
Your Voice survey, and the feedback was
clear. Colleague belief that we are in a
position to succeed has really improved,
there remains huge pride in the brand, and
scores on being empowered and trusted
to do what’s best for the business and
customers are high. However, while
colleagues’ belief that we engage in
genuine two-way communication has
moved upwards, it remains poor; too few
colleagues believe the right people are
recognised and rewarded, and belief that
action will be taken on feedback through
the colleague survey is very low. These are
critical areas to target in the coming year.
Our Business Involvement Group, BIG,
continues to engage regularly with the
leadership – including at Board and
executive levels – and work has been done
to better establish the role of BIG reps.
We’ve also taken action to get the basics
right with a much-improved induction.
Finally, it’s been a year since we launched
our alumni network – the M&S Family
Alongside tracking of performance, we
also invested in our rates of pay and
benefits for colleagues. With pay and cost
of living remaining top of mind for our
colleagues, in February we announced an
increase in the base rate of pay so that all
permanent colleagues earn a minimum
of £10, rising to £11.25 for colleagues in
London, both ahead of the real living
wage. In addition, we enhanced wider
benefits to include health & wellness
benefits, such as Virtual GP access and
financial management advice which
combined with our pension and discount
contributions offers one of the best
all-round reward packages in retail.
#6
Building an involving, engaging culture
where everyone can get on
M&S is made up of over 65,000 colleagues,
and our aim is to establish a culture which
brings out the best in each of them.
A place where everyone can get on
We have expanded the successful Food
Leaders programmes to offer a range of
innovative development programmes;
BUILD for colleagues new to leadership,
EVOLVE for colleagues moving from
management to broader roles and
TRANSFORM for colleagues moving
into senior leadership roles. They are,
critically, for ALL colleagues across the
business, and feedback is extremely
positive. The key now is to expand and
embed the programmes without lowering
their quality. In addition, we have
expanded our coaching offer, previously
only for executive leaders, to 300
high-potential colleagues, and have
developed “Stepping Into” programmes
to better support the career path of 750
high-performing store colleagues.
To ensure we are building a diverse
organisation, we have invested in new
attraction routes and partnered with
third parties to source candidates from
diverse backgrounds. This summer we will
welcome the first of our “Black Interns”
initiative participants and we have already
delivered our first “Diversity Insight”
work experience programme targeted at
undergraduates with an ethnic minority or
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STRATEGIC REPORT
SUSTAINABILITY
While we have leading positions in
customer perception, there is much
more to do in Plan A to communicate our
practices. In the year ahead we expect to
accelerate our programmes and bring
them through much more strongly to
the shelf edge both within the store
environment and during the online
shopping experience. We believe that
wider sustainability concerns are here to
stay, resulting in opportunities for our
brand to enter new markets. Through
our deep relationships with customers
through Sparks, our longstanding trusted
supplier partners and our portfolio of
innovation partners, we are well placed
to develop customer propositions
in areas such as circular fashion and
low-impact farming.
Sustainability Report
Shareholders can read a full update
on our progress in our sustainability
report at marksandspencer.com/
sustainabilityreport2022
ESG committee
report
Read our ESG committee report
on p70
EXTENDING AND EXPRESSING
OUR SUSTAINABILITY LEAD
M&S was a pioneer in creating an industry-
leading, fully integrated sustainability plan
under the “Plan A” banner, launched in
2007, which reflected values that have
been core to M&S’ culture since its
inception. During the year we reset
Plan A with a singular focus on cutting
our carbon footprint by one third by 2025
and becoming a net zero business across
Scope 1, 2 and 3 by 2040. As an own-brand
retailer, M&S is very well positioned to work
with its supplier partners to find better
ways of doing things. We have developed
a multi-stakeholder plan spanning
customers, colleagues and suppliers
to deliver on this target.
This reset includes the return of the
Group’s iconic “Look Behind the Label”
campaign, focusing customers on the
stories behind five everyday products,
from coffee to cotton, which are
responsibly sourced. We also identified
100 colleagues as “Carbon Champions”
in leadership positions in key roles in
buying, sourcing and operations and
identified key targets for 2025.
Following the reset of Plan A, we agreed
to link our new £850m revolving credit
facility to the delivery of our net zero
targets. These targets span activity on our
net zero roadmap across the value
chain, including commitments to zero
deforestation in soy sourcing, sourcing
more sustainable fibres, reducing
emissions in our property estate and
eliminating millions of units of single-use
plastic packaging.
During the year we launched new
initiatives to help customers lead
lower-carbon lives, including:
– Removing 75 million items of plastic
packaging from our food products and
installing plastic take-back bins in over
500 of our stores to make it easier for
customers to recycle soft plastic.
– A new incentive programme to reward
Sparks customers when they donate
pre-loved clothes to our “Shwopping”
partnership with Oxfam.
– A “test and learn” trial in an important
growth market, clothing rental, with a
Founders Factory joint venture
investment in the Zoa Group, the
operator of leading clothing rental
website, Hirestreet.
– In January, a Sparking Change National
Challenge, inviting 14 million Sparks
customers to try a lower-carbon
diet, to feel healthier and potentially
save money.
OUR
PARTNERSHIP
with dotte
Supporting the circular economy
In April, we joined the dotte collective, the UK’s first fully
circular kidswear peer-to-peer marketplace where parents
can buy, sell, donate and recycle outgrown kidswear. We
share a commitment with dotte to finding more circular
solutions which incorporate both new and pre-loved
clothing. dotte addresses the challenges parents face
when buying secondhand – through our partnership,
those who sell a pre-loved M&S item on the platform
will receive a M&S voucher for £5 off when they spend
£25 in our stores or online. Sustainability has been at
the heart of M&S Kids’ thinking for over a decade, and
we’re continuing to develop the sustainability credentials
within our ranges. Our schoolwear is made to offer
quality that can be handed down and this is proven in
the fact that M&S is one of the most popular brands on
dotte for resale, with over 400 items listed on the site.
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NON-FINANCIAL INFORMATION
STATEMENT
The statements below reflect our commitment to, and management of, people,
communities, the environment, human rights, anti-bribery and anti-corruption
in the last 12 months. Full details of all our policies on these matters can be found at
marksandspencer.com/thecompany.
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PEOPLE
We are committed to providing all of
our colleagues with a safe working
environment and an organisational culture
which promotes inclusion, diversity, equal
opportunities, personal development and
mutual respect. We want people to enjoy
coming to work and for the workplace to
be free from discrimination, harassment
and victimisation. We know that our Board
and leadership team play a vital role in this
commitment, which is why we have laid
out our progress in balanced leadership
on pages 68 to 69. Further detail on social
matters can be found in People & Culture
on pages 26 to 29, and our Section 172(1)
statement on pages 32 to 34.
Read more on our commitment to
people in our:
– People Principles
– Code of Conduct
– Responsible Marketing Principles
–
Inclusion, Diversity & Equal
Opportunities Policy
COMMUNITIES AND ENVIRONMENT
We have supported our local communities
throughout our 138-year history, because
we know that vibrant communities are
essential for our success. We aim to take a
progressive approach to our community
engagement, which is reflected in our
sustainability commitments. Sustainability
is also core to the M&S brand. This
framework brings together individual
business unit strategies into a shared
programme to drive behavioural change
and ensure the whole business operates
in a more sustainable way.
– Our contributions towards, and
consideration of, communities is integrated
throughout the report and can also be
found in our Section 172(1) statement on
pages 32 to 34, and in the ESG Committee
Report on pages 70 to 77.
HUMAN RIGHTS
M&S has a long history of respecting
human rights in the UK and standing
up for those values internationally. Our
commitment to human rights is reinforced
in our Human Rights Policy and Code
of Conduct and, for all suppliers and
business partners, in our Global Sourcing
Principles. We are also a signatory to the
UN Women’s Empowerment Principles and
the principles of the United Nations Global
Compact. We strive to be a fair partner by
paying a fair price to suppliers, supporting
local communities and ensuring good
working conditions for everyone working
in our business and supply chains. We are
committed to building knowledge and
awareness on human rights for all of our
colleagues and suppliers, encouraging
them to speak up about any concerns
without fear of retribution – the outcomes
of which also enable us to comply with
legislation and meet the expectations
of shareholders.
Read more on our commitment to
human rights in our:
– Modern Slavery Statement
– Human Rights Policy
– Code of Conduct
– M&S Global Sourcing Principles
– Child Labour Procedure
– M&S grievance procedure for Food
and Clothing & Home supply chains
Read more on our commitment to
communities and the environment on
our dedicated corporate website areas:
ANTI-BRIBERY AND
ANTI-CORRUPTION
– Our Communities
– Plan A: Our Planet
Read more on our activities in these
areas this year:
– Environmental commitments and progress
can be found in the ESG Committee Report
on pages 70 to 77. Details of our greenhouse
gas (“GHG”) emissions are on page 76.
M&S is committed to the highest
standards of ethics, honesty and integrity.
We have a zero-tolerance approach to
any form of bribery and corruption and
operate a compliance programme to
prevent bribery and corruption in our
business and supply chain.
Our Anti-Bribery and Anti-Corruption
policies outline the expected standards
of conduct that colleagues, contractors,
suppliers, business partners and any other
third parties who act for or on behalf of
M&S are obliged to follow. The Group
Policy outlines core principles and
approach, while the Colleague Policy
provides detailed guidance and sets out
the applicable procedures for colleagues,
workers and contractors. The Business
Partner Policy identifies the requirements
for service providers, suppliers and other
business parties.
Our programme includes detailed
procedures and controls around giving
and receiving gifts, hospitality and
entertainment; procedures for engaging
new suppliers and partners, specifically
those who are based in higher-risk
jurisdictions; and standard contract
clauses and clear reporting channels,
including confidential reporting. All
colleagues are required to undertake
mandatory Anti-Bribery and Anti-
Corruption e-learning. The Company
will consider taking disciplinary action
against anyone who fails to comply with
its Anti-Bribery Policy, up to and including
dismissal. Any potential incidents reported
internally or to the external confidential
reporting channels are followed up and
full investigations launched where such
action is deemed appropriate after
preliminary enquiries. All investigations
are subsequently reported to the
Audit Committee.
Bribery Risk Assessments are conducted
on an annual basis and an annual report
issued to the Audit Committee.
Read more on our commitment to
Anti-Bribery and Anti-Corruption in our:
– Business Partner Anti-Bribery and
Anti-Corruption Policy
– Code of Conduct
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Annual Report & Financial Statements 2022
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SECTION 172(1) STATEMENT
ENGAGEMENT &
DECISION-MAKING
SECTION 172(1) STATEMENT
We believe that considering our stakeholders
in key business decisions is not only the right
thing to do, but is fundamental to our ability
to drive value creation over the longer
term. During this financial year, in the midst
of recovering from a global pandemic,
balancing the needs and expectations of
our stakeholders has never been a more
important or challenging task.
Board directors are bound by their duties
under the Companies Act 2006 (the “Act”)
to promote the success of the Company
for the benefit of our members as a whole.
In doing so, however, they must have regard
to the interests of all of our stakeholders,
to ensure the long-term sustainability of the
Company. The Board is therefore responsible
for ensuring that it fulfils its obligations
to those impacted by our business, in its
stakeholder consideration and engagement.
Stakeholder consideration is embedded
throughout the business, with the Executive
Committee (“ExCo”) and senior management
actively engaged in communication and
involvement initiatives.
The following pages comprise our Section
172(1) statement, setting out how the Board
has, in performing its duties over the course
of the year, had regard to the matters set out
in Section 172(1) (a) to (f) of the Act, alongside
examples of how each of our key stakeholders
have been considered and engaged. Further
information can also be found throughout
the Strategic Report and in our exploration
of key strategic decisions made in the
Governance Report.
Read more:
Strategic Report, p2-55
Key Board Decisions, p34, p63-64
At marksandspencer.com/thecompany
STAKEHOLDER ENGAGEMENT & CONSIDERATIONS
SHAREHOLDERS
Why they matter
Securing our shareholders’ trust through
continuous engagement ensures their
ongoing investment and support.
Key priorities
For some, delivering sustainable, profitable
growth over the long-term. For others, seeing
immediate returns on their investment.
Increasingly for all, seeing proactive and
conscientious Environmental, Social and
Governance (“ESG”) plans being formed and
corresponding good performance in ESG areas.
How the Board engages
– The Annual General Meeting (“AGM”) is the
Board’s primary opportunity to interact
with shareholders, and at last year’s digital
meeting the Board engaged with nearly three
times as many shareholders than at the last
physically held AGM in 2019. Almost 1,700
individual shareholders engaged with our
AGM platform, either to watch, vote or submit
questions. The Board intends to continue with
this improved engagement trajectory, by
hosting another digital meeting this year.
– Our Private Shareholder Panel is a group of
randomly selected private shareholders
who have the opportunity to attend regular
meetings with our Board and senior
management, during which they can hear
more about M&S and provide their input
on the business’ direction of travel.
How M&S engages
– Our Investor Relations team, alongside
the Chairman and senior management,
maintains a regular dialogue with key
institutional investors. Over the course of
the past year, the team met with (via video
conferencing, over the phone and in-person)
over 120 institutional funds, engaging with
investors who we estimate represent over
half of our issued share capital.
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Governance considerations
How M&S engages
– Dividend decision-making, balancing the
desire of shareholders for immediate
returns, against the need to preserve liquidity
and ensure the long-term sustainability
of the business.
– This year we introduced our Voice of the
Customer programme, to measure customer
satisfaction and experience with short,
targeted surveys across approximately
1.5 million touchpoints online and in store.
– Overarching strategy and purpose setting,
aimed at delivering against shareholders’
needs for long-term, sustainable and
profitable growth.
– Audit Committee oversight of internal and
external audit processes, ensuring the
business’ internal framework of controls is
sufficient to protect shareholder investment,
and that the presentation of the financial
statements provides investors with
an accurate, fair and balanced view of
performance, strategy and operations.
CUSTOMERS
Why they matter
Our customers are at the heart of our business.
Maintaining and increasing their enthusiasm
and loyalty for the M&S brand ensures the
enduring success of our business.
Key priorities
Great quality and value products; having
good availability across product lines; a store
estate and an online offer that are easy and
enjoyable to shop in; a conscientious corporate
citizen who customers can rely on to have
acted ethically and sustainably when sourcing
the products they wear, eat, and bring into
their homes.
How the Board engages
– Customer feedback is incorporated into
business updates and proposals for the
Board’s review and consideration.
– Our non-executive directors regularly attend
store visits throughout the year, seeing
first-hand how stores operate and how
this impacts customer experience.
– We regularly monitor customer mood and
topical issues through a monthly survey of
1,000 customers. This helps us to understand
how customers are feeling and what is going
on in their lives, so we can shape content and
tone across our communication channels.
– We conduct focus groups, in-depth
interviews and surveys throughout the year
on our strategic priorities. This year, in-depth
discussions have been held with over 400
customers, and another 9,000 have been
surveyed, on a range of topics including:
website experience; delivery and collections
proposition; Spring and Autumn campaigns
response; and Christmas store experience.
Governance considerations
– ESG Committee review of customer insights
and perceptions on M&S’ sustainability
credentials, to inform the Plan A reset and
future strategic aims on sustainability.
– Budget and three-year plan discussions,
agreeing pricing strategies to take account
of customer impact amidst inflationary
pressures and the energy price crisis.
COLLEAGUES
Why they matter
We cannot operate and achieve our strategic
goals without an engaged colleague base that
feels appreciated, and is motivated to deliver
for our customers and the business’ success.
Key priorities
Feeling valued and appropriately rewarded;
having an inclusive and diverse place to work
with a respectful corporate culture; being able
to share their views and have their colleague
voice heard in decision-making.
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STAKEHOLDER ENGAGEMENT & CONSIDERATIONS CONTINUED
– Directors meet and engage with various
community players in visits to stores and
distribution centres.
How M&S engages
– This year, our charitable donations reached
over £5.2m, and we fundraised more than
£4m in donations from our customers,
colleagues and partners. Our donations
were made to our 35 Sparks charity partners,
as well as to UNHCR and UNICEF in support
of the crisis in Ukraine.
PARTNERS
Why they matter
Our partners provide avenues to expand our
reach and access to new customers - in the
UK and internationally. We also have partners
assessing and supporting our operations, to
ensure we constantly evolve and improve.
– The M&S Company Archive provided
Key priorities
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A
T
E
G
I
C
R
E
P
O
R
T
How the Board engages
– Our Business Involvement Group (“BIG”),
a network of elected representatives from
across all parts of the business, facilitates
engagement with colleagues, with local BIG
teams regularly feeding back to National BIG.
The chair of BIG represents the collective
colleague voice by attending a number of
Board and Remuneration Committee
meetings throughout the year.
– Board members hear from and engage
with our colleagues directly during store
visits, through listening groups, and also
regularly join leadership team meetings
across the business.
How M&S engages
– Colleague updates on performance and
strategy are provided by ExCo members
and senior management through regular
business area “huddles”, as well as by email,
virtual meetings, and our Microsoft Teams
communication and collaboration platform.
Colleagues are encouraged to be involved in
these forums by voicing their views, ideas and
questions with the leadership team directly.
– This year, we introduced a new Colleague
Voice programme, surveying our colleagues
bi-annually to give the Board and ExCo an
informed picture of how colleagues feel
about working for the business. The
progressive colleague engagement score
through the year was 62%, with 75% of
colleagues participating saying that they
feel proud to work for M&S.
Governance considerations
– The Board’s Group purpose setting
and strategy discussions, highlighting
the importance of colleague buy-in
and consequently commissioning a
colleague survey to invite views on
purpose communication.
opportunities for people to enjoy M&S’
rich heritage through a combination of
popular online events, an expanded range of
digital learning resources and relaunched
visitor services at the “Marks in Time”
Exhibition in Leeds. Visit marksintime.
marksandspencer.com for more details.
Governance considerations
– In consideration of our community and to
ensure the business’ effective charitable
giving, the ESG Committee overhauled and
strengthened our governance process
on charity partnerships and donations.
SUPPLIERS
Why they matter
Our trusted suppliers enable us to provide
our customers with the high-quality, ethically
sourced and produced goods they expect.
Key priorities
A long-term, productive relationship with M&S,
allowing them to create great products, build
volume at equitable prices and achieve their
own strategic goals.
– In support of an “internal first” approach to
How the Board engages
growing talent and improving diversity in the
workforce, and colleague survey feedback
on development opportunities, the Board
encouraged the continued launch of
long-form learning and development
programmes tailored to all career stages.
COMMUNITIES
Why they matter
Community acceptance and mutual respect
provides us with a licence to operate and
ensures we are a force for good for the
people and places we impact. This includes
the wider environment, where considerate
use of resources contributes towards our
long-term sustainability.
Key priorities
A fair and valuable contribution to society
and the economy and for M&S to be a socially
responsible corporate, that cares about its
long-term impact on the communities and
environment it operates in.
How the Board engages
– The Board and ESG Committee have
reviewed key community initiatives
in meetings, including as part of the
sustainability strategy and, more recently,
the business’ approach to the invasion
of Ukraine.
– The Board and Audit Committee reviews
and considers supplier relationships and
feedback in operational, performance and
risk updates.
– The ESG Committee monitors and critically
evaluates sustainability and ethical trading
in the supply chain.
How M&S engages
– We measure Supplier Satisfaction using the
independent Advantage Report Mirror to
survey a proportion of our supplier base each
year. The annual Groceries Code Adjudicator
survey also provides valuable insight on
sector priorities and supplier perceptions.
– We have engaged with our M&S Select Farm
farmers and growers on low impact farming
to help address the challenges of global
warming and climate change. As a result,
we have established a network of 18 Indicator
& Innovation Farms to trial new concepts,
identify solutions for wider adoption and
champion production systems that reduce
carbon and improve wildlife habitats.
Governance considerations
– Audit Committee review of compliance with
the Groceries Supply Code of Practice, using
the results from the annual Groceries Code
Adjudicator survey to focus management’s
activities with suppliers for the coming year.
– Review of our payment practices, ensuring
that these are appropriate and our smaller
suppliers are supported and also have access
to our Supply Chain Finance solution.
A corporate partner who responds to concerns,
acknowledges jurisdictional and technical
expertise, and provides peer-to-peer support.
How the Board engages
– The Board has considered and approved
contract extensions with existing partners,
as well as approving the launch of a new
strategic partnership with Costa Coffee,
supplying chilled and snacking M&S food in
over 2,000 Costa stores.
– Upon Russia’s invasion of Ukraine, the Board
quickly discussed the impact on our
colleagues and customers in the region. The
proposed response to our Turkish franchise
partner operating in both Ukraine and Russia
was also debated at length. The Board readily
agreed that colleague welfare should be the
priority and our partner should be engaged
to ensure the safety of colleagues by any
means necessary.
How M&S engages
– We have worked closely with our global
franchise partners during the year to support
them through the various challenges that
Covid-19 has created in their markets.
Frequently changing government regulations
have impacted consumer sentiment and
shopping habits; we have responded by
supporting our partners with changes to
product demand and facilitating multiple
new selling channels to make it easier for
partners to continue providing M&S products.
– At the Board’s direction, we continue to
engage with our Turkish franchise partner,
FIBA, on the operation of stores in Ukraine
and Russia. For the safety of colleagues, all
operations in Ukraine were suspended on
24 February 2022. Shipments to Russian
stores were suspended on 3 March 2022,
and negotiations have now concluded with
FIBA to fully exit from Russia.
Governance considerations
– The Board considered our Turkish franchise
partner’s needs at length in its decision to
withdraw from Russia. Ultimately agreeing
that, while our partner’s interests and our
ongoing relationship would likely be
jeopardised, ceasing trade in Russia was
the right thing to do morally.
– Investments in third-party brands, reviewing
corporate and decision-making structures
being implemented whilst considering the
needs and support required by our new
strategic brand partners.
Annual Report & Financial Statements 2022
33
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SECTION 172(1) STATEMENT
STAKEHOLDER CONSIDERATIONS
During the year, as the Board made decisions implementing our strategic priorities, the different interests
of our stakeholder groups, and the impact of key decisions upon them, were considered.
In some cases, the interests and impacts between stakeholder groups conflicted, and the Board and ExCo
had to assess these conflicts and attempt to balance them in their decision-making.
Here, we provide an overview of how some of these decisions were influenced by, and impacted, our six stakeholder groups.
THREE-YEAR PLAN AND STRATEGIC FINANCIAL MANAGEMENT
Background: The Board and ExCo complete a three-yearly root and branch review of the Group’s strategic financial plans. This year’s review
was particularly focused on ensuring balance sheet strength for the next phase of our transformation.
Shareholders In its discussions, the Board carefully
considered the need to deliver tangible value to shareholders,
weighing their short-term desire for returns against the need
to deliver long-term sustainable value. The Board discussed
reintroduction of a dividend alongside overall capital
management; in particular, investments in the transformation,
and actions aimed at improving investment grade metrics.
The Board agreed non-payment of a dividend continues to be
appropriate in the context of strengthening the balance sheet
and securing the business’ long-term future for shareholders.
Customers Amidst inflationary pressures and the energy price
crisis, the Board has been conscious of customers’ perception
of M&S’ affordability and ensuring our pricing strategy does not
add to pressure on households. It agreed early on in three-year
plan discussions that increases in customer pricing should be
avoided where possible, in favour of maximising internal
efficiencies and resource allocation.
Colleagues Knowing that our colleagues will also be
managing pressure on their household budgets, the Board
agreed to incorporate in the plan inflationary pay rises for all
colleagues. The payment of a bonus to c.5,000 employees
was also approved, and to align colleague interests with
shareholders, 50% of bonus entitlement is being deferred
into shares exercisable in three years’ time.
Communities In recognition of our Plan A commitments
to our community and the environment, the Board has
incorporated strategic investments into the three-year plan,
ensuring the business can achieve its target of a one-third
reduction in carbon emissions by the end of the three-year
plan’s duration in 2025, and is set up in the longer term to
become a net zero business by 2040.
Suppliers The Board has considered how best to support
suppliers. It has committed to mitigating cost pressures by
absorbing inflationary impacts where possible, supporting
smaller suppliers with access to supply chain finance and
shorter payment terms, investing in local sourcing in the
Food supply chain and considering near-shore manufacturing
in Clothing & Home.
Partners The Board considered existing and potential
partners in three-year plan deliberations. Ultimately agreeing
that the use of partners could be beneficial to expand the
M&S brand’s reach and impact the bottom line (Costa) and
would encourage a culture of innovation in the business
(True Capital III Fund investment).
Outcome
The business’ three-year plan focuses on supporting
the next stage of the M&S transformation, setting
the business up for longer-term sustainable value
growth while considering and meeting various
stakeholder expectations.
FRANCHISE PARTNERSHIPS IN UKRAINE
AND RUSSIA
Background Upon Russia’s invasion of Ukraine, the Board quickly
met and agreed that any trading in Russia should cease immediately.
TALENT AND SUCCESSION REVIEWS
Background As part of its commitment to internal talent
growth, succession and diversity, the Board has reviewed and
directed the ExCo to develop succession plans for senior
management across the business.
Colleagues The Board considered colleagues affected
in the region first and foremost, agreeing that colleague
safety is a priority and therefore Ukrainian stores should
not trade while unsafe to do so.
Customers & Communities Anticipating that our
customers and wider community would expect an M&S
response, the Board encouraged decisive management
action to donate and fundraise for charitable causes in
support of Ukraine, including by activating till-point and
online giving in the UK.
Partners Our Turkish franchise partner, FIBA, operates
M&S stores in both Ukraine and Russia. Their interests were
considered at length by the Board, noting that these and
our ongoing relationship would likely be jeopardised if we
ceased trade in Russia.
Outcome
The Board is wholly agreed that its approach is the
right thing to do morally for all our stakeholders.
As a result, the Group has recognised a charge of
£31.0m representing the Group’s full exit costs from
Russia and business disruptions in Ukraine. See note 5
in the financial statements.
34
Marks and Spencer Group plc
Shareholders: The Board considers that diversity of
thought and appropriate succession planning at all levels
in the business will positively contribute to shareholders’
long-term returns.
Colleagues: Acknowledging colleague appetite to
grow and develop their careers at M&S, the Board has
supported the use of leadership programmes, enhancing
the personal and professional development of colleagues
at all career stages.
Customers & Communities: Noting the diversity of
our customers and communities, the Board believes an
equally diverse colleague base, championing products
that they themselves would buy, will ultimately resonate
with customers.
Outcome
Succession plans are in place for all key senior leadership
positions, with longer-term development programmes
being used to grow our internal talent.
© 2019 Friend Studio Ltd
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Modification Date: 26 May 2022 6:36 pm
KEY PERFORMANCE
INDICATORS
FINANCIAL
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
GROUP REVENUE
£10.9bn+6.9%
18/19
19/20
20/21
21/22
10.4
10.2
10.9
9.0
52
APM
GROUP PROFIT BEFORE TAX (PBT)
& ADJUSTING ITEMS
52
APM
£522.9m +29.7%
18/19
19/20
20/21
21/22
41.6
511.7
403.1
522.9
Group revenue before adjusting items increased 6.9% versus 2019/20,
driven by Food sales up 10.1%, Clothing & Home sales up 3.8% and
International sales down 0.8%.
The Group delivered profit before tax and adjusting items of
£522.9m as a strong all-round performance combined with the
benefits of the transformation delivered an encouraging performance
across the business.
RETURN ON CAPITAL EMPLOYED (ROCE)
ADJUSTED EARNINGS PER SHARE (EPS)
53
APM
52
APM
12.2%
+2.2ppt
18/19
19/20
20/21
21/22
3.8
11.8
10.0
12.2
21.7p +29.9%
18/19
19/20
20/21
21/22
1.1
23.7
16.7
21.7
Return on capital employed improved two percentage points on 19/20
following a rebound in earnings before interest, tax and adjusting items.
Adjusted basic earnings per share was 21.7p (2019/20: 16.7p; 2020/21
52-week basis: 1.1p) due to higher adjusted profit year-on-year.
APM
FREE CASH FLOW
(PRE-SHAREHOLDER RETURNS)
53
APM
£699.2m
+239.9%
18/19
19/20
20/21
21/22
205.7
296.4
580.8
699.2
The business generated free cash flow of £699.2m, largely driven by
the recovery in EBITDA, working capital inflow and reduced cash tax and
capital expenditure.
DIVIDEND PER SHARE
Nil (20/21: nil)
18/19
19/20
20/21
21/22
Nil
Nil
3.9
13.3
We did not pay a dividend for 2020/21, and the Board has decided not to
pay a dividend this year. This is consistent with the announcement at the
half-year results that payment of a dividend this financial year would be
unlikely as we focus on restoring sustainable profitability and recovering
balance sheet metrics consistent with investment grade.
APM Alternative performance measures as outlined on the inside cover.
52 These figures are reported on a 52-week basis.
53 These figures are reported on a 53-week basis.
© 2019 Friend Studio Ltd
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Modification Date: 27 May 2022 1:59 pm
Annual Report & Financial Statements 2022
35
STRATEGIC REPORT
FINANCIAL REVIEW
‘‘
DESPITE THE NEAR-TERM CHALLENGES,
THE BUSINESS IS BETTER SET UP
BOTH FINANCIALLY AND OPERATIONALLY
TO INVEST FOR THE FUTURE.
Eoin Tonge, Chief Financial Officer
2 Apr 22
27 Mar 211
28 Mar 20
10,885.1
10,909.0
6,639.6
3,332.2
937.2
8,961.5
8,972.7
5,994.8
2,198.6
779.3
10,181.9
10,181.9
6,028.2
3,209.1
944.6
709.0
277.8
330.7
73.6
13.0
13.9
(115.6)
(70.5)
522.9
(131.2)
391.7
309.0
15.7p
21.7p
–
209.7
213.6
(129.4)
45.1
2.0
78.4
(122.5)
(45.6)
41.6
(242.8)
(201.2)
(194.4)
(9.8)p
1.1p
–
590.7
236.7
223.9
110.7
16.8
2.6
(133.4)
(54.2)
403.1
(335.9)
67.2
27.4
1.3p
16.7p
3.9p
’’
Change vs
20/21 %
21.5
21.6
10.8
51.6
20.3
238.1
30.1
n/a
63.2
550.0
-82.3
-5.6
54.6
1,157.0
-46.0
n/a
n/a
n/a
1,872.7
n/a
Change vs
19/20 %
6.9
7.1
10.1
3.8
-0.8
20.0
17.4
47.7
-33.5
-22.6
434.6
-13.3
30.1
29.7
-60.9
482.9
1,027.7
1,107.7
29.9
n/a
FINANCIAL SUMMARY
52 weeks ended
Group statutory revenue
Group sales before adjusting items
UK Food
UK Clothing & Home
International
Group operating profit/(loss) before adjusting items
UK Food
UK Clothing & Home
International
M&S Bank and Services
Share of result in associates and joint ventures
Interest payable on lease liabilities
Net financial interest
Profit before tax & adjusting items
Adjusting items
Profit/(loss) before tax
Profit/(loss) after tax
Basic earnings/(loss) per share
Adjusted basic earnings/(loss) per share
Dividend per share
-31.6
Net debt
1. 2020/21 was a 53-week year and comparative periods are on a 52-week basis. To aid understanding, we have presented the unaudited 52 weeks to 27 March 2021; however, net debt is
£3.95bn
£2.70bn
£3.52bn
-23.3
given on a 53-week basis.
Notes:
There are a number of non-GAAP measures and alternative profit measures ("APMs”) discussed within this announcement, and a glossary and reconciliation to statutory measures is
provided at the end of this report. Adjusted results are consistent with how business performance is measured internally and presented to aid comparability of performance. Refer to
the adjusting items table below for further details.
Given the exceptional nature of financial results last year due to the impact of Covid, all comparatives within this Financial Review are given against 2019/20 unless otherwise stated.
In the current period, we have introduced a new APM: ‘sales’. All references to sales throughout this document are statutory revenue plus the gross value of consignment sales
excluding VAT. Where third-party branded goods are sold on a consignment basis, only the commission receivable is included in statutory revenue. This new measure has been
introduced given the Group’s focus on launching and growing third-party brands and is consistent with how the business performance is reported and assessed by the Board and the
Executive Committee.
36
Marks and Spencer Group plc
© 2019 Friend Studio Ltd
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Modification Date: 27 May 2022 1:59 pm
GROUP RESULTS
Group sales before adjusting items was £10,909.0m. Sales
increased 7.1% versus 2019/20, driven by Food sales up 10.1%,
Clothing & Home sales up 3.8% and International sales down 0.8%.
Statutory revenue in the period was £10,885.1m, an increase of
6.9% versus 2019/20. The Group generated an adjusted
profit before tax of £522.9m and a statutory profit before tax
of £391.7m.
UK business rates relief of £59.8m (2020/21: £172.2m) helped to
compensate for the continuing loss of trade from lower footfall
to Clothing & Home stores in the UK, and in the Food hospitality
business which was closed until mid-May 2021 and continues to
trade well below 2019/20 levels.
Statutory profit before tax includes total charges for adjusting
items of £131.2m.
For full details on adjusting items and the Group’s related policy,
see notes 1 and 5 to the financial statements.
UK: FOOD
UK Food sales increased by 10.1%, driven by the performance
of core categories, partly offset by reduced sales from the
recovering franchise and hospitality businesses. Excluding
franchise and hospitality, sales grew 14.7%.
Change vs 19/20 %
Food
Food ex franchise
and hospitality
Q1
9.4
Q2
11.5
Q3
12.4
Q4
7.0
FY
10.1
17.0
16.8
16.4
8.6
14.7
M&S Food reported sales do not benefit from a direct online
grocery presence, with these sales instead reported through
Ocado Retail.
52 weeks ended
2 Apr 22 27 Mar 21 28 Mar 20
Change vs
19/20 %
Footfall, m (average/week)
Transactions, m
(average/week)
Basket value inc VAT (£)
Total sales ex VAT £m1
1. Includes M&S.com.
10.1
8.0
11.8
-14.4
8.0
15.9
5.6
20.6
9.3
12.6
6,639.6 5,994.8 6,028.2
-14.0
26.2
10.1
Footfall in the period, while recovering, remained below 2019/20,
with a similar trend for the number of transactions. Revenue was
driven by increased basket value as customers used M&S for
more of their everyday shop. However, basket size has declined
compared to 2020/21 driven by the gradual recovery of our
hospitality and food-on-the-move businesses, which typically
have smaller baskets, as well as a reduction in “core” basket size
through the year as Covid tailwinds reduced. Although customer
behaviour started to normalise in Q4, metrics remained ahead of
2019/20 levels.
52 weeks ended
Sales1
Operating profit before
adjusting items
Operating margin
2 Apr 22
£m
27 Mar 21
£m
28 Mar 20
£m
Change vs
19/20 %
6,639.6 5,994.8 6,028.2
10.1
277.8
4.2%
213.6
3.6%
236.7
17.4
3.9% 30 bps
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
1. ‘Sales’ is equal to revenue within the Food business.
The Food business in total generated operating profit before
adjusting items of £277.8m compared with £236.7m in 2019/20.
The table below sets out the drivers of the movement in Food
operating profit margin before adjusting items over two years.
Operating profit margin before adjusting items
2019/20
Gross margin
Store staffing
Other store costs
Distribution and warehousing
Central costs
2021/22
%
3.9
0.2
1.4
0.4
(1.1)
(0.6)
4.2
– Gross margin increased c.20bps. The improvement in margin
rate was a result of cost-saving programmes, including Ocado
synergies, as well as lower net waste and reduced sales in our
lower gross margin Franchise business. This was partly offset
by investment in price, reduced sales from our higher-margin
Hospitality offering, and additional warehousing and freight
charges within margin.
– Store staffing costs decreased c.140bps, primarily driven
by retail restructuring efficiencies enabled by technology
improvements in store and ongoing initiatives, partly offset by
investment in colleague pay rates and Covid-related costs
such as door hosts.
– The c.40bps decrease in other store costs relates to
government business rates relief of £24.6m and lower
depreciation charges as legacy store modernisations come to
the end of their useful economic lives, partly offset by an
increase in maintenance and store standards spend.
– Distribution and warehousing costs increased c.110 bps,
reflecting investment in the Milton Keynes ambient depot to
support volume growth, higher pay, incentives and sub-
contracting related to warehouses and haulage, the cost to
serve of online orders, and inefficiencies from EU border-
related processes for serving Northern Ireland.
– Central costs increased c.60bps, driven by investments in
technology, data and digital initiatives, including in forecasting,
ordering and allocation systems, as well as colleague
incentives. This was partly offset by technology savings from
optimising the cost base and a reduction in the depreciation of
technology assets as they reach the end of their useful lives.
© 2019 Friend Studio Ltd
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Annual Report & Financial Statements 2022
37
STRATEGIC REPORT
FINANCIAL REVIEW
CONTINUED
OCADO RETAIL LTD
UK: CLOTHING & HOME
Clothing & Home sales increased 3.8% as the continued growth
of the online business offset the decline in store sales due to
lower footfall. The online business remained robust throughout
the period.
Change vs 19/20 %
Q1
Q2
Q3
Q4
FY
Clothing & Home
sales
Clothing & Home
stores sales
Clothing & Home
online sales
Clothing & Home
statutory revenue
-4.2
2.0
3.2
17.3
3.8
-21.2
-14.3
-10.9
5.6
-11.2
59.2
62.3
50.8
52.1
55.6
-4.6
1.4
2.4
16.0
3.1
Comparative figures in Q4 are impacted by the first Covid
national lockdown, which we estimated had a £78m adverse
impact on sales at the time, predominantly in stores. Adjusting
for this, Clothing & Home sales increased c.3.9% in Q4 and c.1.4%
for the full year.
Online
52 weeks ended
Traffic (m)1
Active customers (m)2
Conversion (%)3
Average order value inc VAT
pre returns (£)
Returns rate (%)
2 Apr 22 27 Mar 21 28 Mar 20
Change vs
19/20 %
405.7
9.0
7.0
55.4
25.8
417.5
9.0
7.2
49.7
18.6
31.4
308.8
5.9
52.5
6.3 +70 bps
51.5
7.6
28.0 -220 bps
Sales ex VAT £m
1. Traffic: the number of site visits to M&S.com and the app.
2. Active customers: the number of unique customers who have made a purchase in the
1,122.7 1,109.7
721.3
55.6
prior 52 weeks.
3. Conversion: the number of orders as a % of the number of site visits.
Following growth in 2020/21, online sales remained robust,
with growth on both a one and two-year basis for the full year,
despite elevated comparatives in Q4 2020/21 from the third
national lockdown. Online traffic through the app was up over
200% on 2019/20 following the relaunch of Sparks in July 2020,
which has helped to drive the increase in active customers.
Increased app usage has driven better conversion and,
encouragingly, app conversion for the full year remains
consistent with H1 at over 9%.
As anticipated, as customer habits reverted to pre-pandemic
trends, returns rates have normalised towards 2019/20 levels
through the year. Average order value (“AOV”) was ahead of
2019/20 levels driven by a full-price trading stance which
increased average selling price (“ASP”), along with the benefit
of third-party brands.
The Group holds a 50% interest in Ocado Retail Ltd ("Ocado
Retail"). The remaining 50% interest is held by Ocado Group
plc ("Ocado Group"). Full Year Results are consistent with the
quarterly results reported by Ocado Group on behalf of Ocado
Retail for the quarterly periods ended 30 May 2021, 29 August
2021, 28 November 2021 and 27 February 2022.
All commentary in this section is against 2020/21 comparatives,
as the acquisition of the investment in Ocado Retail Ltd by M&S
was made part-way through 2019/20.
Revenue growth vs
2020/21 (%)
Active customers (k)
Average orders per week (k)
Q1
Q2
Q3
Q4
8.4
777
383
-10.6
769
338
-3.9
832
375
-5.7
835
367
Notes: Retail revenue comprises revenues from Ocado.com and Ocado Zoom and
excludes revenues from Fetch in current and prior periods. Average orders per week
refers to results of Ocado.com.
Revenue declined 4.4% compared to 2020/21 (-3.0% excluding
Fetch) as trade annualised against sales growth during three
national lockdowns in 2020 and towards the end of H1 was
impacted by the fire at the Erith CFC on 16 July. These impacts
were partly offset by the ongoing capacity roll-out in the period.
M&S products continue to account for over 25% of the average
Ocado basket.
£m
Revenue
52 weeks
ended 27
February
2022
52 weeks
ended 28
February
2021 Change %
2,248.8 2,353.2
-4.4
EBITDA before exceptional items
Exceptional items
Depreciation and amortisation
Operating profit
104.8
(14.4)
(41.3)
189.9
50.5
(36.2)
49.1
204.2
-44.8
-128.5
-14.1
-76.0
Profit after tax
27.8
156.8
-82.3
M&S 50% share of profit after tax
Ocado Retail Ltd is reported as an associate of M&S as certain rights are conferred
on Ocado Group plc for an initial period of at least five years from acquisition. It is
expected that full consolidation of Ocado Retail Ltd by Ocado Group plc will continue
for at least five years from the formation of the joint venture, after which it is anticipated
that control of the joint venture will pass to M&S following which it will consolidate the
joint venture. Exceptional items are defined within the Ocado Group plc Annual Report
and Accounts 2021.
-82.3
78.4
13.9
Ocado Retail EBITDA before exceptional items was down 44.8%,
reflecting the normalisation of basket size and shape of week as
well as an increasing higher percentage of immature capacity as
we open new CFCs.
In addition, Ocado Retail has recognised £14.4m of net
exceptional costs before tax, including £6.8m exceptional
costs relating to the fire at Erith CFC and £6.2m relating to the
development and introduction of IT systems as we transition
away from Ocado Group IT services, tools and support.
Exceptional items in the prior period relate primarily to the
Andover fire insurance receipts.
As a result of lower EBITDA and net exceptional costs,
Group share of Ocado Retail profit after tax was £13.9m.
38
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– The increase in central costs of c.100bps was driven
by investments in technology, data and digital initiatives,
colleague incentives, additional costs to support brands, and
higher pay-per-click marketing activity to drive online growth.
This was partly offset by a reduction in the depreciation of
technology assets as they reach the end of their useful lives.
Clothing & Home online generated an adjusted operating profit
margin of c.9%, with the reversion towards 2019/20 returns
rates reducing margin year-on-year as anticipated, as well as
investments in data and digital initiatives to drive future growth.
The adjusted operating profit in stores represented a margin on
sales of c.10%, or approximately 9% after excluding the benefit of
rates relief.
INTERNATIONAL
International sales increased 1.7% at constant currency (“CC”)
despite the continued impact of Covid on Asian markets, in
particular in India during Q1, and the disruption and complexity
arising from new EU border processes in Food supply chains,
predominantly in France and the Republic of Ireland. There was
solid growth in the Middle East and online sales continued to
grow on both a one- and two-year constant currency basis, with
both our own websites and marketplaces driving growth of
125.5% as we retained customers acquired during the lockdowns
in 2020/21.
Change vs
19/20 %
Q1 CC
Q2 CC
Q3 CC
Q4 CC
FY CC
FY
Reported
Total sales
-6.1
-0.3
5.1
7.9
1.7
-0.8
52 weeks ended
Sales1
2 Apr 22
£m
27 Mar 21
£m
28 Mar 20
£m
Change vs
19/20 %
Change vs
19/20 CC
%
Clothing & Home
Food
Total
Memo: Online sales
654.2
283.0
937.2
172.5
483.2
296.1
779.3
165.7
620.7
323.9
944.6
77.2
5.4
-12.6
-0.8
123.4
9.1
-12.1
1.7
125.5
1. ‘Sales’ is equal to revenue within the International business.
Clothing & Home sales recovered to above 2019/20 levels,
driven by robust growth in online sales and exceptionally strong
shipments to the Middle East. India was heavily impacted in Q1 by
Covid (c.-61% vs 2019/20) and again in Q4 (c.-3% excluding March
vs 2019/20), but overall retail sales in the market grew 6%. Trading
in the rest of Asia remained challenging. We saw a similar shape
of trade in European owned markets, with Clothing & Home
performance in the Republic of Ireland performing robustly.
Food sales declined due to disruption caused by EU border-
related processes in European markets. This has resulted in
significant cost and complexity in servicing the Republic of
Ireland and a restructuring of our Food operations in continental
Europe. Excluding France, Food sales were level with 2019/20.
Operating profit before adjusting items was down 33.5%, driven
principally by the additional costs of new EU border processes
and tariffs of £29.6m, and associated trade impacts such as lower
availability and higher waste, which we estimate reduced gross
profit by a further c.£15m.
3.1
3.8
Stores
52 weeks ended
2 Apr 22 27 Mar 21 28 Mar 20
Change vs
19/20 %
Footfall, m (average/week)
Transactions, m
(average/week)
Average basket value inc
VAT pre returns (£)
4.0
1.7
1.9
1.0
5.9
-32.2
2.1
-19.0
34.9
30.6
32.3
8.0
Sales ex VAT £m
2,209.5 1,088.9 2,487.8
-11.2
UK Clothing & Home store sales decreased 11.2%: Average weekly
footfall was below 2019/20 levels in the period, with the business
continuing to be adversely impacted by the shape of the store
estate. Excluding March, sales in high streets and city centres
were down 22% and 26% respectively, while sales in retail parks
were up c.1% on 2019/20 levels.
Total Clothing & Home
The Clothing & Home business in total generated an operating
profit before adjusting items of £330.7m compared with £223.9m
in 2019/20.
52 weeks ended
Revenue before
adjusting items
2 Apr 22
£m
27 Mar 21
£m
28 Mar 20
£m
Change vs
19/20 %
3,308.3 2,198.6 3,209.1
Sales
3,332.2 2,198.6 3,209.1
Operating profit/(loss)
before adjusting items
Operating margin
330.7 (129.4)
-5.9%
9.9%
223.9
47.7
7.0% 290 bps
The table below sets out the drivers of the movement in Clothing
& Home operating profit before adjusting items over two years.
Operating profit margin before adjusting items
2019/20
Gross margin
Store staffing
Other store costs
Distribution and warehousing
Central costs
2021/22
%
7.0
1.5
2.6
1.5
(1.7)
(1.0)
9.9
– Gross margin increased c.150bps. The continuing benefit of
increased full-price trading and lower stock into sale more than
offset cost headwinds of adverse currency movements and
additional freight and warehousing costs.
– Store staffing costs decreased c.260bps, primarily driven
by retail restructuring efficiencies enabled by technology
improvements in store and ongoing initiatives as well as lower
variable staffing costs from reduced volumes. These impacts
more than offset investment in colleague pay rates.
– The decrease in other store costs of c.150bps largely relates to
government business rates relief of £35.2m, with lower
depreciation charges relating to legacy store modernisations
offset by increased maintenance costs in the store estate and
reduced rates rebates.
– Distribution and warehousing increased c.170bps, largely
relating to the higher costs to serve online demand, including
an increased proportion of home deliveries, as well as
increased pay rates, haulage incentives and fuel inflation.
Note the higher courier costs of home deliveries were offset
by delivery income, which is reported within sales. These overall
higher costs were partly offset by savings from lower volumes
and cost-reduction programmes.
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Annual Report & Financial Statements 2022
39
STRATEGIC REPORT
FINANCIAL REVIEW
CONTINUED
The table below sets out the drivers of the movement in
International operating profit margin before adjusting items
over two years.
Operating profit margin before adjusting items
2019/20
Gross margin
Store staffing
Other store costs
Distribution and warehousing
Central costs
2021/22
NET FINANCE COST
%
11.7
(0.1)
1.0
1.0
(3.0)
(2.7)
7.9
52 weeks ended
Interest payable
Interest income
Net interest payable
Pension net finance income
Unwind of discount on
Scottish Limited
Partnership liability
Unwind of discount on
provisions
2 Apr 22
£m
27 Mar 21
£m
28 Mar 20
£m
Change vs
19/20 £m
(85.1)
9.6
(75.5)
13.2
(89.9)
4.7
(85.2)
47.2
(80.5)
14.5
(66.0)
23.6
(4.6)
(4.9)
(9.5)
(10.4)
(4.4)
(4.9)
(6.9)
(3.8)
(2.7)
(4.9)
2.5
1.1
– Gross margin declined c.10bps primarily as a result of
additional tariffs and waste due to inefficiencies from EU
border-related processes for serving the Republic of Ireland.
This was partly offset by growth of the online business.
– Store staffing costs decreased c.100bps primarily as a result
of efficiency savings from retail restructuring in the Republic
of Ireland.
– The c.100bps movement in other store costs largely relates
to government relief in owned markets and rent concessions
in India, which resulted in one-off savings in the period.
– Distribution and warehousing increased c.300bps, reflecting
higher operational and administrative costs associated with EU
border-related processes, as well as higher costs to serve
online demand.
– Central costs increased c.270bps, driven by higher marketing
spend associated with the growth of the online channel and
colleague incentives.
M&S BANK AND SERVICES
M&S Bank and Services profit before adjusting items was down
£3.8m to £13.0m. Adjusting items charges of £16.0m have been
incurred relating primarily to the insurance mis-selling provision,
resulting in a statutory loss of £(3.0)m.
Lower demand for unsecured credit and travel money is the
primary driver for the lower profits. This was largely offset by
the release of bad debt provisions, as economic conditions
proved more favourable than anticipated.
Net financial interest
(70.5)
(45.6)
(54.2)
(16.3)
Net interest payable on
lease liabilities
(115.6)
(122.5)
(133.4)
17.8
Net finance costs before
adjusting items
Adjusting items included in
net finance costs
(186.1)
(168.1)
(187.6)
5.6
(6.8)
–
Net finance costs
(180.5)
(174.9)
(187.6)
Net finance costs before adjusting items decreased £1.5m to
£186.1m. Lower pension income due to the reduced IAS 19
pension surplus compared with 2019/20 and the reversal of
ineffectiveness on a currency swap within interest income in
2019/20 offset a reduction in the net interest payable on
lease liabilities.
1.5
5.6
7.1
GROUP PROFIT BEFORE TAX AND ADJUSTING ITEMS
Group profit before tax and adjusting items was £522.9m,
up 29.7% on 2019/20. The profit increase was driven by adjusted
operating profit growth in Clothing & Home and Food and the
additional profit from the Ocado joint venture, offset by a
reduction in International and M&S Bank operating profits.
GROUP PROFIT BEFORE TAX
Group profit before tax was £391.7m, up £324.5m on
2019/20. This includes net charges for adjusting items of
£131.2m (2019/20: £335.9m).
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ADJUSTING ITEMS
The Group makes certain adjustments to statutory profit
measures in order to derive alternative performance measures
(APMs) that provide stakeholders with additional helpful
information and to aid comparability of the performance of
the business. For further detail on these charges/gains and the
Group’s policy for adjusting items, please see notes 1 and 5 to
the financial statements.
52 weeks
ended
2 Apr 22
£m
53 weeks
ended
3 Apr 21
£m
52 weeks
ended
28 Mar 20
£m
Change
vs 19/20
£m
(161.4)
(95.3)
(29.3)
(132.1)
21.9
(2.2)
(10.2)
32.1
14.3
(133.7)
(13.8)
28.1
PPE and ROU
asset impairments
Accelerated depreciation
Closed store rent, rates
and onerous leases net
of sublet income
Redundancy
Profit/(loss) or cash
proceeds/(outflows)
on disposal/surrender
Closure costs, strips,
dilapidations
Other
Incurred up to
3 Apr 21
£m
Incurred in
52 weeks ended
2 Apr 22
£m
P&L
Cash
P&L
Cash
(452.2)
(175.3)
n/a
n/a
(81.0)
(50.7)
n/a
n/a
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(23.1)
(9.9)
(26.1)
(7.0)
(16.4)
(2.4)
(10.9)
(0.7)
(3.8)
11.4
(3.7)
(3.2)
0.4
(3.6)
(17.1)
17.5
and proceeds on disposal/surrender, which is net off against capex in the cash flow.
Therefore, these cash outflows do not tie to UK store estate cash adjusting items
Strategic programmes –
UK store estate
Strategic programmes –
UK logistics
Strategic programmes –
Organisation
Strategic programmes –
International store closures,
impairments and other
Store impairments,
impairment reversals and
other property charges
Amortisation and fair
value adjustments arising
from the investment in
Ocado Retail Limited
Directly attributable to Covid
M&S Bank charges incurred
in relation to insurance
mis-selling provisions
Franchise restructure
Intangible asset impairments
Sparks loyalty
programme transition
Establishing the investment
in Ocado Retail Limited
Remeasurement of
contingent consideration
including discount unwind
Other
60.0
6.9
(78.5)
138.5
(32.5)
17.8
(14.2)
90.8
(16.8)
(163.6)
(15.7)
181.4
(16.0)
(41.3)
–
(2.4)
–
(79.9)
(12.6)
–
(13.4)
(3.4)
(41.3)
13.4
–
–
(16.6)
–
–
(1.7)
(1.2)
1.2
5.6
–
(6.8)
(1.0)
(2.9)
23.5
8.5
(23.5)
Adjusting items
(131.2)
(259.7)
(335.9)
204.7
Adjusting items net charges incurred in the period were £131.2m.
UK store estate
A charge of £161.4m has been recognised in relation to store
closures identified as part of UK store estate rotation plans.
The charge reflects a revised view of latest store exits and
underlying assumptions around estimated store closure costs,
as well as charges relating to the impairment of buildings and
fixtures and fittings, and depreciation as a result of shortening
the useful economic life of stores. Further charges relating to
the closure and rotation of the UK store estate are anticipated
as the programme progresses, with total future charges of
up to c.£200m over the next nine financial years, bringing
anticipated total programme costs since 2016 to c.£1bn. The
anticipated total programme costs do not include any costs
that may arise in relation to a further c.30 stores currently under
consideration for closure within the next nine years. At this stage
these c.30 stores remain commercially supportable and in the
event of a decision to close the store the exit routes are not
yet certain.
Total
1. Cash outflows include rent, reported within cash lease payments in the cash flow,
(657.6)
(161.4)
(70.4)
10.3
(3.6)
(39.7)
(9.0)
(4.0)
(3.2)
(11.0)
(4.4)
(30.2)1
Other adjusting items
A net credit of £21.9m has been recognised in the period relating
to UK logistics, reflecting in large part a gain on the disposal of
distribution centres.
A credit of £14.3m has been recognised in relation to
organisational change. This credit largely relates to an £11.9m
reversal of an impairment associated with the centralising of the
Group’s London support office functions, with the remainder
reflecting the finalisation of previous redundancy costs
associated with this programme. No provision remains at the
year end and there are no further charges anticipated.
In response to the strong Group performance and lifting of
government restrictions, a credit of £63.4m has been incurred for
the reversal of store impairments recognised in adjusting items in
previous periods, partly offset by a £3.4m charge primarily
relating to the impairment of assets in certain stores.
A charge of £41.3m has been recognised relating to the
restructuring of certain International franchise operations. In
September 2021, the Group restructured our French operations
after an assessment of the profitability of the business under
increased EU border costs and tariffs, at a cost of £10.3m. In
March 2022, the Group made the decision to fully exit its Russian
franchise. As a result, the Group has recognised a charge of
£31.0m representing the Group’s full exit costs from Russia
and business disruption in Ukraine.
A charge of £32.5m has been recognised with respect to the
amortisation of intangible assets acquired on the purchase of our
share in Ocado Retail and related deferred tax charges of £14.9m
predominantly relating to the substantive enactment of the
Finance Act 2021 during the period, which will increase the UK’s
main corporation tax rate from 19% to 25% from 1 April 2023.
A gain of £17.8m has been recognised as being directly
attributable to the Covid pandemic. This relates mostly to the
release of the remaining inventory provision made in adjusting
items in 2019/20, driven by the sell-through of Clothing & Home
stock being greater than anticipated.
Charges of £16.0m have been incurred relating to M&S Bank,
primarily due to the insurance mis-selling provision. The total
charges recognised in adjusting items since September 2012
for PPI is £326.3m, which exceeds the total offset against profit
share of £259.0m to date; this deficit will be deducted from
the Group’s share of future profits from M&S Bank.
Annual Report & Financial Statements 2022
41
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STRATEGIC REPORT
FINANCIAL REVIEW
CONTINUED
TAXATION
CASH FLOW
The effective tax rate on profit before adjusting items was 18.2%
(2019/20: 20.7%; 2020/21: 50.3% on a 53-week basis). As part of
cash-optimisation measures, no payments were made to the
Marks and Spencer Scottish Limited Partnership (“SLP”) during
the year. As such, there has been no recapture of previous tax
relief, resulting in a lower effective tax rate than prior years.
As well as there being no recapture of previous tax relief
under the SLP structure in the period, future changes to the
UK statutory corporation tax rate result in deferred tax assets
being recognised at the higher substantively enacted rate of
25%. Restating these deferred tax assets from a rate of 19% to
25% results in a tax credit in the period, reducing the effective
tax rate.
The effective tax rate on statutory profit before tax was 21.1%
(2019/20: 59.3%; 2020/21: 3.9% credit on a statutory loss on a
53-week basis), which was higher than the effective tax rate on
profit before adjusting items due to the impact of disallowable
adjusting items.
Next year, we anticipate an effective tax rate on profit before
adjusting items higher than the UK corporation tax rate of
19%, principally due to the recapture of previous tax relief as
payments to the SLP resume.
EARNINGS/LOSS PER SHARE
Basic earnings per share was 15.7p (2019/20: 1.3p; 2020/21:
loss of 10.1p on a 53-week basis), due to the increase in
profit year-on-year. The weighted average number of shares
in issue during the period was 1,958.1m (2019/20: 1,894.9m ;
2020/21: 1,953.5m).
Adjusted basic earnings per share was 21.7p (2019/20: 16.7p;
2020/21: 1.4p on a 53-week basis) due to higher adjusted profit
year-on-year.
Adjusted operating profit
Depreciation and
amortisation before
adjusting items
Cash lease payments
Working capital
Defined benefit scheme
pension funding
Capex and disposals
Financial interest
Taxation
Acquisitions, investments
and divestments
Employee-related
share transactions
Proceeds from rights issue
net of costs
Share of (profit)/loss
from associate
Cash received from
settlement of derivatives
Adjusting items outflow
Free cash flow
Dividends paid
Free cash flow after
shareholder returns
Opening net debt
excluding lease liabilities
Free cash flow after
shareholder returns
Exchange and other
non-cash movements
excluding leases
Closing net debt
excluding lease liabilities
Opening net debt
Free cash flow after
shareholder returns
Decrease in
lease obligations
New lease commitments
and remeasurements
Exchange and other
non-cash movements
52 weeks
ended
2 Apr 22
£m
53 weeks
ended
3 Apr 21
£m
52 weeks
ended
28 Mar 20
£m
Change
vs 19/20
£m
709.0
222.2
590.7
118.3
510.7
(344.3)
239.7
(36.8)
(213.5)
(79.9)
(7.7)
603.1
(316.6)
268.1
(37.1)
(203.8)
(76.0)
(5.8)
632.5
(335.7)
(67.8)
(37.9)
(325.9)
(79.5)
(91.6)
(121.8)
(8.6)
307.5
1.1
112.4
(0.4)
83.9
(41.4)
8.7
(580.3)
538.9
39.1
18.5
9.7
29.4
–
–
574.4
(574.4)
(13.9)
(78.4)
(2.6)
(11.3)
–
(61.8)
699.2
–
14.0
(120.5)
296.4
–
7.7
(88.0)
(7.7)
26.2
205.7 493.5
191.1
(191.1)
699.2
296.4
14.6 684.6
(1,110.0) (1,388.6) (1,404.7)
294.7
699.2
296.4
14.6
684.6
(9.3)
(17.8)
1.5
(10.8)
(420.1) (1,110.0) (1,388.6)
968.5
(3,515.9) (3,950.6) (3,981.5)
465.6
699.2
296.4
14.6
684.6
216.0
184.3
201.4
14.6
(100.6)
(48.3)
(204.1)
103.5
2.5
2.3
19.0
(16.5)
Closing net debt
(2,698.8) (3,515.9) (3,950.6) 1,251.8
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The business generated free cash flow of £699.2m, largely driven
by the recovery in EBITDA, working capital inflow and reduced
cash tax and capital expenditure.
Cash lease payments increased £8.6m partly as a result of rental
payments which were deferred from last year into this year as
part of cash conservation measures enacted at the start of the
pandemic. Cash lease payments relating to stores identified as
part of the UK store estate strategic programme which are
probable for closure totalled £54.8m.
For further detail on working capital movements, refer to the
section below.
Defined benefit scheme pension funding of £36.8m reflects
the SLP interest distribution to the pension scheme.
For capex and disposals, refer to the section below.
The reduction in tax payments of £83.9m is due to no UK
corporation tax being paid in the period. This is driven by the
utilisation of carried-forward tax losses from 2020/21.
Acquisitions, investments and divestments were driven
principally by the payment of £33.8m of contingent consideration
relating to the investment in Ocado Retail Ltd in the period. The
final contingent payment for Ocado Retail Ltd of c.£156m plus
interest will be paid in financial year 2024/25 if a specified target
level of earnings in the financial year ending November 2023 is
achieved. Based on the latest five-year plan of Ocado Retail Ltd,
the performance target is expected to be met.
Other acquisitions and investments in the period include the
strategic investment in the fast-growing brand platform “The
Sports Edit”, a minority stake and funding for “Nobody’s Child”
and a cornerstone investment in True Capital Limited’s seed-
stage fund. These investments were offset by income from the
disposal of a property investment company.
Employee-related share transactions cash inflows increased due
to a change in policy to no longer purchase shares for issue in
colleague incentive schemes, increased deferred colleague
incentive share scheme payments, and increased uptake of
employee share schemes during the pandemic.
Adjusting items cash outflow was £61.8m. This included £16.5m
relating to the UK store estate strategy, £16.0m relating to
the M&S Bank insurance mis-selling provisions, £15.9m of
organisational restructuring costs largely relating to the Republic
of Ireland, £9.4m largely relating to the restructuring of our
French operations, and £3.7m for the restructuring of the
UK Clothing & Home logistics network.
WORKING CAPITAL
The business generated £508m cash inflow from working capital
over the past two years.
Most of this was driven by payables, partly as a result of changes
to payment terms for Clothing & Home suppliers, in addition to
higher outstanding payments over year end as a result of
business growth.
As previously reported, receivables remain at a lower level than
pre-Covid, partly due to the adverse impact of the pandemic on
our Food franchise business.
Stock increased slightly over the period, driven primarily by
inventory build in the Food business as we approached the end
of March, as well as the timing of Clothing & Home intake over
year-end.
As part of our focus on deeper, strategic supplier relationships,
we are improving supplier payment terms in both Clothing &
Home and Food. In Clothing & Home, we anticipate the benefits
of longer supplier terms within these results to partially reverse
in the coming year.
CAPITAL EXPENDITURE
UK store remodelling
New UK stores
International
Supply chain
IT and M&S.com
Property asset replacement
Acquisition of Jaeger brand
Capital expenditure
before property
acquisitions and disposals
Property acquisitions
and disposals
Capital expenditure
Movement in capital accruals
Capex and disposals as
per cashflow
52 weeks
ended
2 Apr 22
£m
53 weeks
ended
3 Apr 21
£m
52 weeks
ended
28 Mar 20
£m
Change
vs 19/20
£m
50.1
49.9
18.2
28.6
68.2
85.2
–
27.0
14.9
6.7
25.2
47.6
19.2
6.3
60.3
33.3
15.7
39.2
81.1
102.4
–
(10.2)
16.6
2.5
(10.6)
(12.9)
(17.2)
–
300.2
146.9
332.0
(31.8)
(43.9)
256.3
(42.8)
(0.3)
(2.7)
146.6
57.2
329.3
(3.4)
(41.2)
(73.0)
(39.4)
213.5
203.8
325.9 (112.4)
Group capital expenditure before disposals decreased £31.8m to
£300.2m compared to 2019/20; however, it was up on 2020/21 as
we increased investment in the transformation.
UK store remodelling costs related principally to 22 full line and
food renewal stores, some of which have not yet opened, as well
as upgrades to Clothing & Home space.
Spend on new UK stores primarily related to eight new or
extended Simply Foods and seven new or extended full-line
stores in the current year, some of which have not yet opened.
Supply chain expenditure reflects the expansion of our Bradford
warehouse to support online growth in Clothing & Home, Food
equipment purchases, and investment in our Milton Keynes Food
depot to support capacity increases.
IT and M&S.com spend includes costs related to technology
replacement and upgrades in stores, the development of the
Food ordering and allocation system and buying portals, website
development and ongoing investment in digital capability in the
support centre and stores.
Property asset replacement normalised towards 2019/20 levels
as replacement of core assets across the estate, which had been
de-prioritised during 2020/21 due to cash conservation measures,
was re-prioritised. This includes roof works and replacement of
fridges, freezers, boilers, lifts and escalators.
Property acquisitions and disposals primarily relates to cash
inflows from the disposal of two warehouses in the third quarter.
Capital accruals were higher at year-end compared to 2020/21 as
transformation spend increased in the second half. It should be
noted that 2020/21 capital expenditure cash flow included some
accrued spend relating to 2019/20.
NET DEBT
Group net debt decreased by £1.25bn compared to 2019/20,
driven by free cash flow generation, and by £0.8bn since the start
of the year.
There was a further reduction in the value of discounted lease
obligations outstanding since the start of the year. New lease
commitments and remeasurements in the period were £100.6m,
largely relating to 20 new UK leases, lease additions in India and
UK property and logistics liability remeasurements. This was
more than offset by £216.0m of capital lease repayments.
Annual Report & Financial Statements 2022
43
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STRATEGIC REPORT
FINANCIAL REVIEW
CONTINUED
The composition of Group net debt is as follows:
52 weeks
ended
2 Apr 22
£m
53 weeks
ended
3 Apr 21
£m
52 weeks
ended
28 Mar 20
£m
As part of our approach to liability management we have
announced a tender offer for c.£150m of our near-term
debt maturities.
vs 19/20
£m
DIVIDEND
Cash and cash equivalents
Medium Term Notes
Current financial assets
and other
Partnership liability to the
UK DB pension fund
Net debt excluding
lease liabilities
1,197.9
254.2
674.4
(1,529.5) (1,682.1) (1,536.2)
943.7
6.7
99.4
83.2
96.1
3.3
(187.9)
(185.5)
(202.7)
14.8
We did not pay a dividend for 2020/21, and the Board has decided
not to pay a dividend this year.
This is consistent with the announcement at the half-year results
that payment of a dividend this financial year would be unlikely
as we focus on restoring sustainable profitability and recovering
balance sheet metrics consistent with investment grade.
(420.1) (1,110.0) (1,388.6)
968.5
PENSION
Lease liabilities
– Full-line stores
– Simply Food stores
– Offices, warehouses
and other
– International
(2,278.7) (2,405.9) (2,562.0)
(982.6) (1,054.8)
(747.7)
(727.0)
(919.5)
(712.8)
283.3
135.3
34.9
(449.5)
(196.9)
(494.5)
(201.8)
(523.7)
(235.8)
74.2
38.9
Group net debt
(2,698.8) (3,515.9)
(3,950.6) 1,251.8
Full-line store liabilities include £225.3m relating to stores
identified as part of the UK store estate strategic programme.
We are seeking to fund the closure costs of rotation of the
store estate with the realisation of funds from our asset
management programme.
Of the remaining full-line stores lease liability, the average
liability-weighted lease length is c.25 years, although the average
lease term to break is shorter at c.19 years. However, these
average lease lengths are skewed by five particularly long leases
we hold, with the longest of these having 135 years remaining.
These five leases, with a combined lease liability of c.£100m,
are not deemed probable for closure in our UK store estate
programme as they are currently trading well in locations we
wish to remain in. Excluding these five leases, the average lease
term to break is c.14 years.
Simply Food store liabilities include £30.9m relating to stores
identified as part of the UK store estate strategic programme.
Of the remaining lease liability, the average lease length to break
is c.10 years.
Within offices, warehouses and other, £144.9m relates to the
sublet lease on our Merchant Square offices. Average lease
length of all other offices and warehouses to break is c.7 years.
International leases relate primarily to India (c.£85m) and Ireland
(c.£66m). Average lease length to break in India is close to nil, as
most of these leases are past the break point, and so we have
the flexibility to exit these at any time on several months’ notice.
Average lease length to break in Ireland is c.10 years.
LIQUIDITY
At 2 April 2022, the Group held cash balances of £1,197.9m
(2019/20: £254.2m). In addition, during the year the Group agreed
a new £850m revolving credit facility expiring in June 2025 on
terms linked to delivery of its net zero roadmap. With the facility
undrawn, the Group now has liquidity headroom of £2.1bn. This
liquidity position is as a result of free cash flow performance.
44
Marks and Spencer Group plc
At 2 April 2022, the IAS 19 net retirement benefit surplus was
£1,038.2m (2020/21: £631.4m). The increase was largely driven
by an increase in discount rates towards the end of the period.
The most recent actuarial valuation of the UK DB Pension
Scheme was carried out as at 31 March 2018 and showed
a funding surplus of £652m. This is an improvement on the
previous position at 31 March 2015 (statutory surplus of £204m),
primarily due to lower assumed life expectancy. We continue
to work constructively with the Trustees of the UK DB Pension
Scheme with regard to agreeing the triennial actuarial valuation
of the scheme as at 31 March 2021. Consequently, the results of
the valuation are not yet finalised, although it is likely that there
will continue to be a surplus.
With the pensioner buy-in policies purchased in September 2020,
April 2019 and March 2018, the scheme has now, in total, insured
around 80% of the pensioner cash flow liabilities for pensions in
payment. The buy-in policies cover specific pensioner liabilities
and pass all risks to an insurer in exchange for a fixed premium
payment, thus reducing the Group’s exposure to changes in
longevity, interest rates, inflation and other factors.
STATEMENT OF FINANCIAL POSITION
Net assets were £2,917.9m at the period end, an increase
of 27.7% since the start of the year largely due to free
cash generation.
Eoin Tonge, Chief Financial Officer
Important Notice:
Statements made in this announcement that look forward in time or that express
management's beliefs, expectations or estimates regarding future occurrences and
prospects are "forward-looking statements" within the meaning of the United States
federal securities laws. These forward-looking statements reflect Marks & Spencer's
current expectations concerning future events and actual results may differ materially
from current expectations or historical results. Any forward-looking statements are
subject to various risks and uncertainties, including, but not limited to, failure by Marks &
Spencer to predict accurately customer preferences; decline in the demand for products
offered by Marks & Spencer; competitive influences; changes in levels of store traffic or
consumer spending habits; effectiveness of Marks & Spencer's brand awareness and
marketing programmes; general economic conditions including, but not limited to,
those related to the Covid-19 pandemic or a downturn in the retail or financial services
industries; acts of war or terrorism worldwide; work stoppages, slowdowns or strikes; and
changes in financial and equity markets. For further information regarding risks to Marks
& Spencer’s business, please consult the risk management section of the 2022 Annual
Report (pages 45 to 54).
The forward-looking statements contained in this document speak only as of the date
of this announcement, and Marks & Spencer does not undertake to update any forward-
looking statement to reflect events or circumstances after the date hereof or to reflect
the occurrence of unanticipated events.
© 2019 Friend Studio Ltd
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RISK MANAGEMENT
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
The pace and nature of change in the external environment, combined with the
need to successfully implement both transformational and core business initiatives internally,
underline the importance of maintaining effective and agile risk management
processes covering every part of our business.
APPROACH TO RISK MANAGEMENT
– identification, measurement and
– direct reporting to the Audit
Our approach to risk management
remains simple and practical. The Audit
Committee, under delegated authority
from the Board, is accountable for
overseeing the effectiveness of our
risk management process, including
identification of the principal and
emerging risks facing M&S. To support the
Audit Committee in executing on this
responsibility, underlying processes are
in place which are fully aligned to the
M&S operating model, with each business
and key function being responsible for
the ongoing tracking and management
of risks. These processes comprise the
identification, assessment and effective
mitigation of core risks, as well as
monitoring for changes triggered by the
dynamic and, sometimes, unpredictable
environment in which we operate.
Our risk management process is
underpinned by the Group Risk
Management Policy which is subject
to periodic review to ensure it
remains appropriate for our business
needs and delivers against our
governance responsibilities.
The key activities forming a part of
this process include:
– the development and maintenance
of Board-approved risk appetite
statements which align with business
strategy, three-year plan, core operating
activities and our purpose and values;
reporting of risks against a consistently
applied criteria considering both the
likelihood of occurrence and potential
impact to the Group, with clear
ownership sitting with relevant
members of the leadership team;
– maintenance of detailed risk registers
and mitigation plans by each business
and function which are approved by
their leadership teams and the
appropriate Executive Committee
members, and are also incorporated
into related governance processes,
such as the Environmental, Social
and Governance (ESG) or Group
Safety Committees;
– proactive monitoring of emerging
risks where the full extent and
implications may not be fully
understood but need to be tracked;
– swift action to evaluate changes
to the risk profile triggered by new
or unexpected events – such as the
rapid assessment of the business-wide
consequences of Russia’s invasion
of Ukraine;
– Continued assessment of risks
to reflect changes in the business
operating model, accountabilities and
reporting – for example, to incorporate
the changes in Irish operations
post-Brexit or the reset of Plan A;
– a formal half-yearly review of all risk
registers by the Group Risk team to
provide independent challenge and
support cross-business alignment;
Committee by each of our business and
functional leadership teams on a rolling,
scheduled basis, flexed to respond to
changes or potential issues; and
– the compilation of an overarching
view of Group risks, combining
both top-down and bottom-up
perspectives, which considers the
impact of changes in the external
environment, our strategy,
transformation programme, core
operations and our engagement
with external parties.
The output from the above process is
subject to periodic review and challenge
with the executive directors and,
subsequently, the principal risks and
uncertainties are submitted to the Audit
Committee ahead of final review and
approval by the Board.
An overview of this process is presented
in the diagram on the following page and
the interaction of our principal risks with
the strategic priorities is shown in the
table on page 48.
The directors’ assessment of the long-
term viability of M&S is also reviewed
annually, mindful of the principal risks
faced. The approach for assessing
long-term viability is set out on page 55.
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Annual Report & Financial Statements 2022
45
STRATEGIC REPORT
RISK MANAGEMENT
CONTINUED
Risk management process and governance overview
The following diagrams provide an overview of the risk management process and activities undertaken within our business
that allow the Board to fulfil its obligations under the Corporate Governance Code 2018.
5
1
Ongoing
communication
& feedback
4
3
1 Setting risk appetite
2 Risk identification & ownership
2
3 Risk assessment
4 Risk response
5 Monitoring, reporting
& escalation
Internal reporting
Parties involved
External reporting
Consolidated Group-level risks
– Consolidation of significant risks from underlying
risk registers
– Overlay of Group-level risks
– Review and agreement of the principal risks by the
executive directors
– Review and approval by the Audit Committee
Business and functional risk registers
– Development and ongoing maintenance of risk registers,
including consideration of emerging risks, by the business
and functional leadership teams
– Review and challenge of risk content and quality of
mitigation plans by the Group Risk team
– Review and challenge of risks at leadership forums
Current issues and areas of change
– Monitoring emerging areas of change or issues that
may become significant at a Group level
Top-down
– M&S Board
– Audit Committee
– Executive Committee
– Group Risk team
Bottom-up
– Group Risk team
– Business and
functional
leadership teams
– Policy and
process owners
Principal risks
and uncertainties
– Full disclosure of
Principal risks for
external reporting
– Review and approval
by the Board and
Audit Committee
Maintaining an effective risk framework
In complying with the process and policy described above, some examples of how risk management has
developed to remain relevant during the year include:
– a full refresh of our risk appetite statements, led by the Executive Team with full Board participation,
to ensure alignment with business strategy and the ongoing transformation activities as well as the
core requirements of business operations;
– refinement of the suite of underlying business and functional risk registers to mirror changes in our
operating model, including the reset of Plan A and the need to manage climate-related risks and
opportunities;
– using our established crisis management response to immediately assess the risk consequences of
Russia’s invasion of Ukraine; and
– re-evaluating the tools that support the continued maturity and effectiveness of the established process.
46
Marks and Spencer Group plc
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OVERVIEW OF PRINCIPAL RISKS
AND UNCERTAINTIES
S
T
R
A
T
E
G
I
C
R
E
P
O
R
T
Our principal risks and uncertainties have been assessed in accordance with the methodology outlined on the previous pages.
At an overarching level, three ongoing issues are having a pervasive impact on the risks being faced – the continually evolving nature
of Covid-19, the further consequences of the Russian invasion of Ukraine, and the cost of living crisis emerging in the communities in
which we operate.
In previous disclosures we have explained how Covid-19 has had wide ranging consequences on our suite of principal risks and
uncertainties and was not, therefore, presented as a single principal risk. This has not changed. The same approach has also been
used in relation to the Russian invasion of Ukraine and the cost of living crisis, with the consequences of both being captured in the
relevant principal risks rather than shown as stand alone items.
THE CONTINUED CONSEQUENCES
OF COVID-19
THE RUSSIAN INVASION
OF UKRAINE
The business continues to manage the
ongoing consequences of Covid-19 and
while these have, and may continue to
evolve, they have become intrinsically
linked with other prevalent external
factors contributing to current
uncertainty in the environment in
which we operate. These include:
– labour shortages across transport,
distribution, manufacturing and
service industries;
– threats to supplier resilience
and viability;
– continued and changing lockdown
measures in a number of countries;
– economic volatility;
– evolving customer behaviours;
– disruption to the supply of
natural, refined and manufactured
resources; and
– the threat of new variants.
Each of these potential risks are
incorporated, as needed, in the suite
of principal risks.
Russia’s invasion of Ukraine has already
impacted our business and, while the
conflict continues, may continue to
do so. In line with our established ways
of working, the crisis management and
business continuity protocols were
invoked at the time of the invasion and
provided the structure and governance
for our response and risk mitigation
plans including:
– prioritising the wellbeing and safety
of our Ukrainian colleagues in-country
and those working elsewhere in
the business;
– working with FIBA Group, our franchise
partner in Ukraine and Russia, to
understand the immediate and
longer-term business implications;
– reviewing ranges to identify products
that include materials or ingredients
from Ukraine, Russia or Belarus, that
could be impacted by shortages or
corporate decisions to change supply
and, where needed, developing
alternative sourcing plans;
– protecting our brand and reputation;
– connecting with our customers
to understand their perspectives
and expectations;
– confirming our trade position in
Russia; and
– tracking the potential impact of
sanctions being introduced.
As explained elsewhere in this report,
we have also now made a decision to exit
from Russia. There may, however, be
further potential consequences from
the ongoing conflict. These have been
incorporated in the relevant principal
risks and include the:
– impact on our growth strategy for
franchise operations;
– ongoing relationship with FIBA;
– effect on key materials and products
including sunflower oil, grains, natural
gas, fuel, fertiliser and nickel that could
impact the manufacture of products,
cost and availability;
– additional pressure on supply
chains creating a shortage of labour
and the potential risk of human
rights exploitation;
– safety and integrity of our food as we
substitute products from the countries
of conflict;
– related effects on wider inflation,
energy and raw material input costs;
– potential implications on cyber
security; and
– further global socio-political tensions
and fragility.
Due to the evolving nature of the
invasion, there is a risk of further impact,
and the business will continue to assess
the implications.
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Annual Report & Financial Statements 2022
47
STRATEGIC REPORT
OVERVIEW OF PRINCIPAL RISKS
AND UNCERTAINTIES CONTINUED
THE COST OF LIVING CRISIS
– As the external environment grows
– Our risk relating to technology and
The combined impact of Covid-19 and
the Russian invasion have, along with other
factors, triggered a cost of living crisis.
Rising energy prices, supply chain
difficulties, product shortages and labour
constraints are all contributing to
significant price inflation, and associated
rises in interest rates. This is now placing
real pressure on household budgets both
in the UK and in other markets, and
impacting all aspects of people's daily
lives – adding significant challenges to
the choices they make, including where
and how they shop.
The impact on our business will be
dependent on a number of key
factors including:
more turbulent our trading
performance risk is becoming
increasingly influenced by the
associated headwinds. As such this risk
has evolved from being primarily
internally focused to the challenges
of maintaining performance
improvement in a changing world.
– While our responsibility and
commitment on safety has always
covered all M&S products, our principal
risk disclosure provided a specific focus
on food safety. As we continue to
expand our range of products and
incorporate new acquisitions and
investments, often in non-food areas,
we have amended the risk to reflect
all product safety responsibilities.
– the speed and scale of government action;
– our ability to respond to the inflationary
pressures on both inputs and customer
pricing; and
– the duration of the economic downturn.
– The principal risk associated with
the UK’s exit from the European
Union ("EU") has been refined to focus
on how we continue to adapt to the
complexity of moving goods across
the EU borders.
KEY CHANGES TO OUR
RISK PROFILE
The above issues, and changes in our
business in the past year, have resulted
in the following key changes to our
risk profile:
– We have refined the social, ethical
and environmental risk to focus
explicitly on climate change and
environmental responsibility.
This reflects the importance of
climate-related issues and better
aligns with the reset of Plan A. Other
business responsibilities continue
to be reflected within the corporate
compliance and responsibility risk.
digital capability had previously been
disclosed separately. This has now been
disaggregated and incorporated in
other principal risks including business
transformation, talent and capability
and information security.
– The positive cash generation over the
last two years (since the start of the
pandemic) has resulted in the liquidity
and funding risk being less prominent
than in recent years.
MONITORING OUR EMERGING RISKS
Our risks will continue to evolve as a
result of future events and, therefore, an
awareness of emerging risks is important
in driving effective strategic planning. This
will allow us to monitor and understand
the potential implications and build these
into our decision-making processes at
the right time. Key emerging risks include:
– the potential unknown and/or
unanticipated consequences from the
Russian invasion of Ukraine, including
those covered on page 47; and
– the impact of future regulatory
changes, including in UK corporate
governance requirements, adding
additional responsibilities to our existing
legal and regulatory compliance risk.
LINKING PRINCIPAL RISKS WITH OUR STRATEGIC PRIORITIES
The table below shows how our principal risks align with our strategic priorities, described on page 6.
M&S FOOD
high-performing
business
and market
share growth
OCADO
transitioning to
strong capacity
growth post
pandemic
reversion
CLOTHING &
HOME on track
for a more
profitable
model capable
of growth
Building STORE
ROTATION
pipeline driving
exit from
legacy stores
INTERNATIONAL
absorbing Brexit
related costs,
but embryonic
global strategy
encouraging
Trading performance in a challenging environment
Business transformation
Ocado Retail
Talent and capability
EU border challenges
Business continuity and resilience
Product safety
Information security
Corporate compliance and responsibility
Climate change and environmental responsibility
Liquidity and funding
48
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RISK
DESCRIPTION
PRINCIPAL RISKS AND UNCERTAINTIES
1
An uncertain trading environment
Our ability to deliver continued improvements in trading performance could be significantly affected by the
individual or aggregate impact of an increasingly complex set of external factors. The ongoing consequences of
the pandemic, geo-political and economic uncertainties (both national and international) and the resultant cost of
living crisis, are combining to generate difficult and unpredictable headwinds.
Context
– M&S operates in an increasingly competitive sector against
Mitigations
– Strong, varied and complementary senior leadership
S
T
R
A
T
E
G
I
C
R
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P
O
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T
team capabilities.
– Planned senior leadership continuity.
– An established operating model consisting of a family
of accountable businesses who share M&S brand values,
support functions, technology and customer data.
– A clear three-year plan constructed to remain relevant to
the current challenges.
– Improved budgeting processes, including detailed
sensitivity analysis to anticipate the potential impact of
external uncertainty.
– Formal operating reviews for all business and functional
teams to enable effective executive oversight and
governance of each business.
– Effective business continuity and crisis management
processes to support business-wide response to issues
as they arise.
– Prioritised focus and discipline across the business on cost,
range, trusted value and availability.
– Effective and proactive working with critical third parties –
for example, a structured supplier engagement programme
to both anticipate and support management of escalating
issues such as cost inflation.
– Continued commitment to initiatives that maintain and
support improved and sustained customer engagement
including the Sparks loyalty programme, broader digital
engagement, personalisation of offers and shop your way.
a backdrop of continued cost and pricing pressures,
changing consumer behaviours and a broad range of
macroeconomic uncertainties.
– Over recent months the consequences of Covid-19 have
continued to evolve and combine with other external macro
factors to contribute to widespread, ongoing uncertainty
across the communities in which we operate. Continued
lockdown measures; labour shortages across transport,
distribution, manufacturing and service industries; threats
to supplier resilience and viability; ongoing changes to
customer behaviours; price inflation, including energy;
the potential for further interest rate rises; increases in
taxation; socio-political tensions; and disruption to the
supply of natural, refined and manufactured resources,
have combined to create a challenging environment for our,
and all businesses, to operate within.
– The cost of living crisis will further influence customer
behaviour and buying choices which could impact our
performance and strategic decisions as we respond to
these changes.
– The potential consequences of the Russian invasion of
Ukraine further highlight the fragility linked to high-impact
"shock" events. These include the long-term impact on our
franchise operations in the region, and on key materials
and products including sunflower oil, grains, natural gas,
fuel, fertiliser, nickel and microchips that could impact
manufacture, cost and availability of products.
– While the business has demonstrated continued resilience
in the face of this range of pressures, and remained relevant
to customers throughout the period, continued turbulence
in the external environment could negatively impact
the business's ability to continue delivering an improved
trading performance.
– In addition, the possibility of future new variants of Covid-19
combined with restrictive government interventions,
either in the UK or other countries, could negatively impact
future performance.
Operational oversight by Executive Committee
RISK MOVEMENT
No change
New/evolving risk
Increased net risk exposure
Reduced net risk exposure
Annual Report & Financial Statements 2022
49
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STRATEGIC REPORT
RISK
DESCRIPTION
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
2
3
Business transformation
A failure to successfully implement the suite of critical transformation projects could impact medium- and
longer-term growth ambitions. While each initiative is individually significant and has its own inherent risks,
the aggregate impact of simultaneously delivering these challenging projects could also create further risks
to successful implementation.
Mitigations
– Clear prioritisation of the required transformation activities
as part of our three-year planning process.
– Initiatives underpinned by function-specific strategic plans
and leadership governance structures.
– Dedicated strategy and transformation roles to support
focus, consistency and challenge across our family
of businesses.
– Application of programme governance principles for all
core projects, with clear accountabilities and milestones
in place.
– Ongoing benefits tracking of initiatives in line with spend
targets and value outcomes.
– Periodic reporting on key business activities to the
Audit Committee.
Context
While significant change is ongoing across the business,
the three critical projects underpinning our transformation
agenda comprise:
– modernising of our supply chain and logistics activities to
improve speed, operational effectiveness and availability
and reduce costs;
– improving our IT infrastructure and underlying systems
while also adopting new technologies and digital products
to support operational efficiency, improved data-driven
decision-making, creation of a customer-centric "ecosystem",
increased personalisation and the shift to omni-channel; and
– reshaping and modernising our UK store estate to be fit
for the future, with the right-sized stores in the right spaces,
supporting omni-channel growth and meeting the
expectations of our customers.
The ability to balance cost-effective programme execution
at pace and to deliver on time, while also managing the
consequences of the external pressures discussed above,
is key to improving operational efficiency, competitiveness
and growth. Any significant delays, failure to achieve the
anticipated outcomes, or excess implementation costs could
also impact delivery of the planned business benefits.
Operational oversight by Executive Committee,
Property Committee
Ocado Retail
A failure to effectively manage the strategic and operational relationship with Ocado Retail could significantly
impact the value of our investment, the achievement of our multi-channel food strategy, our Brand and our ability
to deliver shareholder value.
Context
The investment in Ocado Retail is part of our strategy for
improving our online reach and capability.
There are three core aspects of our relationship with Ocado
Retail that the business is actively focusing on:
– developing our relationship with Ocado Retail and evolving
our ways of working to ensure alignment of strategies in a
way that supports innovation and growth and prioritising
areas for future investment;
– planning for our long-term strategic relationship with the
partner, including its role in the M&S ecosystem; and
– maintaining a seamless supply process to support customer
fulfilment – existing and in line with future growth – and
seeking opportunities to expand and refine product ranges.
Mitigations
– M&S nominated directors are part of the Ocado Retail
Board, with collective sign-off of business plans directing
the growth of the business.
– Jointly agreed investment plans to support the continued
investment in the Customer Fulfilment Centre network,
to expand presence in the ultra-fast grocery delivery
market and the planned migration to the new Ocado
service platform.
– Established data and technology interfaces with
Ocado Retail.
– A dedicated M&S Ocado delivery team, supported by
senior leadership, to coordinate sourcing, product
development, ranging, customer data and marketing.
Operational oversight by Executive Committee,
representation on the Ocado Retail Board
RISK MOVEMENT
No change
New/evolving risk
Increased net risk exposure
Reduced net risk exposure
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PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
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5
Talent and capability
An inability to attract, retain and develop the right talent, skills and capabilities or to successfully adapt to the
expectations of a post-pandemic labour market could impact the delivery of core operational activities and
longer-term strategic objectives, including aspects of our transformation programme.
Context
The business employs more than 65,000 talented and
passionate colleagues and remains an attractive brand
to future colleagues. However, the current labour market
conditions create a heightened risk around recruitment.
– The consequences of the pandemic, including skills
shortages and wage inflation, have contributed to a tight
labour market in some key specialist areas (including digital,
technology and data science) and other critical operational
roles (such as in supply chain and logistics).
– In addition, colleagues and potential candidates are
demonstrating a preference for roles and employers that
offer increasing flexibility to support life choices, work-life
balance and career development in addition to attractive
pay and benefits. Linked to these influences, the need for
employers to demonstrate a cultural alignment in other
areas such as sustainability, diversity and ethical values are
becoming increasingly important.
Mitigations
– Direct Executive Committee ownership of the people plan.
– Continued investment in internal and external talent to
strengthen capability at all levels, develop our future
leaders and drive internal career progression.
– Ongoing delivery of improvements in core people
management systems and processes, including a refreshed
performance and talent management process to drive
consistency and improved decision-making.
– An established colleague skills framework to support
role-based performance, development and progression.
– Ongoing review and maintenance of succession plans for
key roles.
– Continued investment in skills and capabilities with a
particular focus on driving digital literacy and capability
building.
– Investment in pay and wellbeing benefits following
– The broader implications on the availability of labour and
completion of a business-wide reward review.
key skills post-Brexit also continue to be monitored.
To support the continued delivery of improved trading
performance and our transformation ambitions, it is essential
that we have the right processes in place, underpinned
by effective technology, to identify, develop and retain
talented colleagues.
Operational oversight by Executive Committee
– A focus on externally benchmarked, market-relevant pay
including full consideration of gender, ethnicity, disability
and age.
– A well-established Business Involvement Group which is
actively involved in business-wide colleague engagement
and representation, including at Board meetings.
– Improved usage of our M&S Alumni community to engage,
energise and re-attract great talent.
EU border challenges
A failure to manage the cost consequences and operational friction arising from the complexity of border
arrangements following the UK’s exit from the European Union (EU) or further developments in the Trade and
Cooperation Agreement (“TCA”), including the Northern Ireland Protocol, could have a significant and long-term
impact on our Irish business and overall trading performance.
Context
The business continues to manage a range of complexities
that have arisen following the UK’s exit from the EU.
Key challenges include:
Mitigations
– Regular engagement with the Board to discuss the actions
being taken to manage evolving border challenges by our
accountable businesses.
– continued uncertainty as the requirements of the Northern
– Strengthening the management and accountabilities
Ireland Protocol evolve and our ability to implement
sustainable solutions to manage the impact on our Irish
business, including the movement of goods across to the
Republic of Ireland, our largest EU export business;
– further increases in the cost base following the introduction
of checks to inbound goods from the EU to the UK
(expected in 2022) and the consequent pressure on the
supply base including viability of suppliers and the impact
on product availability;
– managing the consequences of introducing more locally
sourced products; and
– monitoring and implementing solutions for any longer-term
divergence of UK and EU rules that may add additional cost
and complexity to the business, particularly in Ireland.
Operational oversight by Executive Committee
of Irish operations to support targeted mitigation of costs,
including opportunities for local sourcing.
– Operation of a virtual customs warehouse environment and
implementation of an EU hub to mitigate tariff costs.
– Continued engagement with key government departments
and other external experts to represent M&S views and
review our mitigation strategies. These include ministers,
industry bodies, the Border and Protocol Delivery Group,
the Department for Environment, Food & Rural Affairs
(Defra), HM Revenue & Customs, the Foreign Office, and the
Northern Ireland Executive.
– Ongoing work with Defra and our supply base in readiness
for the rules for moving goods from the EU to Great Britain.
– Proactively managing our franchise arrangements
with partners.
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STRATEGIC REPORT
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DESCRIPTION
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
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7
Business continuity and resilience
Significant operational failures or resilience issues at key business locations, such as Castle Donington, our primary
online Clothing & Home distribution centre, or any of our key international sourcing locations, could result in
significant business interruption. More broadly, an inability to effectively respond to global events, such as the
pandemic or Russia’s invasion of Ukraine, a shortage of raw materials or other products used in our business,
or significant supply chain disruption, could also impact business performance.
Context
The business has continued to demonstrate resilience through
the pandemic and in responding to other significant changes,
such as the Russian invasion of Ukraine however, threats to
business continuity remain:
– As our online business grows, the potential risk linked to our
sales and growth ambitions from a sustained period offline
or an inability to fulfil online orders due to a major incident
at our Castle Donington fulfilment centre increases.
– The loss of, or major disruption at other locations, such as primary
supply countries like Bangladesh, China or Sri Lanka; the dedicated
warehouses that store specific food products in the UK; or
support facilities (such as IT), could also impact us significantly.
– A specific, unexpected or unplanned shortage of product
or materials such as those being created by Russia’s invasion
of Ukraine (including sunflower oil or fertiliser), or the global
shortage of microchips, could also impact core trading or
transformation activities.
– The potential widespread consequences from currently
unknown/new Covid variants on both our business and third
parties could also have severe operational consequences.
– In addition, our dependency on major third parties means
that significant incidents, long-term resilience issues and
recoverability in these businesses would also impact our own.
Operational oversight by Executive Committee,
Crisis Management Team
Product safety and integrity
Mitigations
– A dedicated and experienced Business Continuity (BC)
team with established Group Crisis and Incident
Management processes.
– Risk-based BC assessments for stores, sourcing offices and
warehouses and validation of key supplier arrangements.
– Up-to-date BC plans for key activities across our operations,
including offices, warehouses and IT sites, that continue to
evolve in response to new threats including, where needed,
work with critical third parties.
– Enhanced capabilities at Castle Donington to manage
technology failure and fulfilment capabilities through
in-store fulfilment and the use of other warehouses in
our network.
– Proactive testing of plans for key business continuity
risk scenarios.
– Live digital platform to support the business continuity
governance programme.
– Active engagement with external organisations including
the Retail BC Association, government-led forums
and membership of the National Counter Terrorism
Information Exchange.
– Enhanced incident reporting with live data-driven dashboard.
Failure to prevent and/or effectively respond to a food or product safety incident, or to maintain their integrity,
could impact customer confidence in our brand and business performance.
Context
– The safety of our products – food and all other product
categories - is vital for our business and we need to
effectively manage the potential risks to customer health
and safety and consumer confidence that face all retailers.
– This includes considering how external pressures, including
economic and environmental changes, could impact the
integrity of our products and the ability to effectively
operate and maintain all key controls throughout the
supply chain.
– These external pressures, including the ongoing
consequences of the pandemic, inflationary costs,
labour quality and availability, and regulatory changes,
are becoming increasingly acute. While some of these
events are outside of our control, they must nevertheless
be monitored and mitigated against.
Operational oversight by Executive Committee, Group Safety
Committee, Consumer Brand Protection Committee
Mitigations
– Group-wide assessment of all safety risks with specific
Executive Committee and business unit ownership.
– Relevant Safety Policy and Standards, Terms of Trade,
product safety and "from farm to fork" specifications with
clear accountability set at all levels, including processes
to comply with overseas requirements.
– Compliance standards included in contracts with
third-party brands.
– Risk-based store, supplier and warehouse audit programmes
completed by independent third parties and own second-
line functions, including franchise operations.
– Established processes for the development of products
and the associated packaging, including independent
review and approval before launch.
– Qualified Food and Product Technology teams with access
to external experts where appropriate.
– Regular engagement with expert bodies and third-party
consultants to understand and respond to changes in
safety standards.
– Tested crisis management plan for safety incidents.
– Monitoring of product quality and customer complaints.
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PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
8
9
Information security
Failure to adequately prevent or respond to a data breach or cyber-attack could adversely impact our reputation,
result in significant fines, business disruption, loss of information for our customers, employees or business and/or
loss of stakeholder and customer confidence.
Context
– The sophistication and frequency of cyber-attacks in the retail
industry continue to increase and highlight an escalating
information security threat. This threat is further exacerbated by
the pandemic and other external events, such as the increased
threat of cyber warfare linked to current global uncertainty.
– As we continue to use data more intelligently across the
business, move away from legacy systems to new
technology and digital solutions, transition to the cloud,
enhance omni-channel customer experiences and build a
broader “ecosystem”, the profile of information security
and the overall threats landscape will continue to change.
– Our reliance on several third parties hosting critical services
and holding M&S and customer data also means that
continued assessment and monitoring is required to ensure
that vulnerabilities in their cyber and data controls do not
impact us or our customers.
– Longer-term changes such as the increase in customers
using e-commerce, the growing number of digital and
mobile shopping channels, the development of new
technologies and digital touchpoints, and permanent
changes in the pattern of office/home working, will all
continue to impact the overall risk.
Operational oversight by Executive Committee
Mitigations
– Information security and data protection policies in place,
with a mandatory training programme for colleagues.
– Information Security function, with multidisciplinary
specialists, supported by a 24-hour Security Operations
Centre and mature incident management plan.
– Network of Data Protection Officers in priority
business areas.
– Continued delivery of our improvement programme with
prioritised investment in response to an increase in security
events, breaches and the potential threat of cyber warfare.
– Risk-based cyber security assurance programme, including
assessment of controls in overseas locations.
– Information security obligations included in third-party
contracts with a risk-based assurance programme to
monitor our exposure.
– Active monitoring of our threat environment.
– Focused security assurance, architecture and hygiene
around our digital product lifecycle, operations model
and significant change activities, like omni-channel and
new technologies.
Corporate compliance and responsibility
A failure to deliver against our legal and regulatory obligations or broader corporate responsibility commitments
would undermine our reputation as a responsible retailer, may result in legal exposure or regulatory sanctions, and
could negatively impact our ability to operate and/or remain relevant to our customers and other stakeholders.
Context
– The increasingly broad and stringent legal and regulatory
framework for retailers creates pressures on business
performance and management of market sentiment requiring
frequent changes or improvements in how we operate.
Mitigations
– Code of Conduct in place and underpinned by policies and
procedures in core areas of regulation and responsibility
that is shared with suppliers and third parties where relevant
and published externally.
– New and evolving regulatory requirements include:
restrictions on the promotion of foods high in fat, sugar
and salt becoming effective from October 2022; sanctions
and export controls linked to Russia; extended producer
responsibility for packaging plastics recycling targets; the
proposed EU Directive on corporate due diligence and
accountability in the supply chain; anticipated changes in
UK corporate governance requirements, development of
Taskforce on Climate-related Financial Disclosures (TCFD)
requirements; and potential new reporting under the
Taskforce on Nature-related Financial Disclosures.
– The diligence required to remain compliant is also impacted
by the global nature of activities, particularly our supply
chains, where changes in the external environment and
challenging economic conditions, including the impact of
Covid-19 and the Russian invasion of Ukraine, leave ethical
and social responsibilities open to a heightened risk of
mismanagement or exploitation.
– Non-compliance may result in fines, criminal prosecution
for M&S or colleagues, litigation, additional investment to
rectify breaches, disruption or cessation of business activity,
as well as impacting our reputation.
Operational oversight by Executive Committee, Group Safety
Committee, Consumer Brand Protection Committee, Bank and
Services Compliance Monitoring Committee, Fraud Committee
– Group-wide mandatory training programme for higher-risk
regulatory areas, like health and safety, anti-bribery and
corruption, data privacy, and information security.
– Established in-house regulatory legal team in place,
including specialist solicitors.
– Dedicated subject-area leaders embedded in the business.
– Continuous horizon scanning, including monitoring of
sanctions and export controls.
– Risk-based assurance and monitoring systems in place
covering legal and regulatory compliance, and ethical and
social considerations, including for our overseas operations
and suppliers.
– Cross-business Fraud Committee and controls framework.
– A Confidential Reporting line to allow colleagues and other
stakeholders to report areas of concern, including breaches.
– Established Worker Voice programme in the Food business
and transparency initiatives within Clothing & Home.
– Active monitoring of customer feedback and public
sentiment on compliance and responsibility, including
social media trends.
– Proactive engagement with regulators, legislators, trade
bodies and policy makers.
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STRATEGIC REPORT
RISK
DESCRIPTION
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
10
Climate change and environmental responsibility
An inability to reduce the environmental impact of our business and progress towards our net zero targets,
including those linked to our supply chains, as well as managing the consequences of climate change on our
business, would fail to meet the expectations of our customers, colleagues, investors and other stakeholders,
impacting our brand, future trading performance and other business costs, including financing.
Context
– We operate in a world and sector with increasing pressure
Mitigations
– Established Plan A programme with clear accountabilities
from carbon-conscious customers, investors and
government bodies to operate in a more environmentally
conscious manner, where sustainability forms a core part
of decision-making. This includes, for example, our response
to the growth in the circular economy, waste reduction,
low-carbon products and use of recycled fabrics.
– Future business performance will be impacted by our ability
to effectively manage the transition to a low-carbon
economy – balancing commercial decisions with
environmental responsibility, agreeing business-wide
decarbonisation priorities and managing changes in
customer preferences. This includes management of the
increasing costs associated with sustainable materials,
recycling, carbon pricing and further technological,
policy and regulatory interventions.
– Early engagement and planning with partners and
suppliers to support their decarbonising activities is also
becoming increasingly important in the delivery of our
net zero commitment.
– From an operational perspective, the physical impact of
climate change on the availability of raw materials and food
products, the geography of the locations from which we
source and operate, and the condition of our buildings will
need to be managed effectively to reduce the impact on
trade and the income statement.
Operational oversight by ESG Committee
Liquidity and funding
for each area of the business relating to our environmental
objectives.
– Net zero targets agreed with the Board.
– Alignment of carbon commitments with our revolving
credit facility.
– Appointment of c.120 cross-business carbon champions,
and launch of an internal Green Network with c.600
cross-business colleagues.
– Established product and raw material standards and
processes outlining environmental and sustainability
considerations for own activities and the supply chain.
– Clothing Quality Charter and Environmental and
Chemical Policy in place for all suppliers.
– ESG Committee, with Board membership, in place to
oversee the delivery of our carbon commitments and
broader ESG risks.
– Developed our response to TCFD including quantitative
scenario analysis in key areas (cotton, animal protein and
property) to enhance external reporting.
– Inclusion of specific climate-related risks and mitigations
linked to Plan A in business and functional risk registers.
– Linkage of financing with the delivery of our net zero roadmap.
An inability to maintain short- and long-term funding to meet business needs or to effectively manage associated
risks could impact our ability to transform at pace, as well as have an adverse impact on business viability.
Context
– While active management of our cash, liquidity and debt
Mitigations
– A £850m undrawn, revolving credit facility and £1,197.9m
position through the pandemic and an improvement in trade
have resulted in a strong cash performance, we maintain a
continued focus on our liquidity and funding requirements.
– Availability of, and access to, appropriate sources and levels
of funding remain vital for the continued operation of
business activity and the next phase of our transformation.
Our ability to repay debt and fund working capital, capital
expenditures and other expenses depends on our operating
performance, ability to generate cash and to refinance
existing debt.
– We also have pension fund commitments that require active
management and monitoring.
of cash and cash equivalents.
– Review and refinement of our three-year plan, linked
to strategic priorities, with sensitivity analysis to assess
the impact of the changing economic environment.
– Continued focus on working capital management to
continue to improve cash flow and reduce reliance on
bank facilities.
– Ongoing scrutiny and challenge of discretionary
expenditure and capital spend controls that were
strengthened during the pandemic.
– Close monitoring and stress testing of projected cash and
debt capacity, financial covenants and other rating metrics.
– Treasury operations are managed and monitored in line
with a Board approved Treasury Policy.
– Frequent engagement and dialogue with the market and
Operational oversight by Executive Committee
rating agencies.
11
RISK MOVEMENT
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OUR APPROACH TO ASSESSING LONG-TERM VIABILITY
The UK Corporate Governance Code requires
us to issue a “viability statement” declaring
whether we believe the Group can continue to
operate and meet its liabilities, taking into
account its current position and principal risks.
The overriding aim is to encourage directors to
focus on the longer term and be more actively
involved in risk management and internal
controls. In assessing viability, the Board
considered a number of key factors, including
our business model (see page 9), our strategy
(see page 6), approach to risk management (see
page 45) and our principal risks and
uncertainties (see pages 47 to 54).
The Board is required to assess the Group’s
viability over a period greater than 12 months,
and in keeping with the way that the Board
views the development of our business over the
long term, a period of three years is considered
appropriate for business planning, measuring
performance and remunerating at a senior level.
This three-year period aligns to the Group’s
annual strategic review exercise conducted
within the business and reviewed by the Board,
and captures a large proportion of the Group’s
investment into its ongoing transformation
programme as well as the renewal of its
December 2023 bond.
The Group successfully renegotiated its
revolving credit facility (“RCF”) in December
2021, which is set to run until June 2025, and
replaces the facility which was due to mature in
April 2023. The new facility contains a financial
covenant, being the ratio of earnings before
interest, tax, depreciation and amortisation; to
net interest and depreciation on right-of-use
assets under IFRS 16. The covenant is measured
semi-annually.
The Group continues to maintain a robust
financial position, providing it with sufficient
access to liquidity, through a combination of
cash and committed facilities, to meet its needs
in the short and medium term. At 2 April 2022,
the Group had further strengthened its
available liquidity over the year to £2.1bn
(last year: £1.8bn). Furthermore, the Group’s
strong free cash flow generation has driven a
reduction in net debt of £817.1m to £2,698.8m
at 2 April 2022.
For the purpose of assessing the Group’s
viability, the Board identified that, although
all of the principal risks detailed on pages 47
to 54 could have an impact on Group
performance, the following risks pose the
greatest threat to the business model, future
performance, solvency and liquidity of the
Group and are therefore the most important to
the assessment of the viability of the Group:
– Maintaining trading performance in an
increasingly challenging environment.
– Business transformation.
– Ocado Retail.
– Talent and capability.
In assessing viability, the Board considered the
position presented in the approved Budget and
Three-Year Plan. The process adopted to
prepare the financial model for assessing the
viability of the Group involved collaborative
input from a number of functions across the
business to model a severe but plausible
downside scenario.
The severe but plausible downside scenario
includes the following assumptions:
– There will be a period of economic recession
in the UK in 2022/23 and 2023/24 (following
the impacts of the Covid-19 pandemic, the
unfolding humanitarian crisis following the
invasion of Ukraine and the subsequent
sharp increases in the cost of living), resulting
in a decline in sales of 4.0% per annum,
across all three business units.
– Utilities, fuel and other costs increasing by
over £50m in aggregate across 2022/23 and
2023/24.
– In addition, a delay on transformation
benefits results in incremental sales
expected from the transformation declining
by 10%, 20% and 40% respectively across the
three-year period across both Food and
Clothing & Home business units.
Other scenarios linked to key principal risks
were also considered. However, the estimated
financial impact of these risks cumulatively
was comparable to the severe but plausible
downside scenario outlined above. Moreover,
the likelihood of these risks occurring
concurrently would be so remote as to be
considered a “black swan” event. As a result,
further detailed modelling was not performed.
The Board has also considered the potential
impact of changes to environmental factors
which may affect the business model and
performance in the future. As set out in the
Taskforce on Climate-related Financial
Disclosures (“TCFD”) section on page 72,
no material impact on the Group’s financial
performance is considered to exist in the
short term.
The impact of the severe but plausible
downside scenario has been reviewed against
the Group’s projected cash flow position
and financial covenant over the three-year
viability period. In the event of this scenario
materialising, mitigating actions would be
available, including, but not limited to, a
reduction in labour, technology and head office
costs, as well as deferring or cancelling
discretionary spend (including discretionary
bonuses) and reducing capital expenditure.
As a result, even under this scenario, which the
Board considers to reflect a plausible, but
remote, outcome, the Group would continue
to have sufficient liquidity and headroom on its
existing facilities and meet the measurement
criteria against the revolving credit facility
financial covenant. The Audit Committee
reviews the output of the viability assessment
in advance of final evaluation by the Board.
The Board have also satisfied themselves that
they have the evidence necessary to support
the statement in terms of the effectiveness of
the internal control environment in place to
mitigate risk.
Reverse stress testing has also been applied to
the model to determine the decline in sales that
the Group could absorb before breaching any
financial covenants. Such a scenario, and the
sequence of events which could lead to it, is
considered to be extremely remote, as it
requires sales reductions of c.15% per annum
compared to base expectations with no
mitigations implemented before there is a
breach in financial covenants. While the
occurrence of one or more of the principal risks
has the potential to affect future performance,
none of them are considered likely either
individually or collectively to give rise to a
trading deterioration of the magnitude
indicated by the reverse stress testing and to
threaten the viability of the Group over the
three-year assessment period.
Having reviewed the current performance,
forecasts, debt servicing requirements, total
facilities and current liquidity, the Board
expects the Group to have adequate resources
to continue in operation, meets its liabilities as
they fall due, retain sufficient available cash
across all three years of the assessment period
and not breach the covenant under the
revolving credit facility. The Board therefore
expects the Group will remain commercially
viable and the Viability Statement can be
found on page 111.
The Strategic Report, including pages 2 to 55, was approved by a duly authorised Committee of the Board of Directors on
24 May 2022, and signed on its behalf by
Steve Rowe, Chief Executive
24 May 2022
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GOVERNANCE
CHAIRMAN’S
GOVERNANCE OVERVIEW
‘‘
THE BOARD’S ROLE HAS BEEN TO
GUIDE THE BUSINESS THROUGH
CHALLENGING HEADWINDS.
Archie Norman, Chairman
’’
As outlined in my Chairman’s letter on
pages 2 to 3, macro events have had a
significant impact on the business this
year. My role, and that of the Board, has
been to guide our way through these
varied and challenging headwinds;
ensuring our overarching strategy stays
the course. Simultaneously, your Board
has remained ready to respond and to
adjust for external factors threatening
to derail us.
In keeping with the demands made on
the Board in these recent, turbulent years,
circumstances have made it vital we
remain highly engaged. We have been
flexible with our time to support and
challenge senior leadership, to ensure
the continued acceleration of our
transformation programmes, and not
only to react to events, but have our
eyes firmly fixed on the horizon into
2022 and beyond. Naturally, we continue
to fulfil our other core duties to oversee
M&S’ governance, culture, financial
controls, risk and change management.
The Governance section that follows is
by intention concise, in keeping with our
approach in previous years. Further detail
on the Board, its Committees and our
governance framework are available at
marksandspencer.com/thecompany.
NAVIGATING HEADWINDS
The Board has had to remain vigilant
alongside management this year and to
stay abreast of current events impacting
the business. We continue to deal with
uncertainty in our European supply chain,
as we enter the fourth Brexit extension
period before complete customs
checks are implemented. Meanwhile, we
experienced a positive trading response
when Covid-19 restrictions were lifted at
the start of 2022, but trading in the fourth
quarter then slowed, with consumers
conscious of cost of living increases
amidst inflationary pressures.
The Board has proactively discussed
with management how best to trade
through these macro impacts, resulting
in detailed stakeholder discussions in line
with Section 172(1) of the Companies Act
2006 (“s.172(1)”). There has been no “one
size fits all” answer across the business,
and inevitably trade-offs between our
stakeholders have been made. These have
been allied with our strategic objectives
and have included measures such as price
and margin protections, supplier support
and buying process improvements.
The invasion of Ukraine has materially
impacted the business, as we have
franchise agreements in both Ukraine
and Russia. While we felt it was important
to support colleagues and continue to
trade in Ukraine for as long as possible,
events have made that impossible. The
Board and I are nonetheless heartened
by the response from our customers and
colleagues who have donated significantly
to the aid effort. You can read more on our
response on page 5.
Meanwhile, we have suspended shipments
to our Russian franchise partner and
directed them to cease trading. The result
of this decision is that, following legal
negotiations with our franchise partner,
we have reached a settlement to exit fully
our Russian franchise. While our franchise
agreement was not captured under the
sanctions regime, we strongly believe it is
right and just to ensure we are not trading,
even indirectly, in that jurisdiction while
the war in Ukraine is ongoing.
NEW LEADERSHIP
Shareholders will have noted our recent
announcement of a new leadership team
structure. Before I outline this, I first want
to express my and the business’ thanks to
Steve Rowe, our outgoing Chief Executive
Officer. Steve has been a magnificent
servant of M&S, dedicating 40 years to the
Company, coming from the shop floor to
lead the business. His career is testament
to the opportunities M&S can provide for
great people to succeed. The M&S he took
over was in parlous shape and throughout
my tenure as Chairman, he has been
fearless in facing into the challenges and
has delivered massive progress.
To replace Steve, we have chosen to
promote our internal talent. With effect
from 25 May 2022, Stuart Machin has
become Chief Executive Officer, taking
responsibility for day-to-day leadership
of the business and the Executive
Committee. He continues to have
oversight of his current portfolio of
responsibilities, including leadership of
the Food business, Operations, Property,
Store Development and Technology,
and will also take responsibility for HR
and Corporate Communications. Katie
Bickerstaffe has become Co-Chief
Executive Officer, with a particular focus
on driving the future of Digital & Data,
and of our global omni-channel business.
She retains her existing portfolio of
responsibility for Clothing & Home,
MS2, International and Financial Services.
Eoin Tonge has become Group CFO &
Chief Strategy Officer. In addition to his
current responsibilities, he will play an
enhanced role in leading the future
development of the business and will
also take on oversight of Plan A.
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M&S is now embarking on the second
phase of its transformation programme
“Shaping the Future”. The Board’s view
is that, under the leadership of Stuart,
Katie and Eoin, the business has made
remarkable progress and that continuity
of strategy and leadership is the best
approach for the Company. Bringing
together these three outstanding leaders
will provide the stability, pace and
bandwidth required to accelerate the
pace of change.
I would also like to note the contribution
Andy Halford has made to the Board.
Noting that his tenure has now reached
nine years, he will be stepping down as
Chair of the Audit Committee, with Evelyn
Bourke replacing him as Chair. Having
reviewed and confirmed that Andy
remains independent, the Nomination
Committee agrees that his role as Senior
Independent Director (“SID”) is an
important constant while new Board
members settle into their roles. He will
therefore remain as SID and a member of
the Audit Committee for a transitionary
period, and will leave the Board by the
end of 2022.
Board and Executive Committee
biographies can be found on pages 60
to 62. Full details of these Board and
executive changes, our assessment
of the balance of leadership skills and
experience, and our talent and succession
processes, can be found in the Nomination
Committee Report on pages 66 to 69.
BOARD ACTIVITIES AND
CONSIDERATION OF STAKEHOLDERS
The Board’s focus during the year
has been to accelerate the Company’s
pursuance of its strategic priorities,
while steering through macro-induced
headwinds. In our meetings, we have
continued our approach of considering
“strategic deep dives” presented by all
areas of the business, which we have
then debated and challenged. All while
being mindful of the impact of any
decisions made on the business’ various
stakeholders and on its long-term,
sustainable success, in line with s.172(1).
An overview of the range of matters that
the Board discussed and debated at its
meetings during the year can be found
on pages 63 to 64.
The Company’s s.172(1) statement is
available on pages 32 to 34.
EMBEDDING ESG
AGM: STAYING DIGITAL
As explained in last year’s Annual Report,
the Board’s Environmental, Social &
Governance (“ESG”) Sub-Committee
was established to assist the Board in
providing focus and oversight of the Plan
A programme, both in its reinvigoration
and its ongoing effectiveness. The report
of the ESG Committee for 2021/22 is
available on pages 70 to 77.
In demonstration of our commitment to
embedding ESG across the organisation,
sustainability is now one of the five
strategic pillars comprising our corporate
purpose. Furthermore, the business
negotiated and entered a sustainability
linked financing agreement for the first
time. While we have strides to take on our
Plan A agenda still, the Board, with the
support of the ESG Committee, are
focused on delivering tangible progress
in the year ahead.
FUTURE SHAPING GOVERNANCE
The Company has made a number of
strategic investments during the course of
the year, following the acquisitions of 50%
of Ocado Retail Limited in 2019 and of the
Jaeger brand in 2020. In partnership with
True Capital, we became the cornerstone
investor in a Direct-to-Customer (“D2C”)
focused fund. We have also acquired a
minority stake in Nobody’s Child Limited,
an exciting eco-conscious, affordable
fashion brand, and have become the
majority owner (with a route to 100%
ownership) of The Sports Edit Limited,
an activewear platform with proven
capability in brand curation and
emerging brand identification.
Each of these investments is unique and,
as such, the governance arrangements
supporting them are bespoke for the
nature of the investment and lifecycle
of the businesses. This has required the
Board to ensure we have the appropriate
controls in place, not only to mitigate
risk, but also to be a supportive and
productive strategic investor.
DIVIDEND
While the balance sheet is strengthening,
the Board and I believe on balance, and
in line with our approach last year, that
non-payment of a dividend is appropriate
for the 2021/22 financial year. This
continues to be one of the proactive
steps we are taking to ensure the business
is set up for success in the future.
G
O
V
E
R
N
A
N
C
E
The Annual General Meeting (“AGM”)
provides investors with a valuable
opportunity to communicate with the
Board. We have learnt in recent years that
digital meetings are more engaging, more
democratic, and allow us to communicate
and hear from more of our shareholders,
with participation levels trebled at last
year’s meeting compared with the last
physical meeting. In recognition, we will
be conducting this year’s AGM digitally
once again. We strongly believe digitally-
enabled meetings should become the
default across the FTSE and I encourage
other companies to follow our example.
In addition to being able to vote and
submit questions electronically in
advance, all shareholders will be able
to join the meeting online to hear from
Stuart, Katie, Eoin and me, ask questions
and vote on our resolutions.
We will be joined by Anita Anand who will
be acting as your shareholder advocate,
sharing your views and questioning me
and the Board on your behalf. If you
would like us to hear from you directly,
you also have the option of dialling in
and asking your question live on the day,
or submitting a video question to be
played to the Board for response during
the meeting. I look forward to hearing
from you all then.
Information on how to participate
electronically, both in advance and on the
day, can be found on pages 208 to 209.
Archie Norman, Chairman
UK CORPORATE
GOVERNANCE CODE
The UK Corporate Governance Code
2018 (the “Code”) which is available
to view on the Financial Reporting
Council’s website is the standard
against which we measured ourselves
in 2021/22.
The Board confirms that we complied
with all of the provisions set out in
the Code for the period under review.
Details on how we have applied the
principles set out in the Code and
how governance operates at M&S have
been summarised throughout the
Directors’ Report. Our full Corporate
Governance Statement outlining
our compliance is available online at
marksandspencer.com/thecompany.
Annual Report & Financial Statements 2022
57
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GOVERNANCE
LEADERSHIP AND OVERSIGHT
Our governance framework facilitates responsive and effective decision-making,
ensuring that the Board and its Committees, the Executive Committee and senior management are
able to collaborate proactively, consider issues and respond.
BOARD COMMITTEES
BOARD
EXECUTIVE COMMITTEE
The Board is supported by its sub-
committees in discharging its duties.
At each Board meeting, the Chairs of
the Committees provide an update on
their Committee activities.
Audit Committee
See p78-84
Responsible for monitoring the integrity
of the financial statements, reviewing
the Group’s risk framework and
internal controls and maintaining
the auditor relationship.
Remuneration Committee
See p85-107
Responsible for remuneration policy,
performance-linked pay schemes and
share-based incentive plans.
Nomination Committee
See p66-69
Responsible for reviewing Board
composition and diversity, proposing
new Board appointments and monitoring
the Board’s succession needs.
ESG Committee
See p70-77
Responsible for ensuring the Company’s
ESG strategy remains fit for purpose, and
plans are in place and reported on. Advises
the Audit Committee on ESG-related risks,
including climate-related issues.
The Board is responsible for establishing
the purpose, values and strategy for the
M&S Group, ensuring our culture is aligned,
overseeing our conduct and affairs,
and for promoting the success of M&S
for the benefit of our members and
stakeholders. The Board discharges some
of its responsibilities directly and others
through its sub-committees.
Terms of Reference for the Board and
its sub-committees are available in our
governance framework, published on
marksandspencer.com/thecompany.
Execution of the M&S strategy and
day-to-day management is delegated
to the Executive Committee, and
subsequently to senior leadership forums
where relevant, with the Board retaining
responsibility for overseeing, guiding and
holding management to account.
BOARD
The Executive Committee (“ExCo”) is
our leadership team responsible for
executing strategy. It manages, monitors
and provides the executive input
underlying M&S’ strategic and operational
decisions, ensuring strong executive
alignment on business priorities,
investments and actions.
During the year, the ExCo consisted of the
CEO, CFO, Chief Operating Officers, and
the Managing Directors of each business
unit. Authority is conferred on the ExCo
by the Group Delegation of Authority,
as approved by the Board.
The ExCo reviews strategic opportunities
and initiatives from the Group’s key
businesses and centralised functions,
ensuring these contribute to and
elevate the Board’s overarching strategy.
In addition, and in support of the Board’s
purpose, values and culture setting,
the ExCo is responsible for all colleague
matters, including the structure and
operation of the HR function throughout
the business, the development and
monitoring of culture and values,
and reviewing talent and leadership
development and succession plans
below ExCo level.
Disclosure Committee
Responsible for determining the
disclosure treatment of material
information and identifying
confidential and inside
information for the purpose
of maintaining project lists
compliant with the UK Market
Abuse Regulations.
BOARD
COMMITTEES
Governance
at M&S
EXECUTIVE
COMMITTEE
SENIOR
LEADERSHIP
FORUMS
SENIOR LEADERSHIP FORUMS
Underlying this governance feedback loop
between the Board, its sub-committees and
the ExCo, there are forums comprising senior
management supporting each of these
governing bodies.
Primarily, each of the Group’s key business
units have “Operating Review” meetings with
streamlined memberships. Their main remit is
management of key trading and operational
matters, with decision-making delegated to
them by the Group Delegation of Authority
and underpinned by business unit Delegations
of Authority.
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Marks and Spencer Group plc
Additional forums support on specific
projects, business needs, or strategic
priorities, meeting as and when required.
People Forum
For driving the people and culture agenda
across the Group.
Examples include:
Property Committee
For reviewing and approving property
investments.
Digital Board
For driving the Company’s “Digital First”
agenda across the Group.
Brand Forum
For reviewing use of the M&S brand, as well
as considering use of third-party brands.
Fraud and Loss Committee
For pulling together all fraud related
governance activities, reporting directly into
the Audit Committee.
Compliance Monitoring Committee
Oversight of credit broking activities within
the Group, as regulated by the Financial
Conduct Authority.
Plan A (Net Zero) Steering Group
For mobilising action across the business
on our net zero roadmap, updating the
ESG Committee on progress.
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G
O
V
E
R
N
A
N
C
E
BOARD COMPOSITION
AND MEETING ATTENDANCE
BOARD MEETING ATTENDANCE AND DIRECTOR RESPONSIBILITIES IN 2021/22
During the year, the Board held 12 scheduled
meetings for which individual attendance is
set out below.
Sufficient time is provided, periodically,
for the Chairman to meet privately with the
Senior Independent Director (“SID”) and the
non-executive directors to discuss any
matters arising.
For information on what the Board did
during the year, see p63-64.
CHAIRMAN
Archie Norman*
* Considered independent on appointment.
Maximum
Attended
possible Independent Responsibility in 2021/22
Linked to
remuneration
12
12
Board governance and performance.
Shareholder engagement.
EXECUTIVE DIRECTORS
Chief Executive
Steve Rowe
Chief Financial Officer
Eoin Tonge
NON-EXECUTIVE DIRECTORS
Full Year
Evelyn Bourke
Andrew Fisher
Andy Halford
Tamara Ingram
Justin King
Sapna Sood
Appointed in 2021/22
Fiona Dawson
12
12
12
12
12
11*
12
11**
11***
12
12
12
12
12
12
12
12
10
Group performance and management.
Executive Committee leadership.
Group financial performance, risk management and
investor relations. Strategy and transformation planning.
Role at Board meetings
Independent non-executive directors assess, challenge and monitor the
executive directors’ delivery of strategy within the risk and governance
structure agreed by the Board.
As Board Committee members, directors also review the integrity of
the Company's financial information, consider ESG issues, recommend
appropriate succession plans, monitor Board diversity and set the
directors’ remuneration.
Unable to attend one meeting due to participation in residential course on behalf of M&S.
*
** Unable to attend one meeting due to external board commitments.
*** Attended 24 May meeting as an observer prior to appointment.
STANDING ATTENDEES
Nick Folland –
General Counsel & Company Secretary
12
12
Advising the Board on all legal and corporate governance issues,
including sustainability and Plan A.
Responsibility
EXECUTIVE COMMITTEE – ATTENDED BY INVITATION
Role at Board meetings
Sacha Berendji
Katie Bickerstaffe
Paul Friston
Stuart Machin
Richard Price
4
11
5
10
5
The ExCo comprises the Company’s senior leadership team below Board
level and is tasked with running the day-to-day operations of the business
and facilitating delivery of the strategy as approved by the Board.
Members of the ExCo attend Board meetings by invitation to present
and discuss matters of strategic importance.
Direct reports to ExCo members also attend Board meetings by invitation
as and when input is required on their specific areas of expertise.
Note: The tables above provide details of scheduled meetings held in the 2021/22 financial year.
Monitoring non-executive
director independence
The Board reviews the independence of its
non-executive directors as part of its annual
Board Effectiveness Review. The non-executive
directors also meet annually, led by the SID,
to conduct the Chairman’s appraisal. The
results of the meeting are then fed back
to the Chairman by the SID.
The Chairman was considered to be
independent on appointment and is
committed to ensuring that the Board
comprises a majority of independent
non-executive directors who objectively
challenge management, balanced against
the need to ensure continuity on the Board.
The Company maintains clear records of
the terms of service of the Chairman and
non-executive directors to ensure that they
continue to meet the requirements of the
UK Corporate Governance Code.
Neither the Chairman nor any of the
non-executive directors have exceeded the
maximum nine-year recommended term of
service set out in the Code, with the exception
of our longest-serving non-executive director,
Andy Halford. While Andy’s tenure has
now reached nine years, the Nomination
Committee has reviewed and agreed he
remains independent, and his role as SID
is an important constant while new executive
Board members settle into their roles.
As such, the Board considers that all of its
non-executive directors continue to
demonstrate independence.
For information on the skills and
experience of each director,
see p60-62. For more information
on director tenure see p67.
Annual Report & Financial Statements 2022
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GOVERNANCE
This is our Board as it operated during the year. To see changes for the new financial year please see page 62.
OUR BOARD
1
4
2
5
3
6
1. Archie Norman Chairman
Appointed: September 2017
N
R
2. Steve Rowe Chief Executive
Appointed: April 2016
Career and external appointments:
Archie is an experienced Chairman and
former Chief Executive having led major
transformation programmes at ITV, Lazard,
Asda, Energis and Hobbycraft. He was
previously Deputy Chairman of Coles Limited
and was Lead Director at the Department for
Business, Energy & Industrial Strategy from
2016-2020. Archie is also the Chairman of
Signal AI, Non-Executive Vice Chairman of
the Global Counsel and Senior Independent
Director of Bridgepoint Group plc.
Career and external appointments:
Steve joined M&S in 1989 and worked in senior
roles across all areas of the business prior to
his appointment as CEO, including Director of
Home, Director of Retail, Director of Retail and
E-commerce, Executive Director, Food, and
Executive Director, General Merchandise.
Steve stepped down from the Board on 25 May
2022 and, with heartfelt thanks for his many
years of dedication to the Company, will
formally leave M&S at the AGM on 5 July 2022.
Committee Chairs
3. Eoin Tonge Group CFO &
Chief Strategy Officer
Appointed: June 2020
Career and external appointments:
Eoin joined the business from Greencore, where
he had been CFO since 2016. At Greencore, he
oversaw the divestment of their US operations,
strengthening the company’s balance sheet,
returning capital to shareholders and
simplifying the business. Prior to that he was
MD of Greencore’s Grocery business and also
worked in a variety of roles across strategy,
finance, treasury and capital markets at
Greencore and previously Goldman Sachs.
Eoin became Group CFO & Chief Strategy
Officer on 25 May 2022, taking on oversight of
Plan A and playing an enhanced role in leading
the future development of the business.
4. Andy Halford Senior Independent
Non-Executive Director
A
N
5. Andrew Fisher OBE
Independent Non-Executive Director
R
N
6. Tamara Ingram OBE
Independent Non-Executive Director
Appointed: January 2013
Appointed: December 2015
Appointed: June 2020
E
N
R
Career and external appointments:
Andy’s strong finance background and
broad knowledge of the UK and international
consumer market was gained from CFO
positions held in global listed companies.
He is Chief Financial Officer of Standard
Chartered, which he joined after 15 years
at Vodafone, nine of which were spent as
Chief Financial Officer.
Career and external appointments:
Andrew was instrumental in establishing mobile
lifestyle app Shazam, where he was Executive
Chairman until October 2018, as a leading
mobile consumer brand, and brings over
20 years’ experience leading and growing
numerous technology-focused enterprises.
He is Non-Executive Chair of both Rightmove
plc and Epidemic Sound, and is also a member
of the UK Advisory Board for Spencer Stuart.
Career and external appointments:
Tamara has a longstanding leadership
career in advertising, marketing and digital
communications, having held leadership roles
at WPP since 2002 and as Non-Executive Chair
of Wunderman Thompson. Prior to this, she
worked at Saatchi and Saatchi where she held
the roles of CEO and Chair. Tamara has led
renowned marketing campaigns for household
brands around the world and delivered cultural
and business transformation at pace within her
own businesses as well as on behalf of clients.
She is also a non-executive director of Marsh
MacLennan and Intertek Group.
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Committees key
A
Audit
N
Nomination
E
ESG
R
Remuneration
Committee Chair
7. Evelyn Bourke
Independent Non-Executive Director
A
N
8. Fiona Dawson CBE
Independent Non-Executive Director
N
9. Justin King CBE
Independent Non-Executive Director
A
N
Appointed: February 2021
Appointed: May 2021
Appointed: January 2019
Career and external appointments:
Evelyn retired from her role as CEO of
Bupa Group in December 2020 where she led
transformative change during her near five-year
tenure. She also has extensive experience in
financial services, risk and capital management
and mergers and acquisitions; having spent
three and a half years as Bupa’s CFO and in
leadership roles at the Bank of Ireland,
Standard Life and Friends Provident. Evelyn
joined Admiral PLC as a non-executive director
on 30 April 2021 and AJ Bell PLC on 1 July.
She is also a Trustee of the Ireland Fund of
Great Britain.
Career and external appointments:
Fiona left her position as part of the Leadership
Team of Mars Inc. in July 2021 after more
than three decades at the business. Fiona
has a strong track record in sustainability,
health and wellbeing, particularly women’s
entrepreneurship and human rights and has
always been a strong advocate for equality and
diversity in the workplace. In May 2021, Fiona
was awarded a CBE for services to women and
the economy. Fiona is also a non-executive
director of LEGO and joined Kerry Group plc as
a non-executive director in January 2022. She is
a Trustee of The Social Mobility Foundation and
Chair of the Women’s Business Council.
Career and external appointments:
Justin has over 30 years of experience in
large retail operations and transformations,
and now acts as an adviser to a range of
growing businesses. Between 2004 and 2014,
he was the CEO of Sainsbury’s, leading the
business through a major turnaround. He has
also previously held senior positions at M&S,
as Head of Food, as well as at Asda,
Haagen-Dazs, PepsiCo and Mars.
10. Sapna Sood
Independent Non-Executive Director
E
N
Appointed: June 2020
Career and external appointments:
Sapna recently joined The Adecco Group as a
Senior Vice President and Chief of Staff to the
Group CEO. She has in-depth knowledge of
running complex supply chains, including in
food and clothing, as well as experience of
leading large transformation programmes and
is passionate about sustainability. She has also
held leading operational roles in the building
materials and industrial gas sectors in Europe
and Asia-Pacific, latterly as CEO and President
of LafargeHolcim in the Philippines. More
recently, Sapna was a senior executive at
Compass Group and a non-executive director
at Kering SA and is currently an Advisory Board
member of Imperial College Business School.
7
8
9
10
Joined the Board on 25 May 2022
13
G
O
V
E
R
N
A
N
C
E
11. Katie Bickerstaffe
Co-Chief Executive Officer
12. Stuart Machin
Chief Executive Officer
Career summary: Katie has held a number
of roles at M&S including Non-Executive
Director, Chief Strategy and Transformation
Director and most recently, joint Chief
Operating Officer. On 25 May 2022, she
re-joined the Board as Co-Chief Executive
Officer. Katie is currently a non-executive
director of Barratt Developments PLC and
the England and Wales Cricket Board, and
was previously Executive Chair of SSE Energy
Services and Chief Executive, UK and Ireland
of Dixons Carphone plc, with extensive
experience of digital retail and operations
and leading consumer-focused businesses.
Career summary: Stuart took over as
Chief Executive Officer on 25 May 2022.
Having joined M&S as Food Managing
Director in April 2018 with nearly 30 years’
experience in the food, fashion and home
retail sectors, Stuart was appointed joint
Chief Operating Officer in May last year. In his
new CEO role, Stuart will continue to serve as
a Director of Ocado Retail Ltd. Prior to joining
M&S, Stuart was CEO at Steinhoff UK and
spent 10 years in Australia working at
Wesfarmers as COO and CEO of Coles and
Target respectively. Stuart has also held
senior operational and commercial positions
in UK retailers Sainsbury’s, Tesco and ASDA.
11
12
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13. Nick Folland
General Counsel and Company Secretary
Appointed: February 2019
Career and external appointments: Nick has
extensive legal and governance experience,
having been General Counsel and Company
Secretary in FTSE 100 businesses since 2001.
He has held positions as Chief Executive of the
Crown Prosecution Service and Chief External
Affairs Officer and Chief of Staff to the CEO
of the Co-op. Nick is the Senior Independent
Member of the Natural Environment Research
Council – the UK’s leading public funder of
environmental science. He joined HMPPS as a
non-executive member of its Audit and
Risk Assurance Committee in May 2021.
Annual Report & Financial Statements 2022
61
GOVERNANCE
OUR BOARD CONTINUED
Recent changes:
Our Board for the
coming year
Archie Norman
Chairman
N R
Nick Folland
General Counsel &
Company Secretary
Katie Bickerstaffe
Co-Chief
Executive
Officer
Stuart Machin
Chief
Executive
Officer
Eoin Tonge
Group CFO &
Chief Strategy
Officer
Andy Halford
Senior Independent
Non-Executive
Director
A N
Evelyn Bourke
Independent
Non-Executive
Director
A N
Andrew Fisher OBE
Independent
Non-Executive
Director
R
N
Tamara Ingram OBE
Independent
Non-Executive
Director
E
N
R
Fiona Dawson CBE
Independent
Non-Executive
Director
N
Justin King CBE
Independent
Non-Executive
Director
A
N
Sapna Sood
Independent
Non-Executive
Director
N
E
Committees key
A
Audit
N
Nomination
E
ESG
R
Remuneration
Committee Chair
Our Executive Committee
The Executive
Committee
is established and
led by the CEO,
and is responsible for
executing strategy
and the day-to-day
management of
the business.
Richard, Paul and
Sacha were members
during the year,
alongside the CEO,
CFO and Chief
Operating Officers.
They will continue
serving as members
into 2022/23 with the
executive directors.
Richard Price
Clothing & Home
Managing Director
Paul Friston
Managing Director
of International
Career summary: Paul began
his M&S career on the Finance
graduate programme in 1996
and qualified as a management
accountant in 2000. He held a
variety of roles during his time at
M&S, including Interim CFO and
Executive Assistant to former CEO,
Marc Bolland. Paul was appointed
to his current position in May 2016
and became Executive Committee
sponsor for Inclusion & Diversity
in April 2018.
Career summary: Richard joined
M&S on 7 July 2020 as Clothing &
Home Managing Director. Richard
spent three years as MD of BHS
before becoming CEO of F&F
Clothing at Tesco PLC in 2015.
Prior to this Richard was at M&S
from 2005 to 2012, first as
Head of Merchandise and then as
Menswear Trading Director. Earlier
in his career he worked for Next
in a range of merchandising roles
across womenswear and menswear
from 1989 to 2005. Richard’s career
spanning some of the UK’s top
clothing brands demonstrates
his proven track record of
delivering growth through
stylish, great value product.
Sacha Berendji
Group Property, Store
Development and IT Director
Career summary: Sacha joined
M&S in 1994 through the Graduate
training programme. He undertook
various appointments including
General Manager of Marble Arch
Store, Regional Manager for
London, Head of Property Planning
& Store Development, Executive
Assistant to the Chief Executive,
and Director of Merchandising.
Sacha took up his current position
in November 2012.
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BOARD ACTIVITIES
The following pages outline the key
topics reviewed, monitored, considered
and debated by the Board in 2021/22.
Meeting agendas, agreed in advance
by the Chairman, CEO and Company
Secretary, combine a balance of regular
standing items, such as reports on current
trading and financial performance,
with two or three detailed “deep dives”.
All items for discussion are guided
by, and mapped against, the
Company’s strategic priorities which
are highlighted in the key below.
The Board recognises the importance
of understanding and considering
the views and interests of all the
Company’s stakeholders, and this
forms a crucial component of directors’
discussion and decision-making.
The icons below highlight the
stakeholders considered and impacted
in each key area of activity, together
with an example demonstrating the
discharge of duties under Section 172(1)
of the Companies Act 2006 (“s.172”).
For more information, see p32-34
for our Section 172(1) statement.
Stakeholder
groups:
Strategic
priorities:
Shareholders
Colleagues
Suppliers
Customers
Communities
Partners
1
M&S Food
high-performing
business and
market share
growth
2
Ocado
transitioning to
strong capacity
growth post
pandemic
reversion
3
Clothing &
Home on track
for a more
profitable
model capable
of growth
4
Building store
rotation
pipeline,
driving exit from
legacy stores
5
International
absorbing Brexit
related costs,
but embryonic
global strategy
encouraging
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GROUP PURPOSE UPDATE 1 2 3 4 5
– As the business moved into the next phase of
– In shaping the Group purpose, the Board agreed
– During discussions, the Board and Executive
transformation, the Board discussed a “North Star”
under which all the Group’s activities could be
collectively focused, guided and galvanised.
This took the shape of an updated Group purpose
which was relaunched internally in October.
This reinvigorated articulation of how and why we
serve our stakeholders has been the overarching
backdrop against which all subsequent Board
discussion and decision-making took place during
the year.
this should be aspirational, exciting and engaging,
particularly for colleagues. The Board emphasised
the need to balance this with language and
concepts which colleagues would find relatable,
and also to ensure the integration of sustainability
as a key strategic pillar.
– Crucially, directors considered shareholder returns
and agreed the updated purpose should remain
grounded in commercial reality.
Committee (“ExCo”) explored M&S’ rich heritage
and our place in the communities we serve with
the help of our M&S Archive.
– Feedback was sought from leaders across the
business and a wider “Talk Straight Survey” invited
the views of all employees. The results identified
clear communication as an area for improvement,
and as a result, alignment with our wider “People
Plan” and colleague communication strategy
were key focus areas in the relaunch.
MS2 3 5
The Board has monitored progress of MS2,
the Company’s digital and online change
programme, which was launched last year with
the ambition to bring M&S.com front and centre
of our business proposition.
Decisions and s.172 considerations
– In reviewing regular updates on MS2’s progress,
the Board monitored and encouraged
advancement of growth plans, including
appropriate investment in talent.
End-to-end supply chain 1 3 5
The Board reviewed regular updates on
modernising supply chains across Food,
Clothing & Home and International.
Decisions and s.172 considerations
– Guidance was offered on the roll-out of Vanguarde
and consideration given to the impact of labour
shortages and global delays on our partners, store
colleagues, agency workers and shareholders.
Rotating the store estate 4
Ensuring the store estate is fit for the future
continued to be a key priority during the year.
STRATEGY AND TRANSFORMATION
Decisions and s.172 considerations
Decisions and s.172 considerations
– In addition to reviewing developments and visiting
stores, the Board considered how changes in the
community post-Covid-19 had impacted plans for
store locations and encouraged management to
focus on store geography during budget planning.
– The Board supported investment in the True
Capital III Fund to enrich M&S’ understanding
of changing customer priorities, such as
sustainability and convenience, through access
to emerging technology.
Strategic investments 3
CEO and CFO updates included reports on proposed
and in-flight strategic investments and acquisitions,
including on Nobody’s Child, The Sports Edit and
True Capital III Fund.
Decisions and s.172 considerations
– As part of the Brands strategy, the Board
challenged management on integration with
M&S colleagues and culture, long-term returns
for investors, and adding value to the customer
proposition.
Digital & Data 1 2 3 4 5
The “Digital First” agenda has remained a focal point
in the transformation. The Board has monitored
progress of programmes to enhance M&S’ utilisation
of data including Sparks, Personalisation at Scale and
BEAM Academy.
– Reviewed and challenged the personalisation
plans in relation to more focused customer
engagement.
Plan A 1 2 3 4 5
While Plan A metrics are primarily evaluated by
the ESG Committee, the Board reviewed progress
against key objectives and considered Plan A
factors throughout Board discussions.
Decisions and s.172 considerations
– The Board considered and approved the addition
of sustainability metrics in a renewed revolving
credit facility.
– A newly overhauled and strengthened governance
process on charity partnerships and donations
was agreed.
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GOVERNANCE
Budget and financial performance
1 2 3 4 5
Financial performance was monitored by the
Board at every meeting, with deep dives on financial
results announcements, in-year budget and the
three-year plan.
Decisions and s.172 considerations
– Management re-forecasts were robustly
scrutinised by the Board, leading to two market
announcements increasing profit outlook
guidance.
– The Board debated the Company’s cost base,
particularly in light of macroeconomic factors such
as inflation. Discussing the impact on customers
and partners in terms of pricing and supply
strategy, it was agreed an emphasis on internal
efficiency would remain vital.
Balance sheet management
1 2 3 4 5
As the business recovered from Covid, balance
sheet management remained a critical component
in sustainability of the Company’s performance.
Decisions and s.172 considerations
– The Board considered broad stakeholder support
in agreeing the new £850m revolving credit facility,
which was linked to net zero sustainability metrics.
– The declaration of a dividend was debated by
the Board, concluding prioritisation of balance
Risk appetite 1 2 3 4 5
Group-wide risk appetite is set by the Board through a
series of assessments at individual business unit level,
followed by collective Board debate. See pages 45
to 46 for further information.
Decisions and s.172 considerations
– Data-related risk was debated, with the Board
concluding to separate risks associated with
customer data versus utilising technology to drive
the digital and data agenda more broadly. It was
agreed there would be no risk appetite in the
former category.
– The Board agreed that the global context of the
Clothing & Home supply chain necessitated a separate
risk appetite from that of the Food business.
Business Involvement Group (“BIG”)
1 2 3 4 5
The Chair of National BIG was invited to several Board
meetings throughout the year, with two “deep dive”
Board evaluation
Last year’s external evaluator held regular sessions
with the Board, including an all-Board deep dive,
to monitor and review Board effectiveness, as well
as progress with last year’s Board action plan.
See page 65 for further information.
Decisions and s.172 considerations
– Consideration was given to the Colleague
Engagement Survey results, in line with the Board’s
action to ensure that people and culture are at the
heart of the Company’s transformation. With the
Board agreeing it should focus on development
of other senior leadership in addition to ExCo.
Board committees
The principal Committee meetings are aligned to
the cadence of the Board calendar, with the Chair
of each Committee providing the Board with their
latest updates and recommendations for approval.
Decisions and s.172 considerations
– The Board debated the Remuneration Committee
recommendation on an inflationary pay rise
across the Group, considering cost of living
pressures.
64
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EXECUTIVE UPDATES
sheet and debt management during 2021/22
remained in the best interest of shareholders
and their long-term returns.
Invasion of Ukraine 5
Following the invasion of Ukraine by Russia,
the Board rapidly engaged in crisis discussions
and closely monitored the unfolding situation.
Decisions and s.172 considerations
– The Board unanimously agreed that colleague
welfare was the Company’s main priority and
encouraged management’s plans to support
the humanitarian crisis.
– Detailed discussions took place on the challenges
involved in suspending shipments to the Turkish
franchisee’s Russian business, and continuing to
supply franchise stores in Ukraine. The Board
continue to receive regular updates on how the
conflict is impacting our franchise partner,
suppliers, colleagues, charity partners
and investors.
Brexit and Covid-19 1 2 3 4 5
Despite the easing of restrictions, the challenges
and opportunities arising from Covid-19, and the
ongoing impact and management of Brexit, remained
regular topics in the boardroom during 2021/22.
Decisions and s.172 considerations
– Deep dive discussions on the markets most
heavily impacted by Brexit, mindful of the diversity
of customer perceptions. The Board agreed ways
CULTURE AND ORGANISATION
discussions dedicated to colleague engagement
and feedback.
Decisions and s.172 considerations
– Colleague feedback was considered in relation to
pay reviews, the holiday buy programme and the
Save As You Earn share scheme.
– The Board encouraged the plans to modernise
the BIG network and supported agility in
communications between colleagues and
management.
– In an additional session dedicated to the Colleague
Engagement Survey, the Board debated the
themes behind the results, supported the delivery
of consequent action plans, and agreed to focus
on driving momentum from an inclusion and
diversity perspective.
Talent 1 2 3 4 5
Following discussion at the Remuneration Committee,
the Board considered an update on talent acquisition,
development and retention.
LEGAL AND GOVERNANCE
to best meet customer and community needs,
instructing that partners with strong local
knowledge should be sought and local sourcing
should be engaged wherever possible.
– Regular updates on Covid-19 cases, restrictions
and trading patterns were monitored across all
markets and sourcing locations. The Board
considered colleague welfare and continuity
risks, instructing a renewal of contingency
plans for the Castle Donington distribution centre.
Third-party brands 3 5
The Board reviewed brand proposals and received
progress reports on third-party brand performance
against a balanced scorecard, discussing potential
structuring models, with both short-term and
long-term objectives, and how they would support
the M&S “ecosystem”.
Decisions and s.172 considerations
– The Board considered how customer and brand
partner propositions should be balanced. In doing
so, directors reviewed the results of Customer
Pulse Surveys and agreed the need to take a
simplified and well-articulated position to improve
customer understanding. Agreeing also that a
clear stance would also support brand partners
to curate their own offering.
Decisions and s.172 considerations
– The Board supported the “internal first” approach
to growing talent and improving diversity in the
workforce.
– Changes in both current and potential colleague’s
priorities were considered, including wellbeing
and flexibility.
MyHR 1 2 3 4 5
In September 2021, M&S launched a new
system designed to put digital at the heart of
people activities.
Decisions and s.172 considerations
– The Board reviewed regular updates leading to
the launch of MyHR and considered feedback from
listening groups of c.300 colleagues to simplify
and embed the system.
Year-end controls and approvals
After a series of briefings on planning, and following
review and recommendation from the principal
Committees, the Board considered the year-end
approval matrix.
Decisions and s.172 considerations
– Detailed sessions on the Full Year Results and
the Annual Report included rigorous debate and
scrutiny on principal risks, investor returns, more
customer-centric messaging, and communicating
colleague recognition.
AGM
Updates on planning for both the practical and
legal aspects of the AGM were reviewed by
the Board, followed by post-meeting feedback.
Decisions and s.172 considerations
– The Board reviewed plans to reduce the
nominal value of the Company’s shares and
amend its Articles of Association, and supported
the evolution of the digital format as a
method demonstrating improved shareholder
engagement.
Shareholder analysis and engagement
The Board reviewed regular updates on analysis of
the M&S share register and reports on the priorities
of institutional investors and proxy voting agencies.
Conflicts of interest
Any potential or actual director conflicts of interest
are monitored by the General Counsel and Company
Secretary and reported to the Board.
Decisions and s.172 considerations
Decisions and s.172 considerations
– Consideration was given to investors’ increased
focus on ESG activities and the Company’s
record on plastic was agreed as a focus area
for management.
– A number of external appointments were
considered by the Board, including Evelyn Bourke’s
appointment to Admiral Group, Fiona Dawson’s
Kerry Group directorship and Archie Norman’s role
at Bridgepoint. In all instances, it was agreed there
was no evident conflict.
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BOARD REVIEW
G
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BOARD EFFECTIVENESS REVIEW:
BOARD REVIEW INSIGHTS
After two years of externally facilitated Board
Effectiveness and Developmental Reviews,
conducted by Gurnek Bains of Global Future
Partners (“GFP”), it was determined this year’s
review would be conducted internally and
led by the Chairman, Archie Norman, and
supported by the General Counsel & Company
Secretary, Nick Folland. Last year’s externally
facilitated Board Review was detailed in our
2020/21 Annual Report on page 70.
IMPACT OF THE 2021/22 BOARD
ACTION PLAN:
The action plan resulting from last year’s review
has been a core foundation of the work
conducted by the Board during this financial
year. For example, the level, depth and
frequency of engagement between the Board
and senior executives significantly increased
both formally and informally, including via the
ExCo mentoring programme. This process
clearly built the Board’s trust and confidence
in senior management, as it has culminated in
the promotion of two members of the ExCo
to the Board in an executive director capacity;
the appointment of Stuart Machin as CEO and
Katie Bickerstaffe as Co-CEO. Eoin Tonge also
had his duties increased.
As evidenced in the ESG Committee’s Report
on pages 70 to 77, the Company has worked
hard on building capability and focus across
the organisation in relation to ESG. This has
included the reset of Plan A, new net zero
ambitions, and the inclusion of sustainability-
related performance metrics built into the
Company’s £850m revolving credit facility.
Against the backdrop of Covid-19, our people
responded admirably and the Board has
remained focused on ensuring that the culture
and people agenda is at the heart of the
Company’s transformation. This year there has
been a greater focus on individual performance
monitoring, the introduction of leadership
and management trainings as well as wider
investment in learning and development across
the organisation. The Board is heartened that
after five years, the Company’s performance
has produced a Group-wide bonus, half of
which has been deferred for three years
and will be awarded in equity – to further
strengthen the alignment between colleagues
and shareholders.
THE PROCESS
The Board and Committee review took the form
of a series of structured interviews conducted
internally and led by the Chairman, Archie
Norman, and supported by the General Counsel
& Company Secretary, Nick Folland, with each
of the non-executive directors and ExCo
members. These interviews were conducted
in accordance with the principles of the UK
Corporate Governance Code 2018 and the
supporting Guidance on Board Effectiveness.
These meetings also provided Board members
with the opportunity to discuss further themes
that had emerged from last year’s Board action
plan, as well as addressing topics emerging
from sessions held this year.
Following the interviews, a Board review report
was finalised and circulated to members and
became a discussion tool for the Board, helping
them to devise the action plan for the year
ahead. The main points highlighted are
summarised below.
Board performance
– In general, members were very positive
about the Board and how it functions, feeling
that there had been noticeable improvement
following the board review programme in
the previous year. Members agreed that there
is a good blend of expertise around the table
and a high level of energy.
– The Board felt universally that dialogue is
open and transparent, and that Steve Rowe
and other ExCo members deserved credit
for this.
– The executive Board members were
considered to be working well with the
Board, contributing openly and
without defensiveness.
– Newer Board members had settled in well
and all Board members had devoted time
to understanding the business.
Discussing the critical issues and
balancing the agenda
– Board members agreed that meeting
agendas addressed the most important
issues, with a good balance and range of
issues discussed.
– However, there was a perceived need for
improvement in the framing of issues for
discussion, a desire for more strategic
discussion, and a desire to close out
returning issues.
– Given the high level of Board activity,
Board members felt that keeping meeting
schedules tight was a good discipline to
force choices and to prioritise the agenda.
Getting the best out of Board members
– The Board agreed they all had good
opportunities to contribute and
that the expertise around the table is
currently appropriate.
– There was a high level of respect for people
around the table.
– Although discussions were sometimes
considered to be robust, they were also
respectful with a good level of debate.
The level of challenge to management
was viewed as constructive.
– Sometimes discussion felt time-constrained,
with members expressing a need to
balance more appropriately covering all
issues against examining them in depth.
It was felt there was a tendency amongst
the executive team to present issues already
set out in Board papers, causing some
minor frustration.
Board papers and information
– The Board papers generally contained a
comprehensive overview of business
performance. The monthly management
reports especially were open about the
issues, providing real insight into what the
executive were tackling and what their
concerns are.
– However, members agreed that the framing
of options could be improved, with some
papers presenting a narrative on a subject
and the steps being taken, without outlining
the choices clearly. It was felt this sometimes
led to less-focused discussion.
Chairman
– The Chairman received feedback
from all Board members on his
performance, as well as on the effectiveness
of the General Counsel & Company
Secretary, with a particular focus on the
onboarding of new directors, and the
Board involvement programme.
– The Board agreed that the Chairman’s style
and approach had been appropriate and
necessary to drive change during the critical
first stage of transformation. Members also
agreed that his style would inevitably evolve
with the leadership changes and with the
differing demands of the next stage
of transformation.
Senior Independent Director (“SID”)
– Andy Halford was praised for his role
on the Board, with members commenting he
has played an important role in articulating
hard truths, and had been pivotal with new
director onboarding.
– There was an awareness that when Andy
leaves the Board and his role as SID by the
end of 2022, he will be leaving a gap and he
will be hard to replace.
2022/23 ACTION PLAN:
– Post-pandemic, and with the anticipation
of a new executive leadership team in
place, it has been agreed that it is time to
revive the Board’s informal engagement
opportunities outside of formal Board
meetings, with breakfasts and dinners.
It was also agreed the Board Involvement
Programme should be refreshed, with
the Board expressing a desire to meet in
stores, distribution centres and at Ocado,
to increase the Board’s visibility in
the business and to engage fully with a
wide range of colleagues.
– After an intense period of Board
involvement and focus on operational
issues, the Board’s focus should be
re-oriented on strategic issues,
particularly in the long-term; with
technology and M&A activity flagged as
possible areas for discussion. The Board
has agreed to consider future trends
on two or three occasions during the
coming year.
– A key focus for the Board will be ensuring
that the customer is at the heart of
all that M&S does, with heightened
attention paid to the M&S brand and
consumer behaviour.
– The Board’s composition will continue
to be reviewed, but with particular
emphasis this year on the identification
of a successor for Andy Halford as
Senior Independent Director, and on
the Audit Committee.
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GOVERNANCE
NOMINATION COMMITTEE REPORT
‘‘
THE COMMITTEE’S ACTIVITIES WERE
FOCUSED ON EMBEDDING THE NEWLY
BALANCED BOARD AND PREPARING FOR
THE EXECUTIVE TRANSITION.
Archie Norman, Chair of the Nomination Committee
’’
REVIEW OF THE YEAR
Following a period of non-executive
director changes, the Committee’s
activities in 2021/22 were focused on
embedding the newly balanced Board
and preparing for executive succession.
Since the outbreak of Covid-19, the pace
of our transformation has increased
significantly. To support this escalation
with the appropriate skills and experience,
we have seen a number of non-executive
director appointments over the last two
years. As such, the Committee focused
on oversight of a thorough induction for
Fiona Dawson in the early part of this year.
As the year progressed, attention turned
to the talent pipeline and in particular,
executive succession planning. As
announced on 10 March 2022, and as
I’ve outlined in my Governance Overview
on pages 56 to 57, this has culminated
in the appointment of Stuart Machin
as CEO and Katie Bickerstaffe as
Co-CEO on 25 May 2022, following
Steve Rowe standing down as CEO.
In addition to their current activities, Stuart
will be responsible for the day-to-day
leadership of the business and Executive
Committee, also taking on responsibility
for HR and Corporate Communications.
Katie will have a particular focus on
driving the global omni-channel, digital
and data future for the business.
The Board’s executive directors will
continue to include Eoin Tonge, whose
role has also expanded to Group CFO
& Chief Strategy Officer. Eoin’s new
responsibilities involve an enhanced role
in leading the future development of
the business and oversight of Plan A.
In making these executive changes,
the Committee appointed and worked
with an independent executive search
firm, which is a signatory to the Voluntary
Code of Conduct for Executive Search
66
Marks and Spencer Group plc
Firms. Together, we reviewed the Board
and Executive Committee’s balance
of skills, experience and knowledge
and considered the business’ immediate
and longer-term requirements. In
recognition of the progress made
under the current leadership team, as
well as the recent period of boardroom
changes, the Committee agreed that
the continuity and stability provided
by this new executive trio would be
valuable during this next stage of our
transformation, in “Shaping the Future”.
These appointments also bring female
representation in the Company’s
most senior executive to 33%, and to
45% overall at the Board, supporting
the Committee’s ambition to surpass
internal and external diversity targets.
COMMITTEE ROLE AND MEMBERSHIP
The Nomination Committee is responsible
for ensuring the composition and structure
of the Board remains effective, balanced and
optimally suited to the Company’s strategic
priorities. In practice this involves overseeing
the nomination, induction, evaluation
and orderly succession of directors.
The Committee also ensures the Group’s
governance facilitates the appointment
and development of effective management
that can deliver shareholder value over the
long term. The full Terms of Reference
for the Committee can be found at
marksandspencer.com/thecompany.
MEETINGS HELD IN 2021/22
The Committee comprises the non-executive
directors and is chaired by Archie Norman.
Individual meeting attendance and changes
to membership are displayed in the below
table. More information on the skills and
experience of all Committee members
can be found on pages 60 to 61.
The Committee’s performance was reviewed
as part of the 2021/22 internal Board Review,
which is covered on page 65.
The review established that the Committee
functions well in terms of planning succession
to Board roles and other senior positions.
Member since
meetings attended
possible meetings
Number of
Maximum
Archie Norman
Evelyn Bourke
Andrew Fisher
Andy Halford
Tamara Ingram
Justin King
Sapna Sood
1 Sep 2017
1 Feb 2021
1 Dec 2015
1 Jan 2013
1 Jun 2020
1 Jan 2019
1 Jun 2020
Non-executive directors who served on the Committee for part of 2021/22
Fiona Dawson
25 May 2021
* Unable to join due to prior business commitments.
7
7
7
7
7
6*
7
4*
7
7
7
7
7
7
7
5
More information on the Nomination Committee is available in our
full disclosure of compliance with the UK Corporate Governance Code at
marksandspencer.com/thecompany.
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DIRECTOR TENURE
In January 2022, Andy Halford reached
nine years of service on our Board.
Last year, the Committee reported
that Andy remained independent, and
would provide a key point of stability
during 2021/22. In light of the executive
changes made at the start of 2022/23,
the Committee has agreed Andy’s
skills and experience remain vital to the
Board’s composition during this period
of transition. The Committee has also
discussed his independence in depth
and, in agreement with the internal Board
Review (see page 65), we have established
that Andy remains independent in
both character and judgement. He
has no other significant links to the
Company and continues to make an
effective and valuable contribution.
In line with our succession plans already
in place, Andy steps down as Chair of the
Audit Committee on 7 June, with Evelyn
Bourke replacing him. Andy will remain
a member of the Audit Committee and
our Senior Independent Director until he
leaves the Board by the end of 2022.
TALENT MANAGEMENT
Following the change from the Operating
Committee into the Executive Committee
(“ExCo”) in 2020, each Nomination
Committee member became a mentor
to a member of the ExCo. This guidance
has continued and developed during
the year, with particular focus on
broader HR and talent management.
Discussions around the contribution of
talent management to the Company’s
transformation have principally taken
place at the Board and Remuneration
Committee. The Committee supports
the stronger governance controls
and improved succession planning
which has been taking place.
Last year, our review processes focused
on senior leaders. In 2021/22 the review
and development of our most senior
individuals progressed, in addition to
new arrangements for the acquisition,
assessment and nurture of talent
throughout the entire organisation.
The Committee acknowledges the
important role growing talent internally
plays in M&S’ diversity ambitions, aligning
with the Board’s own diversity policy,
which encourages directors to contribute
to the development of a diverse range
of future leaders. Internally promoting
talent in our CEO succession is, we believe,
an important demonstration of our
commitment to talent development.
CEO SUCCESSION PROCESS
In light of the Committee’s most recent activities, we have taken the opportunity to provide
an insight into our approach to succession and induction of our new CEO and Co-CEO.
The process is designed to ensure the appointment of our executive directors is strategic,
orderly and comprehensive. Since the new executives have been part of the business for a
number of years, their inductions are primarily focused on providing a robust understanding
of their new responsibilities as statutory directors of a premium listed company. However, both
Katie and Stuart will undertake some deep dive introductions to areas of the business not
previously under their remit.
Succession planning
Identify and develop
The talent pipeline for all senior
roles is prepared, identifying the
emergency cover, medium-term
(1-3 years) and longer-term
(3-5 years) candidates who meet
current business needs. This includes
consideration of whether a role can
be filled internally, or whether
external search is required.
The candidates in the pipeline are
mentored by members of the
Committee. In particular, those
identified for medium- or longer-term
plans are provided with training and
support to aid the Company’s ability
to promote internal candidates, in line
with the Board Diversity Policy.
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Appoint
Review
Having considered the requirements
of the business, it was agreed that
both Stuart and Katie would be
recommended for appointment to
the Board as CEO and Co-CEO, with
Eoin remaining in place to complete
the executive leadership trio, and
with the General Counsel & Company
Secretary tasked with the formalities.
Review of the succession plans for
the most senior roles takes place
periodically. Immediately following
notification of an incumbent director’s
upcoming departure, plans are
considered and scrutinised in-depth
by the Committee and an executive
search firm, taking into account
the prospective CEO’s expertise,
leadership style, and the current
composition of the Board. This
includes both an assessment
of interpersonal dynamics and
a skills matrix reflective of the
one on page 68.
Induct
The final step is to provide the new directors with a comprehensive
induction. Some of the activities included in Stuart and Katie’s
inductions have been:
– Board procedures and
– Business area deep dives
team dynamics
– Listed company matters and
corporate governance
– Directors duties
– Corporate communications
and media training
– Shareholder and investor
(Clothing & Home, Food, Stores
& Property, Bank & Services,
Digital & Data, Plan A)
– Store visits, including
renewal stores
– Supply chain depot visit
– Customer services centre visit
relations analysis and briefing
– Castle Donington distribution
– External Auditor introduction
– National BIG introduction
centre visit
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Annual Report & Financial Statements 2022
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GOVERNANCE
NOMINATION COMMITTEE REPORT
CONTINUED
Balanced leadership
BOARD
All Board
gender
identity
Non-
executive
director
gender
identity
Executive
director
gender
identity
Female (45%)
Male (55%)
Female (50%)
Male (50%)
Female (33%)
Male (67%)
Figures as at publication date.
Board
ethnicity
Ethnic
minority (9%)
White (91%)
Evidencing effectiveness
Throughout 2020/21 and until the publication of last
year’s report, the Company took steps to ensure, in line
with our Board Diversity Policy (the “Policy”), that Board
appointments contributed to our Group-wide ambition
of driving inclusion and diversity (“I&D”). Consolidating
the improving trendline, 2021/22 then focused on
embedding our newest non-executive directors and
harnessing the value of an effective boardroom
dynamic. As director diversity increased, so too did the
frequency of the I&D agenda as a consideration across
many topics at Board level. In addition, the Board
Evaluation established the Board as continuing to
demonstrate effective debate and decision-making;
a key outcome the Policy seeks to produce.
Shaping the future
It is our belief, supported by external evidence, that a Board which is diverse in gender, ethnic and social background correlates with a wealth and
diversity of skill, experience and perspective shared in the boardroom. The Board skills and experience matrix below demonstrates this belief.
The matrix is regularly reviewed to ensure it meets current business needs and was an essential tool in the CEO succession process. The ongoing
consideration of the competencies highlighted in the matrix and, crucially, its alignment with our strategic priorities, has also ensured the Board
is fully equipped to drive the next stage of the transformation.
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Sapna Sood
Stuart Machin
Katie Bickerstaffe
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Newly appointed
Outgoing
General Counsel & Company Secretary
Strategic priorities:
1
M&S Food high-performing business
and market share growth
2
Ocado transitioning to strong capacity
growth post pandemic reversion
3
4
Clothing & Home on track for a more
profitable model capable of growth
Building store rotation pipeline,
driving exit from legacy stores
5
International absorbing Brexit
related costs, but embryonic
global strategy encouraging
68
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Expanding goals
In 2020, we met both our internal target set out
in the Policy and the external target laid out in
the FTSE Women Leaders Review (formerly the
Hampton-Alexander Review), ensuring a 33%
female Board. Towards the end of last year, we
surpassed these goals with the appointments
of Evelyn Bourke and Fiona Dawson. Since then,
we have expanded scope and, in recognition of
the different roles of non-executive and
executive directors, we have also achieved a
33% female executive population. In addition,
we are fully compliant with the Parker Review’s
target to appoint at least one Board member
from an ethnic minority background. However,
the Board recognises the importance of all
forms of diversity and remains committed to
striving for further progress in this space.
EXECUTIVE COMMITTEE
FTSE Women Leaders Review
Target
M&S
Target: 33% female Board
Parker Review
Target
M&S
Target: One Board member from an ethnic minority
background by 2021
Wider leadership
As reported above, the improved gender diversity of
our executive directors has been a positive outcome
of the CEO succession. Separately, the balance of
individuals reporting into ExCo members who identify
as female has also seen improvement this year. In
recognition of the importance of the talent pipeline,
we have also outlined the ethnic diversity of senior
leadership below ExCo level for the first time. We
are pleased to report that our senior leadership is
representative of the wider organisation, of which
12% are from ethnic minority backgrounds. However,
we remain committed to enhancing the quality
of the talent pipeline while driving change.
More detail on diversity in the wider organisation
can be found on page 27.
ExCo
gender
identity
ExCo direct
reports
gender
identity
ExCo
ethnicity
ExCo
direct
reports
ethnicity
Female (14%)
Male (86%)
Female (46%)
Male (54%)
Ethnic
minority (14%)
White (86%)
Ethnic
minority (14%)
White (86%)
Skills and
experience
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Eoin Tonge
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Richard Price
Paul Friston
Sacha Berendji
Newly appointed
Outgoing
OUR COMMITMENT
Our objective of driving the benefits
of a diverse Board, senior management
team and wider workforce is underpinned
by the Policy, which can be viewed on our
corporate website at marksandspencer.com/
thecompany.
In addition to the above mentioned
commitments to promote gender diversity,
ethnic diversity and succession planning,
the Policy covers other inclusion initiatives
taking place within the Company which are
sponsored and endorsed by the Board.
During the year, these have included:
– A reset, including budget allocation, for the
seven employee-led networks on gender,
ethnicity, sexual orientation (LGBTQ+),
and disabilities and health conditions.
– Continued involvement in the 30% Club,
an organisation committed to increasing
female representation on UK boards through
developing our junior leaders. This year,
opportunity to join was extended to all
under-represented groups.
celebrations, International Women’s Day,
Black History Month, National Inclusion Week,
Mental Health Awareness Week and World
International Day of Disability, raising
awareness and our profile as an inclusive
place to work.
– The Marks & Start programme, which
continues to support young people, the
homeless, lone parents and those with
disabilities in finding work at M&S.
– The Kickstart Scheme, through which M&S
provides six-month employment contracts
and helps to develop skills in 16-24-year-
olds on Universal Credit who are at risk of
long-term unemployment.
– Continued active involvement in key
campaigns including LGBTQ+ Pride
– Added our first LGBTQ+ charity partnership
to Sparks for our customers and colleagues
to support AKT, a charity supporting LGBTQ+
young people aged 16-25 in the UK who are
facing or experiencing homelessness or
living in a hostile environment.
– Continued to drive and improve mandatory
I&D training across the business, with a
particular focus on line managers.
Read more in our Sustainability Report
Annual Report & Financial Statements 2022
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GOVERNANCE
ESG COMMITTEE REPORT
‘‘
OUR PRIORITY HAS BEEN ENSURING
SUSTAINABILITY REMAINS AT THE HEART
OF M&S’ CUSTOMER PROPOSITION.
Tamara Ingram, Chair of the Environmental,
Social & Governance Committee
’’
INTRODUCTION
Last year, we established our
Environmental, Social & Governance
(“ESG”) Committee to provide the business
with rigour, support and challenge on
ESG matters. Throughout the course of
2021/22, our priority has been the
reinvigoration of Plan A – our multi-year
sustainability programme – ensuring
our leadership position is upheld and
sustainability remains at the very heart of
M&S’ customer proposition. This report
outlines our activities in support of this
aim, and how we have discharged the
responsibilities delegated to the
Committee by the Board.
Doing the right thing by our planet, people
and the places we serve, is a value that has
been core to M&S’ culture since its inception.
In recognition of this, the Committee and
I would like to thank Steve Rowe for his
consistent leadership in this regard. He
has ensured this year, as a standing
attendee, that this was forefront of the
Committee’s minds, and in turn confirmed
sustainability, in particular climate change,
as a key strategic pillar in the Company’s
purpose as it moves through the next
stage of its transformation.
In line with the intention we set last
year, the Committee has reviewed the
sustainability strategies of each of
COMMITTEE ROLE AND MEMBERSHIP
The Committee is responsible for ensuring
that the Company has an ESG strategy
(“Plan A”) that is both inspiring and
differentiates M&S from its competitors,
while also remaining fit for purpose.
The Committee will also review the
effectiveness of Plan A, including the
governance arrangements for ensuring
the successful delivery of the strategy
and monitoring its overall performance.
In addition, the Committee advises the
Audit Committee on ESG-related risks,
including climate-related issues.
MEETINGS HELD IN 2021/22
The full Terms of Reference for
the Committee can be found at
marksandspencer.com/thecompany.
The Committee comprises Tamara Ingram
as Chair and Sapna Sood, with Archie Norman,
Steve Rowe, Eoin Tonge and Nick Folland
standing attendees at Committee meetings.
Individual meeting attendance is displayed in
the table below. More information on the skills
and experience of Committee members can
be found on pages 60 to 61.
Tamara Ingram
Sapna Sood
By standing invite
Archie Norman
Steve Rowe
Eoin Tonge
Nick Folland
70
Marks and Spencer Group plc
Member since
16 Dec 2020
16 Dec 2020
N/A
N/A
N/A
N/A
Number of
meetings attended
Maximum
possible meetings
6
6
6
6
6
6
6
6
6
6
6
6
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the Group’s accountable businesses,
challenging management to ensure
they are relevant to all stakeholders.
This culminated in our reset of Plan A
with a singular focus; to cut our carbon
footprint by one-third by 2025 and to
become a net zero business by 2040. We
have developed a multi-stakeholder plan
spanning customers, colleagues and
suppliers to deliver on this target.
Important progress has been made
with our Plan A reset, which included the
return of our iconic “Look behind the
Label” campaign to engage customers
in the stories behind our responsibly
sourced, everyday products, from coffee
to cotton. We have also introduced new
propositions including our partnership
with Hirestreet (the clothing hiring
business), and our Sparking Change
Challenge encouraging customers to
live more sustainably by reducing food
waste and exploring more plant-based
protein. Bringing customers along on
our sustainability journey is and will
increasingly become vital; to ensure,
alongside our own sustainability efforts,
we are positively influencing the
sustainability of our wider community.
This approach will be necessary for
us to achieve our Scope 3 net zero
emissions targets.
The Committee has been conscious
this year that unless we hold ourselves
accountable against our actions plans
and targets, our efforts to reset Plan A
will ultimately become futile. Embedding
sustainability throughout the business,
ensuring all decisions are aligned to
Plan A, strengthening our governance
to manage climate-related risks and
opportunities, and monitoring progress
with our net zero target, have all
therefore been key areas of focus for
the Committee.
We recognise we must never be
complacent. The world is unpredictable,
complex and changing fast. As a
consequence, the Committee will
continue to challenge the business
proactively to tackle relevant
sustainability topics, climate-related
risks and opportunities, respond to
stakeholder expectations, and ensure
the business has appropriate controls in
place to meet our Plan A targets.
WHAT WAS ON THE COMMITTEE’S
AGENDA 2021/22
The Committee’s time during the year
was devoted to the following interlocking
key areas of focus:
– Strategy
– Embedding
– Controls
Strategy
The Committee received updates from
the Executive Committee (“ExCo”) on
the sustainability strategies for the Food,
Clothing & Home and International
businesses, as well as the common
themes across the Group on climate
change, community, human rights and
ethical trading. ExCo and senior leadership
were challenged to develop these
strategies with a focus on key customer
concerns, our market position on
sustainability and upcoming regulatory
issues. These reviews concluded with the
reset of Plan A, under a unifying Group
commitment to be a net zero business
(including Scope 3) by 2040. As an interim
but meaningful step, we have also made a
public commitment to cut our carbon
footprint by one-third by 2025 and the
teams across the business have been
tasked with developing operational
plans to deliver against this.
Embedding
The Committee has emphasised during
the year the importance of creating and
embedding a sustainability culture within
the business, to ensure all decision-
making is aligned with Plan A objectives.
As such, and to promote the alignment
of Plan A with investment and financing
decisions, the Committee reviewed,
advised on and supported the proposal to
link a new £850m revolving credit facility
to the delivery of net zero targets. Further
detail can be found on page 74.
The Committee also considered
aligning colleague mindset with
Plan A by incorporating sustainability
objectives in performance-related pay,
recommending that the Remuneration
Committee investigate this further.
More information is given on page 76.
Controls
In addition to reviewing and advising
the Audit Committee on ESG risks and
opportunities (further detail on page 76),
the Committee has challenged the
business to improve its controls on
ESG-related reporting and Plan A
progress. At the Committee’s direction
to enhance accountability, the business
now compiles and tracks progress
with metrics spanning all ESG activities.
Progress with the net zero roadmap is
also overseen via a new Plan A (Net Zero)
Steering Group, providing the Committee
with assurance that progress is
consistently monitored.
Outside In – Rolling programme
The Committee has been keen to hear
from as many significant voices in the
sustainability world as possible. As such,
it has heard from a host of external
speakers and will continue this practice
in the coming year:
The Committee was also presented
with “deep dives” on the following areas,
to aid its thinking and development of
sustainability objectives:
– CEO of a leading consumer goods
business, on embedding sustainability
through controls and culture, and the
market’s response.
– Customer insights on sustainability
concerns and perception of M&S’
sustainability performance.
– M&S’ market position on sustainability.
– Climate change.
– Animal welfare.
– Plastics.
– Community investment.
– Chief Sustainability Officer of a
global fashion company, on the
importance of innovation, supplier
relationships, transparency through
global supply chains, and changing
consumer sentiment.
– A scientific adviser on animal welfare,
farming subsidies, agricultural
automation, and labour shortages.
G
O
V
E
R
N
A
N
C
E
ESG COMMITTEE
EFFECTIVENESS REVIEW
The Committee’s performance was
reviewed as part of the 2021/22 internal
Board Evaluation, which is covered on
page 65. The Committee also proactively
discussed its own effectiveness and
progress against objectives in its first
full year of operation.
The review found that the Committee
was considered to be operating well. The
frequency of meetings, while more often
than the Board’s other sub-committees,
was not considered overly onerous given
the need to maintain momentum with
the Committee’s objectives. It is felt that
having the Committee meet frequently
and providing leadership is having a
positive and galvanising effect on the
business while we are trying to embed
sustainability more deeply.
The level of challenge provided by
the Committee to management was
deemed appropriate, and Committee
members also felt the quality of input
from external guest speakers was
valuable. The Committee agreed that
a key focus for next year would be
enhancing customer communication
of our Plan A practices.
2022/23 action plan:
– Demonstrate visible change to
customers and colleagues aligned to
our Plan A objectives, on customer
focus points such as carrier bags,
hangers and plastic packaging.
– Agree strategies for sustainability focus
areas, including on Community, Circular
Fashion and Low Impact Farming.
– Review our existing strategies
on Human Rights, Health and
Animal Welfare.
– Monitor delivery against our net
zero targets, ensuring accountable
businesses have targets integrated
into their three-year plans.
– Strengthen ESG skills and talent
across the business.
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Annual Report & Financial Statements 2022
71
GOVERNANCE
ESG COMMITTEE REPORT
CONTINUED
Task Force on Climate-related Financial Disclosures report
INTRODUCTION
This report sets out our climate-related financial disclosures, which M&S believes demonstrate our alignment to the Task Force on Climate-related
Financial Disclosures (“TCFD”) recommendations. For ease, an index table of page references for our TCFD-aligned disclosures can be found on page 77.
Marks and Spencer Group plc has complied with the requirements of LR 9.8.6R by including climate-related financial disclosures consistent with the TCFD
recommendations and recommended disclosures. Further detailed information can be found in our Sustainability Report, a supplement to our Annual
Report which enables the Group to provide more detailed and comprehensive reporting of our climate strategy and progress against our Plan A metrics in
alignment with the TCFD recommendations and recommended disclosures. The Sustainability Report was published on 7 June 2022 and is available at
corporate.marksandspencer.com/sustainabilityreport2022.
In our report last year, we set out the actions required for us to disclose fully against all TCFD recommendations. Our progress against this plan
is set out below:
2021/2022 Actions
Update
Publish the delivery roadmap to
underpin our new net zero ambition
with clear targets across each of
the three scopes.
Continue to track our performance
against the baseline.
In September we relaunched our Plan A sustainability programme, supported by a detailed
roadmap which identifies the immediate priority areas that we must focus on now as we make
our journey towards net zero.
Our Scope 1 and 2 greenhouse gas emissions continue to be tracked in line with the
Greenhouse Gas Protocol and can be found on page 75. This year we have chosen to disclose
our Scope 3 emissions, recognising that our ability to track Scope 3 emissions is still very
limited due to the complexity of measurement. Improvement in Scope 3 emissions
measurement has been identified as a clear enabler to delivering our strategy.
Conduct scenario analysis.
We have undertaken scenario analysis on three key areas of our business – Protein, Cotton and
Property – see page 74.
Publish the climate-related risks
and opportunities over the short,
medium and long term.
This disclosure articulates how we have considered the climate-related risks and opportunities
we face, over the short (<3 years), medium (3-10 years), and long term (>10 years).
STRATEGY AND RISK MANAGEMENT
Since its launch in 2007 Plan A, our
sustainability programme, has underpinned
the resilience of our organisation’s strategy,
ensuring that we are managing the
environmental and ethical risks and
opportunities we face as a business, including
climate-related issues. In September 2021,
our Executive Committee and the Board’s ESG
Committee reset Plan A to focus exclusively
on our new Group goal of being a net zero
business by 2040, integrating this ambition
into our core strategic planning processes,
budgeting and commercial strategy. Led by
the CEO, over the course of 2021 the Executive
Committee reviewed and updated the
sustainability strategies of the Group and
accountable businesses. An independent
expert review was commissioned to identify
the most material sustainability issues for our
business and assess our performance relative
to competitors. This review highlighted the
importance of climate change as an issue
for multiple stakeholders and for the M&S
business over the short, medium and long
term, and led to the inclusion of climate
change as a standalone emerging risk in last
year’s Annual Report. Our response to TCFD
last year explored this emerging risk and
identified the need to better understand
the transitional and physical risks and
opportunities we face as a business.
As we have further developed our
understanding of our climate-related risks
and opportunities, we have moved climate
change from an emerging risk and have
disclosed “Climate change and environmental
responsibility” as an evolution of the previously
disclosed “Social, ethical and environmental
responsibility” principal risk to emphasise the
importance of climate-related issues, and
acknowledge our short term requirement
to deliver rapid decarbonisation by 2025.
In line with the identification of this principal
risk, each of our accountable businesses and
key functional areas have considered risks
relating to climate change, and more broadly
the delivery of our net zero commitment, as
part of the Group risk management process.
This has allowed the businesses to consider
how climate-related issues may impact their
strategy both in the short term and beyond,
and therefore to implement the required
controls to manage these.
Further integration of climate change into
our risk management process, as a principal
risk, has increased the visibility of how the
businesses are decarbonising their activities.
This approach has also provided broader
oversight through the risk reviews taking place
at business leadership and executive team
level, as well as to the Audit Committee
through Group risk reporting. More
information on our risk management process
can be found on page 45, which includes
the consideration of climate-related risks.
72
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TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES REPORT CONTINUED
Climate risks and opportunities
The below table provides a high-level summary of the risks and opportunities we have identified over the short, medium and long term across the
business, and the potential impacts these could have.
Policy and regulatory
landscape
S M L
Current and future policies and regulations could impact the financial performance of our business and affect our ability
to trade. Governments, including the UK’s, are expected to introduce carbon pricing mechanisms to cut emissions in
line with targets set out in the Paris Agreement. Policies that control the production and use of raw materials could
increase costs of key commodities in our supply chain.
Technological
changes
M L
Changing consumer
preferences
S M
Impact of extreme
weather on raw
material supply chain
L
To achieve the targets set out in the Paris Agreement, new technologies will be required to support a low-carbon
future. A number of these technological changes could also be driven by regulation. For M&S, these could include the
requirement to move away from internal combustion engine vehicles and to move to low-carbon refrigeration systems.
Our continued success as a business is reliant on our ability to adapt and meet the changing expectations and needs
of our customers. As public awareness of climate change grows, consumers are seeking more sustainable product
choices, embracing plant-based alternatives, and choosing reusable packaging options.
G
O
V
E
R
N
A
N
C
E
We are reliant on raw materials as ingredients in our food and fibres in our clothing and home products. Extreme weather
and the effects of changing temperature and precipitation can impact the growth of raw materials such as cotton and
produce. Any impact in supply could increase the cost of raw materials.
Risk key
S
Short term
M
Medium term
L
Long term
Building on these risks and opportunities, we
believe it is highly likely that factors such as
the cost of carbon and sustainable consumer
choice will become the norm. It is therefore
imperative that we act now to be ahead of the
curve and manage the impact of these risks
and opportunities, so we can deliver long-
term, sustainable, profitable growth for our
investors, colleagues and wider communities,
and avoid material financial risk in the future.
Our agreed Group goal, developed in response
to the long term climate-related regulatory
pressures we face, is to be a net zero business
across our entire supply chain and products by
2040, 10 years ahead of the UK Government’s
strategy. To support this, we have set a
medium-term target (2030), aligned to the
Paris Agreement.
To be on track to meet this target, we know
that rapid decarbonisation of our entire
business is essential to ensure we mitigate
medium-term risks such as carbon pricing in
high emissions activities. In the short term, we
have set ourselves an interim goal of reducing
emissions by almost 2 million tonnes by 2025
and have set out a detailed roadmap outlining
the immediate priorities we will focus on as we
make our journey towards net zero.
OUR ROADMAP TOWARDS NET ZERO
Rapid carbon reduction
PLAN A
Because there is no Plan B
T E N I M M E D I AT E P R I O R I T Y A R E A S F O R T R A N S F O R M AT I O N
Reduced waste and emissions
Change driven in collaboration with supplier partners, stakeholders and customers
Zero emissions property
Deliver a more efficient
store estate.
Reduce food waste
- 100% of edible surplus to
be redistributed by 2025.
- Food waste reduced by 50%
by 2030.
Suppliers and business
partners on net zero journey
Looking beyond our own
operations to spark change and
support decarbonising across our
full value chain.
Zero deforestation
- 100% of soy to be sourced
from verified deforestation and
conversion-free regions by 2025/26.
- 100% segregated responsibly
sourced palm oil by 2025/26.
Increasing the range
of plant-based protein
Double the sales of vegan and
vegetarian products by 2024.
Reduce and recycle
packaging
- 100% of packaging to
be recyclable by 2025.
- 30% reduction in volume
of plastic food packaging
by 2027.
Zero emissions transport
Moving to low-carbon logistics
with reduced dependency on
diesel and increased use of new
technologies and cleaner fuels.
Contributing to cross-industry
action through collaboration.
Low-impact farming
We support our farmers to
enable them to grow low carbon,
responsible food, use fewer
pesticides, enhance their soil,
protect natural resources and
drive innovation.
Circular economy
Enhancing our clothes
recycling scheme with
new incentives for
Sparks members.
Sustainable sourcing
100% verified recycled
polyester by 2025/26.
2025
TARGET
2030
TARGET
2035
TARGET
OUR BASELINE
5.7m tonnes
of carbon emitted in 2016/17
34% reduction
55% reduction
in carbon emissions
versus our baseline
in carbon emissions
versus our baseline
Net zero
across our
own business
2040
TARGET
Net zero
across entire
value chain
Annual Report & Financial Statements 2022
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The 10 workstreams identified in our roadmap
towards net zero cover emissions reductions in
our property estate and logistics network, as
well as sourcing lower impact raw materials for
our products and engaging suppliers and
business partners to reduce emissions from
their own operations. As an own brand retailer,
we are uniquely positioned to influence
upstream to effect change with our
trusted supplier partners, and downstream to
incentivise changes in customer behaviour
thanks to the unique relationships we have.
To support our net zero ambition, we are
resetting our investment approach to ensure
Plan A sits at the very centre of investment
decisions. We have begun to integrate the
climate-related risks and opportunities into
our three-year financial planning process by,
for example, including the capital expenditure
required to manage the impact of our
climate-related risks in our operations and the
profit impact from climate-linked products
and services. As part of our broader financial
strategy, we have also launched our first
sustainability-linked loan facility.
£850m Sustainability-
linked loan facility
In December, we agreed a new £850m Revolving Credit Facility, directly linked to the delivery of net
zero targets. Under the terms of our new facility, which will run to June 2026, we will benefit from a
lower interest rate for delivery against four metrics that deliberately focus on material emissions
hotspots aligning to our roadmap towards net zero, and areas of customer concern. These cover zero
deforestation, sustainable fibre sourcing, packaging reduction and reducing our property emissions.
We have engaged Deloitte to undertake an ISAE 3000/3401 limited assurance engagement in respect
of M&S’ reported information aligned to the metrics associated with our Revolving Credit Facility.
You can read more from our Group Treasurer on our corporate website: corporate.marksandspencer.
com/stories/blog/driving-net-zero-with-our-first-sustainability-linked-loan-facility
Quantitative scenario analysis
We are clear on the importance of
understanding climate risks and opportunities
over the short, medium and long term.
Recognising climate-related risks and
opportunities is an emerging area but critical
issue, we complimented our existing risk
management process outlined on page 45
with a bespoke scenario analysis to assess
potential implications of climate-related
risks in the medium term.
2030 reflects a medium-term timeframe for
climate risks and opportunities to emerge,
whilst also allowing for the integration of risk
management into our business planning
cycles. We chose a narrow scope for our
quantitative scenario analysis, focusing on
animal protein, cotton and UK property. These
areas were selected following a materiality
assessment which considered both the
potential climate-related impact and the
impact on financial performance to M&S,
whilst ensuring fair and balanced reporting
across the accountable businesses.
Exposure was determined based on
percentage of profit, percentage of total
consumption and total emissions. Our analysis
looked at the impact of two plausible future
states – average global temperature increases
of 1.5˚C and 4˚C due to climate change by
2100. The transition and physical risks
identified are outlined in the table on page 75
(Impact in 2030).
For the purpose of this risk assessment and
analysis, we have assumed that M&S’ business
activities remain static, that we do not innovate
or mitigate the impacts or change our
sourcing strategy; and increases in costs are
absorbed by M&S. This is a worst-case scenario
approach, focusing on the risk exposure in
these areas. Our financial modelling has not
included quantitative analysis of opportunities,
however, these are considered qualitatively
in our mitigating strategies.
74
Marks and Spencer Group plc
What does a 1.5˚C scenario look like?
A low-carbon transition scenario (known as transition risk) focuses on the rapid policy,
regulatory, technological and market changes that will be required by 2030 to restrict
emissions to a level which limits global warming to 1.5°C. Examples of the types of changes
include the application of carbon pricing schemes in both advanced and emerging
economies to reduce emissions across various sectors, and an increasing awareness
within society on climate change resulting in a change in lifestyle choices and habits.
Based on the climate risks and opportunities outlined on page 73, we have identified the
expected introduction of carbon pricing mechanisms to cut emissions in line with targets set
out in the Paris Agreement as the greatest risk we face in the medium term. This is also a
transition risk that is suitable for quantitative scenario analysis, as we have quantifiable data
which is linked to detailed measures set out by the UK Climate Change Committee required
to deliver UK emissions net zero by 2050. We have therefore focused our scenario analysis on
the impact of a carbon tax on the three scope areas.
What does a 4˚C scenario look like?
The physical climate impact scenario (known as physical risk) assumes limited policy or
regulatory support for emission reduction, leading to a world with increasing physical climate
change impacts. The scenario showcases a future world where there are gradual, chronic
changes in temperature and precipitation patterns, as well as more frequent and intense
extreme weather events.
We have undertaken our scenario analysis on the following risk areas, focusing on the most
material risks for which climate data from credible sources is available:
– Chronic climate change – changes in temperature and precipitation.
– Extreme weather events – floods, droughts, heatwaves and cold waves.
As we expand our scenario analysis to
develop a more detailed understanding
of the financial risk on our business, we will
share the quantitative impact.
Whilst it is clear that the impact of risks
under a 1.5°C and 4°C scenario could happen
simultaneously, for the purposes of our
scenario analysis we have assumed them to
be mutually exclusive. This year we have
chosen to disclose our impact qualitatively.
Moving forward, we want to expand our
quantitative scenario analysis to other areas
of the business, and consider longer-term
horizons to help us continue to build a better
picture of the climate-related risks and
opportunities facing M&S.
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* Financial exposure from physical risk analysis to 2030 is low and therefore not considered as part of the mitigating strategies outlined above. Moving forward we will consider
TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES REPORT CONTINUED
To ensure the resilience of our organisational strategy across these different climate-related scenarios, our plans for mitigation highlighted in our
quantitative scenario analysis are integrated within Plan A and delivered via our roadmap workstreams (see page 73). The outcomes of the scenario
analysis were then embedded in the risk registers of our various businesses, via the risk owners. Our mitigating strategies outlined on the right-hand
side of the table below are four of the 10 workstreams identified in the roadmap. More details of the ongoing progress within these workstreams can
be found in our Sustainability Report under the relevant headings.
Impact in 2030
Business
area
Scope
Transition risk
(1.5˚C scenario)
Physical risk
(4˚C scenario)*
Protein
UK and Ireland
sourced beef,
lamb, pork,
chicken and
turkey products
Carbon tax
on agricultural
emissions (to
the farm-gate)
Cotton
Globally
sourced
raw material
used in our
clothing
Property UK Property
Estate
Carbon tax on
agricultural
(seed to
farm-gate) and
manufacturing
(all steps
in cotton
production)
emissions
Carbon tax on
Scope 1 and 2
emissions
longer-term horizons when assessing physical risks.
METRICS AND TARGETS
Our net zero ambition builds on our absolute
science-based target, aligned to the UN
ambition to limit global warming to 1.5˚C.
Behind this ambition is a roadmap with
clear milestones:
– 2025 target – 34% reduction in carbon
emissions versus our baseline1.
– 2030 target – 55% reduction in carbon
emissions versus our baseline.
– 2035 target – Net zero across our own
business.
– 2040 target – Net zero across our entire
value supply chain.
To achieve these targets, our roadmap
includes 10 key workstreams outlining the
immediate priorities we will focus on as we
make on our journey towards net zero. These
workstreams are at differing levels of maturity.
Those more mature workstreams have targets
(see roadmap on page 73) with associated
metrics to measure performance. The
remaining workstreams have more formative
goals. Performance against these metrics, and
updates on the remaining workstreams can be
found in our Sustainability Report under the
relevant headings.
1. Our baseline is 5.7 million tonnes of carbon emitted
in 2016/2017.
Impact of climate risks on our
organisation’s financial performance
In 2030, the highest financial risk arises
from modelled transition risk, not modelled
physical risk.*
Beef has the largest cost impact due
to the high carbon emissions associated
with its production.
Cost impacts from manufacturing
emissions are higher than agricultural
emissions, as manufacturing is a more
carbon intensive process. The financial
exposure is greatest on cotton sourced
and manufactured in India and China,
due to our reliance on cotton products
from these countries.
Extreme weather
events and
chronic climate
change impact
on agricultural
production
Extreme weather
events and
chronic climate
change impact
on agricultural
production
Flood risk
The financial impact may manifest itself in
an increased cost of compliance.
G
O
V
E
R
N
A
N
C
E
Net Zero Workstream mitigating
strategies to ensure resilience
Low-impact farming –
to reduce agricultural
emissions
Increasing our range
of plant-based protein –
to encourage plant-based
diets for our customers
Working with supplier
and business partners on
net zero journey –
Sustainable Apparel Coalition
– to support partners to
reduce emissions in
manufacturing
Zero emissions property –
Our Scope 1 and 2
greenhouse gas emissions
– to reduce Scope 1
and 2 emissions
Greenhouse gas emissions
Our Scope 1 and 2 carbon emissions, reported in line with the Greenhouse Gas Protocol are
outlined in the chart below. These are assured by DNV Business Assurance Services UK Limited –
more information can be found in the Sustainability Report Independent Assurance Statement.
M&S operational emissions (Scope 1 and 2)*
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Original
Baseline**
Base year for our net zero
reset required by SBTi**
{
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Location based
Market based
10-year performance snapshot
* Please note, in accordance with GHG protocol guidelines, and in the absence of appropriate renewable sourcing in
our 2015-16 reporting year and prior, our location-based emissions were equal to market-based emissions.
Significant reductions in market-based performance in 2017 is primarily due to the procurement of renewable
electricity. All figures represent scope 1 and 2 data only so as to present a fair and like-for-like trend for comparison.
** Our original baseline was 2006/07. This has been used consistently as our baseline year in annual Plan A
performance reports. Following the reset of Plan A, our base year is now 2016/17. This is used for our Science
Based Target submission and will be used for our submissions to the Carbon Disclosure Project (CDP).
Annual Report & Financial Statements 2022
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METRICS AND TARGETS CONTINUED
Scope 3
emissions
2016/2017
5.5 million
tonnes CO2e
Sourcing
Manufacturing
Packaging
Operations
Franchise
Investments
In addition to Scope 1 and 2 emissions, we
have chosen to disclose the Scope 3 emissions
that form the basis of our science-based target.
Moving forward, this baseline will be used to
track the emissions reduction that form our
rapid decarbonisation plan to reduce our
footprint by 34% by 2025.
Integrating sustainability
metrics in remuneration
During the year, the ESG Committee
recommended the inclusion of a sustainability-
related metric into performance share
plan awards should be investigated. The
Remuneration Committee considered this,
instructing a review of feasibility with input
from our remuneration advisers, PwC,
on the market position. More information
on the outcome of this is provided in the
Remuneration Committee Report on page 88.
Streamlined energy and carbon reporting
Energy and transport fuel consumed
Greenhouse gas (“GHG”) emissions
UK Operations
International Operations
Group
This year
2021/22 (GWh)
1,132
25
1,157
Last year
2020/21
(GWh)^
1,072
18
1,091
% Change
6%
35%
6%
^ Energy consumption (GWh) for 2020/21 has been re-stated to account for a
historical reporting error that has been identified, concerning reported energy from
diesel fuel. Consumption of diesel fuel has been reported accurately in litres, with
fuel cards being used to collect data. A conversion factor used to calculate energy
(GWh) from fuel consumption (litres) has previously been applied incorrectly, and as
such, the energy reported last year has been re-stated. The conversion factor used
to calculate greenhouse gas emissions (tCO2e) from diesel fuel consumption (litres)
was applied correctly and reported as such.
In 2021/22 operations were not impacted by national lockdowns in
the way they had been in 2020/21. As a result, energy and fuel
consumption increased this year, as compared to the previous year, by
6%, returning to similar levels of consumption as seen in 2019/20 (+4%).
Location-based Scope 1 and 2 greenhouse gas emissions have gone
up in line with the increase in energy consumption, but also reflecting a
reported increase in emissions from refrigerant leakage, as maintenance
of refrigerant systems and top-ups resumed this year following
Covid-related disruption last year. Market-based Scope 1 and 2
emissions have increased by a smaller amount, due to a greater portion
of electricity being purchased via a green tariff. Measures taken to
improve energy efficiency throughout this year have included the
installation of LED lighting in our International division, introduction
of ISO 50001 in our Clothing and Home warehouses and improved
metering in UK and ROI properties.
Direct emissions (Scope 1)
of which UK & ROI:
Indirect emissions from
purchased electricity (Scope 2)
of which UK & ROI:
Total gross location-based
method Scope 1+2
GHG emissions
of which UK & ROI:
GHG intensity per 1,000 sq ft
of salesfloor
Procured renewable energy
Total gross market-based
method Scope 1+2
GHG emissions
of which UK & ROI:
This year
2021/22 (000
tonnes)
Last year
2020/21
(000 tonnes)^^
% Change
174
172
140
124
314
296
16
124
190
172
157
156
141
129
298
285
15
120
177
165
11%
10%
-1%
-4%
5%
4%
6%
3%
7%
5%
^^ GHG emissions (000 tCO2e) for 2020/21 have been restated to account for the
Motherwell warehouse coming into M&S’ boundary of operational control in 2021/22,
since operations began at the site during 2020.
GOVERNANCE
The Board has ultimate responsibility for both
risk management and ESG matters, including
those risks and opportunities related to
climate change. Responsibilities in relation
to ESG matters are discharged to the ESG
Committee. Responsibilities in relation to risk
management are discharged to the Audit
Committee. Board members are on both of
these Committees. The CEO is accountable
for the delivery of the Company’s ESG
programme including climate change.
Climate change and the delivery of our net
zero goal are a strategic priority as outlined
in the ESG Committee Report (page 70).
Executive accountability for overseeing
the structure of the Group’s overall risk
management framework sits with the CFO,
supported by the Group Risk team. At a
management level, the leadership teams of
76
Marks and Spencer Group plc
the business areas (Food, Clothing & Home,
International, Retail & Property and Bank &
Services) are responsible for their business’ risk
register, and for managing and resourcing
mitigating activities.
ESG risks, including those climate change
risks identified via our TCFD scenario analysis,
are considered as part of the business’ risk
register. The Executive Committee members
are individually responsible for reviewing and
confirming risks in their own areas, with the
executive directors reviewing the entirety of
the principal risks at the half year and year
end, providing the Audit Committee with
assurance that significant risks are
appropriately monitored and managed.
As required by the UK Corporate Governance
Code, the Audit Committee is tasked with
ensuring the effectiveness of the risk
management process, as well as confirming
that the principal risks and uncertainties of
the business are appropriately addressed.
The Audit Committee review the principal risks
twice a year, of which climate change and
environmental responsibility is one. In addition
to this, as part of our governance and
non-financial control arrangements, the ESG
Committee have oversight of our climate
change and environmental responsibility
principal risk and continue to support the risk
management process by reviewing and
providing the Audit Committee with
recommendations on all ESG-related risks,
including climate change. Further details on
the Group’s overall risk management process
and governance are available on page 45.
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Following confirmation of our Group goal, we
set up a Plan A (Net Zero) Steering Group to
mobilise action across the business in line with
the roadmap towards net zero.
This Steering Group is formed of business
representatives across the leadership team
and sponsored by the CFO and Nick Folland,
our General Counsel & Company Secretary,
who are responsible for Plan A. The Group
meets bi-monthly to drive progress along our
roadmap and workstreams, ensuring that
targets are delivered to mitigate our climate
risks, including those identified in our scenario
analysis. The Steering Group also ensures
suitable considerations are included within
the financial planning cycle. The Steering
Group updates the ESG Committee,
a sub-committee of the Board, on a quarterly
basis on progress against our net zero targets.
G
O
V
E
R
N
A
N
C
E
Board – Ultimate responsibility for both Risk Management and ESG matters,
including those risks and opportunities related to climate change.
Audit Committee
ESG Committee
– Responsible for ensuring the effectiveness of the
risk management process, and confirming that the
principal risks and uncertainties of the business are
appropriately addressed.
– Reviews the principal risks twice a year, of which
climate change and environmental responsibility is one.
– Responsible for ensuring the Company’s ESG strategy
remains fit for purpose, and plans are in place and
reported on.
– Advises the Audit Committee on ESG-related risks and
opportunities, including climate-related issues.
– The CEO is accountable for the delivery of the Company’s ESG programme including climate change.
– The Executive Committee members are individually responsible for reviewing and confirming risks in their own areas,
including climate risks.
Executive Committee
Group Risk Management
Plan A (Net Zero) Steering Group
– Responsible for implementing the Group risk management
process, through which the business manages climate-
related risks.
– Responsible for driving progress along our Net Zero
Workstreams, which mitigate our climate risks.
– Updates the ESG Committee on a quarterly basis on
– See risk management process and governance overview
progress against targets.
on page 45.
– Ensures net zero strategy considerations are included
within financial planning cycles.
Business and Functional Leadership Teams
– Responsible for their business’ risk register, and for
managing and resourcing mitigating activities.
– Responsible for ensuring climate-related risks are
considered as part of the business’ risk register.
ACTIONS WE WILL TAKE IN 2022/23
– Undertake a detailed business-wide review of climate risks and
opportunities over the short, medium and long term.
– Extend our scenario analysis to focus on additional business areas.
– Develop a financial framework to support our roadmap towards net zero.
– Review the inclusion of sustainability-linked performance metrics into
share plan awards.
– Update on progress for tracking Scope 3 emissions data with initial focus
on own brand products across Foods and Clothing & Home.
INDEX
Section (as per TCFD
recommendations)
Page
1a
1b
2a
2b
2c
3a
3b
3c
4a
4b
4c
Page 76 and 77
Page 76 and 77
Page 73, 74 and 75
Page 73, 74 and 75
Page 72, 74 and 75
Page 72
Page 72 (Risk Management
Section – page 45)
Page 72 (Risk Management
Section – page 45)
Page 75 and 76
Sustainability Report
Page 75 and 76
Page 73, 75 and 76
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GOVERNANCE
AUDIT COMMITTEE REPORT
‘‘
THIS YEAR CONTINUED TO BE
CHARACTERISED BY CHANGE AND
UNCERTAINTY. NAVIGATING THE RISKS
ASSOCIATED WITH MACROECONOMIC
FACTORS WERE KEY COMPONENTS
OF DISCUSSION.
Andy Halford, Chair of the Audit Committee
’’
The Committee fulfils a vital role in
the Company’s governance framework,
providing valuable independent challenge
and oversight across all financial reporting
and internal control procedures.
Ultimately, it ensures our shareholders’
interests are protected, the Company’s
accelerated transformation is supported
and long-term value is created.
As referenced in the Chairman’s Overview
and the Nomination Committee Report,
I have served as a non-executive director
of M&S and chaired this Committee
for nine years. I am therefore stepping
down as Chair of the Committee on
7 June and, having ensured a smooth
transition, will retire from the Board and
as a Committee member by the end
of 2022.
Evelyn Bourke will take over as Chair of
the Audit Committee, bringing a wealth of
knowledge from a variety of financial and
risk-related leadership roles, including at
the Bank of Ireland, Admiral and AJ Bell.
I leave the Committee in good hands.
COMMITTEE MEMBERSHIP
INDEPENDENCE AND EXPERIENCE
The Committee solely comprises independent
non-executive directors. Detailed information
on the experience, qualifications and skillsets
of all Committee members can be found
on pages 60 to 61.
The Board has confirmed that it is satisfied all
Committee members possess an appropriate
level of independence and relevant financial
and commercial experience across various
industries, including the retail sector.
MEETINGS HELD IN 2021/22
The Committee held five meetings during the
year, with members of senior management
invited to attend and to present as and when
specialist technical knowledge was required.
The Committee met without management
present before a number of meetings. It also
met privately with the lead audit partners,
and separately with the Head of Internal
Audit & Risk, after a number of meetings.
It is important for the Committee Chair to
understand fully any topics of concern to
facilitate meaningful dialogue during
Committee meetings.
The Board has also confirmed that it is
satisfied both Andy Halford and Evelyn
Bourke possess recent and relevant
financial experience.
To support him in fulfilling this role during
the year, Andy Halford met regularly, on a
one-to-one basis, with the CEO and CFO,
the Director of Group Finance, the Head of
Internal Audit & Risk, members of senior
management and the lead audit partner
from Deloitte.
More information about the Audit
Committee is available in our full
disclosure of compliance with the
UK Corporate Governance Code at
marksandspencer.com/thecompany.
Evelyn Bourke
Andy Halford
Justin King
Member since
meetings attended
possible meetings
Number of
Maximum
1 Feb 2021
1 Jan 2013
4 Nov 2019
5
5
5
5
5
5
INTRODUCTION
As Chair of the Audit Committee
(the “Committee”), I am pleased to present
my ninth and final report. These pages
outline how the Committee discharged
the responsibilities delegated to it by
the Board over the course of the year
ended 2 April 2022, and the key topics
it considered in doing so.
During the year, the Committee’s core
duties remained unchanged and the
usual cadence of activities relating to
risk, assurance and internal controls
remained in place. While many immediate
challenges arising from Covid-19 and
Brexit had dominated the prior year, the
backdrop of this year continued to be
characterised by change and uncertainty.
In particular, navigating the risks
associated with macroeconomic factors
were key components of discussion in
every area of the business, including the
Russian invasion of Ukraine in the latter
part of the financial year. Detail on our
risk mitigating activities can be found on
pages 49 to 54.
The Committee continued its work to
strengthen non-financial controls and
governance arrangements including:
updating and improving policies, metrics
and assurance processes to ensure
compliance with our Code of Conduct;
refreshing accountabilities of the
Financial Services Compliance Monitoring
Committee to enhance oversight of
duties relating to M&S Bank and Services;
and driving progress with business unit
level improvements to risk reporting
and monitoring.
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WHAT WAS ON THE COMMITTEE’S AGENDA IN 2021/22
G
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N
A
N
C
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Food
– Reviewed and assessed risks relating to
Ocado Retail, from the launch of new
products on the platform through to
financial and strategic impacts of the
joint venture.
– Considered GSCOP compliance, agreed on
additional training for suppliers and monitored
the supply chain transformation risk.
– Discussed and agreed stronger controls
and process adherence in food product
development and food safety.
International
– Monitored risks arising from
macroeconomic conditions, including
delivering growth in priority markets,
end-to-end supply chain and brand
investment by franchise partners.
– Evaluated the mitigating actions presented
by management against Brexit and differing
responses to Covid-19 in local jurisdictions.
Bank & Services
– Considered the regulatory responsibilities
and risks associated with having commercial
partners operating under the M&S brand.
– Examined updates from the Financial
Services Compliance Monitoring
Committee, including an annual review
of the framework and accountabilities.
Digital & Data
– Discussed risk appetite and ethics around
data use.
– Assessed cyber security risk and instigated
a review of existing insurance policies. Later
in the year, the Committee evaluated the
potential security impact of the invasion of
Ukraine and reviewed actions to manage the
increased threat.
– Monitored the technology transformation and
discussed key areas of risk including available
talent resource, quarterly investment
assessments, cloud migration and compliance
with payment data standards.
HR
– Considered the launch of the MyHR
system and recommended a project
implementation review with regards to
colleague onboarding, particularly during
the Company’s peak-trading period.
CORE DUTIES
The Committee undertook the following core
activities during the year:
– Monitored the integrity of the annual and
interim financial statements and any formal
announcements relating to the Company’s
financial performance, with a focus on
reviewing the significant financial reporting
policies and judgements within them.
– Reviewed internal controls and risk
management processes particularly in the
context of challenges posed by Covid-19
and Brexit.
– Reviewed the Board’s approach to assessing
the Company’s long-term viability.
– Debated and agreed changes to the
principal risks.
– Maintained the relationship with the
external auditor, including monitoring
their independence and effectiveness.
– Reviewed the effectiveness of the
Company’s whistleblowing, fraud, gifts
and hospitality procedures.
– Reviewed and approved the Company’s
statement of compliance with the Groceries
Supply Code of Practice (“GSCOP”).
– Assessed whether the Annual Report,
taken as a whole, was fair, balanced and
understandable.
– Reviewed the effectiveness and
independence of the Internal Audit &
Risk function.
– Reviewed relevant financial and climate-
related scenario analysis, identifying
future climate risks and opportunities
with the support of the Environmental,
Social & Governance (“ESG”) Committee,
for the purpose of aligning with the
recommendations from the Task Force on
Climate-related Financial Disclosures (“TCFD”).
Risk and control updates
In line with the Group Risk Policy, our
accountable businesses and key functions
remain responsible for managing and reporting
their risks, as well as maintaining their internal
control environment. The output of these
activities is reviewed by the Audit Committee
through annual updates provided directly by
management, and summarised below.
External audit
The Committee also noted the internal control
findings highlighted in the external auditor’s
report and confirmed that it is satisfied there
is no material misstatement and that relevant
actions are being taken to resolve any control
matters raised.
MANAGEMENT UPDATES
The Committee received detailed updates
from one or more business areas at each of its
meetings. Each update included a review of
the risk register, noting progress made to
implement key mitigating actions, emerging
risks being monitored and outstanding actions
from Internal Audit reviews completed.
Management has also confirmed how it
continues to maintain key control and
assurance activities. These presentations are
scheduled on a rolling 12-month basis, with
additional matters identified by Internal Audit
added throughout the year as they arise.
Retail, Property and
Business Continuity
– Evaluated the plans to rotate the store
estate, considering risks relating to
inflationary pressures on renewal costs,
sustainability factors, and the potential
need to expand human resources to
maintain and accelerate pace. The
accounting treatment of the store
programme was also debated and agreed
with the external auditors.
INTERNAL CONTROLS FRAMEWORK
– Monitored results and agreed actions from
The Committee received updates on internal
control matters from the Internal Audit team
at each meeting, as part of its key duty
to review the Company’s internal control
processes. This regular monitoring of the
internal control framework ensured timely
identification of issues and formal tracking of
remediation plans.
Instances where the effectiveness of internal
controls were deemed to be insufficient
were discussed during the year, either by the
Audit Committee or the full Board, and the
resulting improvement plans were monitored
by the Committee.
In particular, the Committee debated M&S’
response and approach to the BEIS white
paper on restoring trust in audit and corporate
governance. Whilst our gap analysis indicated
the business would be in a strong position
to comply with each of the potential
requirements, it was agreed that steps should
be taken to strengthen the Company’s
internal control environment, regardless of the
outcome of the BEIS proposals. The progress
of the Control Strategy delivery plan was
then monitored by the Committee.
business continuity exercises and assurance
reviews which had taken place globally.
Assessment areas included disaster
recovery plans at distribution centres and
the manufacturing and sourcing model.
Clothing & Home
– Evaluated the risks arising from delivery of
Plan A commitments in light of the scale
and complexity of the net zero challenge,
and risks arising from the introduction of
third-party brands. Considered and agreed
controls to manage these and other
changes, including creation of a new
Finance role.
– Discussed post-Covid customer behaviour
and uncertainties arising from inflationary
pressures in raw material, labour and freight.
– Monitored compliance in the supply
chain with emphasis on modern slavery,
child labour, chemicals and product
safety regulations, including a return to
in-person audits.
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Annual Report & Financial Statements 2022
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GOVERNANCE
AUDIT COMMITTEE REPORT
CONTINUED
AUDIT COMMITTEE EFFECTIVENESS REVIEW
The Committee’s performance was
reviewed as part of the 2021/22 internally
facilitated Board Evaluation, which is
covered on page 65.
The review found that the Committee
functions effectively, with strong
leadership from Andy Halford. Issues are
dealt with in a thoughtful, clear and
rigorous manner. Feedback on the level
of challenge and quality of updates
provided by the Committee to the
Board was positive.
The Committee was considered to be
operating well in terms of meeting
structure. There is an awareness and
acceptance that the demands on
members time are significant but
necessary. The remit and duties of the
Committee were considered correct,
particularly with its expanded oversight of
risk, with a greater focus on non-financial
controls and cyber threat, both of which
are only expected to increase. The range
of assurance provided to the Board by the
Committee was deemed appropriate, and
its interactions with the ESG Committee
were considered to be working well. It was
agreed more work was required to tackle
business actions, structural issues, and
topics that frequently reappear on the
Committee’s agenda.
The Committee made good progress on
the 2021/22 action plan, particularly in
relation to increasing the focus on
technology, with risk reporting and
compliance monitoring becoming
embedded into the business in a more
robust way. The Company’s business units
are becoming more accountable for risk
management, but further work is required
in this area to continue to improve.
2022/23 ACTION PLAN:
– Support the transition of the
Committee Chair, and related
Committee composition.
– Prepare for the next external audit
tender, and Partner rotation the
following year.
– Review the effectiveness of the Internal
Audit function and its activities.
– Continue review of the Group’s controls
framework as well as monitoring the
implications of the BEIS Restoring Trust
in Audit and Corporate Governance
reforms when they are published.
– Continue to push the accountability
agenda for risk reporting at a business
unit level.
– Continue to assess what improvements
are required in the Company’s
information security, systems and
technology.
– Drive and encourage management to
tackle structural or reoccurring risk and
issue areas.
FAIR, BALANCED AND UNDERSTANDABLE
At the request of the Board, the
Committee has considered whether,
in its opinion, the 2022 Annual Report &
Financial Statements are fair, balanced
and understandable, and whether they
provide the information necessary for
shareholders to assess the Group’s
position and performance, business
model and strategy.
The structure of the Annual Report
focuses strongly on the key strategic
messages in the Strategic Report. It was
therefore important for the Committee
to ensure these messages are fairly
summarised and lead to the overall
transparency of the disclosures made
throughout the report, which it knows
stakeholders find useful, and that the
messages presented by the business are
both clear and reflective of the Company
as a whole.
The Committee received a full draft of
the report and provided feedback on it,
highlighting the areas that would benefit
from further clarity. The draft report
was then amended to incorporate this
feedback ahead of final approval.
When forming its opinion, the Committee
reflected on the information it had
received and its discussions
throughout the year. In particular,
the Committee considered:
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IS THE REPORT FAIR?
– Are the key judgements referred
– Is the whole story presented and has
any sensitive material been omitted
that should have been included?
– Is the narrative in the reporting on the
business performance in the front of
the report consistent with that used
for the financial reporting in the
financial statements?
– Are the key messages in the narrative
reflected in the financial reporting?
to in the narrative reporting and the
significant issues reported in this
Audit Committee Report consistent
with the disclosures of key estimation
uncertainties and critical judgements
set out in the financial statements?
– How do the significant issues identified
compare with the risks that Deloitte
plans to include in its report?
IS THE REPORT UNDERSTANDABLE?
– Are the KPIs disclosed at an appropriate
level based on the financial reporting?
– Is there a clear and understandable
framework to the report?
IS THE REPORT BALANCED?
– Is there a good level of consistency
between the narrative reporting in
the front and the financial reporting
in the back of the report; and does
the messaging presented within each
part remain consistent when one is
read independently of the other?
– Is the Annual Report properly
considered a document for
shareholders?
– Are the statutory and adjusted
measures explained clearly with
appropriate prominence?
– Are the important messages
highlighted appropriately throughout
the document?
– Is the layout clear with good linkage
throughout in a manner that reflects
the whole story?
CONCLUSION
Following its review, the Committee
was of the opinion that the 2022
Annual Report & Financial Statements
are representative of the year
and present a fair, balanced and
understandable overview, providing
the necessary information for
shareholders to assess the Group’s
position, performance, business model
and strategy.
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The Audit Committee has assessed
whether suitable accounting policies
have been adopted and whether
management has made appropriate
judgements and estimates.
Throughout the year, the Finance team
has worked to ensure that the business
is transparent and provides the required
level of disclosure regarding significant
issues considered by the Committee in
relation to the financial statements, as well
as how these issues were addressed, while
being mindful of matters that may be
business-sensitive.
This section outlines the main areas of
judgement that have been considered by
the Committee to ensure that appropriate
rigour has been applied. All accounting
policies can be found in note 1 to the
financial statements. Where further
information is provided in the notes to the
financial statements, we have included the
note reference.
Each of the areas of judgement has
been identified as an area of focus and
therefore the Committee has also
received detailed reporting on these
matters from Deloitte.
PRESENTATION OF THE
FINANCIAL STATEMENTS
The Committee gave consideration to the
presentation of the financial statements
and, in particular, the use of alternative
performance measures and the
presentation of adjusting items in
accordance with the Group accounting
policy. This policy states that adjustments
are only made to reported profit before
tax where income and charges are
significant in value and/or nature. The
Committee received detailed reports from
management outlining the judgements
applied in relation to the disclosure of
adjusting items. In the current year,
management has included in this
category: the implementation and
execution of strategic programmes;
directly attributable gains resulting from
the Covid-19 pandemic; impairments,
impairment reversals and write-offs of
the carrying value of stores and other
property charges; Ocado Retail Limited
related charges; the reduction in M&S
Bank charges incurred in relation to the
insurance mis-selling provision; and
franchise restructuring charges.
See note 5 on p143.
SIGNIFICANT ISSUES
PROPERTY MATTERS (INCLUDING
ASSET WRITE-OFFS, ONEROUS
LEASE CHARGES AND USEFUL
ECONOMIC LIVES)
and reversals of tangible and intangible
assets have been recognised.
See notes 1, 5, 14 and 15 on p130, p143
and p157-159 respectively.
The Committee has considered the
assessments made in relation to the
accounting associated with the Group’s
UK store estate strategy. The Committee
received detailed reports from
management outlining the accounting
treatment of the relevant charges and
reversals, including impairment,
accelerated depreciation, dilapidations,
redundancy and onerous lease costs
(including void periods). The Committee
has reviewed the basis for the key
assumptions used in the estimation of
charges/reversals (most notably in relation
to the costs associated with property exit/
sub-let costs, the sale proceeds expected
to be recovered on exit, where relevant,
and the cash flows to be generated by
each cash-generating unit in the period to
closure). The Committee has challenged
management and is satisfied that the
assumptions made are appropriate.
The Committee is also satisfied that
appropriate costs and associated
provisions have been recognised in
the current financial year.
See notes 1, 5, 15 and 22 on p130, p143,
p159 and p175 respectively.
IMPAIRMENT OF GOODWILL,
BRANDS, AND TANGIBLE AND
INTANGIBLE ASSETS
The Committee has considered the
assessments made in relation to the
impairment and impairment reversals
of goodwill, brands, and tangible and
intangible fixed assets, including land
and buildings, store assets and software
assets. The Committee received detailed
reports from management outlining the
treatment of impairments and reversals,
valuation methodology, the basis for
key assumptions (e.g. discount rate and
long-term growth rate) and the key drivers
of the cash flow forecasts. The Committee
has challenged management and is
satisfied that these are appropriate.
The Committee has also understood the
sensitivity analysis used by management
in its review of impairments and reversals,
including consideration of the specific
sensitivity disclosures in the relevant
notes. In addition, the business plans
detailing management’s expectations of
future performance of the business are
Board-approved. The Committee is
satisfied that appropriate impairments
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INVENTORY VALUATION
AND PROVISIONING
As a direct result of the restrictions on
non-essential retail imposed in response
to the Covid-19 pandemic, the Group’s
ability to sell through existing Clothing &
Home stock was deemed to be
significantly impacted, and additional
Clothing & Home inventory provisioning
was required at the end of 2019/20.
However, strong trade has allowed the
Group to continue to sell much higher
volumes of stock than assumed versus
the Covid-19 scenario on which the
provision was created. As a result and
supported by the vaccines and removal
of Covid-19 restrictions, a net credit has
been recorded. After taking into account
this release, the Covid-related inventory
provisions recorded in the 2019/20
financial statements have now been
fully released and inventory provisioning
methodology has returned to
pre-pandemic methodology.
Incremental provisions remain in place
only in relation to the provision against
excess slow-moving personal protective
equipment, committed to during the peak
of the first Covid-19 lockdown and
incurred directly in response to the
Covid-19 pandemic.
The Committee considered the Group’s
current provisioning policy, the impact
of expected future expectations of
sell-through impacting the recoverability
of the cost of inventories held at the
balance sheet date and the nature and
condition of current inventory. When
calculating inventory provisions, the
Group has considered the nature and
condition of inventory, as well as applying
assumptions around future trade. The
Committee has concluded that such are
appropriate. The assumptions have been
disclosed in the financial statements.
See notes 1 and 5 on p130 and p143
respectively.
Annual Report & Financial Statements 2022
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GOVERNANCE
AUDIT COMMITTEE REPORT
CONTINUED
SIGNIFICANT ISSUES CONTINUED
REVENUE RECOGNITION IN
RELATION TO REFUNDS, GIFT
CARDS AND LOYALTY SCHEMES
Revenue accruals for sales returns and
deferred income in relation to loyalty
scheme redemptions and gift card and
credit voucher redemptions are estimated
based on historical returns and
redemptions. The Committee has
considered the basis of these accruals,
along with the analysis of historical returns
and redemption rates and has agreed with
the judgements reached by management.
See note 19 on p163.
SUPPLIER INCOME
The Committee is satisfied that this
continues to be monitored closely by
management and controls are in place
to ensure appropriate recognition in the
correct period. The financial statements
include specific disclosures in relation to
the accounting policy and of the effect
of supplier income on certain balance
sheet accounts.
See note 1 on p130.
VALUATION OF MARKS AND
SPENCER GROUP PLC COMPANY
ONLY INVESTMENT
Marks and Spencer Group plc holds
investments in Group companies which
are reviewed annually for impairment.
Management has prepared an impairment
review based on estimated value in use
of the Group. An impairment charge has
been recorded (see note C6 Investments
on page 186). The Committee has
reviewed management papers outlining
the key assumptions used in calculating
the value in use and is satisfied that these
are appropriate.
GOING CONCERN AND
VIABILITY STATEMENT
The Committee has reviewed the Group’s
assessment of viability over a period
greater than 12 months. In assessing
viability, the Committee has considered
the Group’s position presented in the
approved budget and three-year plan.
In the context of the current challenging
environment as a result of Covid-19, the
unfolding humanitarian crisis following the
invasion of Ukraine, a severe but plausible
downside scenario was applied to the
plan. This included assumptions such as a
sustained economic recession, increased
costs and an inability for the Group to
execute the transformation plan. The
Committee has concluded that these
assumptions are appropriate.
The Committee has also reviewed the
Group’s reverse stress test that was
applied to the model. The Committee
has reviewed this with management
and is satisfied that this is appropriate in
supporting the Group as a Going Concern.
In addition, the Committee received
regular updates on the steps taken by
management regarding liquidity, including
the successful renegotiation of its
revolving credit facility, which is set to run
until June 2025, and replaces the facility
which was due to mature in April 2023.
The Committee is satisfied that these
measures have reduced liquidity risk.
See note 1 on p130.
RETIREMENT BENEFITS
Following the significant increase in the
pension surplus during the year, the
Committee has reviewed the actuarial
assumptions, such as discount rate,
inflation rate, expected return of scheme
assets and mortality, which determine
the pension cost and the UK defined
benefit scheme valuation, and has
concluded that they are appropriate.
The assumptions have been disclosed
in the financial statements.
See note 11 on p149.
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All non-audit work performed by
Deloitte, with fees in excess of £50,000,
was put to the Audit Committee for
prior consideration and approval. For
non-audit work where fees were below
£50,000, approval was obtained from
the Chief Financial Officer and the Audit
Committee notified of all work falling
within this threshold. Further details
on non-audit services provided by
Deloitte can be found in note 4 to the
financial statements.
The non-audit fees to audit fees ratio for
the financial year ended 2 April 2022 was
0.09:1, compared with the previous year’s
ratio of 0.09:1. The majority of the £0.2m
in non-audit fees paid in total to Deloitte
during 2021/22 was incurred for assurance
services provided during the year. These
comprised fees in respect of the Half Year
review, turnover certificates and ESG
assurance. It is normal practice for such
assurance services to be provided by the
Company’s statutory auditor.
No additional recurring or one-off
non-audit services were provided during
the year.
In addition, the Committee reviewed and
approved the audit fee for the year,
making sure any fee increase was
understood and reasonable.
TENURE
Deloitte was appointed by shareholders
as the Group’s statutory auditor in 2014
following a formal tender process. The
lead audit partner, Richard Muschamp,
has been in post since the start of
the 2019/20 audit. The external audit
contract will be put out to tender at
least every 10 years. The Committee
considers that it would be appropriate
to conduct an external audit tender
by no later than 2024.
The Committee recommends that
Deloitte be reappointed as the Company’s
statutory auditor for the 2022/23 financial
year. It believes the independence and
objectivity of the external auditor and
the effectiveness of the audit process
are safeguarded and remain strong.
The Company is in compliance with the
requirements of the Statutory Audit
Services for Large Companies Market
Investigation (Mandatory Use of
Competitive Tender Processes and Audit
Committee Responsibilities) Order 2014
and the Corporate Governance Code.
There are no contractual obligations that
restrict the Committee’s choice of
external auditor.
EFFECTIVENESS
The effectiveness of our external auditor
is assessed in accordance with a process
agreed by the Audit Committee, which
involves the Committee’s own views,
as well as providing opportunity
to comment, via completion of a
questionnaire, from a targeted group that
have regular interactions with the external
auditor. The targeted group include: the
Chief Financial Officer, Director of Group
Finance, the four Finance Directors for
Clothing & Home, Food, International and
Retail & Property, the Head of Investor
Relations, the Group Financial Controller
and Head of Finance Business Services.
EXTERNAL AUDITOR
The Committee was provided with a
summary of the responses received
from management to assist with its
own considerations.
Feedback from the target groups was
overall positive. It was agreed that
the audit team had continued to be
responsive and cooperative and had again
demonstrated flexibility and adaptability
in working with management day-to-day
to overcome the challenges faced
throughout the year as restrictions on
working from home began to lift. The
audit partners continue to have a good
understanding of our business. Early
engagement throughout the year on
key accounting judgements continues to
be appreciated and allows a number of
items to be addressed in advance of the
year end.
A common theme reflected a desire for
more focus on planning and
communication during certain aspects
of the audit cycle with opportunities for
improvement available, as well as more
engagement, including insights, outside
of the peak year-end period.
NON-AUDIT FEES
To safeguard the independence
and objectivity of the external auditor,
the Committee has put in place a
robust auditor engagement policy
which it reviews annually. The policy
is disclosed on our website at
marksandspencer.com/thecompany.
The Committee is satisfied that the
Company was compliant during the year
with both the UK Corporate Governance
Code and the Financial Reporting
Council’s Ethical and Auditing Standards
in respect of the scope and maximum
permitted level of fees incurred for
non-audit services provided by Deloitte.
Where non-audit work is performed by
Deloitte, both the Company and Deloitte
ensure adherence to robust processes to
prevent the objectivity and independence
of the auditor from being compromised.
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AUDIT COMMITTEE REPORT
CONTINUED
ASSURANCE AND INTERNAL CONTROL ENVIRONMENT
The Board assumes ultimate
responsibility for the effective
management of risk across the Group,
determining its risk appetite and
ensuring that each business area
implements appropriate internal
controls. The Group’s risk management
systems are designed to support the
business in actively managing risk to
achieve business objectives, and can
only provide reasonable and not
absolute assurance against material
misstatement or loss. These systems are
also designed to be sufficiently agile
to respond to changes in circumstances,
such as the evolution of Covid-19,
EU-UK border regulations and more
recently managing the implications of
Russia’s invasion of Ukraine.
See p47-54 of the Strategic Report for
more information on our principal risks
and uncertainties.
The key features of the Group’s internal
control and risk management systems that
underpin the accuracy and reliability of
financial reporting include clearly defined
lines of accountability and delegation of
authority, the Group’s Code of Conduct, and
policies and procedures that cover financial
planning and reporting, preparing
consolidated accounts, capital expenditure,
project governance and information security.
SOURCES OF ASSURANCE
The Board has delegated responsibility
for reviewing the effectiveness of the
Group’s systems of internal control to the
Audit Committee, which includes financial,
operational and compliance controls
and risk management systems. The
Committee is supported by a number of
sources of internal assurance from within
the Group to complete these reviews:
1. Internal Audit
The Group’s primary source of internal
assurance is delivery of the Internal Audit
Plan, which is structured to align with the
Group’s strategic priorities and key risks
and is developed by Internal Audit with
input from management. The plan has
been reviewed periodically throughout
the year to confirm it remains relevant for
new and emerging circumstances, both
internal and external. The findings and
actions from Internal Audit reviews are
agreed with the relevant business area,
communicated to the Audit Committee
and tracked through to completion.
The work completed by Internal Audit during
the year focused on key risks including
corporate compliance and responsibility,
information security, our property estate
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and new legal and regulatory requirements,
like Natasha’s Law and TCFD.
2. Management updates and risk
deep dives
As part of the Committee’s annual calendar,
it receives updates on risk management,
whistleblowing and fraud, and the maturity
of control and assurance activities from
individual business areas and functions.
These updates are complemented by
Internal Audit’s independent audits
performed within these areas.
3. Functional assurance
A broad range of assurance activity
has been designed and deployed across
the business to target key risk areas, such
as ethical sourcing responsibilities, food
safety and fire, health and safety. While
reporting lines for these activities are
directly to business areas, the processes
and controls of these functions are
periodically tested by Internal Audit and
discussed with the Audit Committee.
4. Operational oversight
Senior management forums and
committees provide oversight and
challenge on key risk areas within
individual business areas, cross-business
programmes and activities, such as
business continuity, fire, health and
safety, ESG responsibilities, fraud risk
management, property estate, technology
and other areas of change. The output
from these discussions forms part of
the cyclical updates provided to the
Audit Committee.
GOVERNANCE
The Group was compliant throughout
the year with the provisions of the UK
Corporate Governance Code relating
to internal controls and the Financial
Reporting Council’s revised Guidance on
Audit Committees and Guidance on Risk
Management, Internal Control and Related
Financial and Business Reporting.
The Committee has considered the controls
findings raised in the independent auditor’s
report on pages 113 to 123. No other
significant failings or weaknesses were
identified during the Committee’s review in
respect of the year ended 2 April 2022 and
up to the date of this Annual Report.
Where the Committee has identified areas
requiring improvement, processes are in
place to ensure that the necessary action
is taken and that progress is monitored.
Further details of these processes
can be found within our full
disclosure of compliance with the
UK Corporate Governance Code at
marksandspencer.com/thecompany.
INTERNAL ASSURANCE FRAMEWORK
Source of information
Frequency/nature of reporting
Internal
Audit
Management
updates and
risk deep
dives
– Internal Audit Plan
– Regular reports against Plan
– Follow-up of remediation
– Updates on fraud, whistleblowing and
other irregularity
– Ad hoc engagement with the business
in response to new/emerging risks or
major incidents – e.g. Covid-19/Brexit
Papers submitted on a range of
issues including:
– Information security
– Bribery
– Code of Conduct
– GSCOP
– Financial control
– Business continuity
– Risk deep dives from individual business
Functional
assurance
areas and functions
Functional audit activities
undertaken, including:
– Food safety and integrity
– Ethical audits
– Trading safely and legally
Operational
oversight
– Compliance Monitoring Committee
– Fire, Health & Safety Committees
– Customer & Brand Protection
Committee
– Business Continuity Committee
– Business Unit Operating Reviews
Formal updates
presented to the
Committee at
each meeting.
Updates to the
Audit Committee
Chair as required.
Formal updates
presented to the
Committee annually
and as needed.
Updates provided to
the Committee
as part of annual
business updates
where appropriate
and as requested.
Updates presented
to the Committee
annually and
as needed.
Audit
Committee
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’’
REMUNERATION
REMUNERATION
OVERVIEW
‘‘
THE COMMITTEE ENSURES THE
PAY FRAMEWORK APPROPRIATELY
RECOGNISES AND REWARDS HARD
WORK AND FINANCIAL PERFORMANCE
Andrew Fisher, Chair of the Remuneration Committee
In this section
REMUNERATION
Remuneration overview
Remuneration in context
Summary Remuneration Policy
ANNUAL REPORT ON
REMUNERATION
Remuneration structure
Total single figure remuneration
Salary and benefits
Annual Bonus Scheme
Performance Share Plan
Directors’ share interests
Changes to Board membership
Non-executive directors’
remuneration
Remuneration Committee remit
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INTRODUCTION
On behalf of the Board, I am pleased to
present our 2021/22 Remuneration Report.
The Remuneration Report provides a
comprehensive picture of the structure
and scale of our remuneration framework
and its alignment with the business
strategy and the rest of the workforce.
It also details decisions made by the
Committee as a result of business
performance for this year and the
intended arrangements for 2022/23,
including the appointment of Stuart
Machin as Chief Executive Officer (CEO)
and Katie Bickerstaffe as Co-Chief
Executive Officer.
CONTEXT OF BUSINESS
PERFORMANCE
As anticipated in last year’s report, the
Committee focused much of its activities
during the year, on ensuring M&S’ pay
frameworks and practices support M&S’
fundamental values of fairness where
colleagues across the business are
appropriately recognised and rewarded
for hard work and financial results. The
Committee ensures that any payments
made do not “reward failure” or poor
performance; and targets set are
challenging yet motivational. Any
discussion involving executive director
incentive payments considers the
appropriateness of the payment in the
context of the shareholder experience,
the general health of the business as
well as pay outcomes experienced by
colleagues across the business.
Based on the strong financial
performance of M&S during the year,
with PBT of £522.9m, the maximum
payment opportunity under the corporate
financial performance element of the
Annual Bonus Scheme (ABS) was
triggered (see page 97). This will be the
first bonus payment made to colleagues
or executives since 2017. This above-
maximum profit performance was
delivered through a mix of strong Food
sales growth, an improving margin
mix and the performance of the new
Ocado and Costa channels, together with
3.8% sales growth in Clothing & Home,
significant improvements in the online
offer and fulfilment together with
improved profitability, cash conversion
and net debt. Further detail on these
and other aspects of the business’s
performance over the last year is
explained earlier in this annual report.
As explained later in this Remuneration
Report (see page 97 and 100),
the Committee was mindful of this
performance when discussing and
approving incentive outcomes, especially
when considering the uncertainty
of performance caused by global
macro events.
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BOARD CHANGES
On 10 March we announced that after
nearly 40 years of loyal service to M&S,
Steve Rowe would be stepping down from
his role as the CEO on 25 May, a role he
has held for the last six years. He will cease
full-time employment with the business
at the conclusion of the Annual General
Meeting (AGM) on 5 July. In view of his
wisdom and formidable knowledge of
the business, Steve has agreed to remain
as an adviser to the new leadership for
up to 12 months. I would like to take this
opportunity to extend my personal
thanks to Steve for his unwavering
dedication and commitment to M&S,
its colleagues and the Board.
When setting Steve’s exit arrangements,
the Remuneration Policy provided an
effective and clear framework, while also
providing appropriate levels of flexibility
for the application of discretion by the
Remuneration Committee. Final pay
arrangements for Steve are outlined
on page 104 of this report.
During his tenure, Steve oversaw far-
reaching changes in organisational
structure and management, leaving
behind a very strong leadership team.
As a result of robust succession planning,
the Board was delighted to be able to
select Steve’s successors from within
the existing leadership team, which not
only demonstrates strong internal talent
development but also provides for
stability and continuity as we move to the
next stage of our transformation journey.
I warmly welcome Stuart Machin and
Katie Bickerstaffe to the Board as CEO and
Co-Chief Executive Officer respectively
with effect from 25 May 2022, and I look
forward to working more closely with both
of them in their new roles.
As detailed on page 61, both Stuart
and Katie are outstanding leaders
with very strong track records and
experience of leading businesses through
Annual Report & Financial Statements 2022
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REMUNERATION
REMUNERATION OVERVIEW
CONTINUED
transformative change. The Board is
confident in their ability to take M&S
through the next stage of transformation.
The Board is also cognisant that our
leadership structure is unusual so it has
ensured clear accountability of roles
between Stuart and Katie. Stuart has
responsibility for day-to-day leadership
of the business and the Executive
Committee. He continues to have
oversight of our Food business, as well as
Operations, Property, Store Development
and Technology, and has taken on
responsibility for HR and Corporate
Communications. Upon appointment,
Stuart will receive an annual salary of
£800,000. Katie has responsibility for
Clothing & Home, MS2, International and
Financial Services. She also has a
particular focus on driving the global
omni-channel, data and digital future of
the business. Upon appointment, Katie
will receive an annual salary of £750,000,
reflecting her different work pattern. Both
Stuart and Katie continue to be entitled to
pension arrangements on the same terms
as all colleagues and will be eligible to
participate in the ABS and Performance
Share Plan (PSP) on the same basis as all
executive directors. There was careful
deliberation when setting the pay
arrangements for Stuart and Katie, during
which a number of factors were taken into
consideration, including their different
work patterns, their experience and skill
and the responsibilities of each, as well as
external market factors.
In addition to his finance responsibilities,
Eoin Tonge has taken on an enhanced role
in leading the future development of the
business strategy and oversight of Plan A,
becoming our Group CFO & Chief Strategy
Officer with effect from 25 May 2022. We
believe the accountabilities of his new role
go significantly beyond those normally
associated with the CFO position. In light
of this, Eoin’s salary will increase to
£660,000 from 25 May in recognition of
his increased responsibilities, inclusive of
any salary review for 2022/23.
Future Board salaries are confirmed on page
96, and further details of the contractual
provisions for executive directors will be
summarised in the Directors’ Remuneration
Report in next year’s Annual Report &
Financial Statements.
SINGLE FIGURE AND INCENTIVE
SCHEME OUTCOMES
As shown in the table on page 95,
the total single figure for the executive
directors is higher than prior year. This can
be wholly attributed to the outcome of
the ABS as no bonus was paid last year.
As in previous years, the 2021/22 ABS
remained focused on restoring the
business to profitable growth with
performance focused on Group Profit
Before Tax before adjusting items (PBT)
(70%) and individual measures set against
key areas of delivery of the transformation
(30%). Individual performance was
measured independently of PBT
performance, but no individual element
could be earned until a threshold level
of PBT was achieved.
It was with cautious optimism that we
welcomed the 2021/22 financial results,
recognising this as an indication of not
only strong underlying performance in
a very challenging climate, but also the
impact of the successful transformation
to date. The PBT outturn of £522.9m
was above the maximum financial target,
meaning the financial element of the
bonus was achieved in full and the
individual measures could pay out to
the extent that executive directors
achieved between target and stretch
performance against their stretching
personal objectives.
The Committee carefully reviewed the
achievement of the individual objectives
set at the beginning of the year to align
with the strategic priorities to fulfil its
remit and enable transparent disclosure to
shareholders. Full disclosure can be seen
on page 97, but the Committee noted in
particular the step change in Clothing &
STRATEGIC ALIGNMENT OF REMUNERATION FRAMEWORK WITH KPIS
KPI/Strategic priority
KPI
Adjusted earnings per share (EPS)
See KPIs
on p35
Strategic
priority
Return on capital employed (ROCE)
Group PBT before adjusting items (PBT)
M&S Food high-performing business and market share growth
Ocado transitioning to strong capacity growth post pandemic reversion
See
Strategic
priorities
on p6
Clothing & Home on track for a more profitable model capable of growth
Building store rotation pipeline driving exit from legacy stores
Absorbing Brexit related costs, but embryonic global
strategy encouraging
As measured by
Performance
Share Plan (PSP)
Annual Bonus
Scheme (ABS)
Financial
results
Achievement
against
objectives
2021/22 performance
ADJUSTED EARNINGS PER SHARE
RETURN ON CAPITAL EMPLOYED
GROUP PBT BEFORE ADJUSTING ITEMS
21.7p
8.7%
Adjusted EPS in 2021/22 was 21.7p. This was
below the 22.7p threshold required for any
vesting under this element of the 2019
PSP award.
Average three-year ROCE performance
was 8.7%. This was below the required 10.2%
threshold for any vesting under this element
of the 2019 PSP award.
£522.9m
Group PBT was above the “maximum” target
for bonus payments to be made under the
2021/22 ABS.
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Home performance and action taken
to strengthen the balance sheet in the
challenging environment. The Committee
was in agreement that it was appropriate
to award 83% against the individual
objectives for the CEO and CFO.
Even when considering the strong
financial results and strong individual
performances, the decision to pay 95%
of maximum bonus opportunity was
not taken lightly. Financial and strategic
targets were examined throughout the
financial year and at year-end to ensure
they retained the same level of stretch
envisaged when originally set. The
Committee was satisfied that this was the
case, and the ABS operated as intended.
None of the 2019 PSP will vest in respect
of the three-year performance period up
to 2 April 2022. Page 100 of this report
provides further detail on the 2019
measures and targets and their respective
achievement. While vesting of the PSP
remains low, the Committee remains
satisfied that this level of vesting is
reflective of the shareholder experience in
the challenging business environment in
which the 2019 plan operated, particularly
the first two years of the three-year
performance period.
APPLICATION OF DISCRETION
A number of mechanisms are available
to the Committee to ensure pay
outcomes appropriately reflect individual
and business performance, together with
the wider economic and societal climate.
This includes the ability to apply malus,
clawback and responsible discretion to
override formulaic outcomes under the
incentive schemes.
Throughout the year, the Committee has
carefully considered pay arrangements
and where it may, or indeed may not,
be appropriate to apply discretion.
After meaningful deliberation, the
Committee concluded it was appropriate
CEO single figure as a percentage
of maximum opportunity
22%
PSP
Fixed
Annual
Bonus
to award Steve Rowe a bonus despite
him being under notice at the date
of payment.
As detailed above, not only will Steve be
working beyond the end of the 2021/22
financial year and for up to 12 months as
an adviser to the new leadership team, he
has worked tirelessly and determinedly to
deliver on the transformation promise,
as demonstrated in our strong 2021/22
business performance. Steve will not be
eligible for a bonus in respect of the
2022/23 financial year.
As illustrated in the bar chart at the
bottom of this page, half of Steve’s bonus
will be deferred into M&S shares and will
be released to him after a three-year
holding period; this treatment ensures a
long-term alignment with shareholders’
interests following the end of Steve’s
tenure as CEO.
Considering the ABS further, the
Committee debated the appropriateness
of the original 2021/22 bonus PBT targets
in light of the achievement of above
“maximum” PBT target performance.
Together with the individual objectives,
the Committee reviewed the targets set
throughout the year and at year-end
to ensure they remained relevant and
appropriately stretching, recognising that
when the targets were set ahead of the
start of the financial year, there was still a
high degree of uncertainty as to how the
challenges of Covid-19 would impact
the business throughout the year. The
Committee was satisfied that the original
targets set required stretching PBT
performance. The Committee also took
into account the experience of wider
stakeholders, including our colleagues,
customers and shareholders, when
approving the final outcome. It was
determined that the outcome is reflective
of a strong year in business performance
and recovery, together with individual
outstanding contributions, and in this
context it is important that colleagues
are recognised for this performance.
The Committee did not apply any
discretion to the outcomes of the 2019
PSP, which reached the end of its
performance period on 2 April 2022
and will lapse in full. Despite the robust
business performance in 2021/22,
when considering the full three-year
performance period of the plan, the
Committee was satisfied the final vesting
outcome is reflective of the shareholder
33%
Total
£000
Steve
Rowe
£1,029
£1,601
£2,630
2021/22 Bonus payment timings (£000)
Steve Rowe
Eoin Tonge
July 2022
£800.7
£575.7
experience during the period and the
scheme had operated as intended.
As shown in the pie chart at the bottom of
the page, Steve Rowe’s single figure pay is
55% of the maximum possible for 2021/22.
STRATEGIC ALIGNMENT OF PAY
The Covid-19 pandemic increased the focus
on transformation at M&S, which continued
throughout this last financial year. During
the year, the measures and targets used in
M&S’ incentive schemes, namely those of
the PSP and ABS, were reviewed to ensure
alignment with the key performance
indicators (KPIs) and identified strategic
priorities across the business. The illustration
opposite on page 86 demonstrates the
strong link between the KPIs and strategic
priorities with executive remuneration at
M&S. This strength of alignment enables
the Committee to ensure pay arrangements
support the delivery of transformation
and fulfil M&S’ potential for long-term
sustainable growth. The Committee will
continue to review thoroughly the pay
structures and incentive arrangements
for the senior leadership team to ensure
strong alignment between the delivery of
business performance and the associated
remuneration arrangements, as the
business moves into the ‘shaping the future’
phase of our transformation journey.
PAY ARRANGEMENTS FOR 2022/23
Due to the timings of Stuart’s and Katie’s
appointments to the Board and Eoin’s role
change, as well as the accompanying
significant analysis and consideration of
both external and internal factors when
setting their respective salaries, Stuart,
Katie and Eoin will not be eligible to
participate in the 2022 salary review. They
will next be eligible to be considered for a
salary review in July 2023. Further details
of the wider workforce 2022 salary review
can be found on page 88.
Reflecting on the existing variable
remuneration framework, it was agreed
that in 2021/22 the structures of the PSP
and ABS worked well and as intended.
As a result, no changes have been
proposed for 2022/23.
Once again, performance under the
ABS will be measured against corporate
financial targets (70%) and individual
objectives (30%). The Committee believes
it remains appropriate for PBT to continue
to represent the largest element of
bonus potential as M&S seeks to return
to significant levels of profitability.
2025
£800.7
£575.7
Fixed pay
Total bonus
PSP
One-year performance period
Three-year deferral period
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REMUNERATION
REMUNERATION OVERVIEW
CONTINUED
The maximum opportunity will remain at
200% of base salary.
The Committee continues to ensure
that the remuneration framework for
executives is aligned with shareholder
interests. Following careful debate, it
has been agreed that the 2022 PSP will
maintain measures applied to the 2021
PSP awards, being 30% adjusted EPS,
30% ROCE, 20% relative total shareholder
return (TSR) and 20% strategic measures.
Targets have been set to be stretching
yet motivating and are detailed in full on
pages 100 and 101.
While no change has been proposed to
the structure and measures of the 2022
PSP, this belies the significant and detailed
conversation and analysis that took
place around the appropriateness of the
introduction of environmental, social and
governance (ESG) measures and targets
into the PSP. There is no doubt that M&S
takes its ESG responsibility seriously.
Our sustainability commitments sit at the
heart of our business operations and
inform decisions at all levels and across all
departments (see page 70 for our
ESG Committee Review). M&S was an early
pioneer of championing sustainability and
continues to hold a leading position in this
field. One of the ways we believe we can
improve our work in this area is to focus
on communication with consumers to
engage them on this important topic, and
to be sure we improve awareness of the
work we do. As such, when the Committee
considered the introduction of a more
traditional carbon metric in the pay
framework, it determined that a measure
which charts an improvement in customer
sentiment would be more aligned to
the strategy for the business. To track
this credibly and robustly, a base
case for current sentiment must first
be established. This forthcoming year
the Committee will review the base
measurement line throughout the year
with the intention of introducing a metric
to show improvement from that baseline
for 2023.
Having reduced award levels in 2020 to
acknowledge the shareholder experience
of Covid-19 and to mitigate against
windfall gains, share price recovery led the
Committee to decide that for the 2021
PSP award it was appropriate to return
PSP award percentages to 250% of salary.
Mindful of the need to incentivise
executives and ensure that they remain
aligned with the long-term interests of
shareholders, we intend to once again
grant PSP awards of 250% of salary in June
2022. The Committee retains the right to
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Marks and Spencer Group plc
review award levels in the event of
significant share price movement prior to
the date of grant. Furthermore, it should
be noted that when this award reaches
the point of vesting, careful consideration
will not only be applied to achievement
against the relevant performance
conditions, but also to ensure the vesting
values are reflective of the shareholder
experience across the term of the plan.
Should the Committee believe this not to
be the case, it retains its right to apply
discretion to the final outturn.
WIDER WORKFORCE
PAY ARRANGEMENTS
The Committee continued to receive,
and indeed welcome, regular and varied
updates during the year relating to M&S’
pay arrangements. In addition to those
already outlined in the Committee’s remit,
available on the M&S website, discussions
included hourly pay for store colleagues
and career progression through the
organisation. The Committee was also
informed of the outcome of the company-
wide Total Reward Review that took
place in the prior year. More than 14,000
colleagues gave us their views and
suggestions on pay arrangements at M&S.
As a result of this feedback in 2021/22,
we saw the implementation of Virtual GP,
which allowed colleagues unlimited 24/7
access to a GP, Check4Cancer, which
provides free screenings to all colleagues
for high-risk cancers, and salary finance
options to help consolidate debt,
save and protect through income
protection insurance.
To bring M&S in line with market practice,
and in direct response to colleague
feedback as a result of the company-wide
Total Reward Review, from 1 April 2022 the
Company has introduced a 5% payment in
lieu of pension allowance for colleagues
impacted by either the Annual or Lifetime
Allowance limits. The Committee
recognises this provision aligns with
market practice. To maintain alignment
between executive directors and
colleagues in the wider population,
it is intended to introduce a similar
arrangement into the new Remuneration
Policy which will be brought for
shareholder approval at the 2023 AGM.
The Committee welcomes continued
collaboration with the Business
Involvement Group (BIG). At Committee
meetings we receive direct feedback on
colleagues’ views from the National Chair
of BIG and in turn the Head of Executive
Reward and Pay Governance attends
National BIG Committee meetings to
share and discuss the executive pay
framework and its relationship with the
wider workforce. Such dialogue forms the
basis of a trusted and valued collaborative
working partnership and ensures a close
link between the pay philosophies at the
most senior levels and those for the
wider population.
To demonstrate the importance the
Committee gives to the alignment of
executive pay with the wider workforce,
in the 2021 Remuneration Report we
expanded our disclosures on such pay
arrangements. We are pleased to continue
this approach in this year’s report;
see pages 89 and 90.
Given the economic environment in
which we are operating currently, it is
unsurprising that significant time was
taken in discussing the appropriate
approach to the annual pay review. As is to
be expected, this topic generated a robust
debate, and we believe the end result of
salary increases ranging from 3% for our
senior population to 4%-6.5% for the wider
workforce balances the need for financial
restraint with support for our colleagues
given the increases to cost of living being
experienced by all. Further details can be
found on pages 89 and 96.
LOOKING AHEAD
We look ahead to what will be a new and
dynamic chapter in the M&S story. This will
be the final year under the current
remuneration framework, and at the 2023
AGM we will be seeking your support and
approval for a new Remuneration Policy.
During the coming year, the Committee
will be working to ensure any new
Remuneration Policy is valid and effective
in driving and supporting the business
strategy while remaining appropriate
when considering the overall M&S
remuneration framework and the
external regulatory environment.
I would like to thank our shareholders for
their continued support during the year.
I will be available at the AGM on the 5 July
2022 to answer any questions in relation
to this Remuneration Report.
Andrew Fisher
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REMUNERATION
IN CONTEXT
COLLEAGUE ENGAGEMENT
CONSIDERATION OF
COLLEAGUE PAY
Share ownership across
our colleagues
M&S is a proud advocate of employee share
ownership. The Board believes this supports
colleagues not only to share in M&S’ success
but also to behave as owners of our
business, aligned with our shareholders’
interests. Across our UK and Irish colleagues,
M&S has a significant number of participants
in all employee share schemes; colleagues
hold over 101m save as you earn options
in our ShareSave scheme and over 2,000
colleagues hold shares in our share incentive
plan ShareBuy.
Direct engagement with
our colleagues
Since 2018, the Chair of BIG, our colleague
representative body, has been invited to
attend a Remuneration Committee meeting
each year to engage and contribute on a
full range of topics and activities. During the
year, representatives from BIG have been
engaged on a number of pay-related topics,
beyond the executive level, including
providing feedback on, and agreeing with,
the ShareSave communication materials
and funding options of our share schemes.
They also discussed the operation of a
tax-advantaged ShareSave in Ireland, which
has been paused while alternative options
are investigated due to the absence of an
approved savings carrier. The collaborative
relationship we have with BIG strongly
reflects our belief in the key role that
colleague voice plays in ensuring the
Committee has greater visibility of the
things that really matter to our colleagues.
This also gives the Committee the
opportunity to explain and discuss our pay
practices and how executive pay aligns
with pay across the wider workforce. In
addition, the Head of Executive Reward &
Pay Governance provides updates to the
Committee as appropriate on pay and
people-related issues during the year.
Pay budgets
Under the remit of the Remuneration
Committee, total budgeted salary
expenditure across M&S for salary review
is noted, as are bonus and share scheme
budgets, ensuring principles for reward
allocation are aligned across the full
workforce, inclusive of senior leaders.
The average pay increase for our UK Store
Customer Assistants and Team Support
Managers awarded in April 2022 was 5.3%.
Effective July 2022, salary increases ranging
from 3% for our senior population to
4%-6.5% for the wider salaried workforce
have been awarded.
The Committee monitors and reviews
the effectiveness of the executive reward
policy and its impact and compatibility
with remuneration policies in the wider
workforce. Throughout the year, the
Committee reviews the frameworks and
budgets for key components of colleague
pay arrangements, together with the
broader structure of Group bonus
provisions, which ensures appropriate
alignment with senior pay arrangements.
The Committee is provided throughout
the year with information detailing pay
in the wider workforce, which gives
it the additional context needed to
make informed decisions. The Head of
Executive Reward & Pay Governance
advises the Committee on the approach
to be adopted in the forthcoming UK
pay review, and the Committee then
considers the executive directors’ pay
in line with these arrangements.
In approving the budget for the annual
bonus, the Committee reviews all bonus
costs for the Company against the
operating plan. The Committee also
reviews and approves any PSP awards
made to executive directors and directors
below the Board prior to their grant.
The Committee receives updates on
a variety of colleague engagement
initiatives. Alongside our annual survey,
bi-annual pulse and quarterly focused
surveys provide dynamic and relevant
colleague feedback. The pulse surveys
have helped us to better understand,
and take action on, the things which
matter most to our colleagues. These
have focused on topics such as
Inclusion & Diversity, Wellbeing and
overall colleague engagement.
Colleagues are encouraged to raise
questions at the periodic all-colleague
announcements led by the CEO. All
questions raised are answered, and
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comments made during the year through
surveys or our network of elected
colleague representatives via BIG are
considered. The Head of Executive Reward
& Pay Governance typically provides
an annual update to these colleague
representatives with an explanation of the
executive directors’ pay arrangements
during the year, and these representatives
in turn are able to ask questions on
the arrangements and their fit with the
other reward policies at this time.
CONSIDERATION OF
STAKEHOLDER VIEWS
The Committee is dedicated to an
open and transparent dialogue with
shareholders on the issue of executive
remuneration. Where appropriate,
the Committee will actively engage
with shareholders and shareholder
representative bodies, seeking views
which are considered when making
any decisions about changes to the
directors’ Remuneration Policy.
The Committee seeks the views of the
largest shareholders individually, and
others through shareholder representative
bodies, when considering making any
significant changes to the Remuneration
Policy. This may be done annually or on an
ad hoc basis, dependent upon the issue.
This year, the Committee consulted on the
proposed strategic measures and targets
to be applied to the PSP. The Committee,
led by the Chair, annually engages
in a process of investor consultation,
which is typically in written format, but
has included face-to-face meetings,
telephone or video calls. The Committee
Chair is available to answer questions
at the AGM, and the answers to specific
questions are posted on our website.
As part of our reporting approach,
an annual shareholder meeting
is normally held and views on a
variety of topics, including executive
pay, are taken into account.
PERCENTAGE CHANGE IN CEO’S REMUNERATION
The table below sets out the change
in the CEO’s remuneration (i.e. salary,
taxable benefits and annual bonus)
compared with the change in the
average non-executive director and our
UK-based colleagues’ pay. This group
has been chosen as the majority of our
workforce are based in the UK. Further
details of the non-executive director
pay changes are shown on page 104.
CEO (Steve Rowe)
Average non-executive director
UK colleagues (average per FTE)
% change 2020/21 – 2021/22
Base salary/fees
1%
1%
4%
Benefits
-20%%
0%
0%
Annual bonus
100%
–
100%
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REMUNERATION
REMUNERATION IN CONTEXT
CONTINUED
GENDER PAY GAP
The M&S median gender pay gap for the
year to April 2021 is 4.8%, compared with an
average of 9% for the Wholesale and Retail
sector. The M&S mean gap for the same
period is 12.5%.
Throughout the year we’ve continued to
take actions that further promote and
enhance inclusion and diversity (I&D) at M&S
so that all of our remarkable colleagues are
able to feel comfortable being themselves
and experience a culture that’s inclusive and
diverse, where everyone is respected and
feels valued and that they belong.
A data-led reset of the I&D strategy has
resulted in a clear and focused plan for
the next three years to build better
representation through targeted hiring,
internal development and progression
initiatives, and better education and
awareness activities which will build on the
impact arising from over 90% of colleagues
completing the first two I&D modules.
M&S is clear that any form of discrimination,
bullying, harassment, or victimisation will
not be tolerated in any part of the business,
and this is underpinned by a new ‘Respect
Matters’ policy, launched in October 2021.
Our colleague networks continue to bring
our diverse communities together and help
create a safe space for colleagues to
speak out and share their views, as well
as influencing our plans and culture,
celebrating key events in the inclusion
calendar, and raising important matters
through the online social communities.
This year, the Gender Equality Network
celebrated International Women’s Day by
hosting the first ever Ideathon to generate
ideas and suggestions on how M&S can ‘break
the bias’ when it comes to gender equality.
We remain proud that nearly 73% of our
customer assistants are women, but while
we’re seeing some progress in diversity in
more senior roles, more still needs to be
done to drive better representation. I&D
remains a strategic priority for M&S, and
we’ll continue to focus our efforts to build
on the success of previous years.
Gender pay gap (median)
4.8%
The CEO and the non-executive
directors were awarded a 1% pay
increase in respect of the 2020/21
financial year, while customer
assistants received a 5.6% increase to
£9.50 per hour. Salaried colleagues
received on average a 2% increase.
The overall structure of the benefits
package has not changed; however, as
previously agreed, in order to bring the
pension supplement in line with the
broader colleague offer by 2024, the
pension supplement paid to Steve Rowe
was reduced from £202,500 to £135,000.
CHIEF EXECUTIVE’S PAY RATIO
Year
2022
2021
2020
Methodology
Option A
Option A
Option A
As reported last year, the Committee
approved the use of Methodology A, as
set out in the regulations, as we believe it
to be the simplest and most appropriate
and robust way to calculate the ratio.
Option A requires the pay and benefits
of all UK colleagues to be calculated
to identify the three colleagues at the
25th, 50th and 75th percentiles as at
2 April 2022. This is calculated on the
same basis as the CEO total single figure
of remuneration except in that the
individual performance element of the
ABS that is applicable to the relevant
colleagues (when operating) is the
estimated actual value. This requires:
– starting with colleague pay that
was calculated based on actual
base pay, benefits, bonus and long-
term incentives for the 12 monthly
payrolls within the full financial year.
Earnings for part-time colleagues are
annualised on a full-time equivalent
basis to allow equal comparisons.
– adjusting the value of any bonus so
that it only reflects the amount earned
in respect of the 2021/22 financial year
and does not include the value of any
deferred shares vesting in the year.
In 2020/21 Steve Rowe returned to using
the chauffeur service in contrast to
2019/20 when, during periods of national
lockdown, Steve Rowe drove himself,
to ensure the safety of his driver and
maintain the required social distancing.
As previously disclosed, the bonus
scheme for 2020/21 was cancelled,
so no award was made to either
the CEO or anyone else within the
wider workforce; a bonus payment
was made in respect of the 2021/22
financial year to the CEO and just under
5,000 bonus-eligible colleagues.
25th percentile
ratio
128 : 1
55 : 1
64 : 1
50th percentile
ratio
117 : 1
50 : 1
59 : 1
75th percentile
ratio
99 : 1
42 : 1
51 : 1
– adding in the employer pension
contribution from the Your
M&S Pension Saving Plan.
Joiners and leavers in the year have
been excluded from the calculations.
The percentile figures are therefore
representative of the whole colleague
population but do not include all
colleagues as at 2 April 2022.
The table above shows the ratio of CEO
pay in 2021/22, using the single total figure
remuneration as disclosed in Figure 7
(page 95), to the comparable equivalent
total reward of those colleagues whose
pay is ranked at the relevant percentiles in
our UK workforce. We believe the median
pay ratio this year is consistent with pay,
reward and progression policies for UK
colleagues, as it reflects the consistent
approach to pay along with M&S’ policy
to pay for performance. The increase
in pay ratio this year is as a result of
bonus payments being made across
the business, including to the CEO.
Pay data
CEO remuneration
UK colleague 25th percentile
UK colleague 50th percentile
UK colleague 75th percentile
Salary
(£000)
2020/21
834
18
20
24
Total pay
and benefits
(£000)
2020/21
1,068
20
21
25
Salary
(£000)
2021/22
841
19
21
25
Total pay
and benefits
(£000)
2021/22
2,630
21
22
26
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SUMMARY
REMUNERATION POLICY
SUMMARY EXECUTIVE DIRECTORS’ REMUNERATION POLICY (AS APPROVED ON 3 JULY 2020)
This report sets out a summary of M&S’ policy on remuneration for executive and non-executive directors. The full Policy was
approved by shareholders at the AGM on 3 July 2020 and can be found on our website at marksandspencer.com/thecompany.
The Policy took effect from this date and is designed to attract, retain and motivate our leaders within a framework designed to
promote the long-term success of M&S and aligned with our shareholders’ interests.
FIGURE 1: EXECUTIVE DIRECTORS’ REMUNERATION POLICY TABLE
ELEMENT
OPERATION
OPPORTUNITY
Salaries are payable in cash and are reviewed annually by the Committee considering a
number of factors, including external market data, historic increases given to the
individual and salary review principles applied to the rest of the organisation.
Normally in line with those in
the wider workforce, although
no maximum is set.
Base salary
Benefits
Pension
benefits
In line with our policies, directors are eligible to receive benefits which may include:
a car or cash allowance and a driver, life assurance and relocation and tax equalisation
allowances in line with our mobility policies.
As with all colleagues, directors are also offered other benefits, including colleague
discount, salary sacrifice schemes and participation in all-employee share schemes.
Directors may participate in the Your M&S Pension Saving Plan (a defined contribution
arrangement), on the same terms as all other colleagues.
The defined benefit pension scheme is closed to new members. Directors who are
members of this scheme will continue to accrue benefits as a deferred member.
G
O
V
E
R
N
A
N
C
E
There is no set maximum;
however, any provision will
be commensurate with local
markets and for all-employee
share schemes is in line with
local statutory limits.
Currently a maximum employer
contribution of 12% of salary
where the employee
contributes 6% of salary.
From 3 July 2020, pension cash
supplements were removed
for future directors.
Total maximum annual
potential of up to 200% of
salary for each director.
The maximum value of shares
at grant is capped at 300% in
respect of a financial year.
For the CEO, this requirement
is 250% of salary. For all other
executive directors, the
requirement is 200%.
ABS including
Deferred
Share Bonus
Plan (DSBP)
Directors are eligible to participate in this non-contractual, discretionary scheme.
Performance is measured against one-year financial and individual performance
targets linked with the delivery of the business plan. At least half of awards are
measured against financial measures, which typically include Group PBT before
adjusting items (PBT).
Corporate and individual elements may be earned independently, but no part of
the individual objectives may be earned unless a threshold level of PBT has been
achieved, after which up to 40% of the maximum may be payable for the achievement
of individual objectives.
Not less than 50% of any bonus earned is paid in shares which are deferred for
three years.
The Committee retains the right to exercise discretion, both upwards and downwards,
to ensure that the level of award payable is appropriate.
Malus provisions apply to the deferred share awards. Cash bonus payments are subject
to two-year clawback provisions. Clawback would be triggered in specified events
such as, but not limited to, a material misstatement of the Company’s audited results,
an error in calculation of the award, gross misconduct, or events or behaviour that
have a detrimental impact on the reputation of any member of the Group.
Directors are eligible to participate in the PSP. This is a non-contractual, discretionary
plan and is M&S’ main long-term incentive scheme. Performance may be measured
against appropriate financial, non-financial and/or strategic measures. Financial
measures must comprise at least 50% of awards.
Malus and clawback provisions apply to these awards. Clawback triggers include,
but are not limited to, a material misstatement of the Company’s audited results,
an error in calculation of the award, gross misconduct or events or behaviour that
has a detrimental impact on the reputation of any member of the Group.
Awards are subject to a further two-year holding period after the vesting date.
Directors are required to hold shares equivalent in value to a minimum percentage
of their salary within a five-year period from their appointment date.
Directors are required to continue to hold their shareholding requirement, or, if their
level of shareholding is below the requirement, their actual shareholding, for two years
after leaving M&S.
PSP
Shareholding
requirement
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REMUNERATION
SUMMARY REMUNERATION POLICY
CONTINUED
FIGURE 2: RECRUITMENT POLICY & SERVICE CONTRACTS
The table below summarises the Company’s policy on the recruitment of new executive directors. Similar considerations may also
apply where a director is promoted to the Board.
In addition, the Committee has discretion to include any other remuneration component or award which it feels is appropriate,
considering the specific circumstances of the individual, subject to the limit on variable remuneration set out below. The rationale
for any such component would be appropriately disclosed.
ELEMENT
Service
contract
APPROACH
– All executive directors have rolling contracts for service which may be terminated by M&S giving 12 months’ notice and the
individual giving six months’ notice.
Base salary
– Salaries are set by the Committee, taking into consideration a number of factors, including the current pay for other
executive directors, the experience, skill and current pay level of the individual and external market forces.
Benefits
Pension
benefits
ABS
PSP
Buy-out
awards
– The Committee will offer a benefits package in line with our benefits policy for executive directors.
– Maximum contribution in line with our policy for future executive directors (currently up to 12% of salary).
– Eligible to take part in the ABS with a maximum bonus of 200% of salary in line with our policy for executive directors.
– A maximum award of up to 300% of salary in line with our policy.
– The Committee may offer compensatory payments or buy-out awards, dependent on the individual circumstances of
recruitment, determined on a case-by-case basis.
– The specifics of any buy-out awards would be dependent on the individual circumstances of recruitment. The Committee’s
intention would be that the expected value awarded is no greater than the expected value forfeited by the individual.
FIGURE 3: TERMINATION POLICY
The Company may choose to terminate the contract of any executive director in line with the terms of their service agreement,
either by means of a payment in lieu of notice or through a series of phased payments subject to mitigation. Service agreements
may be terminated without notice and, in certain circumstances such as gross misconduct, without payments.
The table below summarises our Termination Policy for executive directors under their service agreements and the incentive plan rules.
ELEMENT
Base salary,
benefits and
pension
benefits
ABS
Long-term
incentive
awards
Repatriation
Legal
expenses &
outplacement
APPROACH
– Payment made up to the termination date in line with contractual notice periods.
– There is no contractual entitlement to payments under the ABS. If the director is under notice or not in active service
at either the relevant year end or on the date of payment, awards (and any unvested deferred bonus shares) may lapse.
The Committee may use its discretion to make a bonus award.
– The treatment of outstanding awards is determined in accordance with the plan rules.
– M&S may pay for repatriation where a director has been recruited from overseas.
– Where a director leaves by mutual consent, M&S may reimburse reasonable legal fees and pay for professional
outplacement services.
The full Policy sets out further detail on the treatment of the executive directors’ pay arrangements, including the treatment of share
schemes in the event of a change of control or winding up of the Company.
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APPLICATION OF REMUNERATION POLICY
The charts below provide an illustration of what could be received by each of the executive directors in 2022/23 under the Policy.
These charts are illustrative, as the actual value which will ultimately be received will depend on business performance in the year
2022/23 (for the cash element of the ABS) and in the three-year period to 2024/25 (for the PSP), as well as share price performance
to the date of the vesting of the PSP awards in 2025
DIRECTORS
Stuart Machin
£000
BASIS OF CALCULATIONS AND KEY
Fixed
Fixed remuneration only.
Target
£4,496
44%
36%
20%
£2,096
19%
38%
43%
£5,496
55%
29%
16%
Target
Maximum
Maximum
+ 50%
Maximum
£896
100%
Fixed
Katie Bickerstaffe
£000
£1,912
20%
39%
41%
Target
£787
100%
Fixed
Eoin Tonge
£000
£739
100%
Fixed
£1,729
19%
38%
43%
Target
£4,162
45%
36%
19%
£5,100
55%
29%
16%
Maximum
Maximum
+ 50%
£3,709
44%
36%
20%
£4,534
55%
29%
16%
Maximum
Maximum
+ 50%
Maximum
+50%
share price
growth
No vesting under the ABS and PSP.
Includes the following assumptions
for the vesting of the incentive
components of the package:
– ABS: 50% of maximum, assumes
no share price growth.
– PSP: 20% of 250% of salary,
assumes no share price growth.
Includes the following assumptions
for the vesting of the incentive
components of the package:
– ABS: 100% of maximum, assumes
no share price growth.
– PSP: 100% of 250% of salary,
assumes no share price growth.
Includes the following assumptions
for the vesting of the incentive
components of the package:
– ABS: 100% of maximum, assumes
no share price growth.
– PSP: 100% of 250% of salary with
50% share price growth.
– Grant share price for the purpose
of demonstrating the 50% growth
taken as closing share price at
2021/22 year end.
Fixed remuneration
Includes all elements of
fixed remuneration:
– Base salary (effective 25 May
2022), as shown in the table
on page 96.
– Pension benefits, as detailed
on page 96.
– Benefits (using the value for
2021/22 included in the single
figure table on page 95).
ABS
Represents the potential total value
of the annual bonus for 2022/23.
Half of any bonus would be deferred
into shares for three years, and this
is included in the value shown.
PSP
PSP represents the potential value
of the PSP to be awarded in 2022,
which would vest in 2025 subject to
the relevant performance targets.
Awards would then be held for a
further two years.
G
O
V
E
R
N
A
N
C
E
FIGURE 4: SUMMARY OF REMUNERATION POLICY
The diagram below illustrates the balance of pay and time period of each element of the Remuneration Policy for executive directors,
approved in July 2020. The Committee believes this mixture of short- and long-term incentives fixed to performance-related pay is
currently appropriate for M&S’ strategy and risk profile.
Year 1
Year 2
Year 3
Year 4
Year 5
Fixed pay
– Base salary
– Benefits
– Pension benefits
Y
A
P
L
A
T
O
T
ABS
– Up to 100% salary
(cash)
– One-year
performance
– Clawback
provisions apply
– Up to 100% salary (deferred shares)
– Three-year deferral period
– No further performance conditions
– Malus provisions apply
PSP
– Maximum 300% of salary
– Three-year performance
– Malus provisions apply
– Two-year holding period post-vesting
– No further performance conditions
– Clawback provisions apply
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REMUNERATION
SUMMARY REMUNERATION POLICY
CONTINUED
FIGURE 5: NON-EXECUTIVE DIRECTORS’ REMUNERATION POLICY
The table below sets out our Policy for the operation of non-executive director fees and benefits at the Company. The Policy was
approved in July 2020 and may operate for up to three years.
ELEMENT
Chairman’s
fees
Non-executive
director’s
basic fee
Additional
fees
Benefits
Share
ownership
OPERATION AND OPPORTUNITY
– Fees are reviewed annually and are determined by the Remuneration Committee.
– Total fee comprises the non-executive director basic fee and the additional fee for undertaking the role.
– The maximum aggregate non-executive director basic fee, including the Chairman’s basic fee, is £750,000 p.a, as set out in
our Articles of Association.
– Fees are reviewed annually and are determined by the Chairman and executive directors.
– The maximum aggregate non-executive director basic fee, including the Chairman’s basic fee, is £750,000 p.a, as set out in
our Articles of Association.
Additional fees are paid for undertaking the extra responsibilities of:
– Board Chairman.
– Senior Independent Director.
– Committee Chair.
– In line with our other colleagues, the Chairman and non-executive directors are entitled to receive colleague discounts.
– The Company may reimburse the Chairman and non-executive directors for reasonable expenses in performing their duties
and may settle any tax incurred in relation to these.
– The Chairman may also be entitled to the use of a car and driver.
– All non-executive directors, including the Chairman, are required to build and maintain a shareholding of at least 2,000 shares
upon joining M&S.
– This shareholding must be held for the period of their tenure.
REMUNERATION FRAMEWORK FOR THE REST OF THE ORGANISATION
M&S’ philosophy is to provide a
fair and consistent approach to pay.
Remuneration is determined by level
and is broadly aligned with those of
the executive directors.
Base salaries are reviewed annually and
reflect the local labour market.
All UK colleagues are eligible to
participate in the Your M&S Pension
Saving Plan on the same terms as the
executive directors. Colleagues affected
by the HMRC Annual and/or Lifetime
Allowance limits, can now choose to opt
out of the pension and receive a cash
payment in lieu of this. In addition, all
UK colleagues are provided with life
insurance and colleague discounts,
and may choose to participate in the
Company’s all-employee share schemes
and salary-sacrifice arrangements.
A significant number of colleagues are
eligible to be considered to participate
in an ABS which is partially determined
by Group PBT performance. Part of
the bonus is deferred into shares for
three years.
Around 170 of M&S’ top senior executives
may be invited to participate in the
PSP, and will then be measured against
the same performance conditions as
executive directors. Award levels granted
are determined to be aligned with market
practice and reflect an individual’s level of
seniority as well as their performance and
potential within the business.
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REMUNERATION
REPORT
EXECUTIVE DIRECTORS’ REMUNERATION
Each year, the Remuneration Committee
assesses the current senior remuneration
framework to determine whether the
existing incentive arrangements remain
appropriately challenging in the context
of the business strategy, fulfil current
external guidelines and are aligned with
a range of internal factors, including
the pay arrangements and policies
throughout the rest of the organisation.
In its discussions, the Remuneration
Committee aims to ensure not only that
the framework is strategically aligned to
the delivery of business priorities, but also
that payments made during the year fairly
reflect the performance of the business
and individuals. A significant proportion of
the performance measures used in the
incentive schemes are integrated with
M&S’ KPIs and strategic priorities detailed
in the Strategic Report, as illustrated on
pages 35 and 6 respectively.
The diagram below (Figure 6) details
the achievement of each executive
director under the Company’s incentive
schemes as a result of short- and long-
term performance to the end of the
reported financial year and summarises
the main elements of the senior
remuneration framework. Further details
of payments made during the year are
set out in the table below (Figure 7) and
later in this report.
G
O
V
E
R
N
A
N
C
E
FIGURE 6: REMUNERATION STRUCTURE 2021/22
Fixed pay
Annual bonus
PSP
Total pay for 2021/22
Base salary
Benefits
Pension benefits
200% of salary maximum
bonus opportunity
(with 50% deferral)
Measured against a balance
of Group PBT before
adjusting items and
individual performance
250% of salary awarded
in 2019
Measured against adjusted
EPS, average ROCE and
TSR achievement was
0% against targets set
Total payments are
c.55% of maximum
potential
1% increase in line with
other management positions
Payments made are 95% of
maximum bonus opportunity
0% of award vested
For more information see p97
For more information see p99
FIGURE 7: TOTAL SINGLE FIGURE REMUNERATION (AUDITED)
Salary
Benefits
£000
£000
Total
bonus
£000
Total PSP
vested
£000
Pensions
benefits
£000
Total RSP
granted
£000
Total
pay
£000
Total
fixed pay
£000
Total
variable pay
£000
Director
Steve Rowe
Eoin Tonge
Year
2021/22
2020/21
2021/22
2020/21
841
834
605
489
53
31
24
105
1,601
0
1,151
0
0
0
0
0
135
203
73
39
0
0
0
1,316
2,630
1,068
1,853
1,949
1,029
1,068
701
1,949
1,601
0
1,151
–
The increase in Steve’s benefits is a result of the resumed use of his driver, which was paused during periods of lockdown in 2020/21,
and the upgrade of the car used to a lower CO2 emitting vehicle. Whilst the change in vehicle is better for the environment, it does
have a higher market value which increased the level of tax payable by Steve. No additional benefit was received by Steve.
Eoin Tonge received an award under the Restricted Share Plan (RSP) to compensate him, on a fair value basis, for share awards granted
under his prior employer’s share schemes. The face value of this award is shown in the 2020/21 row of the above table. Details of the
calculation method were disclosed on page 94 of last year’s annual report.
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95
REMUNERATION
REMUNERATION REPORT
CONTINUED
SALARIES
When reviewing salary levels, the Committee
takes into account a number of internal
and external factors, including Company
performance during the year, external
market data, historic increases made to
the individual and, to ensure a consistent
approach, the salary review principles
applied to the rest of the organisation.
As detailed in last year’s report, for
salaries effective July 2021, in line with
increases for management positions,
the Committee awarded Steve Rowe an
increase of 1%, making his salary £842,845.
Eoin Tonge also received a 1% salary
increase, making his salary £606,000.
As set out on page 104 when Steve Rowe
steps down from CEO on 25 May, Stuart
Machin will become CEO, and his salary
on appointment will be £800,000. On the
same day, Katie Bickerstaffe will become
Co-Chief Executive Officer on a salary of
£750,000; Eoin Tonge will become Group
CFO & Chief Strategy Officer, and his
salary will increase by 8.9% to £660,000.
The next annual salary review for the
executive directors will be effective in
July 2023.
The table below details the executive
directors’ salaries as at 2 April 2022
and salaries which will take effect from
25 May 2022.
FIGURE 8: SALARIES
Steve Rowe
Eoin Tonge
Stuart Machin
Katie Bickerstaffe
Annual salary
as of 2 April
2022
£000
Annual salary
as of 25 May
2022
£000
Change in
salary
% increase
842.8
606.0
N/A
N/A
–
660.0
800.0
750.0
–
8.9%
N/A
N/A
BENEFITS (AUDITED)
The Remuneration Policy permits that
each executive director may receive a car
or cash allowance as well as being offered
the benefit of a driver. During the year,
in lieu of a car allowance, Steve Rowe
received a car and the benefit of a driver.
Eoin Tonge does not receive a car or
cash allowance. As disclosed last year, to
facilitate Eoin Tonge’s recruitment and
relocation, he was provided with travel and
accommodation allowances. The taxable
value of these benefits in kind was
detailed in Figure 7 on the previous page.
In line with all other colleagues, executive
directors receive life assurance, colleague
discount and are eligible to participate in
salary sacrifice schemes such as Cycle2Work.
PENSION BENEFITS (AUDITED)
During the year, Steve Rowe received a
cash payment in lieu of participation in
an M&S pension scheme. As previously
disclosed, he has agreed that his pension
cash supplement be reduced to zero over
a three-year period. For 2022/23, the CEO’s
total annual cash supplement will be
reduced by one-third to £67,500 until
Steve Rowe ceases employment with the
business at the AGM on 5 July. Details of
these future payments will be reflected in
the single figure table in next year’s report.
Steve Rowe is a deferred member of the
Marks & Spencer UK Pension Scheme.
Details of the pension accrued during the
year ended 2 April 2022 are shown in
Figure 9 below.
Eoin Tonge is a member of the Your
M&S Pension Savings Plan, as described
on page 91. Eoin contributes 6% of his
salary into the scheme, and the Company
matches this with a 12% contribution.
The value of the Company’s contribution
in the year is shown in Figure 7 on
page 95. This is the maximum level
of contribution offered by M&S and is
consistent with the terms available to
all other colleagues.
FIGURE 9: PENSION BENEFITS (AUDITED)
Steve Rowe
Accrued
pension
entitlement as
at year end
£000
Additional
value on early
retirement
£000
Increase
in accrued
value
£000
Increase in
accrued value
(net of
inflation)
£000
Transfer value
of total
accrued
pension
£000
Normal
retirement
age
60
164.6
0
0.5
0
5,320
The accrued pension entitlement is the deferred pension amount that Steve Rowe would receive at age 60 if he left the Company
on 2 April 2022. All transfer values have been calculated on the basis of actuarial advice in accordance with the current Transfer Value
Regulations. The transfer value of the accrued entitlement represents the value of the assets that the pension scheme would transfer
to another pension provider on transferring the scheme’s liability in respect of a director’s pension benefits. It does not represent
sums payable to a director and therefore cannot be added meaningfully to annual remuneration.
ANNUAL BONUS SCHEME 2021/22 (AUDITED)
Annual performance for the year was
measured against pre-determined Group
PBT before adjusting items (PBT) (70%)
and individual performance (30%) targets.
PBT is used as a core bonus measure, as it
is considered to be an important measure
of overall performance and is consistent
with how business performance is
assessed internally by the Board and
Executive Committee.
Individual performance was measured
against a scorecard of individual measures
set against the areas of delivery of the
transformation plan that were deemed
most critical to the future success
of M&S. Individual performance was
measured independently of PBT
performance; no individual element could
be earned until a threshold needed to
secure payment under the corporate
element was similarly achieved.
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ANNUAL BONUS SCHEME
ANNUAL BONUS SCHEME 2021/22 (AUDITED) CONTINUED
PBT outturn for the year was £522.9m,
which was above the target set to trigger
payments under both the corporate and
individual elements of the scheme. As
shown in Figure 11 below, the strong PBT
performance during the year exceeding
the maximum target set at the start
of the year meaning that executive
directors were awarded 100% of maximum
opportunity under the corporate element
of the scheme and c.83% of the maximum
for individual performance. Total bonus
achievement was 95% of opportunity.
When discussing the payments to
executive directors, the Committee noted
that under the terms of scheme, Steve
would not technically be eligible for a
payment due to being under notice
before the payment date. However,
the Committee considered his direct
impact on delivering this first phase of
transformation and his achievements
against the individual objectives set
for 2021/22. Given these and Steve’s
agreement to continue to support
M&S beyond the end of his tenure, the
Committee deemed it appropriate to
apply their discretion and agree a bonus
payment commensurate with his
performance over the year.
FIGURE 10: INDIVIDUAL OBJECTIVES (AUDITED)
Director
Individual
The Committee reviewed achievement
to ensure that total payments were
appropriate in the context of several
factors. These included M&S’ overall
financial performance, the outturn of
individual objectives, and the level of
bonus payable elsewhere in the business.
Figure 11 below sets out the Group PBT
targets comprising 70% of awards and
illustrates the extent to which each
director achieved their four individual
objectives. Total payments shown below
directly correspond to the figure included
in the single figure table on page 95.
G
O
V
E
R
N
A
N
C
E
Steve Rowe Creation and implementation of revised Executive Committee structure and roles and the development of strong
succession plans.
Streamlined and sharpened the Executive Committee, creating a cohesive top team, supported by the CEO through coaching and
counselling. Supported the Board in the delivery of a strong succession plan, as demonstrated by the internal appointment of the
new leadership team.
Delivery of the transformation programme in Clothing & Home.
Clothing & Home delivered sales growth of 3.8% vs 2019/20 with three consecutive quarters of underlying growth. Online sales grew
55.6% with strong growth throughout the year outperforming pure play peers and gaining 60bps of market share. Store sales declined
11.2% with performance continuing to be impacted by legacy High Street and City Centre stores which is being addressed through the
store renewal programme. Operating profit before adjusting items of £330.7m, compared to £224.0m in 2019/20 reflected the benefit
of sales growth combined with a much stronger full price sales mix. Brand strategy established and model refined, with third party
brands across Clothing & Home and Beauty generating c.£100m of orders in 2021/22.
Reset the strategic relationship with Ocado regarding platform integration, data sharing, infrastructure and category strategy.
Significant improvement in working relationships with Ocado Group. Greater “omni-channel” joint working, with upcoming trials on data
sharing and category approaches. As expected 2021/22 saw a reduction in average basket size resulting in a decline in revenue,
however, Ocado substantially outperformed the online grocery market. M&S branded products consistently make up over 25% of
Ocado Retail’s sales, generating substantial buying gains for both M&S Foods and Ocado Retail.
Revitalise Plan A.
Plan A has always been an important pillar within the M&S business, and this year saw a relaunch of a strengthened Plan A mission
providing new oversight, energy and momentum, and a singular focus on cutting the M&S carbon footprint by one third by 2025 and
to be fully net zero by 2040. Agreed a new £850m Revolving Credit Facility linked to the delivery of the net zero roadmap.
Eoin Tonge Drive a focus on financial delivery of critical transformation strategies in Property and supply chain.
Stepped up the new store pipeline to enable a drive in rotation with c.15 new full line stores and a further 32 store closures in the
pipeline over the next three years with expectation that this will build further. Trials implemented to test an accelerated “close and
recapture” model delivered proof of concept, expanding possibilities around estate rotation capabilities. Strong results from recent
openings with sales averaging 11% above plan with payback at around 1.5 years (-44% against plan).
With regard to supply chain, Eoin played a key role in the resetting of the Gist relationship. Put a strong three-year plan in place for
Clothing & Home supply chain and successfully delivered in-store fulfilment.
Design and deliver critical Group investment evaluation processes and models.
Further tightening of our capital discipline and appraisal processes. Delivered corporate development through purchase of
strategically identified businesses, such as Nobody’s Child, The Sports Edit and our investment in the True investment fund.
Successfully integrated Jaeger into the M&S family.
Shape and strengthen the balance sheet.
Balance sheet strengthened with net debt down two-thirds from two years ago, through prudent cashflow management,
capex discipline and working capital initiatives. Critically renegotiated bank revolving credit facility.
Deliver step change in the control environment.
Improvement in all internal governance mechanisms including reporting to and engaging with the Audit Committee and
ESG Committee. New business model control framework put in place.
FIGURE 11: ANNUAL BONUS SCHEME 2021/22 (AUDITED)
Director
Steve Rowe
Eoin Tonge
CORPORATE GROUP PBT (70%)
INDIVIDUAL (30%)
TOTAL PAYMENT
Target/performance
Min £315m
100% of max bonus
100% of max bonus
Performance
Achievement
% of salary
£000
83.3% of max bonus
190%
£1,601
83.3% of max bonus
190%
£1,151
Max £361m
£522.9m
£522.9m
Annual Report & Financial Statements 2022
97
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REMUNERATION
REMUNERATION REPORT
CONTINUED
DEFERRED SHARE BONUS
PLAN (AUDITED)
Currently 50% of any bonus payment is
compulsorily deferred into a conditional
share award. These awards vest after three
years, subject to continued employment
as well as malus provisions. As the ABS did
not operate in 2020/21, no share awards
under the DSBP were made during the
year. The table below provides the value of
the share awards to be made in respect of
the 2021/22 bonus. This value reflects half
of the value shown for the 2021/22 bonus
payments in the single figure table on
page 95.
FIGURE 12:
DSBP AWARDS
IN RESPECT OF
2021/22
Steve Rowe
Eoin Tonge
Face value
of award
£000
End of
deferral
period
£800.7 30/6/2025
£575.7 30/6/2025
Basis of
award
50% of
bonus
50% of
bonus
ANNUAL BONUS SCHEME CONTINUED
ANNUAL BONUS SCHEME FOR 2022/23
During the year, the Committee reviewed
the 2022/23 scheme, considering the
accelerated Never the Same Again
transformation programme together
with bonus arrangements elsewhere in
the business.
The Committee was satisfied that the
structure of the ABS, as approved by
shareholders at the 2020 AGM, remains
appropriate. Subject to the achievement
of stretching targets, set in line with
the 2022/23 financial plan, the scheme
provides for a competitive bonus
opportunity with a strong focus on
stretching PBT performance.
Executive directors are eligible to receive a
bonus payment of up to 200% of salary.
Performance will be focused on Group
PBT before adjusting items (PBT) (70%)
with individual measures set against key
areas of delivery of the transformation
plan. Individual performance will again be
measured independently of PBT
performance; no individual element may
be earned until a threshold level of PBT
is achieved.
The remaining 30% of the bonus will be
measured against a scorecard of individual
objectives, identified as the measurable
key priorities required to drive the
continued transformation of M&S.
The performance targets for the 2022/23
scheme are deemed by the Board to be
too commercially sensitive to disclose
at this time, as they are not disclosed
elsewhere in the report. Where possible,
they will be disclosed in next year’s report.
The Committee, at its absolute discretion,
may use its judgement to adjust
outcomes to ensure that any payments
made reflect overall business and
individual performance during the year.
Any discretion applied will be clearly
disclosed and justified.
Director
Stuart
Machin
Katie
Bickerstaffe
CORPORATE TARGETS
INDIVIDUAL OBJECTIVES
Group PBT before adjusting items PBT
Scorecard of
individual
measures
% bonus
% bonus Measures
70%
30%
– Lead and develop a successful rhythm and effective ways of
working with new executive team. Leadership and governance of
Executive Committee.
– Implement a simplified and effective organisational structure.
– Evolve the Ocado Retail joint venture and strategic plan.
– Deliver the Food supply chain transformation.
– Deliver the Property store rotation and renewal programme.
– Create a high performing and engaged culture across the whole
of M&S.
70%
30%
– Deliver the MS2 and omni-channel strategy and performance.
– Improvement in Sparks active members, engagement, personalisation
and payment.
– Achieve International growth and strategy for India expansion.
– Deliver end to end clothing supply chain (phase 1).
– Deliver digital and data capability and put at the heart of the delivery
of the next phase of growth transformation.
– Clothing category management and effective ways of working.
Eoin Tonge
70%
30%
– Continue to improve and strengthen the Group balance sheet.
– Implement a new energised control and risk framework
– Lead the strategic framework review for the next phase of
growth transformation
– Accelerate the Property store rotation programme.
– Lead the organisation productivity and efficiency initiatives.
– Deliver a step change in our sustainability plan and put at the
centre of our Brand and proposition.
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PERFORMANCE SHARE PLAN (PSP)
PSP AWARDS MADE IN 2021/22 (AUDITED)
Ahead of grants being made, the
Committee reviewed the long-term
incentive framework at M&S, assessing
the extent to which it remained suitable.
After consideration, it was decided that
the current structural arrangements
remained appropriate, 20% of the 2021
PSP award would be based upon strategic
transformation goals relevant to the
achievement of the business strategy over
the next three years and the remaining
80% of the award would be based on EPS
(30%), ROCE (30%) and relative TSR (20%).
TSR is measured against a bespoke group
of 13 companies taken from the FTSE 350
General and Food & Drug Retailers indices,
reviewed prior to grant to ensure the
constituents remained appropriately
aligned to M&S’ business operations and
best reflected the value of shareholders’
investment in M&S over the respective
performance period. These companies
are listed in Figure 14.
In light of the return of share price to
pre-pandemic levels, the Committee
decided that it was appropriate for grant
levels to return to 250% of salary for the
2021 PSP. In determining the size of the
2021 PSP awards, the Committee decided
that as a result of the share price recovery
over the last 12 months, fewer shares
would be awarded than in 2020. The grant
was made on 29 June 2021.
Having taken the decision to delay target
setting, the Committee consulted with
shareholders on the proposed targets
and received support for the proposed
targets. The strategic targets are deemed
too commercially sensitive to disclose but
will be reported at the time of vesting.
In line with policy, awards will vest three
years after the date of grant, to the extent
that the performance conditions are met,
and must then be held for a further two
years. Clawback provisions apply during
this holding period. For financial measures,
20% of awards will vest for threshold
performance, increasing to 100% on a
straight-line basis between threshold and
maximum performance. For strategic
measures, no payment shall be made if
the target is not achieved. This supports
the Committee’s view that delivery of
these strategic measures is critical;
payment for achievement below the
target is not appropriate. Detailed targets
can be seen in Figure 13.
G
O
V
E
R
N
A
N
C
E
FIGURE 13: PERFORMANCE CONDITIONS FOR PSP AWARDS MADE IN 2021/22 (AUDITED)
2021/22 award measures
Adjusted EPS in 2023/24 (p)
ROCE in 2023/24 (%)
Relative TSR
Strategic measures
Weighting
30%
30%
20%
20%
Details
Threshold
15p
10.5%
Maximum
24p
13.5%
Median Upper quartile
M&S.com growth
Food like-for-like sales
Store staff cost to sales ratio
FIGURE 14: TSR COMPARATOR GROUP 2021/22 AWARDS
ASOS
B&M European
Dixons Carphone
Dunelm Group
Frasers
JD Sports Fashion
J Sainsbury
Kingfisher
N Brown Group
Next
Tesco
WHSmith
Wm Morrisons
FIGURE 15: PSP AWARDS MADE IN 2021/22 (AUDITED)
Steve Rowe
Eoin Tonge
Basis of award
% of salary
250%
250%
Threshold
level of
vesting
20%
20%
Face value
of award
£000
2,086
1,500
End of
performance
period
01/04/2024
01/04/2024
Vesting date
29/06/2024
29/06/2024
PSP grants were made as a conditional share award. When calculating the face value of awards to be granted, the number of shares
awarded was multiplied by the average mid-market share price on the five dealing days prior to the date of grant. For the 2021 award,
the share price was calculated as £1.5267, being the average share price between 22 June 2021 and 28 June 2021.
FIGURE 16: PSP AWARDS VESTING IN 2021/22 (AUDITED)
For directors in receipt of PSP awards
granted in 2019, the awards will vest
in June 2022 based on three-year
performance over the period to 2 April
2022. Performance has been assessed
and it has been determined that 0% of the
total award will vest. The Committee
reviewed this level of vesting against the
wider business performance of the period
and determined this level of payment was
appropriate; no discretion was applied for
either share price movements or
formulaic vesting outcomes.
Details of performance against the
specific targets set are shown in the
table overleaf.
The total vesting values shown in Figure 17
directly correspond to the figure included
in the single figure table on page 95.
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Annual Report & Financial Statements 2022
99
REMUNERATION
REMUNERATION REPORT
CONTINUED
PERFORMANCE SHARE PLAN (PSP) CONTINUED
Adjusted EPS in
2021/22
(p)
Average ROCE
(2019/20-2021/22)
(%)
TSR
1/3 of award
22.7
28.5
21.7p
0%
1/3 of award
1/3 of award
Median
10.2
12.7 Upper quartile
8.7% Below median
0%
0%
Total vesting
% of award
0%
2019/20 award
Threshold performance
Maximum performance
Actual performance achieved
Percentage of maximum achieved
The targets outlined above are stated on a post-IFRS 16 basis and include adjustments that have been made for the impact of the
investment in Ocado Retail Limited. The original targets were EPS 24.0p-31.0p and ROCE 13.0%-17.0%. For threshold performance 20%
of the 2019/20 award would have vested, increasing to 100% on a straight-line basis between threshold and maximum performance.
FIGURE 17: VESTING VALUE OF AWARDS VESTING IN 2021/22 (AUDITED)
On grant
At the end of performance period (2 April 2022)
Number
of shares
granted (incl.
rights issue
adjustment)
% of salary
granted
Dividend
equivalents
accrued
during the
performance
period
Number of
shares vesting
Number of
shares lapsing
Impact of
share price
performance
Total vesting
of award
£000
Steve Rowe
983,801
250%
51,437
0
1,035,238
–
£0k
Dividend equivalents accrued during the performance period have been included in the table above.
PSP AWARDS TO BE MADE IN 2022/23
During the year, the Committee reviewed the long-term incentive framework at M&S, assessing the extent to which it remained
suitable. While the 2022 PSP will maintain the measures used for the 2021 PSP awards (30% adjusted EPS, 30% ROCE, 20% relative TSR
and 20% strategic measures), the EPS and ROCE targets have been increased from those seen in awards from previous years.
In making this decision, the Committee was mindful of the need to ensure that M&S’ PSP motivates senior leaders to drive the
required transformation to secure M&S’ long-term success while balancing shareholder interests. Overall, the Committee believes that
these PSP targets are appropriately stretching in the context of the business and analyst expectations and remain equally challenging
as those set at the start of the performance period for previous awards.
TSR will once again be measured against a bespoke group of companies taken from the FTSE 350 General and Food & Drug Retailers
indices. The existing group of 13 companies, as detailed in Figure 14, was thoroughly reviewed to ensure the constituents remained
appropriate and aligned to M&S’ business operations. This review resulted in the removal of Wm Morrisons, as it is no longer listed on
the FTSE. The revised TSR comparator group of 12 companies can be found in Figure 19.
Following a debate on M&S’ share price performance since the 2020/21 PSP was awarded in June 2021, a grant of 250% of salary
was approved for the 2022 PSP. The Committee will review and reconfirm this decision immediately prior to grant to ensure this
remains appropriate.
Performance will be measured as shown in Figure 18 below, with 20% of awards vesting for threshold performance and 100% for maximum.
FIGURE 18: PERFORMANCE CONDITIONS FOR PSP AWARDS TO BE MADE IN 2022/23
Weighting
30%
30%
20%
20%
Details
Threshold
18p
11.5%
Maximum
27p
14.0%
Median Upper quartile
M&S.com growth
Food like-for-like sales
Store staff cost to sales ratio
2022/23 award measures
Adjusted EPS in 2024/25 (p)
ROCE in 2024/25 (%)
Relative TSR
Strategic measures
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Marks and Spencer Group plc
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G
O
V
E
R
N
A
N
C
E
PERFORMANCE SHARE PLAN (PSP) CONTINUED
FIGURE 19: TSR COMPARATOR GROUP 2022/23 AWARD
ASOS
B&M European
Dixons Carphone
Dunelm Group
Frasers
JD Sports Fashion
J Sainsbury
Kingfisher
N Brown Group
Next
Tesco
WHSmith
EXECUTIVE DIRECTORS’ REMUNERATION
FIGURE 20: DIRECTORS’ SHAREHOLDINGS (AUDITED)
The table below sets out the total number of shares held by each executive director serving on the Board during the period to
2 April 2022. Shares owned outright include those held by connected persons.
There have been no changes in the current directors’ interests in shares or options granted by the Company and its subsidiaries
between the end of the financial year and 24 May 2022. No director had an interest in any of the Company’s subsidiaries at the
statutory end of the year.
Steve Rowe
Eoin Tonge
Unvested
With
performance
conditions
Without
performance
conditions
Shares owned
outright
Performance
Share Plan
Restricted Share
Plan
562,662
277,999
3,861,479
2,032,049
–
789,252
Vested
unexercised
options
–
–
FIGURE 21: SHAREHOLDING REQUIREMENTS INCLUDING POST-CESSATION (AUDITED)
All executive directors are required to build shares equivalent in value to a minimum percentage of their salary within a five-year period
from their appointment date. For the CEO, this requirement is 250% of salary and for other executive directors the requirement is 200%
of salary. A similar requirement of 100% of salary currently applies to members of the Executive Committee below Board level.
The chart below shows the extent to which each executive director has met their target shareholding as at 2 April 2022. For Steve
Rowe, his 250% shareholding requirement is measured from the date he was appointed CEO. Although the respective target has not
yet been achieved, the Committee is satisfied that no shares granted or held have been sold by either the CEO or his related parties
and that the CEO’s interests remain strongly aligned with shareholders.
For the purposes of the requirements, the net number of unvested share awards not subject to performance conditions is included
and is reflected in the chart below. The Committee continues to keep shareholding requirement guidelines and actual director
shareholdings under review and will take appropriate action should it feel this is necessary.
To support the Committee’s intention to drive long-term, sustainable decision-making for the benefit of M&S and our shareholders
and in line with the 2018 UK Corporate Governance Code changes and the Investment Association’s updated guidelines, in 2020
the Committee approved the extension of shareholding guidelines to beyond the time at which an executive director leaves M&S.
Directors are required to maintain their minimum shareholding requirement, or, if their level of shareholding is below this, their actual
shareholding, for two years after leaving M&S. For the avoidance of doubt, the Committee has approved all vesting awards from 2020
grants onwards to be held in a nominee vehicle to ensure the successful operation of this policy.
For the purposes of this calculation, an average share price is used to reduce the impact of share price volatility on the results.
The average share price for the year was £1.809, with resultant shareholdings illustrated in the chart below.
Steve
Rowe
Eoin
Tonge
126%
250% of salary
200% of salary
210%
Shares owned outright
Unvested DSBP/RSP shares
Shareholding requirement
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Annual Report & Financial Statements 2022
101
REMUNERATION
REMUNERATION REPORT
CONTINUED
EXECUTIVE DIRECTORS’ REMUNERATION CONTINUED
EMPLOYEE SHARE SCHEMES
ALL-EMPLOYEE SHARE
SCHEMES (AUDITED)
DILUTION OF SHARE CAPITAL
BY EMPLOYEE SHARE PLANS
Executive directors may participate in
ShareSave, the Company’s save as you
earn (SAYE) scheme, and ShareBuy, the
Company’s share incentive plan, on the
same basis as all other eligible colleagues.
Further details of the schemes are set out
in note 13 of the financial statements on
pages 154 to 156.
Awards granted under the Company’s
SAYE scheme and discretionary share plan
can be met by the issue of new shares
when the options are exercised or through
market purchase shares.
The Company monitors the number
of shares issued under these schemes
and their impact on dilution limits. The
Company’s usage of shares compared
with the dilution limits set by the
Investment Association in respect of all
share plans (10% in any rolling 10-year
period) and executive share plans (5% in
any rolling 10-year period) as at 2 April
2022 is shown in Figure 22 and 23:
FIGURE 22: All share plans
Actual
Limit
8.89%
10%
FIGURE 23: Executive share plans
Actual
Limit
2.75%
5%
FIGURE 24: EXECUTIVE DIRECTORS’ INTERESTS IN THE COMPANY’S SHARE SCHEMES (AUDITED)
Steve Rowe
Performance Share Plan
Deferred Share Bonus Plan
SAYE
Total
Eoin Tonge
Performance Share Plan
Restricted Share Plan
SAYE
Total
Awarded during
the year
Exercised during
the year
Lapsed during
the year
Dividend
equivalents
accrued
Maximum
receivable at
2 April 2022
Maximum
receivable at
3 April 2021
3,228,450
–
21,951
3,250,401
1,366,509
–
–
1,366,509
1,049,538
789,252
21,951
1,860,741
982,511
–
–
982,511
–
–
–
–
–
–
–
–
733,480
–
–
733,480
–
–
–
–
–
–
–
–
–
–
–
–
3,861,479
–
21,951
3,883,430
2,032,049
789,252
21,951
2,843,252
The market price of the shares at the end of the financial year was £1.5795; the highest and lowest share prices during the financial
year were £2.5690 and £1.3155 respectively.
Figure 25 shows the time horizons of outstanding discretionary share awards (including dividend equivalent shares accrued during
the performance period) for all directors serving on the Board during the year.
FIGURE 25: VESTING SCHEDULE OF EXECUTIVE DIRECTORS’ OUTSTANDING DISCRETIONARY SHARE AWARDS
Steve Rowe
Eoin Tonge
Performance Share Plan
Performance Share Plan
Restricted Share Plan
Maximum
receivable at
2 April 2022
(all discretionary
schemes)
3,861,479
2,032,049
789,252
2022/23
2023/24
2024/25
Maximum
receivable
Lapsed
– 1,035,238
–
–
–
526,168
Maximum
receivable
1,459,732
1,049,538
263,084
Lapsed
Maximum
receivable
Lapsed
– 1,366,509
982,511
–
–
–
–
–
–
As reported on page 99, the 2019 PSP awards included within the totals shown in Figure 25 will vest at 0% in June 2022. This has been
reflected above in the 2022/23 Lapsed column.
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EXECUTIVE DIRECTORS’ REMUNERATION CONTINUED
FIGURE 26: PERFORMANCE AND CEO REMUNERATION COMPARISON
This graph illustrates the Company’s performance against the FTSE 100 over the past 10 years. While M&S is not currently a
constituent of the FTSE 100 Index, the Committee feels that this remains the most appropriate comparator. The calculation of TSR is
in accordance with the relevant remuneration regulations. The table below the TSR chart sets out the remuneration data for directors
undertaking the role of CEO during each of the last 10 financial years.
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
Marks and
Spencer
Group plc (£)
£
200
FTSE 100
Index (£)
Source:
Thomson
Reuters
CEO single
figure
remuneration
(£000)
150
100
50
0
02/04/12
30/03/13
29/03/14
28/03/15
02/04/16
01/04/17
31/03/18
30/03/19
28/03/20
03/04/21
02/04/22
£m
40
35
30
25
20
15
10
5
0
G
O
V
E
R
N
A
N
C
E
CEO single
figure (£000)
Annual bonus
payment
(% of maximum)
PSP vesting
(% of maximum)
CEO
Steve Rowe
Marc Bolland
Steve Rowe
Marc Bolland
Steve Rowe
Marc Bolland
–
2,142
–
42.50%
–
00.00%
–
1,568
–
0.00%
–
7.60%
–
2,095
–
30.55%
–
4.70%
–
2,015
–
31.90%
–
4.80%
1,642
–
36.98%
–
0.00%
–
1,123
–
0.00%
–
8.20%
–
1,517
–
0.00%
–
34.0%
–
1,205
–
0.00%
–
11.20%
–
1,068
–
0.00%
–
0.00%
–
2,630
–
95.0%
–
0.00%
–
FIGURE 27: PERCENTAGE CHANGE IN DIRECTORS’ REMUNERATION
% change 2020/21-2021/22
% change 2019/2020-2020/21
2020/21
Base salary/
fees
Benefits Annual bonus
2019/20
Base salary/
fees
Benefits Annual bonus
1%
1%
1%
1%
1%
1%
1%
1%
1%
1%
2%
-20%
-33%
200%
100%
100%
-100%
–
–
100%
–
100%
100%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0%
100%
0%
0%
0%
0%
0%
0%
0%
0%
N/A
N/A
0%
-36.8%
–
-74%
0%
-100%
100%
–
–
N/A
N/A
0%
–
–
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
–
Steve Rowe
Eoin Tonge
Archie Norman
Andy Halford
Andrew Fisher
Justin King
Tamara Ingram
Sapna Sood
Evelyn Bourke
Fiona Dawson
UK colleagues
(average FTE)
The table sets out the annual percentage
change in salary, benefits and bonus for
each director compared with that of the
average full-time equivalent total reward
for all UK colleagues.
For non-executive directors,
benefits comprise taxable expense
reimbursements relating to travel,
accommodation and subsistence in
connection with the attendance at Board
and Committee meetings during the year.
The change in the taxable benefits is a
result of Covid-19 travel restrictions easing
and not a change in the benefits policy.
Total colleague pay
Total returns to shareholders
Group PBT before adjusting items
2020/21
£m
1,463.7
Nil
41.6
2021/22
£m
1,487.5
Nil
522.9
% change
1.6%
–
1,257%
Group PBT before adjusting items as disclosed on page 86.
FIGURE 28: RELATIVE IMPORTANCE
OF SPEND ON PAY
The table opposite illustrates the
Company’s expenditure on pay in
comparison with profits before tax and
distributions to shareholders by way of
dividend payments and share buyback.
Total colleague pay is the total pay for
all Group colleagues. Group PBT before
adjusting items has been used as a
comparison, as this is the key financial
metric that the Board considers when
assessing Company performance.
Annual Report & Financial Statements 2022
103
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REMUNERATION
REMUNERATION REPORT
CONTINUED
EXECUTIVE DIRECTORS’ REMUNERATION CONTINUED
FIGURE 29: SERVICE AGREEMENTS
In line with our policy, directors have
rolling contracts which may be terminated
by the Company giving 12 months’ notice
or the director giving six months’ notice.
Steve Rowe
Eoin Tonge
CHANGES TO EXECUTIVE MEMBERSHIP OF THE BOARD DURING 2021/22
Date of
appointment
02/04/2016
08/06/2020
Notice period
12 months/6 months
12 months/6 months
DIRECTORS APPOINTED TO THE BOARD
As announced on 10 March 2022, Stuart
Machin will join the Board on 25 May 2022
as CEO. His basic annual salary is £800,000.
Stuart’s incentive arrangements are
aligned with our Remuneration Policy, as
summarised on page 91.
It was announced on the same day that
Katie Bickerstaffe, having previously
served as a non-executive director, will
rejoin the Board on 25 May 2022 as
Co-Chief Executive. Her basic annual
salary is £750,000. Katie’s incentive
arrangements are aligned with our
Remuneration Policy on page 91.
EXTERNAL APPOINTMENTS
PAYMENTS FOR THE
LOSS OF OFFICE (audited)
As announced on 10 March 2022, Steve
Rowe will stand down from the Board after
the preliminary results on 25 May and will
cease full-time employment with M&S at
the AGM on 5 July. In view of his wisdom
and formidable knowledge of the
business, he has agreed to remain as an
adviser to the new leadership for up to
12 months. The terms of his remuneration
upon leaving are in line with the approved
Termination Policy. Steve is contractually
entitled to receive a salary, and benefits,
by way of phased monthly payments
from 6 July 2022 to 5 July 2023, subject
to mitigation.
The Committee determined good leaver
treatment in line with the plan rules, and
therefore his unvested conditional shares
awarded under the 2020 and 2021 PSP will
be time pro-rated to 5 July 2022. As
detailed earlier in the report, the PSP
awards granted in 2019 vested in June 2022
at 0%, resulting in the award lapsing in full.
PAYMENTS TO PAST
DIRECTORS (audited)
There were no payments made to past
directors during the period.
The Company recognises that executive
directors may be invited to become
non-executive directors of other
companies, and that these appointments
can broaden their knowledge and
experience to the benefit of the Company.
The Policy is for the individual director to
retain any fee. No executive directors held
an external appointment during 2021/22.
FIGURE 30: NON-EXECUTIVE DIRECTORS’ TOTAL SINGLE FIGURE REMUNERATION (AUDITED)
Non-executive directors receive fees
reflecting the time commitment, demands
and responsibilities of the role. Fees paid
to the non-executive directors and Board
Chairman for 2021/22 and 2020/21 are
detailed in the table opposite.
Benefits include expense reimbursements
relating to travel, accommodation and
subsistence in connection with the
attendance at Board and Committee
meetings during the year, which are
deemed by HMRC to be taxable.
The amounts in the table opposite
include the grossed-up cost of UK tax
paid by the Company on behalf of the
non-executive directors. Non-taxable
expense reimbursements have not been
included in the table.
As reported last year, the basic non-
executive fee increased by 1% to £72,215
with effect from 1 July 2021. The Board
Chairman was similarly awarded an
increase of 1% with effect from 1 July 2021.
The total aggregate fee for the Board
Chairman increased to £618,000.
The additional fee for chairing a committee increased in the year from £15,500 to
£20,000 with effect from 1 January 2022.
In line with pay increases across the business, non-executive director fees will increase
by 3% to £74,380 with effect from 1 July 2022. The Board Chairman was also awarded an
increase of 3% bringing the total aggregate fee to £636,540.
Fee levels will again be reviewed in the year, ahead of any changes which would be
effective 1 July 2023.
Director
Year
Basic fees
£000
Additional
fees
£000
Benefits
£000
Total
£000
Archie Norman
Justin King
Andy Halford
Andrew Fisher
626
617
103
102
90
87
72
72
89
70
72
60
73
12
62
0
1. The 2020/21 additional fees for Tamara Ingram have been restated to include £5,167 Committee Chair fees earned in
2021/22
2020/21
2021/22
2020/21
2021/22
2020/21
2021/22
2020/21
2021/22
2020/21
2021/22
2020/21
2021/22
2020/21
2021/22
2020/21
544
541
31
31
17
16
0
0
17
10
0
0
0
0
0
0
72
71
72
71
72
71
72
71
72
60
72
60
72
12
62
0
10
5
0
0
1
0
0
1
0
0
0
0
1
0
0
0
Fiona Dawson
(from 25 May 2021)
Tamara Ingram1
Evelyn Bourke
Sapna Sood
104
Marks and Spencer Group plc
2020/21 but paid in 2021/22.
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NON-EXECUTIVE DIRECTORS’ REMUNERATION CONTINUED
FIGURE 31: NON-EXECUTIVE DIRECTORS’ SHAREHOLDINGS (AUDITED)
Changes in the current non-executive
directors’ interests in shares in the
Company and its subsidiaries between the
end of the financial year and 24 May 2022
(or upon their date of retiring from the
Board) are shown in the table opposite.
The non-executive directors are not
permitted to participate in any of the
Company’s incentive arrangements.
All non-executive directors are
required to build and maintain a
shareholding of at least 2,000 shares
in the Company upon joining M&S.
The table opposite details the
shareholding of the non-executive
directors who served on the Board during
the year as at 2 April 2022 (or upon their
date of retiring from the Board), including
those held by connected persons.
FIGURE 32: NON-EXECUTIVE DIRECTORS’ AGREEMENTS FOR SERVICE
Non-executive directors have an
agreement for service for an initial three-
year term which can be terminated by
either party giving three months’ notice
(or six months’ notice for the Chairman).
The table opposite sets out these terms
for all current members of the Board.
Director
Archie Norman
Andy Halford
Andrew Fisher
Justin King
Tamara Ingram
Sapna Sood
Evelyn Bourke
Fiona Dawson
NON-EXECUTIVE DIRECTOR CHANGES TO THE BOARD DURING 2022/23
ROLE CHANGES WITHIN THE BOARD
Andy Halford retires as the Chair of the
Audit Committee on 7 June 2022; he will
remain as the Senior Independent Director
until he retires and steps down before
the 2023 AGM. His fee will increase, in line
with the increase to basic non-executive
director fees, from £103,215 to £105,380.
Evelyn Bourke will become Chair of
the Audit Committee with effect from
7 June 2022. Evelyn will receive a total
fee of £92,215, which is inclusive of the
standard annual non-executive director
fee of £72,215 (£74,380 from 1 July 2022).
Director
Archie Norman
Andy Halford
Andrew Fisher
Justin King
Tamara Ingram
Sapna Sood
Evelyn Bourke
Fiona Dawson
Number
of shares
held as at
Number
of shares
held as at
2 April 2022
24 May 2022
148,600 No change
25,200 No change
4,243 No change
64,000 No change
2,000 No change
2,000 No change
50,000 No change
12,352 No change
Date of appointment
01/09/2017
01/01/2013
01/12/2015
01/01/2019
01/06/2020
01/06/2020
01/02/2021
25/05/2021
Notice period
6 months/6 months
3 months/3 months
3 months/3 months
3 months/3 months
3 months/3 months
3 months/3 months
3 months/3 months
3 months/3 months
G
O
V
E
R
N
A
N
C
E
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Annual Report & Financial Statements 2022
105
REMUNERATION
REMUNERATION REPORT
CONTINUED
REMUNERATION COMMITTEE
REMUNERATION COMMITTEE REMIT
During the year, the Remuneration Committee reviewed the Terms of Reference to ensure that they reflected the government’s latest recommendations and the revised
principles of the Remuneration Policy, as set out in the UK Corporate Governance Code 2018. In particular, the Committee, in its support of the Nomination Committee,
expanded its remit to specifically discuss the talent and succession in the senior leadership group and associated pay arrangements. The Terms of Reference can be found
on the Company’s website at corporate.marksandspencer.com/investors/corporate-governance/governance-framework.
KEY RESPONSIBILITIES
– The Committee continues to have a strong focus
on ensuring an appropriate alignment between
the remuneration of executive directors, the
Executive Committee and colleagues across M&S,
ensuring that the senior remuneration framework
is strategically aligned with the business but that
it also attracts and recognises the talent required
to drive transformation and cultural change within
M&S. The responsibilities are broadly as follows:
– Setting remuneration policy and practices that
are designed to support strategy and promote
the long-term success of M&S while following
the principles:
· Clarity: Remuneration arrangements
are transparent and promote effective
engagement with shareholders and
the workforce.
· Simplicity: Remuneration structures are
uncomplicated, and their rationale and
operation are easy to understand.
· Risk: Ensure that reputational and other risks
from excessive rewards, and behavioural risks
that can arise from target-based incentive
plans, are identified and mitigated.
· Predictability: The range of possible values of
rewards to executive directors is identified and
explained at the time of approving the policy.
· Proportionality: The link between individual
awards, the delivery of strategy and the
long-term performance of the Company
is clear. Outcomes should not reward
poor performance.
· Alignment with culture: Incentive schemes
that drive behaviours consistent with
M&S’ purpose, values and strategy.
– Determining the terms of employment and
remuneration for the executive directors and the
Executive Committee, including recruitment and
termination arrangements.
– Considering the appropriateness of the senior
remuneration framework and exercising
independent judgement and discretion when
authorising remuneration outcomes, taking
Company and individual performance, and the
context of the wider workforce, into account.
– Noting the total pay budgets, including salary,
bonus and share scheme allocations, across all of
M&S, together with the principles of allocation to
ensure appropriate consistency with the senior
pay frameworks.
– Approving the design, targets and total payments
for all performance-related pay schemes
operated by M&S, seeking shareholder approval
where necessary.
– Assessing the appropriateness and subsequent
achievement of performance targets relating to
any share-based incentive plan for the executive
directors and Executive Committee.
– Receiving direct feedback from BIG, the Group’s
colleague representative body, colleague voice
surveys and management reports to ensure
colleague views on Group culture, including
remuneration strategy and I&D are considered.
REMUNERATION COMMITTEE AGENDA FOR 2021/22
REGULAR ITEMS
Pay arrangements
– Within the terms of the M&S Remuneration Policy,
approval of the remuneration packages for the
executive directors, the Executive Committee,
and any termination payments where applicable.
– Consideration of the appropriateness of
the senior remuneration framework in the
context of the rest of the organisation and
external governance.
– Noting of the total budgeted salary expenditure
across M&S, ensuring principles for reward
allocation are aligned across M&S.
Annual Bonus Scheme
– Review of achievements against 2021/22
performance objectives for executive directors
and the Executive Committee.
– Approval of targets for the 2022/23 ABS ensuring
that the performance conditions are transparent,
stretching and rigorously applied.
– Approval of the 2022/23 individual performance
objectives for executive directors and the
Executive Committee.
– Noting of the total budgeted expenditure for
– Review the appropriateness of the senior
the ABS across M&S.
Long-term incentives
– Approval of 2022 PSP awards for the executive
directors and the Executive Committee.
– Approve the 2022 PSP targets ensuring
appropriate alignment between driving
exceptional performance and motivating and
retaining top talent.
remuneration framework in the context of the
rest of the organisation and external governance.
– Approval of the Directors’ Remuneration Report
for 2021/22 and review of the AGM voting outcome
for the 2020/21 report.
– Review of the Committee’s performance in
2021/22, including assurance that the principles of
the revised Terms of Reference and broader remit
of the Committee are embedded.
– Approval of the vesting level of the 2019 PSP
– Assessment of the external market when
awards across M&S.
– Regular review of all in-flight PSPs against targets.
– Consideration of long-term share awards granted
to colleagues below Executive Committee level.
Governance and external market
– Review of the M&S Remuneration Policy, ensuring
that it continues to support the long-term
success of M&S and is aligned with the 2018 UK
Corporate Governance Code, other external
governance and emerging best practice.
considering remuneration arrangements for
executive directors and the Executive Committee.
– Review the effectiveness and transparency of
remuneration reporting.
– Noting of direct feedback from BIG, M&S’
colleague representative body, to ensure that
all colleague views are received and considered
by the Board when making remuneration and
reward decisions.
Talent planning
– Noting the performance management
process across the business.
– Discussing senior leadership talent and
succession planning.
EFFECTIVENESS OF THE
REMUNERATION COMMITTEE
During the year, the Board Chairman led an internal
review of the Board’s effectiveness. All non-executive
directors independently provided their views, which
were then reviewed and discussed collectively.
The Remuneration Committee, under the
leadership of Andrew Fisher, continues to operate
efficiently; matters discussed during the year
fulfil the Committee’s expanded remit and are
thoughtfully debated in the context of internal
and external factors.
2022/23 ACTION PLAN
– Full review of the M&S Remuneration Policy in
anticipation of the binding shareholder vote at
the 2023 AGM, ensuring the policy continues to
accelerate the transformation and support
long-term success of M&S and is aligned with
the 2018 UK Corporate Governance Code, other
external governance and emerging best practice.
– Review and discuss Group future pay and incentive
structures to align with organisational design
and M&S values, ensuring appropriateness of
reward structures and costs for the future, as well
as continued alignment with the Board approach
to pay.
– Review of proposed ESG customer sentiment
metric and establishment of base line for
measurement together with continuing discussion
on alternative ESG measures to ensure appropriate
focus on Plan A goals in Board pay arrangements.
– Continue to support the work of the Nomination
Committee through the assessment of senior
leadership talent, succession planning and
associated pay arrangements, together with
talent plans and colleague engagement across
the entire organisation.
106
Marks and Spencer Group plc
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FIGURE 33: REMUNERATION COMMITTEE MEETINGS
REMUNERATION COMMITTEE CONTINUED
The table opposite details the
independent non-executive
directors that were members of
the Committee during 2021/22.
MEMBER
Andrew Fisher
(Committee Chair)
Archie Norman
Tamara Ingram
Member
since
Maximum
possible
meetings
Number of
meetings
attended
% of
meetings
attended
1 October 2018
3 November 2017
11 September 2020
5
5
5
5
5
5
100%
100%
100%
COMMITTEE ADVISERS
In carrying out its responsibilities, the
Committee is independently advised
by external advisers. The Committee
was advised by PwC during the year.
PwC is a founding member of the
Remuneration Consultants Group and
voluntarily operates under the code
of conduct in relation to executive
remuneration consulting in the UK.
The code of conduct can be found at
remunerationconsultantsgroup.com.
The Committee has not explicitly
considered the independence of the
advice it receives, although it regularly
reflects on the quality and objectivity of
this advice. The Committee is satisfied that
any conflicts are appropriately managed.
PwC was appointed by the Committee as
its independent adviser in 2014, following
a rigorous and competitive tender
process. PwC provides independent
commentary on matters under
consideration by the Committee and
updates on legislative requirements, best
practice and market practice. PwC’s fees
are typically charged on an hourly basis,
with costs for work agreed in advance.
During the year, PwC charged £66,750 for
Remuneration Committee matters. This
is based on an agreed fee for business
as usual support, with additional work
charged at hourly rates. PwC has provided
tax, consultancy and risk consulting
services to the Group in the financial year.
PwC’s advisory team has no connection
with any individual director of the Group.
The Committee also seeks internal
support from the CEO, CFO, General
Counsel & Company Secretary and
the Head of Executive Reward & Pay
Governance as necessary. All may attend
the Committee meetings by invitation but
are not present for any discussions that
relate directly to their own remuneration.
The Committee also reviews external
survey and bespoke benchmarking
data, including that published by
Aon Hewitt Limited, KPMG, PwC, FIT
Remuneration Consultants, Korn
Ferry and Willis Towers Watson.
G
O
V
E
R
N
A
N
C
E
REMUNERATION COMMITTEE STAKEHOLDER AND SHAREHOLDER ENGAGEMENT
The Committee is dedicated to ensuring
that executive pay remains competitive,
appropriate and fair in the contexts of the
external market, Company performance
and the pay arrangements of the wider
workforce. In collaboration with the Head
of Executive Reward & Pay Governance,
the Committee gives colleagues,
through colleague representatives,
the opportunity to raise questions or
concerns regarding the remuneration of
the executive directors. During the year,
colleague representatives were given
the opportunity to raise their views with
the Remuneration Committee via the
BIG Chair. Details of the directors’ pay
arrangements were discussed in the
context of the reward framework for the
rest of the organisation and external
factors; no concerns were raised either
during these discussions or subsequently.
The Committee is dedicated to a
continuous, open and transparent
dialogue with shareholders on the issue of
executive remuneration. As described in
the Committee Chair’s letter, dialogue on
the proposed measures and weightings
of the PSP continued during the year.
Shareholders were positive in their
feedback and confirmed that the targets
set aligned with their expectations.
SHAREHOLDER SUPPORT FOR THE REMUNERATION POLICY AND 2020/21 DIRECTORS’ REMUNERATION REPORT
At the Annual General Meeting on
6 July 2021, 99.15% of shareholders
voted in favour of approving the
Directors’ Remuneration Report for
2020/21. The Committee believes that this
illustrates the strong level of shareholder
support for the senior remuneration
framework. The table below shows full
details of the voting outcomes for the
2020/21 Directors’ Remuneration Report.
FIGURE 34: VOTING OUTCOMES FOR THE REMUNERATION POLICY AND 2020/21 REMUNERATION REPORT
Remuneration Policy (at the 2020 AGM)
2020/21 Remuneration Report (at the 2021 AGM)
APPROVED BY THE BOARD
Andrew Fisher Chair of the Remuneration Committee
London, 24 May 2022
Votes for
1,125,697,134
1,271,170,625
% Votes for
97.14% 33,187,602
99.15% 10,910,040
Votes against % Votes against Votes withheld
942,792
2,734,663
2.86%
0.85%
This Remuneration Policy and these remuneration reports have been prepared in accordance with the relevant provision of the Companies Act 2006 and on the basis prescribed in
the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (“the Regulations”). Where required, data has been audited by Deloitte,
and this is indicated appropriately.
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Annual Report & Financial Statements 2022
107
GOVERNANCE
OTHER DISCLOSURES
DIRECTORS’ REPORT
Marks and Spencer Group plc
(the “Company”) is the holding company
of the Marks & Spencer Group of
companies (the “Group”).
The Directors’ Report for the year ended
2 April 2022 comprises pages 56 to 112
and pages 210 to 211 of this report,
together with the sections of the Annual
Report incorporated by reference. As
permitted by legislation, some of the
matters required to be included in the
Directors’ Report have instead been
included in the Strategic Report on pages
2 to 55, as the Board considers them to
be of strategic importance. Specifically,
these are:
– Future business developments
(throughout the Strategic Report).
– Risk management on pages 45 to 46.
– Details of branches operated by the
Company on pages 9 to 25.
– Information on how the directors
have had regard for the Company’s
stakeholders, and the effect of that
regard, on pages 32 to 34.
The Strategic Report and the Directors’
Report together form the Management
Report for the purposes of the Disclosure
Guidance and Transparency Rules
(“DTR”) 4.1.8R.
Information relating to financial
instruments can be found on pages 165
to 175 and is incorporated by reference.
For information on our approach to
social, environmental and ethical matters,
please see our ESG Committee report
on pages 70 to 77, and refer to the
sustainability section of our website:
marksandspencer.com/sustainability.
Other information to be disclosed in the
Directors’ Report is given in this section.
The Directors’ Report fulfils the
requirements of the Corporate
Governance Statement for the purposes
of DTR 7.2.3R. Further information is
available online at marksandspencer.
com/thecompany.
Both the Strategic Report and the
Directors’ Report have been drawn up
and presented in accordance with, and in
reliance upon, applicable English company
law, and the liabilities of the directors in
connection with those reports shall be
subject to the limitations and restrictions
provided by such law.
108
Marks and Spencer Group plc
INFORMATION TO BE DISCLOSED
UNDER LR 9.8.4R
Listing Rule
9.8.4R (1) (2)
(5-14) (A) (B)
9.8.4R (4)
Detail
Not applicable
Long-term
incentive schemes
Page
reference
N/A
86-88,
91-93,
95,
99-104
BOARD OF DIRECTORS
The membership of the Board and
biographical details of the directors
are provided on pages 60 and 61. Changes
to the directors during the year and up to
the date of this report are set out below.
Details of directors’ beneficial and
non-beneficial interests in the shares of
the Company are shown on pages 100 to
102 and 105. Options granted to directors
under the Save As You Earn (“SAYE”) and
Executive Share Option Schemes are
shown on page 102. Further information
regarding employee share option
schemes is provided in note 13 to the
financial statements on pages 154 to 156.
Name
Role
Departures
Steve Rowe Executive
Director
Effective date of
departure/
appointment
25 May 2022
Appointments
Fiona
Dawson
Stuart
Machin
Katie
Bickerstaffe
Non-Executive
Director
Executive
Director
Executive
Director
25 May 2021
25 May 2022
25 May 2022
The appointment and replacement of
directors is governed by the Company’s
Articles of Association (the “Articles”),
the UK Corporate Governance Code
(the “Code”), the Companies Act 2006 and
related legislation. The Articles may be
amended by a special resolution of the
shareholders. Subject to the Articles,
the Companies Act 2006 and any
directions given by special resolution,
the business of the Company will be
managed by the Board who may exercise
all the powers of the Company.
The Company may, by ordinary resolution,
declare dividends not exceeding the
amount recommended by the Board.
Subject to the Companies Act 2006, the
Board may pay interim dividends and also
any fixed rate dividend, whenever the
financial position of the Company, in the
opinion of the Board, justifies its payment.
The directors may from time to time
appoint one or more directors. The Board
may appoint any person to be a director
(so long as the total number of directors
does not exceed the limit prescribed in
the Articles). Under the Articles, any such
director shall hold office only until the
next Annual General Meeting (“AGM”)
where they will stand for annual election.
DIRECTORS’ CONFLICTS OF
INTEREST
The Company has procedures in place for
managing conflicts of interest. Should a
director become aware that they, or any of
their connected parties, have an interest
in an existing or proposed transaction with
Marks & Spencer, they should notify the
Board in writing or at the next Board
meeting. Internal controls are in place to
ensure that any related party transactions
involving directors, or their connected
parties, are conducted on an arm’s length
basis. Directors have a continuing duty
to update any changes to these conflicts.
DIRECTORS’ INDEMNITIES
The Company maintains directors’ and
officers’ liability insurance which provides
appropriate cover for legal action brought
against its directors. The Company has
also granted indemnities to each of its
directors and the Company Secretary to
the extent permitted by law. Qualifying
third-party indemnity provisions (as
defined by Section 234 of the Companies
Act 2006) were in force during the year
ended 2 April 2022 and remain in force
in relation to certain losses and liabilities
which the directors (or Company
Secretary) may incur to third parties in
the course of acting as directors or
Company Secretary or employees of the
Company or of any associated company.
Qualifying pension scheme indemnity
provisions (as defined by Section 235 of
the Companies Act 2006) were in force
during the course of the financial year
ended 2 April 2022 for the benefit of
the Trustees of the Marks & Spencer
UK Pension Scheme, both in the UK and
the Republic of Ireland.
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PROFIT AND DIVIDENDS
VARIATION OF RIGHTS
The profit for the financial year, after
taxation, amounts to £309.0m (last
year £(194.4)m on a 52 week basis). The
directors have not declared dividends
as follows:
Ordinary shares
No proposed interim dividend
(last year no proposed
interim dividend)
No proposed final dividend
(last year no proposed
final dividend)
No dividend proposed
for 2021/22
(last year no
proposed dividend)
SHARE CAPITAL
£m
–
–
–
The Company’s issued ordinary share
capital as at 2 April 2022 comprised a
single class of ordinary share. Each share
carries the right to one vote at general
meetings of the Company.
During the financial year, 215,753 ordinary
shares in the Company were issued under
the terms of the United Kingdom
Employees’ SAYE Share Option Scheme.
31,470 shares were issued at a price of
151p, 122,163 shares at a price of 82p and
62,120 shares at a price of 238p.
In addition, during the period, 2,176,000
ordinary shares were issued to satisfy
employee share awards under the
Company’s Restricted Share Plan at a
price of 1p.
Details of movements in the Company’s
issued share capital can be found in
note 24 to the financial statements
on page 177.
RESTRICTIONS ON TRANSFER
OF SECURITIES
There are no specific restrictions on the
transfer of securities in the Company,
which is governed by its Articles and
prevailing legislation. The Company is not
aware of any agreements between holders
of securities that may result in restrictions
on the transfer of securities or that might
result in restrictions on voting rights.
Subject to applicable statutes, rights
attached to any class of share may be
varied with the written consent of the
holders of at least three-quarters in
nominal value of the issued shares of
that class, or by a special resolution
passed at a separate general meeting
of the shareholders.
RIGHTS AND OBLIGATIONS
ATTACHING TO SHARES
Subject to the provisions of the
Companies Act 2006, any resolution
passed by the Company under the
Companies Act 2006 and other
shareholders’ rights, shares may be issued
with such rights and restrictions as the
Company may by ordinary resolution
decide, or (if there is no such resolution
or so far as it does not make specific
provision) as the Board may decide.
POWERS FOR THE COMPANY
ISSUING OR BUYING BACK ITS OWN
SHARES
The Company was authorised by
shareholders at the 2021 AGM to purchase
in the market up to 10% of the Company’s
issued share capital, as permitted under
the Company’s Articles. No shares were
bought back under this authority during
the year ended 2 April 2022 and up to the
date of this report.
This standard authority is renewable
annually; the directors will seek to renew it
at the 2022 AGM.
The Company was also authorised at the
2021 AGM, pursuant to the reduction of
the nominal value of its ordinary shares
from £0.25 to £0.01, to make an off-market
purchase of its deferred shares of £0.24
each. In accordance with this authority,
1,957,779,626 deferred shares of £0.24 were
bought back for a total aggregate amount
of £0.01, and cancelled on 8 July 2021.
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INTERESTS IN VOTING RIGHTS
Information provided to the Company
pursuant to the Financial Conduct
Authority’s DTRs is published on a
Regulatory Information Service and
on the Company’s website. As at 2 April
2022, the following information has
been received, in accordance with DTR
5, from holders of notifiable interests in
the Company’s issued share capital.
The information provided below was
correct at the date of notification;
however, the date received may not
have been within the current financial
year. It should be noted that these
holdings are likely to have changed
since the Company was notified.
However, notification of any change is
not required until the next notifiable
threshold is crossed.
Notifiable interests
Schroders plc
% of capital
Voting rights
90,153,730
disclosed Nature of holding as per disclosure
5.549* Indirect interest (5.547%),
Citadel LLC and its group
Blackrock, Inc.
97,679,549
98,157,250
CFD (0.001%)
5.00052** Equity swap
5.01 Indirect interest (4.62%),
securities lending (0.13%),
CFD (0.26%)
5.38 Indirect interest
RWC Asset
Management LLP
Norges Bank
104,965,660
57,796,956
2.95168 Direct interest
* Disclosures made prior to the 2019 rights issue.
** Disclosed on 15 September 2020. A further disclosure was made on 15 September notifying the Company
that Citadel’s holding had decreased below the 5% notifiable threshold, which did not state the new position.
In the period from 2 April 2022 to the date of this report, we received a further
notification in accordance with DTR 5 from Blackrock Inc., disclosing a holding
of 117,319,126 ordinary shares (5.97%, broken down as follows: Indirect, 5.49%;
Securities lending, 0.07%; and CFD, 0.41%).
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Annual Report & Financial Statements 2022
109
GOVERNANCE
OTHER DISCLOSURES
CONTINUED
The directors were granted authority
at the 2021 AGM to allot relevant
securities up to a nominal amount of
£6,521,758.64. This authority will apply
until the conclusion of the 2022 AGM.
At this year’s AGM, shareholders will be
asked to grant an authority to allot
relevant securities (i) up to a nominal
amount of £6,529,881.95 and (ii)
comprising equity securities up to a
nominal amount of £13,059,763.91
(after deducting from such limit any
relevant securities allotted under (i)),
in connection with an offer of a rights
issue (the Section 551 amount), such
Section 551 amount to apply until the
conclusion of the AGM to be held in 2023
or on 1 October 2023, whichever is sooner.
A special resolution will be proposed
to renew the directors’ powers to make
non pre-emptive issues for cash in
connection with rights issues and
otherwise up to a nominal amount of
£979,482.29. In addition, a separate
special resolution will be proposed, in line
with institutional shareholder guidelines,
to authorise the directors to make
non-pre-emptive issues for cash in
connection with acquisitions/specified
capital investments, up to a further
nominal amount of £979,482.29.
A special resolution will also be proposed
to renew the directors’ authority to
repurchase the Company’s ordinary
shares in the market. The authority will
be limited to a maximum of 195,896,459
ordinary shares and sets the minimum
and maximum prices which will be paid.
DEADLINES FOR EXERCISING
VOTING RIGHTS
Votes are exercisable at a general meeting
of the Company in respect of which
the business being voted upon is being
heard. Votes may be exercised in person,
by proxy or, in relation to corporate
members, by corporate representatives.
The Articles provide a deadline for
submission of proxy forms of not less
than 48 hours before the time appointed
for the holding of the meeting or
adjourned meeting. However, when
calculating the 48-hour period, the
directors can, and have, decided not to
take account of any part of a day that is
not a working day.
SIGNIFICANT AGREEMENTS –
CHANGE OF CONTROL
There are a number of agreements to
which the Company is party that take
effect, alter or terminate upon a change
of control of the Company following a
takeover bid. Details of the significant
agreements of this kind are as follows:
– The $300m US Notes issued by the
Company to various institutions on
6 December 2007 under Section 144a
of the US Securities Act contain an
option such that, upon a change of
control event, combined with a credit
ratings downgrade, any holder of
such a US Note may require the
Company to prepay the principal
amount of that US Note.
– The £850m Credit Agreement dated
13 December 2021 between the
Company and various banks contains
a provision such that, upon a change
of control event, unless new terms are
agreed within 60 days, the facility under
this agreement will be cancelled with all
outstanding amounts becoming
immediately payable with interest.
– The amended and restated Relationship
Agreement dated 6 October 2014
(originally dated 9 November 2004 as
amended on 1 March 2005), between
HSBC and the Company and relating to
M&S Bank, contains certain provisions
which address a change of control of
the Company. Upon a change of
control, the existing rights and
obligations of the parties in respect of
M&S Bank continue and HSBC gains
certain limited additional rights in
respect of existing customers of the
new controller of the Company. Where
a third-party arrangement is in place
for the supply of financial services
products to existing customers of the
new controller, the Company is required
to procure the termination of such
arrangement as soon as practicable
(while not being required to do anything
that would breach such a third-party
arrangement). Where a third-party
arrangement is so terminated, or does
not exist, HSBC has the exclusive right
to negotiate proposed terms for the
offer and sale, of financial services
products to the existing customers of
the new controller by HSBC on an
exclusive basis. Where the Company
undertakes a re-branding exercise with
the new controller following a change
of control (which includes using any
M&S brand in respect of the new
controller’s business or vice versa),
HSBC may, depending on the nature
of the re-branding exercise, have the
right (exercisable at HSBC’s election) to
terminate the Relationship Agreement.
– The Company does not have
agreements with any director
or employee that would provide
compensation for loss of office or
employment resulting from a takeover
except that provisions of the Company’s
share schemes and plans may cause
options and awards granted to
employees under such schemes and
plans to vest on a takeover.
COLLEAGUE INVOLVEMENT
We remain committed to colleague
involvement throughout the business.
Colleagues are kept well informed of the
performance and strategy of the Group.
Examples of colleague involvement and
engagement, and information on our
approach to our workforce, are highlighted
throughout this Annual Report and
specifically on pages 26 to 29, 32 to 34,
and 63 to 64.
Share schemes are a long-established and
successful part of colleagues’ total reward
packages, encouraging and supporting
employee share ownership. The Company
operates both an all-employee SAYE
Scheme and Share Incentive Plan. As at
2 April 2022, 15,442 colleagues were
participating in ShareSave, the Company’s
SAYE Scheme. Full details of all schemes
are given on pages 154 to 156.
There are websites for both pension
schemes – the defined contribution
scheme (Your M&S UK Pension Saving
Plan) and the defined benefit scheme
(the Marks & Spencer UK Pension Scheme)
– which are fully accessible to employees
and former employees who have retained
benefits in either scheme. Employees are
updated as needed with any pertinent
information on their pension savings.
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EQUAL OPPORTUNITIES
The Group is committed to an active
inclusion, diversity and equal
opportunities policy: from recruitment
and selection, through training and
development, performance reviews
and promotion, to retirement.
The Company’s policy is to promote an
environment free from discrimination,
harassment and victimisation, where
everyone will receive equal treatment
regardless of gender, colour, ethnic or
national origin, health condition, age,
marital or civil partner status, sexual
orientation, gender identity or faith.
All decisions relating to employment
practices will be objective, free from
bias and based solely upon work criteria
and individual merit. The Company is
responsive to the needs of its employees,
customers and the community at large.
M&S is an organisation which uses
everyone’s talents and abilities and
where inclusion and diversity are valued.
M&S has a business-wide inclusion and
diversity strategy, sponsored by a
member of the Executive Committee
and championed by our Inclusion
Activation Group of senior leaders.
Our seven employee-led diversity
networks are supported by a central
Inclusion and Diversity team, who work to
embed a culture of inclusion across the
organisation. In 2017, our inclusion and
diversity targets were agreed as: aiming
to have 50% female representation and
15% ethnic minority representation on the
M&S senior management team by 2022.
Unfortunately, these targets have not
been achieved; in response we will
maintain these as targets and through
a review and re-set of our strategy and
approach, we will ensure focus is given
to gender representation, ethnicity
and disability.
We know we have a lot more to do, but we
are facing into this and want to show our
colleagues, customers and communities
that we continue to be committed to
making M&S an inclusive organisation.
Further information on our inclusion
and diversity initiatives can be found on
pages 26 to 29, and page 69.
EMPLOYEES WITH DISABILITIES
The Company is clear in its policy that
people with health conditions, both visible
and non-visible, should have full and
fair consideration for all vacancies.
M&S has continued to demonstrate its
commitment to interviewing those
applicants with disabilities who fulfil
the minimum criteria, and endeavouring
to retain employees in the workforce
if they become disabled during
employment. M&S will actively retrain and
adjust employees’ environments where
possible to allow them to maximise their
potential and will continue to work with
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external organisations to provide
workplace opportunities through our
innovative Marks & Start scheme, working
closely with The Prince’s Trust and
Jobcentre Plus, most recently via the
Kickstart programme.
RESEARCH & DEVELOPMENT
Research and innovation remain key to
our Food offer and the development
of improved product and fabric in
Clothing & Home. Further information
is available on our corporate website:
marksandspencer.com/thecompany.
GROCERIES SUPPLY CODE
OF PRACTICE
The Groceries (Supply Chain Practices)
Market Investigation Order 2009 (the
“Order”) and The Groceries Supply Code
of Practice (the “Code”) impose obligations
on M&S regarding its relationships with its
suppliers of groceries. Under the Order
and Code, M&S is required to submit an
annual compliance report to the Audit
Committee for approval and then to the
Competition and Markets Authority and
Groceries Code Adjudicator (“GCA”).
M&S submitted its report, covering the
period from 4 April 2021 to 2 April 2022
to the Audit Committee on 12 May 2022.
It was approved on 19 May 2022.
In accordance with the Order, a summary
of that compliance report is set out below.
M&S believes that it has materially
complied with the Code and the Order
during the relevant period. No formal
disputes under the Code have arisen
during the reporting period. There have
been seven instances during the reporting
period in which suppliers have either
alleged a breach or made a reference to
potential non-compliance with the Code.
M&S has worked with the suppliers to
address the issues raised and six of them
have been resolved or closed, with one
issue remaining open. One additional
Code reference made by a supplier before
4 April 2021 was also closed during the
reporting period.
A detailed summary of the compliance
report is available on our website.
GOING CONCERN
In adopting the going concern basis for
preparing the financial statements, the
directors have considered the business
activities as set out on pages 10 to 25,
the financial position of the Group, its cash
flows, liquidity position and borrowing
facilities as set out in the Financial Review
on pages 36 to 44, the Group’s financial
risk management objectives and
exposures to liquidity and financial risks
as set out in note 21 to the financial
statements, as well as the Group’s
principal risks and uncertainties as set
out on pages 47 to 54.
Based on the Group’s cash flow forecasts,
the Board expects the Group to have
adequate resources to continue in
operation, meet its liabilities as they
fall due, retain sufficient available cash
and not breach the covenant under
its revolving credit facility for the
foreseeable future, being a period of
at least 12 months from the approval of
the financial statements. The Board
therefore considers it appropriate for the
Group to adopt the going concern basis
in preparing its financial statements.
See note 20 to the financial statements
for more information on our facilities.
LONG-TERM VIABILITY STATEMENT
The directors have assessed the prospects
of the Company over a three-year period
to March 2025. This has taken into account
the business model, strategic aims,
risk appetite, and principal risks and
uncertainties, along with the Company’s
current financial position. Based on this
assessment, the directors have a
reasonable expectation that the Company
will be able to continue in operation and
meet its liabilities as they fall due over
the three-year period under review.
See our approach to assessing long-term
viability on page 55.
AUDITOR
Resolutions to reappoint Deloitte LLP as
auditor of the Company and to authorise
the Audit Committee to determine its
remuneration will be proposed at the
2022 AGM.
POLITICAL DONATIONS
The Company did not make any political
donations or incur any political
expenditure during the year ended
2 April 2022. M&S has a policy of
not making donations to political
organisations or independent election
candidates or incurring political
expenditure anywhere in the world as
defined in the Political Parties, Elections
and Referendums Act 2000.
ANNUAL GENERAL MEETING
The AGM of Marks and Spencer Group
plc will be broadcast online from
M&S’ Waterside House support centre
on 5 July 2022 at 11am. Shareholders
are advised not to travel to the venue
on the day. The Notice of Meeting is
given, together with explanatory
notes and guidance on how to access
the meeting and vote electronically,
on pages 198 to 209.
Annual Report & Financial Statements 2022
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DISCLOSURE OF INFORMATION
TO AUDITOR
Each of the persons who are directors
at the time when this Directors’ Report
is approved confirms that, so far as
he/she is aware, there is no relevant
audit information of which the Company’s
auditor is unaware and that he/she has
taken all the steps that he/she ought
to have taken as a director to make
himself/herself aware of any relevant audit
information and to establish
that the Company’s auditor is aware of
that information.
The Directors’ Report was approved
by a duly authorised committee of the
Board of Directors on 24 May 2022 and
signed on its behalf by
Nick Folland General Counsel
and Company Secretary
London, 24 May 2022
GOVERNANCE
OTHER DISCLOSURES
CONTINUED
DIRECTORS’ RESPONSIBILITIES
– The directors are responsible for
The Board is of the view that the Annual
Report should be truly representative of
the year and provide shareholders with
the information necessary to assess the
Group’s position, performance, business
model and strategy.
The Board requested that the Audit
Committee review the Annual Report and
provide its opinion on whether the report
is fair, balanced and understandable. The
Audit Committee’s opinion is on page 80.
The directors are also responsible for
preparing the Annual Report, the
Remuneration Report and Policy and the
financial statements in accordance with
applicable law and regulations. Company
law requires the directors to prepare
financial statements for each financial
year. Under that law the directors are
required to prepare the Group financial
statements in accordance with
international accounting standards in
conformity with the requirements of the
Companies Act 2006 and International
Financial Reporting Standards (“IFRS”).
Under company law, the directors must
not approve the financial statements
unless they are satisfied that they give a
true and fair view of the state of affairs
of the Group and the Company and of
the profit or loss of the Group and the
Company for that period.
In preparing these financial statements,
the directors are required to:
– Select suitable accounting policies and
then apply them consistently.
– Make judgements and accounting
estimates that are reasonable
and prudent.
– State whether applicable IFRS
(as adopted by the UK) have been
followed, subject to any material
departures disclosed and explained
in the financial statements.
– Prepare the financial statements
on a going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
keeping adequate accounting records
that are sufficient to show and explain
the Company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
Company and enable them to ensure
that the financial statements comply
with the Companies Act 2006. They are
also responsible for safeguarding the
assets of the Group and the Company
and hence for taking reasonable steps
for the prevention and detection of
fraud and other irregularities.
The directors are responsible for
the maintenance and integrity of
the Company’s website. Legislation
in the UK governing the preparation
and dissemination of financial
statements may differ from legislation
in other jurisdictions.
Each of the current directors, whose
names and functions are listed on pages
60 and 61, confirms that, to the best
of their knowledge:
– The Group financial statements,
prepared in accordance with the
applicable set of accounting standards,
give a true and fair view of the assets,
liabilities, financial position and profit
or loss of the Company and the
undertakings included in the
consolidation taken as a whole.
– The Management Report includes a
fair review of the development and
performance of the business and
the position of the Company and
the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks
and uncertainties that they face.
– The Annual Report, taken as a whole,
is fair, balanced and understandable,
and provides the necessary information
for shareholders to assess the Group’s
position, performance, business model
and strategy.
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MARKS AND SPENCER GROUP PLC
Report on the audit of the financial statements
In our opinion:
– the financial statements of Marks and
Spencer Group plc (the ‘Company’)
and its subsidiaries (the ‘Group’)
give a true and fair view of the
state of the Group’s and of the
Company’s affairs as at 2 April 2022
and of the Group’s profit for the
52 weeks then ended;
– the Group financial statements
have been properly prepared in
accordance with United Kingdom
adopted international accounting
standards;
– the Company financial statements
have been properly prepared in
We conducted our audit in accordance
with International Standards on Auditing
(UK) (‘ISAs (UK)’) and applicable law.
Our responsibilities under those
standards are further described in
the auditor’s responsibilities for the
audit of the financial statements section
of our report.
1. OPINION
accordance with United Kingdom
adopted international accounting
standards and as applied in
accordance with the provisions
of the Companies Act 2006; and
– the financial statements have been
prepared in accordance with the
requirements of the Companies
Act 2006.
We have audited the financial statements
which comprise:
– the Consolidated Income Statement;
– the Consolidated Statement of
Comprehensive Income;
2. BASIS FOR OPINION
We are independent of the Group and the
Company in accordance with the ethical
requirements that are relevant to our
audit of the financial statements in the
UK, including the Financial Reporting
Council’s (the ‘FRC’s’) Ethical Standard as
applied to listed public interest entities,
and we have fulfilled our other ethical
responsibilities in accordance with these
requirements. The non-audit services
provided to the Group and Company for
the period are disclosed in note 4 to the
financial statements. We confirm that we
have not provided any non-audit services
prohibited by the FRC’s Ethical Standard
to the Group or the Company.
– the Consolidated and Company
Statements of Financial Position;
– the Consolidated and Company
Statements of Changes in Equity;
– the Consolidated and Company
Statements of Cash Flows; and
– the related notes 1 to 32 and C1 to C7.
The financial reporting framework that
has been applied in their preparation is
applicable law and United Kingdom
adopted international accounting
standards and, as regards the Company
financial statements, as applied in
accordance with the provisions of the
Companies Act 2006.
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We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
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INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
CONTINUED
3. SUMMARY OF OUR AUDIT APPROACH
KEY AUDIT MATTERS
MATERIALITY
The key audit matters that we identified
in the current year were:
– impairment and impairment reversal
of UK store assets;
– accounting for the UK store estate
programme;
The materiality that we used for the
Group financial statements was £25.0m
(2021: £16.0m) which was determined on
the basis of considering a number of
different metrics used by investors and
other readers of the financial statements.
These included:
– inventory provisions for UK Clothing &
– adjusted profit before tax;
Home; and
– disclosure of adjusting items as part
of alternative performance measures.
Within this report, key audit matters are
identified as follows:
Increased level of risk
Similar level of risk
Decreased level of risk
– earnings before interest, tax,
depreciation and amortisation; and
– revenue.
SCOPING
We have performed a full-scope audit
on the UK component of the business.
Balances subject to full scope audit
represent 95% (2021: 96%) of the
Group’s revenue, 88% (2021: 95%) of
adjusted profit before tax, 93% (2021: 93%
of loss before tax) of profit before tax,
80% (2021: 80%) of total assets and 88%
(2021: 88%) of total liabilities. We perform
analytical review procedures on the
residual balances.
SIGNIFICANT CHANGES IN
OUR APPROACH
We have determined that the impairment
of per una goodwill and the going
concern basis of accounting are no
longer key audit matters in the current
period. These changes are discussed
further in section 5.
4. CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we
have concluded that the directors’ use of
the going concern basis of accounting
in the preparation of the financial
statements is appropriate.
Our evaluation of the directors’
assessment of the Group’s and Company’s
ability to continue to adopt the going
concern basis of accounting included:
– obtained an understanding of relevant
controls relating to the assessment of
going concern models, including the
review of the inputs and assumptions
used in those models;
– obtained management’s board-
approved three-year cash flow forecasts
and covenant compliance forecasts,
including the sensitivity analyses;
– reviewed management’s assessment
of going concern and viability, including
the three-year plan, as set out in their
paper to the Audit Committee;
– assessed the appropriateness of
forecast assumptions by:
·
reading analyst reports, industry
data and other external information
and comparing these with
management’s estimates;
· comparing forecast sales with recent
historical financial information to
consider accuracy of forecasting;
· testing the underlying data generated
to prepare the forecast scenarios
and to determine whether there
was adequate support for the
assumptions underlying the forecast;
·
·
reviewing correspondence relating
to UK Government support such
as indirect tax holidays and
staff furlough;
reviewing correspondence relating
to the availability of the Group’s
financing arrangements;
· considering the results of the
sensitivity analyses performed; and
· evaluating the Group’s disclosures
on going concern against the
requirements of IAS 1.
Based on the work we have performed,
we have not identified any material
uncertainties relating to events or
conditions that, individually or collectively,
may cast significant doubt on the Group's
and Company’s ability to continue as a
going concern for a period of at least
twelve months from when the financial
statements are authorised for issue.
In relation to the reporting on how the
Group has applied the UK Corporate
Governance Code, we have nothing
material to add or draw attention to
in relation to the directors’ statement in
the financial statements about whether
the directors considered it appropriate
to adopt the going concern basis
of accounting.
Our responsibilities and the
responsibilities of the directors with
respect to going concern are described
in the relevant sections of this report.
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Key audit matters are those matters that,
in our professional judgement, were of
most significance in our audit of the
financial statements of the current period
and include the most significant assessed
risks of material misstatement (whether
or not due to fraud) that we identified.
These matters included those which had
the greatest effect on: the overall audit
strategy, the allocation of resources in
the audit; and directing the efforts of the
engagement team.
These matters were addressed in the
context of our audit of the financial
statements as a whole, and in forming our
opinion thereon, and we do not provide a
separate opinion on these matters.
5. KEY AUDIT MATTERS
Changes in the current period relative to
the prior period are as follows:
– Due to the recognition of an impairment
in the prior period, the carrying amount
of per una goodwill is below our
materiality and, therefore, it does
not represent a risk of material
misstatement. We have therefore not
identified the impairment of per una
goodwill as a key audit matter. Goodwill
is disclosed in note 14.
– In the prior period going concern was
identified as a key audit matter as a
response to the Covid-19 pandemic
when there was uncertainty around the
financial impact and the potential for
5.1. IMPAIRMENT AND IMPAIRMENT REVERSAL OF UK STORE ASSETS
restrictions to the Group’s ability to
trade from its physical stores. This
uncertainty has reduced significantly
and accordingly we have not identified
the going concern basis of accounting
as a key audit matter in the current
period. Our conclusions relating to
going concern are discussed in
section 4.
G
O
V
E
R
N
A
N
C
E
KEY AUDIT MATTER DESCRIPTION
As at 2 April 2022 the Group held
£3,379.4 million (2021: £3,594.0 million)
of UK store assets in respect of stores
not considered for closure within the UK
store estate programme. In accordance
with IAS 36 Impairment of Assets,
the Group has undertaken an annual
assessment of indicators of impairment.
An impairment charge of £6.9 million
(2021: £66.4 million) and a reversal of
previously recognised impairment
charges of £63.4 million have been
recognised as set out in notes 5 and 15
to the financial statements.
As described in note 15 to the financial
statements, the Group has estimated the
recoverable amount of store assets
based on their value in use, derived from
a discounted cash flow model prepared
by management. The model relies on
certain assumptions and estimates
of future trading performance,
incorporating committed strategic
changes to the UK Clothing & Home and
Food businesses and the performance of
new stores operating within their shelter
period (which takes into account the time
new stores take to establish themselves
in the market), all of which involve a
high degree of estimation uncertainty
(as disclosed in note 1 and note 15).
The key assumptions applied by
management in the impairment reviews
performed are:
– future revenue growth and changes in
gross margin;
– long term growth rates; and
– discount rates.
The Audit Committee considers this
to be a significant matter. Their
consideration is on page 81.
HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE KEY AUDIT MATTER
In responding to the identified key audit
matter we completed the following
audit procedures:
– obtained an understanding of relevant
controls relating to the impairment
review process;
– evaluated and challenged
management's range of impairment
indicators with due consideration
given to the profitability impact of
committed strategic changes to
the UK Clothing & Home and Food
businesses and the performance of
new stores;
– assessed the mechanical accuracy
of the impairment models and the
methodology applied by management
for consistency with the requirements
of IAS 36;
– assessed the appropriateness of
– assessed the completeness and
accuracy of disclosures within the
financial statements in accordance
with IFRS.
Key observations
We are satisfied that the judgements
applied, impairment charges and
reversals recorded and disclosures within
the financial statements are appropriate.
forecast revenue and gross margin
growth rates through comparison with
external economic benchmarking data
and with reference to historical
forecasting accuracy;
– assessed the appropriateness of
the discount rates applied with the
involvement of our internal valuations
specialists and compared the
rates applied with our internal
benchmarking data;
– evaluated the appropriateness and
completeness of information included
in the impairment model based on our
cumulative knowledge of the business
driven by our review of trading plans,
strategic initiatives, minutes of
property and investment committee
meetings, and meetings with regional
store managers and senior trading
managers from key product
categories, together with our wider
retail industry knowledge; and
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INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
CONTINUED
5. KEY AUDIT MATTERS CONTINUED
5.2. ACCOUNTING FOR THE UK STORE ESTATE PROGRAMME
KEY AUDIT MATTER DESCRIPTION
In February 2018, the Board approved a
list of stores marked for closure as part
of its UK store estate programme. The
total charge recognised in connection
with this closure programme in previous
periods was £657.6 million. A further net
charge of £161.4 million has been
recognised in the current period as a
result of:
– an increase in the number of stores
assessed as probable for closure and
the update of estimates made in light
of known developments in the exit
strategy, including current trading
performance, negotiations with
landlords and changes in the retail
property market;
– depreciation of store assets where
previously identified for closure, as
they approach their planned closure
dates; and
– accelerated depreciation and
impairment of buildings and fixtures
and fittings in respect of additional
stores added to the programme.
Further information is set out in notes 1
and 5 to the financial statements and
page 22 of the strategic report.
Our key audit matter was focused on
the specific assumptions applied in the
discounted cash flow analysis prepared
by management including the discount
rate, store closure costs, freehold sale
HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE KEY AUDIT MATTER
In responding to the identified key
audit matter we completed the following
audit procedures:
– obtained an understanding of relevant
controls relating to the review and
approval of the Group's UK store
exit model;
– performed enquiries of management
and inspected the latest strategic
plans, Board and relevant sub-
committee minutes of meetings;
– understood and challenged the basis
of management's judgement where
stores previously marked for closure
are no longer expected to close and
additional stores have been identified
for closure;
– with the involvement of our internal
real estate specialists, we evaluated
the appropriateness of management's
judgements for a representative
sample of properties and benchmark
with reference to external data;
– assessed the mechanical accuracy
of discounted cash flow models and
other key provision calculations;
– assessed the integrity of key inputs
to the discounted cash flow models
including the discount rate, store
closure costs, freehold sale proceeds,
leasehold surrender costs, expected
sublet income, sublet lease incentives
and void periods with reference to
available evidence;
proceeds, leasehold surrender costs and
expected sublet income, lease incentives
and void periods.
The Audit Committee considers this
to be a significant matter. Their
consideration is on page 81.
– recalculated the closing provision for a
representative sample of stores;
– evaluated the accuracy and
completeness of provisions recorded
in light of the status of the Group's UK
store estate plan; and
– assessed the completeness and
accuracy of disclosures within the
financial statements in accordance
with IFRS.
Key observations
We are satisfied that the Group’s estimate
of the impairments and store exit
charges and the associated disclosures
are appropriate.
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5.3. INVENTORY PROVISIONS FOR UK CLOTHING & HOME
5. KEY AUDIT MATTERS CONTINUED
KEY AUDIT MATTER DESCRIPTION
As at 2 April 2022, the Group held
UK Clothing & Home inventories of
£458.6 million (2021: £430.6 million),
inclusive of a provision of £48.3 million
(2021: £78.2 million).
In 2020 the Group recognised an
inventory write-down of £157.0 million
(of which £145.3 million related to UK
Clothing & Home inventory) which
was included within the Group’s
directly attributable gains/(expenses)
resulting from the Covid-19 pandemic
adjusting item.
In the prior period the Group recorded a
net reversal of the inventory impairment
of £90.8 million (£101.6 million relating
to UK Clothing & Home inventory).
In this period the Group has reversed
or utilised the remaining Covid-19
provision of £18.6 million that was
originally recorded and presented
within adjusting items.
of inventory provisions within UK
Clothing & Home to require the most
judgement due to historical trading
performance and the quantum of
gross inventory.
As described in the Accounting Policies
in note 1 to the financial statements,
inventories are carried at the lower of
cost and net realisable value. As a result,
judgement is applied in determining the
appropriate provisions required for
obsolete inventory and inventory
expected to be sold below cost based
upon a detailed analysis of old season
inventory and forecast net realisable
value based upon plans for inventory to
go into sale. We consider the assessment
Management has determined the level
of provision using judgement and with
reference to forecast future sales utilising
available data from past periods on the
saleability of stock. Management has
described its methodology for the
calculation of the inventory provision in
notes 1 and 5.
The Audit Committee considers this
to be a significant matter. Their
consideration is on page 81.
G
O
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N
A
N
C
E
HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE KEY AUDIT MATTER
In responding to the identified key
audit matter we completed the following
audit procedures:
– obtained an understanding of relevant
controls relating to inventory
management and the review and
approval of the inventory provision;
– assessed the validity, accuracy and
completeness of the information
used by management in computing
the provision;
– assessed the mechanical accuracy
and logic of the models underpinning
the provision;
– understood the changes in the
provisioning methodology and
challenged the appropriateness thereof;
– challenged and validated the key
assumptions applied by management
in estimating the provision, by
performing enquiries of buyers and
merchandisers, considering the current
purchasing strategy and ranging plans,
assessed the historical accuracy of
forecasting stock to be subject to a
future discount;
Key observations
We are satisfied with the judgements
taken by management and that the
resulting inventory provision for UK
Clothing & Home is appropriate. We
believe the disclosures made around the
level of uncertainty appropriately reflect
reasonably possible future changes to
management’s estimates.
– tested the accuracy of the process
used by management to identify
potentially impaired inventory across
a representative sample of individual
product lines; and
– assessed the completeness and
accuracy of disclosures within the
financial statements in accordance
with IFRS.
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INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
CONTINUED
5.4. DISCLOSURE OF ADJUSTING ITEMS AS PART OF ALTERNATIVE PERFORMANCE MEASURES
5. KEY AUDIT MATTERS CONTINUED
KEY AUDIT MATTER DESCRIPTION
The Group has presented an alternative
performance measure being adjusted
profit before tax of £522.9 million
(2021: £50.3 million), which is derived
from statutory profit before tax of
£391.7 million (2021: loss before tax of
£209.4 million) adjusted for a number
of items totalling £131.2 million
(2021: £259.7 million) which the Group
considers meet their definition of an
‘adjusting item’. Judgement is exercised
by management in determining the
classification of such items in accordance
with guidance issued by the FRC
and ESMA. We consider there to be
a risk of fraud in the reporting of
adjusting items within the alternative
performance measures.
Explanations of each adjusting item
are set out in note 5 to the financial
statements and are summarised in the
graphic to the right.
£m
600
550
500
450
400
350
161.4
(21.9)
(14.3)
(0.4)
(60.0)
26.9
522.9
16.0
41.3
(17.8)
391.7
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In determining adjusted profit before tax,
we identified the following risks:
– the identification and classification of
items as ‘adjusting’ as part of the
presentation of alternative
performance measures may be
inappropriate, distorting the
reported results;
– the omission of items which are
considered material, one-off or
significant in nature, distorting the
alternative performance measures; and
– the clarity and detail of disclosures in
respect of adjusting items as part of
alternative performance measures may
be insufficient, preventing investors
from obtaining a clear understanding
of the Group’s results and
performance.
The Group’s policy regarding adjusting
items is set out in note 1. This is a
significant matter considered by the
Audit Committee on page 81.
HOW THE SCOPE OF OUR AUDIT RESPONDED TO THE KEY AUDIT MATTER
In responding to the identified key
audit matter we completed the following
audit procedures:
– obtained an understanding of relevant
controls, relating to the identification
and disclosure of adjusting items within
alternative performance measures;
– performed enquiries of management
to understand the rationale applied
in identifying items as adjusting
and completed an independent
assessment as to the selection and
presentation of adjusting items based
on their nature;
– assessed the identification and
– considered the impact of adjusting
consistency of items reported as
adjusting period on period, with
reference to guidance published by
ESMA and the FRC;
– performed tests over a representative
sample of adjusting items through
agreement to supporting evidence;
– used our cumulative audit knowledge
and applied data analytics to identify
and test other transactions outside
of the normal course of business,
or which display characteristics of
being material, significant or one-off
in nature;
items on the directors' remuneration
targets to determine whether any
increased fraud risk factor existed
based on actual results for the
period; and
– assessed the completeness and
accuracy of disclosures within the
financial statements in accordance
with IFRSs.
Key observations
We are satisfied that the items included
in adjusting items within the alternative
performance measures are in line with
the Group’s policy and that they are
appropriately disclosed.
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6.1. MATERIALITY
We define materiality as the magnitude of
misstatement in the financial statements
that makes it probable that the economic
decisions of a reasonably knowledgeable
person would be changed or influenced.
We use materiality both in planning the
scope of our audit work and in evaluating
the results of our work.
Based on our professional judgement,
we determined materiality for the financial
statements as a whole as follows:
6. OUR APPLICATION OF MATERIALITY
Group financial statements
Materiality
£25.0 million (2021: £16.0 million)
Basis for
determining
materiality
Rationale
for the
benchmark
applied
We considered the following metrics in the
current and prior period:
– Adjusted profit before tax
– Earnings before interest, tax, depreciation and
amortisation (‘EBITDA’)
– Revenue
Using professional judgement, we determined
materiality to be £25.0m.
In determining our benchmark for materiality
we considered a number of different metrics
used by investors and other readers of the
financial statements.
Group materiality represents:
Metric
Adjusted profit before tax
EBITDA
Revenue
%
4.8
2.3
0.2
Company financial
statements
£22.5 million
(2021: £14.4 million)
We have used 3% of
net assets in both the
current and the prior
period, capped at 90%
of Group materiality,
as the basis for
materiality.
Net assets is used as
the benchmark as the
Company operates
primarily as a holding
company for the
Group and we
therefore consider
this as they key metric
for the Company.
We capped materiality
at 90% of Group
materiality to reduce
the risk of a material
error arising as a
result of the
consolidation of the
Company’s result in
the Group financial
statements.
G
O
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N
A
N
C
E
6.2. PERFORMANCE MATERIALITY
We set performance materiality at a
level lower than materiality to reduce the
probability that, in aggregate, uncorrected
and undetected misstatements exceed
the materiality for the financial
statements as a whole.
Performance
materiality
Basis and
rationale for
determining
performance
materiality
Group financial statements
Company financial
statements
65% (2021: 60%) of Group materiality
65% (2021: 60%) of
Company materiality
In determining performance materiality, we considered the following factors:
– our cumulative knowledge of the Group and its environment, including
industry specific trends;
– the change in the level of judgement required in key accounting estimates;
– reliability on internal control over financial reporting;
– the level of change to the business in the period;
– the stability in key management personnel;
– the level of centralisation in the Group’s financial reporting controls
and processes; and
– the level of misstatements identified in prior periods.
Our performance materiality percentage has increased from 60% to
65% of materiality due to the reduction in the level of uncertainty caused
by Covid-19.
6.3. ERROR REPORTING THRESHOLD
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.3 million
(2021: £0.8 million), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the
financial statements.
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119
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
CONTINUED
7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT
7.1. IDENTIFICATION AND SCOPING
OF COMPONENTS
Our audit was scoped by obtaining an
understanding of the Group and its
environment, including group-wide
controls, and assessing the risks of
material misstatement at the Group level.
Components were selected to provide an
appropriate basis for undertaking audit
work to address the risks of material
misstatement identified. Based on our
assessment we have focused our audit on
the UK business which was subject to full
audit procedures. We have performed
our full audit scope of the UK component
using a materiality of £22.5 million (or 90%
of Group materiality) (2021: £15.2 million).
The Group holds 50% of the ordinary
shares of Ocado Retail Ltd (‘ORL’). This
interest is accounted for as an investment
in associate in accordance with IAS 28
on the basis that the shareholders’
agreement gives control over ORL to
Ocado Group plc. In the current period
the Group recorded a share of loss of
associate from ORL of £18.6 million and
is subject to specified audit procedures.
We have also tested the consolidation
process and carried out analytical
procedures in forming our conclusion
that there were no significant risks of
material misstatement remaining in the
consolidated financial information arising
from the components not subject to a
full audit.
5%
12%
Revenue
7%
95%
88%
Adjusted profit
before tax
20%
93%
80%
Total assets
Profit
before tax
12%
Full audit scope
Review at Group level
88%
Total liabilities
7.2. OUR CONSIDERATION OF THE
CONTROL ENVIRONMENT
Our audit strategy is to rely on controls
over certain processes within a number
of business cycles. These included
procurement within UK Clothing & Home
and Food, inventory, and fixed assets
including IFRS 16 Leases. As part of
our controls testing, we obtained an
understanding of the Group’s processes
and tested controls through a combination
of tests of inquiry, observation, inspection
and re-performance.
On certain business cycles, we obtained
an understanding of, but did not rely
on, controls. These included inventory
provisions, food rebates and financial
close and reporting.
Given the importance of information
technology (“IT”) to the recording of
financial information and transactions,
we have tested General IT controls
relating to certain of the Group’s IT
systems where relevant to our audit work.
We have been able to place IT controls
reliance across these systems to support
the audit of a number of business cycles,
such as payables, procurement, lease
accounting, property plant and
equipment and inventory.
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7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT CONTINUED
7.3. OUR CONSIDERATION OF
CLIMATE-RELATED RISKS
The Group continues to develop its
assessment of the potential impacts of
climate change and set targets which
management considers to be aligned
with the Paris Agreement. Management
has identified a number of milestones,
including the target of net zero carbon
emissions by 2040, as discussed in the
Task Force on Climate-Related Financial
Disclosures report on pages 72 to 77.
This assessment focusses on the impact
on property and two of the Group’s key
resources: animal protein and cotton.
Management considers that the most
likely impact on the financial statements
will be in relation to its three-year cash
flow forecasts, including those described
as part of our key audit matters in section
5, and has included the impact within
these forecasts where appropriate.
Whilst at this stage there is significant
uncertainty regarding what the long-term
impact of climate change initiatives may
be, the forecasts reflect management's
best estimate of the impact on the
financial statements as explained in
note 1.
As a part of our audit procedures, we have
obtained management’s climate-related
risk assessment and held discussions with
management to understand the process
of identifying climate-related risks, the
determination of mitigating actions and
the impact on the Group’s financial
statements. We performed our own
qualitative risk assessment of the
potential impact of climate change on
the Group’s account balances and classes
of transaction and did not identify any
reasonably possible risks of material
misstatement. Our procedures were
performed with the involvement of our
climate-change specialists and included
reading disclosures included in the
Strategic Report to consider whether they
are materially consistent with the financial
statements and our knowledge obtained
in the audit.
We did not identify climate-related risk as
a separate Key Audit Matter in our audit
given the nature of the Group’s operations
and knowledge gained of its impact
on critical accounting estimates and
judgements during our risk assessment
procedures and audit procedures.
We have not been engaged to provide
assurance over the accuracy of
these disclosures.
8. OTHER INFORMATION
7.4. WORKING WITH OTHER AUDITORS
ORL is the only component of the Group
where work is conducted by a Deloitte
component auditor. We have issued
detailed instructions to the component
audit team to perform specified audit
procedures. Due to the non-co-terminus
year-end of ORL, we have performed a
review of the component auditor’s files
for the period ended 28 November 2021
and the reporting received from the
component auditor for the period
subsequent to 28 November 2021.
We have engaged regularly with the
component auditor throughout the
audit process, determining the nature,
timing and extent of the specified audit
procedures to be performed and to
review their component reporting.
A dedicated member of the Group
audit team is assigned to facilitate an
effective and consistent approach to
component oversight.
G
O
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N
A
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C
E
The other information comprises the
information included in the annual report,
other than the financial statements and
our auditor’s report thereon. The directors
are responsible for the other information
contained within the annual report.
Our opinion on the financial statements
does not cover the other information and,
except to the extent otherwise explicitly
stated in our report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other
information and, in doing so, consider
whether the other information is
materially inconsistent with the financial
statements or our knowledge obtained
in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies
or apparent material misstatements, we
are required to determine whether this
gives rise to a material misstatement in
the financial statements themselves. If,
based on the work we have performed,
we conclude that there is a material
misstatement of this other information,
we are required to report that fact.
We have nothing to report in this regard.
9. RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’
responsibilities statement, the directors
are responsible for the preparation of the
financial statements and for being
satisfied that they give a true and fair view,
and for such internal control as the
directors determine is necessary to enable
the preparation of financial statements
that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
Group’s and the Company’s ability to
continue as a going concern, disclosing
as applicable, matters related to going
concern and using the going concern
basis of accounting unless the directors
either intend to liquidate the Group or the
Company or to cease operations, or have
no realistic alternative but to do so.
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INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORT
CONTINUED
10. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from
material misstatement, whether due to
fraud or error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of
assurance, but is not a guarantee that an
audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists.
Misstatements can arise from fraud
or error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of these financial statements.
A further description of our
responsibilities for the audit of the
financial statements is located on
the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description
forms part of our auditor’s report.
11. EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
Irregularities, including fraud, are instances
of non-compliance with laws and
regulations. We design procedures in line
with our responsibilities, outlined above,
to detect material misstatements in
respect of irregularities, including fraud.
The extent to which our procedures are
capable of detecting irregularities,
including fraud is detailed below.
11.1. IDENTIFYING AND ASSESSING
POTENTIAL RISKS RELATED TO
IRREGULARITIES
In identifying and assessing risks of
material misstatement in respect of
irregularities, including fraud and
non-compliance with laws and regulations,
we considered the following:
– the nature of the industry and sector,
control environment and business
performance including the design of
the Group’s remuneration policies,
key drivers for directors’ remuneration,
bonus levels and performance targets;
– the Group’s own assessment of the
risks that irregularities may occur either
as a result of fraud or error that was
approved by the board;
– results of our enquiries of management,
internal audit and the audit committee
about their own identification and
assessment of the risks of irregularities;
– any matters we identified having
obtained and reviewed the Group’s
documentation of their policies and
procedures relating to:
·
identifying, evaluating and complying
with laws and regulations and
whether they were aware of any
instances of non-compliance;
· detecting and responding to the risks
of fraud and whether they have
knowledge of any actual, suspected
or alleged fraud;
– the matters discussed among the audit
engagement team and relevant internal
specialists, including tax, valuations,
pensions, IT and industry specialists
regarding how and where fraud might
occur in the financial statements and
any potential indicators of fraud.
As a result of these procedures, we
considered the opportunities and
incentives that may exist within the
organisation for fraud and identified the
greatest potential for fraud in the areas in
which management is required to exercise
significant judgment, such as disclosure
of adjusting items within alternative
performance measures. In common
with all audits under ISAs (UK), we are
also required to perform specific
procedures to respond to the risk of
management override.
We also obtained an understanding of
the legal and regulatory framework that
the Group operates in, focusing on
provisions of those laws and regulations
that had a direct effect on the
determination of material amounts and
disclosures in the financial statements.
The key laws and regulations we
considered in this context included
UK Companies Act, Financial Conduct
Authority regulations including the Listing
Rules, pensions and tax legislation.
In addition, we considered provisions of
other laws and regulations that do not
have a direct effect on the financial
statements but compliance with which
may be fundamental to the Group’s ability
to operate or to avoid a material penalty.
These included the competition and
anti-bribery laws, data protection,
Groceries Supply Code of Practice, and
employment, environmental and health
and safety regulations.
11.2. AUDIT RESPONSE TO
RISKS IDENTIFIED
· the internal controls established
to mitigate risks of fraud or
non-compliance with laws and
regulations; and
As a result of performing the above, we
identified the disclosure of adjusting items
within alternative performance measures
as a key audit matter related to the
122
Marks and Spencer Group plc
potential risk of fraud. The key audit
matters section of our report explains the
matter in more detail and also describes
the specific procedures we performed in
response to that key audit matter.
In addition to the above, our procedures
to respond to risks identified included
the following:
– reviewing the financial statement
disclosures and testing to supporting
documentation to assess compliance
with provisions of relevant laws and
regulations described as having a direct
effect on the financial statements;
– enquiring of management, the audit
committee and in-house legal counsel
concerning actual and potential
litigation and claims;
– performing analytical procedures to
identify any unusual or unexpected
relationships that may indicate risks of
material misstatement due to fraud;
– reading minutes of meetings of those
charged with governance, reviewing
internal audit reports and reviewing
correspondence with HMRC; and
– in addressing the risk of fraud through
management override of controls,
testing the appropriateness of journal
entries and other adjustments;
assessing whether the judgements
made in making accounting estimates
are indicative of a potential bias; and
evaluating the business rationale of
any significant transactions that are
unusual or outside the normal course
of business.
We also communicated relevant identified
laws and regulations and potential fraud
risks to all engagement team members
including internal specialists and
component team, and remained
alert to any indications of fraud or
non-compliance with laws and regulations
throughout the audit.
© 2019 Friend Studio Ltd
File name: Auditor_sXReport_v28
Modification Date: 27 May 2022 12:29 pm
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. OPINIONS ON OTHER MATTERS
PRESCRIBED BY THE COMPANIES
ACT 2006
In our opinion the part of the directors’
remuneration report to be audited has
been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work
undertaken in the course of the audit:
– the information given in the strategic
report and the directors’ report for the
financial year for which the financial
statements are prepared is consistent
with the financial statements; and
– the strategic report and the directors’
report have been prepared in
accordance with applicable
legal requirements.
In the light of the knowledge and
understanding of the Group and the
Company and their environment
obtained in the course of the audit,
we have not identified any material
misstatements in the strategic report
or the directors’ report.
13. CORPORATE GOVERNANCE
STATEMENT
The Listing Rules require us to review the
directors' statement in relation to going
concern, longer-term viability and that
part of the Corporate Governance
Statement relating to the Group’s
compliance with the provisions of the
UK Corporate Governance Code specified
for our review.
Based on the work undertaken as part of
our audit, we have concluded that each of
the following elements of the Corporate
Governance Statement is materially
consistent with the financial statements
and our knowledge obtained during
the audit:
– the directors’ statement with regards
to the appropriateness of adopting the
going concern basis of accounting and
any material uncertainties identified set
out on page 111;
– the directors’ explanation as to its
assessment of the Group’s prospects,
the period this assessment covers and
why the period is appropriate set out
on page 55;
– the directors' statement on fair,
balanced and understandable set
out on page 112;
– the board’s confirmation that it has
carried out a robust assessment of the
emerging and principal risks set out
on page 112;
– the section of the annual report that
describes the review of effectiveness
of risk management and internal control
systems set out on pages 45 to 55; and
– the section describing the work of the
audit committee set out on pages 78
to 84.
14. MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY EXCEPTION
14.1. Adequacy of explanations received
and accounting records
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
– we have not received all the information
and explanations we require for our
audit; or
– adequate accounting records have not
been kept by the Company, or returns
adequate for our audit have not been
received from branches not visited by
us; or
– the Company financial statements are
not in agreement with the accounting
records and returns.
We have nothing to report in respect
of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are
also required to report if in our opinion
certain disclosures of directors’
remuneration have not been made or
the part of the directors’ remuneration
report to be audited is not in agreement
with the accounting records and returns.
We have nothing to report in respect of
these matters.
G
O
V
E
R
N
A
N
C
E
15. OTHER MATTERS WHICH WE ARE
REQUIRED TO ADDRESS
15.1. Auditor tenure
Following the recommendation of the
Audit Committee, we were appointed by
the shareholders on 8 July 2014 to audit
the financial statements for the period
ending 28 March 2015 and subsequent
financial periods. The period of total
uninterrupted engagement including
previous renewals and reappointments of
the firm is 8 periods, covering the periods
ending 28 March 2015 to 2 April 2022.
15.2. Consistency of the audit report
with the additional report to the
audit committee
Our audit opinion is consistent with the
additional report to the audit committee
we are required to provide in accordance
with ISAs (UK).
16. USE OF OUR REPORT
This report is made solely to the
company’s members, as a body, in
accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work
has been undertaken so that we might
state to the company’s members those
matters we are required to state to them
in an auditor’s 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 and the company’s members as
a body, for our audit work, for this report,
or for the opinions we have formed.
As required by the Financial Conduct
Authority (FCA) Disclosure Guidance and
Transparency Rule (DTR) 4.1.14R, these
financial statements form part of the
European Single Electronic Format (ESEF)
prepared Annual Financial Report filed
on the National Storage Mechanism of
the UK FCA in accordance with the ESEF
Regulatory Technical Standard (‘ESEF
RTS’). This auditor’s report provides no
assurance over whether the annual
financial report has been prepared using
the single electronic format specified in
the ESEF RTS.
Richard Muschamp FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London
24 May 2022
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Modification Date: 27 May 2022 12:29 pm
Annual Report & Financial Statements 2022
123
FINANCIAL STATEMENTS
Revenue
CONSOLIDATED INCOME STATEMENT
52 weeks ended
2 April 2022
53 weeks ended
3 April 2021
Notes
2, 3
Total
£m
Total
£m
10,885.1
9,155.7
Share of result in associate – Ocado Retail Limited
3, 5, 29
(18.6)
64.2
Operating profit/(loss)
Finance income
Finance costs
Profit/(loss) before tax
Income tax (expense)/credit
Profit/(loss) for the year
Attributable to:
Owners of the parent
Non-controlling interests
Earnings/(loss) per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Reconciliation of profit before tax and adjusting items:
Profit/(loss) before tax
Adjusting items
Profit before tax and adjusting items – non-GAAP measure
Adjusted earnings per share – non-GAAP measure
Adjusted basic earnings per share
Adjusted diluted earnings per share
2, 3, 5
572.2
(30.7)
5, 6
5, 6
4, 5
7
8
8
5
8
8
33.9
(214.4)
391.7
(82.7)
309.0
306.6
2.4
309.0
57.4
(236.1)
(209.4)
8.2
(201.2)
(198.0)
(3.2)
(201.2)
15.7p
15.1p
(10.1p)
(10.1p)
391.7
131.2
522.9
(209.4)
259.7
50.3
21.7p
20.9p
1.4p
1.4p
124 Marks and Spencer Group plc
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Modification Date: May 26, 2022 5:44 pm
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit/(loss) for the year
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss
Remeasurements of retirement benefit schemes
Tax (charge)/credit on retirement benefit schemes
Loss on disposal of investment held at fair value through
other comprehensive income (“FVOCI”)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences
– movements recognised in other comprehensive income
– reclassified and reported in profit or loss
Cash flow hedges
– fair value movements recognised in other comprehensive income
– reclassified and reported in profit or loss
Tax (charge)/credit on cash flow hedges
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive income/(expense) for the year
Attributable to:
Owners of the parent
Non-controlling interests
52 weeks ended
2 April 2022
£m
53 weeks ended
3 April 2021
£m
Notes
309.0
(201.2)
11
16
21
21
357.0
(127.6)
(1,352.0)
256.5
(3.7)
225.7
–
(1,095.5)
(13.5)
(0.5)
91.3
(10.5)
(14.7)
52.1
277.8
586.8
(27.7)
3.7
(215.5)
26.5
37.0
(176.0)
(1,271.5)
(1,472.7)
584.4
2.4
586.8
(1,469.5)
(3.2)
(1,472.7)
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
Annual Report & Financial Statements 2022
125
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Modification Date: May 26, 2022 5:44 pm
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at
2 April 2022
£m
As at
3 April 2021
£m
Notes
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment property
Investments in joint ventures and associates
Other financial assets
Retirement benefit asset
Trade and other receivables
Derivative financial instruments
Current assets
Inventories
Other financial assets
Trade and other receivables
Derivative financial instruments
Current tax assets
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Trade and other payables
Partnership liability to the Marks & Spencer UK Pension Scheme
Borrowings and other financial liabilities
Derivative financial instruments
Provisions
Current tax liabilities
Non-current liabilities
Retirement benefit deficit
Trade and other payables
Partnership liability to the Marks & Spencer UK Pension Scheme
Borrowings and other financial liabilities
Derivative financial instruments
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity
Issued share capital
Share premium account
Capital redemption reserve
Hedging reserve
Cost of hedging reserve
Other reserve
Foreign exchange reserve
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
Total equity
14
15
29
16
11
17
21
5
16
17
21
18
19
12
20
21
22
11
19
12
20
21
22
23
24
21
21
192.5
4,902.3
15.0
810.9
4.5
1,043.9
270.6
21.4
7,261.1
706.1
17.6
217.1
43.6
–
1,197.9
2,182.3
9,443.4
1,960.9
71.9
247.2
3.2
53.6
34.0
2,370.8
5.7
188.2
120.4
3,561.0
0.4
91.8
187.2
4,154.7
6,525.5
2,917.9
232.0
5,058.6
15.2
825.8
9.7
639.2
261.4
0.3
7,042.2
624.6
18.4
209.6
32.8
35.4
674.4
1,595.2
8,637.4
1,599.0
124.9
432.8
96.0
43.1
–
2,295.8
7.8
192.3
68.6
3,659.9
10.7
74.2
42.3
4,055.8
6,351.6
2,285.8
19.7
910.6
2,680.4
17.6
3.6
(6,542.2)
(73.9)
5,897.9
2,913.7
4.2
2,917.9
489.2
910.4
2,210.5
(54.8)
4.6
(6,542.2)
(59.9)
5,325.2
2,283.0
2.8
2,285.8
The financial statements were approved by the Board and authorised for issue on 24 May 2022. The financial statements also comprise
notes 1 to 32.
Steve Rowe, Chief Executive Officer
Eoin Tonge, Chief Financial Officer
126 Marks and Spencer Group plc
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Modification Date: May 26, 2022 5:44 pm
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Ordinary
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Hedging
reserve
£m
Cost of
hedging
£m
Other
reserve¹
£m
Foreign
exchange
reserve
£m
Retained
earnings2
£m
Non-
controlling
interest
£m
Total
£m
Total
£m
487.6 910.4 2,210.5
–
–
–
68.6
–
5.7 (6,542.2)
–
–
(35.9) 6,597.8 3,702.5
(198.0)
(198.0)
–
6.0 3,708.5
(201.2)
(3.2)
–
–
–
–
–
–
–
–
–
–
–
1.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– (214.2)
(1.3)
–
–
26.5
36.8
–
0.2
– (150.9)
(1.1)
– (150.9)
(1.1)
–
–
–
–
–
–
33.9
(6.4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(27.7)
3.7
–
–
(27.7)
3.7
–
–
(27.7)
3.7
– (1,352.0) (1,352.0)
– (1,352.0)
–
–
–
–
256.5
256.5
–
–
–
(215.5)
26.5
37.0
–
–
–
–
256.5
(215.5)
26.5
37.0
(24.0) (1,095.5) (1,271.5)
– (1,271.5)
(24.0) (1,293.5) (1,469.5)
(3.2) (1,472.7)
–
–
–
–
–
–
–
–
33.9
(6.4)
(1.6)
–
(0.8)
19.3
4.0
(0.8)
19.3
4.0
–
–
–
–
–
–
33.9
(6.4)
–
(0.8)
19.3
4.0
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
As at 29 March 2020
Loss for the year
Other comprehensive
(expense)/income:
Foreign currency translation
– movements recognised in
other comprehensive income
– reclassified and reported
in profit or loss
Remeasurements of
retirement benefit schemes
Tax credit on retirement
benefit schemes
Cash flow hedges
– fair value movement in other
comprehensive income
– reclassified and reported
in profit or loss
Tax on cash flow hedges
Other comprehensive
(expense)/income
Total comprehensive
(expense)/income
Cash flow hedges
recognised in inventories
Tax on cash flow hedges
recognised in inventories
Transactions with owners:
Shares issued in respect
of employee share options
Purchase of own shares
held by employee trusts
Credit for share-based payments
Deferred tax on share schemes
As at 3 April 2021
489.2 910.4 2,210.5 (54.8)
4.6 (6,542.2)
(59.9) 5,325.2 2,283.0
2.8 2,285.8
Annual Report & Financial Statements 2022
127
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FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONTINUED
Ordinary
share
capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
Hedging
reserve
£m
Cost of
hedging
£m
Other
reserve¹
£m
Foreign
exchange
reserve
£m
Retained
earnings2
£m
Non-
controlling
interest
£m
Total
£m
Total
£m
As at 4 April 2021
Profit for the year
Other comprehensive
income/(expense):
Foreign currency translation
– movements recognised in
other comprehensive income
– reclassified and reported
in profit or loss
Remeasurements of
retirement benefit schemes
Tax charge on retirement
benefit schemes
Loss on disposal of
investments held at FVOCI
Cash flow hedges
– fair value movement in other
comprehensive income
– reclassified and reported
in profit or loss
Tax on cash flow hedges
Other comprehensive
income/(expense)
Total comprehensive
income/(expense)
Cash flow hedges
recognised in inventories
Tax on cash flow hedges
recognised in inventories
Transactions with owners:
Transactions with
non-controlling shareholders
Shares issued in respect
of employee share options
Buy back and cancellation
of own shares3
Credit for share-based payments
Deferred tax on share schemes
As at 2 April 2022
489.2 910.4 2,210.5 (54.8)
–
–
–
–
4.6 (6,542.2)
–
–
(59.9) 5,325.2 2,283.0
306.6
306.6
–
2.8 2,285.8
309.0
2.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.4
0.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
92.1
(0.8)
(10.5)
(14.5)
–
(0.2)
67.1
(1.0)
67.1
(1.0)
6.5
(1.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13.5)
(0.5)
–
–
(13.5)
(0.5)
–
–
–
–
–
–
357.0
357.0
(127.6)
(127.6)
(3.7)
(3.7)
–
–
–
91.3
(10.5)
(14.7)
(14.0)
225.7
277.8
–
–
–
–
–
–
–
–
–
(13.5)
(0.5)
357.0
(127.6)
(3.7)
91.3
(10.5)
(14.7)
277.8
(14.0)
532.3
584.4
2.4
586.8
–
–
–
–
–
–
6.5
(1.2)
–
–
6.5
(1.2)
(1.7)
(1.7)
(1.0)
(2.7)
(0.3)
0.3
–
0.3
(469.9)
–
–
469.9
–
–
–
–
–
19.7 910.6 2,680.4
–
–
–
17.6
–
–
–
–
–
–
3.6 (6,542.2)
–
–
–
–
–
38.8
38.8
3.6
3.6
(73.9) 5,897.9 2,913.7
–
–
–
–
38.8
3.6
4.2 2,917.9
1. The “other reserve” was originally created as part of the capital restructuring that took place in 2002. It represents the difference between the nominal value of the shares issued
prior to the capital reduction by the Company (being the carrying value of the investment in Marks and Spencer plc) and the share capital, share premium and capital redemption
reserve of Marks and Spencer plc at the date of the transaction.
2. Included within retained earnings is the fair value through other comprehensive income reserve.
3. On 8 July 2021, the Company reduced the nominal value of its 1,957,779,626 ordinary shares in issue at that date from £0.25 to £0.01. The reduction was completed by subdividing
each £0.25 ordinary share in issue into one ordinary share of £0.01 and one deferred share of £0.24. All deferred shares were then bought back for total aggregate consideration of
£0.01 and cancelled. The Company’s issued share capital remains unchanged and each shareholder’s proportionate interest in the share capital of the Company remains unchanged.
Aside from the change in nominal value, the rights attaching to the ordinary shares (including voting and dividend rights and rights on a return of capital) remain unchanged.
128 Marks and Spencer Group plc
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CONSOLIDATED STATEMENT OF CASH FLOWS
Cash flows from operating activities
Cash generated from operations
Income tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Proceeds on property disposals
Purchase of property, plant and equipment
Purchase of intangible assets
Sale/(purchase) of current financial assets
Purchase of non-current financial assets
Proceeds on disposal of non-current financial assets
Purchase of investments in associates and joint ventures1
Acquisition of subsidiary, net of cash acquired2
Loans to related parties
Interest received
Net cash used in investing activities
Cash flows from financing activities
Interest paid3
Issuance of Medium Term Notes
Redemption of Medium Term Notes
Repayment of lease liabilities
Payment of liability to the Marks & Spencer UK Pension Scheme
Shares issued on exercise of employee share options
Purchase of own shares by employee trust
Cash received from settlement of derivatives
Net cash used in financing activities
Net cash inflow from activities
Effects of exchange rate changes
Opening net cash
Closing net cash
52 weeks ended
2 April 2022
£m
53 weeks ended
3 April 2021
£m
Notes
26
1,385.7
(7.7)
1,378.0
43.9
(192.8)
(64.6)
0.8
(3.3)
5.2
(37.8)
(4.5)
(1.0)
8.4
(245.7)
(216.6)
–
(163.6)
(216.0)
–
0.3
–
–
(595.9)
536.4
(8.2)
669.7
1,197.9
24
27
876.7
(5.8)
870.9
2.9
(158.9)
(47.8)
(6.7)
–
–
8.7
–
–
9.2
(192.6)
(219.3)
300.0
(136.4)
(184.3)
(17.2)
–
(0.8)
14.0
(244.0)
434.3
(3.3)
238.7
669.7
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1. Current year includes £33.8m outflow in relation to contingent consideration settled with Ocado Retail Limited and £4.0m outflow on the acquisition of 27% of the issued share
capital of Nobody’s Child Limited. Last year includes inflow of £11.2m upon finalisation of the completion statement in relation to the investment in Ocado Retail Limited and
outflow of £2.5m in relation to Founders Factory Retail Limited.
2. £4.5m outflow on the acquisition of 77.7% of the issued share capital of The Sports Edit Limited.
3. Includes interest paid on the Partnership liability to the Marks & Spencer UK Pension Scheme of £nil (last year: £6.4m) and interest paid on lease liabilities of £128.3m (last year: £132.3m).
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Under these latest forecasts, the Group is able to operate
without the need to draw on its available facilities and without
taking any supplementary mitigating actions, such as reducing
capital expenditure and other discretionary spend. The forecast
cash flows also indicate that the Group will comply with all
relevant banking covenants during the forecast period, being at
least 12 months from the approval of the financial statements.
The Board has also modelled a more severe, but plausible,
downside scenario. This downside scenario assumes that:
– There will be a period of economic recession in the UK in 2022/23
and 2023/24 (following the impacts of the Covid-19 pandemic,
the unfolding humanitarian crisis following the invasion
of Ukraine and the subsequent sharp increases in the cost
of living), resulting in a decline in sales of 4.0% per annum,
across all three business units.
– Utilities, fuel and other costs increasing by over £50m across
2022/23 and 2023/24.
– A delay on transformation benefits results in incremental sales
expected from the transformation declining by 10%, 20% and
40% respectively across the three-year period across both
Food and Clothing & Home business units.
Even under this severe but plausible downside scenario, the
Group would continue to have sufficient liquidity and headroom
on its existing facilities and against the RCF financial covenant
for the forecast period. Although, should such a scenario arise,
there are a range of mitigating actions that could be taken to
reduce the impact. Given current trading and expectations for
the business, the Board considers that this downside scenario
reflects a plausible, but remote, outcome for the Group.
In addition, reverse stress testing has been applied to the model,
which represents a significant decline in sales compared to the
downside scenario. Such a scenario, and the sequence of events
which could lead to it, is considered to be remote.
As a result, the Board expects the Group to have adequate
resources to continue in operation, meet its liabilities as they
fall due, retain sufficient available cash and not breach the
covenant under the revolving credit facility for the foreseeable
future, being a period of at least 12 months from the approval
of the financial statements. The Board therefore considers
it appropriate for the Group to adopt the going concern basis
in preparing its financial statements.
New accounting standards adopted by the Group
The Group has applied the following new standards and
interpretations for the first time for the annual reporting period
commencing 4 April 2021:
– Amendments to IFRS 16: Covid-19-Related Rent Concessions
beyond 30 June 2021.
– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16:
Interest Rate Benchmark Reform Phase 2.
The adoption of the standards and interpretations listed above
has not led to any changes to the Group’s accounting policies
or had any other material impact on the financial position
or performance of the Group.
1 ACCOUNTING POLICIES
General information
Marks and Spencer Group plc (the “Company”) is a public limited
company domiciled and incorporated in England and Wales
under the Companies Act 2006. The address of the Company’s
registered office is Waterside House, 35 North Wharf Road,
London, W2 1NW, United Kingdom.
The principal activities of the Company and its subsidiaries
(the “Group”) and the nature of the Group’s operations are as
a Clothing & Home and Food retailer.
These financial statements are presented in sterling, which is
also the Company’s functional currency, and are rounded to the
nearest hundred thousand. Foreign operations are included in
accordance with the policies set out within this note.
Basis of preparation
The financial statements have been prepared for the 52 weeks
ended 2 April 2022 (last year: 53 weeks ended 3 April 2021) in
accordance with UK-adopted International Accounting Standards
and with the requirements of the Companies Act 2006 as
applicable to companies reporting under those standards.
The Marks and Spencer Scottish Limited Partnership has taken
an exemption under paragraph 7 of the Partnership (Accounts)
Regulations 2008 from the requirement to prepare and deliver
financial statements in accordance with the Companies Act.
The financial statements have been prepared on a going
concern basis. In adopting the going concern basis, the Board
has considered the business activities as set out on pages 10
to 25, the financial position of the Group, its cash flows, liquidity
position and borrowing facilities as set out in the Financial Review
on pages 36 to 44, the Group’s financial risk management
objectives and exposures to liquidity and other financial risks
as set out in note 21 and the principal risks and uncertainties
as set out on pages 47 to 54.
The Group continues to maintain a robust financial position
providing it with sufficient access to liquidity, through a
combination of cash and committed facilities, to meet its needs
in the short and medium term. At 2 April 2022, the Group had
further strengthened its available liquidity over the year to
£2,072.9m (last year: £1,799.4m), comprising cash and cash
equivalents of £1,197.9m, an undrawn committed syndicated bank
revolving credit facility (“RCF”) of £850.0m (set to mature in June
2025), and undrawn uncommitted facilities amounting to £25.0m.
The Group’s net debt at 2 April 2022 was £2,698.8m, a reduction
of £817.1m since 3 April 2021, primarily driven by strong free
cash flow generation.
The Group successfully renegotiated its RCF in December 2021,
which is set to run until June 2025, and replaces the facility which
was due to mature in April 2023. The new facility contains a
financial covenant, being the ratio of earnings before interest, tax,
depreciation and amortisation; to net interest and depreciation
on right-of-use assets under IFRS 16. The covenant is measured
semi-annually.
In adopting the going concern basis of preparation, the Board
has assessed the Group’s cash flow forecasts which incorporate
a latest estimate of the ongoing impact of current market
conditions on the Group and include a number of assumptions
including sales growth and customer behaviour. While trading
continues to be strong, in forming their outlook on the future
financial performance, the Board considered a variety of
downsides that the Group might experience, such as a sustained
economic recession, increased costs and an inability for the
Group to execute the transformation plan.
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New accounting standards in issue but not yet effective
New standards and interpretations that are in issue but not
yet effective are listed below:
– Amendments to IAS 16: Property, Plant and Equipment –
Proceeds before Intended Use
– Amendments to IFRS 3: Reference to the Conceptual Framework
– Amendments to IAS 37: Onerous Contracts – Cost of Fulfilling
a Contract
– Annual Improvements to IFRS Standards 2018-2020 Cycle:
Amendments to IFRS 1 First-time Adoption of International
Financial Reporting Standards, IFRS 9 Financial Instruments,
IFRS 16 Leases and IAS 41 Agriculture
– IFRS 17 Insurance Contracts
– Amendments to IAS 1: Classification of Liabilities as Current
or Non-Current
– Amendments to IAS 1 and IFRS Practice Statement 2:
Disclosure of Accounting Policies
– Amendments to IAS 8: Definition of Accounting Estimates
– Amendments to IAS 12: Deferred Tax Related to Assets and
Liabilities arising from a Single Transaction
– Amendments to IFRS 10 and IAS 28: Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
The adoption of the above standards and interpretations is not
expected to lead to any changes to the Group’s accounting
policies or have any other material impact on the financial
position or performance of the Group.
Alternative performance measures
In reporting financial information, the Group presents alternative
performance measures (“APMs”), which are not defined or
specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered
to be a substitute for, or superior to, IFRS measures, provide
stakeholders with additional helpful information on the
performance of the business. These APMs are consistent with
how the business performance is planned and reported within
the internal management reporting to the Board and Executive
Committee. Some of these measures are also used for the
purpose of setting remuneration targets.
The key APMs that the Group uses include: sales; like-for-like
revenue growth; operating profit before adjusting items; profit
before tax and adjusting items; adjusted basic earnings per share;
net debt; net debt excluding lease liabilities; free cash flow; and
return on capital employed. Each of these APMs, and others used
by the Group, are set out in the Glossary including explanations
of how they are calculated and how they can be reconciled to
a statutory measure where relevant.
The Group reports some financial measures, primarily
International sales, on both a reported and constant currency
basis. The constant currency basis, which is an APM, retranslates
the previous year revenues at the average actual periodic
exchange rates used in the current financial year. This measure
is presented as a means of eliminating the effects of exchange
rate fluctuations on the year-on-year reported results.
The Group makes certain adjustments to the statutory profit
measures in order to derive many of these APMs. The Group’s
policy is to exclude items that are considered significant in nature
and/or quantum to the financial statement line item or applicable
disclosure note or are consistent with items that were treated as
adjusting in prior periods. The Group’s definition of adjusting
items is consistent with prior periods. Adjusted results are
consistent with how business performance is measured internally
and presented to aid comparability of performance. On this basis,
the following items were included within adjusting items for the
52-week period ended 2 April 2022:
– Net charges associated with the strategic programme in relation
to the review of the UK store estate.
– Significant restructuring costs and other associated costs
arising from strategy or operational changes that are not
considered by the Group to be part of the normal operating
costs of the business.
– Impairment charges and provisions that are considered to be
significant in nature and/or value to the trading performance
of the business.
– Charges and reversals of previous impairments arising from
the write-off of assets and other property charges that are
significant in nature and/or value. Impairment charges are
recognised in operating profit before adjusting items where
they relate to stores not previously impaired.
– Adjustments to income from M&S Bank due to a provision
recognised by M&S Bank for the cost of providing redress to
customers in respect of possible mis-selling of M&S Bank
financial products.
– Amortisation of the identified intangible assets arising as part
of the investment in Ocado Retail Limited.
– Remeasurement of contingent consideration including
discount unwind.
– Directly attributable gains and expenses resulting from the
Covid-19 pandemic.
Refer to note 5 for a summary of the adjusting items.
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A summary of the Company’s and the Group’s accounting
policies is given below.
Accounting convention
The financial statements are drawn up on the historical cost basis
of accounting, except for certain financial instruments (including
derivative instruments) and plan assets of defined benefit pension
schemes which are measured at fair value at the end of each
reporting period, as explained in the accounting policies below.
Basis of consolidation
The Group financial statements incorporate the financial
statements of Marks and Spencer Group plc and all its subsidiaries
made up to the period end date. Where necessary, adjustments
are made to the financial statements of subsidiaries to bring the
accounting policies used in line with those used by the Group.
Subsidiaries
Subsidiary undertakings are all entities (including special purpose
entities) over which the Company has control. Control is achieved
when the Company has the power over the entity; is exposed,
or has rights to, variable returns from its involvement with the
entity; and has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an entity if
facts and circumstances indicate that there are changes to one
or more of these three elements of control. Consolidation of
a subsidiary begins when the Company obtains control over the
subsidiary and ceases when the Company loses control of the
subsidiary. Subsidiary undertakings acquired during the year are
recorded using the acquisition method of accounting and their
results are included from the date of acquisition.
The separable net assets, including property, plant and
equipment and intangible assets, of the newly acquired
subsidiary undertakings are incorporated into the consolidated
financial statements on the basis of the fair value as at the
effective date of control.
Intercompany transactions, balances, and unrealised gains
on transactions between Group companies are eliminated
on consolidation.
Associates
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in
a joint venture. Significant influence is the power to participate
in the financial and operating policy decisions of the investee
but is not control or joint control over those policies. The results
and assets and liabilities of associates are incorporated in these
financial statements using the equity method of accounting.
Under the equity method, an investment in an associate is
recognised initially in the consolidated statement of financial
position at cost and adjusted thereafter to recognise the Group’s
share of the profit or loss and other comprehensive income of
the associate. When the Group’s share of losses of an associate
exceeds the Group’s interest in that associate (which includes
any long-term interests that, in substance, form part of the
Group’s net investment in the associate), the Group discontinues
recognising its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of
the associate. Dividends received or receivable from an associate
are recognised as a reduction in the carrying amount of
the investment.
Associated undertakings acquired during the year are recorded
using the equity method of accounting and their results are
included from the date of acquisition. On acquisition of the
investment in an associate, any excess of the cost of the
investment over the Group’s share of the net fair value of the
identifiable assets and liabilities of the investee is recognised
as goodwill, which is included within the carrying amount of the
investment. Any excess of the Group’s share of the net fair value
of the identifiable assets and liabilities over the cost of the
investment, after reassessment, is recognised immediately in
profit or loss in the period in which the investment is acquired.
The Group’s share of the net fair value of identified intangible
assets is amortised over the expected useful economic life
of the assets.
The requirements of IAS 36 are applied to determine whether
it is necessary to recognise any impairment loss with respect to
the Group’s investment in an associate. When necessary, the
entire carrying amount of the investment (including goodwill) is
tested for impairment in accordance with IAS 36 as a single asset
by comparing its recoverable amount (higher of value in use
and fair value less costs of disposal) with its carrying amount.
When a Group company transacts with an associate of the Group,
profits and losses resulting from the transactions with the
associate are recognised only to the extent of interests in the
associate that are not related to the Group.
Revenue
Revenue comprises sales of goods to customers outside the
Group less an appropriate deduction for actual and expected
returns, discounts and loyalty scheme vouchers, and is stated
net of value added tax and other sales taxes. Revenue is
recognised when performance obligations are satisfied and
goods are delivered to our franchise partners or the customer
and the control of goods is transferred to the buyer. Online sales
are recognised when items are delivered, as this is when the
performance obligation is deemed to have been satisfied.
Where third-party branded goods are sold on a consignment basis,
only the commission receivable is included in statutory revenue.
A right of return is not a separate performance obligation and
the Group is required to recognise revenue net of estimated
returns. A refund liability and a corresponding asset in inventory
representing the right to recover products from the customer
are recognised.
The Group enters into agreements which entitle other parties
to operate under the Marks & Spencer brand name for certain
activities and operations, such as M&S Bank and M&S Energy.
These contracts give rise to performance-based variable
consideration. Income dependent on the performance of the
third-party operations is recognised when it is highly probable
that a significant reversal in the amount of income recognised
will not occur, and presented as other operating income.
Supplier income
In line with industry practice, the Group enters into agreements
with suppliers to share the costs and benefits of promotional
activity and volume growth. The Group receives income from its
suppliers based on specific agreements in place. This supplier
income received is recognised as a deduction from cost of sales
based on the entitlement that has been earned up to the balance
sheet date for each relevant supplier agreement. Marketing
contributions, equipment hire and other non-judgemental, fixed
rate supplier charges are not included in the Group’s definition
of supplier income.
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The types of supplier income recognised by the Group and
the associated recognition policies are:
A. Promotional contribution Includes supplier contributions
to promotional giveaways and pre-agreed contributions to
annual “spend and save” activity.
Income is recognised as a deduction to cost of sales over the
relevant promotional period. Income is calculated and invoiced
at the end of the promotional period based on actual sales or
according to fixed contribution arrangements. Contributions earned
but not invoiced are accrued at the end of the relevant period.
B. Volume-based rebates Includes annual growth incentives,
seasonal contributions and contributions to share economies
of scale resulting from moving product supply.
Annual growth incentives are calculated and invoiced at the end
of the financial year, once earned, based on fixed percentage
growth targets agreed for each supplier at the beginning of
the year. They are recognised as a reduction in cost of sales in
the year to which they relate. Other volume-based rebates are
agreed with the supplier and spread over the relevant season/
contract period to which they relate. Contributions earned but
not invoiced are accrued at the end of the relevant period.
Uncollected supplier income at the balance sheet date is
classified within the financial statements as follows:
A. Trade and other payables The majority of income due from
suppliers is netted against amounts owed to that supplier as the
Group has the legal right and intention to offset these balances.
B. Trade and other receivables Supplier income that has been
earned but not invoiced at the balance sheet date is recognised
in trade and other receivables and primarily relates to volume-
based rebates that run up to the period end.
In order to provide users of the accounts with greater
understanding in this area, additional balance sheet disclosure
is provided in note 17 to the financial statements.
M&S Bank
The Group has an economic interest in M&S Bank which entitles
the Group to a 50% share of the profits of M&S Bank after
appropriate contractual deductions.
Dividends
Final dividends are recorded in the financial statements in the
period in which they are approved by the Company’s shareholders.
Interim dividends are recorded in the period in which they are
approved and paid.
Government grants
Government grants are recognised where there is reasonable
assurance that the grants will be received and that the Group
will comply with the conditions attached to them.
Government grants that compensate the Group for expenses
incurred are recognised in profit or loss, as a deduction against
the related expense, over the periods necessary to match them
with the related costs.
Government grant income is disclosed in note 30.
Pensions
Funded pension plans are in place for the Group’s UK employees
and some overseas employees.
For defined benefit (“DB”) pension schemes, the difference
between the fair value of the assets and the present value of
the DB obligation is recognised as an asset or liability in the
statement of financial position. The DB obligation is actuarially
calculated using the projected unit credit method. An asset can
be recognised as, in the event of a plan wind-up, the pension
scheme rules provide the Group with an unconditional right
to a refund of surplus assets assuming a full settlement of plan
liabilities. In the ordinary course of business, the Trustees have
no rights to wind-up or change, the benefits due to the members
of the scheme. As a result, any net surplus in the UK DB scheme
is recognised in full.
The service cost of providing retirement benefits to employees
during the year, together with the cost of any curtailment, is
charged to operating profit in the year. The Group no longer
incurs any service cost or curtailment costs related to the UK
DB Pension Scheme as the scheme is closed to future accrual.
The net interest cost on the net retirement benefit asset/liability
is calculated by applying the discount rate, measured at the
beginning of the year, to the net defined benefit asset/liability
and is included as a single net amount in finance income.
Remeasurements, being actuarial gains and losses, together with
the difference between actual investment returns and the return
implied by the net interest cost, are recognised immediately
in other comprehensive income.
Payments to defined contribution retirement benefit schemes
are charged as an expense on an accruals basis.
For further details on pension schemes and the Partnership liability
to the Marks & Spencer UK Pension scheme, see notes 11 and 12.
Intangible assets
A. Goodwill Goodwill arising on consolidation represents the
excess of the consideration paid and the amount of any non-
controlling interest in the acquiree over the fair value of the
identifiable assets and liabilities (including intangible assets)
of the acquired entity at the date of the acquisition. Goodwill is
recognised as an asset and assessed for impairment annually
or as triggering events occur. Any impairment in value is
recognised within the income statement.
B. Acquired intangible assets Acquired intangible assets include
trademarks or brands. These assets are capitalised on acquisition
at cost and amortised on a straight-line basis over their
estimated useful lives.
Acquired intangible assets are tested for impairment as triggering
events occur. Any impairment in value is recognised within the
income statement.
C. Software intangibles Where computer software is not an
integral part of a related item of computer hardware, the software
is treated as an intangible asset. Capitalised software costs include
external direct costs of goods and services, as well as internal
payroll-related costs for employees who are directly associated
with the project. When the Group incurs configuration and
customisation costs as part of a cloud-based software-as-a-
service agreement, and where this does not result in the creation
of an asset which the Group has control over, then these costs
are expensed.
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Capitalised software development costs are amortised
on a straight-line basis over their expected economic lives,
normally between three and five years. Computer software
under development is held at cost less any recognised
impairment loss. Any impairment in value is recognised
within the income statement.
Property, plant and equipment
The Group’s policy is to state property, plant and equipment
at cost less accumulated depreciation and any recognised
impairment loss. Property is not revalued for accounting
purposes. Assets in the course of construction are held at cost
less any recognised impairment loss. Costs include professional
fees and, for qualifying assets, borrowing costs. Leasehold
buildings with lease premiums and ongoing peppercorn lease
payments are considered in-substance purchases and are
therefore included within the buildings category of property,
plant and equipment.
Depreciation is provided to write off the cost of tangible
non-current assets (including investment properties), less
estimated residual values on a straight-line basis as follows:
– Freehold land – not depreciated.
– Buildings – depreciated to their residual value over their
estimated remaining economic lives of 25-50 years.
– Fixtures, fittings and equipment – 3 to 25 years according
to the estimated economic life of the asset.
Residual values and useful economic lives are reviewed annually.
Depreciation is charged on all additions to, or disposals of,
depreciating assets in the year of purchase or disposal.
Any impairment in value, or reversal of an impairment,
is recognised within the income statement.
Leasing
The Group recognises a right-of-use asset and corresponding
liability at the date at which a leased asset is made available
for use by the Group, except for short-term leases (defined
as leases with a lease term of 12 months or less) and leases
of low-value assets. For these leases, the Group recognises
the lease payments as an operating expense on a straight-line
basis over the term of the lease.
Lease liabilities are measured at the present value of the future
lease payments, excluding any payments relating to non-lease
components. Future lease payments include fixed payments,
in-substance fixed payments, and variable lease payments
that are based on an index or a rate, less any lease incentives
receivable. Lease liabilities also take into account amounts
payable under residual value guarantees and payments to
exercise options to the extent that it is reasonably certain that
such payments will be made. The payments are discounted
at the rate implicit in the lease or, where that cannot be readily
determined, at an incremental borrowing rate.
Right-of-use assets are measured initially at cost based on the
value of the associated lease liability, adjusted for any payments
made before inception, initial direct costs and an estimate of
the dismantling, removal and restoration costs required in the
terms of the lease. The Group presents right-of-use assets in
“property, plant and equipment” in the consolidated statement
of financial position.
Subsequent to initial recognition, the lease liability is reduced
for payments made and increased to reflect interest on the
lease liability (using the effective interest method). The related
right-of-use asset is depreciated over the term of the lease or,
if shorter, the useful economic life of the leased asset. The lease
term shall include the period of an extension option where it is
reasonably certain that the option will be exercised. Where the
lease contains a purchase option, the asset is written off over
the useful life of the asset when it is reasonably certain that the
purchase option will be exercised.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use asset)
whenever:
– The lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which case
the lease liability is remeasured by discounting the revised
lease payments using a revised discount rate.
– The lease payments change due to changes in an index or
rate or a change in expected payment under a guaranteed
residual value, in which cases the lease liability is remeasured
by discounting the revised lease payments using the initial
discount rate (unless the lease payments change is due to
a change in a floating interest rate, in which case a revised
discount rate is used).
– A lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the lease
liability is remeasured by discounting the revised lease
payments using a revised discount rate.
Leases for which the Group is a lessor are classified as finance
or operating leases. A lease is classified as a finance lease if it
transfers substantially all the risks and rewards of ownership
to the lessee, and classified as an operating lease if it does not.
When the Group is an intermediate lessor, it accounts for the
head lease and the sublease as two separate contracts. The
sublease is classified as a finance or operating lease by reference
to the right-of-use asset arising from the head lease.
Amounts due from lessees under finance leases are recognised
as receivables at the amount of the Group’s net investment in the
leases. Finance lease income is allocated to accounting periods
so as to reflect a constant periodic rate of return on the Group’s
net investment in the lease. Rental income from operating leases
is recognised on a straight-line basis over the term of the
relevant lease.
Cash and cash equivalents
Cash and cash equivalents includes short-term deposits with
banks and other financial institutions, with an initial maturity
of three months or less and credit card payments received
within 48 hours. Bank transactions are recorded on their
settlement date.
Inventories
Inventories are valued on a weighted average cost basis and
carried at the lower of cost and net realisable value. Cost includes
all direct expenditure and other attributable costs incurred
in bringing inventories to their present location and condition.
All inventories are finished goods. Certain purchases of inventories
may be subject to cash flow hedges for foreign exchange risk.
The initial cost of hedged inventory is adjusted by the associated
hedging gain or loss transferred from the cash flow hedge
reserve (“basis adjustment”).
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Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, and it is probable that the
Group will be required to settle that obligation. Provisions are
measured at the best estimate of the expenditure required to
settle the obligation at the end of the reporting period, and
are discounted to present value where the effect is material.
Share-based payments
The Group issues equity-settled share-based payments to
certain employees. A fair value for the equity-settled share
awards is measured at the date of grant. The Group measures
the fair value of each award using the Black-Scholes model
where appropriate.
The fair value of each award is recognised as an expense
over the vesting period on a straight-line basis, after allowing
for an estimate of the share awards that will eventually vest.
The level of vesting is reviewed at each reporting period and
the charge is adjusted to reflect actual and estimated levels
of vesting.
Foreign currencies
The financial statements are presented in sterling which is
the Company’s functional currency.
The results of overseas subsidiaries are translated at the weighted
average of monthly exchange rates for revenue and profits.
The statements of financial position of overseas subsidiaries are
translated at year-end exchange rates. The resulting exchange
differences are booked into reserves and reported in the
consolidated statement of comprehensive income. On disposal
of an overseas subsidiary the related cumulative translation
differences recognised in reserves are reclassified to profit or
loss and are recognised as part of the gain or loss on disposal.
Transactions denominated in foreign currencies are translated
at the exchange rate at the date of the transaction. Foreign
currency monetary assets and liabilities held at the end of the
reporting period are translated at the closing balance sheet
rate. The resulting exchange gain or loss is recognised within
the income statement.
Taxation
Tax expense comprises current and deferred tax. Tax is recognised
in the income statement, except to the extent that it relates
to items recognised in other comprehensive income or directly
in equity, in which case the related tax is recognised in other
comprehensive income or directly in equity.
Provision is made for uncertain tax positions when it is considered
probable that there will be a future outflow of funds to a tax
authority. The provision is calculated using the single best
estimate where that outcome is more likely than not and a
weighted average probability in other circumstances. The position
is reviewed on an ongoing basis, to ensure appropriate provision
is made for each known tax risk.
Deferred tax is accounted for using a temporary difference
approach, and is the tax expected to be payable or recoverable
on temporary differences between the carrying amount of
assets and liabilities in the statement of financial position and
the corresponding tax bases used in the computation of taxable
profit. Deferred tax is calculated based on the expected manner
of realisation or settlement of the carrying amount of assets and
liabilities, applying tax rates and laws enacted or substantively
enacted at the end of the reporting period.
Deferred tax liabilities are generally recognised for all taxable
temporary differences. Deferred tax liabilities are recognised
for taxable temporary differences arising on investments in
subsidiaries, associates and joint ventures, except where the
reversal of the temporary difference can be controlled by the
Group and it is probable that the difference will not reverse in
the foreseeable future. In addition, deferred tax liabilities are not
recognised on temporary differences that arise from goodwill
which is not deductible for tax purposes.
Deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which the
deductible temporary differences can be utilised. The carrying
amount of deferred tax assets is reviewed at the end of each
reporting period and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect
of temporary differences that arise on initial recognition of assets
and liabilities acquired other than in a business combination.
Financial instruments
Financial assets and liabilities are recognised in the Group’s
statement of financial position when the Group becomes a party
to the contractual provisions of the instrument. Financial assets
are initially classified as at fair value through profit and loss, fair
value through other comprehensive income or amortised cost
depending on the Group’s business model for managing the
financial asset and its cash flow characteristics. Financial assets
that are held for collection of contractual cash flows, where
those cash flows represent solely payments of principal and
interest, are measured at amortised cost.
The table below sets out the Group’s accounting classification
of each class of its financial assets and liabilities:
Note
Measurement
Financial assets:
Other investments
Unlisted equity investments
Trade receivables
Lease receivables
Other receivables
Cash and cash equivalents
Derivative financial instruments
Financial liabilities:
Borrowings and overdrafts
Trade payables
Other payables
Contingent consideration
Accruals
Lease liabilities
Derivative financial instruments
1. Fair value through profit or loss.
2. Fair value through other comprehensive income.
16
16
17
17
17
18
21
20
19
19
19
19
20
21
FVTPL1
FVOCI2
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVTPL
Amortised cost
Amortised cost
Amortised cost
FVTPL
Amortised cost
Amortised cost
FVTPL
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
A. Trade and other receivables Trade receivables are recorded
initially at transaction price and subsequently measured at
amortised cost, except those which, due to factoring arrangements,
are held within a “hold to collect and sell” business model and are
measured at FVOCI. Trade receivables measured at amortised
cost are carried at nominal value less an allowance for any
doubtful debts. The allowance for doubtful debts is recognised
based on management’s expectation of losses without regard to
whether an impairment trigger happened or not (an “expected
credit loss” model).
B. Other financial assets Other financial assets consist of
investments in unlisted equity securities, loans receivable,
venture capital investments and short-term investments with
a maturity date of over 90 days and are classified as either fair
value through other comprehensive income (“FVOCI”) or fair
value through profit or loss (“FVTPL”). Financial assets held at
FVOCI are initially measured at fair value, including transaction
costs directly attributable to the acquisition of the financial
asset. Financial assets held at FVTPL are initially recognised
at fair value and transaction costs are expensed.
For equity investments at FVOCI, gains or losses arising from
changes in fair value are recognised in other comprehensive
income until the security is disposed of, at which time
the cumulative gain or loss previously recognised in other
comprehensive income and accumulated in the FVOCI reserve
is transferred to retained earnings.
The Group designated all non-listed equity investments not
held for trading as FVOCI on initial recognition because the
Group intends to hold them for long-term strategic purposes.
Financial assets that do not meet the criteria for being measured
at amortised cost or FVOCI are measured at FVTPL with gains
and losses arising from changes in fair value included in the
income statement for the period.
C. Classification of financial liabilities and equity Financial
liabilities and equity instruments are classified according to
the substance of the contractual arrangements entered into.
An equity instrument is any contract that evidences a residual
interest in the assets of the Group after deducting all of
its liabilities.
D. Bank borrowings Interest-bearing bank loans and overdrafts
are initially recorded at fair value, which equals the proceeds
received, net of direct issue costs. They are subsequently held at
amortised cost. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are accounted
for using an effective interest rate method and are added to
or deducted from the carrying amount of the instrument.
E. Loan notes Long-term loans are initially measured at fair value
net of direct issue costs and are subsequently held at amortised
cost. If the loan is designated in a fair value hedge relationship,
the carrying value of the loan is adjusted for fair value gains
or losses attributable to the risk being hedged.
F. Trade payables Trade payables are recorded initially at fair
value and subsequently measured at amortised cost. Generally,
this results in their recognition at their nominal value.
G. Equity instruments Equity instruments issued by the Group are
recorded at the consideration received, net of direct issue costs.
Derivative financial instruments and hedging activities
The Group primarily uses cross-currency swaps and forward
foreign currency contracts to manage its exposures to fluctuations
in interest rates and foreign exchange rates. These instruments
are initially recognised at fair value on the trade date and are
subsequently remeasured at their fair value at the end of the
reporting period. The method of recognising the resulting gain
or loss is dependent on whether the derivative is designated as
a hedging instrument and the nature of the item being hedged.
The Group designates certain hedging derivatives as either:
– A hedge of a highly probable forecast transaction or change
in the cash flows of a recognised asset or liability (a cash flow
hedge); or
– A hedge of the exposure to change in the fair value of
a recognised asset or liability (a fair value hedge).
At the inception of a hedging relationship, the hedging instrument
and the hedged item are documented, along with the risk
management objectives and strategy for undertaking various
hedge transactions and prospective effectiveness testing is
performed. During the life of the hedging relationship, prospective
effectiveness testing is performed to ensure that the instrument
remains an effective hedge of the transaction. Changes in the
fair value of derivative financial instruments that do not qualify
for hedge accounting are recognised in the income statement
as they arise.
In 2019/20, the Group early adopted the Phase 1 amendments
Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39
and IFRS 7. These amendments modify specific hedge accounting
requirements to allow hedge accounting to continue for affected
hedges during the period of uncertainty before the hedged
items or hedging instruments affected by the current interest rate
benchmarks are amended as a result of the ongoing interest rate
benchmark reforms. The application of the amendments impacts
the Group’s accounting in relation to a sterling denominated
fixed rate debt, for which it fair value hedge accounts using
sterling fixed to GBP LIBOR interest rate swaps. The amendments
permit continuation of hedge accounting even if in the future
the hedged benchmark interest rate, GBP LIBOR, may no longer
be separately identifiable. However, this relief does not extend to
the requirement that the designated interest rate risk component
must continue to be reliably measurable. If the risk component
is no longer reliably measurable, the hedging relationship
is discontinued.
In the current year, the Group adopted the Phase 2 amendments
Interest Rate Benchmark Reform – Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 which was issued in August 2020.
These amendments are mandatory for annual reporting periods
beginning on or after 1 January 2021. While the Group no longer
holds any fair value hedge relationships, these amendments
allow the Group to retain any balances from discontinued IBOR
linked hedge relationships on the balance sheet as these are now
deemed to be based on the replacement rate.
136 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
A. Cash flow hedges Changes in the fair value of derivative
financial instruments that are designated and effective as hedges
of future cash flows are recognised in other comprehensive
income. The element of the change in fair value which relates
to the foreign currency basis spread is recognised in the cost
of hedging reserve, with the remaining change in fair value
recognised in the hedging reserve and any ineffective portion is
recognised immediately in the income statement in finance costs.
If the firm commitment or forecast transaction that is the subject
of a cash flow hedge results in the recognition of a non-financial
asset or liability, then, at the time the asset or liability is recognised,
the associated gains or losses on the derivative that had previously
been recognised in other comprehensive income and accumulated
in the cash flow hedge reserve are removed directly from equity
and included in the initial measurement of the asset or liability.
If the hedged item is transaction-related the foreign currency
basis spread is reclassified to profit or loss when the hedged item
affects profit or loss. If the hedged item is time-period related,
then the amount accumulated in the cost of hedging reserve is
reclassified to profit or loss on a systematic and rational basis.
Those reclassified amounts are recognised in profit or loss in the
same line as the hedged item. If the hedged item is a non-financial
item, then the amount accumulated in the cost of hedging reserve
is removed directly from equity and included in the initial carrying
amount of the recognised non-financial item.
For hedges that do not result in the recognition of an asset
or a liability, amounts deferred in the cash flow hedge reserve
are recognised in the income statement in the same period in
which the hedged items affect net profit or loss.
B. Fair value hedges Changes in the fair value of a derivative
instrument designated in a fair value hedge are recognised in
the income statement. The hedged item is adjusted for changes
in fair value attributable to the risk being hedged with the
corresponding entry in the income statement.
Changes in the fair value of derivative financial instruments
that do not qualify for hedge accounting are recognised in the
income statement as they arise.
C. Discontinuance of hedge accounting Hedge accounting is
discontinued when the hedge relationship no longer qualifies for
hedge accounting. This includes when the hedging instrument
expires, is sold, terminated or exercised, or when occurrence of
the forecast transaction is no longer highly probable. The Group
cannot voluntarily de-designate a hedging relationship.
When a cash flow hedge is discontinued, any cumulative gain
or loss on the hedging instrument accumulated in the cash flow
hedge reserve is retained in equity until the forecast transaction
occurs. Subsequent changes in the fair value are recognised in
the income statement. If a hedged transaction is no longer
expected to occur, the net cumulative gain or loss accumulated
in the cash flow hedge reserve is transferred to the income
statement for the period.
When a fair value hedge is discontinued, the fair value
adjustment to the carrying amount of the hedged item arising
from the hedged risk is amortised to the income statement
based on the recalculated effective interest rate at that date.
The Group does not use derivatives to hedge income statement
translation exposures.
Reserves
The following describes the nature and purpose of each reserve
within equity:
A. Share premium account Proceeds received in excess of the
nominal value of shares issued, net of any transaction costs.
B. Capital redemption reserve Amounts transferred from
share capital on redemption or repurchase of issued shares.
C. Hedging reserve Cumulative gains and losses on hedging
instruments deemed effective in cash flow hedges.
D. Cost of hedging Cumulative gains and losses on the portion
excluded from the designated hedging instrument that relates
to changes in the foreign currency basis.
E. Other reserve Originally created as part of the capital
restructuring that took place in 2002. It represents the difference
between the nominal value of the shares issued prior to the
capital reduction by the Company (being the carrying value of
the investment in Marks and Spencer plc) and the share capital,
share premium and capital redemption reserve of Marks and
Spencer plc at the date of the transaction.
F. Foreign exchange reserve Gains and losses arising on
retranslating the net assets of overseas operations into sterling.
G. Retained earnings All other net gains and losses and
transactions with owners (e.g. dividends) not recognised elsewhere.
Critical accounting judgements and
key sources of estimation uncertainty
The preparation of consolidated financial statements requires
the Group to make estimates and judgements that affect the
application of policies and reported amounts.
Critical judgements represent key decisions made by management
in the application of the Group accounting policies. Where a
significant risk of materially different outcomes exists due to
management assumptions or sources of estimation uncertainty,
this will represent a key source of estimation uncertainty. Estimates
and judgements are continually evaluated and are based on
historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
The estimates which have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities
within the next 12 months are discussed below.
Critical accounting judgements
Adjusting items
The directors believe that the adjusted profit and earnings
per share measures provide additional useful information to
shareholders on the performance of the business. These measures
are consistent with how business performance is measured
internally by the Board and Executive Committee. The profit
before tax and adjusting items measure is not a recognised
profit measure under IFRS and may not be directly comparable
with adjusted profit measures used by other companies.
The classification of adjusting items requires significant
management judgement after considering the nature and
intentions of a transaction. The Group’s definitions of adjusting
items are outlined within both the Group accounting policies
and the Glossary. These definitions have been applied
consistently year on year.
Note 5 provides further details on current year adjusting items
and their adherence to Group policy.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
UK defined benefit pension surplus
Where a surplus on a defined benefit scheme arises, the rights
of the Trustees to prevent the Group obtaining a refund of that
surplus in the future are considered in determining whether it is
necessary to restrict the amount of the surplus that is recognised.
The UK defined benefit scheme is in surplus at 2 April 2022.
The directors have made the judgement that these amounts
meet the requirements of recoverability on the basis that
paragraph 11(b) of IFRIC 14 applies, enabling a refund of surplus
assuming the gradual settlement of the scheme liabilities over
time until all members have left the scheme, and a surplus
of £1,043.9m has been recognised.
Assessment of control over Ocado Retail Limited
The directors have assessed that the Group has significant
influence over Ocado Retail Limited and has therefore accounted
for the investment as an associate (see note 29). This assessment
is based on the current rights held by the respective shareholders
and requires judgement in assessing these rights. These rights
include determinative rights currently held by Ocado Group Plc,
after agreed dispute-resolution procedures, in relation to the
approval of the Ocado Retail Limited business plan and budget
and the appointment and removal of Ocado Retail Limited’s
Chief Executive Officer. Any future change to these rights
requires a reassessment of control and could result in a change
in the status of the investment from associate to joint venture,
subsidiary or investment.
Determining the lease term
The Group determines the lease term as the non-cancellable
term of the lease, together with any periods covered by an option
to extend the lease if it is reasonably certain to be exercised, or
any periods covered by an option to terminate the lease if it is
reasonably certain not to be exercised.
The Group has several lease contracts for land and buildings
that include extension and termination options. The Group
applies judgement in evaluating whether it is reasonably certain
whether or not to exercise the option to renew or terminate
the lease. That is, it considers all relevant factors that create
an economic incentive for it to exercise either the renewal or
termination, including: whether there are significant penalties to
terminate (or not extend); whether any leasehold improvements
are expected to have a significant remaining value; historical
lease durations; the importance of the underlying asset to the
Group’s operations; and the costs and business disruption
required to replace the leased asset.
Most renewal periods and periods covered by termination
options are included as part of the lease term for leases of land
and buildings. The Group typically exercises its option to renew
(or does not exercise its option to terminate) for these leases
because there will be a significant negative effect on trading
if a replacement property is not readily available.
The lease term is reassessed if a significant event or a significant
change in circumstances occurs which affects the assessment
of reasonable certainty, for example, if a store is identified to be
closed as part of the UK store estate strategic programme.
Determining whether forecast purchases are highly probable
The Group is exposed to foreign currency risk, most significantly
to the US dollar as a result of sourcing Clothing & Home
products from Asia which are paid for predominantly in US
dollars. The Group hedges these exposures using forward foreign
exchange contracts and hedge accounting is applied when the
requirements of IFRS 9 are met, which include that a forecast
transaction must be “highly probable”.
The Group has applied judgement in assessing whether forecast
purchases are “highly probable”. In making this assessment, the
Group has considered the most recent budgets and plans. The
Group’s policy is a “layered” hedging strategy where only a small
fraction of the forecast purchase requirements is initially hedged,
approximately 14 months prior to a season, with incremental
hedges layered on over time as the buying period for that season
approaches and therefore as certainty increases over the
forecast purchases. As a result of this progressive strategy,
a reduction in the supply pipeline of inventory does not
immediately lead to over-hedging and the disqualification of
“highly probable”. If the forecast transactions were no longer
expected to occur, any accumulated gain or loss on the hedging
instruments would be immediately reclassified to profit or loss.
Key sources of estimation uncertainty
Climate change impact
Climate change is a global challenge and an emerging risk to
businesses, people and the environment across the world.
Although commitments we have made to date form part of the
cash flow projections within our going concern and impairment
assessments, the impact of climate change is not judged to have
been a key driver in determining the outcomes of these exercises
and is therefore not currently classified as a key source of
estimation uncertainty. The Group will continue to review this
classification as the assessment of the impacts, risks and
opportunities presented by climate change and the Group’s
commitments to address the challenges presented evolve over
the coming years.
UK store estate programme
The Group is undertaking a significant strategic programme to
review its UK store estate resulting in a net charge of £161.4m
(last year: £95.3m) in the year. A significant level of estimation has
been used to determine the charges to be recognised in the year.
The most significant judgement that impacts the charge is that
the stores identified as part of the programme are more likely
than not to close. Further significant closure costs and impairment
charges may be recorded in future years depending on decisions
made about further store closures and the successful delivery
of the transformation programme.
Where a store closure has been announced there is a reduced
level of estimation uncertainty as the programme actions are
to be taken over a shorter and more immediate timeframe.
Further significant estimation uncertainty arises in respect of
determining the recoverable amount of assets and the costs to
be incurred as part of the programme. Significant assumptions
have been made including:
– Reassessment of the useful lives of store fixed assets and
closure dates.
– Estimation in respect of the expected shorter-term trading
value in use, including assumptions with regard to the period
of trading as well as changes to future sales, gross margin
and operating costs.
138 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Inventory provisioning
The Group assesses the recoverability of inventories by applying
assumptions around the future saleability and estimated selling
prices of items.
At 2 April 2022, the Group had recognised a total UK Clothing
& Home inventory provision of £48.3m (last year: £78.2m), which
included £nil (last year: £24.2m) relating specifically to the
estimated impact of the Covid-19 pandemic. During 2021/22, UK
Clothing & Home performance has been strong, with better-than-
expected sell-through of inventory originally provided for and the
Group has updated its assumptions regarding future trading
performance. After utilising £10.2m of these provisions in the
period, the Group has released the remaining £14.0m, resulting in
no UK Clothing & Home inventory provisions in relation to Covid-19
remaining on the balance sheet at 2 April 2022. See note 5 for
further details on the assumptions and associated sensitivities.
Post-retirement benefits
The determination of pension net interest income and the
defined benefit obligation of the Group’s defined benefit pension
schemes depends on the selection of certain assumptions which
include the discount rate, inflation rate and mortality rates.
Differences arising from actual experiences or future changes in
assumptions will be reflected in subsequent periods. The fair value
of unquoted investments within total plan assets is estimated with
consideration of fair value estimates provided by the manager of
the investment or fund. See note 11 for further details on the
impact of changes in the key assumptions and estimates.
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– Estimation of the sale proceeds for freehold stores which
is dependent upon location-specific factors, timing of likely
exit and future changes to the UK retail property market
valuations.
– Estimation of the value of dilapidation payments required
for leasehold store exits, which is dependent on a number
of factors including the extent of modifications to the store,
the terms of the lease agreement, and the condition of the
property.
The assumptions most likely to have a material impact are
closure dates and changes to future sales. See notes 5 and 15
for further detail.
Useful lives and residual values of property,
plant and equipment and intangibles
Depreciation and amortisation are provided to write down the
cost of property, plant and equipment and certain intangibles to
their estimated residual values over their estimated useful lives,
as set out above. The selection of the residual values and useful
lives gives rise to estimation uncertainty, especially in the context
of changing economic and market factors, the channel shift
from stores to online, increasing technological advancement
and the Group’s ongoing strategic transformation programmes.
The useful lives of property, plant and equipment and intangibles
are reviewed by management annually. See notes 14 and 15 for
further details. Refer to the UK store estate programme section
above for specific sources of estimation uncertainty in relation
to the useful lives of property, plant and equipment for stores
identified as part of the UK store estate programme. Due to the
nature of the Group’s property, plant and equipment, it is not
practicable to provide a meaningful sensitivity analysis.
Impairment of property, plant and equipment and intangibles
Property, plant and equipment and computer software
intangibles are reviewed for impairment if events or changes
in circumstances indicate that the carrying amount may not be
recoverable. Goodwill and indefinite life brands are reviewed for
impairment on an annual basis. When a review for impairment is
conducted, the recoverable amount is determined based on the
higher of value in use and fair value less costs to sell. The value
in use method requires the Group to determine appropriate
assumptions in relation to the cash flow projections over the
three-year strategic plan period (which is a key source of
estimation uncertainty), the long-term growth rate to be applied
beyond this three-year period and the risk-adjusted pre-tax
discount rate used to discount the assumed cash flows to
present value. See notes 14 and 15 for further details on the
Group’s assumptions and associated sensitivities.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 SEGMENTAL INFORMATION
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reporting on components of the
Group that are regularly reviewed by the chief operating decision-maker to allocate resources to the segments and to assess their
performance.
The chief operating decision-maker has been identified as the Executive Committee. The Executive Committee reviews the Group’s
internal reporting in order to assess performance and allocate resources across each operating segment.
The Group’s reportable operating segments have therefore been identified as follows:
– UK Clothing & Home – comprises the retailing of womenswear, menswear, lingerie, kidswear and home products through UK retail
stores and online.
– UK Food – includes the results of the UK retail food business and UK Food franchise operations, with the following five main
categories: protein deli and dairy; produce; ambient and in-store bakery; meals, dessert and frozen; and hospitality and ‘Food on
the Move’; and direct sales to Ocado Retail Limited.
– International – consists of Marks and Spencer owned businesses in Europe and Asia and the international franchise operations.
– Ocado – includes the Group’s share of profits or losses from the investment in Ocado Retail Limited.
Other business activities and operating segments, including M&S Bank and M&S Energy, are combined and presented in “all other
segments”. Finance income and costs are not allocated to segments as each is managed on a centralised basis.
The Executive Committee assesses the performance of the operating segments based on a measure of operating profit before
adjusting items. This measurement basis excludes the effects of adjusting items from the operating segments.
The following is an analysis of the Group’s revenue and results by reportable segment:
52 weeks ended 2 April 2022
53 weeks ended 3 April 2021
UK
Clothing
& Home
£m
UK Food
£m
International
£m
Ocado
£m
All other
segments
£m
Group
£m
UK
Clothing
& Home
£m
UK Food
£m
International
£m
Ocado
£m
All other
segments
£m
Group
£m
3,332.2 6,639.6
937.2
3,308.3 6,639.6
937.2
–
–
– 10,909.0 2,239.0 6,138.5
789.4
– 10,885.1 2,239.0 6,138.5
789.4
–
–
– 9,166.9
– 9,166.9
330.7
277.8
73.6
13.9
13.0
709.0
(130.8)
228.6
44.1
78.4
1.9
222.2
28.3
(214.4)
57.4
(229.3)
330.7
277.8
73.6
13.9
13.0
522.9
(130.8)
228.6
44.1
78.4
1.9
50.3
(131.2)
(259.7)
330.7
277.8
73.6
13.9
13.0
391.7
(130.8)
228.6
44.1
78.4
1.9
(209.4)
Sales before
adjusting items1
Revenue before
adjusting items2
Operating
profit/(loss) before
adjusting items3
Finance income
before adjusting
items
Finance costs
before adjusting
items
Profit/(loss)
before tax and
adjusting items
Adjusting items
Profit/(loss)
before tax
1. Sales before adjusting items is revenue before adjusting items stated prior to adjustments for UK Clothing & Home brand consignment sales of £23.9m.
2. Revenue is stated prior to adjusting items of £nil (last full year: £11.2m) (see note 5).
3. Operating profit/(loss) before adjusting items is stated as gross profit less operating costs prior to adjusting items. Reportable segment level costs are allocated where directly
attributable or based on an appropriate cost driver for the cost.
140 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2 SEGMENTAL INFORMATION CONTINUED
Other segmental information
52 weeks ended 2 April 2022
53 weeks ended 3 April 2021
UK
Clothing
& Home
£m
UK Food
£m
International
£m
Ocado
£m
All other
segments
£m
Group
£m
UK
Clothing
& Home
£m
UK Food
£m
International
£m
Ocado
£m
All other
segments
£m
Group
£m
Additions to
property, plant
and equipment,
and intangible
assets (excluding
goodwill and
right-of-use assets)
Depreciation and
amortisation1,2
Impairment charges,
impairment reversals
and asset write-offs1
139.2
163.7
18.5
(268.1)
(248.8)
(35.0)
(37.2)
10.7
(8.0)
–
–
–
–
–
–
321.4
50.5
105.0
6.8
(551.9)
(312.3)
(259.4)
(25.1)
(34.5)
(155.1)
(34.9)
(4.7)
–
–
–
–
–
162.3
(596.8)
–
(194.7)
1. These costs are allocated to a reportable segment where they are directly attributable. Where costs are not directly attributable, a proportional allocation is made to each segment
based on an appropriate cost driver.
2. Includes £0.2m (last year: £0.3m) depreciation charged on investment property.
Segment assets and liabilities, including investments in associates and joint ventures, are not disclosed because they are not reported
to or reviewed by the Executive Committee.
3 EXPENSE ANALYSIS
Revenue
Cost of sales
Gross profit
Selling and administrative expenses
Other operating income
Share of results of Ocado Retail Limited
Operating profit/(loss)
2022
Total
£m
10,885.1
(7,130.3)
3,754.8
(3,244.1)
80.1
(18.6)
572.2
2021
Total
£m
9,155.7
(6,244.1)
2,911.6
(3,018.9)
12.4
64.2
(30.7)
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The figures above include £136.8m (last year: £252.9m) adjusting item charges within operating profit/(loss) (see note 5). These are further
analysed against the categories of revenue (£nil; last year: £11.2m), cost of sales (£17.0m gain; last year: £86.3m gain), selling and
administrative expenses (£155.9m; last year: £313.8m), other operating income (£34.6m; last year: £nil) and share of results of Ocado
Retail Limited (£32.5m; last year: £14.2m).
The selling and administrative expenses are further analysed below:
Employee costs1,2
Occupancy costs
Repairs, renewals and maintenance of property
Depreciation, amortisation and asset impairments and write-offs3
Other costs4
Selling and administrative expenses
2022
Total
£m
1,420.6
344.3
122.2
586.4
770.6
3,244.1
2021
Total
£m
1,339.1
223.9
95.8
791.7
568.4
3,018.9
1. There are an additional £65.1m (last year: £68.8m) employee costs recorded within cost of sales. These costs are included within the aggregate remuneration disclosures in note 10A.
2. Last year included furlough income (see note 30).
3. Includes £0.2m (last year: £0.3m) depreciation charged on investment property.
4. Includes costs such as logistics, IT, marketing and sundry costs.
Adjusting items categorised as selling and administrative expenses are further analysed as: employee costs of £0.1m (last year: £100.4m);
occupancy costs £5.9m (last year: £6.1m); depreciation, amortisation and asset impairments/reversals and write-offs £64.9m (last year:
£188.6m); and other costs £85.0m (last year: £18.7m).
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
4 PROFIT/(LOSS) BEFORE TAXATION
The following items have been included in arriving at profit/(loss) before taxation:
Net foreign exchange (gains)/losses
Cost of inventories recognised as an expense
Write-down of inventories recognised as an expense
Depreciation of property, plant and equipment1
– owned assets
– right-of-use assets
Amortisation of intangible assets
Impairments and write-offs of intangible assets and property, plant and equipment
Impairment reversals of property, plant and equipment
Impairments of right-of-use assets
Impairment reversals of right-of-use assets
1. Includes £0.2m (last year: £0.3m) depreciation charged on investment property.
2022
£m
(14.5)
6,086.3
197.6
290.5
167.8
93.6
100.1
(62.1)
25.4
(28.9)
2021
£m
2.9
5,427.6
117.0
312.1
153.1
131.6
252.0
(73.1)
52.7
(36.9)
Included in administrative expenses is the auditor’s remuneration, including expenses for audit and non-audit services, payable to the
Company’s auditor Deloitte LLP and its associates as follows:
Annual audit of the Company and the consolidated financial statements
Audit of subsidiary companies
Total audit fees
Audit-related assurance services
Total non-audit services fees
Total audit and non-audit services
2022
£m
1.7
0.6
2.3
0.2
0.2
2.5
2021
£m
1.6
0.6
2.2
0.2
0.2
2.4
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
5 ADJUSTING ITEMS
The total adjusting items reported for the 52-week period ended 2 April 2022 is a net charge of £131.2m (last year: £259.7m).
The adjustments made to reported profit before tax to arrive at adjusted profit are:
Included in revenue
Sparks loyalty programme transition
Included in operating profit
Strategic programmes – UK store estate
Strategic programmes – UK logistics
Strategic programmes – Organisation
Strategic programmes – International store closures and impairments
Store impairments, impairment reversals and other property charges
Amortisation and fair value adjustments arising as part of the investment in
Ocado Retail Limited
Directly attributable gains resulting from the Covid-19 pandemic
M&S Bank charges incurred in relation to insurance mis-selling provision
Franchise restructure
Intangible asset impairments
Sparks loyalty programme transition
Establishing the investment in Ocado Retail Limited
GMP and other pension equalisation
Included in net finance costs
Remeasurement of contingent consideration including discount unwind
Notes
15, 22
15, 22
15, 22
22
15, 22
29
14
11
2022
£m
–
–
(161.4)
21.9
14.3
0.4
60.0
(32.5)
17.8
(16.0)
(41.3)
–
–
–
–
(136.8)
5.6
5.6
2021
£m
(11.2)
(11.2)
(95.3)
(2.2)
(133.7)
(3.6)
6.9
(14.2)
90.8
(2.4)
–
(79.9)
(5.4)
(1.7)
(1.0)
(241.7)
(6.8)
(6.8)
Adjustments to profit before tax
(131.2)
(259.7)
Strategic programmes – UK store estate (£161.4m)
In November 2016, the Group announced a strategic programme to transform the UK store estate with the overall objective to
improve our store estate to better meet our customers’ needs. The Group incurred charges of £657.6m up to April 2021 under this
programme primarily relating to closure costs associated with stores identified as part of the strategic transformation plans.
During 2020/21, the Group experienced a significant channel shift from stores to online due to the pandemic, accelerating the Group’s
ambition to achieve a Clothing & Home online sales mix of at least 40% over the next three years. This acceleration in channel shift
required the Group to revise the UK store estate strategic programme to ensure the estate continued to meet customers’ needs.
The Group has recognised a charge of £161.4m in the period in relation to those stores identified as part of the rotation plans. The charge
primarily reflects a revised view of latest store closure plans and assumptions for estimated store closure costs, as well as charges
relating to the impairment of buildings and fixtures and fittings, and depreciation as a result of shortening the useful economic life
of stores based on the latest approved exit routes.
Further charges relating to the closure and rotation of the UK store estate are anticipated over the next nine years as the programme
progresses, the quantum of which is subject to change throughout the programme period as we get greater certainty
of circumstances that need to be in place to make closure financially viable. Future charges will not include Foodhall closures at lease
event where there is opportunity for a better location, as this is not in the scope of the programme.
Following the latest review at 2 April 2022, the total closure programme now consists of 204 stores, 100 of which have already closed.
Further charges of c.£200m are estimated within the next nine financial years, bringing anticipated total programme costs since 2016
to c.£1bn, vs c.£926m year. In addition, where store exit routes in the next nine years lead to the recognition of gains on exit, particularly
those relating to asset management, these credits will also be recognised within adjusting items as part of the programme.
These costs are reported as adjusting items on the basis that they are significant in quantum, relate to a strategic initiative focused
on reviewing our store estate and to aid comparability from one period to the next.
The anticipated total programme costs do not include any costs that may arise in relation to a further c.30 stores currently under
consideration for closure within the next nine years. At this stage these c.30 stores remain commercially supportable and in the event
of a decision to close the store the exit routes are not yet certain.
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5 ADJUSTING ITEMS CONTINUED
Strategic programmes – UK logistics (£21.9m credit)
In 2017/18, as part of the previously announced long-term strategic
programme to transition to a single-tier UK distribution network,
the Group announced the opening of a new Clothing & Home
distribution centre in Welham Green. As a direct result, the Group
announced the closure of two existing distribution centres.
In February 2020, the next phase of the single-tier programme
was announced with the closure of two further distribution
centres across 2020/21 and 2021/22. A net credit of £21.9m has
been recognised in the period, reflecting the gain on disposal of
distributions centres and an updated view of estimated closure
costs. Total programme costs to date are £17.9m with further net
charges of £43.3m expected over the next three financial years.
These net credits are reported as adjusting items on the basis
that they are significant in quantum, relate to a strategic initiative
focused on reviewing our UK logistics network and to aid
comparability from one period to the next.
Strategic programmes – Organisation (£14.3m credit)
During 2020/21, the Group announced a commitment to integrate
more flexible management structures into store operations as well
as streamline the business at store and management level in the
UK and Republic of Ireland as part of the ‘Never the Same Again’
transformation. The changes resulted in a reduction of c.8,200
roles across central support centres, regional management and
stores. A credit of £2.4m has been recognised in the period based
on the finalisation of redundancy costs associated with these
changes. No provision remains at the year end and there are no
further charges anticipated.
During 2016/17, the Group announced a wide-ranging strategic
review across a number of areas of the business which included
UK organisation and the programme to centralise our London
Head Office functions into one building. In previous years, an
impairment charge of £11.9m was recognised in relation to the
sub-let of previously closed offices. In the period, this impairment
charge has been fully reversed with a credit of £11.9m recognised.
This relates to the updating of assumptions and market fluctuations
over the life of the sublet of previously closed offices. Total costs
of centralising our London Head Office functions into one building
incurred to date are c.£86m. Any future charges will relate to the
updating of assumptions and market fluctuations over the life
of the sublet lease.
These credits are reported as adjusting items on the basis that they
are consistent with the disclosure of costs previously recognised.
Strategic programmes – International store
closures and impairments (£0.4m credit)
In 2016/17, the Group announced its intention to close owned
stores in 10 international markets. A credit of £0.4m (last year:
charge of £3.6m) has been recognised in the year, reflecting an
updated view of the estimated final closure costs for certain
markets and those costs which can only be recognised as
incurred, taking the programme net cost to date to £148.2m.
The net credit is considered to be an adjusting item as it is part
of a strategic programme which, over the six years of net charges,
has been significant in both quantum and nature to the results
of the Group. No further significant charges are expected.
Directly attributable gains resulting from
the Covid-19 pandemic (£17.8m credit)
In March 2020, following the onset of the Covid-19 global
pandemic and subsequent UK government restrictions, the Group
sustained significant disruption to its operations. In response to
the uncertainty resulting from the pandemic, coupled with the
fast-paced changes taking place across the retail sector, the
144 Marks and Spencer Group plc
Board approved a Covid-19 scenario to reflect management’s
best estimate of the significant volatility and business disruption
expected as a result of the ongoing pandemic.
The pandemic continued to impact the Group throughout 2020/21
and it became increasingly more difficult to differentiate Covid-19
items from costs that supported the underlying performance
of the business. In addition, the estimated timeframe over which
these effects may have impacted the business increased. As a
result, the Group took the decision in the interim 2020/21 results
to only include changes in estimates to items that were included
in adjusting items in 2019/20, in this case relating to the inventory
provision and bad debt provision.
Included within directly attributable expenses resulting from
the Covid-19 pandemic of £163.6m at 2019/20, was an incremental
write-down of inventory to net realisable value of £157.0m
(UK Clothing & Home: £145.3m; UK Food: £6.0m; and International:
£5.7m), reflecting management’s best estimate of the impact
on the Group of the Covid-19 pandemic. Accordingly, of the total
£204.8m inventory provision, £157.0m was recognised in adjusting
items and £47.8m in the underlying results. The total remaining
provision held as at 3 April 2021 was £36.7m.
Included within the UK Clothing & Home provision last year was
an incremental write-down of inventory to net realisable value
of £18.6m reflecting management’s best estimate of the impact
of the Covid-19 pandemic on UK Clothing & Home inventory as
at 3 April 2021. During 2021/22, UK Clothing & Home performance
has been strong, with better-than-expected sell-through of stock
originally provided for. During the year, £10.2m of the Covid-19
provision has been utilised, and there has been a release of £14.0m
recognised in adjusting items. No UK Clothing & Home inventory
provisions in relation to Covid-19 remain on the balance sheet
at 2021/22. Similarly, following better-than-expected sell-through
of inventory previously provided for in the International markets,
there has been a release of £0.8m of the Covid-19 inventory
provisions during 2021/22. No International Covid-19 stock
provisions remain on the balance sheet at 2021/22. During the
year, of the UK Food provision against excess slow-moving
personal protective equipment, committed to during the peak
of the first Covid-19 lockdown and incurred directly in response
to the Covid-19 pandemic, £3.0m has been utilised and £2.2m
released. A provision of £5.6m remains on the balance sheet
at 2021/22.
The carrying value of the Group’s inventories at 2 April 2022
is £706.1m, split across the UK Clothing & Home, UK Food and
International businesses representing gross inventories of £506.9m,
£200.4m and £70.8m respectively, against which a provision of
£48.3m, £17.8m and £5.9m has been recognised. The total UK
Clothing & Home inventory provisions represent 9.5% (last year:
15.4%) of UK Clothing & Home inventory. The UK Clothing & Home
inventory provision is based on future trading assumptions in
line with the Group’s 2022/23 Budget. However, trading could
be higher or lower than expected and a 5% increase in the UK
Clothing & Home inventory provision (from 9.5% to 14.5%) would
result in a reduction in the valuation of inventory held on the
balance sheet of £25.2m and would result in a corresponding
decrease to recognised profit before tax in the period.
In addition, a release of £0.8m has been recognised within
adjusting items in relation to the Covid-19 bad debt provision
recognised against international franchise partners. At 2021/22
no Covid-19 bad debt provision remains.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
5 ADJUSTING ITEMS CONTINUED
The £17.8m directly attributable net gains from the Covid-19
pandemic are considered to be adjusting items as they meet the
Group’s established definition, being both significant in nature
and value to the results of the Group in the current period, and
treatment as adjusting items is consistent with the treatment of
charges of a consistent nature recognised in 2019/20. No future
charges are expected. Any future credits relating to these items
will continue to also be classified as adjusting.
Store impairments, impairment reversals
and property charges (£60.0m credit)
The Group has recognised a number of charges and credits in the
period associated with the carrying value of items of property,
plant and equipment.
In response to the strong Group performance and lifting of
government restrictions, the Group has revised future cash flow
projections for UK and International stores (excluding those
stores that have been captured as part of the UK store estate
programme). As a result, store impairment testing has identified
stores where the current and anticipated future performance
does not support the carrying value of the stores. A charge of
£2.9m (last year: £66.4m) has been incurred primarily in respect of
the impairment of assets associated with these stores. In addition,
a credit of £63.4m (last year: £73.3m) has been incurred for the
reversal of store impairments recognised in previous periods,
where revised future cash flow projections more than support
the carrying value of the stores, reflecting improved trading
expectations compared to those assumed at the prior year end.
Refer to note 15 for further details on the impairments.
A further charge of £0.5m has been recognised in relation to
the settlement of provisions for property charges. This treatment
is consistent with the original provision charges, which were
recognised within adjusting items.
The charges/credits have been classified as an adjusting item
on the basis of the significant quantum of the charge/credit in
the period to the results of the Group. Any future charges or
reversals relating to stores previously impaired within adjusting
items will continue to be recognised within adjusting items in
line with the original charge.
Amortisation and fair value adjustments arising as part
of the investment in Ocado Retail Limited (£32.5m)
Intangible assets of £366.0m were acquired as part of the
investment in Ocado Retail Limited in 2019/20 relating to the Ocado
brand and acquired customer relationships. These intangibles are
being amortised over their useful economic lives of 10-40 years
with an amortisation charge of £17.6m recognised in the period.
In addition, a further deferred tax charge of £14.9m has been
recognised predominantly relating to the substantial enactment
of the Finance Act 2021 during the period increasing the UK’s
main corporation tax rate from 19% to 25% from 1 April 2023.
The amortisation charge and changes in the related deferred tax
liability are included within the Group’s share of the profit or loss
of the associate and are considered to be adjusting items as they
are based on judgements about their value and economic life
and are not related to the Group’s underlying trading performance.
These charges are reported as adjusting items on the basis that
they are significant in quantum and to aid comparability from
one period to the next.
M&S Bank charges incurred in relation
to insurance mis-selling provisions (£16.0m)
The Group has an economic interest in Marks and Spencer
Financial Services plc (trading as M&S Bank), a wholly owned
subsidiary of HSBC UK Bank plc, by way of a Relationship
Agreement that entitles the Group to a 50% share of the profits
of M&S Bank after appropriate deductions. The Group does not
share in any losses of M&S Bank and is not obliged to refund
any profit share received from HSBC, although future income
may be impacted by significant one-off deductions.
Since the year ended 31 December 2010, M&S Bank has recognised
in its audited financial statements an estimated liability for redress
to customers in respect of possible mis-selling of financial
products. The Group’s profit share and fee income from M&S Bank
has been reduced by the deduction of the estimated liability in
both the current and prior years. In line with the accounting
treatment under the Relationship Agreement, there is a cap on
the amount of charges that can be offset against the profit share
in any one year, whereby excess liabilities carried forward are
deducted from the Group’s future profit share from M&S Bank.
The deduction in the period is £16.0m (last year: £2.4m).
The treatment of this in adjusting items is in line with previous
charges in relation to settlement of Payment Protection
Insurance (PPI) claims and, although it is recurring, it is significant
in quantum in the context of the total charges recognised
for PPI mis-selling to-date and is not considered representative
of the normal operating performance of the Group. As previously
noted, while the August 2019 deadline to raise potential mis-
selling claims has now passed, costs relating to the estimated
liability for redress are expected to continue. The total charges
recognised in adjusting items since September 2012 for PPI is
£326.3m which exceeds the total offset against profit share
of £259.0m to date, and this deficit will be deducted from the
Group’s share of future profits from M&S Bank.
Franchise restructuring (£41.3m)
During the year, the Group recognised a charge of £41.3m as a result
of the restructure of certain International franchise operations.
In September 2021 the Group announced the closure of 11 franchise
stores in France in response to increased EU border costs.
Consequently, the Group has recognised a charge of £10.3m
for closure costs. No future costs are currently expected.
In March 2022, in response to the unfolding humanitarian crisis
following the invasion of Ukraine, the Group announced it had
suspended shipments to its Turkish franchisee’s Russian business.
The Group has subsequently made the decision to fully exit its
Russian franchise. As a result, the Group has recognised a charge
of £31.0m representing the Group’s full exit costs from Russia and
business disruptions in Ukraine.
The costs are considered to be adjusting items as they are
one-off in nature and significant in value to the results of the
Group and to the International segment.
Remeasurement of contingent consideration
including discount unwind (£5.6m credit)
Contingent consideration, resulting from the investment in
Ocado Retail Limited, is remeasured at fair value at each reporting
date with the changes in fair value recognised in profit or loss.
During the period, £33.8m of contingent consideration was settled,
following the achievement of the first and second performance
targets (see note 21). A credit of £5.6m has been recognised
in the period, representing the revaluation of the contingent
consideration payable. The change in fair value is considered
to be an adjusting item as it relates to a major transaction and
consequently is not considered representative of the normal
operating performance of the Group. The remeasurement will
be recognised in adjusting items until the final contingent
consideration payment is made in 2024/25.
Annual Report & Financial Statements 2022
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
6 FINANCE INCOME/COSTS
Bank and other interest receivable
Other finance income
Pension net finance income (see note 11H)
Interest income of subleases
Finance income before adjusting items
Finance income in adjusting items
Finance income
Other finance costs
Interest payable on syndicated bank facility
Interest payable on Medium Term Notes
Interest payable on commercial paper facility
Interest payable on lease liabilities
Unwind of discount on provisions
Unwind of discount on Partnership liability to the Marks & Spencer UK Pension Scheme (see note 12)
Finance costs before adjusting items
Finance costs in adjusting items
Finance costs
Net finance costs
7 INCOME TAX (CREDIT)/EXPENSE
A. Taxation charge
Current tax
UK corporation tax on profits for the year at 19% (last year: 19%)
– current year
– adjustments in respect of prior years
UK current tax
Overseas current taxation
– current year
– adjustments in respect of prior years
Total current taxation
Deferred tax
– origination and reversal of temporary differences
– adjustments in respect of prior years
– changes in tax rate
Total deferred tax (see note 23)
Total income tax expense/(credit)
2022
£m
3.7
5.9
13.2
5.5
28.3
5.6
33.9
(0.8)
(4.7)
(79.6)
–
(121.1)
(3.8)
(4.4)
(214.4)
–
(214.4)
(180.5)
2021
£m
2.9
1.8
47.2
5.5
57.4
–
57.4
(0.6)
(3.9)
(86.4)
(0.4)
(130.4)
(2.7)
(4.9)
(229.3)
(6.8)
(236.1)
(178.7)
2022
£m
2021
£m
66.8
(1.0)
65.8
9.6
2.2
77.6
14.9
0.7
(10.5)
5.1
82.7
3.7
(12.1)
(8.4)
0.2
(0.2)
(8.4)
6.7
(5.9)
(0.6)
0.2
(8.2)
146 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
7 INCOME TAX (CREDIT)/EXPENSE CONTINUED
B. Taxation reconciliation
The effective tax rate was 21.1% (last year: 3.9%) and is explained below.
Profit/(loss) before tax
Notional taxation at standard UK corporation tax rate of 19% (last year: 19%)
Depreciation and other amounts in relation to fixed assets that do not qualify for tax relief
Tax benefit arising from UK super deduction regime
Other income and expenses that are not taxable or allowable for tax purposes
Joint venture results accounted for as profit after tax
Retranslation of deferred tax balances due to the change in statutory UK tax rates
Overseas profits taxed at rates different to those of the UK
Movement in unrecognised overseas deferred tax assets
Adjustments to the current and deferred tax charges in respect of prior periods
Capital losses no longer recognised
Adjusting items:
– UK store and strategic programme impairments and other property
charges where no tax relief is available
– International store closures and impairments
– Other strategic programme income and expenses that are not taxable or allowable for tax purposes
– Amortisation arising as a part of the investment in Ocado Retail Limited
Total income tax expense/(credit)
The effective tax rate in respect of the profit excluding adjusting items was 18.2% (last year: 50.3%).
2022
£m
391.7
74.4
7.8
(6.2)
6.1
(2.5)
(10.5)
(0.6)
–
1.9
–
3.9
–
2.2
6.2
82.7
2021
£m
(209.4)
(39.8)
5.2
–
8.6
(14.6)
–
0.7
0.9
(18.2)
25.8
8.5
(1.0)
13.0
2.7
(8.2)
During the period, no payments have been made to the Marks and Spencer Scottish Limited Partnership and as such the tax impact
to the income tax expense in the period was £nil (last year: £4.1m charge). Under this structure, tax relief for payments to be made
to the Marks & Spencer UK Pension Scheme in relation to the first Partnership interest arose in the first 10 years of the structure and
some of this benefit is recaptured in subsequent years.
The Finance Act 2021 contains legislation to increase the main rate of UK corporation tax from 19% to 25% with effect from 1 April 2023.
The Group has therefore remeasured its UK deferred tax assets and liabilities at this higher rate of tax where these are expected to be
realised or settled on or after 1 April 2023. This has resulted in the recognition of a deferred tax credit of £10.5m in the income statement.
On 20 December 2021, the OECD published their proposals in relation to Global Anti-Base Erosion Rules, which provide for an
internationally co-ordinated system of taxation to ensure that large multinational groups pay a minimum level of corporate income
tax in countries where they operate. In January 2022 the UK government reconfirmed its intention to introduce legislation to give
effect to the OECD proposals. The new rules are expected to take effect from 2023 onwards.
There remains a considerable amount of uncertainty with respect to the detailed operation of the Global Anti-Base Erosion Rules and
their impact. Further details and guidance are due in the course of 2022. From an initial review of the Group’s business and tax profile,
we do not expect the rules to have a material impact on the Group’s tax rate or tax payments. There is no impact on the Group’s
results for 2021/22.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
7 INCOME TAX (CREDIT)/EXPENSE CONTINUED
C. Current tax reconciliation
The current tax reconciliation shows the tax effect of the main adjustments made to the Group’s accounting profits in order to arrive
at its taxable profits. The reconciling items differ from those in note 7B as the effects of deferred tax temporary differences are
ignored below.
Profit/(loss) before tax
Notional taxation at standard UK corporation tax rate of 19% (last year: 19%)
Disallowable accounting depreciation and other similar items
Deductible capital allowances
Adjustments in relation to employee share schemes
Adjustments in relation to employee pension schemes
Overseas profits taxed at rates different to those of the UK
Movement in unrecognised overseas deferred tax
Joint venture results accounted for as profit after tax
Current year losses carried forward
Other income and expenses that are not taxable or allowable
Adjusting items:
– UK store and strategic programme impairments and other property charges where no tax relief is available
– International store closures and impairments
– Other strategic programme income and expenses that are not taxable or allowable for tax purposes
– Impairment to per una goodwill
– Amortisation arising as a part of the investment in Ocado Retail Limited
Current year current tax charge
Represented by:
UK current year current tax
Overseas current year current tax
UK adjustments in respect of prior years
Overseas adjustments in respect of prior years
Total current taxation (note 7A)
8 EARNINGS PER SHARE
2022
£m
391.7
74.4
63.7
(75.7)
6.7
(2.5)
(0.6)
–
(2.5)
–
0.6
3.9
–
2.2
–
6.2
76.4
66.8
9.6
76.4
(1.0)
2.2
77.6
2021
£m
(209.4)
(39.8)
75.1
(50.0)
1.9
(4.7)
0.7
0.9
(14.6)
11.3
(0.1)
8.5
(1.0)
5.5
7.5
2.7
3.9
3.7
0.2
3.9
(12.1)
(0.2)
(8.4)
The calculation of earnings per ordinary share is based on earnings after tax and the weighted average number of ordinary shares
in issue during the year.
The adjusted earnings per share figures have also been calculated based on earnings before adjusting items that are significant
in nature and/or quantum and are considered distortive to underlying results (see note 5). These have been presented to provide
shareholders with an additional measure of the Group’s year-on-year performance.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. The Group has four types of dilutive potential ordinary shares, being: those share options granted to
employees where the exercise price is less than the average market price of the Company’s ordinary shares during the year; unvested
shares granted under the Deferred Share Bonus Plan; unvested shares granted under the Restricted Share Plan; and unvested shares
within the Performance Share Plan that have met the relevant performance conditions at the end of the reporting period.
Details of the adjusted earnings per share are set out below:
Profit/(loss) attributable to equity shareholders of the Company
Add/(less):
Adjusting items (see note 5)
Tax on adjusting items
Profit before adjusting items attributable to equity shareholders of the Company
2022
£m
306.6
131.2
(12.6)
425.2
2021
£m
(198.0)
259.7
(33.5)
28.2
148 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8 EARNINGS PER SHARE CONTINUED
Weighted average number of ordinary shares in issue
Potentially dilutive share options under Group's share option schemes1
Weighted average number of diluted ordinary shares
Million
1,958.1
73.0
2,031.1
Million
1,953.5
15.0
1,968.5
1. In the prior year, the potentially dilutive share options are only considered in relation to adjusted diluted earnings per share as the Group made a basic loss per share.
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
9 DIVIDENDS
Pence
15.7
15.1
21.7
20.9
Pence
(10.1)
(10.1)
1.4
1.4
At the full-year results in May 2021, the Board announced that payment of a dividend in the 2021/22 financial year would be unlikely
as we focus on restoring sustainable profitability and recovering the balance sheet towards metrics consistent with investment grade.
Consistent with that announcement, the Board does not expect to pay a dividend this financial year.
10 EMPLOYEES
A. Aggregate remuneration
The aggregate remuneration and associated costs of Group employees (including Executive Committee) were:
Wages and salaries
Social security costs
Pension costs
Share-based payments (see note 13)
Employee welfare and other personnel costs
Capitalised staffing costs
Total aggregate remuneration1
1. Excludes amounts recognised within adjusting items of £0.1m (last year: £100.4m) (see notes 3 and 5).
Details of key management compensation are given in note 28.
B. Average monthly number of employees
UK stores
– management and supervisory categories
– other
UK head office
– management and supervisory categories
– other
UK operations
– management and supervisory categories
– other
Overseas
Total average number of employees
2022
Total
£m
1,256.0
84.6
69.0
30.2
54.1
(6.4)
1,487.5
2021
Total
£m
1,210.3
99.5
71.3
19.3
43.7
(6.4)
1,437.7
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2022
2021
4,570
51,585
3,275
660
124
1,667
5,205
67,086
4,870
54,076
2,948
749
117
1,507
5,579
69,846
The average number of full-time equivalent employees is 47,108 (last year: 49,177).
11 RETIREMENT BENEFITS
The Group provides pension arrangements for the benefit of its UK employees through the Your M&S Pension Saving Plan (a defined
contribution (“DC”) arrangement) and prior to 2017, through the Marks & Spencer Pension Scheme (“UK DB Pension Scheme”) (a defined
benefit (“DB”) arrangement).
The legacy UK DB Pension Scheme operated on a final pensionable salary basis and is governed by a Trustee board which is independent
of the Group. The UK DB Pension Scheme closed to future accrual on 1 April 2017. There will be no further service charges relating to
the scheme and no future monthly employer contributions for current service. At year end, the UK DB Pension Scheme had no active
members (last year: nil), 51,444 deferred members (last year: 53,674) and 53,270 pensioners (last year: 52,794).
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11 RETIREMENT BENEFITS CONTINUED
The DC plan is a pension plan under which the Group pays contributions to an independently administered fund. Such contributions
are based upon a fixed percentage of employees’ pay. The Group has no legal or constructive obligations to pay further contributions
to the fund once the contributions have been paid. Members’ benefits are determined by the amount of contributions paid by the
Group and the member, together with the investment returns earned on the contributions arising from the performance of each
individual’s investments and how each member chooses to receive their retirement benefits. As a result, actuarial risk (that benefits
will be lower than expected) and investment risk (that assets invested in will not perform in line with expectations) fall on the
employee. At the year end, the DC arrangement had some 46,560 active members (last year: 46,191) and some 45,778 deferred
members (last year: 40,604).
The Group also operates a small legacy funded DB pension scheme in the Republic of Ireland. This scheme closed to future accrual on
31 October 2013. Other retirement benefits also include a UK post-retirement healthcare scheme and unfunded retirement benefits.
The total Group retirement benefit cost was £55.9m (last year: £23.9m). Of this, income of £8.8m (last year: income of £43.3m) relates
to the UK DB Pension Scheme, costs of £62.0m (last year: costs of £64.0m) to the UK DC plan and costs of £2.8m (last year: costs of
£3.2m) to other retirement benefit schemes.
The Group considers two measures of the pension deficit. The accounting position is shown on the Group balance sheet. The funding
position, calculated at the triennial actuarial valuation, is used to agree contributions made to the schemes. The two measures will
vary because they are for different purposes, and are calculated at different dates and in different ways. The key calculation difference
is that the funding position considers the expected returns of scheme assets when calculating the liability, whereas the accounting
position calculated under IAS 19 discounts liabilities is based on corporate bond yields.
The most recent actuarial valuation of the UK DB Pension Scheme was carried out as at 31 March 2018 and showed a funding surplus
of £652m. This is an improvement on the previous position at 31 March 2015 (statutory surplus of £204m), primarily due to lower assumed
life expectancy. The Company and Trustee have confirmed, in line with the current funding arrangement, that no further contributions
will be required to fund past service as a result of this valuation (other than those already contractually committed under the existing
Marks and Spencer Scottish Limited Partnership arrangements – see note 12). We continue to work constructively with the Trustees of
the UK DB Pension Scheme with regard to agreeing the triennial actuarial valuation of the scheme as at 31 March 2021. Consequently,
the results of the valuation are not yet finalised, although it is likely that there will continue to be a surplus.
By funding its DB pension schemes, the Group is exposed to the risk that the cost of meeting its obligations is higher than anticipated.
This could occur for several reasons, for example:
– Investment returns on the schemes’ assets may be lower than anticipated, especially if falls in asset values are not matched by
similar falls in the value of the schemes’ liabilities.
– The level of price inflation may be higher than that assumed, resulting in higher payments from the schemes.
– Scheme members may live longer than assumed; for example, due to advances in healthcare. Members may also exercise (or not
exercise) options in a way that leads to increases in the schemes’ liabilities; for example, through early retirement or commutation
of pension for cash.
– Legislative changes could also lead to an increase in the schemes’ liabilities.
In addition, the Group is exposed to additional risks through its obligation to the UK DB Pension Scheme via its interest in the Scottish
Limited Partnership (see note 12). In particular, under the legal terms of the Partnership, a default by the Group on the rental payments
to the Partnership or a future change in legislation could trigger earlier or higher payments to the pension scheme, or an increase
in the collateral to be provided by the Group.
With the pensioner buy-in policies purchased in September 2020, April 2019 and March 2018, the Scheme has now, in total, insured
around 80% of the pensioner cash flow liabilities for pensions in payment. The buy-in policies cover specific pensioner liabilities and
pass all risks to an insurer in exchange for a fixed premium payment, thus reducing the Group’s exposure to changes in longevity,
interest rates, inflation and other factors.
A. Pensions and other post-retirement liabilities
Total market value of assets
Present value of scheme liabilities
Net funded pension plan asset
Unfunded retirement benefits
Post-retirement healthcare
Net retirement benefit surplus
Analysed in the statement of financial position as:
Retirement benefit asset
Retirement benefit deficit
Net retirement benefit surplus
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2022
£m
10,090.7
(9,046.8)
1,043.9
(2.6)
(3.1)
1,038.2
2021
£m
10,442.9
(9,803.7)
639.2
(3.8)
(4.0)
631.4
1,043.9
(5.7)
1,038.2
639.2
(7.8)
631.4
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 RETIREMENT BENEFITS CONTINUED
In the event of a plan wind-up, the pension scheme rules provide M&S with an unconditional right to a refund of surplus
assets assuming the full settlement of plan liabilities. In the ordinary course of business, the Trustee has no right to wind up or
change the benefits due to members of the scheme. As a result, any net surplus in the UK DB Pension Scheme is recognised in full.
B. Scheme assets
Changes in the fair value of the scheme assets are as follows:
Fair value of scheme assets at start of year
Interest income based on discount rate
Actual return on scheme assets excluding amounts included in net interest income¹
Actuarial loss – asset ceiling
Employer contributions
Benefits paid
Administration costs
Exchange movement
Fair value of scheme assets at end of year
1. The actual return on scheme assets was a loss of £9.0m (last year: gain of £137.4m).
C. Pensions and other post-retirement liabilities
Changes in the present value of retirement benefit obligations are as follows:
Present value of obligation at start of year
Current service cost
Administration costs
Past service cost
Interest cost
Benefits paid
Actuarial loss/(gain) – experience1
Actuarial loss/(gain) – demographic assumptions
Actuarial (gain)/loss – financial assumptions
Exchange movement
Present value of obligation at end of year
Analysed as:
Present value of pension scheme liabilities
Unfunded pension plans
Post–retirement healthcare
Present value of obligation at end of year
1. Includes £nil (last year: £2.5m loss) relating to an equalisation charge recognised in 2018/19 that was reclassified from provisions.
The average duration of the defined benefit obligation at 2 April 2022 is 17.3 years (last year: 19.0 years).
2022
£m
10,442.9
204.4
(213.4)
(19.4)
41.8
(359.3)
(4.6)
(1.7)
10,090.7
2021
£m
10,653.8
254.9
(117.5)
–
41.5
(379.4)
(4.3)
(6.1)
10,442.9
2022
£m
9,811.5
0.2
0.2
–
191.2
(359.3)
153.9
89.0
(832.7)
(1.5)
9,052.5
9,046.8
2.6
3.1
9,052.5
2021
£m
8,751.2
0.2
0.2
1.0
207.7
(379.4)
(82.6)
(12.5)
1,332.1
(6.4)
9,811.5
9,803.7
3.8
4.0
9,811.5
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 RETIREMENT BENEFITS CONTINUED
D. Analysis of assets
The investment strategy of the UK DB Pension Scheme is driven by its liability profile, including its inflation-linked pension benefits.
In addition to its interest in the Scottish Limited Partnership (refer to note 12), the scheme invests in different types of bond (including
corporate bonds and gilts) and derivative instruments (including inflation, interest rate, cross-currency and total return swaps) in
order to align movements in the value of its assets with movements in its liabilities arising from changes in market conditions. Broadly,
the scheme has hedging that covers 103% of interest rate movements and 104% of inflation movements, as measured on the Trustee’s
funding assumptions which use a discount rate derived from gilt yields.
The fair value of the total plan assets at the end of the reporting period for each category is as follows:
Debt investments
– Government bonds net of repurchase agreements1
– Corporate bonds
– Asset-backed securities and structured debt
Scottish Limited Partnership Interest (see note 12)
Equity investments
– Developed markets
– Emerging markets
Growth asset funds
– Global property
– Hedge and reinsurance
– Private equity and infrastructure
Derivatives
– Interest and inflation rate swaps
– Foreign exchange contracts and other derivatives
Cash and cash equivalents
Other
– Buy-in insurance
– Secure income asset funds
– Other
Total2
2022
2021
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
3,482.9
6.0
–
–
550.3
113.7
5.4
25.8
5.9
15.6
–
5.9
(1,185.2)
950.0
365.9
193.5
2,297.7
956.0
365.9
193.5
–
–
308.7
324.7
223.6
406.9
(40.0)
168.1
550.3
113.7
314.1
350.5
229.5
422.5
(40.0)
174.0
3,945.2
6.4
–
–
450.9
131.1
5.4
43.8
–
18.4
93.2
13.6
(1,443.5)
1,036.6
256.1
142.5
2,501.7
1,043.0
256.1
142.5
–
–
276.8
299.0
224.1
298.6
4.5
148.9
450.9
131.1
282.2
342.8
224.1
317.0
97.7
162.5
–
–
–
4,211.5
2,910.0
1,121.6
150.8
5,898.6
2,910.0
1,121.6
150.8
10,110.1
–
–
38.7
4,746.7
3,177.0
1,064.4
211.2
5,696.2
3,177.0
1,064.4
249.9
10,442.9
1. Repurchase agreements were £1,184.0m (last year: £1,443.5m).
2. The difference between the total assets of £10,110.1m above compared to £10,090.7m is £19.4m. This relates to the cap applied to the Irish DB scheme and therefore the actuarial
gain is not recognised as per IFRIC 14.
The fair values of the above equity and debt investments are based on publicly available market prices wherever available. Unquoted
investments, hedge funds and reinsurance funds are stated at fair value estimates provided by the manager of the investment or fund.
Property includes both quoted and unquoted investments. The fair value of the Scottish Limited Partnership interest is based on the
expected cash flows and benchmark asset-backed credit spreads. It is the policy of the scheme to hedge a proportion of interest rate
and inflation risk. The scheme reduces its foreign currency exposure using forward foreign exchange contracts.
At year end, the UK schemes (UK DB Pension Scheme and post-retirement healthcare) indirectly held 33,210 (last year: 75,223) ordinary
shares in the Company through its investment in UK Equity Index Funds.
152 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 RETIREMENT BENEFITS CONTINUED
E. Financial assumptions
The financial assumptions for the UK DB Pension Scheme and the most recent actuarial valuations of the other post-retirement
schemes have been updated by independent qualified actuaries to take account of the requirements of IAS 19 Employee Benefits
in order to assess the liabilities of the schemes and are as follows:
Rate of increase in pensions in payment for service
Discount rate
Inflation rate for Retail Price Index (RPI)
Long-term healthcare cost increases
2022
%
2.3-3.6
2.70
3.70
7.70
2021
%
2.2-3.2
2.00
3.30
7.30
F. Demographic assumptions
The UK demographic assumptions are mainly in line with those adopted for the last formal actuarial valuation of the scheme
performed as at 31 March 2018. The UK post-retirement mortality assumptions are based on an analysis of the pensioner mortality
trends under the scheme for the period to March 2018. The specific mortality rates used are based on the VITA lite tables, with future
projections based on up-to-date industry models, parameterised to reflect scheme data. The life expectancies underlying the
valuation are as follows:
Current pensioners (at age 65)
Future pensioners – currently in deferred status (at age 65)
– male
– female
– male
– female
2022
22.3
25.1
24.0
26.9
G. Sensitivity analysis
The table below summarises the estimated impact of changes in the principal actuarial assumptions on the UK DB Pension
Scheme surplus:
Decrease in scheme surplus caused by a decrease in the discount rate of 0.25%
Decrease in scheme surplus caused by a decrease in the discount rate of 0.50%
Decrease in scheme surplus caused by a decrease in the inflation rate of 0.25%
Decrease in scheme surplus caused by a decrease in the inflation rate of 0.50%
Increase in scheme surplus caused by a decrease in the average life expectancy of one year
2022
£m
(20.0)
(30.0)
(70.0)
(130.0)
270.0
2021
22.2
25.0
24.0
26.8
2021
£m
(20.0)
(30.0)
(20.0)
(30.0)
300.0
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The sensitivity analysis above is based on a change in one assumption while holding all others constant. Therefore, interdependencies
between the assumptions have not been taken into account within the analysis.
H. Analysis of amounts charged against profits
Amounts recognised in comprehensive income in respect of defined benefit retirement plans are as follows:
Current service cost
Administration costs
Past service costs
Net interest income
Total
Remeasurement on the net defined benefit surplus:
Actual return on scheme assets excluding amounts included in net interest income
Actuarial loss/(gain) – demographic assumptions
Actuarial loss/(gain) – experience1
Actuarial (gain)/loss – financial assumptions
Actuarial loss – asset ceiling
Components of defined benefit (income)/expense recognised in other comprehensive income
1. Includes £nil (last year: £2.5m loss) relating to an equalisation charge recognised in 2018/19 that was reclassified from provisions.
2022
£m
0.2
4.8
–
(13.2)
(8.2)
213.4
89.0
153.9
(832.7)
19.4
(357.0)
2021
£m
0.2
4.5
1.0
(47.2)
(41.5)
117.5
(12.5)
(82.6)
1,332.1
–
1,354.5
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
12 MARKS AND SPENCER SCOTTISH LIMITED PARTNERSHIP
Marks and Spencer plc is a general partner and the Marks & Spencer UK Pension Scheme is a limited partner of the Marks and Spencer
Scottish Limited Partnership (the “Partnership”). Under the Partnership agreement, the limited partners have no involvement in the
management of the business and shall not take any part in the control of the Partnership. The general partner is responsible for the
management and control of the Partnership and, as such, the Partnership is consolidated into the results of the Group.
The Partnership holds £1.3bn (last year: £1.4bn) of properties at book value which have been leased back to Marks and Spencer plc.
The Group retains control over these properties, including the flexibility to substitute alternative properties into the Partnership. The
first limited Partnership interest (held by the Marks & Spencer UK Pension Scheme) previously entitled the Pension Scheme to receive
an annual distribution of £71.9m until June 2022 from the Partnership. As a result of the Covid-19 pandemic and the need to preserve
cash, in agreement with the Trustees, only £18.9m of the June 2020 payment was made, with the remaining £53.0m being deferred.
During the period, the Group and the Pension Scheme Trustees agreed to amend the distribution dates so that, rather than making
the planned payment of £71.9m in June 2021 along with the deferred £53.0m, the Pension Scheme is now entitled to receive £71.9m
in 2022, £73.0m in 2023 and £54.4m in 2024. The second Partnership interest (also held by the Marks & Spencer UK Pension Scheme)
entitles the Pension Scheme to receive a further £36.4m annually from June 2017 until June 2031. All profits generated by the
Partnership in excess of this are distributable to Marks and Spencer plc.
The Partnership liability in relation to the first interest of £192.3m (last year: £193.5m) is included as a financial liability in the Group’s
financial statements as it is a transferable financial instrument and measured at amortised cost, being the net present value of the
future expected distributions from the Partnership. During the year to 2 April 2022, an interest charge of £4.4m (last year: £4.9m) was
recognised in the income statement, representing the unwinding of the discount included in this obligation. The first limited Partnership
interest of the Pension Scheme is included within the UK DB Pension Scheme assets, valued at £193.5m (last year: £142.5m).
The second Partnership interest is not a transferable financial instrument as the Scheme Trustee does not have the right to transfer
it to any party other than a successor Trustee. It is therefore not included as a plan asset within the UK DB Pension Scheme surplus
reported in accordance with IAS 19. Similarly, the associated liability is not included on the Group’s statement of financial position,
rather the annual distribution is recognised as a contribution to the scheme each year.
13 SHARE-BASED PAYMENTS
This year, a charge of £30.2m was recognised for share-based payments (last year: charge of £19.3m). Of the total share-based payments
charge, £15.1m (last year: £9.2m) relates to the Save As You Earn share option scheme and a charge of £6.7m (last year: £1.7m) relates
to the Performance Share Plan. The remaining charge of £8.4m (last year: £8.4m) is spread over the other share plans. In addition,
a charge of £8.6m was recognised in relation to the Annual Bonus Scheme for 2021/22 under the Deferred Share Bonus Scheme.
Further details of the operation of the Group share plans are provided in the Remuneration Report.
A. Save As You Earn scheme – £15.1m
The Save As You Earn (“SAYE”) scheme was approved by shareholders for a further 10 years at the 2017 Annual General Meeting (AGM).
Under the terms of the scheme, the Board may offer options to purchase ordinary shares in the Company once in each financial year
to those employees who enter into Her Majesty’s Revenue & Customs (HMRC) approved SAYE savings contract. The scheme allows
participants to save up to a maximum of £500 (last year: £500) each month. The price at which options may be offered is 80% of the
average mid-market price for three consecutive dealing days preceding the offer date. The options may normally be exercised during
the six-month period after the completion of the SAYE contract.
Outstanding at beginning of the year
Granted
Exercised
Forfeited
Expired
Outstanding at end of year
Exercisable at end of year
2022
2021
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
119,151,406
11,526,149
(208,238)
(12,207,656)
(7,698,700)
110,562,961
11,945
99.4p 53,139,941
189.0p 101,466,321
(556)
138.2p
102.6p (23,811,474)
206.5p (11,642,826)
100.9p 119,151,406
7,211,376
186.8p
190.7p
82.0p
151.0p
155.7p
248.7p
99.4p
212.5p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 206.3p (last year: 152.4p).
154 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13 SHARE-BASED PAYMENTS CONTINUED
The fair values of the options granted during the year have been calculated using the Black-Scholes model assuming the inputs
shown below:
Grant date
Share price at grant date
Exercise price
Option life in years
Risk-free rate
Expected volatility
Expected dividend yield
Fair value of option
Incremental fair value of option
2022
2021
3-year plan
3-year plan
3-year plan
2020 modified1
Dec 21
235p
189p
3 years
0.5%
49.3%
0.0%
81p
n/a
Dec 20
103p
82p
3 years
0.0%
45.6%
0.0%
34p
n/a
Dec 20
103p
151p
3 years
0.0%
45.6%
0.0%
19p
15p
1. In the prior year, there was a modification to the 2021 scheme relating to employees cancelling awards from previous years in substitution for awards granted under the 2021 scheme.
The fair value of the modified awards has been amortised based on the incremental fair value. The incremental fair value is the difference between the fair value of the 2021 options,
being 34p, and the fair value of repriced previous awards, calculated using 2020 award assumptions, keeping the initial exercise price consistent. The fair value of the modified
options, being 15p for 2021 modified options was recognised in operating loss.
Volatility has been estimated by taking the historical volatility in the Company’s share price over a three-year period.
The resulting fair value is expensed over the service period of three years on the assumption that 10% (last year: 10%) of options
will lapse over the service period as employees leave the Group.
Outstanding options granted under the UK Employee SAYE Scheme are as follows:
Options granted1
January 2017
January 2018
January 2019
February 2020
February 2021
February 2022
Number of options
Weighted average remaining contractual life (years)
2022
2021
–
5,441
2,399,413
8,006,941
89,284,282
10,866,884
9,202
4,112,855
3,405,862
12,331,683
99,291,804
–
110,562,961 119,151,406
2022
–
(0.8)
0.2
1.3
2.3
3.3
2.3
2021
Option price
–
0.3
1.3
2.3
3.3
–
3.1
250p
251p
238p
151p
82p
189p
101p
F
I
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1. For the purpose of the above table the option granted date is the contract start date.
B. Performance Share Plan* – £6.7m
The Performance Share Plan (“PSP”) is the primary long-term incentive plan for approximately 160 of the most senior managers
within the Group. It was first approved by shareholders at the 2005 AGM and again at the 2020 AGM. Under the plan, annual awards,
based on a percentage of salary, may be offered. The extent to which an award vests is measured over a three-year period against
financial targets, which for 2021/22 included earnings per share (“EPS”), return on capital employed (“ROCE”), total shareholder return
(“TSR”) and strategic measures. The value of any dividends earned on the vested shares during the three years may also be paid on
vesting. Awards under this plan have been made in each year since 2005. More information is available in relation to this plan within
the Remuneration Report.
During the year, 19,374,217 shares (last year: 19,777,921) were awarded under the plan. The weighted average fair value of the shares
awarded was 155.1p (last year: 101.4p). As at 2 April 2022, 44,534,437 shares (last year: 33,878,325) were outstanding under the plan.
C. Deferred Share Bonus Plan* – £8.8m
The Deferred Share Bonus Plan (“DSBP”) was first introduced in 2005/06 as part of the Annual Bonus Scheme and was approved by
shareholders at the 2020 AGM. It may be operated for approximately 5,000 employees within the Group. As part of the plan, the
employees are required to defer a proportion of any bonus paid into shares which will be held for three years. There are no further
performance conditions on these shares, other than continued employment within the Group, and the value of any dividends earned
on the vested shares during the deferred period may also be paid on vesting. More information is available in relation to this plan
within the Remuneration Report.
During the year no shares (last year: no shares) have been awarded under the plan in relation to the annual bonus. As at 2 April 2022,
190,596 shares (last year: 422,672) were outstanding under the plan.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13 SHARE-BASED PAYMENTS CONTINUED
D. Restricted Share Plan* – £8.2m
The Restricted Share Plan (“RSP”) was established in 2000 as part of the reward strategy for retention and recruitment of senior managers
who are vital to the success of the business, and was approved by shareholders at the 2020 AGM. The plan operates for the senior
management team. Awards vest at the end of the restricted period (typically between one and three years) subject to the participant
still being in employment of the Company on the relevant vesting date. The value of any dividends earned on the vested shares during
the restricted period may also be paid on vesting. More information is available in relation to this plan within the Remuneration Report.
During the year, 2,441,809 shares (last year: 11,996,948) have been awarded under the plan. The weighted average fair value of the shares
awarded was 158.7p (last year: 124.3p). As at 2 April 2022, 10,368,217 shares (last year: 10,722,919) were outstanding under the plan.
E. Republic of Ireland Save As You Earn scheme – £0.2m
Sharesave, the Company’s Save As You Earn scheme, was introduced in 2009 to all employees in the Republic of Ireland for a 10-year
period, after approval by shareholders at the 2009 AGM and again at the 2019 AGM. The scheme is subject to Irish Revenue rules and
allows participants to save up to a maximum of €500 (last year: €500) each month. The price at which options may be offered is 80%
of the average mid-market price for three consecutive dealing days preceding the offer date. The options may normally be exercised
during the six-month period after the completion of the SAYE contract.
During the year, no options were granted (last year: 1,409,129 were granted at a fair value of 33.7p). As at 2 April 2022, 1,195,159 options
(last year: 1,846,589) were outstanding under the scheme.
F. Marks and Spencer Employee Benefit Trust
The Marks and Spencer Employee Benefit Trust (the “Trust”) holds 264,779 (last year: 527,116) shares with a book value of £0m (last year:
£0.1m) and a market value of £0.4m (last year: £0.8m). These shares were acquired by the Trust through a combination of market purchases
and new issues and are shown as a reduction in retained earnings in the consolidated statement of financial position. Awards are
granted to employees at the discretion of Marks and Spencer plc and the Trust agrees to satisfy the awards in accordance with the
wishes of Marks and Spencer plc under the senior executive share plans described above. Dividends are waived on all of these shares.
G. ShareBuy
ShareBuy, the Company’s Share Incentive Plan, enables the participants to buy shares directly from their gross salary. This scheme
does not attract an IFRS 2 charge.
* All awards both this year and last year were conditional shares. For the purposes of calculating the number of shares awarded, the share price used is the average of the mid-market
price for the five consecutive dealing days preceding the grant date.
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14 INTANGIBLE ASSETS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
At 28 March 2020
Cost
Accumulated amortisation and impairments
Net book value
Year ended 3 April 2021
Opening net book value
Additions
Transfers and reclassifications
Asset Impairments1
Asset write-offs
Amortisation charge
Exchange difference
Closing net book value
At 3 April 2021
Cost
Accumulated amortisation, impairments and write-offs
Net book value
Year ended 2 April 2022
Opening net book value
Additions
Transfers and reclassifications
Asset write-offs
Amortisation charge
Exchange difference
Closing net book value
At 2 April 2022
Cost
Accumulated amortisation, impairments and write-offs
Net book value
Goodwill
£m
Brands
£m
Computer
software
£m
Computer
software under
development
£m
136.4
(72.4)
64.0
64.0
–
–
(39.6)
–
–
(0.7)
23.7
135.7
(112.0)
23.7
23.7
4.8
–
–
–
0.1
28.6
112.3
(112.3)
–
1,495.1
(1,187.6)
307.5
–
6.3
–
–
–
(0.2)
–
6.1
307.5
0.1
44.7
(40.0)
(3.2)
(131.4)
(0.3)
177.4
118.6
(112.5)
6.1
1,539.6
(1,362.2)
177.4
6.1
0.1
–
–
(0.6)
–
5.6
177.4
0.9
29.6
(0.6)
(93.0)
–
114.3
140.6
(112.0)
28.6
118.7
(113.1)
5.6
1,570.1
(1,455.8)
114.3
59.7
(32.1)
27.6
27.6
41.4
(44.2)
–
–
–
–
24.8
56.9
(32.1)
24.8
24.8
63.8
(44.6)
–
–
–
44.0
76.1
(32.1)
44.0
Goodwill related to the following assets and groups of cash generating units (CGUs):
Net book value at 3 April 2021
Additions2
Exchange difference
Net book value at 2 April 2022
per una
£m
India
£m
Sports Edit
£m
Other
£m
16.5
–
–
16.5
6.5
–
0.1
6.6
–
4.8
–
4.8
0.7
–
–
0.7
Total
£m
1,803.5
(1,404.4)
399.1
399.1
47.8
0.5
(79.6)
(3.2)
(131.6)
(1.0)
232.0
1,850.8
(1,618.8)
232.0
232.0
69.6
(15.0)
(0.6)
(93.6)
0.1
192.5
1,905.5
(1,713.0)
192.5
Total
goodwill
£m
23.7
4.8
0.1
28.6
F
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1. Last year asset impairments of £79.6m made up of: £39.6m charge recorded against per una goodwill, £40.0m in relation to replaced, retired or decommissioned as part of MS2.
2. In February 2022, the Group acquired 77.7% of the issued share capital of The Sports Edit Limited, a non-listed company based in England and Wales. The Sports Edit Limited is a
brand platform specialising in activewear and was acquired for an initial purchase price of £4.5m. Goodwill of £4.8m was recognised on acquisition of the business, with the
acquisition representing a strategic investment opportunity.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
14 INTANGIBLE ASSETS CONTINUED
Goodwill impairment testing
Goodwill is not amortised but is tested annually for impairment with the recoverable amount being determined from value in
use calculations.
The goodwill balance relates to the goodwill recognised on the acquisition of per una £16.5m (last year: £16.5m), India £6.6m (last year:
£6.5m), Sports Edit £4.8m (last year: £nil) and other £0.7m (last year: £0.7m).
Goodwill for India is monitored by management at a country level, including the combined retail and wholesale businesses, and has
been tested for impairment on that basis.
The per una brand was a definite life intangible asset amortised on a straight-line basis over a period of 15 years. The brand intangible
was acquired for a cost of £80.0m and has been fully amortised. It is held at a net book value of £nil (last year: £nil). The per una
goodwill of £16.5m is tested for annually for impairment.
The cash flows used for impairment testing are based on the Group’s latest budget and forecast cash flows, covering a three-year period,
which have regard to historical performance and knowledge of the current market, together with the Group’s views on the future
achievable growth and the impact of committed cash flows. The cash flows include ongoing capital expenditure required to maintain
the store network, but exclude any growth capital initiatives not committed.
Cash flows beyond this three-year period are extrapolated using a long-term growth rate based on the Group’s current view of achievable
long-term growth. The Group’s current view of achievable long-term growth for per una is 1.6% (last year: 0.5%), which is a reduction
from the overall Group long-term growth rate of 2.0% (last year: 1.75%). The Group’s current view of achievable long-term growth for
India is 5.5% (last year: 5.9%).
Management estimates discount rates that reflect the current market assessment of the time value of money and the risks specific
to each asset or CGU. The pre-tax discount rates are derived from the Group’s post-tax weighted average cost of capital (“WACC”)
which has been calculated using the capital asset pricing model, the inputs of which include a country risk-free rate, equity risk
premium, Group size premium and a risk adjustment (beta). The post-tax WACC is subsequently grossed up to a pre-tax rate and
was 10.8% for per una (last year: 11.0%) and 11.3% for India (last year: 12.9%).
Management has performed sensitivity analysis on the key assumptions in the impairment model using reasonably possible changes
in these key assumptions, both individually and in combination. Management has considered reasonably possible changes in key
assumptions that would cause the carrying amounts of goodwill or brands to exceed the value in use for each asset.
For both per una and India respectively, there are no reasonably possible changes in key assumptions that would lead to an impairment
and the assumptions do not give rise to a key source of estimation uncertainty.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15 PROPERTY, PLANT AND EQUIPMENT
The Group’s property, plant and equipment of £4,902.3m (last year: £5,058.6m) consists of owned assets of £3,486.5m (last year: £3,562.6m)
and right-of-use assets of £1,415.8m (last year: £1,496.0m).
Property, plant and equipment – owned
At 28 March 2020
Cost
Accumulated depreciation, impairments and write-offs
Net book value
Year ended 3 April 2021
Opening net book value
Additions
Transfers and reclassifications
Impairment reversals
Impairment charge
Asset write-offs
Depreciation charge
Exchange difference
Closing net book value
At 3 April 2021
Cost
Accumulated depreciation, impairments and write-offs
Net book value
Year ended 2 April 2022
Opening net book value
Additions
Transfers and reclassifications
Disposals
Impairment reversals
Impairment charge
Asset write-offs
Depreciation charge
Exchange difference
Closing net book value
At 2 April 2022
Cost
Accumulated depreciation, impairments and write-offs
Net book value
Land and
buildings
£m
2,887.5
(720.1)
2,167.4
2,167.4
3.8
7.2
36.9
(73.2)
(29.8)
(83.3)
(6.6)
2,022.4
2,809.9
(787.5)
2,022.4
2,022.4
0.9
3.0
(15.9)
34.5
(57.6)
0.9
(34.2)
(1.7)
1,952.3
2,764.8
(812.5)
1,952.3
Fixtures,
fittings and
equipment
£m
Assets in the
course of
construction
£m
5,457.1
(3,880.6)
1,576.5
1,576.5
18.6
157.0
36.2
(48.7)
(17.4)
(228.5)
(2.8)
1,490.9
5,450.2
(3,959.3)
1,490.9
1,490.9
17.7
175.8
(1.9)
27.6
(31.4)
(11.4)
(256.1)
–
1,411.2
5,275.7
(3,864.5)
1,411.2
138.0
(18.0)
120.0
120.0
92.1
(162.6)
–
–
(0.1)
–
(0.1)
49.3
67.5
(18.2)
49.3
49.3
238.0
(164.3)
–
–
–
–
–
–
123.0
141.2
(18.2)
123.0
Total
£m
8,482.6
(4,618.7)
3,863.9
3,863.9
114.5
1.6
73.1
(121.9)
(47.3)
(311.8)
(9.5)
3,562.6
8,327.6
(4,765.0)
3,562.6
3,562.6
256.6
14.5
(17.8)
62.1
(89.0)
(10.5)
(290.3)
(1.7)
3,486.5
8,181.7
(4,695.2)
3,486.5
F
I
N
A
N
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I
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Asset write-offs in the year include assets with gross book value of £383.3m (last year: £67.4m) and £nil (last year: £nil) net book value
that are no longer in use and have therefore been retired.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15 PROPERTY, PLANT AND EQUIPMENT CONTINUED
Right-of-use assets
Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period:
Right-of-use assets
As at 28 March 2020
Additions
Transfers and reclassifications
Disposals
Impairment reversals
Impairment charge
Depreciation charge
Exchange difference
As at 3 April 2021
Additions
Transfers and reclassifications
Disposals
Impairment reversals
Impairment charge
Depreciation charge
Exchange difference
As at 2 April 2022
Land and
buildings
£m
1,571.1
37.2
0.3
(5.5)
36.9
(52.7)
(132.0)
(10.6)
1,444.7
72.7
0.5
(7.7)
28.9
(25.4)
(146.2)
0.9
1,368.4
Fixtures,
fittings and
equipment
£m
59.2
13.1
–
0.2
–
–
(21.1)
(0.1)
51.3
17.9
–
(0.2)
–
–
(21.6)
–
47.4
Total
£m
1,630.3
50.3
0.3
(5.3)
36.9
(52.7)
(153.1)
(10.7)
1,496.0
90.6
0.5
(7.9)
28.9
(25.4)
(167.8)
0.9
1,415.8
Impairment of property, plant and equipment and right-of-use assets
For impairment testing purposes, the Group has determined that each store is a separate CGU, with the exception of Outlets stores,
which are considered together as one CGU. Click & collect sales are included in the cash flows of the relevant CGU.
Each CGU is tested for impairment at the balance sheet date if any indicators of impairment and impairment reversals have been
identified. Stores identified within the Group’s UK store estate programme are automatically tested for impairment (see note 5).
The value in use of each CGU is calculated based on the Group’s latest budget and forecast cash flows, covering a three-year period,
which have regard to historic performance and knowledge of the current market, together with the Group’s views on the future
achievable growth and the impact of committed initiatives. The cash flows include ongoing capital expenditure required to maintain
the store network, but exclude any growth capital initiatives not committed. Cash flows beyond this three-year period are
extrapolated using a long-term growth rate based on management’s future expectations, with reference to forecast GDP growth.
These growth rates do not exceed the long-term growth rate for the Group’s retail businesses in the relevant territory. If the CGU
relates to a store which the Group has identified as part of the UK store estate programme, the value in use calculated has been
modified by estimation of the future cash flows up to the point where it is estimated that trade will cease and then estimation of the
timing and amount of costs associated with closure as detailed fully in note 5.
The key assumptions in the value in use calculations are the growth rates of sales and gross profit margins, changes in the operating
cost base, long-term growth rates and the risk-adjusted pre-tax discount rate. The pre-tax discount rates are derived from the Group’s
weighted average cost of capital, which has been calculated using the capital asset pricing model, the inputs of which include a
country risk-free rate, equity risk premium, Group size premium and a risk adjustment (beta). The pre-tax discount rates range from
9.8% to 15.8% (last year: 8.9% to 14.0%). If the CGU relates to a store which the Group has identified as part of the UK store estate
programme, the additional key assumptions in the value in use calculations are costs associated with closure, the disposal proceeds
from store exits and the timing of the store exits.
160 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
15 PROPERTY, PLANT AND EQUIPMENT CONTINUED
Impairments – UK stores excluding the UK store estate programme
During the year, the Group has recognised an impairment charge of £6.9m and impairment reversals of £63.4m as a result of UK store
impairment testing unrelated to the UK store estate programme (last year: impairment charge of £66.4m and impairment reversals
of £64.5m). Impairment charges of £2.9m and impairment reversals of £63.4m have been recognised within adjusting items (see note 5).
The remaining £4.0m impairment charge has been recognised in operating profit before adjusting items as it relates to stores not
previously impaired. The impaired stores were impaired to their ‘value in use’ recoverable amount of £37.1m, which is their carrying
value at year end. The stores with impairment reversals were written back to their ‘value in use’ recoverable amount of £302.3m.
For UK stores, when considering both impairment charges and reversals, cash flows beyond the three-year period are extrapolated
using the Group’s current view of achievable long-term growth of 2.0%, adjusted to 0% where management believes the current
trading performance and future expectations of the store do not support the growth rate of 2.0%. The rate used to discount the
forecast cash flows for UK stores is 9.8% (last year: 8.9%).
As disclosed in the accounting policies (note 1), the cash flows used within the impairment model are based on assumptions which
are sources of estimation uncertainty and small movements in these assumptions could lead to further impairments. Management
has performed sensitivity analysis on the key assumptions in the impairment model using reasonably possible changes in these key
assumptions across the UK store portfolio.
A reduction in sales of 5% from the three-year plan in year 3 would result in an increase in the impairment charge of £22.8m and
a 25 basis point reduction in gross profit margin from year 3 onwards would increase the impairment charge by £2.5m. In combination,
a 1% fall in sales and a 10 basis point fall in gross profit margin would increase the impairment charge by £4.7m. A 50 basis point
increase in the discount rate would increase the impairment charge by £6.0m. Reducing the long-term growth rate to 0% across all
stores, would not result in a significant increase to the impairment charge, either individually or in combination.
A reduction in sales of 5% from the three-year plan in year 3 would result in a reduction in the reversal of £17.2m and a 25 basis point
reduction in gross profit margin from year 3 onwards would result in a reduction in the reversal of £1.1m. In combination, a 5% fall in
sales and a 25 basis point fall in gross profit margin would reduce the reversal by £19.0m. A 50 basis point increase in the discount rate
would reduce the reversal by £3.3m. Reducing the long-term growth rate to 0% across all stores, would not result in a significant
decrease to the reversal, either individually or in combination.
Impairments – UK store estate programme
During the year, the Group has recognised an impairment charge of £107.5m and impairment reversals of £27.6m relating to the
on-going UK store estate programme (last year: impairment charge of £107.9m and impairment reversals of £36.7m). These stores
were impaired to their ‘value in use’ recoverable amount of £376.7m, which is their carrying value at year end. The impairment charge
relates to the store closure programme and has been recognised within adjusting items (see note 5). Impairment reversals predominantly
reflect improved trading expectations compared to those assumed at the end of the prior year.
Where the planned closure date for a store is outside the three-year plan period, no growth rate is applied. The rate used to discount
the forecast cash flows for UK stores is 9.8% (last year: 8.9%).
As disclosed in the accounting policies (note 1), the cash flows used within the impairment models for the UK store estate programme
are based on assumptions which are sources of estimation uncertainty, and small movements in these assumptions could lead to
further impairments. Management has performed sensitivity analysis on the key assumptions in the impairment model using
reasonably possible changes in these key assumptions across the UK store estate programme.
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A delay of 12 months in the probable date of each store exit would result in a decrease in the impairment charge by £37.8m. A 5%
reduction in planned sales in years 2 and 3 (where relevant) would result in an increase in the impairment charge by £14.2m. Neither
a 50 basis point increase in the discount rate, a 25 basis point reduction in management gross margin during the period of trading,
nor a 2% increase in the costs associated with exiting a store would result in a significant increase to the impairment charge,
individually or in combination with the other reasonably possible scenarios considered.
Impairments – International stores
During the prior year, the Group recognised an impairment reversal of £8.8m in Ireland as a result of store impairment testing.
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FINANCIAL STATEMENTS
16 OTHER FINANCIAL ASSETS
Non-current
Other investments1
Unlisted equity investments2
Current
Other investments3
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2022
£m
4.5
–
2021
£m
–
9.7
17.6
18.4
1. Includes £3.1m (last year: £nil) of venture capital investments managed by True Capital Limited.
2. The Group has recognised a loss on disposal of its unlisted equity investment of £3.7m (last year:£nil) in other comprehensive income.
3. Includes £8.8m (last year: £9.2m) of money market deposits held by Marks and Spencer plc in an escrow account.
The Group irrevocably designated unlisted equity investments at fair value through other comprehensive income. Other financial
assets are measured at fair value with changes in their value taken to the income statement.
17 TRADE AND OTHER RECEIVABLES
Non–current
Trade receivables
Lease receivables – net
Other receivables
Prepayments
Current
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Lease receivables – net
Other receivables
Prepayments
Accrued income
2022
£m
2021
£m
0.1
74.7
3.3
192.5
270.6
103.0
(4.8)
98.2
0.8
27.2
76.8
14.1
217.1
0.1
62.8
2.1
196.4
261.4
109.8
(3.7)
106.1
–
30.5
53.9
19.1
209.6
The directors consider that the carrying amount of trade and other receivables approximates their fair value. The Group’s assessment
of any expected credit losses is included in note 21B. Included in accrued income is £7.7m (last year: £5.7m) of accrued supplier income
relating to rebates that have been earned but not yet invoiced. An amount of supplier income that has been invoiced but not yet
settled against future trade creditor balances is included within trade creditors, where there is a right to offset.
The Group entered into finance leasing arrangements as a lessor for surplus office space in the Merchant Square building in London,
which is sublet for the remaining duration of the lease.
The maturity analysis of the Group’s lease receivables is as follows:
Timing of cash flows
Within one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
More than five years
Total undiscounted cash flows
Effect of discounting
Present value of lease payments receivable
Less: provision for impairment of receivables
Net investment in the lease
2022
£m
2021
£m
4.8
4.7
4.7
6.1
7.8
121.1
149.2
(73.7)
75.5
–
75.5
4.8
4.8
4.7
4.7
6.1
128.9
154.0
(79.3)
74.7
(11.9)
62.8
Included within trade and other receivables is £1.1m (last year: £nil) which, due to non-recourse factoring arrangements in place, are held
within a “hold to collect and sell” business model and are measured at FVOCI.
162 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
18 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are £1,197.9m (last year: £674.4m). The carrying amount of these assets approximates their fair value.
The effective interest rate on short-term bank deposits is 0.7% (last year: 0.1%). These deposits have an average maturity of 39 days
(last year: 5 days).
19 TRADE AND OTHER PAYABLES
Current
Trade payables
Other payables
Social security and other taxes
Accruals
Deferred income
Non-current
Other payables
Deferred income
2022
£m
2021
£m
732.8
523.5
59.1
595.2
50.3
1,960.9
174.4
13.8
188.2
624.8
466.7
46.8
407.5
53.2
1,599.0
179.2
13.1
192.3
Included within current other payables is £nil (last year: £33.6m) and non-current other payables is £172.6m (last year: £178.4m)
of contingent consideration relating to the investment in Ocado Retail Limited. See note 21D for further details.
A contract liability arises in respect of gift cards and voucher schemes as payment has been received for a performance obligation
which will be performed at a later point in time. Included within trade and other payables are gift card/voucher scheme liabilities:
Opening balance
Issues
Released to the income statement
Closing balance
2022
£m
2021
£m
194.4
404.2
(412.8)
185.8
180.8
363.2
(349.6)
194.4
The Group operates a number of supplier financing arrangements, under which suppliers can obtain accelerated settlement on
invoices from the finance provider. This is a form of reverse factoring which has the objective of serving the Group’s suppliers by
giving them early access to funding. The Group settles these amounts in accordance with each supplier’s agreed payment terms.
The Group is not party to these financing arrangements and the arrangements do not permit the Group to obtain finance from
the provider by paying the provider later than the Group would have paid its supplier. The Group does not incur any interest towards
the provider on the amounts due to the suppliers. The Group therefore discloses the amounts factored by suppliers within trade
payables because the nature and function of the financial liability remain the same as those of other trade payables.
The payments by the Group under these arrangements are included within operating cash flows because they continue to be part
of the normal operating cycle of the Group and their principal nature remains operating – i.e. payments for the purchase of goods
and services.
At 2 April 2022, £330.0m (last year: £272.6m) of trade payables were amounts owed under these arrangements. During the year
the maximum facility available at any one time under the arrangements was £404.1m (last year: £305.0m).
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FINANCIAL STATEMENTS
20 BORROWINGS AND OTHER FINANCIAL LIABILITIES
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Current
Bank loans and overdrafts
Lease liabilities
6.125% £400m Medium Term Notes 20211
Interest accrued on Medium Term Notes
Non-current
3.00% £300m Medium Term Notes 20231
4.75% £400m Medium Term Notes 20251,2
3.75% £300m Medium Term Notes 20261
3.25% £250 Medium Term Notes 20271
7.125% US$300m Medium Term Notes 20373,4
Revaluation of Medium Term Notes5
Lease liabilities
Total
2022
£m
2021
£m
–
200.2
–
47.0
247.2
299.1
409.4
298.6
248.3
192.3
34.8
2,078.5
3,561.0
3,808.2
4.7
219.4
163.5
45.2
432.8
298.5
412.2
298.3
248.0
192.2
24.2
2,186.5
3,659.9
4,092.7
1. These notes are issued under Marks and Spencer plc’s £3bn Euro Medium Term Note programme and all pay interest annually.
2. The Group occasionally enters into interest rate swaps to manage interest rate exposure. At year end, £10.5m (last year: £13.6m) of fair value adjustment for terminated hedges to be
amortised over the remaining debt maturity.
3. Interest on these bonds is payable semi-annually.
4. US$300m Medium Term Note exposure swapped to sterling (fixed-to-fixed cross currency interest rate swaps).
5. Revaluation consists of foreign exchange loss on revaluation of the 7.125% US$300m Medium Term Notes 2037 of £34.8m (last year: £24.2m).
Leases
The Group leases various stores, offices, warehouses and equipment with varying terms, escalation clauses and renewal rights.
The Group has certain leases with lease terms of 12 months or less and leases of assets with low values. The Group applies the “short-term
lease” and “lease of low-value assets” recognition exemptions for these leases.
Set out below are the carrying amounts of lease liabilities and the movements during the period.
Opening lease liabilities
Additions
Interest expense relating to lease liabilities
Payments
Disposals
Exchange difference
Current
Non-current
2022
£m
2,405.9
100.6
124.1
(344.3)
(8.1)
0.5
2,278.7
200.2
2,078.5
2021
£m
2,562.0
48.3
133.8
(316.7)
(7.8)
(13.7)
2,405.9
219.4
2,186.5
The maturity analysis of lease liabilities is disclosed in note 21A.
Future cash outflows related to the post break clause period included in the lease liability
The Group holds certain leases that contain break clause options to provide operational flexibility. In accordance with IFRS 16, the Group
has calculated the full lease term, beyond break, to represent the reasonably certain lease term (except for those stores identified as part
of the UK store estate programme) within the total £2,278.7m of lease liabilities held on the balance sheet.
The following amounts were recognised in profit or loss:
Expenses relating to short-term leases
Expenses relating to low-value assets
Expenses relating to variable consideration
2022
£m
5.9
1.4
4.4
2021
£m
4.6
1.0
2.5
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS
Treasury policy
The Group operates a centralised treasury function to manage the Group’s funding requirements and financial risks in line with the
Board-approved treasury policies and procedures, and their delegated authorities.
The Group’s financial instruments, other than derivatives, comprise borrowings, cash and liquid resources and various items, such
as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is
to finance the Group’s operations.
The Group treasury function also enters into derivative transactions, principally interest rate swaps, cross-currency swaps and forward
currency contracts. The purpose of these transactions is to manage the interest rate and foreign currency risks arising from the
Group’s operations and financing.
It remains the Group’s policy not to hold or issue financial instruments for trading purposes, except where financial constraints
necessitate the need to liquidate any outstanding investments. The treasury function is managed as a cost centre and does not
engage in speculative trading.
Financial risk management
The principal financial risks faced by the Group are liquidity and funding, counterparty, foreign currency and interest rate risks.
The policies and strategies for managing these risks are summarised on the following pages:
A. Liquidity & funding risk
The risk that the Group could be unable to settle or meet its obligations as they fall due:
– The Group’s funding strategy ensures a mix of funding sources offering sufficient headroom, maturity and flexibility, and cost-
effectiveness to match the requirements of the Group.
– Marks and Spencer plc is financed by a combination of retained profits, bank borrowings, Medium Term Notes and committed
syndicated bank facilities.
– Operating subsidiaries are financed by a combination of retained profits, bank borrowings and intercompany loans.
During the year, the Group terminated its committed syndicated bank revolving credit facility and entered a new committed
syndicated bank revolving credit facility of £850.0m with a current maturity date of 13 June 2025. The new facility contains a financial
covenant, being the ratio of earnings before interest, tax, depreciation and amortisation; to net interest and depreciation on right-of-
use assets under IFRS 16. The covenant is measured semi-annually. The Group was not in breach of this covenant at the reporting date.
The new revolving credit facility includes four additional sustainability metrics where the margin payable on the facility is adjusted to
reflect the Group’s performance against a number of ESG targets material to the Group’s Plan A objectives. The Group was not in
breach of these metrics at the reporting date.
The Group also has a number of uncommitted facilities available to it. At year end, these amounted to £25m (last year: £25m), all of
which are due to be reviewed within a year. At the balance sheet date, a sterling equivalent of £nil (last year: £nil) was drawn under the
committed facilities and £nil (last year: £nil) was drawn under the uncommitted facilities.
In addition to the existing borrowings, the Group has a Euro Medium Term Note programme of £3bn, of which £1.3bn (last year: £1.4bn)
was in issuance as at the balance sheet date. The initial rate of interest is fixed at the date of issue and the Notes are referred to as
fixed rate borrowings throughout the Annual Report as the coupon does not change with movements in benchmark interest rates.
However, the rate of interest on certain Notes varies both up and down in response to third-party credit ratings (to above/below
Baa3 or above/below BBB-) that reflects the relative deterioration or improvement in the Group’s cost of credit, and the interest
payable on these Notes increases from the next interest payment date following a relevant credit rating downgrade. As the original
contractual terms of these Notes provide for changes in cash flows to be reset to reflect the relative deterioration or improvement in
the Group’s cost of credit, the Group considers these Notes to be floating rate instruments when determining amortised cost under
IFRS 9 and consequently the Group applied IFRS 9 paragraph B5.4.5, which requires no adjustment to the carrying amount of the
liabilities or immediate impact on profit and loss. If the Group had determined these Notes to be fixed rate instruments, the Notes
would be remeasured to reflect the revised cash flows discounted at the original effective rate. This would result in initially a higher
interest expense to profit or loss, offset by lower interest charges subsequently, when compared to the Group’s treatment.
As part of the Ocado Retail Limited investment, Ocado Retail Limited entered into a £30m, three-year revolving credit facility.
Along with Ocado Group Plc, the Group has provided a parent guarantee to cover 50% of the £30m revolving credit facility provided
by BNPP to Ocado Retail Limited.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
The table below summarises the contractual maturity of the Group’s non-derivative financial liabilities and derivatives, excluding trade
payables, other payables and accruals. The carrying value of all trade payables, other payables (excluding contingent consideration
payable) and accruals of £1,853.3m (last year: £1,466.2m) is equal to their contractual undiscounted cash flows (see note 19) which are
due within one year. Contingent consideration (see the fair value hierarchy section within note 21) of £nil (last year: £33.7m) is expected to
become payable within one year and £190.8m (last year: £190.8m) between two and five years.
Bank loans
and
overdrafts
£m
Medium
Term Notes
£m
Lease
liabilities1
£m
Partnership
liability to the
Marks & Spencer
UK Pension
Scheme
(note 12)
£m
(4.7)
–
–
–
(4.7)
–
(4.7)
–
–
–
–
–
–
–
(244.8)
(74.8)
(898.8)
(987.7)
(2,206.1)
524.0
(1,682.1)
(75.5)
(375.5)
(864.3)
(668.4)
(1,983.7)
454.2
(1,529.5)
(326.3)
(289.1)
(754.6)
(3,293.2)
(4,663.2)
2,257.3
(2,405.9)
(313.2)
(279.3)
(786.0)
(3,082.1)
(4,460.6)
2,181.9
(2,278.7)
(124.9)
(71.9)
–
–
(196.8)
3.3
(193.5)
(71.9)
(73.0)
(54.4)
–
(199.3)
7.0
(192.3)
Total
borrowings
and other
financial
liabilities
£m
(700.7)
(435.8)
(1,653.4)
(4,280.9)
(7,070.8)
2,784.6
(4,286.2)
(460.6)
(727.8)
(1,704.7)
(3,750.5)
(6,643.6)
2,643.1
(4,000.5)
Cash
inflow on
derivatives2
£m
Cash
outflow on
derivatives2
£m
Total
derivative
liabilities
£m
1,492.9
162.7
46.5
404.0
2,106.1
(1,586.8)
(164.4)
(43.8)
(368.6)
(2,163.6)
330.2
30.9
–
–
361.1
(333.6)
(31.1)
–
–
(364.7)
(93.9)
(1.7)
2.7
35.4
(57.5)
(3.4)
(0.2)
–
–
(3.6)
Timing of cash flows
Within one year
Between one and two years
Between two and five years
More than five years
Total undiscounted cash flows
Effect of discounting
At 3 April 2021
Timing of cash flows
Within one year
Between one and two years
Between two and five years
More than five years
Total undiscounted cash flows
Effect of discounting
At 2 April 2022
1. Total undiscounted lease payments of £766.2m relating to the period post break clause, and the earliest contractual lease exit point, are included in lease liabilities. These undiscounted
lease payments should be excluded when determining the Group’s contractual indebtedness under these leases, where there is a contractual right to break. Furthermore, £155.2m of these
payments relate to leases where, following the break clause, the Group will have the ability to exit the lease at any point before the lease expiry with a maximum of six months’ notice.
2. Cash inflows and outflows on derivative instruments that require gross settlement (such as cross-currency swaps and forward foreign exchange contracts) are disclosed gross.
Cash inflows and outflows on derivative instruments that settle on a net basis are disclosed net.
B. Counterparty risk
Counterparty risk exists where the Group can suffer financial loss through the default or non-performance of the counterparties
with whom it transacts.
Exposures are managed in accordance with the Group treasury policy which limits the value that can be placed with each approved
counterparty to minimise the risk of loss. The minimum long-term rating for all counterparties is long-term Standard & Poor’s (S&P)/
Moody’s A-/A3 (BBB+/Baa1 for committed lending banks). In the event of a rating by one agency being different from the other,
reference will be made to Fitch to determine the casting vote of the rating group. In the absence of a Fitch rating, the lower agency
rating will prevail. Limits are reviewed regularly by senior management. The credit risk of these financial instruments is estimated
as the fair value of the assets resulting from the contracts.
The table below analyses the Group’s short-term investments and derivative assets by credit exposure excluding bank balances,
store cash and cash in transit.
Other investments1
Derivative assets2
At 3 April 2021
Other investments1
Derivative assets2
At 2 April 2022
AAA
£m
–
–
–
AAA
£m
–
–
–
AA+
£m
–
–
–
AA+
£m
–
–
–
AA
£m
–
–
–
AA
£m
–
–
–
Credit rating of counterparty
AA-
£m
54.4
6.1
60.5
AA-
£m
158.5
–
158.5
A+
£m
182.4
25.8
208.2
A+
£m
288.6
31.9
320.5
A
£m
250.3
0.7
251.0
A
£m
462.0
24.4
486.4
A-
£m
4.7
0.5
5.2
A-
£m
89.0
8.7
97.7
BBB+
£m
3.3
–
3.3
BBB+
£m
–
–
–
Total
£m
495.1
33.1
528.2
Total
£m
998.1
65.0
1,063.1
1. Includes cash on deposit and money market funds held by Marks and Spencer Scottish Limited Partnership, Marks and Spencer plc and Marks and Spencer General Insurance.
Excludes cash in hand and in transit of £217.4m (last year: £197.7m).
2. Standard & Poor’s equivalent rating shown as reference to the majority credit rating of the counterparty from either Standard & Poor’s, Moody’s or Fitch where applicable.
166 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
The Group has a very low retail credit risk due to transactions principally being of high volume, low value and short maturity.
The maximum exposure to credit risk at the balance sheet date was as follows: trade receivables £103.1m (last year: £106.2m), lease
receivables £75.5m (last year: £62.8m), other receivables £30.5m (last year: £32.6m), cash and cash equivalents £1,197.9m (last year:
£674.4m) and derivatives £65.0m (last year: £33.1m).
Impairment of financial assets
The credit risk management practices of the Group include internal review and reporting of the ageing of trade and other receivables
by days past due by a centralised accounts receivable function, and grouped by respective contractual revenue stream, along
with liaison with the debtors by the credit control function.
The Group applies the IFRS 9 simplified approach in measuring expected credit losses which use a lifetime expected credit loss
allowance for all trade receivables and lease receivables.
To measure expected credit losses, trade receivables have been grouped by shared credit risk characteristics along the lines of
differing revenue streams such as international franchise, food, UK franchise, corporate and sundry, as well as by geographical
location and days past due. In addition to the expected credit losses calculated using a provision matrix, the Group may provide
additional provision for the receivables of particular customers if the deterioration of financial position was observed. The Group’s
trade receivables are of very low credit risk due to transactions being principally of high volume, low value and short maturity.
Therefore, it also has very low concentration risk.
The expected loss rates are determined based on the average write-offs as a proportion of average debt over a period of 36 months
prior to the reporting date. The historical loss rates are adjusted for current and forward-looking information where significant.
The Group considers GDP growth, unemployment, sales growth and bankruptcy rates of the countries in which goods are sold to
be the most relevant factors and, where the impact of these is significant, adjusts the historical loss rates based on expected changes
in these factors.
Historical experience has indicated that debts aged 180 days or over are generally not recoverable. The Group has incorporated this
into the expected loss model through a uniform loss rate for ageing buckets below 180 days, dependent on the revenue stream and
country and providing for 100% of debt aged over 180 days past due. Where the Group specifically holds insurance or holds the legal
right of offset with debtors which are also creditors, the loss provision is applied only to the extent of the uninsured or net exposure.
Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there may be no reasonable
expectation of recovery include the failure of the debtor to engage in a payment plan, and failure to make contractual payments
within 180 days past due.
Impairment losses on trade receivables are presented as net impairment losses within operating profit, and subsequent recoveries
are credited to the same line item.
As at 3 April 2021
Gross carrying amount –
trade receivables
Expected loss rate
Lifetime expected credit loss
Net carrying amount
As at 2 April 2022
Gross carrying amount –
trade receivables
Expected loss rate
Lifetime expected credit loss
Net carrying amount
Current
£m
95.0
1.45%
1.4
93.6
Current
£m
76.7
2.87%
2.2
74.5
Up to
30 days
past due
£m
9.9
5.43%
0.5
9.4
Up to
30 days
past due
£m
15.8
4.93%
0.8
15.0
31-60 days
past due
£m
61-90 days
past due
£m
91-180 days
past due
£m
2.0
12.88%
0.3
1.7
0.8
15.78%
0.1
0.7
0.8
17.06%
0.1
0.7
31-60 days
past due
£m
61-90 days
past due
£m
91-180 days
past due
£m
–
0.0%
–
–
1.9
5.72%
0.1
1.8
7.5
7.76%
0.6
6.9
181 days
or more
past due
£m
1.3
100.0%
1.3
–
181 days
or more
past due
£m
1.1
100.0%
1.1
–
Total
£m
109.8
3.40%
3.7
106.1
Total
£m
103.0
4.63%
4.8
98.2
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
The closing loss allowances for trade receivables reconciles to the opening loss allowances as follows:
Trade receivables expected loss provision
Opening loss allowance
Increase/(decrease) in loss allowance recognised in profit and loss during the year
Receivables written off during the year as uncollectable
Closing loss allowance
The closing loss allowances for lease receivables reconciles to the opening loss allowances as follows:
Lease receivables expected loss provision
Opening loss allowance
(Decrease)/increase in loss allowance recognised in profit and loss during the year1
Receivables written off during the year as uncollectable
Closing loss allowance
2022
£m
3.7
1.5
(0.4)
4.8
2022
£m
11.9
(11.9)
–
–
2021
£m
4.0
(0.3)
–
3.7
2021
£m
4.7
7.2
–
11.9
1. Relates to the sublet of previously closed offices associated with the strategic programme to centralise the Group’s London Head Office functions (see note 5).
The provision for other receivables is highly immaterial (it can be quantified) and therefore no disclosure is provided.
C. Foreign currency risk
Transactional foreign currency exposure arises primarily from the import of goods sourced from overseas suppliers and also from the
export of goods from the UK to overseas subsidiaries. The most significant exposure is to the US dollar, incurred in the sourcing of
Clothing & Home products from Asia.
Group Treasury hedges these exposures principally using forward foreign exchange contracts progressively based on dynamic
forecasts from the business. Hedging begins around 14 months ahead of the start of the season, with between 80% and 100% of the
risk hedged eight months before the start of the season. In accordance with the Group’s treasury policy, hedges are entered into by
business line and by season.
Other exposures arising from the export of goods to overseas subsidiaries are also hedged progressively over the course of the year
before they are incurred. As at the balance sheet date, the gross notional value in sterling terms of forward foreign exchange sell or
buy contracts amounted to £1,865.7m (last year: £1,776.6m) with a weighted average maturity date of six months (last year: six months).
Gains and losses in equity on forward foreign exchange contracts designated in cash flow hedge relationships as at 2 April 2022 will be
reclassified to the income statement at various dates over the following 15 months (last year: 16 months) from the balance sheet date.
The foreign exchange forwards are designated as cash flow hedges of highly probable forecast transactions. Both spot and forward
points are designated in the hedge relationship; under IFRS 9 the currency basis spread may be excluded from the hedge relationship
and recognised in other comprehensive income – cost of hedging reserve. The change in the fair value of the hedging instrument, to
the degree effective, is deferred in equity and subsequently either reclassified to profit or loss or removed from equity and included
in the initial cost of inventory as part of the “basis adjustment”. This will be realised in the income statement once the hedged item is
sold. The Group has considered and elected not to recognise the currency basis spread element in the cost of hedging reserve, owing
to the relatively short-dated nature of the hedging instruments.
The Group regularly reviews the foreign exchange hedging portfolio to confirm whether the underlying transactions remain highly
probable. Any identified instance of over-hedging or ineffectiveness would result in immediate recycling to the income statement.
A change in the timing of a forecast item does not disqualify a hedge relationship nor the assertion of “highly probable” as there
remains an economic relationship between the underlying transaction and the derivative.
The foreign exchange forwards are recognised at fair value. The Group has considered and elected not to apply credit/debit valuation
adjustments, owing to their relatively short-dated nature. The risks at the reporting date are representative of the financial year.
The Group also holds a number of cross-currency swaps to designate its fixed rate US dollar debt to fixed rate sterling debt. These
are reported as cash flow hedges. The change in the fair value of the hedging instrument, to the degree effective, is retained in other
comprehensive income, segregated by cost and effect of hedging. Under IFRS 9 the currency basis on the cross-currency swaps is
excluded from the hedge designation and recognised in other comprehensive income – cost of hedging reserve. Effectiveness is
measured using the hypothetical derivative approach. The contractual terms of the cross-currency swaps include break clauses every
five years which allow for the interest rates to be reset (last reset December 2017). The hypothetical derivative is based on the original
critical terms and so ineffectiveness may result.
168 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
The cross-currency swaps are recognised at fair value. The inclusion of credit risk on cross-currency swaps will cause ineffectiveness
of the hedge relationship. The Group has considered and elected to apply credit/debit valuation adjustments, owing to the swaps’
relative materiality and longer dated nature.
The Group also hedges foreign currency intercompany loans where these exist. Forward foreign exchange contracts in relation to the
hedging of the Group’s foreign currency intercompany loans are classified as fair value through profit and loss. The corresponding fair
value movement of the intercompany loan balance resulted in a £0.3m gain (last year: £1.4m gain) in the income statement. As at the
balance sheet date, the gross notional value of intercompany loan hedges was £166.8m (last year: £172.0m).
After taking into account the hedging derivatives entered into by the Group, the currency and interest rate exposure of the Group’s
financial liabilities, excluding short-term payables and the liability to the Marks & Spencer UK Pension Scheme, is set out below:
Currency
Sterling
Euro
Other
2022
2021
Fixed rate
£m
Floating rate
£m
Total
£m
Fixed rate
£m
Floating rate
£m
Total
£m
3,610.6
104.3
93.3
3,808.2
–
–
–
–
3,610.6
104.3
93.3
3,808.2
3,886.2
95.8
106.0
4,088.0
4.7
–
–
4.7
3,890.9
95.8
106.0
4,092.7
The prior year floating rate sterling borrowings were cash balances classified as overdrafts.
As at the balance sheet date and excluding lease liabilities, post-hedging the GBP and USD fixed rate borrowings are at an average
rate of 5.1% (last year: 5.3%) and the weighted average time for which the rate is fixed is five years (last year: six years).
During the prior year, the Group closed out all interest rate swaps designated in hedge relationships.
D. Interest rate risk
The Group is exposed to interest rate risk in relation to sterling, US dollar and euro variable rate financial assets and liabilities.
The Group’s policy is to use derivative contracts where necessary to maintain a mix of fixed and floating rate borrowings to manage
this risk. The structure and maturity of these derivatives correspond to the underlying borrowings and are accounted for as fair value
or cash flow hedges as appropriate.
At the balance sheet date, fixed rate borrowings amounted to £3,808.2m (last year: £4,088.0m) representing the public bond issues
and lease liabilities, amounting to 100% (last year: 99%) of the Group’s gross borrowings.
The effective interest rates at the balance sheet date were as follows:
Committed and uncommitted borrowings
Medium Term Notes
Leases
2022
%
N/A
5.1%
5.4%
2021
%
N/A
5.3%
5.4%
The Group has closely monitored the market and the output from the various industry working groups managing the transition to new
benchmark interest rates. This includes announcements made by LIBOR regulators (including the Financial Conduct Authority (“FCA”))
regarding the transition away from GBP LIBOR to the Sterling Overnight Index Average Rate (“SONIA”). In March 2021, the FCA announced
that it will no longer seek to persuade, or compel, banks to submit LIBOR from 31 December 2021 (for USD LIBOR: 30 June 2023).
Last year, the Group identified all contracts with reference to LIBOR and ensured that these were terminated or amended to specify
the date on which the interest rate benchmark would be replaced, the alternative benchmark rate and the relevant spread adjustment.
Where applicable, fallback language was included to incorporate any future transitions to new benchmark interest rates.
The Group no longer holds any financial instruments that reference LIBOR and is therefore not exposed to any liquidity, basis or
accounting risks arising from benchmark reform. All necessary system and operational changes have been made to reference SONIA.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
Derivative financial instruments
The below table illustrates the effects of hedge accounting on the consolidated statement of financial position and consolidated
income statement through detailing separately by risk category and each type of hedge the details of the associated hedging
instrument and hedged item.
Hedging risk strategy
Notional/currency legs
Carrying amount assets
Carrying amount (liabilities)
Maturity date
Hedge ratio
Description of hedged item
Change in fair value of hedging instrument1
Change in fair value of hedged item
used to determine hedge effectiveness
Weighted average hedge rate for the year
Amounts recognised within finance costs in profit and loss
Balance on cash flow hedge reserve at 3 April 2021
Balance on cost of hedging reserve at 3 April 2021
Current
Non-current
3 April 2021
Forward foreign
exchange
(FX) contracts
£m
Cash flow
hedges
1,585.9
32.1
(83.9)
to Sep 2021
100%
Highly probable
transactional
FX exposures
(100.2)
100.2
GBP/USD 1.32,
GBP/EUR1.13
–
40.6
–
Forward foreign
exchange
(FX) contracts
£m
FVTPL
333.8
0.7
(12.1)
to Jan 2022
n/a
Intercompany
loans/deposits
Cross-currency
swaps
£m
Cash flow
hedges
193.5
–
(8.1)
to Dec 2037
100%
USD fixed rate
borrowing
(11.1)
12.5
(91.7)
93.0
–
GBP/USD 1.55
1.4
–
–
2 April 2022
1.3
25.4
(5.8)
Forward foreign
exchange
(FX) contracts
£m
Cash flow
hedges
190.7
0.3
(2.6)
to May 2022
100%
Highly probable
transactional
FX exposures
(11.8)
11.8
GBP/USD 1.28,
GBP/EUR1.12
–
2.2
–
Current
Non-current
Hedging risk strategy
Notional/currency legs
Carrying amount assets
Carrying amount (liabilities)
Maturity date
Hedge ratio
Description of hedged item
Change in fair value of hedging instrument
Change in fair value of hedged item
used to determine hedge effectiveness
Weighted average hedge rate for the year
Amounts recognised within finance costs in profit and loss
Balance on cash flow hedge reserve at 2 April 2022
Balance on cost of hedging reserve at 2 April 2022
Forward foreign
exchange
(FX) contracts
£m
Cash flow
hedges
1,536.9
43.0
(2.3)
to Sep 2022
100%
Highly probable
transactional FX
exposures
60.1
(60.1)
GBP/USD 1.37;
GBP/EUR 1.18
–
(32.0)
–
Forward foreign
exchange
(FX) contracts
£m
FVTPL
166.8
0.6
(0.9)
to May 2022
n/a
Intercompany
loans/deposits
Cross-currency
swaps
£m
Cash flow
hedges
193.5
18.5
–
to Dec 2037
100%
USD fixed rate
borrowing
11.1
(10.8)
26.7
(25.4)
Forward foreign
exchange
(FX) contracts
£m
Cash flow
hedges
162.0
2.9
(0.4)
to Apr 2023
100%
Highly probable
transactional
FX exposures
4.8
(4.8)
– GBP/USD 1.55 GBP/USD 1.34;
GBP/EUR 1.17
–
2.5
–
(0.1)
9.5
(5.0)
0.3
–
–
1. Last year, the £(11.1)m fair value change represented in the fair value movement of the forward contracts under FVTPL consisted of economic hedges of certain intercompany
loans/deposits and forward contracts that were no longer in hedge relationships (total equivalent notional: £333.8m; current year: nil). Of this fair value change, £(10.2)m related to
movements in valid hedge relationships that de-designated at the end of the respective financial year and were reclassified to the cost of inventory (current year: nil). This line also
includes the cash settlements of the derivative positions during each respective year.
170 Marks and Spencer Group plc
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21 FINANCIAL INSTRUMENTS CONTINUED
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Current
Forward foreign
exchange contracts
– cash flow hedges
– FVTPL
Non-current
Cross-currency swaps – cash flow hedges
– cash flow hedges
Forward foreign
exchange contracts
2 April 2022
3 April 2021
Notional value
Fair value
Notional value
Fair value
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
1,348.8
37.2
1,386.0
188.1
129.6
317.7
193.5
131.1
–
30.9
43.0
0.6
43.6
18.5
2.9
(2.3)
(0.9)
(3.2)
–
(0.4)
449.0
72.2
521.2
–
46.2
1,136.9
261.6
1,398.5
193.5
144.5
324.6
30.9
21.4
(0.4)
46.2
338.0
32.1
0.7
32.8
–
0.3
0.3
(83.9)
(12.1)
(96.0)
(8.1)
(2.6)
(10.7)
The Group’s hedging reserves disclosed in the consolidated statement of changes in equity, relate to the following hedging
instruments:
Opening balance 29 March 2020
Add: Change in fair value of hedging
instrument recognised in OCI2
Add: Costs of hedging deferred and
recognised in OCI
Less: Reclassified to the cost of inventory
Less: Reclassified from OCI to profit or loss
Less: Deferred tax
Closing balance 3 April 2021
Opening balance 4 April 2021
Add: Change in fair value of hedging
instrument recognised in OCI
Add: Costs of hedging deferred and
recognised in OCI
Less: Reclassified to the cost of inventory
Less: Reclassified from OCI to profit or loss
Less: Deferred tax
Closing balance 2 April 2022
1. Cross-currency interest rate swaps.
2. Other comprehensive income.
Cost of
hedging
reserve
CCIRS1
£m
(7.1)
–
1.3
–
–
–
(5.8)
(5.8)
–
0.8
–
–
–
(5.0)
Deferred
tax
£m
1.4
–
–
–
–
(0.2)
1.2
1.2
–
–
–
–
0.2
1.4
Total
cost of
hedging
reserve
£m
Hedge
reserve FX
derivatives
£m
(5.7)
(45.6)
Hedge
reserve
CCIRS
£m
(40.1)
–
122.2
92.0
1.3
–
–
(0.2)
(4.6)
(4.6)
–
(33.9)
–
–
42.7
42.7
–
–
(26.5)
–
25.4
25.4
–
(65.7)
(26.4)
0.8
–
–
0.2
(3.6)
–
(6.5)
–
–
(29.5)
–
–
10.5
–
9.5
Hedge
reserve gilt
locks
£m
0.1
–
–
–
–
–
0.1
0.1
–
–
–
–
–
0.1
Deferred
tax
£m
Total hedge
reserve
£m
17.0
(68.6)
–
214.2
–
–
–
(30.4)
(13.4)
(13.4)
–
(33.9)
(26.5)
(30.4)
54.8
54.8
–
(92.1)
–
–
–
15.7
2.3
–
(6.5)
10.5
15.7
(17.6)
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
During the prior year, the Group closed out all interest rate swaps designating its GBP fixed debt to floating debt which were reported
as fair value hedges (see note 20 for details of fair value adjustment). At 2 April 2022, the Group had a deferred fair value adjustment
of £10.5m (last year: £13.6m) in borrowings relating to terminated fair value hedges. The ineffective portion recognised in profit or loss
that arose from fair value hedges amounted to a nil gain or loss as the loss on the hedged items was £nil (last year: loss of £4.4m) and
the gain on the hedging instruments was £nil (last year: gain of £4.4m).
Movement in hedged items and hedging instruments
Net gain in fair value of interest rate swap
Net loss on hedged items
Ineffectiveness
2022
£m
–
–
–
2021
£m
4.4
(4.4)
–
The Group holds a number of cross-currency interest rate swaps to designate its USD to GBP fixed debt. These are reported as cash
flow hedges. The ineffective portion recognised in profit or loss that arises from the cash flow hedge amounts to a £1.3m gain (last year:
£1.3m gain) as the loss on the hedged items was £25.4m (last year: £93.0m gain) and the movement on the hedging instruments was
a £26.7m gain (last year: £91.7m loss). A nil gain or loss (last year: nil gain or loss) was recognised in profit or loss as previously realised
ineffectiveness reversed out.
Movement in hedged items and hedging instruments
Net gain/(loss) in fair value of cross-currency interest rate swap
Net (loss)/gain on hedged items
Ineffectiveness
2022
£m
26.7
(25.4)
1.3
2021
£m
(91.7)
93.0
1.3
Sensitivity analysis
The table below illustrates the estimated impact on the income statement and equity as a result of market movements in foreign
exchange and interest rates in relation to the Group’s financial instruments. The directors consider that a 2% +/- (last year: 2%) movement
in interest and a 20% +/- (last year: 20%) movement in sterling against the relevant currency represents a reasonably possible change.
However, this analysis is for illustrative purposes only. The Group believes that these illustrative assumed movements continue to
provide sufficient guidance.
The table excludes financial instruments that expose the Group to interest rate and foreign exchange risk where such a risk is fully
hedged with another financial instrument. Also excluded are trade receivables and payables as these are either sterling denominated
or the foreign exchange risk is hedged.
Interest rates
The impact in the income statement due to changes in interest rates reflects the effect on the Group’s floating rate debt as at the
balance sheet date. The impact in equity reflects the fair value movement in relation to the Group’s cross-currency swaps.
Foreign exchange
The impact from foreign exchange movements reflects the change in the fair value of the Group’s transactional foreign exchange
cash flow hedges at the balance sheet date. The equity impact shown for foreign exchange sensitivity relates to derivatives. This value
is expected to be materially offset by the re-translation of the related transactional exposures.
At 3 April 2021
Impact on income statement: (loss)/gain
Impact on other comprehensive income: (loss)/gain
At 2 April 2022
Impact on income statement: (loss)/gain
Impact on other comprehensive income: (loss)/gain
2%
decrease in
interest rates
£m
2%
increase in
interest rates
£m
20%
weakening in
sterling
£m
20%
strengthening
in sterling
£m
(9.2)
(2.1)
(19.2)
(4.2)
9.2
4.7
19.2
3.3
–
199.4
–
243.5
–
(199.4)
–
(243.5)
172 Marks and Spencer Group plc
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
Offsetting of financial assets and liabilities
The following tables set out the financial assets and financial liabilities which are subject to offsetting, enforceable master netting
arrangements and similar agreements. Amounts which are offset against financial assets and liabilities in the Group’s balance sheet
are set out below. For trade and other receivables and trade and other payables, amounts not offset in the balance sheet but which
could be offset under certain circumstances are also set out. To reconcile the amount shown in the tables below to the statement
of financial position, items which are not subject to offsetting should be included.
At 3 April 2021
Trade and other receivables
Derivative financial assets
Trade and other payables
Derivative financial liabilities
At 2 April 2022
Trade and other receivables
Derivative financial assets
Trade and other payables
Derivative financial liabilities
Gross financial
assets/
(liabilities)
£m
Gross financial
(liabilities)/
assets offset
£m
Net financial
assets/
(liabilities) per
statement of
financial
position
£m
Related
amounts not
offset in the
statement of
financial
position
£m
16.5
33.1
49.6
(257.4)
(106.7)
(364.1)
(12.8)
–
(12.8)
12.8
–
12.8
3.7
33.1
36.8
(244.6)
(106.7)
(351.3)
–
(24.9)
(24.9)
–
24.9
24.9
Gross financial
assets/
(liabilities)
£m
Gross financial
(liabilities)/
assets offset
£m
Net financial
assets/
(liabilities) per
statement of
financial
position
£m
Related
amounts not
offset in the
statement of
financial
position
£m
27.9
65.0
92.9
(284.8)
(3.6)
(288.4)
(25.0)
–
(25.0)
25.0
–
25.0
2.9
65.0
67.9
(259.8)
(3.6)
(263.4)
–
(3.4)
(3.4)
–
3.4
3.4
Net
£m
3.7
8.2
11.9
(244.6)
(81.8)
(326.4)
Net
£m
2.9
61.6
64.5
(259.8)
(0.2)
(260.0)
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Amounts which do not meet the criteria for offsetting on the balance sheet but could be settled net in certain circumstances
principally relate to derivative transactions under International Swaps and Derivatives Association (“ISDA”) agreements where each
party has the option to settle amounts on a net basis in the event of default of the other party.
Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
– Level 1: quoted (unadjusted) prices in active markets for identical assets and liabilities. The Group had no Level 1 investments
or financial instruments.
– Level 2: not traded in an active market but the fair values are based on quoted market prices or alternative pricing sources with
reasonable levels of price transparency. The Group’s Level 2 financial instruments include interest rate and foreign exchange
derivatives. Fair value is calculated using discounted cash flow methodology, future cash flows are estimated based on forward
exchange rates and interest rates (from observable market curves) and contract rates, discounted at a rate that reflects the credit
risk of the various counterparties for those with a long maturity.
– Level 3: techniques that use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
At the end of the reporting period, the Group held the following financial instruments at fair value:
2022
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
2021
Level 2
£m
Level 3
£m
Total
£m
Assets measured at fair value
Financial assets at fair value
through profit or loss (FVTPL)
– derivatives held at FVTPL
– other investments1
Derivatives used for hedging
Unlisted equity investments2
Liabilities measured at fair value
Financial liabilities at fair value
through profit or loss (FVTPL)
– derivatives held at FVTPL
– contingent consideration3
Derivatives used for hedging
–
–
–
–
–
–
–
0.6
17.6
64.4
–
–
4.5
–
–
0.6
22.1
64.4
–
(0.9)
–
(2.7)
–
(172.6)
–
(0.9)
(172.6)
(2.7)
–
–
–
–
–
–
–
0.7
18.4
32.4
–
–
–
–
9.7
0.7
18.4
32.4
9.7
(12.1)
–
(94.6)
–
(212.0)
–
(12.1)
(212.0)
(94.6)
There were no transfers between the levels of the fair value hierarchy during the period. There were also no changes made to any
of the valuation techniques during the period.
1. Within Level 3 other investments, the Group holds £3.1m of venture capital investments, managed by True Capital Limited, measured at FVTPL (last year: £nil) (see note 16) which are
Level 3 instruments. The fair value of these investments has been determined in accordance with the International Private Equity and Venture Capital (“IPEV”) Valuation Guidelines.
Where investments are either recently acquired or there have been recent funding rounds with third parties, the primary input when determining the valuation is the latest
transaction price.
2. The Group holds £nil in unlisted equity securities measured at fair value through other comprehensive income (last year: £9.7m) (see note 16) which is a Level 3 instrument. The fair
value of this investment was determined with reference to the net asset value of the entity in which the investment was held, which in turn derived the majority of its net asset value
through a third-party property valuation.
3. As part of the investment in Ocado Retail Limited, a contingent consideration arrangement was agreed. The arrangement comprises three separate elements which only become
payable on the achievement of three separate financial and operational performance targets. In June 2021, £16.8m was settled, relating to the first of the three targets. In October 2021,
£17.0m was settled, relating to the second target. The final target relates to Ocado Retail Limited achieving a specified target level of earnings in the financial year ending November
2023. The maximum potential undiscounted amount of all future payments that the Group could be required to make under the arrangement is £156.3m plus interest of 4%.
The fair value of the contingent consideration was estimated by applying an appropriate discount rate to the expected future payments. The key assumptions take into consideration
the probability of meeting each performance target and the discount factor. The performance target is binary and, based on the latest five-year plan of Ocado Retail Limited, is
expected to be met and therefore the fair value reflects the full, discounted £156.3m plus interest, and it is therefore expected that £190.8m will become payable in 2024/25. Should
the target not be met, no consideration would be payable. Should the discount rate applied be changed, the fair value of the contingent consideration would change, but the amount
of consideration that would ultimately be paid would not necessarily change. A discount rate of 4.2% was used and a 2.0% change in the discount rate would result in a change in fair
value of £8.0m. A 5% change in the forecast level of earnings used to assess the performance target would not result in a significant change in fair value of the contingent consideration.
During the period, £33.8m of contingent consideration was settled and a gain of £5.6m recognised in profit or loss in relation to the remeasurement (see note 5).
The Marks & Spencer UK Pension Scheme holds a number of financial instruments which make up the pension asset of £10,090.7m
(last year: £10,442.9m). Level 1 and Level 2 financial assets measured at fair value through other comprehensive income amounted to
£4,998.8m (last year: £5,446.0m). Additionally, the scheme assets include £5,091.9m (last year: £4,996.9m) of Level 3 financial assets.
See note 11 for information on the Group’s retirement benefits.
The following table represents the changes in Level 3 instruments held by the Pension Schemes:
Opening balance
Fair value gain recognised in other comprehensive income
(Withdrawal)/additional investment
Closing balance
2022
£m
4,996.9
138.6
(43.6)
5,091.9
2021
£m
4,325.1
68.3
603.5
4,996.9
Fair value of financial instruments
With the exception of the Group’s fixed rate bond debt and the Partnership liability to the Marks & Spencer UK Pension Scheme (note 12),
there were no material differences between the carrying value of non-derivative financial assets and financial liabilities and their fair
values as at the balance sheet date.
The carrying value of the Group’s fixed rate bond debt (Level 1 equivalent) was £1,482.5m (last year: £1,682.1m); the fair value of this debt
was £1,549.6m (last year: £1,807.6m) which has been calculated using quoted market prices and includes accrued interest. The carrying
value of the Partnership liability to the Marks & Spencer UK Pension Scheme (Level 2 equivalent) is £192.3m (last year: £193.5m) and
the fair value of this liability is £187.9m (last year: £185.5m).
Capital policy
The Group’s objectives when managing capital (defined as net debt plus equity) are to fund investment in the transformation and
rebuild balance sheet metrics towards levels consistent with investment grade, to safeguard its ability to continue as a going concern
in order to provide optimal returns for shareholders and to maintain an efficient capital structure to reduce the cost of capital.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
21 FINANCIAL INSTRUMENTS CONTINUED
In doing so, the Group’s strategy is to rebuild a capital structure commensurate with an investment grade credit rating and to retain
appropriate levels of liquidity headroom to ensure financial stability and flexibility. To achieve this strategy, the Group regularly monitors
key credit metrics such as the gearing ratio, cash flow to net debt and fixed charge cover to maintain this position. In addition,
the Group ensures a combination of appropriate committed short-term liquidity headroom with a diverse and balanced long-term
debt maturity profile. As at the balance sheet date, the Group’s average debt maturity profile was five years (last year: six years).
During the year, the Group maintained credit ratings of Ba1 (stable) with Moody’s and BB+ (stable) with Standard & Poor’s.
In order to maintain or realign the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to reduce debt.
22 PROVISIONS
At 29 March 2020
Provided in the year – charged to profit or loss
Provided in the year – charged to property, plant and equipment
Released in the year
Utilised during the year
Exchange differences
Discount rate unwind
Reclassified to the pension liability
At 3 April 2021
Analysed as:
Current
Non-current
At 4 April 2021
Provided in the year – charged to profit or loss
Provided in the year – charged to property, plant and equipment
Released in the year
Utilised during the year
Exchange differences
Discount rate unwind
At 2 April 2022
Analysed as:
Current
Non-current
Property
£m
Restructuring
£m
60.0
22.5
25.9
(29.8)
(4.6)
–
2.7
–
76.7
12.6
105.2
–
(7.6)
(81.6)
(0.1)
–
–
28.5
Property
£m
76.7
23.5
5.3
(8.4)
(5.1)
–
3.8
95.8
Restructuring
£m
28.5
38.0
–
(2.8)
(28.2)
(0.1)
–
35.4
Other
£m
5.4
9.6
–
(0.1)
(0.3)
–
–
(2.5)
12.1
Other
£m
12.1
6.2
–
(3.0)
(0.9)
(0.2)
–
14.2
Total
£m
78.0
137.3
25.9
(37.5)
(86.5)
(0.1)
2.7
(2.5)
117.3
43.1
74.2
Total
£m
117.3
67.7
5.3
(14.2)
(34.2)
(0.3)
3.8
145.4
53.6
91.8
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A
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A
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M
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T
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Property provisions relate primarily to obligations such as dilapidations arising as a result of the closure of stores in the UK, as part of
the UK store estate strategic programme. These provisions are expected to be utilised over the period to the end of each specific lease
(up to 10 years).
Movements in restructuring provisions relate to the utilisation and finalisation of costs associated with the strategic programme to
reduce roles across central support centres, regional management and our UK and Republic of Ireland stores; the historical International
exit strategy; the strategic programme to transition to a single-tier UK distribution network; and costs associated with the decision to
fully exit our Russian franchise operations. Closing provisions relate primarily to the strategic programme to transition to a single-tier
UK distribution network, expected to be utilised over the period of closure of sites, and exit our Russian franchise operations,
expected to be utilised within the next year.
Other provisions include amounts in respect of probable liabilities for employee-related matters.
Provisions related to adjusting items were £124.9m at 2 April 2022 (last year: £100.8m), with a net charge in the year of £48.2m
(last year: £90.1m) (see note 5).
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
23 DEFERRED TAX
Deferred tax is provided under the balance sheet liability method using the tax rate at which the balances are expected to unwind
of 19% and 25% as applicable (last year: 19%) for UK differences and local tax rates for overseas differences. Details of the changes
to the UK corporation tax rate and the impact on the Group are described in note 7.
The movements in deferred tax assets and liabilities (after the offsetting of balances within the same jurisdiction as permitted by
IAS 12 – ‘Income Taxes’) during the year are shown below.
Deferred tax assets/(liabilities)
At 29 March 2020
(Charged)/credited
to income statement
Credited/(charged) to equity/
other comprehensive income
At 3 April 2021
At 4 April 2021
(Charged)/credited
to income statement
(Charged)/Credited to equity/
other comprehensive income
At 2 April 2022
Land and
buildings
temporary
differences
£m
Capital
allowances in
excess of
depreciation
£m
Pension
temporary
differences
£m
Other
short-term
temporary
differences
£m
Total UK
deferred tax
£m
Overseas
deferred tax
£m
Total
£m
(28.3)
(0.2)
(398.8)
95.2
(332.1)
(0.3)
(332.4)
(22.0)
–
(50.3)
(50.3)
(15.4)
–
(65.7)
22.8
–
22.6
22.6
(7.6)
4.5
(2.3)
257.7
(148.7)
(148.7)
35.8
135.5
135.5
293.5
(40.9)
(40.9)
3.7
(14.7)
20.3
(6.1)
–
26.3
(128.7)
(292.1)
(14.1)
141.7
(142.8)
(189.8)
2.1
(3.2)
(1.4)
(1.4)
1.0
3.0
2.6
(0.2)
290.3
(42.3)
(42.3)
(5.1)
(139.8)
(187.2)
Other short-term temporary differences relate mainly to employee share options, financial instruments and IFRS 16.
The deferred tax liability on land and buildings temporary differences is reduced by the benefit of capital losses with a gross value
of £236.6m (last year: £228.0m) and a tax value of £58.6m (last year: £43.3m). The tax value has increased in comparison to the prior
year due to the effects of the change in rate, whereby, UK deferred tax assets and liabilities have been remeasured at 25% where these
are expected to be realised or settled on or after 1 April 2023.
Due to uncertainty over their future use, no benefit has been recognised in respect of trading losses carried forward in overseas
jurisdictions with a gross value of £5.6m (last year: £11.0m) and a tax value of £1.4m (last year: £3.0m).
No deferred tax is recognised in respect of undistributed earnings of overseas subsidiaries and joint ventures with a gross value of £34.2m
(last year: £24.1m) unless a material liability is expected to arise on distribution of these earnings under applicable tax legislation.
There is a potential tax liability in respect of undistributed earnings of £3.1m (last year: £2.3m) however this has not been recognised
on the basis that the distribution can be controlled by the Group, and it is probable that the temporary difference will not reverse
in the foreseeable future.
In the prior year, a deferred tax asset of £10.5m relating to trading losses in the UK was recognised. As the amount has been fully
utilised, no deferred tax asset relating to trading losses in the UK is recognised in the current period.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24 ORDINARY SHARE CAPITAL
Issued and fully paid
At start of year
Shares issued in respect of share
option schemes
Subdivision of ordinary share capital
Repurchase of deferred shares
Shares issued in respect of share
option schemes
At end of year
Ordinary shares
of £0.25 each
2022
Ordinary shares
of £0.01 each
Deferred shares
of £0.24 each
Shares
£m
Shares
£m
Shares
£m
1,956,513,591
489.2
–
–
–
–
2021
Ordinary shares
of £0.25 each
Shares
£m
1,950,059,808 487.6
1.6
6,453,783
1,266,035
(1,957,779,626)
–
0.3
–
(489.5) 1,957,779,626 19.6
–
–
–
–
–
1,957,779,626
(1,957,779,626)
–
469.9
(469.9)
–
–
–
–
–
–
–
–
0.1
1,125,718
–
– 1,958,905,344 19.7
–
–
–
–
– 1,956,513,591 489.2
–
Nominal value reduction
In July 2021, the Company reduced the nominal value of its ordinary shares from £0.25 to £0.01. The reduction was completed by
subdividing each £0.25 ordinary share in issue into one ordinary share of £0.01 and one deferred share of £0.24. All deferred shares
were then bought back for total aggregate consideration of £0.01 and cancelled. The Company’s issued share capital remained
unchanged and each shareholder’s proportionate interest in the share capital of the Company remained unchanged. Aside from the
change in nominal value, the rights attaching to the ordinary shares (including voting and dividend rights and rights on a return of
capital) remain unchanged. The repurchase and cancellation of the shares resulted in an increase to the Company’s capital
redemption reserve of £469.9m.
Issue of new shares
A total of 2,391,753 (last year: 6,453,783) ordinary shares having a nominal value of £0.4m (last year: £1.6m) were allotted during the
year under the terms of the Company’s share schemes which are described in note 13 of the Group financial statements. The
aggregate consideration received was £0.3m (last year: £0.0m).
25 CONTINGENCIES AND COMMITMENTS
A. Capital commitments
Commitments in respect of properties in the course of construction
Software capital commitments
2022
£m
59.8
6.1
65.9
2021
£m
88.3
10.6
98.9
In addition to the above, the Group has committed to invest up to £25.0m, over a three-year period to 2024/25, in an innovation and
consumer growth fund managed by True Capital Limited. The fund can drawdown amounts at any time over the three-year period to
make specific investments. During the period, the Group invested £3.3m of this commitment, which is held as a non-current other
investment and measured at fair value through profit or loss (see note 16).
B. Other material contracts
In the event of termination of our trading arrangements with certain warehouse operators, the Group has a number of options and
commitments to purchase some property, plant and equipment, at values ranging from historical net book value to market value,
which are currently owned and operated by the warehouse operators on the Group’s behalf. These options and commitments would
have an immaterial impact on the Group’s statement of financial position.
See note 12 for details on the Partnership arrangement with the Marks & Spencer UK Pension Scheme.
F
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
26 ANALYSIS OF CASH FLOWS GIVEN IN THE STATEMENT OF CASH FLOWS
Cash flows from operating activities
Profit/(loss) on ordinary activities after taxation
Income tax expense/(credit)
Finance costs
Finance income
Operating profit/(loss)
Share of results of Ocado Retail Limited
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase in payables
Depreciation, amortisation and write-offs
Non-cash share-based payment expense
Defined benefit pension funding
Adjusting items net cash outflows1,2
Adjusting items M&S Bank3
Adjusting operating profit items
Cash generated from operations
2022
£m
309.0
82.7
214.4
(33.9)
572.2
(13.9)
(46.5)
(2.9)
289.1
510.7
38.8
(36.8)
(45.8)
(16.0)
136.8
1,385.7
2021
£m
(201.2)
(8.2)
236.1
(57.4)
(30.7)
(78.4)
41.2
67.4
159.5
603.1
19.3
(37.1)
(118.1)
(2.4)
252.9
876.7
1. Excludes £5.6m (last year: £12.4m) of surrender payments included within repayment of lease liabilities in the consolidated statement of cash flows relating to leases within the UK store
estate programme.
2. Adjusting items net cash outflows relate to strategic programme costs associated with the UK store estate, UK logistics, and the utilisation of the provisions for International store
closures and impairments.
3. Adjusting items M&S Bank relates to M&S Bank income recognised in operating profit offset by charges incurred in relation to the insurance mis-selling provision, which is a non-cash item.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
27 ANALYSIS OF NET DEBT
A. Reconciliation of movement in net debt
Net debt
Bank loans and overdrafts (see note 20)
Cash and cash equivalents (see note 18)
Net cash per statement of cash flows
Current other financial assets (see note 16)
Liabilities from financing activities
Medium Term Notes (see note 20)
Lease liabilities (see note 20)
Partnership liability to the Marks & Spencer
UK Pension Scheme (see note 12)
Derivatives held to hedge Medium Term Notes
Liabilities from financing activities
Less: Cashflows related to interest
and derivative instruments
Net debt
Net debt
Bank loans and overdrafts (see note 20)
Cash and cash equivalents (see note 18)
Net cash per statement of cash flows
Current other financial assets (see note 16)
Liabilities from financing activities
Medium Term Notes (see note 20)
Lease liabilities (see note 20)
Partnership liability to the Marks & Spencer
UK Pension Scheme (see note 12)
Derivatives held to hedge Medium Term Notes
Liabilities from financing activities
Less: Cashflows related to interest
and derivative instruments
Net debt
At 29 March
2020
£m
Cash flow
£m
Changes
in fair
values
£m
Lease
additions and
remeasurements
£m
Exchange and
other non-cash
movements1
£m
(15.5)
254.2
238.7
11.7
(1,536.2)
(2,562.0)
(202.7)
102.2
(4,198.7)
(2.3)
(3,950.6)
At 4 April
2021
£m
(4.7)
674.4
669.7
18.4
–
(1,682.1)
(2,405.9)
(185.5)
(8.1)
(4,281.6)
77.6
(3,515.9)
10.8
423.5
434.3
6.7
(87.9)
316.7
23.6
(14.0)
238.4
(212.6)
466.8
–
–
–
–
–
–
–
(96.3)
(96.3)
96.3
–
–
–
–
–
–
(48.3)
–
–
(48.3)
–
(48.3)
–
(3.3)
(3.3)
–
(58.0)
(112.3)
(6.4)
–
(176.7)
196.2
16.2
Cash flow
£m
Changes
in fair
values
£m
Lease
additions and
remeasurements
£m
Exchange and
other non-cash
movements1
£m
4.7
531.7
536.4
(0.8)
–
244.0
344.3
–
–
588.3
(208.7)
915.2
–
–
–
–
–
–
–
–
26.6
26.6
(26.6)
–
–
–
–
–
–
–
(100.6)
–
–
(100.6)
–
(100.6)
–
(8.2)
(8.2)
–
–
(91.4)
(116.5)
(2.4)
–
(210.3)
At 3 April
2021
£m
(4.7)
674.4
669.7
18.4
(1,682.1)
(2,405.9)
(185.5)
(8.1)
(4,281.6)
77.6
(3,515.9)
At 2 April
2022
£m
–
1,197.9
1,197.9
17.6
–
(1,529.5)
(2,278.7)
(187.9)
18.5
(3,977.6)
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B. Reconciliation of net debt to statement of financial position
Statement of financial position and related notes
Cash and cash equivalents (see note 18)
Current other financial assets (see note 16)
Bank loans and overdrafts (see note 20)
Medium Term Notes – net of foreign exchange revaluation (see note 20)
Lease liabilities (see note 20)
Partnership liability to the Marks & Spencer UK Pension Scheme (see notes 12 and 21)
Interest payable included within related borrowing and the Partnership liability
to the Marks & Spencer UK Pension Scheme
Net debt
221.0
2.5
63.3
(2,698.8)
2022
£m
2021
£m
1,197.9
17.6
–
(1,494.7)
(2,278.7)
(192.3)
(2,750.2)
674.4
18.4
(4.7)
(1,657.9)
(2,405.9)
(193.5)
(3,569.2)
51.4
(2,698.8)
53.3
(3,515.9)
1. Exchange and other non-cash movements includes interest paid on Medium Term Notes of £79.6m (last year: £86.4m), interest paid on lease liabilities of £121.1m (last year: £130.4m)
and interest paid on the Partnership liability to the Marks & Spencer UK Pension Scheme of £4.4m (last year: £4.9m).
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28 RELATED PARTY TRANSACTIONS
A. Subsidiaries
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions between the Company and its subsidiaries are disclosed in the Company’s separate financial statements.
B. Joint ventures and associates
Ocado Retail Limited
A shareholder loan facility with Ocado Retail Limited was established in 2019/20, with Ocado Retail Limited having the ability to draw
down up to £30m from each shareholder. The facility was not utilised by Ocado Retail Limited during the year ended 2 April 2022
(last year: not utilised).
As part of the Ocado Retail Limited investment, Ocado Retail Limited entered into a £30m, three-year revolving credit facility. Along with
Ocado Group Plc, the Group has provided a parent guarantee to cover 50% of the £30m revolving credit facility provided by BNPP
to Ocado Retail Limited. The revolving credit facility was undrawn at 2 April 2022 (last year: undrawn).
The following transactions were carried out with Ocado Retail Limited, an associate of the Group.
Sales and purchases of goods and services:
Sales of goods and services
Purchases of goods and services
2022
£m
36.1
0.2
2021
£m
28.5
–
Included within trade and other receivables is a balance of £1.9m (last year: £2.3m) owed by Ocado Retail Limited.
Nobody’s Child Limited
Nobody’s Child Limited became an associate of the Group in November 2021 (see note 29).
Since November 2021, the Group made purchases of goods amounting to £1.2m. At 2 April 2022, included within trade and other
payables is a balance of £0.2m owed to Nobody’s Child Limited, and included within other financial assets is a balance of £0.7m owed
from Nobody’s Child Limited.
C. Marks & Spencer UK Pension Scheme
Details of other transactions and balances held with the Marks & Spencer UK Pension Scheme are set out in notes 11 and 12.
D. Key management compensation
The Group has determined that the key management personnel constitute the Board and the members of the Executive Committee.
Salaries and short-term benefits
Share-based payments
Total
2022
£m
15.3
2.1
17.4
2021
£m
8.6
3.2
11.8
E. Other related party transactions
The Group acquired 77.7% of the issued share capital of The Sports Edit Limited (“TSE”) in February 2022. A further 4.8% of TSE’s issued
share capital is currently owned by Mr. Justin King, a Non-Executive Director of the Group (the “JK TSE Shares”). Subject to shareholder
approval, the Group will acquire the JK TSE Shares from Mr. Justin King at a total purchase price of £0.3m in July 2022.
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NOTES TO THE FINANCIAL STATEMENTS CONTINUED
29 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
The Group holds a 50% interest in Ocado Retail Limited, a company incorporated in the UK. The remaining 50% interest is held by
Ocado Group Plc. Ocado Retail Limited is an online grocery retailer, operating through the ocado.com and ocadozoom.com websites.
Ocado Retail Limited is considered an associate of the Group as certain rights are conferred on Ocado Group Plc for an initial period
of at least five years from acquisition in August 2019, giving Ocado Group Plc control of the company. Following this initial period,
a reassessment of control will be required as the Group will have an option to obtain more power over Ocado Retail Limited if certain
conditions are met. If the Group is deemed to have obtained control, Ocado Retail Limited will then be consolidated as a subsidiary
of the Group. Through Board representation and shareholder voting rights, the Group is currently considered to have significant
influence, therefore the investment in Ocado Retail Limited is treated as an associate and applies the equity method of accounting.
Ocado Retail Limited has a financial year end date of 28 November 2021, aligning with its parent company, Ocado Group Plc. For the
Group’s purpose of applying the equity method of accounting, Ocado Retail Limited has prepared financial information to the nearest
quarter-end date of its financial year end, as to do otherwise would be impracticable. The results of Ocado Retail Limited are incorporated
in these financial statements from 1 March 2021 to 27 February 2022. There were no significant events or transactions in the period
from 28 February 2022 to 2 April 2022.
The carrying amount of the Group’s interest in Ocado Retail Limited is £800.4m (last year: £819.0m). The Group’s share of Ocado Retail
Limited loss of £18.6m (last year: profit of £64.2m) includes the Group’s share of underlying profits of £13.9m, which includes £1.3m
of exceptional income before tax related to insurance receipts (share of profit last year: £25.2m) and adjusting item charges of £32.5m
(last year: £14.2m) (see note 5).
Summarised financial information in respect of Ocado Retail Limited (the Group’s only material associate) is set out below and represents
amounts in the Ocado Retail Limited financial statements prepared in accordance with IFRS, adjusted by the Group for equity
accounting purposes.
Ocado Retail Limited
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Revenue
Profit for the period
Other comprehensive income
Total comprehensive income
As at 27 Feb
2022
£m
As at 28 Feb
2021
£m
291.2
590.1
(223.3)
(449.8)
208.2
353.9
336.8
(245.7)
(264.6)
180.4
29 Feb 2021 to
27 Feb 2022
£m
2 Mar 2020 to
28 Feb 2021
£m
2,248.8
27.8
–
27.8
2,353.2
156.8
–
156.8
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Reconciliation of the above summarised financial information to the carrying amount of the interest in Ocado Retail Limited recognised
in the consolidated financial statements:
Ocado Retail Limited
Net assets
Proportion of the Group's ownership interest
Goodwill
Brand
Customer relationships
Other adjustments to align accounting policies
Acquisition costs
Carrying amount of the Group's interest in Ocado Retail Limited
As at 2 Apr
2022
£m
As at 3 Apr
2021
£m
208.2
104.1
449.1
242.7
77.7
(78.9)
5.7
800.4
180.4
90.2
449.1
249.2
88.3
(63.5)
5.7
819.0
In November 2021, the Group acquired 27% of the issued share capital of Nobody’s Child Limited, which is accounted for as an investment
in associate.
Other than its investment in Ocado Retail Limited, the Group holds immaterial investments in joint ventures and associates (including its
investment in Nobody’s Child Limited) totalling £10.5m (last year: £6.8m). The Group’s share of losses totalled £0.7m (last year: £1.3m loss).
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FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
30 GOVERNMENT SUPPORT
The Group has not benefitted from government grant income in the year. Last year, the Group recognised £131.5m in relation to furlough
programmes, such as the Coronavirus Job Retention Scheme (“CJRS”) in the UK, and its equivalents in other countries. This income was
recognised as a deduction against the related expense.
The Group benefited from business rates relief of £62.2m in the year (last year: £174.6m).
There are no unfulfilled conditions or contingencies attached to these grants.
31 CONTINGENT ASSETS
The Group is currently seeking damages from an independent third party following their involvement in anti-competitive behaviour
that adversely impacted the Group. The Group expects to receive an amount from the claim (either in settlement or from the legal
proceedings), a position reinforced by recent court judgements in similar claims. The value of the claim is confidential and is therefore
not disclosed.
32 SUBSEQUENT EVENTS
The Board have approved a tender offer to repurchase c.£150m of the Group’s Medium Term Notes which will be announced on
25 May 2022.
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COMPANY STATEMENT OF FINANCIAL POSITION
Assets
Non-current assets
Investments in subsidiary undertakings
Total assets
Liabilities
Current liabilities
Amounts owed to subsidiary undertakings
Total liabilities
Net assets
Equity
Ordinary share capital
Share premium account
Capital redemption reserve
Merger reserve
Retained earnings
Total equity
As at 2 April
2022
£m
As at 3 April
2021
£m
Notes
C6
9,403.7
9,403.7
9,730.8
9,730.8
2,541.2
2,541.2
6,862.5
19.7
910.6
2,680.4
870.9
2,380.9
6,862.5
2,541.8
2,541.8
7,189.0
489.2
910.4
2,210.5
1,262.0
2,316.9
7,189.0
C7
C7
C7
The Company’s loss for the year was £357.3m (last year: profit of £951.0m).
The financial statements were approved by the Board and authorised for issue on 24 May 2022. The financial statements also comprise
the notes C1 to C7.
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Steve Rowe, Chief Executive Officer
Eoin Tonge, Chief Financial Officer
Registered number: 04256886
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
At 29 March 2020
Profit for the year
Capital contribution for share-based payments
Shares issued on exercise of employee share options
Reclassification to merger reserve
At 3 April 2021
At 4 April 2021
Loss for the year
Capital contribution for share-based payments
Shares issued on exercise of employee share options
Buy back and cancellation of own Shares1
Reclassification to merger reserve
At 2 April 2022
Ordinary
share capital
£m
Share
premium
account
£m
Capital
redemption
reserve
£m
487.6
–
–
1.6
–
489.2
489.2
–
–
0.4
(469.9)
–
19.7
910.4
–
–
–
–
910.4
910.4
–
–
0.2
–
–
910.6
2,210.5
–
–
–
–
2,210.5
2,210.5
–
–
–
469.9
–
2,680.4
Merger
reserve
£m
311.0
–
–
–
951.0
1,262.0
1,262.0
–
–
–
–
(391.1)
870.9
Retained
earnings
£m
2,300.3
951.0
16.6
–
(951.0)
2,316.9
2,316.9
(357.3)
30.2
–
–
391.1
2,380.9
Total
£m
6,219.8
951.0
16.6
1.6
–
7,189.0
7,189.0
(357.3)
30.2
0.6
–
–
6,862.5
1. On 8 July 2021, the Company reduced the nominal value of its 1,957,779,626 ordinary shares in issue at that date from £0.25 to £0.01. The reduction was completed by subdividing
each £0.25 ordinary share in issue into 1 ordinary share of £0.01 and 1 deferred share of £0.24. All deferred shares were then bought back for total aggregate consideration of £0.01
and cancelled. The Company’s issued share capital remains unchanged and each shareholder’s proportionate interest in the share capital of the Company remains unchanged.
Aside from the change in nominal value, the rights attaching to the ordinary shares (including voting and dividend rights and rights on a return of capital) remain unchanged.
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FINANCIAL STATEMENTS
COMPANY STATEMENT OF CASH FLOWS
Cash flow from investing activities
Dividends received
Additional investment in subsidiary
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Shares issued on exercise of employee share options
Repayment of intercompany loan
Net cash generated from/(used in) financing activities
Net cash inflow from activities
Cash and cash equivalents at beginning and end of year
52 weeks
ended
2 April 2022
£m
53 weeks
ended
3 April 2021
£m
33.8
(33.8)
–
0.6
(0.6)
–
–
–
–
–
–
1.6
(1.6)
–
–
–
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NOTES TO THE COMPANY FINANCIAL STATEMENTS
C1 ACCOUNTING POLICIES
General information
Marks and Spencer Group plc (the “Company”) is a public limited company domiciled and incorporated in England and Wales under
the Companies Act 2006. The address of the Company’s registered office is Waterside House, 35 North Wharf Road, London W2 1NW,
United Kingdom.
The principal activities of the Company and the nature of the Company’s operations are as a holding entity.
These financial statements are presented in sterling, which is the Company’s functional currency, and are rounded to the nearest
hundred thousand.
The Company’s accounting policies are the same as those set out in note 1 of the Group financial statements, except as noted below.
Investments in subsidiaries are stated at cost less, where appropriate, provisions for impairment. The Company grants share-based
payments to the employees of subsidiary companies. Each period the fair value of the employee services received by the subsidiary
as a capital contribution from the Company is reflected as an addition to investments in subsidiaries.
Loans from other Group undertakings and all other payables are initially recorded at fair value, which is generally the proceeds
received. They are then subsequently carried at amortised cost. The loans are non-interest bearing and repayable on demand.
In accordance with the exemption allowed by Section 408(3) of the Companies Act 2006, the Company has not presented its own
income statement or statement of comprehensive income.
Key sources of estimation uncertainty
Impairment of investments in subsidiary undertakings
The carrying value of the investment in subsidiary undertakings is reviewed for impairment or impairment reversal on an annual
basis. The recoverable amount is determined based on value in use which requires the determination of appropriate assumptions
(which are sources of estimation uncertainty) in relation to the cash flows over the three-year strategic plan period, the long-term
growth rate to be applied beyond this three-year period and the risk-adjusted pre-tax discount rate used to discount the assumed
cash flows to present value.
Estimation uncertainty arises due to changing economic and market factors, the channel shift from stores to online, increasing
technological advancement and the Group’s ongoing strategic transformation programmes. See note C6 for further details on the
assumptions and associated sensitivities.
The Company’s financial risk is managed as part of the Group’s strategy and policies as discussed in note 21 of the Group
financial statements.
C2 EMPLOYEES
The Company had no employees during the current or prior year. Directors received emoluments in respect of their services to the
Company during the year of £1,174,790 (last year: £1,093,458). The Company did not operate any pension schemes during the current
or preceding year. For further information see the Remuneration Report.
C3 AUDITOR’S REMUNERATION
Auditor’s remuneration in respect of the Company’s annual audit has been borne by its subsidiary Marks and Spencer plc and has
been disclosed on a consolidated basis in the Company’s consolidated financial statements as required by Section 494(4)(a) of the
Companies Act 2006.
C4 DIVIDENDS
At the full-year results in May 2021, the Board announced that payment of a dividend in the 2021/22 financial year would be unlikely
as we focus on restoring sustainable profitability and recovering the balance sheet towards metrics consistent with investment grade.
Consistent with that announcement, the Board does not expect to pay a dividend this financial year.
C5 RELATED PARTY TRANSACTIONS
During the year, the Company has received dividends from Marks and Spencer plc of £33.8m (last year: nil) and decreased its loan from
Marks and Spencer plc by £0.6m (last year: £1.6m). The outstanding balance was £2,541.2m (last year: £2,541.8m) and is non-interest
bearing. There were no other related party transactions.
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FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
C6 INVESTMENTS
A. Investments in subsidiary undertakings
Beginning of the year
Contributions to subsidiary undertakings relating to share-based payments
Additions
Impairment (charge)/reversal
End of year
2022
£m
9,730.8
30.2
33.8
(391.1)
9,403.7
2021
£m
8,763.2
16.6
–
951.0
9,730.8
Shares in subsidiary undertakings represent the Company’s investment in Marks and Spencer plc and Marks and Spencer Holdings Limited.
During the year, the Company purchased additional shares in Marks and Spencer Holdings Limited (£33.8m). This allowed Marks and
Spencer Holdings Limited to settle the contingent consideration that became payable during the year as a result of the investment
in Ocado Retail Limited.
Impairment of investments in subsidiary undertakings
The Company evaluates its investments in subsidiary undertakings annually for any indicators of impairment or impairment reversal.
The Company considers the relationship between its market capitalisation and the carrying value of its investments, among other
factors, when reviewing for indicators of impairment. As at 2 April 2022, the market capitalisation of the Group was significantly
below the carrying value of its investment in Marks and Spencer plc of £9,188.6m, indicating a potential impairment, despite stronger
Group performance.
The recoverable amount of the investment in Marks and Spencer plc has been determined based on a value in use calculation.
The Company has updated its assumptions as at 2 April 2022, reflecting the latest budget and forecast cash flows covering a three-
year period. The pre-tax discount rate of 9.8% (last year: 8.9%) was derived from the Group’s weighted average cost of capital, the
inputs of which include a country risk-free rate, equity risk premium, Group size premium and a risk adjustment (beta). The long-term
growth rate of 2.0% (last year: 1.75%), was based on inflation forecasts by recognised bodies with reference to rates used within the
retail industry.
The Company has determined that the recoverable amount of its investment in Marks and Spencer plc is £8,797.5m and as a result
has recognised an impairment of £391.1m. This impairment primarily relates to the impact of market volatility on the discount rate as
a result of the unfolding humanitarian crisis following the invasion in Ukraine and updated forecast cashflows, as restrictions on capital
expenditure imposed during the Covid-19 pandemic were lifted.
Sensitivity analysis
As disclosed in the accounting policies note C1, the cash flows used within the value in use model, the long-term growth rate and
the discount rate are sources of estimation uncertainty. Management has performed a sensitivity analysis on the key assumptions
and using reasonably possible changes would result in the following impacts:
– A 5% reduction in cash flows from the three-year plan would result in an additional impairment charge of £447.8m.
– A 50-basis point decrease in the long-term growth rate would result in an additional impairment charge of £479.1m.
– A 50-basis point increase in the discount rate would result in an additional impairment charge of £534.8m.
In the event that all three were to occur simultaneously, an additional impairment charge of £1,356.4m would be recorded.
186 Marks and Spencer Group plc
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NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
C6 INVESTMENTS CONTINUED
B. Related undertakings
In accordance with Section 409 of the Companies Act 2006, a full list of related undertakings, the country of incorporation and the
effective percentage of equity owned, as at 2 April 2022 is disclosed below. All undertakings are indirectly owned by the Company
unless otherwise stated.
Subsidiary and other related undertakings registered in the UK(i)
Name
Founders Factory Retail Limited
Registered office:
Northcliffe House,
Young Street, London,
England, W8 5EH
Hedge End Park Limited
Registered Office: 33 Holborn,
London, EC1N 2HT
Marks and Spencer Company
Archive (CIC) (ii)
Marks and Spencer
Guernsey Investments LLP
Marks and Spencer
Pension Trust Limited (iii)
Marks and Spencer plc (v)
Marks and Spencer Scottish
Limited Partnership (iv)
Registered Office:
2-28 St Nicholas Street,
Aberdeen, AB10 1BU
Share class
£0.01 ordinary
Proportion of
shares held
(%)
50
Share class
£0.0001 ordinary
(25.001% of total capital)
£0.0001 Preference
(74.999% of total capital)
£1 ordinary A
(50% of total capital)
£1 ordinary B
(50% of total capital)
N/A
Partnership interest
£1 ordinary A
£1 ordinary B
£1 ordinary C
£0.25 ordinary
Partnership interest
Proportion of
shares held
(%)
0.004
100
–
100
–
100
100
–
–
100
100
Name
Ocado Retail Limited
Registered Office:
Apollo Court 2 Bishop Square,
Hatfield Business Park,
Hatfield, Hertfordshire,
United Kingdom, AL10 9EX
Amethyst Leasing (Holdings) Limited
M&S Limited
Manford (Textiles) Limited
Marks and Sparks Limited
Marks and Spencer
(Northern Ireland) Limited
Registered Office: Waterfront Plaza,
8 Laganbank Road, Belfast, BT1 3LR
Marks and Spencer Property
Developments Limited
Nobody’s Child Limited
Registered Office:
10–11 Greenland Place,
Camden, London, NW1 0AP
St. Michael (Textiles) Limited
£1 ordinary
£1 ordinary
£1 ordinary
£1 ordinary
£1 ordinary
£1 ordinary
£0.01 ordinary
(72.910% of total capital)
£0.01 Preference
(27.090% of total capital)
£1 ordinary
St. Michael Finance plc
£1 ordinary
100
100
100
100
100
100
–
100
100
100
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FINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
C6 INVESTMENTS CONTINUED
B. Related undertakings continued
UK REGISTERED SUBSIDIARIES EXEMPT FROM AUDIT
The following UK subsidiaries will take advantage of the audit exemption set out within section 479A of the Companies Act 2006 for the
year ended 2 April 2022. Unless otherwise stated, the undertakings listed below are registered at Waterside House, 35 North Wharf Road,
London, W2 1NW, United Kingdom and have a single class of ordinary share with a nominal value of £1. All undertakings are indirectly
owned by the Company unless otherwise stated.
Name
Amethyst Leasing (Properties) Limited
Busyexport Limited
Marks and Spencer (Initial LP) Limited (v)
Registered Office: No. 2 Lochrin Square, 96
Fountainbridge, Edinburgh, Midlothian, EH3 9QA
Marks and Spencer (Property Ventures) Limited
Marks and Spencer 2005 (Brooklands Store) Limited
Marks and Spencer 2005
(Chester Satellite Store) Limited
Marks and Spencer 2005 (Chester Store) Limited
Marks and Spencer 2005
(Fife Road Kingston Store) Limited
Marks and Spencer 2005 (Glasgow Sauchiehall
Store) Limited
Marks and Spencer 2005 (Hedge End Store) Limited
Marks and Spencer 2005 (Kensington Store) Limited
Marks and Spencer 2005
(Kingston–on–Thames Satellite Store) Limited
Marks and Spencer 2005
(Kingston–on–Thames Store) Limited
Marks & Spencer Outlet Limited
Marks & Spencer Simply Foods Limited
Marks and Spencer (Property Investments) Limited
Marks and Spencer Chester Limited
Marks and Spencer France Limited
Proportion
of shares
held (%)
100
100
100
100
100
100
100
100
Company
number
4246934
4411320
SC315365
5502513
5502608
5502519
5502542
5502598
100
5502546
100
100
100
5502538
5502478
5502523
Name
Marks and Spencer International Holdings Limited
Marks and Spencer (Investment Holdings) Limited
Marks and Spencer 2005
(Parman House Kingston Store) Limited
Marks and Spencer 2005 (Pudsey Store) Limited
Marks and Spencer 2005
(Warrington Gemini Store) Limited
Marks and Spencer Holdings Limited (v)
Marks and Spencer Hungary Limited
Marks and Spencer Investments
Marks and Spencer Property Holdings Limited
Ruby Properties (Cumbernauld) Limited
Ruby Properties (Hardwick) Limited
Ruby Properties (Long Eaton) Limited
Ruby Properties (Thorncliffe) Limited
Ruby Properties (Tunbridge) Limited
Simply Food (Property Investments)
100
5502520
Simply Food (Property Ventures) Limited
100
100
100
100
100
4039568
4739922
5502582
5174129
5502548
Minterton Services Limited
Marks and Spencer (Bradford) Limited
Marks and Spencer (Jaeger) Limited
The Sports Edit Limited
Registered office: Studio 419, The Print Rooms,
164/180 Union Street, London, SE1 OLH (vi)
Proportion
of shares
held (%)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Company
number
2615081
13587353
5502520
5502544
5502502
11845975
8540784
4903061
2100781
4922798
4716018
4716031
4716110
4716032
5502543
2239799
4763836
10011863
13098074
77.734
9331295
The Company will guarantee the debts and liabilities of the above UK subsidiary undertakings at the balance sheet date of £21.3m
in accordance with section 479C of the Companies Act 2006. The Company has assessed the probability of loss under the guarantee
as remote.
(i) All companies registered at Waterside House, 35 North Wharf Road, London, W2 1NW, United Kingdom, unless otherwise stated.
(ii) No share capital, as the company is limited by guarantee. Marks and Spencer plc is the sole member.
(iii) In accordance with the articles of association of Marks and Spencer Pension Trust Limited, the holders of B and C ordinary shares are both directors of that company.
(iv) Marks and Spencer (Initial LP) Limited and Marks and Spencer Pension Trust Limited are the limited partners; Marks and Spencer plc is the General Partner.
(v) Interest held directly by Marks and Spencer Group plc.
(vi) Marks and Spencer plc holds 94.078% of A ordinary shares (and will acquire the remaining A ordinary shares to bring it up to 100% once shareholder approval has been obtained
at the AGM), 100% of B ordinary shares and 0% of C ordinary shares.
International subsidiary undertakings(i)
Name
Marks and
Spencer
(Australia)
Pty Limited
Marks and
Spencer
(Shanghai)
Limited
Marks and
Spencer
Czech
Republic a.s
Registered
address
Minter Ellison
‘Governor
Macquarie Tower’
Level 40
1 Farrer Place
Sydney NSW 2000
Australia
Unit 03-04 6/F,
Eco City 1788,
1788 West Nan
Jing Road,
Shanghai, China
Jemnická 1138/1,
Michle, Praha 4,
140 00,
Czech Republic
Country
Share class
Proportion
of shares
held by
subsidiary (%)
Australia
AUD 2 Ordinary
100
China
USD NPV
100
Czech
Republic
CZK 1,000
Ordinary
CZK 100,000
Ordinary
CZK 1,000,000
Ordinary
CZK NPV
100
100
100
100
Marks and
Spencer
Services
S.R.O
Jemnická 1138/1,
Michle, Praha 4,
140 00,
Czech Republic
Czech
Republic
188 Marks and Spencer Group plc
Name
Marks &
Spencer
Marinopoulos
Greece SA
Ignazia
Limited
Teranis
Limited
M.S. General
Insurance L.P.
Registered
address
33-35 Ermou
Street, Athens,
Greece
Heritage Hall, Le
Marchant Street,
St Peter Port, GY1
4JH, Guernsey
Heritage Hall,
Le Marchant
Street, St Peter
Port, GY1 4JH,
Guernsey
Heritage Hall,
Le Marchant
Street, St Peter
Port, GY1 4JH,
Guernsey
Country
Greece
Share class
€3 Ordinary
€3 Preference
Proportion
of shares
held by
subsidiary (%)
80(iv)
100
Guernsey
£1 Ordinary
99.99
Guernsey
£1 Ordinary
99.99
Guernsey
Partnership
Interest
99.99
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NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
Country
Hong Kong
Share class
No Par Value
Ordinary
Proportion
of shares
held by
subsidiary (%)
100
India
INR10 Ordinary
100
Name
Marks and
Spencer
(Hong Kong)
Investments
Limited
Marks and
Spencer (India)
Pvt Limited
Marks and
Spencer
Reliance India
Pvt Limited
Registered
address
Suites 807-13, 8/F,
South Tower,
World Finance
Centre, Harbour
City, Kowloon,
Hong Kong
Tower C, RMZ
Millenia, 4th Floor,
Lake Wing, #1
Murphy Road,
Bangalore,
560008, India
4th Floor, Court
House, Lokmanya
Tilak Marg,
Dhobi Talao,
Mumbai,
400 002, India
India
INR 10 Class A
(14.619% of total
capital)
INR 10 Class B
(43.544% of total
capital)
INR 5 Class C(ii)
(41.837% of total
capital)
51
100
–
100
100
Aprell Limited 24/29 Mary Street,
Ireland
€1.25 Ordinary
Dublin 1, Ireland
24-27 Mary Street,
Dublin 1,
D01 YE83, Ireland
Ireland
24-27 Mary Street,
Dublin 1, Ireland
Ireland
Ordinary of
€1.25
N/A(iii)
–
Netherlands
€100 Ordinary
100
Netherlands
€450 Ordinary
100
Basisweg 10
1043 AP
Amsterdam
Netherlands
Basisweg 10
1043 AP
Amsterdam
Netherlands
Marks and
Spencer
(Ireland)
Limited
Marks and
Spencer
Pensions Trust
(Ireland)
Company
Limited By
Guarantee
M & S Mode
International
B.V.
Marks and
Spencer
(Nederland)
B.V.
Country
Share class
Proportion
of shares
held by
subsidiary (%)
Netherlands
€100 Ordinary
100
Netherlands
€450 Ordinary
100
Portugal
€1 Ordinary
100
Singapore
SGD NPV
100
South Africa
ZAR 2 Ordinary
100
Romania
RON 18.30
Ordinary
100
Spain
€1 Ordinary
100
Turkey
TRL 25.00
Ordinary
100
Name
Marks and
Spencer BV
Marks and
Spencer
Stores B.V.
Marks &
Spencer
(Portugal) Lda.
Marks and
Spencer
(Singapore)
Investments
Pte. Ltd.
Marks and
Spencer (SA)
(Pty) Limited
Marks and
Spencer
Romania SA
(in liquidation)
M&S
(Spain) S.L.
(in liquidation)
Marks and
Spencer
Clothing
Textile Trading
J.S.C
Registered
address
Basisweg 10
1043 AP
Amsterdam
Netherlands
Basisweg 10
1043 AP
Amsterdam
Netherlands
Avenida da
Liberdade 249, 8º,
1250-143, Lisbon,
Portugal
77 Robinson Road,
#13-00 Robinson
77, Singapore
068896,
Singapore
Woolworths
House, 93
Longmarket
Street, Cape Town
8001, South Africa
84 GEN. H. M.
BERTHELOT
Street, Space B,
Room 5, Ground
floor, 1st District,
Bucharest,
Romania
C / Boix Y Morer
11
Local A Madrid
28-Madrid
Spain
Havalani Karsisi
istanbul Dunya
Ticaret Merkezi
A3 Blok, Kat:11
Yesilkoy, Bakirkoy
Istanbul, Turkey
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NOTE: A number of the companies listed are legacy companies which no longer serve any operational purpose.
(i) The shares of all international subsidiary undertakings are held by companies within the Group other than the Company (Marks and Spencer Group plc).
(ii) INR 5 Class C shares 100% owned by JV partner.
(iii) No share capital as the company is limited by guarantee.
(iv) 20% of ordinary shares are owned by JV partner.
C7 SHARE CAPITAL AND OTHER RESERVES
Issue of new shares
In July 2021, the Company reduced the nominal value of its ordinary shares from £0.25 to £0.01. The reduction was completed by
subdividing each £0.25 ordinary share in issue into one ordinary share of £0.01 and one deferred share of £0.24. All deferred shares
were then bought back for total aggregate consideration of £0.01 and cancelled. The Company’s issued share capital remained
unchanged and each shareholder’s proportionate interest in the share capital of the Company remained unchanged. Aside from
the change in nominal value, the rights attaching to the ordinary shares (including voting and dividend rights and rights on a return
of capital) remain unchanged. The repurchase and cancellation of the shares resulted in an increase to the Company’s capital
redemption reserve of £469.9m.
Merger reserve
The Company’s merger reserve was created as part of a Group reorganisation that occurred in 2001/02 and has an economical
relationship to the Company’s investment in Marks and Spencer plc. In 2018/19, an amount equal to the impairment charge of £1,086.3m
was transferred from the merger reserve to retained earnings as that amount had become a realised profit in accordance with
TECH 02/17. Following the reversal of impairment recognised in 2019/20, an amount equal to the reversal of £951.0m was transferred
from retained earnings to the merger reserve, in accordance with TECH 02/17. In the current year, an amount equal to the impairment
of £391.1m has been transferred from the merger reserve to retained earnings in accordance with TECH 02/17.
Annual Report & Financial Statements 2022
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FINANCIAL STATEMENTS
GROUP FINANCIAL RECORD
Income statement
Revenue¹
UK Clothing & Home
UK Food
Total UK
International
Revenue before adjusting items
Adjusting items included in revenue
Revenue
Operating profit/(loss)¹
UK Clothing & Home
UK Food
Ocado
Other
Total UK
International
Total operating profit before adjusting items
Adjusting items included in operating profit
Total operating profit/(loss)
Net interest payable
Pension finance income
Net finance costs before adjusting items
Adjusting items included in net finance costs
Net finance costs
Profit before tax and adjusting items
Profit/(loss) on ordinary activities before taxation
Income tax (expense)/credit
Profit/(loss) after taxation
2022
52 weeks
£m
2021
53 weeks
£m
2020
52 weeks
£m
2019
52 weeks
£m
2018
52 weeks
£m
3,308.3
6,639.6
9,947.9
937.2
10,885.1
–
10,885.1
330.7
277.8
13.9
13.0
635.4
73.6
709.0
(136.8)
572.2
(199.3)
13.2
(186.1)
5.6
(180.5)
522.9
391.7
(82.7)
309.0
2,239.0
6,138.5
8,377.5
789.4
9,166.9
(11.2)
9,155.7
(130.8)
228.6
78.4
1.9
178.1
44.1
222.2
(252.9)
(30.7)
(219.1)
47.2
(171.9)
(6.8)
(178.7)
50.3
(209.4)
8.2
(201.2)
3,209.1
6,028.2
9,237.3
944.6
10,181.9
–
10,181.9
3,499.8
5,903.4
9,403.2
974.1
10,377.3
–
10,377.3
9,611.0
1,087.2
10,698.2
–
10,698.2
223.9
236.7
2.6
16.8
480.0
110.7
590.7
(335.9)
254.8
(211.2)
23.6
(187.6)
–
(187.6)
403.1
67.2
(39.8)
27.4
355.2
212.9
–
27.0
595.1
130.5
725.6
(427.5)
298.1
(239.7)
25.8
(213.9)
–
(213.9)
511.7
84.2
(38.9)
45.3
535.4
135.2
670.6
(514.1)
156.5
(107.4)
17.7
(89.7)
–
(89.7)
580.9
66.8
(37.7)
29.1
190 Marks and Spencer Group plc
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GROUP FINANCIAL RECORD CONTINUED
Basic earnings/
Weighted average
ordinary shares in issue
Adjusted basic earnings/
Weighted average
ordinary shares in issue
Adjusted earnings per
share/Dividend per share
Operating profit before
depreciation/Fixed charges
Basic earnings per share¹
Adjusted basic earnings per share¹
Dividend per share declared in
respect of the year
Dividend cover
Retail fixed charge cover
Statement of financial position
Net assets (£m)
Net debt2 (£m)
Capital expenditure (£m)
Stores and space
UK stores
UK selling space (m sq ft)
International stores
International selling space (m sq ft)
Staffing (full-time equivalent)
UK
International
2022
52 weeks
2021
53 weeks
2020
52 weeks
2019
52 weeks
2018
52 weeks
15.7p
(10.1)p
1.3p
2.5p
1.6p
21.7p
1.4p
16.7p
23.7p
27.8p
–
–
–
–
3.5x
2.0x
2,917.9
2,698.8
300.2
1,035
16.7
452
5.0
2,285.8
3,515.9
146.9
1,037
16.8
472
5.1
3.9p
13.3p
18.7p
4.3x
3.4x
3,708.5
3,950.6
332.0
1,038
16.8
483
5.0
1.8x
3.6x
2,469.2
3,981.5
294.5
1,043
17.2
445
4.9
1.5x
3.8x
2,954.2
1,827.5
300.5
1,035
17.6
429
5.2
42,550
4,558
44,423
4,754
49,094
4,894
50,578
4,862
53,273
5,655
The above results are prepared under IFRS for each reporting period on a consistent basis, with the exception of the adoption of IFRS 9 and IFRS 15 in 2019 for which comparative
periods have not been restated and the adoption of IFRS 16 in 2020 for which the comparative period of 2019 has been restated.
1. Based on continuing operations.
2. Excludes accrued interest.
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FINANCIAL STATEMENTS
GLOSSARY
The Group tracks a number of alternative performance measures in managing its business, which are not defined or specified under
the requirements of IFRS because they exclude amounts that are included in, or include amounts that are excluded from, the most
directly comparable measure calculated and presented in accordance with IFRS, or are calculated using financial measures that are
not calculated in accordance with IFRS.
The Group believes that these alternative performance measures, which are not considered to be a substitute for or superior to IFRS
measures, provide stakeholders with additional helpful information on the performance of the business. These alternative performance
measures are consistent with how the business performance is planned and reported within the internal management reporting to
the Board. Some of these alternative performance measures are also used for the purpose of setting remuneration targets.
These alternative performance measures should be viewed as supplemental to, but not as a substitute for, measures presented in the
consolidated financial information relating to the Group, which are prepared in accordance with IFRS. The Group believes that these
alternative performance measures are useful indicators of its performance. However, they may not be comparable with similarly-titled
measures reported by other companies due to differences in the way they are calculated.
APM
Closest equivalent
statutory measure
Reconciling items
to statutory measure
Definition and purpose
Income statement measures
Revenue
Sales
Consignment sales Sales includes the gross value of consignment sales (excluding VAT)
Clothing & Home
store/Clothing &
Home online sales
None
Not applicable
before the impact of adjusting items.
Where third-party branded goods are sold on a consignment basis, only
the commission receivable is included in statutory revenue. This
measure has been introduced given the Group’s focus on launching
and growing third-party brands and is consistent with how the business
performance is reported and assessed by the Board and the Executive
Committee.
Clothing & Home revenue through stores and through the Clothing & Home
online platforms. These revenues are reported within the UK Clothing
& Home segment results. Store revenue excludes revenue from “shop your
way” and click & collect, which are included in online revenue. The
growth in revenues on a year-on-year basis is a good indicator of the
performance of the stores and online channels.
The growth in revenues on a year-on-year basis is a good indicator of the
performance of the stores and online channels.
UK Clothing & Home
Store sales1
Consignment sales
Store revenue
Online sales1
Consignment sales
Online revenue
UK Clothing & Home sales1
– 52-week basis
Consignment sales
UK Clothing & Home revenue
– 52-week basis
2021/22
£m
2020/21
£m
2,209.5
(8.6)
2,200.9
1,122.7
(15.3)
1,107.4
1,088.9
–
1,088.9
1,109.7
–
1,109.7
3,332.2
(23.9)
2,198.6
–
%
102.9
102.1
1.2
(0.2)
51.6
3,308.3
2,198.6
50.5
Week 53
Total UK Clothing
& Home revenue
–
40.4
3,308.3
2,239.0
47.8
1. UK Clothing & Home store sales excludes revenue from “shop your way” and click & collect,
which are included in UK Clothing & Home online sales.
There is no material difference between sales and revenue for UK Food
and International.
192 Marks and Spencer Group plc
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APM
Closest equivalent
statutory measure
Reconciling items
to statutory measure
Definition and purpose
GLOSSARY CONTINUED
Income statement measures continued
Like-for-like
revenue growth
Movement in
revenue per
the income
statement
Revenue from
non like-for-like
stores
The period-on-period change in revenue (excluding VAT) from stores
which have been trading and where there has been no significant
change (greater than 10%) in footage for at least 52 weeks and online
sales. The measure is used widely in the retail industry as an indicator of
sales performance. It excludes the impact of new stores, closed stores
or stores with significant footage change.
UK Food
Like-for-like
Net new space1
Week 53
Total UK Food revenue
UK Clothing & Home
Like-for-like
Net new space
Week 53
Total UK Clothing & Home revenue
1. UK Food net new space includes sales to Ocado Retail Limited.
2021/22
£m
2020/21
£m
6,414.1
225.5
–
6,639.6
3,218.3
90.0
–
3,308.3
5,831.1
163.7
143.7
6,138.5
2,164.5
34.1
40.4
2,239.0
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Food ex hospitality
and franchise
Movement in
revenue per
the income
statement
Revenue from
hospitality
and franchise
categories and
sales to Ocado
Retail Limited
The period-on-period change in Food revenue (before sales to Ocado
Retail Limited) excluding the hospitality and franchise categories’
revenue (excluding VAT). The hospitality category includes cafes,
counters and marketplace. This measure is based on Food total revenue
rather than like-for-like revenue which was presented in the 2020/21
annual report. This measure is used to provide consistency with other
measures provided within this report.
M&S.com revenue/
Online revenue
None
Not applicable
International online None
Not applicable
UK Food
Revenue
Sales to Ocado Retail
Hospitality
Franchise
Food ex hospitality
and franchise
2021/22
£m
2020/21
£m
6,639.6
(32.1)
(167.0)
(586.6)
6,138.5
(24.2)
(54.0)
(438.4)
%
8.2
32.6
209.3
33.8
5,853.9
5,621.9
4.1
Total revenue through the Group’s online platforms. These revenues
are reported within the relevant UK Clothing & Home, UK Food and
International segment results. The growth in revenues on a year-on-
year basis is a good indicator of the performance of the online channel
and is a measure used within the Group’s incentive plans. Refer to the
Remuneration Report for an explanation of why this measure is used
within incentive plans.
International revenue through International online platforms. These
revenues are reported within the International segment results. The growth
in revenues on a year-on-year basis is a good indicator of the performance
of the online channel. This measure has been introduced given the Group’s
focus on online sales.
International revenue
Stores
Online
Week 53
At reported currency
2021/22
£m
2020/21
£m
764.7
172.5
–
937.2
613.6
165.7
10.1
789.4
%
24.6
4.1
18.7
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FINANCIAL STATEMENTS
APM
Closest equivalent
statutory measure
Reconciling items
to statutory measure
Definition and purpose
GLOSSARY CONTINUED
Income statement measures continued
Revenue growth at
constant currency
None
Not applicable
Adjusting items
None
Not applicable
Revenue before
adjusting items
Revenue
Adjusting items
(See note 5)
Operating
profit before
adjusting items
Finance
income before
adjusting items
Finance costs
before adjusting
items
Operating profit Adjusting items
(See note 5)
Finance income Adjusting items
(See note 5)
Finance costs
Adjusting items
(See note 5)
Net interest
payable on leases
Finance income/
costs
Net financial
interest
Finance
income/costs
EBIT before
adjusting items
EBIT1
Finance income/
costs
(See note 6)
Finance
income/costs
(See note 6)
Adjusting items
(See note 5)
Ocado Retail
Limited EBITDA
Profit before tax
and adjusting items
EBIT1
Not applicable
Profit before tax Adjusting items
(See note 5)
The period-on-period change in revenue retranslating the previous
year revenue at the average actual periodic exchange rates used in the
current financial year. This measure is presented as a means of eliminating
the effects of exchange rate fluctuations on the period-on-period
reported results.
International revenue
At constant currency
Impact of FX retranslation
International revenue –
52-week basis
Week 53
At reported currency
2021/22
£m
2020/21
£m
937.2
–
937.2
–
937.2
761.8
17.5
779.3
10.1
789.4
%
23.0
20.3
18.7
Those items which the Group excludes from its adjusted profit metrics
in order to present a further measure of the Group’s performance.
Each of these items, costs or incomes, is considered to be significant
in nature and/or quantum or are consistent with items treated as
adjusting in prior periods. Excluding these items from profit metrics
provides readers with helpful additional information on the
performance of the business across periods because it is consistent
with how the business performance is planned by, and reported to,
the Board and the Executive Committee.
Revenue before the impact of adjusting items. The Group considers this
to be an important measure of Group performance and is consistent
with how the business performance is reported and assessed by the Board
and the Executive Committee. This measure has been introduced as
certain adjustments have been made to revenue for the first time in
accordance with the Group’s policy for adjusting items.
Operating profit before the impact of adjusting items. The Group considers
this to be an important measure of Group performance and is
consistent with how the business performance is reported and
assessed by the Board and the Executive Committee.
Finance income before the impact of adjusting items. The Group
considers this to be an important measure of Group performance and
is consistent with how the business performance is reported and
assessed by the Board and the Executive Committee.
Finance costs before the impact of adjusting items. The Group
considers this to be an important measure of Group performance and
is consistent with how the business performance is reported and
assessed by the Board and the Executive Committee.
The net of interest income on subleases and interest payable on lease
liabilities. This measure has been introduced as it allows the Board and
Executive Committee to assess the impact of IFRS 16 Leases.
Calculated as net finance costs, excluding interest on leases and adjusting
items. The Group considers this to be an important measure of Group
performance and is consistent with how the business performance is
reported and assessed by the Board and the Executive Committee.
Calculated as profit before the impact of adjusting items, net finance
costs and tax as disclosed on the face of the consolidated income
statement. This measure is used in calculating the return on capital
employed for the Group.
Calculated as Ocado Retail Limited earnings before interest, tax,
depreciation, amortisation, impairment and exceptional items.
Profit before the impact of adjusting items and tax. The Group
considers this to be an important measure of Group performance
and is consistent with how the business performance is reported and
assessed by the Board and the Executive Committee.
This is a measure used within the Group’s incentive plans. Refer to the
Remuneration Report for an explanation of why this measure is used
within incentive plans.
194 Marks and Spencer Group plc
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APM
Closest equivalent
statutory measure
Reconciling items
to statutory measure
Definition and purpose
GLOSSARY CONTINUED
Income statement measures continued
Adjusted basic
earnings per share
Earnings
per share
Adjusting items
(See note 5)
Adjusted diluted
earnings per share
Diluted earnings
per share
Adjusting items
(See note 5)
Effective tax
rate before
adjusting items
52-week
basis for the
2020/21
financial year
Effective tax rate Adjusting items
and their
tax impact
(See note 5)
Last trading
week of 2020/21
Corresponding
equivalent
statutory measure
Profit after tax attributable to owners of the parent and before the impact
of adjusting items, divided by the weighted average number of ordinary
shares in issue during the financial year.
This is a measure used within the Group’s incentive plans. Refer to the
Remuneration Report for an explanation of why this measure is used.
Profit after tax attributable to owners of the parent and before the
impact of adjusting items, divided by the weighted average number of
ordinary shares in issue during the financial year adjusted for the
effects of any potentially dilutive options.
Total income tax charge for the Group excluding the tax impact of
adjusting items divided by the profit before tax and adjusting items.
This measure is an indicator of the ongoing tax rate for the Group.
The Group’s financial year ends on the nearest Saturday to 31 March.
The current financial year is for the 52 weeks ended 2 April 2022 with
the comparative financial year being for the 53 weeks ended 3 April
2021. In order to provide comparability with the prior year results,
adjustments have been made to the 2020/21 53-week income
statement to remove sales, operating costs and other items relating to
the last trading week of the 2020/21 financial year. In determining the
week 53 adjustment, revenue and cost of goods sold represent the actual
trading performance in that week, with overhead expenses allocated
proportionally to week 53.
Revenue
UK Food
UK Clothing & Home
Total UK Retail
International
Total Group
Operating profit/(loss)
before adjusting items
UK Food
UK Clothing & Home
International
Adjusted profit before tax
Total Group
Loss before tax
Total Group
2021/22
£m
6,138.5
2,239.0
8,377.5
789.4
9,166.9
Exclude
week 53
£m
(143.7)
(40.4)
(184.1)
(10.1)
(194.2)
2020/21
52-week
basis
5,994.8
2,198.6
8,193.4
779.3
8,972.7
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A
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M
E
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228.6
(130.8)
44.1
(15.0)
1.4
1.0
213.6
(129.4)
45.1
50.3
(8.7)
41.6
(209.4)
8.2
(201.2)
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FINANCIAL STATEMENTS
APM
Closest equivalent
statutory measure
Reconciling items
to statutory measure
Definition and purpose
GLOSSARY CONTINUED
Balance sheet measures
Net debt
None
Net debt
excluding
lease liabilities
None
Cash flow measures
Free cash flow
after shareholder
returns
Free cash flow
Net cash inflow
from operating
activities
Net cash inflow
from operating
activities
Reconciliation
of net debt
(see note 27)
Reconciliation
of net debt
(see note 27)
Lease liabilities
(see note 20)
Net debt comprises total borrowings (bank and bonds net of accrued
interest and lease liabilities), the spot foreign exchange component of net
derivative financial instruments that hedge the debt and the Scottish
Limited Partnership liability to the Marks and Spencer UK Pension Scheme
less cash, cash equivalents and unlisted and short-term investments. Net
debt does not include contingent consideration as it is conditional upon
future events which are not yet certain at the balance sheet date.
This measure is a good indication of the strength of the Group’s
balance sheet position and is widely used by credit rating agencies.
Calculated as net debt less lease liabilities. This measure is a good
indication of the strength of the Group’s balance sheet position and is
widely used by credit rating agencies.
See Financial
Review
The cash generated from the Group’s operating activities less capital
expenditure, cash lease payments and interest paid.
See Financial
Review
This measure shows the cash retained by the Group in the year.
Calculated as the cash generated from the Group’s operating activities
less capital expenditure and interest paid, excluding returns to
shareholders (dividends and share buyback).
This measure shows the cash generated by the Group during the year
that is available for returning to shareholders and is used within the
Group’s incentive plans.
Other measures
Covid-19
scenario
None
Not applicable
As part of the Group’s normal financial planning process, the Board
approved the 2020/21 budget and three-year plan.
As a result of the UK government restrictions on trade that were announced
in response to the Covid-19 pandemic, the Group revisited the 2020/21
budget and three-year plan to determine a downside scenario.
The downside scenario assumed the government guidelines at the period
end continued for a period of at least four months, resulting in a significant
decline in sales for the remainder of 2020/21, as outlined in the
basis of preparation in the Group’s 2020 Annual Report and
Financial Statements.
This downside scenario was approved by the directors and is defined
as the Covid-19 scenario.
Calculated as the purchase of property, plant and equipment,
investment property and intangible assets during the year, less
proceeds from asset disposals excluding any assets acquired or
disposed of as part of a business combination or through an
investment in an associate.
Capital
expenditure
None
Not applicable
196 Marks and Spencer Group plc
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APM
Closest equivalent
statutory measure
Reconciling items
to statutory measure
Definition and purpose
GLOSSARY CONTINUED
Other measures continued
Return on capital
employed (“ROCE”)
None
Not applicable
Calculated as being EBIT1 before adjusting items divided by the average
of opening and closing capital employed. The measures used in this
calculation are set out below:
EBIT before adjusting items
Net assets
Add back:
Partnership liability to the
Marks & Spencer UK Pension Scheme
Deferred tax liabilities
Non-current borrowings and
other financial liabilities
Retirement benefit deficit
Derivative financial instruments
Current tax liabilities
Less:
Investment property
Derivative financial instruments
Retirement benefit asset
Current tax assets
Net operating assets
Add back: Provisions related
to adjusting items
Capital employed
Average capital employed
ROCE %
2021/22
£m
709.0
2020/21
£m
222.2
2,917.9
2,285.8
192.3
187.2
3,561.0
5.7
–
34.0
(15.0)
(61.4)
(1,043.9)
–
5,777.8
124.9
5,902.7
5,788.3
12.2%
193.5
42.3
3,659.9
7.8
73.6
–
(15.2)
–
(639.2)
(35.4)
5,573.1
100.8
5,673.9
5,874.8
3.8%
1. EBIT is not defined within IFRS but is a widely accepted profit measure being earnings before interest and tax.
This measure is used within the Group’s incentive plans. Refer to the
Remuneration Report for an explanation of why this measure is used
within incentive plans.
F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
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Important
notice
NOTICE OF
ANNUAL GENERAL
MEETING 2022
Tuesday 5 July 2022 at 11am
Held at, and broadcast from, Waterside House
35 North Wharf Road, London W2 1NW
This document is important and requires your immediate attention
If you are in any doubt as to the action you should take, you should immediately consult
your stockbroker, bank manager, solicitor, accountant or other independent professional
adviser authorised under the Financial Services and Markets Act 2000 if you are resident in the
United Kingdom or, if you reside elsewhere, another appropriately authorised financial adviser.
If you have sold or otherwise transferred all your shares in the Company, please forward this
document and accompanying documents (except any personalised form of proxy, if applicable)
to the purchaser or transferee, or to the stockbroker or other agent through whom the sale
or transfer was effected, for transmission to the purchaser or transferee.
198
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DEAR SHAREHOLDER
‘‘
I AM PLEASED TO ANNOUNCE THE
21ST ANNUAL GENERAL MEETING OF
MARKS AND SPENCER GROUP PLC
WILL BE HELD ON 5 JULY 2022.
Nick Folland, General Counsel and Company Secretary
’’
VOTING BEFORE THE MEETING
All shareholders are encouraged to vote
either in advance or on the day. There
are several ways to submit your voting
instructions before the meeting, which
are available from the publication date
of this Notice:
(1) The Lumi AGM platform.
(2) Equiniti’s Shareview website.
(3) The CREST or Proxymity electronic
proxy appointment platforms.
(4) By completing and returning a paper
proxy form.
Votes submitted electronically via the
Lumi or Shareview websites, or via the
CREST or Proxymity platforms, (options 1,
2 and 3 above) should be registered by
no later than 11am on Friday 1 July 2022.
After then, you will no longer be able to
submit your proxy vote via Shareview,
CREST or Proxymity. Voting via the
Lumi website will also close at this time,
but will reopen for voting on the day of
the meeting.
Paper proxy votes (option 4 above) must
be received by no later than 11am on
Friday 1 July 2022. Paper proxy forms
are available from Equiniti on request;
you can call our shareholder helpline on
0345 609 0810, or use any of Equiniti’s
alternative contact details listed on
page 210.
You will be able to vote in one of three
ways for each of the resolutions: “For”,
“Against” or “Vote Withheld”. Please note
that a “Vote Withheld” is not a vote in
law and will not be counted in the
calculation of votes “For” and “Against”
each resolution.
Annual Report & Financial Statements 2022
199
We strongly encourage you to log on and
submit any questions you might have in
advance of the meeting, so that your
views are heard even if you are unable to
participate live.
Shareholders are advised not to
travel to the venue on the day, as the
meeting will be fully digitally enabled.
Board members will not be available for
interaction with shareholders in person,
as they will be taking part in the meeting
broadcast under studio conditions.
Any shareholders travelling to the venue
against the Board’s recommendation
will be advised to join the meeting
electronically, and will be provided
with assistance to do so, if needed.
Refreshments will not be provided.
YOUR VOTE COUNTS
Your vote is important to us. You can:
– Join the AGM live online and vote
electronically via the Lumi AGM
platform. Please see page 209 of
this Notice for further details.
– Register your proxy vote electronically
by logging on to either the Lumi AGM
platform, our Registrar’s website,
shareview.co.uk, or by using the service
offered by Euroclear UK & Ireland
Limited for members of CREST.
– Complete and return a paper proxy
form (enclosed with this Notice if you
have elected for hard copy documents,
or otherwise available from Equiniti on
request, by calling the shareholder
helpline on 0345 609 0810).
ANNUAL GENERAL MEETING (“AGM”)
As we have noted in our Annual Report,
the AGM is a key date in the Board’s
calendar. Alongside presenting the
Company’s performance and strategy to
shareholders, it is the Board’s opportunity
to listen and respond to your questions.
Last year’s digital AGM once again
received higher levels of shareholder
engagement than the previous year’s.
As such, we heard views and received
questions from far more of you than in
recent years, and particularly when
compared with our physically held
meetings. We are therefore confident
that our approach to a digitally-enabled
AGM is far more accessible, engaging
and democratic.
For this reason, the 2022 AGM will
again be a fully digitally-enabled
meeting, broadcast from M&S’
Waterside House Support Centre
at 11am on 5 July 2022.
I’m very pleased that we will also be joined
by Anita Anand who will be acting as this
year’s shareholder advocate. Anita will be
known to many of you as a leading radio
and television broadcaster, journalist and
author. As your shareholder advocate,
she will ensure your views and questions
are put to the Board.
For statutory and regulatory purposes,
the place of meeting will be Waterside
House, 35 North Wharf Road, London
W2 1NW. Shareholders are invited to
participate in the AGM electronically via
the Lumi AGM platform, which you can
access by logging on to https://web.
lumiagm.com/124-849-127. On this
website, you will be able to submit
questions and your voting instructions,
both during the meeting and in advance.
A step-by-step guide on how to join the
meeting electronically and submit your
votes and questions can be found on
page 209.
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NOTICE OF MEETING 2022
NOTICE OF MEETING 2022
CONTINUED
JOINING THE MEETING AND
VOTING ON THE DAY
You can watch the broadcast live, vote and
ask questions on the day of the meeting
via the Lumi website. Please refer to pages
208 to 209 for instructions on how to join
the meeting and submit your votes and
questions on the day.
Voting on all resolutions on the day will
be by way of a poll and the Lumi website
will reopen at 9.30am on Tuesday 5 July
for this purpose. Votes can be cast once
the Chairman has declared the poll open.
QUESTIONS
On the day, your questions will be
posed to the Board by Anita Anand.
Where we receive a number of questions
covering the same topic, Anita will group
these to address as many of your queries
as possible.
It is, of course, important to us that we
have the opportunity to hear from you,
our shareholders, directly. You will have
the opportunity to ask a question live
during the meeting by telephone; full
details and instructions will be provided
on the Lumi AGM platform on the day
of the AGM.
If you would like to ask your question
at the AGM in person, you can
send us a video recording of
yourself asking your question by
email to AGMquestionsubmission@
marks-and-spencer.com, to be received
by no later than 5pm on Friday 1 July.
VOTING RESULTS
The results of the voting will be
announced through a Regulatory
Information Service and will be published
on our website, marksandspencer.com/
thecompany, on 5 July 2022, or as soon
as reasonably practicable thereafter.
In 2021, all resolutions were passed at the
meeting with votes ranging from 93.27% to
99.98% in favour.
EXPLANATORY NOTES
An explanation of each of the resolutions
to be voted on at the AGM is set out below
and on pages 201 to 202.
M&S WEBSITE
Our corporate website,
marksandspencer.com/thecompany,
is the principal means we use to
communicate with our shareholders.
There is a wealth of information
online including:
A copy of our full Annual Report,
which includes our Strategic Report.
All the latest M&S news, press
releases and investor presentations.
A detailed account of our approach
to corporate governance at M&S.
EXPLANATORY NOTES TO THE RESOLUTIONS
TO RECEIVE THE REPORTS AND ACCOUNTS
1
Chief Strategy and Transformation Director in April 2020 and
was later appointed Chief Operating Officer in May 2021.
The Board asks that shareholders receive the Annual Report
and Financial Statements for the 52 weeks ended 2 April 2022.
APPROVAL OF THE DIRECTORS’
REMUNERATION REPORT
2
The Directors’ Remuneration Report sets out the pay and
benefits received by each of the directors for the year ended
2 April 2022. In line with legislation, this vote is advisory and the
directors’ entitlement to remuneration is not conditional on it.
ELECTION OF DIRECTORS
3-13
The directors believe that the Board continues to maintain an
appropriate balance of knowledge and skills and that all the
non-executive directors are independent in character and
judgement. This follows a process of formal evaluation,
which confirms that each director in office at the time of
the evaluation makes an effective and valuable contribution
to the Board and demonstrates commitment to the role
(including making sufficient time available for Board and
Committee meetings and other duties as required).
As announced on 10 March 2022, Steve Rowe will stand
down as CEO on 25 May 2022 as part of a planned succession
programme. Stuart Machin and Katie Bickerstaffe will both join
the Board on 25 May 2022 as CEO and Co-CEO respectively.
Stuart joined M&S as Food Managing Director in April 2018
with nearly 30 years’ experience in the food, fashion and
home retail sector, and was appointed joint Chief Operating
Officer in May 2021. Katie previously served on the Board as a
non-executive director from 2018, bringing extensive
experience of digital, retail and operations and leading
consumer-focused businesses. She joined the business as
The Board notes that while Andy Halford has been a
non-executive director for more than nine years, he is
still considered to be independent in both character and
judgement. He has no other significant links to the Company,
and continues to make an effective and valuable contribution.
The Board believes Andy’s re-election will provide valuable
continuity during the CEO transition. Further details on the
Board’s assessment of Andy’s independence can be found in
the Annual Report on pages 59 and 67.
In accordance with the UK Corporate Governance Code, all
directors will stand for election or re-election, as relevant, at the
AGM this year. Biographies are available on pages 60 and 61 of
the Annual Report, with further details available on our website,
marksandspencer.com/thecompany. It is the Board’s view that
the directors’ biographies illustrate why each director’s
contribution is, and continues to be, important to the
Company’s long-term sustainable success.
APPOINTMENT AND
REMUNERATION OF AUDITOR
14–15
On the recommendation of the Audit Committee, the Board
proposes in resolution 14 that Deloitte LLP be reappointed as
auditor of the Company.
Resolution 15 proposes that the Audit Committee be
authorised to determine the level of the auditor’s remuneration.
AUTHORITY TO MAKE
POLITICAL DONATIONS
16
The Companies Act 2006 (the “2006 Act”) prohibits companies
from making political donations to UK political organisations or
independent candidates, or incurring UK political expenditure,
unless authorised by shareholders in advance.
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EXPLANATORY NOTES TO THE RESOLUTIONS CONTINUED
The Company does not make, and does not intend to
make, donations to political organisations or independent
election candidates, nor does it incur or intend to incur any
political expenditure.
However, the definitions of political donations, political
organisations and political expenditure used in the 2006
Act are very wide. As a result, they can cover activities such as
sponsorship, subscriptions, payment of expenses, paid leave
for employees fulfilling certain public duties, and support for
bodies representing the business community in policy review
or reform.
Shareholder approval is being sought on a precautionary
basis only, to allow the Company and any company which,
at any time during the period for which this resolution has
effect, is a subsidiary of the Company, to continue to support
the community and put forward its views to wider business and
government interests, without running the risk of inadvertently
breaching legislation.
The Board is therefore seeking authority to make political
donations and to incur political expenditure not exceeding
£50,000 in total. In line with best practice guidelines published
by the Investment Association (“IA”), this resolution is put to
shareholders annually rather than every four years as required
by the 2006 Act.
RENEWAL OF THE POWERS
OF THE BOARD TO ALLOT SHARES
17
Paragraph (A) of this resolution 17 would give the directors
the authority to allot ordinary shares of the Company up
to an aggregate nominal amount equal to £6,529,881.95
(representing 652,988,195 ordinary shares of £0.01 each).
This amount represents approximately one-third (33.33%) of
the Company’s issued ordinary share capital as at 24 May 2022,
the latest practicable date before the publication of this Notice.
In line with guidance issued by the IA, paragraph (B) of this
resolution would give the directors authority to allot ordinary
shares in connection with a rights issue in favour of ordinary
shareholders up to an aggregate nominal amount equal to
£13,059,763.91 (representing 1,305,976,391 ordinary shares),
as reduced by the nominal amount of any shares issued under
paragraph (A) of this resolution. This amount (before any
reduction) represents approximately two-thirds (66.66%) of the
Company’s issued ordinary share capital as at 24 May 2022,
the latest practicable date before the publication of this Notice.
The authorities sought under paragraphs (A) and (B) of this
resolution will expire at the conclusion of the AGM in 2023 or
on 1 October 2023, whichever is sooner. The directors have no
present intention to exercise either of the authorities sought
under this resolution; however, the Board wishes to ensure that
the Company has maximum flexibility in managing the Group’s
capital resources.
As at the date of this Notice, no shares are held by the
Company in treasury.
AUTHORITY TO DISAPPLY
PRE-EMPTION RIGHTS
18-19
Resolutions 18 and 19 are proposed as special resolutions. If the
directors wish to allot new shares or other equity securities,
or sell treasury shares, for cash (other than in connection with
an employee share scheme), company law requires that these
shares are first offered to shareholders in proportion to their
existing holdings.
At last year’s AGM, a special resolution was passed, in line with
institutional shareholder guidelines, empowering the directors
to allot equity securities for cash without first offering them to
existing shareholders in proportion to their existing holdings.
It is proposed, under resolution 18, that this authority be
renewed. If approved, the resolution will authorise the directors
to issue shares in connection with pre-emptive offers, or
otherwise to issue shares for cash up to an aggregate nominal
amount of £979,482.29 (representing 97,948,229 ordinary shares)
which includes the sale on a non-pre-emptive basis of any
shares the Company holds in treasury for cash. This aggregate
nominal amount represents approximately 5% of the
Company’s issued ordinary share capital as at 24 May 2022,
being the latest practicable date before the publication of
this Notice.
The Pre-Emption Group’s Statement of Principles also supports
the annual disapplication of pre-emption rights in respect of
allotments of shares and other equity securities and sales of
treasury shares for cash where these represent no more than
an additional 5% of issued ordinary share capital (exclusive
of treasury shares) and are used only in connection with an
acquisition or specified capital investment. The Pre-Emption
Group’s Statement of Principles defines “specified capital
investment” as meaning one or more specific capital
investment related uses for the proceeds of an issue of equity
securities, in respect of which sufficient information regarding
the effect of the transaction on the Company, the assets the
subject of the transaction and (where appropriate) the profits
attributable to them is made available to shareholders to
enable them to reach an assessment of the potential return.
Accordingly, the purpose of resolution 19 is to authorise the
directors to allot new shares and other equity securities
pursuant to the allotment authority given by resolution 17,
or sell treasury shares for cash, without first being required to
offer such securities to existing shareholders, up to a further
nominal amount of £979,482.29 (representing 97,948,229
ordinary shares), being approximately 5% of the Company’s
issued ordinary share capital as at 24 May 2022, the latest
practicable date before the publication of this Notice. The
authority granted by this resolution, if passed, will only be used
in connection with an acquisition or specified capital investment
which is announced contemporaneously with the allotment,
or which has taken place in the preceding six-month period
and is disclosed in the announcement of the issue. If the
authority given in resolution 19 is used, the Company will
publish details of its use in its next Annual Report.
The authority granted by resolution 19 would be in addition
to the general authority to disapply pre-emption rights under
resolution 18. The maximum nominal value of equity securities
that could be allotted if both authorities were used would be
£1,958,964.59, which represents approximately 10% of the
Company’s issued ordinary share capital as at 24 May 2022,
being the latest practicable date before the publication of
this Notice.
The directors intend to adhere to the provisions in the
Pre-Emption Group’s Statement of Principles and not to allot
shares or other equity securities or sell treasury shares for
cash on a non-pre-emptive basis pursuant to the authority
in resolution 18 in excess of an amount equal to 7.5% of the
total issued ordinary share capital of the Company, excluding
treasury shares, within a rolling three-year period, other than:
(i) with prior consultation with shareholders; or
(ii) in connection with an acquisition or specified capital
investment which is announced contemporaneously with
the allotment or which has taken place in the preceding
six-month period and is disclosed in the announcement of
the allotment.
Annual Report & Financial Statements 2022
201
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NOTICE OF MEETING 2022
CONTINUED
EXPLANATORY NOTES TO THE RESOLUTIONS CONTINUED
The directors have no current intention to allot shares
except in connection with employee share schemes.
These authorities will expire at the conclusion of the AGM
in 2023 or on 1 October 2023, whichever is sooner.
AUTHORITY FOR THE COMPANY TO
PURCHASE ITS OWN SHARES
20
Authority is sought for the Company to purchase up to 10% of
its issued ordinary shares renewing the authority granted by
the shareholders at previous AGMs.
The directors have no present intention of exercising the
authority to purchase the Company’s own ordinary shares;
however, this authority would provide them with the flexibility
to do so in the future, if the prevailing market conditions made
such purchases in the best interests of shareholders generally.
Ordinary shares purchased by the Company pursuant to
this authority may be held in treasury or may be cancelled.
It remains the Company’s intention to cancel any shares it
buys back rather than hold them in treasury. The Company
currently holds no shares in treasury. The resolution specifies
the minimum and maximum prices which may be paid for any
ordinary shares purchased under this authority, reflecting the
requirements of the Listing Rules.
The Company has options outstanding over 110.1 million
ordinary shares, representing 5.62% of the Company’s issued
ordinary share capital as at 24 May 2022, the latest practicable
date before the publication of this Notice.
If the existing authority given at the 2021 AGM and the
authority now being sought by this resolution were to be fully
used, these options would represent 6.25% of the Company’s
ordinary share capital in issue at that date.
NOTICE OF
GENERAL MEETING
21
In accordance with the 2006 Act, the notice period for general
meetings (other than an AGM) is 21 clear days’ notice unless
the Company:
(i) Has gained shareholder approval for the holding of general
meetings on 14 clear days’ notice by passing a special
resolution at the most recent AGM; and
(ii) Offers the facility for all shareholders to vote by
electronic means.
The Company would like to preserve its ability to call general
meetings (other than an AGM) on 14 clear days’ notice. This
shorter notice period would not be used as a matter of routine,
but only where the flexibility is merited by the business of the
meeting and is thought to be in the interests of shareholders
as a whole.
Resolution 21 seeks such approval and, should this resolution
be approved, it will remain valid until the end of the next AGM.
This is the same authority as was sought and granted at last
year’s AGM.
SHARE INCENTIVE PLAN RENEWAL
22
Authority is sought to approve the renewal of the existing
Marks and Spencer Group plc Share Incentive Plan (“SIP”), which
is currently operated to enable employees to buy shares in the
202
Marks and Spencer Group plc
Company from their pre-tax salary (ShareBuy). The SIP
is a share incentive plan which was originally approved by
shareholders in 2000 and was renewed by shareholders at the
Company’s Annual General Meeting in 2012. The Company is
seeking shareholder approval to amend and renew the SIP
to allow awards to continue to be made under it for a further
10 years. The main terms of the SIP are summarised on
pages 206 to 207 of this Notice.
SECTION 190 TRANSACTION
23
Authority is sought for the Company’s subsidiary, Marks and
Spencer plc (“M&S plc”), to purchase 565,952 A Ordinary Shares
in The Sports Edit Limited (“TSE”), amounting to 4.8% of TSE’s
issued share capital from Mr. Justin King (the “JK TSE Shares”).
M&S plc acquired 77.7% of TSE’s issued share capital in February
2022 as part of the Company’s third-party brands strategy for
Clothing & Home, and agreed simultaneously a timetable for
acquiring another 17.5% from TSE’s owner/founder with the
ultimate aim of acquiring 100% of TSE’s issued share capital.
The final 4.8% of TSE’s issued share capital is currently owned
by Mr. Justin King, a Non-Executive Director of the Company.
As a result, purchase of the JK TSE Shares is conditional on the
passing of this resolution under Section 190 of the Act, as it
is a substantial property transaction as defined in the Act.
The Board believe that the 100% acquisition of TSE is a strategic
investment and learning opportunity; the brand is well
positioned in the growing activewear market and has proven
capability in customer segmentation, brand curation and
emerging brand identification. Mr. Justin King has been a
minority shareholder in TSE since 2018, which pre-dates his
appointment as a Non-Executive Director of the Company,
declared his interest in TSE upon appointment as a Non-
Executive Director of the Company and did not participate in
any decision-making regarding the acquisition of TSE.
Subject to shareholder approval, M&S plc will acquire the
JK TSE Shares from Mr. Justin King within five business days
of the AGM at a total purchase price of £279,582. This price
amounts to £0.4904 per share, and is the same price per share
at which M&S plc acquired its current 77.7% holding of TSE
pursuant to a share purchase agreement in February 2022.
RECOMMENDATION
Your directors believe that the proposals described above are
in the best interests of the Company and its shareholders as a
whole, and recommend you give them your support by voting
in favour of all the resolutions, as they intend to in respect of
their own beneficial shareholdings.
Yours faithfully,
Nick Folland General Counsel and Company Secretary
London, 24 May 2022
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MARKS AND SPENCER GROUP PLC
NOTICE OF MEETING
5 JULY 2022
Notice is given that the Annual General
Meeting of Marks and Spencer Group
plc (the “Company”) will be held at
and broadcast from Waterside House,
35 North Wharf Road, London W2 1NW,
in accordance with the information
provided on page 208, on Tuesday
5 July 2022 at 11am (the “AGM”)
for the purposes set out below.
Resolutions 1 to 17 and 22 to 23 will
be proposed as ordinary resolutions, and
resolutions 18 to 21 will be proposed
as special resolutions.
1. To receive the Annual Report and
Financial Statements for the 52 weeks
ended 2 April 2022.
2. To approve the Directors’ Remuneration
Report for the year ended 2 April 2022,
as set out on pages 95 to 107 of the
Annual Report.
To re-elect the following directors who are
seeking annual re-election in accordance
with the UK Corporate Governance Code:
3. Archie Norman
4. Eoin Tonge
5. Evelyn Bourke
6. Fiona Dawson
7. Andrew Fisher
8. Andy Halford
9. Tamara Ingram
10. Justin King
11. Sapna Sood
To elect the following directors appointed
to the Board since the last Annual
General Meeting:
12. Stuart Machin
13. Katie Bickerstaffe
14. To resolve that Deloitte LLP be, and
is hereby, reappointed as auditor of
the Company to hold office until the
conclusion of the next general meeting
at which accounts are laid before
the Company.
15. To resolve that the Audit Committee
determine the remuneration of the
auditor on behalf of the Board.
To view our Board biographies
go to the Investors section of
our corporate website,
marksandspencer.com/thecompany
16. POLITICAL DONATIONS
To resolve that, in accordance with Section
366 of the Companies Act 2006, the
Company, and any company which, at any
time during the period for which this
resolution has effect, is a subsidiary
of the Company, be and are authorised to:
(A) make political donations to political
parties or independent election
candidates, not exceeding £50,000
in total;
(B) make political donations to political
organisations other than political
parties, not exceeding £50,000 in
total; and
(C) incur political expenditure not
exceeding £50,000 in total;
provided that the aggregate amount of
any such donations and expenditure shall
not exceed £50,000, during the period
beginning with the date of the passing
of this resolution and ending at the
conclusion of the AGM to be held in 2023
or on 1 October 2023, whichever is sooner.
For the purpose of this resolution, the
terms “political donations”, “political
parties”, “independent election
candidates”, “political organisations”
and “political expenditure” have the
meanings set out in Sections 363 to
365 of the Companies Act 2006.
17. DIRECTORS’ AUTHORITY
TO ALLOT SHARES
To resolve that the directors be and are
authorised generally and unconditionally
to exercise all the powers of the Company
to allot shares in the Company and to
grant rights to subscribe for or convert
any security into shares in the Company:
(ii) To holders of other equity
securities as required by the
rights of those securities or
as the directors otherwise
consider necessary;
and so that the directors may impose
any limits or restrictions and make any
arrangements which they consider
necessary or appropriate to deal with any
treasury shares, fractional entitlements,
record dates, legal, regulatory or practical
problems in, or under the laws of, any
territory or any other matter.
The authorities conferred on the directors
to allot securities under paragraphs (A)
and (B) will expire at the conclusion of the
AGM of the Company to be held in 2023 or
on 1 October 2023, whichever is sooner,
unless previously revoked or varied by the
Company, and such authority shall extend
to the making before such expiry of an
offer or an agreement that would or might
require relevant securities to be allotted
after such expiry, and the directors may
allot relevant securities in pursuance of
that offer or agreement as if the authority
conferred hereby had not expired.
18. GENERAL DISAPPLICATION
OF PRE-EMPTION RIGHTS
To resolve as a special resolution that,
subject to the passing of resolution 17, the
directors be empowered to allot equity
securities (as defined in the Companies
Act 2006) for cash under the authority
given by that resolution 17 (set out in this
Notice of Meeting), and/or to sell ordinary
shares held by the Company as treasury
shares for cash, as if Section 561 of the
Companies Act 2006 did not apply to any
such allotment or sale, provided that such
authority be limited:
(A) Up to a nominal amount of
(A) to the allotment of equity securities
£6,529,881.95 (such amount to be
reduced by any allotments or grants
made under paragraph (B) below
in excess of such sum); and
(B) Comprising equity securities
(as defined in Section 560(1) of
the Companies Act 2006) up to a
nominal amount of £13,059,763.91
(such amount to be reduced by any
allotments made under paragraph
(A) above) in connection with an
offer by way of a rights issue:
(i) To ordinary shareholders in
proportion (as nearly as may be
practicable) to their existing
holdings; and
and sale of treasury shares in
connection with an offer of, or
invitation to apply for, equity
securities (but in the case of the
authority granted under paragraph
(B) of resolution 17, by way of a rights
issue only):
(i) to ordinary shareholders in
proportion (as nearly as may be
practicable) to their existing
holdings; and
(ii) to holders of other equity
securities as required by the
rights of those securities or
as the directors otherwise
consider necessary;
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MARKS AND SPENCER GROUP PLC
NOTICE OF MEETING 5 JULY 2022
CONTINUED
Pre-Emption Group prior to the date
of this Notice of Meeting;
21. CALLING OF GENERAL MEETINGS
ON 14 DAYS’ NOTICE
and shall expire at the conclusion of
the AGM to be held in 2023 or on
1 October 2023, whichever is sooner
(unless previously revoked or varied
by the Company in general meeting),
provided that the Company may before
that date make offers, and enter into
agreements, which would, or might,
require equity securities to be allotted
(and treasury shares to be sold) after the
authority ends and the directors may allot
equity securities (and sell treasury shares)
under any such offer or agreement as if
the authority had not ended.
20. COMPANY’S AUTHORITY TO
PURCHASE ITS OWN SHARES
To resolve as a special resolution that the
Company is authorised for the purposes
of Section 701 of the Companies Act 2006
to make one or more market purchases
(as defined in Section 693(4) of the
Companies Act 2006) of its ordinary
shares of £0.01 each, such power to
be limited:
(A) to a maximum number of
195,896,459 ordinary shares;
(B) by the condition that the minimum
price which may be paid for an
ordinary share is £0.01 and the
maximum price which may be paid for
an ordinary share is the highest of:
(i) an amount equal to 105% of the
average market value of an ordinary
share for the five business days
immediately preceding the day
on which that ordinary share is
contracted to be purchased; and
(ii) the higher of the price of the last
independent trade of an ordinary
share and the highest current
independent bid for an ordinary
share on the trading venue where
the purchase is carried out;
in each case, exclusive of expenses, such
power to apply until the end of the AGM
to be held in 2023 or until 1 October 2023,
whichever is sooner, but in each case
so that the Company may enter into a
contract to purchase ordinary shares
which will or may be completed or
executed wholly or partly after the power
ends and the Company may purchase
ordinary shares pursuant to any such
contract as if the power had not ended.
To resolve as a special resolution that a
general meeting other than an Annual
General Meeting may be called on no
fewer than 14 clear days’ notice.
22. RENEWAL OF SHARE
INCENTIVE PLAN
To resolve that the amendment and
renewal of the amended Marks and
Spencer Group plc Share Incentive Plan
(the “SIP”), the principal terms of which are
summarised on pages 206 to 207 of this
Notice and the amended rules of which
are produced to this meeting, be
approved and the directors of the
Company authorised:
(A) to continue to operate the SIP and
do all acts and things they consider
necessary or desirable to implement
and give effect to the SIP; and
(B) to establish further plans based on
the SIP but modified to take account
of local tax, exchange control or
securities laws in overseas territories,
provided that any shares made
available under such further plans are
treated as counting against the limits
on individual or overall participation
in the SIP.
23. SECTION 190 TRANSACTION
To resolve that the purchase by the
Company’s subsidiary, Marks and Spencer
plc, of 4.8% of The Sports Edit Limited’s
issued share capital for the sum of
£279,582 from Mr. Justin King, being a
Non-Executive Director of the Company,
be approved in accordance with Section
190 of the Companies Act 2006.
By order of the Board
Nick Folland General Counsel
and Company Secretary
London, 24 May 2022
Registered office Waterside House,
35 North Wharf Road, London W2 1NW.
Registered in England and Wales
No. 4256886.
and so that the directors may impose
any limits or restrictions and make any
arrangements which they consider
necessary or appropriate to deal with any
treasury shares, fractional entitlements,
record dates, legal, regulatory or practical
problems in, or under the laws of, any
territory or any other matter; and
(B) in the case of the authority granted
under paragraph (A) of resolution 17
and/or in the case of any sale of
treasury shares, to the allotment of
equity securities or sale of treasury
shares (otherwise than under
paragraph (A) above) up to a nominal
amount of £979,482.29;
and shall expire at the conclusion of the
AGM to be held in 2023 or on 1 October
2023, whichever is sooner (unless
previously revoked or varied by the
Company in general meeting), provided
that the Company may before that date
make offers, and enter into agreements,
which would, or might, require equity
securities to be allotted (and treasury
shares to be sold) after the authority
ends and the directors may allot equity
securities (and sell treasury shares)
under any such offer or agreement
as if the authority had not ended.
19. ADDITIONAL DISAPPLICATION
OF PRE-EMPTION RIGHTS
To resolve as a special resolution that,
subject to the passing of resolution 17,
the directors be empowered in addition
to any authority granted under resolution
18 to allot equity securities (as defined in
the Companies Act 2006) for cash under
the authority given by that resolution 17
(set out in this Notice of Meeting) and/or
to sell ordinary shares held by the
Company as treasury shares for cash as if
Section 561 of the Companies Act 2006
did not apply to any such allotment or
sale, provided that such authority be:
(A) limited to the allotment of equity
securities or sale of treasury shares
up to a nominal amount of
£979,482.29; and
(B) used only for the purposes of
financing (or refinancing, if the
authority is to be used within six
months after the original transaction)
a transaction which the directors
of the Company determine to
be an acquisition or other capital
investment of a kind contemplated
by the Statement of Principles on
Disapplying Pre-Emption Rights
most recently published by the
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1. Biographies of the directors seeking
election (or re-election) are given in the
Annual Report on pages 60 and 61,
including their membership of the
principal Committees. The terms of the
current directors’ service contracts
are such that all executive director
appointments may be terminated by the
Company giving 12 months’ notice and by
the individual giving six months’ notice;
non-executive directors have agreements
for service which can be terminated on
three months’ notice by either party;
the Chairman has an agreement for
service which requires six months’
notice by either party.
2. Registered shareholders: Members are
entitled to appoint a proxy to exercise all
or any of their rights to attend, speak and
vote on their behalf at the AGM. Members
may appoint more than one proxy in
relation to the AGM, provided that each
proxy is appointed to exercise the rights
attached to a different share or shares
held by that shareholder. A proxy need
not be a shareholder of the Company.
To request one or more paper proxy forms
(to appoint more than one proxy), please
contact our shareholder helpline on
0345 609 0810. Please indicate the number
of shares in relation to which each proxy
is authorised to act in the box below the
proxy holder’s name. Please also indicate
if the instruction is one of multiple
instructions being given, and if a proxy
is being appointed for less than your full
entitlement, please enter the number
of shares in relation to which each such
proxy is entitled to act in the box below
the relevant proxy holder’s name. The
proxy form assumes you wish to vote on
all your shares in the same way. To vote
only part of your holding or to vote some
shares one way and some another, please
contact the shareholder helpline. All proxy
forms must be signed and should be
returned together.
3. If you would like to submit your vote
electronically in advance of the AGM, you
can do so by accessing the Lumi website,
https://web.lumiagm.com/124-849-127.
Instructions are available on page 209
of this Notice. Alternatively, you can
submit your instruction by visiting
shareview.co.uk. All advance proxy votes
regardless of how they are cast are to be
returned by 11am on Friday 1 July 2022.
If you return paper and electronic
instructions, those received last by the
Registrar before 11am on Friday 1 July
2022 will take precedence. Electronic
communication facilities are available
to all shareholders and those that use
them will not be disadvantaged.
NOTES
4. In the case of joint holders, where more
than one of the joint holders purports to
appoint a proxy, only the appointment
submitted by the most senior holder will
be accepted. Seniority is determined by
the order in which the names of the joint
holders appear in the Company’s register
of members in respect of the joint holding
(the first-named being the most senior).
5. Votes submitted in advance of the
meeting using the Lumi website will
constitute an instruction to appoint the
Chairman of the meeting as proxy. The
shares covered by the instruction will be
voted as directed by the shareholder in
respect of the resolutions referred to in
this Notice of Meeting at the meeting
and at any adjournment of it.
6. To be valid, any proxy form or other
instrument appointing a proxy must
be received by post (during normal
business hours only) or by hand at Equiniti,
Aspect House, Spencer Road, Lancing,
West Sussex BN99 6DA no later than 11am
on Friday 1 July 2022.
7. The return of a completed paper proxy
form, other such instrument or any
CREST proxy instruction (as described in
paragraph 15 on the following page) will
not prevent a shareholder voting later if
they wish to do so. You must inform the
Company’s Registrar in writing of any
termination of the authority of a proxy.
8. Indirect shareholders: Any person to
whom this Notice is sent who is a person
nominated under Section 146 of the
Companies Act 2006 to enjoy information
rights (a “Nominated Person”) may,
under an agreement between them and
the shareholder by whom they were
nominated, have a right to be appointed
(or to have someone else appointed) as a
proxy for the AGM. If a Nominated Person
has no such proxy appointment right or
does not wish to exercise it, they may,
under any such agreement, have a right
to give instructions to the shareholder
as to the exercise of voting rights.
9. The statement of the rights of
shareholders in relation to the
appointment of proxies in paragraphs 2 to
7 does not apply to Nominated Persons.
The rights described in these paragraphs
can only be exercised by shareholders of
the Company.
10. Nominated Persons are reminded that
they should contact the registered holder
of their shares (and not the Company)
on matters relating to their investments
in the Company.
11. To be entitled to join the meeting,
submit questions and vote (and for the
purpose of the determination by the
Company of the votes they may cast),
shareholders must be entered on the
Register of Members of the Company
by 6.30pm on Friday 1 July 2022 (or, in the
event of any adjournment, 6.30pm
on the date which is two working days
prior to the adjourned meeting). Changes
to the Register of Members after the
relevant deadline shall be disregarded in
determining the rights of any person
to join, submit questions and vote at
the meeting.
12. The following documents are available
for inspection at an agreed time at the
Company’s registered office: Waterside
House, 35 North Wharf Road, London
W2 1NW. Email company.secretary@
marks-and-spencer.com during normal
business hours on any weekday
(excluding public holidays).
(i)
Copies of the executive directors’
service contracts.
(ii) Copies of the non-executive directors’
letters of appointment.
(iii) Copies of the directors’ Deeds
of Indemnity.
(iv) A copy of the Articles of Association
of the Company.
(v)
A copy of the amended rules of the
Marks and Spencer Group plc Share
Incentive Plan.
Copies of these documents will also be
available at the AGM upon request, from
9.30am on the morning of the AGM
until the meeting’s conclusion. A copy
of (v) above will also be available for
inspection on the National Storage
Mechanism at https://data.fca.org.uk/#/
nsm/nationalstoragemechanism from
the publication date of this document.
13. Shareholders are advised that, unless
otherwise specified, the telephone
numbers, website and email addresses
set out in this Notice or proxy forms are
not to be used for the purpose of serving
information or documents on the
Company, including the service of
documents or information relating to
proceedings at the Company’s AGM.
14. As at 24 May 2022 (the latest
practicable date before the publication
of this Notice), the Company’s issued
share capital consists of 1,958,964,586
ordinary shares carrying one vote each.
No shares are held in treasury. Therefore,
the total voting rights in the Company
as at 24 May 2022 are 1,958,964,586.
Annual Report & Financial Statements 2022
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MARKS AND SPENCER GROUP PLC
NOTICE OF MEETING 5 JULY 2022
CONTINUED
NOTES CONTINUED
15. CREST members who wish to appoint
a proxy or proxies through the CREST
electronic proxy appointment service may
do so for the AGM and any adjournment
thereof by using the procedures described
in the CREST manual. CREST personal
members or other CREST-sponsored
members, and those CREST members who
have appointed a service provider, should
refer to their CREST sponsor or voting
service provider, who will be able to take
the appropriate action on their behalf.
or has appointed a voting service provider,
to procure that their CREST sponsor or
voting service provider(s) take(s)) such
action as shall be necessary to ensure that
a message is transmitted by means of the
CREST system by any particular time.
In this connection, CREST members and,
where applicable, their CREST sponsors
or voting system providers are referred in
particular to those sections of the CREST
manual concerning practical limitations
of the CREST system and timings.
16. For a proxy appointment or instruction
made using the CREST service to be valid,
the appropriate CREST message (a “CREST
proxy instruction”) must be properly
authenticated in accordance with
Euroclear UK & Ireland Limited’s
specifications and must contain the
information required for such instruction,
as described in the CREST manual
(available via euroclear.com). The
message, regardless of whether it
constitutes the appointment of a proxy or
is an amendment to the instruction given
to a previously appointed proxy must, in
order to be valid, be transmitted so as to
be received by Equiniti (ID RA19) by 11am
on Friday 1 July 2022. For this purpose, the
time of receipt will be taken to be the time
(as determined by the time stamp applied
to the message by the CREST Application
Host) from which Equiniti is able to retrieve
the message by enquiry to CREST in the
manner prescribed by CREST. After this
time, any change of instructions to proxies
appointed through CREST should be
communicated to the appointee through
other means.
17. CREST members and, where applicable,
their CREST sponsors, or voting service
providers should note that Euroclear UK &
Ireland Limited does not make available
special procedures in CREST for any
particular message. Normal system
timings and limitations will, therefore,
apply in relation to the input of CREST
proxy instructions. It is the responsibility
of the CREST member concerned to
take (or, if the CREST member is a CREST
personal member, or sponsored member,
18. The Company may treat as invalid a
CREST proxy instruction in the
circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities
Regulations 2001.
19. If you are an institutional investor,
you may be able to appoint a proxy
electronically via the Proxymity platform,
a process which has been agreed by
the Company and approved by the
Registrar. For further information
regarding Proxymity, please go to
www.proxymity.io. Your proxy must be
lodged by 11am on Friday 1 July 2022 in
order to be considered valid. Before you
can appoint a proxy via this process you
will need to have agreed to Proxymity’s
associated terms and conditions. It is
important that you read these carefully
as you will be bound by them and they
will govern the electronic appointment
of your proxy.
20. Any corporation that is a member
can appoint one or more corporate
representatives who may exercise on
its behalf all of its powers as a member,
provided that they do not do so in
relation to the same shares.
21. Under Section 527 of the Companies
Act 2006, members meeting the threshold
requirements set out in that section
have the right to require the Company to
publish on a website a statement setting
out any matter relating to:
(i)
the audit of the Company’s accounts
(including the auditor’s report and the
conduct of the audit) that are to be
laid before the AGM; or
(ii) any circumstance connected with
an auditor of the Company ceasing
to hold office since the previous
meeting at which annual accounts
and reports were laid in accordance
with Section 437 of the Companies
Act 2006.
The Company may not require the
shareholders requesting any such website
publication to pay its expenses in
complying with Sections 527 or 528 of
the Companies Act 2006. Where the
Company is required to place a statement
on a website under Section 527 of the
Companies Act 2006, it must forward the
statement to the Company’s auditor no
later than the time when it makes the
statement available on the website. The
business that may be dealt with at the
AGM includes any statement that the
Company has been required to publish
on a website under Section 527 of the
Companies Act 2006.
22. Any member joining the meeting has
the right to ask questions. The Company
must cause to be answered any such
question relating to the business being
dealt with at the meeting but no such
answer need be given if:
(i) to do so would interfere unduly
with the preparation for the meeting
or involve the disclosure of
confidential information;
(ii)
the answer has already been given
on a website in the form of an answer
to a question; or
(iii) it is undesirable in the interests
of the Company or the good order
of the meeting that the question
be answered.
23. A copy of this Notice, and other
information required by Section 311A of
the Companies Act 2006, can be found
at marksandspencer.com/thecompany.
24. Please see the letter dated 24 May
2022 from the General Counsel and
Company Secretary on pages 199 to 200
for further explanatory notes.
SUMMARY OF PRINCIPAL TERMS OF MARKS AND SPENCER GROUP PLC SHARE INCENTIVE PLAN
1.1 GENERAL
The Marks and Spencer Group plc Share
Incentive Plan (the “SIP”) was originally
approved by shareholders in 2000 and
subsequently adopted by the Company in
2003. Shareholder approval was obtained
at the Company’s Annual General Meeting
on 10 July 2012 to renew the SIP and the
Company is seeking shareholder approval
to amend the rules of the SIP to allow
awards to be made under the SIP until
5 July 2032, being the tenth anniversary
of the Annual General Meeting to be held
on 5 July 2022.
The SIP has been designed to meet the
requirements of a tax advantaged share
incentive plan under Schedule 2 of the
Income Tax (Earnings and Pensions) Act
2003 so that shares in the Company can
be provided to UK employees in a tax
efficient manner. The Company currently
operates the SIP to provide employees
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SUMMARY OF PRINCIPAL TERMS OF MARKS AND SPENCER GROUP PLC SHARE INCENTIVE PLAN CONTINUED
with the opportunity to buy shares from
pre-tax salary under the SIP (ShareBuy),
although it may decide to operate other
elements of the SIP in the future.
1.2 OPERATION
The SIP operates in conjunction with a
trust and contains three elements.
The Company will decide which (if any)
of these elements will be offered to
employees, provided that awards of
shares may not be made under the SIP
after 5 July 2032. The three elements are:
(A) ‘Free Shares’, which may be allocated
to an employee by the Company. The
market value of Free Shares allocated
to an employee in any tax year may
not exceed £3,600 or such other limit
as may be permitted by the relevant
tax legislation. Free Shares must
be allocated on the same terms,
although they may be provided on
the basis of remuneration, length of
service or hours worked, or on the
basis of the performance targets,
within the limits specified by the
relevant legislation.
(B) ‘Partnership Shares’, which an
employee may purchase out of their
pre-tax earnings. The market value
of Partnership Shares which an
employee can agree to purchase in
any tax year under current tax
legislation may not exceed £1,800 (or
10% of an employee’s salary if lower).
Partnership Shares are purchased
on behalf of an employee by the
trustees of the SIP (the “Trustees”).
The funds used to purchase shares
will be deducted from the employee’s
salary. Funds deducted from salary
will be held on the employee’s behalf
until they are used to buy Partnership
Shares. The funds may be used to buy
Partnership Shares shortly following
deduction, or accumulated for up to
12 months before they are used to
buy Partnership Shares in which case
shares may be acquired at the lower
of the market value of the shares at
the beginning or end of the
accumulation period.
(C) ‘Matching Shares’, which may be
allocated to an employee by the
Company following a purchase of
Partnership Shares. Matching Shares
are additional free shares. The
maximum number of Matching
Shares which the Company can
allocate to an employee following a
purchase of Partnership Shares by
the employee is two Matching Shares
for every one Partnership Share
purchased by the employee, or such
higher limit as may be permitted by
the relevant legislation. There is no
minimum ratio of Matching Shares
which the Company must provide
following a purchase of Partnership
Shares. The same ratio will apply to all
employees who purchase Partnership
Shares under the SIP at that time.
Benefits provided under the SIP are
not pensionable.
1.3 ELIGIBILITY
When it operates the SIP, the Company
must offer all UK tax-resident employees
of the Company and subsidiaries
participating in the SIP the opportunity
to participate in the SIP and may extend
the invitation to other employees meeting
the legislative requirements. The
Company may require employees to
have completed a minimum qualifying
period of employment before they can
participate but that period must not be
more than, broadly, 18 months prior to
shares being awarded.
1.4 SOURCE OF SHARES
The Trustees may either subscribe for
new shares, acquire treasury shares or
purchase shares in the market for the
purposes of the SIP. The money to buy
shares will be provided either by the
employee’s employing company or, in
respect of the acquisition of Partnership
Shares, by the employees. No new shares
will be issued under the SIP where such
issue would cause the number of shares
which have been or may be issued
pursuant to awards made (including
options granted) under all employee share
plans adopted by the Company over the
preceding 10-year period to exceed 10%
of the Company’s issued ordinary share
capital from time to time. Treasury shares
will count as new issue shares for the
purpose of this limit unless institutional
investor bodies decide that they need not
count. Options or awards which lapse are
excluded from this limit.
1.5 RETENTION OF SHARES
The Trustees will initially hold all Free
Shares or Matching Shares allocated to
employees and any Partnership Shares
acquired on the employees’ behalf.
Employees can withdraw Partnership
Shares from the SIP trust at any time.
Free Shares and Matching Shares held
by employees will be subject to a
requirement that the shares are held by
the Trustees for a period after the initial
allocation. This period will be notified to
employees at the time of allocation and
will not normally be for less than three
years or more than five years. The SIP may
provide that if an employee ceases to be
employed by a Group company within
three years of being allocated Free Shares
or Matching Shares (or such other period
as the Company may specify), their
rights to those shares will be forfeited.
However, in certain circumstances, for
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example death, injury, redundancy,
transfer of the employing business or
company or retirement, employees will
retain any Free Shares and Matching
Shares. The SIP may similarly provide that
Matching Shares will be forfeited if the
corresponding Partnership Shares are
withdrawn within up to three years. Special
provisions apply in accordance with the
relevant legislation in the event of certain
corporate transactions.
1.6 DIVIDENDS ON SHARES HELD
BY THE TRUSTEES
Where ordinary shares are held by
the Trustees for participants in the
SIP, the participants will be treated as
the beneficial owners of the shares.
Some or all of any dividends received in
respect of shares held by the Trustees
may be used to acquire additional shares
for employees which must normally be
held in the SIP for a period of three years
or otherwise dividends may be distributed
to employees.
1.7 ALTERATIONS TO THE SIP
The SIP may at any time be altered by the
directors in any respect, provided that the
prior approval of shareholders is obtained
for alterations to the advantage of
participants to the rules governing
eligibility, the individual limits on
participation, the overall limits on the
issue or shares or transfer of treasury
shares, the basis for determining a
participant’s entitlement to, and terms
of, shares provided under the SIP and any
adjustments which may be made in the
event of a variation of capital, except
for minor alterations to benefit the
administration of the SIP, to take account
of a change in legislation or to obtain or
maintain favourable tax, exchange control
or regulatory treatment for participants or
Group companies.
As previously authorised by shareholders,
the Company may also establish plans
based on the SIP to take account of local
tax, exchange control and securities laws
in overseas jurisdictions provided that any
shares made available under such further
plans are treated as counting against the
limits on individual or overall participation
in the SIP.
Annual Report & Financial Statements 2022
207
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NOTICE OF MEETING 5 JULY 2022
CONTINUED
INFORMATION FOR THE DAY
TIMINGS
LOGGING IN
VOTING
If you’re voting live during the
meeting, the voting options will
appear on the screen after the
resolutions have been proposed.
Press or click the option that
corresponds with the way in which
you wish to vote: “For”, “Against”
or “Withheld”.
If you make a mistake or wish to
change your voting instruction,
simply press or click the correct
choice for that resolution until the
poll is closed. If you wish to cancel
your “live” vote, press “Cancel”.
Please note that an active internet
connection is required in order to
successfully cast your vote when
the Chairman commences polling
on the resolutions. It is your
responsibility to ensure connectivity
for the duration of the meeting.
Advance voting is also available
from 7 June 2022, and details on the
different methods for voting in
advance are set out in the Company
Secretary’s letter on pages 199 to
200 of this Notice.
A step-by-step guide to voting via
the Lumi website live on the day,
and in advance, is on page 209.
PROXIES & CORPORATE
REPRESENTATIVES
If you are a duly appointed proxy
or corporate representative,
please contact the Company’s
Registrar, Equiniti, before 11am on
Monday 4 July 2022 by emailing
hybrid.help@equiniti.com, for your
unique username and password to
join the meeting. Please ensure a
valid proxy appointment has been
made by no later than the voting
deadline detailed on page 199.
Mailboxes are monitored 9.00am to
5.00pm Monday to Friday (excluding
public holidays in England & Wales).
Date:
9:00am
Tuesday 7 June 2022
Registration opens for
vote casting and question
submission in advance of
the meeting.
Friday 1 July 2022
Date:
11:00am Opportunity to submit votes
and questions in advance of
the meeting closes.
Date:
9.30am
Tuesday 5 July 2022
Online meeting opens and
question submission reopens.
11.00am AGM begins and you will
be able to vote once the
Chairman declares the
poll open.
1.00pm AGM closes. The results of
approx.
the poll will be released
to the London Stock
Exchange once collated.
PHYSICAL ATTENDANCE
Following the continued success
of the Company’s digital AGMs, this
year’s meeting will once again be
fully digitally-enabled. Shareholders
are advised not to travel to the
venue on the day. Please refer to the
following information and the user
guide provided on page 209 for
details of how to join and participate
in the meeting electronically.
ELECTRONIC
PARTICIPATION
Shareholders are encouraged to
view and participate in the 2022 AGM
electronically. This can be done by
accessing the AGM website: https://
web.lumiagm.com/124-849-127
ACCESSING THE
AGM WEBSITE
Lumi AGM can be accessed online
using most well-known internet
browsers such as Chrome, Firefox
and Safari on a PC, laptop or
internet-enabled device such as a
tablet or smartphone. If you wish to
access the AGM using this method,
please go to https://web.lumiagm.
com/124-849-127 on the day.
Go to https://web.lumiagm.com/124-
849-127 where you will then be
prompted to enter your Shareholder
Reference Number and PIN. These can
be found printed on your Notice of
Availability or Voting Card sent to you by
post. Access to the AGM website to vote
and submit questions in advance will be
available from 9am on 7 June 2022 until
11am on 1 July 2022. Access to the AGM
website will reopen to participate on the
day from 9.30am on 5 July 2022.
QUESTIONS
You are able to submit questions
live during the meeting on the Lumi
website by clicking on the “Messaging”
button. There will also be details and
instructions on the Lumi website if
you would like to ask a question live
by telephone.
Alternatively, you can submit questions
in advance via Lumi – a step-by-step
guide to voting and question
submission in advance and on
the day is on page 209.
As noted in the Company Secretary’s
letter on pages 199 to 200 of this
Notice, Anita Anand will be posing your
questions to the Board during the
meeting. If you would like to ask your
question in person though, you can
submit your recorded video question
by email to AGMquestionsubmission@
marks-and-spencer.com, to be
received by no later than 5pm on
Friday 1 July 2022. Please ensure that
your question recording lasts no
longer than one minute, so that we
can hear from as many shareholders
as possible. By submitting a video
question, you consent to your video
being played during the AGM
broadcast; please note that the
AGM recording will be made publicly
available on our corporate website
after the meeting.
Shareholder questions and answers will
be published on the corporate website
as soon as practicable after the
meeting. Where we receive a number
of questions covering the same topic,
we will publish summarised questions
and answers addressing as many
questions received as possible.
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ONLINE USER GUIDE TO THE ELECTRONIC 2022 ANNUAL GENERAL MEETING
LUMI AGM PLATFORM GUIDE: BEFORE THE AGM
1
Go to https://web.lumiagm.com/124-849-
127. You will be prompted to enter your
Shareholder Reference Number (“SRN”)
and PIN, both of which can be found on
your Notice of Availability. If you do not
have your SRN, please contact Equiniti
by emailing hybrid.help@equiniti.com
quoting your full name and address. When
successfully authenticated, shareholders
will be taken to the Home Page.
2
To cast a proxy vote, select the voting
button at the top of the screen. The
resolutions and voting choices will be
displayed within the navigation bar.
Further instructions on how to vote
can be found on the Home Page and
at the top of the voting page.
3
To vote, select your voting direction
from the options shown on screen.
To change your mind, simply select a
different option.
Note: Proxy voting will close at 11am
on Friday 1 July 2022.
4
Scroll down the full list of resolutions and
vote on each. Once completed, at the
bottom of the page, select the “Submit”
button to send your vote.
5
If you would like to change your
mind, you can do so by clicking
“Edit Responses”.
6
During the proxy voting period,
shareholders can submit a question by
typing it into the “Messaging” feature.
LUMI AGM PLATFORM GUIDE: ON THE DAY
7
The AGM will commence at 11am on
Tuesday 5 July 2022. It can be accessed
through the same platform: https://web.
lumiagm.com/124-849-127. You will be
prompted to enter your SRN and PIN,
both of which can be found on your
Notice of Availability.
8
The meeting presentation will begin at the
start of the AGM, when the Broadcast
Panel will automatically appear at the
side of the screen. You can expand and
minimise the screen by pressing the
Broadcast arrow at the top of the page.
9
When the Chairman declares the poll
open, a list of all resolutions and voting
choices will appear on your device. Scroll
through the list to view all resolutions.
10
For each resolution, select the choice
corresponding with the way in which
you wish to vote. When selected, a
confirmation message will appear.
To change your mind, simply press
the correct choice which will override
your previous selection. To cancel
your vote, press “Cancel”.
11
You can vote for all motions at the same
time by clicking on the “Vote All” direction
button at the top of the page. You will still
be able to change your mind on individual
motions if using this feature.
12
If you would like to ask a question, select
the messaging option in the navigation
bar at the top of the page. Type your
message within the chat box at the top
of the messaging screen. Click the send
button to submit.
Annual Report & Financial Statements 2022
209
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SHAREHOLDER INFORMATION
ANALYSIS OF SHARE REGISTER
Ordinary shares
As at 2 April 2022, the Company had 141,039 registered holders of ordinary shares. Their shareholdings are analysed below. It should
be noted that many of our private investors hold their shares through nominee companies; therefore, the actual number of shares
held privately will be higher than indicated below.
Range of shareholding
1-500
501-1,000
1,001-2,000
2,001-5,000
5,001-10,000
10,001-100,000
100,001-1,000,000
1,000,001-Highest
Total
Category of shareholder
Private
Institutional and corporate
Total
USEFUL CONTACTS
Marks and Spencer Group plc
Registered Office
Waterside House
35 North Wharf Road
London W2 1NW
Telephone +44 (0)20 7935 4422
Registered in England and Wales
(no. 4256886)
General queries
Customer queries: 0333 014 8555
Shareholder queries: 0345 609 0810
Or email:
chairman@marks-and-spencer.com
Number of
shareholders
Percentage
of total
shareholders
Number of
ordinary
shares
Percentage
of issued
share capital
74,666
25,919
20,501
14,115
3,679
1,687
297
175
52.94
18.38
14.53
10.01
2.61
1.20
0.21
0.12
13,733,929
19,330,681
29,273,286
43,036,371
25,240,066
37,776,214
112,756,675
1,677,758,122
141,039
100 1,958,905,344
0.70
0.99
1.49
2.20
1.29
1.93
5.75
85.65
100
Number of
shareholders
137,808
3,231
141,039
Percentage
of total
shareholders
Number of
ordinary
shares
Percentage
of issued
share capital
97.71
2.29
152,855,826
1,806,049,518
100 1,958,905,344
7.80
92.20
100
Registrar/shareholder queries
Equiniti Limited, Aspect House,
Spencer Road, Lancing, West Sussex
BN99 6DA, United Kingdom
Telephone 0345 609 0810 and outside
the UK +44 (0)121 415 7071
Online: help.shareview.co.uk
(from here, you will be able to securely
email Equiniti with your enquiry).
Students
Please note, students are advised to
source information from our website.
Additional documents
An interactive version of our
Annual Report is available online at
marksandspencer.com/annualreport2022.
Additionally, the Annual Report
(which contains the Strategic Report)
is available for download in pdf format at
marksandspencer.com/annualreport2022.
General Counsel and
Company Secretary
Nick Folland
2021/22 FINANCIAL CALENDAR AND KEY DATES
5 July 2022
9 November 2022*
12 January 2023*
Annual General Meeting (11am)
Results, Half Year†
Results, Quarter 3 Trading Update†
† Those who have registered for electronic communication or news alerts at marksandspencer.com/thecompany will receive notification by email when this is available.
* Provisional dates.
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SHAREHOLDER QUERIES
DIVIDENDS
AGM
This year’s AGM will be held and broadcast
from Waterside House on 5 July 2022.
The meeting will start at 11am.
The 2022 AGM will be fully
digitally enabled once again and
will be broadcast online from
Waterside House. We strongly
encourage shareholders to participate
in the meeting electronically by
accessing the AGM website,
https://web.lumiagm.com/124-849-127.
Further details can be found on
page 208 of the Notice of Meeting
and in the user guide on page 209.
The meeting will also be available to view
online after the event at
marksandspencer.com/thecompany.
M&S reserves the right to retain and use
footage or stills for any purpose, including
Annual Reports, marketing materials and
other publications.
The Company’s share register is
maintained by our Registrar, Equiniti.
Shareholders with queries relating to
their shareholding should contact Equiniti
directly using one of the methods listed
on page 210. For more general queries,
shareholders should consult the Investors
section of our corporate website.
MANAGING YOUR SHARES ONLINE
Shareholders can manage their holdings
online by registering with Shareview,
a secure online platform provided by
Equiniti. Registration is a straightforward
process and allows shareholders to:
– Sign up for electronic shareholder
communications.
– Receive trading updates and other
electronic-only broadcasts by the
Company via email.
– View all of their shareholdings in
one place.
– Update their records following a
change of address.
– Have dividends paid into their
bank account.
– Vote in advance of Company
general meetings.
M&S encourages shareholders to sign
up for electronic communications
(“e-comms”) as the Company has found
this creates a more engaged shareholder
base. The reduction in printing costs and
paper usage also makes a valuable
contribution to our Plan A commitments.
To find out more information about the
services offered by Shareview and to
register, please visit shareview.co.uk.
Further to the announcements made
by the Company on 10 November 2021
and again on 13 January 2022, the Board
will not be making a final dividend
payment for the 2021/22 financial year.
DUPLICATE DOCUMENTS
Many shareholders have more than
one account on the Share Register and
receive duplicate documentation from
us as a result. If you fall into this group,
please contact Equiniti to combine
your accounts.
SHAREGIFT
If you have a very small shareholding
that is uneconomical to sell, you may
want to consider donating it to ShareGift
(Registered charity no. 1052686), a charity
that specialises in the donation of
small, unwanted shareholdings to
good causes. You can find out more
by visiting sharegift.org or by calling
+44 20 7930 3737.
SHAREHOLDER SECURITY
An increasing number of shareholders
have been contacting us to report
unsolicited and suspicious phone calls
received from purported “brokers” who
offer to buy their shares at a price far in
excess of their market value. It is unlikely
that firms authorised by the Financial
Conduct Authority (“FCA”) will contact you
with offers like this. As such, we believe
these calls are part of a scam, commonly
referred to as a “boiler room”. The callers
obtain your details from publicly available
sources of information, including the
Company’s Share Register, and can be
extremely persistent and persuasive.
Shareholders are cautioned to be very
wary of any unsolicited advice, offers to
buy shares at a discount, sell your shares
at a premium or requests to complete
confidentiality agreements with the
callers. Remember, if it sounds too
good to be true, it probably is!
More detailed information and guidance
is available on our corporate website.
We also encourage shareholders to read
the FCA’s guidance on how to avoid scams
at fca.org.uk/consumers/protect-
yourself-scams. An overview of current
common scams is available on the Action
Fraud website actionfraud.police.uk.
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Annual Report & Financial Statements 2022
211
INDEX
A
Page
E
Page
L
Accounting policies
Adjusting items
Appointment and retirement
of directors
Audit Committee Report
Auditor
Auditor’s remuneration
Auditor’s report
Annual General Meeting
B
Board
Borrowing facilities
Business model
C
Capital commitments
Capital expenditure
Colleague involvement
Conflicts of interest
Corporate governance
Cost of sales
Critical accounting judgements
130
143
60, 108
78-84
83
142
113-123
198-209
60-62
164
09
177
43
110
108
56
141
137
D
Deadlines for exercising voting rights 110
176
Deferred tax
134, 159
Depreciation
165
Derivatives
148, 149
Diluted earnings per share
108
Directors’ indemnities
102
Directors’ interests
Directors’ responsibilities
112
Directors’ single figure
of remuneration
Disclosure of information to auditor
Dividend cover
Dividend per share
104
112
191
35
Earnings per share
Employees
Employees with disabilities
Equal opportunities
ESG Committee Report
F
Finance income/costs
Financial assets
Financial instruments
Financial liabilities
Financial review
Fixed charge cover
G
Glossary of alternative
performance measures
Going concern
Goodwill
Groceries Supply Code of Practice
H
Hedging reserve
I
Income statement
Intangible assets
Interests in voting rights
International Financial
Reporting Standards
Inventories
Investment property
K
Key performance
indicators
Page
164
Lease liabilities
N
Nomination Committee Report
66-69
P
Principal risks and uncertainties
Profit and dividends
Power to issue shares
Political donations
R
Risk management
Remuneration Policy
Remuneration Committee
Remuneration Report
47
109
109
111
45
91
85
95
S
140
Segmental information
210
Shareholder information
177, 189
Share capital
154
Share schemes
110
Significant agreements
Statement of cash flows
129
Statement of comprehensive income 125
126
Statement of financial position
06
Strategic priorities
186
Subsidiary undertakings
148
149
111
111
70-77
146
162
135, 165
164
36
191
192
130
157
111
128
124
157
109
130
134, 139
126
13, 18, 22, 35
T
Taxation
Total shareholder return
Trade and other payables
Trade and other receivables
Transfer of securities
V
Variation of rights
Viability statement
146
103
163
162
109
109
55
FINANCIAL STATEMENTS
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of
financial position
Consolidated statement of
changes in equity
Consolidated cash flow statement
Note
1 Accounting policies
Segmental information
2
Expense analysis
3
4 Profit before taxation
5 Adjusting items
6
Finance income/costs
Income tax expense
Earnings per share
7
8
9 Dividends
10 Employees
11 Retirement benefits
Marks and Spencer
12
Scottish Limited Partnership
13 Share-based payments
14 Intangible assets
15 Property, plant and equipment
16 Other financial assets
17 Trade and other receivables
18 Cash and cash equivalents
19 Trade and other payables
20 Borrowings and other
financial liabilities
146
148
149
149
149
154
154
157
159
162
162
163
163
164
124
125
126
127
129
130
140
141
142
143
146
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165
21 Financial instruments
175
22 Provisions
176
23 Deferred tax
177
24 Ordinary share capital
25 Contingencies and commitments 177
26 Analysis of cash flows given in
the statement of cash flows
27 Analysis of net debt
28 Related party transactions
29
Investments in joint ventures
and associates
30 Government support
31 Contingent assets
32 Subsequent events
Company financial statements
Notes to the Company
financial statements
Group financial record
178
179
180
181
182
182
182
183
185
190
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