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Reshaping
Marks and Spencer Group plc
Annual Report & Financial Statements 2023
INTRODUCTION
RESHAPING M&S
for growth
M&S has a heritage of quality, innovation and value
for money and has been voted the UK’s most trusted
brand. From these foundations, M&S is reshaping for
sustainable profitable growth and value creation.
Read more about our strategic priorities on pages 12-13
DELIVER
PROFITABLE
SALES
growth
IMPROVE
OPERATING
margins
Read more on pages 14-21
Read more on pages 22-23
DRIVE
SHAREHOLDER
returns
Read more on page 27
DISCIPLINED
INVESTMENT
choicesRead more on
pages 24-26
Marks and Spencer Group plc
FINANCIAL HIGHLIGHTS
CONTENTS
Basic earnings per share
STRATEGIC REPORT
Group revenue
£11.9bn
21/22: +9.6%
Group profit before tax
£475.7m
21/22: +21.4%
Net debt excluding lease liabilities
£355.6m
21/22: -15.4%
APM
NET PROMOTER SCORES
18.5p
21/22: +17.8%
Group profit before tax
and adjusting items
£482.0m
21/22: -7.8%
Adjusted earnings per share
18.1p
21/22: -16.6%
APM
APM
Omni-channel NPS
International NPS
Group NPS
+36
21/22: +7
+39
New metric
High quality perception
across both Food and
Clothing & Home as well as
continued positive sentiment
towards our customer service
were key drivers of overall
Group NPS increasing by
7 percentage points this year.
To align with our strategic
priorities, Digital and Store
NPS metrics have been
replaced with a single
Omni-channel NPS
measure to track customer
satisfaction as they shop
across channels.
APM
+84
21/22: +4
Customers’ experience
of M&S globally improved
as NPS increased by
4 percentage points
this year.
02 Chairman’s Letter
04 Chief Executive’s Review
06 CEO & Co-CEO
08 Our Business Model
10 How we engage with our stakeholders
12 Our Strategic Priorities
28 People & Culture
32 Our approach to sustainability
34 Our Key Performance Indicators
35
42
Financial Review
Non-Financial and Sustainability
Information Statement
Task Force on Climate-related
Financial Disclosures Report
44
56 Risk Management
58 Principal Risks and Uncertainties
Our approach to assessing
66
long-term viability
GOVERNANCE
68 Chairman’s Governance Overview
70
Our Governance Framework
72 Our Board
75 Board Activities
80
S.172 Statement
83 Board Review
85 Nomination Committee Report
90 ESG Committee Report
92 Audit & Risk Committee Report
100 Remuneration Committee Report
130 Other Disclosures
134
Directors’ Responsibilities
Statements
FINANCIAL STATEMENTS
135
Independent Auditor’s Report
144 Consolidated Financial Statements
150
203 Company Financial Statements
205
Notes to the Financial Statements
Notes to the Company Financial
Statements
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 213 to 217 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.
211 Group Financial Record
213 Glossary
218
Notice of Meeting
230 Shareholder Information
232
Index
COVER
Pure Cotton Printed Maxi Tiered Dress (T427541):
Part of the Summer 23 campaign, the on-trend blue
printed dress is £39.50, our best-selling dress price
point. M&S is now no.3 in the market for dresses, up
from no.6 three years ago.
M&S Tree Ripe Cox Apples: M&S is the only retailer to
tree ripen its British Apples, ensuring a better flavour
development and a richer colour. M&S has worked
with its longstanding grower to use the method on
four apple varieties and seen sales increase 19%.
These icons, used throughout the report,
indicate where you can find out more.
Read more
Download
Link to Sustainability Report
Website
Annual Report & Financial Statements 2023
1
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHAIRMAN’S LETTER
We are now
at last seeing
the reshaping
of M&S
take hold.”
Archie Norman
Chairman
DEAR SHAREHOLDER
When I arrived at M&S five years ago,
we embarked on the most important
turnaround mission in British retailing,
to bring this great British brand back
to health after years of drift. Of all the
turnarounds I have been part of, this has
been the slowest and most intractable;
reflecting the deep-rooted nature of
our problems and culture at the
‘old M&S’, but we are now at last seeing
the reshaping of M&S take hold with new
energetic leadership, new strong trading
results and the prospect of a return
to dividends.
Stuart Machin succeeded Steve Rowe as
Chief Executive at the beginning of the
year with Katie Bickerstaffe as Co-Chief
Executive reporting to Stuart. All new
leaders need to arrive with a bang, create
new energy and set direction early. In the
last twelve months the sense of pace,
openness to change and delivery of
performance has accelerated. The M&S
challenge has always been fundamentally
about culture, talent and organisation
and the change is palpable.
M&S is a family of businesses each
with different economics, suppliers
and consumer dynamics bound
together by a common brand, values
and trading philosophy.
2
Marks and Spencer Group plc
This year almost all the main businesses
traded strongly, growing overall market
share in both Clothing & Home and
Food, despite a challenging consumer
environment and strong regulatory
headwinds. Overall I measure our
progress by the extent of change in the
business and customer reaction to
product and service. Our ratings for
style, quality and value in Clothing are
well ahead and in Food, value perception
is at the highest it has been in six years
and our lead on quality has widened.
At its core our strategy is clear: to
deliver exceptional product ranges at
trusted value; shift our sales into high
performing growth channels; rationalise
the rest and underpin it with a modern
omni-channel infrastructure and lower
cost base. Years of indecision had left
M&S with a sprawling store network,
including some historic but “legacy”
stores. By rotating into new high
productivity digitally-enabled stores in
our new “renewal” format we can increase
sales and margins and the year ahead will
see some exciting new developments.
Our objective is to grow online, so that
50% of our Clothing & Home business
will be ordered online, and with a margin
that will exceed the store average.
This channel shift will be supported by
our emerging competitive advantage
on data, so we will be able to talk to each
customer as an individual, moving away
from “one message fits all” marketing.
In reshaping the business, we still have
plenty of “old world” issues to tackle.
Because the cost headwinds remain
strong, we are still “running up a down
escalator”, not least because we rightly
committed to a near 10% pay award to
support our colleagues through the cost-
of-living crisis. Our central support
functions and supply chain processes
remain inefficient by industry standards.
That means we must become leaner and
invest in improved technology support,
as well as supply networks. This is where
the “spirit of the turnaround” with the
imperative for change needs to be
rekindled and sustained as the desire to
revert to business as usual at M&S is
always strong.
I believe the M&S Board should be an
engaged Board helping drive the
strategy by supporting and challenging
the executive team. With the extent of
modern governance pressures, it is easy
for Boards to lose their “edge”. We run
a very active Board involvement
programme and our meetings are never
dull. Following their appointments in
May, Katie and Stuart joined the Board
and through the year we welcomed
Ronan Dunne and Cheryl Potter as
non-executive directors. Ronan has led
many businesses through technological
and people transformation and Cheryl
brings a strong private equity
shareholder lens as well as retail
turnaround experience to our Board.
Since Cheryl joined us in February, we
now have a majority of women round
the table.
STRATEGIC REPORT At the end of December, Andy Halford -
our superb Senior Independent Director
and Chair of the Audit Committee - stood
down from the Board after ten years and
goes with our thanks.
We believe M&S has to fight its corner in
public life, standing up for our business
and values, as well as our colleagues,
customers and the thousands of trusted
suppliers – large and small – who work
with us. We live in a world where retail,
especially food, has become the
“politicians playground” and we have to
defend the customer’s right to choose.
So we have fought high profile
campaigns on the Northern Ireland
Protocol and customs controls with
some success in the form of the Windsor
Agreement. We are also leading a
national “Share your Voice” campaign to
bring back retail shareholder democracy
fit for a modern digital era. If M&S does
not stand up for the small shareholder,
who will?
Given the scale and passion of our retail
shareholder base, we want to use today’s
technology to make it easier to have a
stake and say in M&S and I look forward
to welcoming many of you to our next
digital AGM in July.
Colleague culture and values are
central to our M&S history and we
want to recreate a business where every
colleague at every level can have a
say and feel listened to. The support
from our store managers, the Business
Involvement Group representatives and
all our colleagues across the business,
including Gist who have now joined the
family, has been magnificent and we
thank them all.
Yours sincerely,
Archie Norman
Chairman
HOW GOVERNANCE
IS SUPPORTING M&S
Reshaping
STAKEHOLDER ENGAGEMENT
Our stakeholders underpin everything we do and
are fundamental to the delivery of our strategy.
Read more in Our Business Model and
Stakeholder Engagement pages 8-11
and S.172 Statement on pages 80-82
‘SHARE YOUR VOICE’ CAMPAIGN
This campaign aims to give all shareholders
a voice by improving communication
and engagement.
Read more in the Chairman’s
Governance Letter on pages 68-69
ANNUAL GENERAL MEETING (‘AGM’)
Following the success of previous years,
the 2023 AGM will once again take place
as a digitally enabled meeting.
Read more in the Notice of Meeting
on pages 218-229
NED APPOINTMENTS
The Nomination Committee led the recruitment
and appointment of two new Non-Executive
Directors, Ronan Dunne and Cheryl Potter.
Read more in the Directors’ biographies on
pages 73-73
Details of the appointment and induction
process can be found in the Nomination
Committee Report on pages 85-89
Annual Report & Financial Statements 2023
3
SHARE YOURVOICESTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHIEF EXECUTIVE’S REVIEW
STRONG RESULTS AS M&S RESHAPES FOR GROWTH
M&S is a
special business
with so much
potential.”
Stuart Machin
Chief Executive Officer
OVERVIEW
One year in, our strategy to reshape
M&S for growth has driven sustained
trading momentum, with both businesses
continuing to grow sales and market
share. Our Food and Clothing & Home
businesses invested in value to protect
customers from the full force of inflation
which, whilst impacting margin, was the
right thing to do as serving our
customers well is the only route to
delivering for our shareholders.
Food sales grew 8.7% with like-for-like
sales up 5.4%, outperforming the market
in volume and value terms, as
we broadened appeal through focused
product development and investment in
trusted value. While investment in value
reduced margin, the positive customer
response supported the delivery of
improved trading performance in the
second half. Margin in the second half
also benefitted from the strategic
acquisition of Gist.
International sales were up 11.2% at
constant currency, driven by demand
for clothing from global partners.
As a result, profits recovered despite
the combined impacts of the exit
from Russia and ongoing EU border-
related costs.
Ocado Retail sales were down 1.2%.
While active customers grew, revenues
reflected reduced volumes as a result of
lower shopping frequency post-
pandemic. Profitability was impacted by
the effects of higher fixed costs from
under-utilised capacity, the impact of
which we are working together to reduce,
as we build customer numbers over time.
Read more in our Financial Review
pages 35-41
STRONG TRADING RESULTS
M&S delivered strong results in 2022/23
despite significant inflationary cost
headwinds impacting margins,
reflecting the benefits of our programme
to reshape for growth. Profit before tax
and adjusting items for the period was
£482.0m (2021/22: £522.9m). Statutory
profit before tax was £475.7m (2021/22:
£391.7m). Prior year results included
£59.8m of UK business rates relief and
a net rates charge of £139.7m compared
with a net rates charge of £186.6m in
2022/23.
Clothing & Home grew sales 11.5%
with like-for-like sales up 11.2% driven
by a more confident approach to buying
and a focus on the modern mainstream
customer, which is starting to drive
better style perceptions. While store
sales outperformed, online sales were
also up, with growth in Click & Collect
sales, active App users and Sparks
loyalty membership. Alongside this,
volume and value market share increased.
RESHAPING M&S
TO DELIVER
LONG-TERM GROWTH
M&S has a heritage of quality, style,
innovation and value for money and
during the year, was voted the UK’s most
trusted brand. After a number of years
of substantial change and investment,
a strengthening omni-channel position
in Clothing & Home and the broader
reach of Food, including through
the Ocado Retail joint venture, there
are significant opportunities for
profitable growth.
During the year, supported by Katie
Bickerstaffe as Co-CEO, I set out our
priorities to reshape M&S to deliver
sustainable growth. To support the
implementation of our plan, Jeremy
Townsend was appointed to the team as
CFO in January 2023, and I am pleased
to say he will remain with the business
until May 2025.
This Annual Report updates on our
delivery against this plan, setting out
how these priorities will deliver profitable
sales growth, improve operating margins,
provide investment choices and drive
shareholder returns. The nine priorities
are summarised below.
Exceptional product, trusted brand:
Developing exceptional product
worthy of a trusted brand, through
investment in great tasting, value for
money, quality Food and developing
stylish, great value, quality Clothing
& Home ranges.
4
Marks and Spencer Group plc
STRATEGIC REPORT Leading in omni-channel:
Driving omni-channel growth.
Increasing the participation of
Clothing & Home online sales, through
leveraging the national store and
distribution network, to offer a
convenient and consistent service
however and wherever customers
choose to shop. And growing
utilisation of Ocado Retail’s capacity,
by providing superior service, market-
leading choice and M&S products.
Expanding global reach:
Capitalising on the strength of the
M&S brand to grow global sales
through capital light partnerships
and the development of a multi-
platform online business.
Structurally reducing costs:
Making £400m of structural cost
savings over five years, reducing cost
to serve and growing our margins
through technology improvements
to increase retail and supply chain
efficiency and simplified and
streamlined digital, technology
and support centre functions.
Creating a high-performance
culture: A simpler, faster, delivery
focused business which is passionate
about M&S products, puts the
customer first and has the digital
skillset to make fast, informed
decisions.
Accelerating store rotation:
Accelerating store rotation and
renewal to create a more productive
estate of c.180 full line stores and
opening more than 100 new Food
stores positioned in growth locations,
which support omni-channel retailing.
Modernising our supply chain:
Modernising the supply chain to
improve availability and customer
service, while reducing costs and
working capital.
Compelling customer ecosystem:
Creating a more engaging and
connected customer experience to
drive omni-channel growth. This
brings together the Sparks loyalty
programme and payment options,
supported by an effective and more
efficient technology infrastructure.
Disciplined capital allocation:
Disciplined capital allocation, to
strengthen the balance sheet,
reinstate an investment grade rating
for our debt and restore dividends.
Robust liquidity and balance sheet
metrics allow for a further bond
repurchase exercise of c.£225m in
respect of our medium-term
maturities.
OUTLOOK AND GUIDANCE
M&S has had a good start to the new
financial year, with both Food and
Clothing & Home growing sales. While
the economic outlook for consumer
spending is uncertain, cost inflation
remains high, and market conditions are
expected to become more challenging,
the strategy is beginning to deliver
improved performance and there
remains much within the Group’s control.
In FY24, modest growth is expected in
revenues, driven by omni-channel as well
as from the benefits of the accelerating
store rotation plan. Further investment in
quality and trusted value will be partly
offset by actions to mitigate sourcing
cost pressures and to reduce waste and
stock loss.
Cost inflation includes over £50m of
energy costs as well as colleague pay
increases of more than £100m, which are
expected to be offset by the delivery of
over £150m of in-year savings from the
structural cost reduction programme.
This gives scope to invest in customer
service and digital development, while
controlling costs.
Despite facing significant headwinds,
we are encouraged by the strong
foundations established last year.
DIVIDEND
We suspended dividend payments at
the start of the pandemic to protect
our balance sheet. This enabled us to
invest in our transformation priorities
and trusted value. With the business
generating an improved operating
performance and having a strengthened
balance sheet with credit metrics
consistent with investment grade, the
Board plans to restore a modest annual
dividend to our shareholders starting
with an interim dividend at the results
in November.
THANK YOU TO OUR
REMARKABLE PEOPLE
M&S is such a special business with so
much potential, and I want to thank all
of my colleagues for their contribution
to these results. Delivering performance
and driving change is everyone’s
responsibility at M&S, and they have
done a remarkable job. Despite facing
significant headwinds, I am encouraged
by the strong foundations established
last year and excited about what we can
achieve in the year ahead.
Stuart Machin
Chief Executive Officer
WHERE TO FIND OUT
more
OUR EXTERNAL MARKET
ENVIRONMENT
Read more on pages 6-7
OUR STRATEGIC PRIORITIES
Read more on pages 12-13
DELIVER
PROFITABLE
SALES
growth
IMPROVE
OPERATING
margins
DISCIPLINED
INVESTMENT
choices
DRIVE
SHAREHOLDER
returns
OUR FINANCIAL PERFORMANCE
Read more on pages 34-41
OUR APPROACH TO
SUSTAINABILITY
Read more on pages 32-33
Annual Report & Financial Statements 2023
5
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CEO & CO-CEO
HOW M&S HAS RESPONDED TO
THE EXTERNAL ENVIRONMENT
Stuart Machin
Chief Executive Officer
Katie Bickerstaffe
Co-Chief Executive Officer
Q How has M&S supported
its customers?
KB
SM
We know value has been the
single most important factor for
customers when deciding where
to shop. Over the last three years
we have started to change value
perceptions of M&S thanks to the
investment we have made in price
– particularly in Food. Of course, at
M&S value isn’t just about price – it
means never compromising on the
quality standards our customers
expect. We wanted to protect this
and invested again in our value.
Read more on page 14
Across both businesses we have
focused on protecting prices on
the products that matter most
to customers. In Food, alongside
our everyday Remarksable ranges
we launched “Price Locks” on over
100 customer favourites to give
them certainty on the products they
love to shop. Customers have
noticed the difference, with M&S
price comparison videos going viral
on TikTok. In Clothing, as the market
leaders in Back-to-School season,
we took the decision to hold prices
on uniforms last summer.
Schoolwear is an essential purchase
for millions of families, and we
wanted them to have confidence in
the value of our uniform.
As in Food, great value in Clothing &
Home means more than just price,
it also means great cost per wear,
hand-me-down quality, the
confidence that it will fit and also
wash well. Ultimately, customers
want clothing that is made well and
made to last. Through our Back-to-
School marketing campaign we
showcased how we extend the life
of our school ranges through
durable design features and
innovations – such as grow-proof
hems and adjustable waistbands.
In January, we launched “Value
You Can Trust”; a Clothing & Home
campaign designed to reaffirm our
value credentials and reassure on
our promise of stylish clothing at
a great everyday price without
compromising on the quality
and standards customers expect.
We have also been agile to have the
right product mix for cost conscious
customers. Their concerns peaked in
the Autumn with the reality of rising
energy prices, so we bought deeper
into warmwear ranges and launched
a “Cosy Shop” in September –
offering great value on thermal
ranges and unique innovations such
as M&S Snuggle™, which sold 79%
more than last year.
COST-OF-LIVING CRISIS
Q How has M&S supported
its colleagues?
SM
KB
Whether you’ve been running
a home or running a business,
everyone across the country has felt
the pressure of rising costs this year.
It was the top concern for our
colleagues, and we wanted to do
what we could to help ease some
of that strain. Throughout 2022/23
we invested over £46m in front-line
colleague pay across two separate
pay rises, including our first ever
Autumn pay review. In February
2023, we announced a commitment
to invest a further £57m in store
colleague pay, meaning the hourly
rate has increased 20% over the last
two years. When combined with
pension and benefits, this gives
M&S one of the strongest reward
packages in retail.
Alongside pay, we have protected
front-line roles this year. We also
wanted to offer practical support to
our colleagues. We used awareness
weeks to make sure colleagues knew
about the help available to them –
such as our free financial planning
workshops and the Unmind mental
wellbeing App. With input from our
colleague listening schemes and
BIG – our colleague representative
group – we introduced free sanitary
products across all sites and stores
and a free meal per shift for
colleagues at our Distribution
Centre in Castle Donington. It was
clear that Christmas was a particular
pinch point, so we gave a £250
giftcard to store and junior
colleagues to provide just a little
extra help towards their
celebrations.
6
Marks and Spencer Group plc
STRATEGIC REPORT
CUSTOMER PRIORITIES AND BEHAVIOUR
Q How has the external environment
impacted customer behaviour?
SM
KB
After the disruption of Covid,
customers were determined to
enjoy events and occasions this
year. Our Family Matters Index
(below) found they were prepared
to cut back in other areas to protect
these celebrations and eating out
was the first thing to go. We
responded in two ways in Food;
firstly, through increased innovation
in our event ranges and secondly,
by making sure we offered a great
value alternative to dining out. Our
much replicated Dine In deal was
launched in response to the 2008
downturn and we have refreshed the
offer with more of our Gastropub
ranges and exciting new restaurant
quality products like our slow
cooked meats, to make it feel really
special again.
We saw a similar story in Clothing.
Customers are enjoying the return
of events – particularly holidays.
Over half of M&S customers told
us they are planning a beach holiday
and three quarters planned to
refresh their summer wardrobe.
That’s why we have extended the
size and scale of our “Holiday Shop”
and brought forward the online
launch to January.
SM Despite cost-of-living concerns,
customers’ focus on sustainability
hasn’t dipped. In fact, many have
seen living more sustainably as an
opportunity to save money. For
instance, seven in ten UK adults are
changing their behaviour, with 85% of
those cutting back on food waste in
particular, according to our latest
Family Matters Index. In response, we
launched our partnership with Tom
Kerridge to provide families with
inspiration for affordable, delicious
recipes designed around “all taste,
less waste”, helping to reduce waste
and use up leftovers. Last July, we
also removed best before dates from
over 300 fruit and vegetable
products (85% of the produce we sell)
to encourage families to throw away
less edible waste at home by using
their judgement.
Q What technology trends
have influenced customer
shopping habits?
KB
Ease of payment is an increasingly
important factor for customers in
building a relationship with a retailer.
Digital payments have grown
exponentially in recent years, and
Apple Pay, Google Pay and PayPal
are three of the most widely used
Apps globally today.
In October we launched Sparks Pay.
Unique to M&S, it’s a fully regulated
digital credit account which gives
Sparks customers a seamless,
personalised, one-click payment
experience on M&S.com and the
App. This creates one definitive way
to pay at M&S, making it easier for
customers to purchase their
favourites, and be rewarded for
shopping with us.
The customer base in our Sparks
loyalty programme gives us a strong
platform to test and trial, and this
year we have started experimenting
with different subscription models –
such as Sparks Delivery Pass –
so we can make shopping with
M&S an established part of
customer routines.
Customer expectations for
personalised experiences
continues to grow and with the
acquisition of fashion marketplace
Thread’s IP and source code in
November, we have taken a “buy-not-
build” approach to accelerating our
capabilities in the space. We already
know the incremental value
personalisation can bring and we
anticipate that personalisation will
generate more than £100m of
annualised incremental revenue
for the business.
SM
FAMILY MATTERS
The M&S Family Matters Index
launched in 2021, in partnership with
research specialists Yonder. Each
quarter we undertake in-depth
research with 5,000 UK adults to help
us understand what really matters to
families in the UK, and to track their
feelings, priorities, and ambitions in
the years to come. The quarterly
findings include an overall index score,
ranging from 0 to 100, specifically
measuring family optimism. A score
above 50 represents a positive,
optimistic perspective.
REGULATION
Q How has M&S responded to
new regulation this year?
SM
We know that health is a priority
for customers and 43% want to eat
more healthily. We want to make
this easier for them and this year
we committed to a new target of
62% of sales coming from healthier
products including our Eat Well
ranges by 2025/26. As part of this,
we have an ongoing reformulation
programme to improve our
products, and this includes
reducing HFSS (High Fat, Salt,
Sugar) within our ranges.
However, the implementation of
the new HFSS regulation across
England this year has placed
additional operational complexity
and cost on a sector already under
huge inflationary and logistical
pressure. Compliance with the new
location requirements in England
required extensive preparatory work
across our stores and we remain
uncertain about the impact it will
have across the wider business, as
we await consultation responses in
both Wales and Scotland. Whilst we
support the regulation’s ambition
to drive healthier choices, we are
yet to see the influence it has on
consumer behaviour.
Separately, we very much welcomed
the decision within the Autumn
statement to drop the proposal for
an online sales tax which would have
made it even harder for retailers to
invest in the digital transformation
required to survive and grow in the
modern, digital era.
Over the past year
we have seen family
optimism fluctuate.
Back in April 2022,
the overall index score was 53, before
dropping to 49 in October as cost-of-
living concerns became the dominant
force in families’ day-to-day lives. With
our most recent index, conducted in
January 2023, the overall family index
score has recovered slightly to 51
– an initial sign of cautious optimism
returning.
Read the Family Matters Index here
corporate.marksandspencer.com/
family-matters
Annual Report & Financial Statements 2023
7
TITLEHEREAlthoughtheconcerns, of which the foremost is 1 | Family index reportMarks and Spencer Group plcThe M&S Family Matters Index, April 2023FAMILYMATTERSSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
OUR BUSINESS MODEL
M&S operates as a family of businesses across Food, Clothing
& Home and International, each led by its own integrated
management team with accountability for their divisions,
including marketing, supply chain and finance.
WHAT MAKES US M&S?
TRUSTED BRAND
A heritage of almost 140 years has built
a unique relationship between M&S and
the British public. M&S is a brand trusted
to do the right thing by the people and
communities it serves.
Read more on pages 14-17
CLOSER TO CUSTOMERS
Insight from the 30 million customers
M&S serves each year and a company-
wide culture that puts colleagues close
to the front line, helps ensure we develop
products and services that make M&S
more relevant, more often.
Read more on page 29
CLOSER TO COLLEAGUES
Over 64,000 remarkable people all have
a role in delivering change and great
service at M&S. They bring extraordinary
passion for the business and deep
technical expertise in areas such as
sourcing, fit and product development.
Read more on pages 28-31
Property
EXCEPTIONAL OWN-BRAND PRODUCT
Innovative and exclusive to M&S
product, made and sourced with care
by longstanding trusted supplier
partners, with market leading animal
welfare standards, ethical trading
programmes and a sustainable
approach to raw materials.
Read more on page 32
OMNI-CHANNEL ADVANTAGE
The scale and reach of our network of
1,064 UK-owned and franchise stores can
connect the digital and physical
shopping experience to make it easier
for customers to shop the way they want.
M&S has a 50% investment in Ocado
Retail and a growing global presence
in over 100 international markets.
Read more on pages 18-21
8
Marks and Spencer Group plc
THE GROUP
A M I L Y O F A C COUNTABLE BUSINESSE
S
E
E LI V
R I N G T H ROUGH OMNI-CH
A
N
N
E
L
C U S TOMERS
R U S T ED BRAN
D
T
F
D
Food
Digital
Stores
O
U
R
A
P
P
R
OACH TO S U S
Y
A I N ABILIT
T
Clothing
& Home
Services
COLLEAG U E S
Ocado
International
OUR APPROACH TO
SUSTAINABILITY
Read more about our
approach to sustainability
in our Sustainability Report
marksandspencer.com/
sustainabilityreport2023
STRATEGIC REPORT
CREATING VALUE FOR ALL OUR STAKEHOLDERS
1
SHAREHOLDERS
2
COLLEAGUES
3
CUSTOMERS
Building shareholders’ trust through
continuous engagement helps secure
their ongoing investment and support.
Given the scale of our shareholder base,
we operate a bespoke engagement
programme for retail shareholders to
enable them to make informed decisions.
As the business generates an improved
operating performance with investment
grade credit metrics, the Board plans to
restore a modest dividend to
shareholders, starting with an interim
dividend at the results in November.
Reshaping M&S requires a high
performance culture where delivering
performance and driving change is
everyone’s accountability. We are
committed to making M&S a great place
to work; that is close to its colleagues and
customers, where everyone has a voice,
can be themselves and be their best.
That starts with all our colleagues feeling
fairly rewarded for the work they do and
we have invested to provide a leading
pay and benefits package to front-line
colleagues.
48,000
shareholders registered
for digital communications
£100m
Announced investment
in store colleague pay
Put simply, without customers M&S
would not exist. Maintaining and growing
their loyalty ensures the enduring
success of our business. We put
customers at the heart of everything we
do and provide great service and
exceptional quality product, at
remarkable value however they want to
shop with us.
No.
1
YouGov No.1 High street,
fashion and supermarket
retailer for 2022
4
COMMUNITIES
5
SUPPLIERS
6
PARTNERS
Our franchise and joint venture partners
provide avenues to expand our reach and
access new customers in the UK and
internationally. These relationships
provide our partners with benefits,
including access to the M&S brand and
distribution of our unique product.
27
Franchise partners globally
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.
M&S makes a difference to the causes that
matter to our customers and colleagues
through activity such as our Marks & Start
employability programme, Neighbourly
food redistribution scheme, Sparks charity
partnerships and by making it easier to live
sustainable lives with facilities such as
shwopping clothes recycling and plastic
take back schemes at our stores.
19.9m
meals redistributed across the UK
Trusted suppliers enable us to provide
customers with the high-quality, ethically
sourced and produced goods they
expect. Long-term partnerships with M&S
allows suppliers to create great products,
build volume at equitable prices and
gives them confidence to invest in
sustainable solutions and new
innovation. This year we invested further
in third-party brand Nobody’s Child,
enabling them to scale the brand. We
also fund specific innovation projects
with our suppliers, such as Farming with
Nature and international gender
empowerment programmes.
£400,000
funding to Farming
with Nature Innovation
OUR STAKEHOLDERS
S.172 STATEMENT
6
1
5
2
4
3
The directors confirm that, during the year, they have acted
in good faith in a way that best promotes the success of
M&S for the benefit of shareholders as a whole. In doing so,
they have had regard for the interest of all M&S
stakeholders, whilst preserving M&S’ reputation and
ensuring our long-term sustainability.
Read more:
Stakeholder
Engagement:
pages 10-11
Our complete
S.172 Statement:
pages 80-82
Annual Report & Financial Statements 2023
9
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS HOW WE ENGAGE WITH OUR STAKEHOLDERS
Understanding what matters most to our key stakeholders.
1
SHAREHOLDERS
2
COLLEAGUES
3
CUSTOMERS
HOW WE ENGAGED
– Our Business Involvement Group (“BIG”)
is the Board’s key engagement method
with colleagues. The Chair of BIG
represents the collective colleague
voice by attending one Board and one
Remuneration Committee meeting
during the year. Discussion at these
meetings was focused on the cost-of-
living crisis and its impact on our
colleagues.
– Our colleague suggestion scheme,
“Straight to Stuart”, allows colleagues to
submit their ideas and receive a response
straight back from CEO, Stuart Machin.
This year, we have introduced live
sessions broadcast online, providing
colleagues with the opportunity to have
their ideas discussed and answered in
real time by Stuart and the leadership
team.
Read more on how we engage with
colleagues in the People & Culture
section on pages 28-31
PRIORITIES AND OUTCOMES
IN 2022/23
– Managing the cost-of-living crisis and
inflationary pressures has created many
challenges for our colleagues. It is
important to them that support provided
by the Company is meaningful in
reducing their uncertainty. As a result,
two out-of-cycle pay reviews have been
implemented to combat increasing
financial pressures.
Read more on page 81
– Colleagues continue to tell us having
their voice heard in Company decision-
making is a priority for them. Numerous
suggestions from our “Straight to Stuart”
scheme have been approved, from
providing sanitary items in women’s
toilets, to including the option to add
stammer symbols to name badges.
PRIORITIES FOR THE COMING YEAR
– The cost-of-living crisis is not expected to
improve dramatically, and colleagues will
continue to expect our ongoing support
over the coming year.
HOW WE ENGAGED
– In 2022/23 we brought customers into
our Support Centre for a series of focus
groups reaching over 400 of our Clothing
& Home colleagues. We have also
conducted “Closer to Customer” events
with Business Unit Leadership Teams on
various topics from Sleepwear to
Autograph.
– This year we launched the “Collective”, an
online community where 40,000 loyal
customers are engaged by our Food
colleagues on problems they are working
on. This direct contact means customers
can influence decision-making and see
results first hand. Topics included
seeking views on digital receipts and
exploring future product ideas.
– This year we set up a quarterly
reputation tracker. Run by Portland
Communications, it surveys a robust
sample of 20,000 nationally
representative customers four times
a year to give a view of how we are
performing on ESG issues.
PRIORITIES AND OUTCOMES
IN 2022/23
– As well as great quality, good product
availability and an easy and enjoyable
way to shop both in store and online, the
cost-of-living crisis has put value firmly
at the forefront of customers’ minds.
This has been a key driver for our
“Remarksable” and “Price Lock”
initiatives in Food.
– Our customers continue to be more
conscious of their environmental
impact and look for sustainable options.
In February 2023 we stepped up our
commitment to reduce plastic packaging
through the roll out of our “BYOB”
initiative; asking customers to bring
their own bag when collecting online
orders in store. We also campaigned for
improved collection and recycling
infrastructure in the UK for plastic
packaging and textiles.
PRIORITIES FOR THE COMING YEAR
– With economic uncertainty and potential
financial strains, our customers will
continue to shop for value and style.
– We expect customers to be increasingly
interested in personalisation, including
product recommendations, loyalty
rewards, and a seamless omni-channel
experience.
HOW WE ENGAGED
– Our Private Shareholder Panel, a group
of shareholders selected from an annual
ballot, attend meetings with our Board
and senior management. This year’s
events included a sustainability session
held at our Company Archive in Leeds
and an introduction to Stuart to discuss
the new leadership team’s priorities.
– The AGM is our key engagement
opportunity for two-way dialogue between
the Board and shareholders. Our digital
AGM format over the past three years has
driven shareholder engagement, trebling
participation levels. At the 2022 meeting,
leading radio and television broadcaster,
Anita Anand, put questions to the Board as
shareholder advocate. Our drive to engage
shareholders led to the launch of our
“Share Your Voice” campaign.
Read more on pages 68-69
– Board members, alongside our Investor
Relations team, regularly engaged with
major shareholders to understand their
views on our strategic performance.
Our Investor Relations team met with
over 120 institutional funds, engaging with
investors who we estimate represent over
half of our issued share capital. In October,
we held a Capital Markets Day with
shareholders, led by the CEO and Co-CEO,
to communicate our strategic ambitions
to reshape the business for growth.
PRIORITIES AND OUTCOMES
IN 2022/23
– During the year, we have frequently heard
from private shareholders that they are
focused on receiving a return on their
investment through the reinstatement
of a dividend payment. While the Board
agreed not to pay a dividend in 2022/23,
it did so to retain and reinvest the funds
in the business instead. The Board plans
to restore a modest dividend to
shareholders, starting with an interim
dividend at the results in November.
– Our institutional shareholders have
continued to tell us they are interested
in our strategy and how this will ensure
delivery of value and long-term,
sustainable growth. Our transition to a
low-carbon economy has also featured
strongly in these conversations.
PRIORITIES FOR THE COMING YEAR
– Shareholders will want to see
acceleration of our transformation
plans to deliver long-term
sustainable growth.
10
Marks and Spencer Group plc
STRATEGIC REPORT
4
COMMUNITIES
5
SUPPLIERS
6
PARTNERS
HOW WE ENGAGED
– M&S donated £5.8m to various charitable
organisations in 2022/23, and through our
customers, colleagues, and partners we
were able to fundraise an additional £2.3m.
Through our Sparks programme we
donated £2.1m to our 35 Sparks charity
partners in the UK.
HOW WE ENGAGED
– 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 helped create meaningful employment
for those facing barriers to work through
our Marks & Start Programme.
Read more on page 9
– We conducted widespread consultation
with our community, sustainability experts
and local government on our plans to
redevelop the Marble Arch store, and how
this will support our Plan A net zero goals.
– The M&S Archive shared our unique
– In 2022/23, we held three conferences
to align supplier partners with our Food
priorities. Suppliers were given
the opportunity to meet the new Food
leadership team. We also held a series
of “Supplier Exchanges” focused on
sustainability and human rights to set
out our Plan A requirements, introducing
tools available to suppliers to facilitate
best practice sharing across our
supply base.
HOW WE ENGAGED
– After three years of travel restrictions,
we have returned to in-person strategic
partner events, bringing our global
franchise partners together to view
future product and discuss the
strategic direction of the business.
This, combined with digital selling
events, fully enhance the buying
experience for our partners.
– Each of our non-executive directors met
the new CEO of Ocado Retail Limited,
Hannah Gibson, to be briefed on her
plans for her first 100 days and the
future of the joint venture. Hannah
then attended the Board strategy
away day in February 2023, to maintain
a collaborative relationship between
M&S and Ocado.
heritage through education workshops,
public outreach programmes, online events
and digital resources. The Archive, which is
based on the University of Leeds campus
and open to the public, has undergone a
complete refurbishment this year.
– In September 2022, we completed the
acquisition of our Food logistics provider,
Gist. We engaged collaboratively with
Gist throughout negotiations, to
balance business as usual with working
towards transaction completion.
Read more on the Ocado joint
venture on page 20
PRIORITIES AND OUTCOMES
IN 2022/23
– Ensuring sustainable and socially
archive.marksandspencercom
Read more on the acquisition
on pages 26-82
PRIORITIES AND OUTCOMES
IN 2022/23
– A priority this year was supporting those
impacted by the conflict in Ukraine, and
the earthquakes in Turkey and Syria,
particularly important given our presence
in Turkey. As a result, in February, M&S
donated £100k to the British Red Cross
earthquake appeal, in addition to
supporting the UNICEF and Oxfam appeals
through doubling our Sparks donations.
– Our community is focused on ESG issues
and is looking for M&S to be a socially
responsible company, that cares about its
long-term impact on the communities and
the environment it operates in. This has
been a key feature in the ESG Committee’s
discussions.
Read more on pages 90-91
PRIORITIES FOR THE COMING YEAR
– Many communities are yet to recover
from the impacts of the pandemic and
are likely to continue to rely on
companies to provide financial support
and to invest in improving employability
and job creation.
– Next year, we will be establishing a new
community strategy to address the
challenges that matter most to our
communities.
PRIORITIES AND OUTCOMES
IN 2022/23
– Building and maintaining long-term,
collaborative relationships and receiving
fair payment terms has remained a
priority. Our Payment Practice submissions
in November 2022 and May 2023 show
our average days to pay suppliers
reduced by two days during the year.
– For our suppliers based in Turkey,
recovery from the impacts of the
earthquake is key. Shortly after the
disaster, we partnered with VISMO
Tracking to offer those on the ground in
Turkey access to its Panic Button app.
– Ensuring sustainable practices is
important to us, and as a result we
worked with our renewable energy
partner, Green Span, to model a
renewable energy solution across our
milk supply chain. We have also worked
with Food suppliers to establish
roadmaps on carbon reductions.
PRIORITIES FOR THE COMING YEAR
– Price will, of course, continue to be an
important factor for suppliers to remain
competitive. However, as customers
become increasingly conscious of
sustainability, we expect suppliers to
look to us to support their sustainable
innovations.
responsible practices is a key priority
for M&S and our Partners. We have
worked closely with franchise partners
to engage them on our ambition to
become a net zero retailer by 2040.
This has included developing local
sourcing on Food with partner Al-
Futtaim in the Middle East and Asia,
as well as increasing the number of food
products available to be shipped using
a freeze defrost model, reducing our
reliance on air freight.
– An exclusive agreement was signed
with bp pulse as an existing franchise
partner to expand its national charging
network with high-speed electric
vehicle charge points at around
70 M&S stores.
Read more on page 82
PRIORITIES FOR THE COMING YEAR
– Continuing to maintain a strong
relationship between our business and
its partners, unlocking further value
and innovative ways of working.
Annual Report & Financial Statements 2023
11
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT OUR STRATEGIC PRIORITIES
RESHAPING FOR GROWTH AND VALUE CREATION
Generating
profitable long-
term sales growth
across channels
and markets.
Read more on
pages 14-21
Implementing
capital investment
programmes to shift
volume into growth
channels and reduce
the cost base.
Read more on
pages 24-26
EXCEPTIONAL PRODUCT,
TRUSTED BRAND
Protecting the magic customers love
– driving quality, innovation and style at
great value.
LEADING IN OMNI-CHANNEL
INCLUDING OCADO
Becoming the UK’s leading omni-channel
retailer, offering a seamless experience.
EXPANDED GLOBAL REACH
Leveraging the M&S brand to drive
capital light growth around the world.
DELIVER
PROFITABLE SALES
growth
DISCIPLINED
INVESTMENT
choices
ACCELERATING STORE ROTATION
Improving the productivity, profitability
and quality of space to create a store
estate fit for the future.
MODERNISED SUPPLY CHAIN
A faster and more agile M&S,
reducing cost to serve in both Food
and Clothing & Home.
COMPELLING CUSTOMER ECOSYSTEM
Connecting every customer
engagement across M&S.
12
Marks and Spencer Group plc
STRATEGIC REPORT During the year the new leadership team set out plans to reshape
M&S to deliver sustainable, profitable sales and market share growth,
and improve operating margins over time. These plans include the
creation of a high performance focused culture, prioritisation of
structural cost reduction and disciplined investment in the areas that
will deliver long-term shareholder returns.
STRUCTURALLY LOWER COST BASE
Permanently removing £400m from the
underlying cost base across M&S.
HIGH PERFORMANCE CULTURE
Building a leaner, faster M&S that is closer
to customers and colleagues.
IMPROVE
OPERATING
margins
Building a more
productive M&S with
a culture of delivery.
Read more on
pages 22-23
DRIVE
SHAREHOLDER
returns
Embedding a single-
minded focus on
value creation for
our shareholders.
Read more on
page 27
DISCIPLINED CAPITAL ALLOCATION
Investing in growth opportunities
with returns commensurate with risk.
Annual Report & Financial Statements 2023
13
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT OUR STRATEGIC PRIORITIES CONTINUED
DELIVERING
PROFITABLE SALES
growth
M&S’ goal is to deliver profitable long-term sales
growth through developing Exceptional Product and
a Trusted Brand, offering a Leading Omni-channel
retail experience including through Ocado Retail and
Expanding the Global Reach of the business.
EXCEPTIONAL PRODUCT,
TRUSTED BRAND
FOOD OUTPERFORMS DUE TO
INVESTMENT IN INNOVATION
AND TRUSTED VALUE
The objective for Food is to achieve 1%
growth in market share and an adjusted
operating margin of c.4% over the next
five years. This will be delivered through
“protecting the M&S magic” of trusted
value and innovation in fresh, easy-to-
cook food, while fixing the backbone
processes of the supply chain and
driving growth in the store estate.
Food grew sales 8.7% to £7.22bn with
like-for-like sales up 5.4%, with
particularly good growth in hospitality
and franchise. Sales in core categories
were up 5.0% and well ahead of pre-Covid
levels, reflecting the strategy to broaden
appeal. Grocery market share increased
20bps to 3.6%, with M&S outperforming
all major full-line supermarkets. (source:
Kantar 52 w/e 19 March 2023).
Operating Profit before adjusting items
of £248.0m compared with £277.8m in
the prior year (which included £24.6m of
business rates relief), resulting in a net
adjusted operating margin of 3.4%.
While investment in value reduced
margin in the first half, as we did not pass
through the full impact of cost inflation
to customers, the resulting positive
effect on customer volumes drove sales.
Combined with an in-year contribution to
operating profit from the Gist acquisition
of £27m, this enabled an increase in
second half adjusted operating margin
to 4.5%, compared with 3.8% last year.
Growth underpinned by investment
in trusted value: In recent years, Food
has shifted to trusted value to broaden
appeal, reducing the volume of
promotions and become competitive
at opening price points. At a time when
customers’ focus is on the cost-of-living,
further investment was made early in the
year, which meant that the business did
not pass through the full impact of cost
inflation on its margins.
14
Marks and Spencer Group plc
This included:
– Sharpening the prices of over
100 ‘Remarksable value’ lines which
offer M&S quality at everyday prices,
implementing locked prices across
a range of c.150 everyday family
favourites and moving the iconic
Dine-In offer to Always On – offering
an affordable, restaurant-quality
alternative to eating out.
– As a result, the mix of value lines
increased. For instance, Remarksable
sales were up 40%, and featured in
over 20% of customer baskets. Dine-In
launches such as “steak and chips”
also drove substantial sales growth
in the offer.
VALUE GOES
viral
Customers have really noticed our
investment in value this year and have
taken to social media to tell the world
about it, with one TikTok post comparing
M&S Remarksable ranges to a value
competitor generating over 1.4 million
views. To maximise the power of peer-to-
peer recommendations, customer social
media comments have been added to
store window displays too. M&S store
social channels across TikTok and
Facebook reach up to 3 million
customers every single week and the
in-store social champions across the 600
accounts have been getting creative to
make M&S value go viral, with M&S
Devizes store topping 1.2 million views on
its ‘What £20 can get you in M&S’ video.
3m
Customers reached every week
via store social channels
STRATEGIC REPORT Performance fuelled by innovation
and investment in basket building
categories: The innovation pipeline
helped to increase sales of fresh
categories across the year and ambient
products over Christmas, Valentine’s and
Mother’s Day when event sales grew by
an estimated 20%. Product launches
included:
– A programme of quality upgrades
with M&S winning c.200 “tried and
tested” awards from titles such as
Good Housekeeping. For instance,
the introduction of Oakham™ Gold
chicken means that all the fresh
chicken sold is now slower-reared,
British and RSPCA Assured.
– Strong seasonal launches such as
the “Master Grill” range for summer
barbeques and limited editions for
key events.
– Reset and relaunched ranges aimed at
driving market share in larger baskets
including soft drinks, household
cleaning, frozen desserts, and cereals.
Quality and value perceptions highest
in six years: M&S continues to generate
market-leading quality and sustainability
perceptions in Food, while the continued
strategy of investment in trusted value
has driven improved perceptions of value.
Raising
WELFARE
STANDARDS
We’re determined to keep raising the
bar when it comes to animal welfare
standards. We offer more RSPCA
Assured products than any other
retailer and this year, took on our
biggest challenge yet. In 2021, we
announced our ambition to become
the first major retailer to sell only
slower-reared, higher welfare chicken
across our fresh chicken products.
In September, we met that goal – a
move welcomed by RSPCA Assured
as “the biggest positive change to
chicken farming in a generation”.
Our Hubbard breed birds now
have 20% more space, benefit from
a multigrain diet, and have an
enhanced environment, including
pecking aids and perches, to
encourage natural behaviours.
The move, in line with the Better
Chicken Commitment, builds on
our long history of leading animal
welfare standards. Customers can
find our slower-reared, higher-welfare
fresh Oakham™ Gold chicken across
stores, alongside our free-range
and Organic offering.
365
RSPCA Assured products
STRATEGIC KPIs
FOOD
Market share
3.6%
21/22: +0.2%
Market share grew as M&S
invested in trusted value and
innovation.
Value for money perception
-3
21/22: -3ppt
Rising costs caused value
perceptions across the market
to fall this year. However, M&S
investment drove improvements
across the year and its position
relative to the market is now
its strongest in six years
(Source: YouGov).
Quality perception
Availability
66
21/22: +1ppt
94.5%
21/22: Level
M&S grew its lead in quality
as we continued to invest
in upgrading our ranges
(Source: YouGov).
Against a backdrop of market
wide supply chain challenges
availability remained level.
The acquisition of Gist will
support future improvements.
Annual Report & Financial Statements 2023
15
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT
OUR STRATEGIC PRIORITIES CONTINUED
DELIVERING
PROFITABLE SALES
growth
FINDING OUR
sweet spot
in dresses
Dresses are a key category in driving
style perception and reducing the
number of products across Clothing &
Home has given us an opportunity to
invest in category resets. Three years
ago M&S ranked 6th in dress market
share and now holds 3rd spot. This has
been achieved by an overhaul of our
pricing architecture, modernising our
designs with forward-looking prints
and taking a more confident trading
approach with more open buys and
testing earlier reactions in Spring and
repeating. With a clearer and simpler
strategy, we went after the consumer
demand for versatile dressing –
dresses that can be dressed down
with a pair of trainers but equally
dressed up for an occasion to really
give our customers the cost per wear
we know they are looking for. It was in
FY2022/23, that we really established
our sweet spot with the £39.50 price
point – last year we sold more than
718,000 units, with the printed square
neck midi dress (pictured to the right)
our current best-seller, selling more
than 9,000 units. As a result, casual
dress sales have increased 40% vs.
last year.
+40%
casual dress sales vs. last year
#3
UK market share
16
Marks and Spencer Group plc
STRATEGIC REPORT Strong performance of event related
categories: In a year when customers
were making the most of the return of
events, weddings and holidays, growth
was generated in top end ‘Autograph’
sales while making further progress
in casual wear.
– Men’s ‘Autograph’ sales increased
c.60% while chino sales increased by
c.25%, reflecting the strategy to
build a ‘smart separates’ business
for workwear. A focus in the current
year is on the introduction of more
regular newness.
– Kidswear and Home offer important
potential for improvement in market
share. However, growth in the year
was modest, in a more difficult
market, against pandemic related
comparatives. Having established a
stronger value position, the aim is to
build increased awareness and appeal
of the range. For instance, partnerships
such as Fired Earth are being expanded
across more categories.
Sustained, market leading value
perception: As a result of improvements
to the range and investment in trusted
value, we have held a leading value
perception in recent years, alongside
Clothing & Home’s lead for quality and
sustainability. Encouragingly, style
perception is also now improving.
STRATEGIC KPIs
CLOTHING & HOME
Market share
9.3%
21/22: +0.4%
M&S market share
strengthened this year as
it outperformed on a value
and volume basis.
Value for money perception
37
21/22: Level
Customers continue to
recognise M&S as a value for
money clothing retailer and
it has held its leading position
this year (Source: YouGov).
Quality perception
55
21/22: +1ppt
Customers continue to rank
M&S above the competition
when it comes to quality and
positive perceptions grew a
further percentage point this
year (Source: YouGov).
CLOTHING & HOME DELIVERING
IMPROVED STYLE PERCEPTIONS
AND SUSTAINING LEADING
VALUE POSITION
The objective for Clothing & Home is to
deliver a 1% increase in market share and
an adjusted operating margin of c.10%
over the next five years, by driving
omni-channel growth of a stylish,
quality, value for money M&S range,
alongside a family of partner brands.
Clothing & Home grew sales 11.5% to
£3.72bn with like-for-like sales up 11.2%.
Full price sell-through at 88% was level
with last year and well above historical
levels. Clothing & Footwear market share
increased 30bps to 9.3% (source: Kantar
52 w/e 2 April 2023).
Store sales increased 14.9% to £2.5bn with
strength in city centre and shopping
centre locations. Online grew 4.8% to
£1.2bn, with strong growth in Click &
Collect sales, which were up c.20%,
with more than one third of orders now
generated through the M&S App.
Operating Profit before adjusting items
of £323.8m compared with £330.7m in
the prior year (which included £35.2m
of business rates relief), an increase of
9.6% excluding the impact of business
rates. Adjusted operating margin of
8.7% is now c.170bps above 2019/20.
Overall results reflected the leverage
from sales growth offsetting cost
pressures, particularly from sourcing and
currency as we did not pass through the
full impact of cost inflation to customers
and from planned digital investments.
Style credentials improving with more
confident buying: A more confident
approach to buying, and focus on the
modern mainstream customer, is starting
to deliver increased value for money and
style perceptions.
– Clothing & Home has focused on
buying more deeply into core lines and
offering clearer price points and better
availability. For instance, women’s
denim sales have grown over several
years, cementing M&S’ leading market
share in the category, which has
increased to 13% from less than 10%
two years ago.
– Greater investment has been made
into categories which drive style
perception. For example, casual dress
sales grew 40% in 2022/23. As the
strength of demand became apparent,
increased purchases of popular lines
were made using short lead-time
supply routes, meeting demand while
managing markdown risk.
– The improved range is supported by
digital analytics to assess profitability
per option more accurately. In addition,
availability is being measured, and stock
is being allocated on a demand
weighted basis.
Annual Report & Financial Statements 2023
Annual Report & Financial Statements 2023
17
17
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT OUR STRATEGIC PRIORITIES CONTINUED
DELIVERING
PROFITABLE SALES
growth
BRINGyour own bag
9%
Across Clothing & Home, we have
removed 60m units of plastic since
2018, but we know we need to find
new and better ways of doing things.
This year, we stepped up our
commitment to reduce our use of
plastic packaging, launching a new
‘BYOB’ – Bring Your Own Bag – Click &
Collect initiative in 251 of our stores.
More than 60% of our customers opt
for Click & Collect – that’s over 15
million orders annually and, of those
orders, 9% are picked and packed in
stores – the equivalent of four million
parcels. By simply asking customers
to bring their own bag when
collecting these orders, we will reduce
unnecessary packaging waste, saving
10 million units of plastic annually.
Click & Collect orders
packed in store
10m
units of plastic
saved annually
LEADING IN OMNI-CHANNEL,
INCLUDING OCADO
Omni-channel development, supporting
growth in Clothing & Home online:
Clothing & Home’s objective is to increase
online sales participation and achieve a
better margin for online sales. We aim to
drive online growth through increased
frequency and spend and using the
national store and distribution network to
offer a convenient and consistent service.
Online sales grew 4.8%, driven by an
improved omni-channel proposition,
with strong growth in Click & Collect
sales which were up 20%. Customer
orders grew 12.6%, despite the effects
of courier capacity constraints over
peak trading. This was partly offset
by the normalisation of returns rates
post-pandemic. As expected, online
adjusted operating profit margin
reduced to 5.0% from 9.1%, this was due
to sourcing cost pressures which reduced
gross margin and planned investments in
digital and omni-channel improvements
to drive future growth.
Acquiring, converting and retaining
customers: Customers who move from
shopping in one channel to multiple
channels and products typically spend
more. An effective and profitable way
to serve these omni-channel customers
is through the M&S App.
– Use of the M&S App and associated
Sparks memberships continued to
grow with average active App users
increasing by c.40% to 4.3m supported
by sign up campaigns such as the ‘12
days of Sparks’ in December when
users could gain access to exclusive
offers and rewards.
– The aim is that the App should provide
a personalised “shop front” to the M&S
brand and Sparks loyalty membership
and connect the store and online worlds
through services such as easy collection
& returns and “Scan and Shop”.
– Upgrades to the online experience
have included “one click” checkout
with digital receipts and improved
functionality in the App. At the same
time, development of automation has
driven further growth in the volume of
personalised interactions.
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Marks and Spencer Group plc
STRATEGIC KPIs
OMNI-CHANNEL
Percentage of UK Clothing
& Homes sales online
32%
21/22: -2.1%
Whilst online sales grew, the
percentage of Clothing sold
online dipped marginally
due to a strong store sales
performance.
Active App users
4.3m
21/22: +40%
Investment in new App
functionality helped drive
strong growth in active
App users.
Omni-channel NPS
+39
New metric
To align with our strategic
priorities, Digital and Store
NPS metrics have been
replaced with a single
Omni-channel NPS measure
to track customer satisfaction
as they shop across channels.
STRATEGIC REPORT Creating a convenient and consistent
service across channels: The national
store and distribution network provides
an important customer service
advantage with over 60% of orders
collected at store and more than three
quarters of returns processed through
the store network.
– Digital Click & Collect is being rolled
out to the estate enabling rapid
collection and we have implemented
self-service returns, reducing the cost
of processing and turnaround time for
resale.
– Using in-store fulfillment to expand
capacity allowed 9% of items ordered
online to be filled from store stock. We
are also trialling the resale of Clothing
& Home returns made to Simply Food
stores through local hubs.
– A key goal over the next three years
is to leverage the omni-channel
store and warehouse network,
further reducing costs and creating
additional capacity.
Early stage growth of third-party
brands: M&S now trades with over 140
partners, strengthening the customer
offer where brands are important such
as dresses, sports, home and beauty.
Third-party brands help attract new
shoppers, who also buy M&S products.
– Total sales of Clothing, Beauty and
Home brands increased 67% to £158 m.
Online brands sales now represent
c.8% of total online sales.
– Launches during the year included
Clinique and Benefit in beauty and
an extended sports offer through
The Sports Edit on M&S.com.
– Having grown rapidly from a standing
start, investment is being made to
simplify on-boarding for partners,
to introduce “drop ship” capability to
enable fulfilment from partner stock
and to reduce the volume of split
shipments, thereby lowering costs.
GROWING
Nobody’s
Child
Nobody’s Child was the first
third-party brand to launch on
M&S.com in November 2020 and
a year later, M&S cemented the
partnership by taking a c.25%
stake in Nobody’s Child.
Through our infrastructure and
financial backing, M&S is continuing
to support Nobody’s Child to scale
the business and its net sales have
increased by 100% since the
original investment.
In March 2023 we launched
Nobody’s Child pop-up shops
across 30 M&S stores nationwide.
Over two thirds of the brand’s
annual sales take place in the
Spring/Summer months, providing
the perfect season to raise the
brand’s profile within M&S.
It remains one of the most popular
third-party brands on M&S.com,
shopped by over 340,000
customers each year, with 1 in 10
being new to M&S. At the heart of
our third-party brand strategy is
careful curation – finding the right
partners who complement and
complete the core offer at M&S.
When we get these partnerships
right, as shown with Nobody’s
Child, everyone wins.
30
pop-up shops nationwide
1 in 10
new to M&S customers
Annual Report & Financial Statements 2023
19
OUR STRATEGIC PRIORITIES CONTINUED
DELIVERING
PROFITABLE SALES
growth
Ocado Retail Reset Underway:
The Ocado Retail joint venture
combines the strength of M&S’ brand,
food quality and innovation with unique
and proprietary technology to create
a compelling offer. It has already
generated significant volume growth
and buying benefits for M&S Food with
over £600m of M&S product sales
through Ocado.com last year. During the
year, new leadership was appointed, with
Hannah Gibson taking the role of CEO.
Ocado Retail generated total revenue
of £2.22bn, down 1.2%. While active
customers grew, revenues reflected
reduced volumes due to lower shopping
frequency as a result of pandemic
reversion and the impact of cost inflation
on customers. The M&S share of Ocado
Retail net loss was £29.5m compared
with a net profit of £13.9m in 2021/22.
The reduction was driven by the effects
of higher fixed costs from new and
underutilised capacity, increased
marketing to drive new customer growth
and energy related cost pressures.
Resetting the customer proposition:
The team’s focus is on improving
customer experience including re-
engaging lapsed and occasional
customers with improved service
including ‘kitchen table’ deliveries and
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Marks and Spencer Group plc
investing in value to broaden appeal,
through the Ocado Price Promise.
Improving operating costs: Alongside
this, steps to reduce costs are underway.
These include network optimisation, with
the proposal to cease operations at the
Hatfield site, shifting volume to more
efficient Customer Fulfilment Centres
including Luton – the first site with
on-grid robotic pick, as well as marketing
efficiencies and overhead reductions.
Deepening collaboration between
Ocado Retail and M&S: The M&S core
range available on Ocado.com has been
increased by more than 300 lines to
c.5,700 and we are starting to leverage
the potential of the M&S customer base
more broadly. Efficiencies are also being
scoped from joint sourcing and logistics.
Substantial growth and profit potential:
Ocado Retail has grown revenue by 40%
since 2019 and has a large, addressable
market and substantial invested capacity
to grow sales and to recover profitability
in the medium term.
300
new M&S core lines added to Ocado
STRATEGIC REPORT EXPANDED GLOBAL REACH
M&S’ objective is to grow International
retail sales by leveraging its brand
through capital light partnerships and
a multi-platform online business with
global reach.
International sales increased 11.2% at
constant currency to £1.06bn, with
partner retail sales growth of 8% driven
by Clothing & Home. Sales were
adversely impacted by c.5% by the exit
from markets including Russia during
the year.
Online sales were up 5% and are
more than double pre-Covid levels
now accounting for 22% of International
Clothing & Home sales. Operating profit
before adjusting items of £84.8m
compared with £73.6m in 2021/22,
which included a contribution in the
prior year of £5.5m from Russia.
Excluding the Republic of Ireland,
operating profit was £67.9m compared
with £58.2m in the prior year.
Demand recovery across partner
markets: In franchise and partner
markets, demand was robust as partners
restocked as footfall increased following
emergence from Covid, with particular
strength in India and the Middle East.
Investing in European operations:
European online sales have grown rapidly
in the past three years, and investment is
being made to improve customer service
and reduce cost to serve, including
opening a new logistics hub in Croatia
enabling the direct import of stock
destined for EU markets.
Working to improve Food profitability
in the Republic of Ireland: In the
Republic of Ireland, while performance in
Clothing & Home was robust, the Food
business continues to be impacted by
Brexit related costs. Steps include cost
restructuring, increasing the proportion
of locally sourced supply and assessing
new routes to market with a franchise
store trial underway with roadside
retailer Applegreen.
Expanding
THROUGH FRANCHISE
In October 2022, M&S Ireland launched
a trial partnership with Applegreen,
one of Ireland’s leading roadside
retailers, to offer the best of M&S Food,
including Food for Now favourites
such as sandwiches, salads and
delicious prepared meals including the
iconic Dine In. The project has been
piloted across five Applegreen
locations: Celbridge, Co. Kildare;
Cullenmore, Co. Wicklow; and
Mountgorry, Booterstown, Kinsealy,
Co. Dublin, with our food offering
delivered as a ‘shop within a shop’ in
a renewal environment. Applegreen
opened its first service station in
1992, and now operates almost 200
locations in the Irish market. The
partnership has expanded the M&S
footprint in Ireland and is helping
bring our delicious, great value M&S
Food to even more customers.
International NPS
International revenue
£1.1bn
21/22: +12.6%
+84
21/22: +4ppt
Customers’ experience
of M&S globally improved
as NPS increased by 4
percentage points this year.
International operating profit
before adjusting items
£84.8m
21/22: +15.2%
Annual Report & Financial Statements 2023
21
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT
OUR STRATEGIC PRIORITIES CONTINUED
IMPROVE
OPERATING
margins
STRUCTURALLY LOWER
COST BASE
IMPLEMENTING A PROGRAMME
TO STRUCTURALLY REDUCE COSTS
In 2022/23, adjusted operating margins
were 8.7% in Clothing & Home and 3.4% in
Food, against a medium-term objective
of improving these to c.10% and c.4%
respectively. The purpose of the cost
reduction programme is to structurally
reduce costs by more than £400m over
the next five years. Accelerated store
rotation and driving profitable online
growth will be an important driver to
increase margins. At the same time, we
will aim to offset annual inflation with
productivity improvements.
To deliver this, investment is being made
in technology to increase retail efficiency
and reduce energy costs, embarking on a
multi-year programme in the supply chain
and simplifying and streamlining digital,
technology and support centre functions.
Examples of programmes include:
– The roll out of a further c.800 self-
checkout tills (including within
Clothing & Home) and further
developments to scan and pay. As a
result, in these stores over 70% of
Food transactions are now self-serve.
Alongside the effects of sales leverage,
this has enabled the business to reach
its target of 10% retail staff costs as a
percentage of sales, ahead of plan.
– Warehouse rationalisation and
investment in automation at the
Bradford warehouse in Clothing
& Home, alongside changes to
returns processing.
– Simplified structures within the
support centre, which in 2022/23
included bringing together the digital
and technology teams in data science,
digital product development and
enterprise systems.
In the year ahead, inflation from
colleague pay of more than £100m
and c.£50m in additional energy costs
is expected. Investments are planned in
store service, accelerating store rotation
and new technology such as the Clothing
& Home order planning system and the
roll out of a new Food forecasting and
ordering system. These headwinds will
be partly offset by cost savings of over
£150m, resulting overall in a slight
increase in costs.
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Marks and Spencer Group plc
STRATEGIC REPORT – Raising the bar on talent; with fast-
track learning and future leaders’
programmes introduced developing
skillsets at all levels. At the same time,
robust goals linked to delivery of the
nine priorities have been implemented.
– Building the skills for tomorrow;
The data science and AI apprenticeship
group has expanded to over 200
colleagues and the M&S BEAM
Academy, which develops technical
skillsets, continues to grow. Alongside
this the Product Academy has
equipped over 25,000 colleagues
with selling and service skills for
modern omni-channel retailing.
This is supported by a set of core
expectations and behaviours of how
the business operates from day to day.
Read more in our People
and Culture section on
pages 28-31
HIGH PERFORMANCE CULTURE
CREATING A CULTURE OF DELIVERY
A key element of the plan to reshape M&S
is the creation of a high-performance
culture. The aim is to raise the “bench
strength” of M&S talent and create a
simpler, faster, digitally enabled
organisation. This requires a culture
that is closer to colleagues, closer to
customers, and a place where everyone
can be themselves and be their best.
Key elements of the programme include:
– Building a simpler, faster, digitally
enabled organisation; for instance,
digital leadership has been reset,
including the introduction of a new
online and omni-channel director role.
The technology, digital product and
data teams have been brought together
as one function and M&S Connect
created, putting M&S Bank & Services
and Sparks under one leadership.
– Creating a culture that is closer to
colleagues and closer to customers,
including a substantial investment in
colleague pay and reward and the
requirement for support centre
colleagues to spend seven days per
year working in store, bringing them
close to the front-line.
680
colleagues took part
in the 24 hour hackathon
IT’S A yes!
Since launch, the Straight to Stuart
colleague suggestion scheme has
generated over 8,000 ideas from
colleagues and grown engagement
by over 270% versus the previous
scheme. More than 200 suggestions
have been implemented in year one:
ranging from transformational ideas
like raising awareness of the symptoms
of bowel cancer on our toilet roll
packaging, suggested by Cara Hoofe
(opposite) which instigated a sector
wide ‘Get on a roll’ campaign, to simple
but effective ideas like adding Air
Fryer cooking instructions to Food
packaging, or adding Café opening
times to M&S.com. Straight to Stuart
LIVE was introduced in August giving
colleagues the opportunity to discuss
their ideas in a live webcast with Stuart
and the relevant leadership. Each
session has been focused on a specific
deep dive theme – including a “Cost
Saving Challenge” and “Making M&S
a great place to work”.
270%
increase in colleague
engagement
200
ideas implemented
Annual Report & Financial Statements 2023
23
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT OUR STRATEGIC PRIORITIES CONTINUED
DISCIPLINED
INVESTMENT
choices
M&S’ capital investment programme is focused
on increasing volume in growth channels and on
structural reductions of the cost base. Appraisal
of investments applies hurdle rates commensurate
with risk, with a primary focus on cash payback
on store investments.
Bigger,
better
STORES
In November 2022, M&S moved
from an ageing town centre site in
Chesterfield to a new 46,000 sq ft
store in a former Debenhams site at
Ravenside Retail Park just 0.5 miles
away. The new store has a market-style
Foodhall, a spacious Clothing, Home
and Beauty department, and over
400 parking spaces to make shopping
more convenient for customers.
Since the relocation, sales are on track
to double year on year. The entire
existing store team transferred across,
and 100 new jobs were created for the
local community. The opening was
welcomed by the leader of the
Chesterfield Borough Council – who
called out M&S’ commitment and
confidence in the town’s future, as
complementary to its wider
regeneration plans.
100
new jobs created
Total investment during the year was
over £500m, up from £300m in 2021/22.
This included the £103m net initial
payment for the acquisition of Gist
and just over £400m of capital
expenditure. The increase in capex
largely related to store renewals, the
resumption of property asset
replacement following the pandemic
and improvements to the technology
infrastructure. In the coming year, we
expect to maintain a similar level of
capital expenditure.
Capital expenditure is focused on
three programmes:
ACCELERATING STORE
ROTATION
Accelerating store rotation and renewal
to create a high productivity brand
defining estate of c.180 full-line and c.400
Food stores positioned in growth locations.
Over five years this is expected to reduce
Clothing & Home selling space by c.20%
and increase Food space by c.10-15%
– In 2022/23, the full-line estate reduced
by three stores, while the owned
Simply Food estate increased by five. In
some cases, we are on track to double
sales and pay back the capital invested
in c.3-4 years, including closure costs
for relocations. A good example of this
is the Chesterfield High Street store,
which was closed and the business
relocated to the nearby retail park.
– This year the plan is to open 8 full-line
and 10 Food stores while closing c.20,
of which 10 will be closed for relocation.
The relocations include opening five
new ‘flagship’ properties in Liverpool,
Leeds, Manchester, Birmingham and
Thurrock.
– Over 80 stores are now in a renewal
format including a new full-line store
at Stevenage. In full Food renewals
these add capacity in areas catering
to the larger family shop. Paybacks
currently average c.4 years and in the
next phase the plan is to refine space
allocation, range and service to
further increase returns.
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Marks and Spencer Group plc
5
new flagship stores
Leeds
Manchester
Liverpool
Birmingham
Thurrock
STRATEGIC REPORT
MODERNISED SUPPLY CHAIN
Modernising the Clothing & Home and
Food supply chains to create a lower cost
network which prioritises the timely flow of
products over storage and stock holding.
Clothing & Home is planning a five-year
programme of investment which includes:
– Consolidation, to focus on fewer, more
strategic clothing and fabric suppliers.
– Systems upgrades to create greater
visibility, improve replenishment and
reduce excess stock commitment
and storage.
– Creating a logistics network to support
the omni-channel offering, largely
using existing assets, and investing
in automation and new capacity to
improve availability and speed up
delivery and returns.
In Food last year the acquisition of Gist
was completed, taking control of the
logistics network.
– The H2 contribution from the
acquisition was c.£27m, from the
elimination of management fees,
operational savings and improved
service over peak.
– There is the potential to drive
productivity improvements from
shared transport across Clothing &
Home and Food and a plan for network
modernisation is being developed.
– A new forecasting, ordering and
allocation system is being
implemented, with the planned benefit
of helping to reduce waste.
Footfall (average per week)
15m
21/22: +6.4%
Store transactions
(average per week)
10.8m
21/22: +11.3%
Clothing & Home space
-0.8%
22/23: 9.9m sq ft
21/22: 10.0m sq ft restated
As we target an estate of c.180
high productivity, brand
defining stores, we reduced
Clothing & Home space this year.
Annual Report & Financial Statements 2023
25
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR STRATEGIC PRIORITIES CONTINUED
TAKING
control
OF OUR FOOD
SUPPLY CHAIN
During the year, M&S acquired Gist, our
principal Food logistics provider for
more than 40 years, which operates
via a network of 16 distribution centres
across the UK and Republic of Ireland.
The acquisition provides a platform
to accelerate our plans to modernise
our supply chain and support growth,
whilst building on the successful
implementation of the Vangarde
supply chain optimisation programme.
Ownership allows us to take closer
control of key decisions relating to
property and technology, as we seek
to reduce costs to serve through a
more efficient supply chain
operating model.
£27m
initial contribution
from acquisition
16
distribution centres
in the UK and ROI
DISCIPLINED
INVESTMENT
choices
COMPELLING CUSTOMER
ECOSYSTEM
Creating a more engaging digital
customer experience which brings
together loyalty and payment,
supported by an effective technology
infrastructure.
In 2022/23, the teams working on
omni-channel and Sparks were combined
with those responsible for commercial
and enterprise planning systems to
optimise use of technology resources
across the Group.
– Investment in the year included
technology improvements in stores
and the initial implementation of the
food forecasting and ordering system,
personalisation developments and the
trial of Sparks Pay.
– Steps are being taken to upgrade core
systems including enterprise resource
and new payroll applications and the
supply chain improvements outlined
above.
– The opportunity to create a more
effective payment and loyalty
proposition through a unified single
sign on across all M&S products is also
being evaluated.
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Marks and Spencer Group plc
STRATEGIC REPORT
DRIVING
SHAREHOLDER
returns
DISCIPLINED CAPITAL
ALLOCATION
The Group’s ability to invest is driven by
its capital allocation framework, which
focuses on the generation of free
cashflow from operations. In 2022/23,
this was £170m and after the initial
consideration for the acquisition of Gist,
net debt excluding lease liabilities
reduced by a further c.£64m to £356m,
with the group continuing to have
substantial cash balances of £1,068m.
After recent improvements to the
balance sheet, ratios of net debt to
EBITDA and cashflow to net debt are now
at levels consistent with an investment
grade credit rating which balances the
needs of shareholders and creditors
while providing a robust “sponsor
covenant” to pension trustees. In
2023/24, we will continue to focus on free
cashflow, prioritised investment and look
to achieve an investment grade credit
rating during the year.
RESTORING THE DIVIDEND
With the business generating an
improved operating performance and
having a strengthened balance sheet
with credit metrics consistent with
investment grade, the Board plans to
restore a modest annual dividend to
shareholders starting with an interim
dividend with the results in November.
NET DEBT CONTINUING TO REDUCE
Net Debt
£2.6bn
21/22: -2.2%
22/23
21/22
20/21
19/20
Net Debt excluding leases
£0.4bn
21/22: -15.4%
22/23
21/22
20/21
19/20
Free cash flow from operations
£170.4m
21/22: -77.0%
22/23
21/22
20/21
19/20
2.6
2.7
3.5
4.0
0.4
0.4
1.1
1.4
170.4
739.6
273.7
203.9
Annual Report & Financial Statements 2023
27
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS PEOPLE & CULTURE
The new leadership team has made high
performance culture a core pillar of the
strategic plan to reshape M&S for growth
(see page 13). The aim is to raise the
‘bench strength’ of M&S talent and
create a simpler, faster, digitally-enabled
organisation. This requires a culture that is
closer to colleagues, closer to customers,
and a place where everyone can be
themselves and be their best.
28
Marks and Spencer Group plc
STRATEGIC REPORT 1 – BUILDING A SIMPLER,
FASTER, DIGITALLY-ENABLED
ORGANISATION
As set out earlier in the strategic report,
the priority has been creating a simpler
organisation that is focused on the right
things, with more empowered roles and
a sustainably lower cost base.
Whilst the programme helps mitigate
the rising costs of doing business,
through a reduction in planned support
centre staffing costs, it also enables
reinvestment in the capabilities that
will drive growth – particularly in data
and digital. Refinements have also been
made to the accountable business
operating model to deliver the right
structure to support M&S’ strategic
plans. For example, in October, Katie
Bickerstaffe reset her leadership team
to bring together the capabilities and
skills required for M&S to become a
world-class omni-channel retailer with
data at the heart. This included the
introduction of an online and omni-
channel director to improve how digital
channels interact with stores, uniting
the technology, digital product and
data teams as one function and the
creation of M&S Connect, which brings
together the accountability for M&S Bank
and Services and Sparks under one
leadership – supporting the ambition to
create a single digital identity.
To build a more empowered Retail team,
spans of control across store leadership
– from Team Manager to Regional
Manager - have been reset to create
clearer accountabilities. Alongside this,
the regional boundaries have been
redrawn to drive greater ownership
amongst regional managers.
2 – CREATING A CULTURE
THAT IS CLOSER TO
COLLEAGUES AND CLOSER
TO CUSTOMERS
CLOSER TO COLLEAGUES
It matters that every colleague at M&S
can share their ideas, be listened to with
respect, and - together - help make M&S
a great place to work. M&S has a long
heritage of working closely with its
colleagues, and over the past year the
business has taken steps to reinvigorate
a culture of two-way communication:
Straight to Stuart:
As one of his first actions, Stuart Machin
relaunched the colleague suggestion
scheme as ‘Straight to Stuart’ giving
every colleague across M&S a direct line
to share ideas and feedback with the
CEO. Over 8,000 suggestions were
submitted during 2022/23 and over
200 ideas were put into action including
game-changing community initiatives
such as the “Get on a Roll” campaign
(see page 23). A faster response time and
the introduction of a new quarterly hot
topic themed ‘Straight to Stuart Live’
format, which gives colleagues the
chance to discuss their ideas live, has
helped boost engagement by over 270%
on the previous scheme.
CommUnity:
Adoption rate of Microsoft Teams is
very high at over 93% and is an excellent
functional tool that allows colleagues
to do their day-to-day job by allowing
them to check shifts and access policies.
However, it did not provide a singular
community channel for all colleagues.
To make colleague communication truly
two-way, M&S launched CommUnity,
in May 2022; an internal social platform
designed for open and honest
interaction and connection for all
colleagues. It drives transparent
communication as colleagues respond
publicly to leaders’ posts and leaders’
reactions are published for all to see.
Post launch there was an immediate
50% increase in ‘reactions’ to content.
CommUnity is now the main route to
reach the entire colleague base – with
posts often achieving over 30,000
audience views.
BIG Network:
BIG – the M&S colleague representative
group –forms the foundation
of an engaging and involving culture.
This year, M&S has provided further
investment in the elected BIG
representatives and focused on driving
increased leadership accountability for
working effectively with BIG. The
National BIG Chair has regular meetings
with ExCo (Executive Committee) and
the Board and the role BIG has played
this year in ensuring colleague support
during the cost-of-living crisis is set out
in the governance section (see page 10).
Supplementary to this, CEO Stuart
Machin meets regularly with National
BIG and Co-CEO Katie Bickerstaffe leads
engagement with Support Centre BIG.
Retail Voice:
In November, M&S held its first Shop-a-
thon. Taking inspiration from the success
of Hack-a-thon formats, this ran as a
48-hour working session for over 60
Retail and Support Centre Colleagues to
focus on identifying solutions to build
more efficient retail operations. Outputs
of the session included the introduction
of a new simplified morning checklist for
stores and a reset of the weekly ‘Store
Voice’ call to reduce time requirements
for managers.
COLLEAGUE REWARD
Since the start of 2022/23, we have
announced investments of over
£100m in colleagues’ pay and
benefits. This has increased the
national hourly rate to a minimum of
£10.90, rising to £12.05 for London,
meaning all colleagues are paid at or
above the real living wage. In
combination with health & wellness
benefits, generous pension and
colleague discount, M&S continues
to offer one of the best all-round
reward packages in retail.
Alongside this, over 44,000 colleagues
- equivalent to over 70% of headcount -
took part in two global Colleague Voice
surveys this year. This was slightly down on
last year’s relaunched survey participation
rate, but the overall engagement index
increased 2ppts to 64%.
The findings made clear that colleagues’
primary concern was to see positive action
taken following any survey. As a result,
M&S reset its approach in February to give
greater accountability to line managers to
engage with their teams and local BIG
representatives and implement clear and
meaningful action plans to address issues.
Every manager must show evidence of
leading this process in their annual
review. Rather than relying on two surveys
per year, the new approach aims to drive
more regular in-depth and action-
orientated conversations that will deliver
positive change.
CLOSER TO CUSTOMERS
The Closer to Customers programme
launched in September to bring support
centre colleagues closer to the front line
with a new requirement to spend seven
days per year working in store built into
everyone’s objectives. Shifts are planned
to allow managers to allocate tasks and
ensure training happens in advance –
so colleagues can support on tills and
with specific processes such as Click &
Collect. Colleagues are asked to
complete four of the seven days over
the peak trading period and this
Christmas over 75,000 hours of support
were given to stores.
The ExCo team led by example and launched the
Closer to Customer programme by taking over as
management team at the Bluewater store in Kent
for a week.
Annual Report & Financial Statements 2023
29
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT PEOPLE & CULTURE CONTINUED
3 – RAISING THE BAR
ON TALENT
Talent development has moved up the
people agenda and there is a regular
cadence of talent discussion at an ExCo
level. There has been increased focus on
succession planning and more regular
assessment of the internal talent
pipeline to identify critical gaps and high
potential candidates. In response, a
‘Fast-track’ learning programme is in
development for 2023/24 to accelerate
the highest potential candidates and
provide more bespoke development
exposure to the skills and experiences
needed for pipeline roles.
In May 2022, M&S relaunched its broader
Future Leaders programmes, featuring
two module stages; Build, for new to line
management colleagues, and Evolve,
for new to leadership colleagues. Over
200 colleagues completed the Build
programme this year, which is designed
to help newer managers develop their
readiness to lead. Almost 70% of
participants in the four-month
programme were women, helping to
support female career progression at
M&S. Evolve is a more advanced module
to help leaders enhance their leadership
skills and style, with a focus on
interpersonal relationships and capacity
for strategic and complex thinking. 47
colleagues completed the six month
Evolve programme this year and over
60% reported that their role, remit, or
responsibilities had expanded as a result.
Both programmes involve a mix of
classroom learning, external speakers,
group and individual coaching and
include a longer-term impact evaluation
between nine and 18 months post
completion to assess colleague
progression.
Managing performance
The foundation of a high-performance
culture is robust goal setting. Objectives
are now clearly linked to our nine
strategic priorities and are monitored
throughout the year via open and honest
conversations between colleagues and
line managers.
End-of year ratings are assigned to 100%
of salaried colleagues and tracked in the
MyHR system. This reporting database is
used to identify performance trends and
improve transparency. It enables better
identification and recognition of high
performers and supports effective
performance improvement plans.
30
Marks and Spencer Group plc
Last year, the performance programme
for Customer Assistants was reset to
include clear outlines of what is expected
in their role. The expectations have been
refreshed this year to focus on priority
areas including digital essentials,
efficiency, customer service, product
knowledge and stock loss. The
expectations provide colleagues with
greater clarity on the part they play in
delivering the store plan and support
line managers to have more robust
performance conversations.
4 – SKILLS FOR TOMORROW
The last 12 months has seen significant
investment in the skills that will drive
future growth. This reflects the strategic
requirement but also direct feedback
that showed, whilst colleagues
understood the importance of a digital
mindset, they did not believe M&S had
invested enough in the capabilities to
do their job better.
The 2022/23 intake for the Data Science
and AI apprenticeship, a 15-month Level
7 course, has been doubled and 200
colleagues have now been enrolled into
a data-upskilling apprenticeship. M&S’
BEAM Academy has grown the number
of learning sessions from 14,000 to
26,000 – ranging from longer-term
courses, to bite-sized sessions,
interactive expos and hackathons.
The programme of activity has included
upskilling over 3,000 colleagues from
Waterside, Chester and Salford Quays
support centres through a half-day
in-person workshop ‘Digital Essentials’.
All store and Castle Donington
colleagues will be receiving in-person
foundational digital and data upskilling
throughout April, May and June 2023.
Digital enablement must be
underpinned by exceptional product
knowledge. Since launch, M&S’ dedicated
Product Academy has trained over
40,000 colleagues - equipping them with
selling and service skills. The specialist
skills in-store training sits alongside the
online Product Academy platform,
which features all the latest product
information on M&S unique innovations
and quality to help colleagues sell better.
5 – A PLACE WHERE
EVERYONE CAN BE
THEMSELVES, AND BE
THEIR BEST
As an employer of over 65,000 people,
M&S is committed to building a culture
where everyone is listened to, has a
voice and feels they can be their best.
To help colleagues perform at their
best, M&S provides a range of benefits
and tools that promote and support a
healthy lifestyle, healthy mind, healthy
finances and increasingly a healthy work
life balance.
WORKLIFE:
Working as a retail manager is a hands-on
job spanning budget management,
leading large teams and serving
thousands of customers, which is why
historically it’s always been challenging
to introduce flexible working across
stores. However, to keep its retail
employment offer competitive, M&S
designed and successfully trialled
Worklife - a new flexible working
programme – with over 800 managers
across 100 stores. Feedback was
overwhelmingly positive, with 75% of
managers agreeing it had a positive
impact on their family life. Worklife
launched nationwide in January, giving
over 3,000 retail managers the option to
choose different working patterns, such
as a nine-day compressed fortnight or a
four day compressed week, giving them
greater flexibility.
Following an idea at the 2022
International Women’s Day Hackathon,
a new Job Finder App was launched in
October to further support colleagues
and line managers exploring flexible
working options, such as a job share, to
access information in a central hub and
help them identify potential job share
partners.
WELLBEING:
In recent years, M&S has invested in new
wellbeing benefits – such as its Virtual GP
service – to make it easier for colleagues
to live healthy lifestyles and strengthen
its overall reward package. As outlined
on page 6, with cost-of-living the top
concern for colleagues this year, M&S has
tried to alleviate some of the strain, with
its biggest ever investment in front-line
colleague pay. In addition, M&S has
promoted the financial tools and advice
available to colleagues during its
Wellbeing Week and introduced new
practical support – such as the
introduction of free sanitary products
to all sites and stores.
STRATEGIC REPORT GROWING INCLUSION
& DIVERSITY NETWORKS
To help colleagues bring their whole
self to work M&S operates a number of
colleague led networks - spanning
racial, family, cultural, sexual and gender
identities - designed to bring diverse
communities together. Each network
has an ExCo sponsor and has its own
designated site within the colleague
intranet offering the latest news and
information.
M&S supports the networks to celebrate
and recognise relevant events in the
inclusion and diversity calendar. For
example, on International Women’s Day,
M&S celebrated Remarkable Women
with a LinkedIn Live panel discussion
attended by almost 900 colleagues
and external participants and hosted
an ‘Ideathon’ with over 150 colleagues
to tackle challenges and come up with
new initiatives to drive gender equality
forwards at M&S. Former rugby player,
Gareth Thomas, was invited to share his
experiences as part of M&S’ Pride events,
and proved to be the most popular
Inspiring Speaker of the Year, with
over 1,000 live views.
The increased profile of network events
has contributed to a 70% increase in
network membership over the last
12 months. Over 7,000 colleagues now
belong to a network and a new Cancer
Network was launched to provide peer
to peer support for colleagues.
SHAPING OUR I&D STRATEGY:
Over the course of the year, M&S has
undertaken a deep-dive review to better
understand the experience of diverse
colleagues across the business. Over 350
colleagues with a disability took part in
a listening activity to shape the discovery
stage of a new accessibility strategy and
over 500 female colleagues participated
in activity to help validate and shape M&S’
plans as a leading employer of women.
80%
of Marks & Start participants
offered a contract with M&S
TEN YEARS OF
MOVEMENT TO WORK
M&S was a founding member
of Movement to Work in 2013; a
voluntary collaboration of UK
employers committed to tackling
youth unemployment through
high quality vocational training.
In partnership with The Prince’s Trust,
M&S’ Marks & Start programme
offers young people who face
barriers to employment a four-week
placement to gain practical
experience, alongside structured
employability and skills training.
Since launch, M&S has supported
over 10,000 disadvantaged young
people aged between 16-30 and over
80% of participants who completed
the programme have been offered
a contract with M&S.
COLLEAGUE REPRESENTATION MEASUREMENTS
Total employees
Female
44,035
21/22: 45,484
Male
20,226
21/22: 20,726
Total Senior Managers
Total Board
Female
64
21/22: 69
Male
79
21/22: 92
Female
6
21/22: 5
Male
5
21/22: 6
Senior Managers from
Ethnic Minorities
5.4%
21/22: 6.8%
Gender Pay Gap
12.5%
21/22: 12.5%
The Gender Pay Gap, the average
difference in hourly earnings between
male and female colleagues, has
remained level. We remain focused
on making M&S a great place to work
for women and expanding talent
development opportunities. Around
70% of participants in our Build
programme – designed to develop the
leadership skills of new line managers
– were women and this year, following
the appointment of Cheryl Potter in
February, we now have a female
majority Board.
Read more in the Remuneration
section on page 107
Whilst representation levels have dipped
slightly following colleague changes,
M&S is making progress in attracting
more colleagues from diverse
backgrounds into the business. This is
helping build a more diverse talent pipe
line and we have strong representation
of colleagues from ethnic minorities
participating in this year’s Future Leaders
programmes.
Engagement (Your Voice Survey)
64%
21/22: 62%
Over 70% of colleagues participated
in the Your Voice surveys giving M&S
an insight into how engaged colleagues
are feeling in their roles. This year,
engagement levels increased by 2%
following the initiatives set out within
the people chapter.
Annual Report & Financial Statements 2023
31
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT OUR APPROACH
TO SUSTAINABILITY
Our Sustainability Report gives
a full update on our progress
marksandspencer.com/
sustainabilityreport2023
The ESG Committee Report
can be found on page 90
Since its inception, M&S has
built trust by doing the right
thing by its people and the
communities it serves, and
this remains one of its core
values today. The unique
relationship of trust between
M&S and its customers runs
much deeper than its
community impact - it runs
right through our entire value
chain and the trusted value
promise made to its
customers.
M&S’ founders knew that value means
much more than price; it means giving
customers assurance that raw materials
are sourced responsibly to protect the
planet for tomorrow, providing
confidence that the people who make
and sell products are treated fairly, and it
means setting the standards that others
follow, whether that’s animal welfare or
product traceability. Over the years, M&S’
approach to doing business has been
increasingly codified into what became
one of the first fully integrated
sustainability programmes, launched in
2007 as Plan A.
In building a business in this way, M&S
has created competitive advantage by
offering exceptional quality products
at remarkable value; products that are
made and sourced with care so that
they’re simply too good to go to waste.
It’s for this reason that Exceptional
Product and Trusted Brand is at the heart
of our strategic priorities to reshape M&S.
As we grow our business, how we source,
make, sell and serve our customers will
impact our business carbon footprint.
However, as an own-brand retailer, we
are uniquely positioned to innovate in
partnership with our long-standing
suppliers and business partners to
reduce emissions in our Food, Clothing
& Home, Property and International
businesses and ultimately be a net zero
business by 2040.
Today, Plan A is not a separate
programme but rather sits within the
business, with accountability for its
delivery devolved to each of the
Managing Directors. Our approach to
sustainability encompasses the critical
issues and concerns of our stakeholders
with clear governance and oversight
by the Board and ExCo as outlined on
page 70.
OUR ESG PROGRAMME
Building & maintaining trust and upholding our product point of difference is dependent on the delivery of our full ESG programme
ENVIRONMENT
SOCIAL
GOVERNANCE
PLANET
ANIMAL
WELFARE
ETHICAL
TRADE
HEALTHIER
FOOD
PEOPLE
COMMUNITY
GOVERNANCE
Exceptional
PRODUCT &
TRUSTED BRAND
PLANET
ANIMAL
WELFARE
ETHICAL TRADE
HEALTHIER
FOOD
PEOPLE
COMMUNITY
GOVERNANCE
LEADING IN
OMNI-CHANNEL
EXPANDED
GLOBAL REACH
STRUCTURALLY
LOWER COST
BASE
HIGH
PERFORMANCE
CULTURE
ACCELERATING
STORE ROTATION
MODERNISED
SUPPLY CHAIN
COMPELLING
CUSTOMER
ECO SYSTEM
PLANET
PLANET
PLANET
PEOPLE
PLANET
PLANET
COMMUNITY
NET ZERO PRIORITY
Reduce and
recycle
packaging
NET ZERO PRIORITY
Zero emissions
transport
NET ZERO PRIORITY
Suppliers and
businesses
NET ZERO PRIORITY
Reduce food
waste
NET ZERO PRIORITY
Zero emissions
transport
NET ZERO PRIORITY
Circular
economy
PEOPLE
(Across
programmes drive
new and more
efficient ways of
doing things)
NET ZERO PRIORITY
Zero emissions
property
NET ZERO PRIORITY
Zero emissions
transport
COMMUNITY
ETHICAL
TRADE
Achieving ESG goals will require us to pioneer new approaches and invest in emerging technology,
but we must do so with clear evidence of carbon reduction, cost and payback.
DISCIPLINED CAPITAL ALLOCATION
In doing the right thing by our customers, colleagues and the communities we serve, we will do right by our shareholders.
GOVERNANCE
32
Marks and Spencer Group plc
STRATEGIC REPORT
This approach is underpinned by our
ESG metrics and targets which we report
transparently in our 2023 Sustainability
Report. We have reset the operating
model and ways of working to more
deeply devolve Plan A into the business
with higher level of oversight. The ESG
Business Forum meets quarterly chaired
by the Corporate Affairs Director.
While M&S’ approach to sustainability
starts with Exceptional Product and
Trusted Brand, it runs through all the
strategic priorities to provide the
foundation for its plans to reshape
M&S for growth that is sustainable
in every sense.
RESHAPING M&S
FOR SUSTAINABLE GROWTH
OUR PROGRESS THIS YEAR:
Our Exceptional Product and
Trusted Brand are core to what makes
us M&S. This year M&S raised the bar
again by becoming the first retailer to
only sell slower-reared higher welfare
chicken across fresh products. In
Clothing we stepped up our sourcing
due diligence, with the introduction
of new technologies that can trace
our cotton right back to its region and
farm of origin – giving us and our
customers increased confidence in
our Responsible Cotton Sourcing
Policy (Read more on page 22 of our
Sustainability Report).
True leadership in Omni-channel
includes leading the way in
sustainable operations as more sales
transition into growth channels. For
example, in 2022/23 there was a 20%
growth in Click & Collect sales, with 9%
of orders picked and packed in stores.
As set out in detail on page 18, M&S
became the first major retailer to
introduce a Bring your Own Bag
initiative for Click & Collect orders,
which will save 10 million pieces of
plastic annually.
A high-performance culture is about
making M&S a place where everyone
can be their best and be themselves.
That starts with everyone feeling
fairly rewarded and recognised
for the work they do. As set out on
pages 6 and 81, with the rising
cost-of-living, the priority this year
has been to support front-line
colleagues with a significant
investment in front-line pay.
As M&S expands its global reach,
the challenge is to do so without
compromising the delivery of its net
zero goals or the trust in its brand.
This year the international team has
delivered a 75% increase in the
adoption of ‘freeze defrost’ delivery
methods. This approach enables M&S
to reach its international customers
using a lower carbon transport
method, such as shipping, whilst
retaining exceptional product quality.
Structurally lowering the cost base
means finding new and better ways of
doing things. But better can mean
more efficient and more sustainable.
In Food, M&S has reduced waste by a
further 24% on last year through new
interventions such as the removal of
best before dates on over 300 fruit
and vegetables – helping extend the
shelf life of 85% of the fresh produce
we sell.
Accelerating store rotation helps
build an estate that’s fit for the future;
this means a more efficient, lower
energy and lower carbon M&S estate.
To support this goal, M&S has invested
in new metering and data capture
technology to help better plan
emission reductions into the ongoing
store investment programme.
Alongside this, in December, M&S
announced a new 10 year agreement
with bp pulse, which includes the
roll-out of 900 electric vehicle
charging points to M&S stores over
the next two years.
Modernising the supply chain will be
a key contributor to reaching M&S’ net
zero target. The acquisition of Gist
– M&S’ primary food logistics provider
– gives M&S full control of the food
supply chain for the first time and
the ability to lead decision making
in sustainable investments and
innovation. Overall, M&S has seen a 3%
reduction in Scope 1 & 2 emissions (our
property and logistics network) in
2022/23.
A compelling customer ecosystem
connects every customer engagement
across M&S to deliver a personalised,
rewarding experience. One aspect of
personalisation is supporting the
causes that matter to customers.
Through Sparks they can select from
35 charities from Macmillan to WWF
and M&S will donate every time they
shop with us. It’s the most popular
feature of Sparks and this year M&S has
donated £2.1m to its Sparks charity
partners.
Disciplined capital allocation requires
a single-minded focus on delivering
value creation for shareholders.
This means investing in growth
opportunities that are commensurate
to risk. Achieving its sustainability
goals will require M&S to pioneer new
alternatives and invest in emerging
technologies. To test the business
case for such investment, M&S has
relaunched its Plan A Accelerator
Fund – a £1m annual fund to support
projects tackling climate related
challenges across our value chain.
This approach allows M&S to innovate,
whilst building clear evidence of
carbon reduction, costs and payback
rates to inform any decision to invest
at scale.
ROADMAP TO NET ZERO –
PROGRESS HIGHLIGHTS
– Our 2030 corporate greenhouse gas
emissions reduction target has been
approved by the Science Based Target
initiative (SBTi) (see official science
based target on page 55).
– We now have clear line of sight to 62% of
the 2.1 million emissions reduction we
are committed to deliver in 2025/26
– We rolled out an ESG data performance
platform (Sphera) to better track and
manage our Scope 1 & 2 emissions
across our property estate and logistics
network (including Gist).
– As part of our SBTi approval process
and after the acquisition of Gist, we
restated our base year (2016/17)
emissions.
– A summary of changes of our base year
and current greenhouse gas emissions
can be found on page 15 of our
Sustainability Report.
Best before dates replaced
with a code used to ensure
freshness and quality
Read more in our Task Force on
Climate-related Financial
Disclosure Report on page 44
Annual Report & Financial Statements 2023
33
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT OUR KEY PERFORMANCE INDICATORS
FINANCIALS
GROUP REVENUE
£11.9bn
21/22: +9.6%
22/23
21/22
20/21
19/20
RETURN ON CAPITAL EMPLOYED (ROCE)
10.6%
21/22: -1.6ppt
11.9
10.9
9.0
10.2
22/23
21/22
20/21
19/20
APM
10.6
12.2
3.8
10.0
Group statutory revenue was £11.9bn, an increase of 9.6% vs.
2021/22. This was driven by Clothing & Home revenue up 10.6%,
Food revenue up 8.7% and International revenue up 12.6%.
Return on capital employed decreased 1.6ppt largely driven by the
decrease in earnings before interest, tax and adjusting items.
GROUP PROFIT BEFORE TAX AND ADJUSTING ITEMS
£482.0m
21/22: -7.8%
APM
GROUP PROFIT BEFORE TAX
£475.7m
21/22: +21.4%
22/23
21/22
20/21
19/20
482.0
522.9
41.6
403.1
22/23
21/22
20/21
19/20
Group profit before tax and adjusting items was £482.0m, down
7.8% vs 2021/22, largely due to declines in Food, Clothing & Home
and Ocado Retail, offset by an increase in International operating
profit and reduced interest.
Group profit before tax was £475.7m, up 21.4% on 2021/22.
ADJUSTED EARNINGS PER SHARE (EPS)
BASIC EARNINGS PER SHARE
APM
18.1p
21/22: -16.6%
22/23
21/22
20/21
19/20
18.5p
21/22: +17.8%
18.1
21.7
1.1
16.7
22/23
21/22
20/21
19/20
475.7
391.7
(201.2)
67.2
18.5
15.7
(9.8)
1.3
Adjusted basic earnings per share was 18.1p due to lower adjusted
profit year on year.
Basic earnings per share was 18.5p, up from 15.7p in 2021/22, due to
the increase in profit year-on-year. The weighted average number of
shares in issue during the period was 1,963.5m (2021/22: 1,958.1m).
DIVIDEND PER SHARE
FREE CASH FLOW FROM OPERATIONS
Nil
21/22: Level
22/23
21/22
20/21
19/20
£170.4m
21/22: -77.0%
Nil
Nil
Nil
3.9
22/23
21/22
20/21
19/20
APM
170.4
739.6
273.7
203.9
As stated elsewhere, the Board plans to restore a modest
dividend to shareholders starting with an interim dividend
with the results in November.
The business generated free cash flow from operations of £170.4m,
reducing year on year. This was driven by lower operating profit as a
result of business rates relief in 2021/22, prior year working capital
inflows, increased capital expenditure, and tax payments.
APM
Read more about our alternative
performance measures on page 1
34
Marks and Spencer Group plc
STRATEGIC REPORT FINANCIAL REVIEW
A focus on cost reduction and cash generation is enabling
investment in growth and a stronger balance sheet.”
Jeremy Townsend
Chief Finance Officer
FINANCIAL SUMMARY
52 weeks ended
Group statutory revenue
Group sales
UK Food
UK Clothing & Home
International
Group operating profit 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 before tax
Profit after tax
Basic earnings per share
Adjusted basic earnings per share
Net debt
Group capex and disposals
Free cash flow from operations
1 Apr 23
£m
11,931.3
11,988.0
7,218.0
3,715.0
1,055.0
626.6
248.0
323.8
84.8
(0.5)
(29.5)
(111.1)
(33.5)
482.0
(6.3)
475.7
364.5
18.5p
18.1p
2.64bn
409.2
170.4
2 Apr 22
£m
10,885.1
10,909.0
6,639.6
3,332.2
937.2
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
2.70bn
213.5
739.6
Change vs
2021/22
%
9.6
9.9
8.7
11.5
12.6
-11.6
-10.7
-2.1
15.2
-103.8
-312.2
-3.9
-52.5
-7.8
-95.2
21.4
18.0
17.8
-16.6
-2.2
91.7
-77.0
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.
Annual Report & Financial Statements 2023
35
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT FINANCIAL REVIEW CONTINUED
GROUP RESULTS
Group sales were £11,988.0m. This was an increase of 9.9%
versus 2021/22, driven by Clothing & Home sales up 11.5%, Food
sales up 8.7% and International sales up 12.6%. UK Food sales
growth also reflects the impact of third party sales by Gist
Limited of £84.2m following its acquisition, which had a positive
effect of c.1.3% in the year. Like-for-like sales were unaffected
by the acquisition of Gist.
Statutory revenue in the period was £11,931.3m, an increase
of 9.6% versus 2021/22.
The Group generated profit before tax and adjusting items
of £482.0m, compared with £522.9m in the prior year.
The Group benefited from Covid-related UK business rates
relief of £59.8m in 2021/22, which was not repeated in 2022/23.
Adjusting items were a net charge of £6.3m, compared with a
charge of £131.2m in the prior year. The reduction was largely a
result of a credit of £108.0m representing the revaluation of the
contingent consideration payable for the investment in Ocado
Retail Limited.
As a result the Group generated a statutory profit before tax
of £475.7m, compared with £391.7m in the prior year.
Adjusted basic EPS were 18.1 pence, down 16.6% on 2021/22
reflecting business rates relief in the prior year. Basic EPS were
18.5 pence, up 17.8% on 2021/22, reflecting the reduced net
charge for adjusting items.
For full details on adjusting items and the Group’s related
policy, read more on notes 1 and 5 to the financial information.
UK: FOOD
UK Food sales increased 8.7%, with like-for-like sales up 5.4%,
underpinned by strong performance of hospitality and
franchise sales, following Covid restrictions in the prior year.
1 UK Food sales growth in Q3 and Q4 reflect the impact of third party sales by Gist
Limited, which had a positive effect in the FY of c.1.3%. UK Food sales are equal to
statutory revenue.
M&S Food has an online grocery presence with Ocado Retail
and these sales are reported through Ocado Retail and are
not contained within these numbers.
52 weeks ended
1 Apr 23
2 Apr 22
Footfall, m (average/week)
Transactions, m (average/week)
Basket value inc VAT (£)
10.5
9.0
15.2
10.2
8.0
15.9
Total sales ex VAT £m1
7,218.0
6,639.6
Change vs
2021/22 %
2.9
12.5
-4.4
8.7
1 Includes M&S.com
Transactions increased, driven by the growth in hospitality and
franchise sales which are typically smaller value and which
were reflected in a reduction in overall basket value. However,
larger basket transactions continued to grow.
52 weeks ended
Sales
Operating profit before
adjusting items
Adjusted operating margin
1 Apr 23
£m
2 Apr 22
£m
Change vs
2021/22 %
7,218.0
6,639.6
8.7
248.0
3.4%
277.8
-10.7
4.2%
-80bps
36
Marks and Spencer Group plc
Change vs 2021/22 %
Food1
Food like-for-like sales
Q1
6.6
3.4
Q2
4.5
2.5
Q3
10.2
6.3
Q4
13.2
9.2
FY
8.7
5.4
2021/22
Gross margin
Store staffing
Operating profit before adjusting items was £248.0m
compared with £277.8m in 2021/22, with last year’s result
benefiting from £24.6m of UK business rates relief.
The overall Food adjusted operating margin decreased by
80bps (40bps excluding rates relief). Within this, gross margin
declined 110bps, largely as a result of investment in trusted
value, while operating costs improved 70bps as sales grew
faster than costs.
Total adjusted operating costs grew c.7%, with growth of c.4%
excluding business rates relief and the acquisition of the Gist
third-party business. This included pay and inflation related
cost increases such as energy of c.7%, new space and volume
of c.1.5%, and investments such as in-store technology
improvements. However, this was partly offset by efficiencies
of c.6%, predominantly in store staffing and benefits from the
Gist management fee saving, following acquisition.
The table below sets out the resulting movement in Food
adjusted operating margin by key cost driver:
– Store staffing costs decreased 50bps. Colleague pay
increases were largely offset by retail efficiencies and
sales growth.
– Other store costs increased 10bps, with a 40bps adverse
impact from the receipt of business rates relief in the prior
year, and additional energy cost headwinds.
– Distribution and warehousing costs increased 10 bps. The
increase largely reflects pay and inflation increasing faster
than sales, although these were partly offset by Gist
management fee savings in H2.
– Central costs decreased 10bps due to sales leverage, despite
additional technology investments in store and trials of the
new forecasting, ordering and allocation system.
Operating profit margin before adjusting items
Other store costs
Distribution and warehousing
Central Food costs
2022/23
UK: CLOTHING & HOME
Clothing & Home sales increased 11.5% with continued recovery
of store sales, which are now above pre-Covid levels, and a
robust performance by the online business.
Change vs 2021/22 %
Q1
Q2
Clothing & Home sales
18.2
10.3
Q3
8.8
Q4
10.2
FY
11.5
Clothing & Home
like-for-like sales
Clothing & Home stores
sales
Clothing & Home online
sales
Clothing & Home
statutory revenue
17.6
10.2
8.6
9.6
11.2
24.3
14.0
12.8
9.8
14.9
7.0
2.9
0.7
11.1
4.8
16.7
9.6
7.1
10.8
10.6
To enable greater insight into these movements, further detail
is provided on the performance of each channel.
%
4.2
(1.1)
0.5
(0.1)
(0.1)
0.1
3.4
STRATEGIC REPORT ONLINE
52 weeks ended
Traffic (m)1
Conversion (%)2
Average order value incl. VAT
pre returns (£)
Returns rate (%)3
Sales ex VAT £m
1 Apr 23
2 Apr 22
Change vs
2021/22 %
446.5
405.7
10.1
6.7
7.0
-30bps
58.6
29.5
55.4
25.6
5.8
390bps
1,176.4
1,122.7
4.8
1 Traffic: the number of site visits to M&S.com and the app.
2 Conversion: the number of orders as a % of the number of site visits.
3 Prior year number restated due to basis of calculation. Returns rate represents returns
on despatch sales.
Following strong performance last year, online sales remained
solid with growth throughout the year despite a tough market
backdrop. Average order value grew almost 6% reflecting
higher average selling prices, partly driven by mix.
The online returns rate increased year-on-year due to the
growth of third-party brands which have a higher returns rate
and a reversion in product mix and customer behaviour. Store
returns rates reduced, with fitting rooms now reopened post
pandemic.
STORES
52 weeks ended
1 Apr 23
2 Apr 22
Footfall, m (average/week)
Transactions, m (average/week)
Average basket value inc VAT
pre returns (£)
Sales ex VAT £m
4.5
1.8
4.0
1.7
37.4
34.9
2,538.6
2,209.5
Total adjusted operating costs increased 7.6%, with growth
of 5.2% adjusted for business rates relief. Pay and inflation
related costs such as energy contributed 4% to cost growth,
while space, volume and channel mix contributed 3% and
investments were made in digital development, the growth
of third-party brands and marketing. These were partly
offset by efficiencies of c.3%, including store staffing.
The table below sets out the drivers of the movement in
Clothing & Home operating profit before adjusting items
for the total segment and by channel.
– Store staffing costs decreased 60bps. Colleague pay
increases were more than offset by retail efficiencies
and sales growth.
– Other store costs were level. There was a 100bps adverse
impact from the receipt of business rates relief in the prior
year, which was offset by the effects of sales growth.
– Distribution and warehousing costs improved 110bps due
to sales growth and channel mix, which more than offset
pay inflation.
– Central costs were level as a percentage of sales despite
significant additional digital investments including website
front end development and increased personalisation.
Operating profit margin
before adjusting items
Total %
Stores %
Online %
Change vs
2021/22 %
2021/22
12.5
5.9
7.2
14.9
Gross margin
Store staffing
Other store costs
Distribution and warehousing
Central Clothing & Home costs
2022/23
9.9
(2.9)
0.6
0.0
1.1
0.0
8.7
10.3
(2.1)
0.9
0.4
0.8
0.1
10.4
9.1
(4.5)
0.4
0.1
0.9
(0.9)
5.0
UK Clothing & Home store sales increased 14.9%, with all
clothing store formats seeing an improvement in sales year-
on-year, also supported by higher average selling prices and
mix. Average weekly footfall was up 12.5% following Covid
restrictions lifting during Q1 last year, contributing to an
increase in transactions.
TOTAL CLOTHING & HOME
Operating profit before adjusting items was £323.8m compared
with £330.7m in 2021/22, with last year’s result benefitting from
£35.2m of UK business rates relief.
52 weeks ended
Statutory revenue
Sales
Operating profit before
adjusting items
Adjusted operating margin
1 Apr 23
£m
2 Apr 22
£m
Change vs
2021/22 %
3,658.3
3,308.3
3,715.0
3,332.2
10.6
11.5
323.8
8.7%
330.7
-2.1
9.9%
-120bps
As outlined above, store margin increased, largely due
to strong sales growth. Online margin was adversely
impacted due to slower sales growth, product mix and
digital investments.
INTERNATIONAL
Total International sales increased 11.2% at constant currency.
Store sales grew 14% as the business recovered from lockdown
in several markets in Q1 of the prior year. Online sales were up
5% led by India and growth through European marketplaces
in H2.
Sales excluding the Republic of Ireland were up 15.1% at
constant currency, driven by Clothing & Home sales in India
and continued robust demand from partners in the Middle
East. Trading in Europe was adversely impacted by the closure
of operations in Russia and France. Sales growth in the Republic
of Ireland was robust despite continuing EU border related
headwinds in Food.
The overall Clothing & Home adjusted operating margin
decreased by c.120bps (20bps excluding rates relief). Within
this, gross margin decreased 290bps, although this was partly
offset by lower operating costs as a percent of sales, as sales
grew faster than costs.
52 weeks ended
1 Apr 23
£m
2 Apr 22
£m
Change vs
2021/22 %
Change vs
2021/22 CC %
Total sales
1,055.0
937.2
Memo: Sales excl.
Republic of Ireland
741.0
637.8
12.6
16.2
11.2
15.1
Within gross margin, bought-in margin declined c.200bps.
Sourcing, freight and in-year currency related cost pressures,
particularly in H2, were not fully offset by pricing activity.
In addition, as expected, promotional mix normalised and,
third-party brands grew, diluting margin by c.30bps.
Operating profit
before adjusting
items
Adjusted operating
margin
Memo: Operating
profit before
adjusting items excl.
Republic of Ireland
84.8
73.6
15.2
16.2
8.0%
7.9%
10bps
30bps
67.9
58.2
16.7
18.6
Annual Report & Financial Statements 2023
37
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT FINANCIAL REVIEW CONTINUED
Total International operating profit before adjusting items was
up 15.2% to £84.8m, with adjusted operating margin up 10bps
to 8.0%. This was largely driven by growth in markets excluding
the Republic of Ireland.
Gross margin decreased by 20bps, driven by a reduced
Clothing & Home gross margin in the Republic of Ireland.
Operating costs increased 11.6% but reduced as a percent of
sales. The increase in operating costs was largely driven by the
business returning to a fully operational state following Covid
related lockdowns in Q1 last year. In addition, pay and energy
related cost inflation was absorbed in owned markets.
OCADO RETAIL LTD
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 29 May 2022, 28 August
2022, 27 November 2022 and 26 February 2023.
Ocado Retail EBITDA before exceptional items was down,
reflecting smaller baskets, lower gross margins, under-utilised
CFC capacity and higher fulfilment and delivery costs.
Ocado Retail recognised £21.2m of exceptional income
before tax, predominantly relating to the insurance income
for Andover and Erith CFCs, offset by costs relating to the
development and introduction of new IT systems as Ocado
Retail transition away from Ocado Group IT services, tools
and support.
As a result of lower EBITDA, partly offset by exceptional profits,
M&S Group share of Ocado Retail loss after tax was £29.5m.
M&S BANK AND SERVICES
M&S Bank and Services generated a loss before adjusting
items of £0.5m, as compared with profit of £13.0m in 2021/22.
Deterioration of the forward macro-economic environment
guidance drove the need for higher bad debt provision resulting
in insufficient profits to generate a profit share payment.
Revenue growth (%)
Active customers (k)
Average orders
per week (k)
Q1
-9.8
867
Q2
2.6
947
Q3
0.3
942
Q4
3.4
957
FY
-1.2
957
NET FINANCE COST
52 weeks ended
Interest payable
385
374
382
381
380
Interest income
Net interest payable
Pension net finance income
Unwind of discount on Scottish
Limited Partnership liability
Unwind of discount on provisions
1 Apr 23
£m
2 Apr 22
£m
Change vs
2021/22
£m
(76.3)
23.8
(52.5)
28.7
(4.3)
(5.4)
(85.1)
9.6
(75.5)
13.2
(4.4)
(3.8)
8.8
14.2
23.0
15.5
0.1
(1.6)
37.0
Net financial interest
(33.5)
(70.5)
Net interest payable on lease
liabilities
(111.1)
(115.6)
4.5
Change
%
Net finance costs before
adjusting items
Adjusting items included in net
finance costs
Net finance costs
(144.6)
(186.1)
41.5
105.2
5.6
(39.4)
(180.5)
99.6
141.1
Net finance costs before adjusting items decreased £41.5m
to £144.6m. This was driven by higher average interest rates
on cash balances and higher pension finance income from a
larger opening pension surplus balance. In addition, interest
expense reduced as a result of the partial buy-back of 2023
and 2025 bonds.
Adjusting items within net finance costs reflect a credit
relating to the remeasurement of Ocado Retail contingent
consideration of £108m and a charge of £2.8m reflecting the
discount unwind on deferred consideration and revaluation of
contingent consideration on the acquisition of Gist Limited.
Notes: Retail revenue comprises revenues from Ocado.com and Ocado Zoom. Average
orders per week refers to results of Ocado.com
Revenue declined 1.2% over the 52 weeks to 26 February 2023.
While active customers grew 14.6% and order numbers
increased 3.9%, basket sizes have continued to decline due to
the near-term pressures of the pandemic unwind and cost-of-
living crisis. Revenue performance in the last three quarters
was ahead of last year.
52 weeks ended
Revenue
EBITDA before exceptional items
Exceptional items1
Depreciation and amortisation
Operating (loss)/profit
Net interest charge
Taxation
(Loss)/profit after tax
26
February
2023
£m
27
February
2022
£m
2,222.0
2,248.8
(15.1)
21.2
(69.4)
(63.3)
(14.3)
18.6
(59.0)
104.8
(14.4)
(41.3)
49.1
(16.4)
(4.9)
27.8
-1.2
-114.4
247.2
68.0
-228.9
-12.8
479.6
-312.2
M&S 50% share of (loss)/profit
after tax
(29.5)
13.9
-312.2
1 Exceptional items are defined within the Ocado Group plc Annual Report and
Accounts 2022.
38
Marks and Spencer Group plc
STRATEGIC REPORT GROUP PROFIT BEFORE TAX AND ADJUSTING ITEMS
Group profit before tax and adjusting items was £482.0m, down
7.8% on 2021/22. The profit decrease was largely due to declines
in Food, Clothing and Home and Ocado Retail, offset by an
increase in International operating profit and reduced interest.
UK profits in the prior year benefitted from £59.8m business
rates relief.
GROUP PROFIT BEFORE TAX
Group profit before tax was £475.7m, up 21.4% on 2021/22.
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 information. These (charges)/gains are reported
as adjusting items on the basis that they are significant in
quantum in current or future years and to aid comparability
from one period to the next.
Adjusting items recognised were a net charge of £6.3m.
These include:
A charge of £51.3m in relation to UK store estate rotation
plans. This reflects a revised view of latest store exit routes,
assumptions, estimated closure costs, charges relating to the
impairment of buildings, fixtures and fittings, and accelerated
depreciation.
A non-cash charge of £10.7m within organisation relating to
updated assumptions regarding the sub-let of previously
closed Merchant Square offices.
A charge of £16.4m for structural simplification of the
organisation, which has resulted in a reduction of c.700 roles
across support centres, management and stores, with the
charge reflecting the associated redundancy and exit costs.
A net charge of £10.5m for UK logistics, reflecting estimated
costs of closure relating to the announced closure of a further
distribution centre in 2023/24, as part of the previously
announced programme to transition to a single-tier UK
distribution network.
52 weeks ended
Strategic programmes –
UK store estate
Strategic programmes –
Structural simplification
Strategic programmes –
Organisation
Strategic programmes –
UK logistics
Strategic programmes –
International store closures
and impairments
Store impairments, reversals and
other property charges
Acquisition of Gist Limited
Amortisation and fair value
adjustments arising as part
of the investment in Ocado
Retail Limited
M&S Bank charges incurred in
relation to the insurance
mis-selling provisions
Franchise restructure
Directly attributable gains
resulting from the Covid-19
pandemic
Included in net finance
income/(costs)
Remeasurement of Ocado Retail
Limited contingent consideration
Net finance costs incurred in
relation to Gist Limited deferred
and contingent consideration
1 Apr 23
£m
2 Apr 22
£m
Change vs
2021/22
£m
A non-cash net credit of £15.1m in relation to UK and
International store impairments, driven by revised future cash
flow projections in relation to the carrying value of stores.
(51.3)
(161.4)
110.1
(16.4)
–
(16.4)
(10.7)
14.3
(25.0)
(10.5)
21.9
(32.4)
A charge of £22.1m relating to the acquisition of Gist to
transform the supply chain. Within this, £18.2m of charges
relate to the settlement of our pre-existing relationship with
Gist Limited.
A non-cash charge of £14.0m with respect to the amortisation
of intangible assets acquired on the purchase of our share in
Ocado Retail partly offset by the related deferred tax credit.
Charges of £2.0m have been incurred relating to M&S Bank,
primarily due to the insurance mis-selling provision.
–
0.4
(0.4)
15.1
(22.1)
60.0
–
(44.9)
(22.1)
In 2021/22, the Group announced the restructure of its
franchise operations in France. Following finalisation of costs,
£0.4m of the provision has been released, with no future costs
currently expected.
(14.0)
(32.5)
18.5
(2.0)
0.4
(16.0)
(41.3)
14.0
41.7
–
17.8
(111.5)
(136.8)
(17.8)
25.3
108.0
5.6
102.4
(2.8)
105.2
–
5.6
(2.8)
99.6
A credit of £108m representing the revaluation of the
contingent consideration payable for the investment in
Ocado Retail Limited to £64.7m.
TAXATION
The effective tax rate on profit before tax and adjusting
items was 25.9% (2021/22: 18.2%). This was higher than the UK
statutory tax rate primarily due to the impact of the recapture
of tax relief on distributions to the Scottish Limited Partnership
(SLP), which have resumed in the year, and non-taxable Ocado
Retail losses.
The effective tax rate on statutory profit before tax was 23.4%
(2021/22: 21.1%). This is lower than the effective tax rate on profit
before adjusting items due to the impact of non-taxable
adjusting items.
In 2023/24 we expect the effective tax rate on profit before tax
and adjusting items to increase to c.31-32%, largely as a result of
the increase in the UK corporation tax rate.
EARNINGS PER SHARE
Basic earnings per share was 18.5p (2021/22: 15.7p), due to the
increase in profit year-on-year. The weighted average number
of shares in issue during the period was 1,963.5m (2021/22:
1,958.1m).
Adjusted basic earnings per share was 18.1p (2021/22: 21.7p) due
to lower adjusted profit year-on-year.
Annual Report & Financial Statements 2023
39
Adjustments to profit before tax
(6.3)
(131.2)
124.9
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT FINANCIAL REVIEW CONTINUED
CASH FLOW
52 weeks ended
Operating profit
Adjusting items within
operating profit
Operating profit before
adjusting items
Depreciation and amortisation
before adjusting items
Cash lease payments
Working capital
Defined benefit scheme
pension funding
Capex and disposals
Financial interest
Taxation
Employee-related share
transactions
Share of (profit)/loss from
associate
Adjusting items in cashflow
Loans to Associates
Free cash flow from operations
Acquisitions, investments, and
divestments
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
1 Apr 23
£m
2 Apr 22
£m
Change vs
2021/22
£m
515.1
572.2
(57.1)
pandemic, which are partially reversing as Clothing & Home
shifts back towards pre-Covid terms. The outflow was lower
than anticipated due to the phasing of payables over year end.
Defined benefit scheme pension funding of £36.8m reflects
the agreed SLP interest distribution to the pension scheme.
111.5
136.8
(25.3)
Increased taxation was principally due to the resumption
of UK corporation tax payments in the period.
626.6
709.0
(82.4)
523.2
510.7
(353.8)
(344.3)
12.5
(9.5)
(10.1)
239.7
(249.8)
(36.8)
(36.8)
–
(409.2)
(213.5)
(195.7)
(66.5)
(70.6)
(79.9)
(7.7)
13.4
(62.9)
Adjusting items in cashflow includes £26.4m relating to the exit
of the Russian franchise business, £22.8m relating to the UK
store estate strategy, £8.9m related to structural simplification,
£6.7m for costs related to the Gist acquisition and £2.0m
relating to the M&S Bank insurance mis-selling provisions.
Loans to associates reflects drawdown of the shareholder
loan facility by Ocado Retail, with an outflow of up to £70m
anticipated in 2023/24.
Acquisitions, investments and divestments were driven
principally by the payment of £102.8m relating to the
acquisition of Gist, net of cash received.
37.9
39.1
(1.2)
The business generated free cashflow of £63.6m, resulting
in a further reduction of net debt.
29.5
(69.9)
(30.0)
170.4
(13.9)
(61.8)
(1.0)
43.4
(8.1)
(29.0)
CAPITAL EXPENDITURE
52 weeks ended
739.6
(569.2)
UK store remodelling
(106.8)
(40.4)
(66.4)
63.6
699.2
(635.6)
–
–
–
63.6
699.2
(635.6)
New UK stores
International
Supply chain
IT and M&S.com
Property asset replacement
Capital expenditure before
property acquisitions and
disposals
1 Apr 23
£m
2 Apr 22
£m
Change vs
2021/22
£m
70.5
55.0
28.9
36.8
109.5
102.1
402.8
50.1
49.9
18.2
28.6
68.2
85.2
20.4
5.1
10.7
8.2
41.3
16.9
300.2
(43.9)
256.3
102.6
42.8
145.4
(420.1)
(1,110.0)
689.9
Property acquisitions and disposals
(1.1)
Capital expenditure
401.7
63.6
699.2
(635.6)
0.9
(9.3)
10.2
Movement in capital accruals and
other items
Capex and disposals as per
cash flow
7.5
(42.8)
50.3
409.2
213.5
195.7
(355.6)
(420.1)
64.5
(2,698.8)
(3,515.9)
817.1
Group capital expenditure before property acquisitions and
disposals increased £102.6m to £402.8m due to increased
investment in technology, store remodelling and property
asset replacement.
63.6
231.8
699.2
216.0
(635.6)
15.8
UK store remodelling costs reflects 31 Food renewals and
upgrades to Clothing & Home space in several full line stores.
(249.4)
(100.6)
(148.8)
Spend on new UK stores primarily related to the opening of
3 full line and 6 Food stores and one Food extension.
New leases from acquisitions
(21.3)
(21.3m)
Exchange and other non-cash
movements
Closing net debt
36.9
2.5
(2,637.2)
(2,698.8)
34.4
61.6
The business generated free cashflow from operations of
£170.4m, reducing year on year. This was driven by lower
operating profit as a result of business rates relief in 2021/22,
prior year working capital inflows, increased capital
expenditure (detailed below), and tax payments.
Prior year working capital inflows were partly a result of changes
to payment terms for Clothing & Home suppliers during the
Supply chain expenditure reflects investment in the
underlying base food infrastructure together with spend
on upgrading vehicles.
IT and M&S.com spend includes technology replacement
and upgrades in stores, continued investment in website
development and investment in Food planning systems.
Property asset replacement has increased in the current year,
primarily driven by the resumption of investment following the
pandemic. This includes roof works and replacement of fridges,
freezers, boilers, lifts and escalators.
Prior year disposals include receipts from the sale of two
warehouses.
40
Marks and Spencer Group plc
STRATEGIC REPORT The movement in capital accruals and other items is driven
by landlord contributions partially offset by an increase in
capital accruals as capex spend normalises post pandemic.
NET DEBT
Group net debt decreased £61.6m driven by free cashflow from
operations of £170.4m, and a net cash outflow of £102.8m
relating to the acquisition of Gist.
New lease commitments, remeasurements (including from
acquisitions) in the period were £270.7m, largely relating to 14
new UK leases, the consolidation of Gist Limited lease liabilities,
lease additions in India, and UK property and logistics liability
remeasurements. This was offset by £231.8m of capital lease
repayments.
The composition of Group net debt is as follows:
52 weeks ended
1 Apr 23
£m
2 Apr 22
£m
Change vs
2021/22
£m
Cash and cash equivalents
1,067.9
1,197.9
(130.0)
Medium Term Notes
(1,346.4)
(1,529.5)
183.1
Current financial assets
and other
Partnership liability
Net debt excluding
lease liabilities
44.8
(121.9)
99.4
(187.9)
(54.6)
66.0
(355.6)
(420.1)
64.5
Lease liabilities
– Full-line stores
– Simply Food stores
– Offices, warehouses and other
– International
Group net debt
(2,281.6)
(2,278.7)
(909.2)
(673.1)
(494.6)
(204.7)
(919.5)
(712.8)
(449.5)
(196.9)
(2,637.2)
(2,698.8)
(2.9)
10.3
39.7
(45.1)
(7.8)
61.6
The Medium Term Notes include five bonds, with maturities out
to 2037, and the associated accrued interest. During the period
part of the 2023 and 2025 bonds were repurchased, reducing
near-term liquidity draws. The USD 300m 2037 bond is valued
by reference to the embedded exchange rate in the associated
cross currency swaps. During the year these swaps were reset
and the embedded mark to market value realised resulting in
an increased value of the debt. The full breakdown of
maturities is as follows:
Bond and maturity date
Dec 2023, GBP
Jun 2025, GBP
May 2026, GBP
Jul 2027, GBP
Dec 2037, USD
Total principal value
Other
Total carrying value
Value (£m)
185.3
330.0
298.9
248.6
251.8
1,314.6
31.8
1,346.4
Full-line store lease liabilities include £192.2m relating to stores
identified as part of the UK store estate strategic programme.
Of the remaining full-line stores lease liability, the liability-
weighted average lease length to break is c.21 years. However,
these average lease lengths are skewed by five particularly
long leases on stores which are trading well in locations
where the Group intends to remain. Excluding these five
leases, the average term to break of leases outside the
programme is c.16 years.
Simply Food store lease liabilities include £26.3m 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 lease liabilities, £143.0m
relates to the sublet lease on the Merchant Square offices in
central London, which is part of the strategic programme,
organisation. Average lease length of all other offices and
warehouses to break is c.8 years.
International leases relate primarily to India (c.£99m) and
Ireland (c.£62m). Average lease length to break in India is close
to nil, as the majority 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 length to lease break or
expiry in Ireland is c.8 years.
PENSION
At 1 April 2023, the IAS 19 net retirement benefit surplus
was £477.4m (2021/22: £1,038.2m). There has been a decrease
of £560.8m from the start of the year largely driven by an
increase in gilt yields.
The pension scheme is fully hedged for movements in gilt
yields. However, on an IAS 19 basis there is an inherent basis risk
to the scheme valuation, with the pension assets moving with
underlying movements in rates and scheme liabilities exposed
to the movement in corporate bonds yields. In a normal period,
this always results in some dislocation between movements in
the scheme assets and liabilities. However, the increase in gilt
yields in the year led to a larger dislocation. Nevertheless,
there has been no material worsening of the scheme’s overall
funding position and the scheme remains fully funded on
a technical provisions basis.
The most recent actuarial valuation of the Marks & Spencer
UK Pension Scheme was carried out as at 31 March 2021 and
showed a funding surplus of £687m. This is an improvement
on the previous position at 31 March 2018 (funding surplus
of £652m), primarily due to lower assumed life expectancy.
MARKS AND SPENCER SCOTTISH LIMITED PARTNERSHIP
Marks and Spencer plc is a general partner of the Marks and
Spencer Scottish Limited Partnership, with the UK defined
benefit pension scheme, which is a limited partner. The
Partnership holds £1.3bn (last year: £1.3bn) of properties at
book value which have been leased back to Marks and Spencer
plc. The first limited Partnership interest held by the scheme
entitles it to receive £73.0m in 2023 and £54.4m in 2024 and is
included as a financial liability in the financial statements as it
is a transferable financial instrument. The second Partnership
interest held by the scheme, entitles it to receive a further
£36.4m annually from June 2017 until June 2031. It is not a
transferable financial instrument, so 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.
LIQUIDITY
At 1 April 2023, the Group held cash and cash equivalents
of £1,067.9m (2021/22: £1,197.9m). In the period, as part of its
approach to liability management, the Group bought back
c.£190m of bonds due for maturity in 2023 and 2025.
The Group currently has an unused £850m revolving credit
facility which is due to expire in June 2026 on terms linked
to delivery of its net zero roadmap. With the facility undrawn,
the Group has liquidity headroom of £1.9bn.
DIVIDEND
With the business generating an improved operating
performance and having a strengthened balance sheet with
credit metrics consistent with investment grade, the Board
plans to restore a modest annual dividend to shareholders
starting with an interim dividend with the results in November.
STATEMENT OF FINANCIAL POSITION
Net assets were £2,814.9m at the period end, a decrease of 3.5%
since the start of the year, largely due to the decrease in the IAS
19 pension surplus, partially offset by profits.
Annual Report & Financial Statements 2023
41
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT NON-FINANCIAL
AND SUSTAINABILITY
INFORMATION STATEMENT
The statements below reflect our commitment to, and management of, employees,
communities, the environment, human rights, anti-bribery and anti-corruption in the
last 12 months as required by sections 414CA and 414CB of the Companies Act 2006.
Policies on these matters can be found at corporate.marksandspencer.com.
Our Business Model can be found on pages 8 to 9.
Relevant policies, documents, or reports
that set out our approach
Sections within the Annual Report to read more
about the outcomes and related non-financial KPIs
of Our Commitment
– Code of Conduct
– Inclusion, Diversity & Equal
Opportunities Policy
– People Principles
– CEO and Co-CEO Q&A, on page 6
– Stakeholder engagement, on pages 9 and 10
– People & Culture, on pages 28 to 31
– S.172 Statement, on pages 80 to 82
– Board Diversity, on page 88
– Climate & Energy Policy
– Food Waste Policy
– Sustainability Report 2023
– Our TCFD Report, on pages 44 to 55
– S.172 Statement, on pages 80 to 82
– ESG Committee Report, on pages 90 to 91
– Climate-related (“CR”) financial disclosures:
– (a) governance arrangements, on pages 45
and 46;
– (b) how CR risks and opportunities are
identified, assessed and managed,
on pages 47 to 53;
– (c) how processes for identifying, assessing
and managing CR risks are integrated within
the Group’s overall risk management
framework, on page 54;
– (d) description of:-
(i) principal CR risks and opportunities,
on pages 48 to 50;
(ii) time periods to which these are
assessed, on page 47;
– (e) actual and potential impacts of the
principal CR risks and opportunities on the
business model and strategy, on page 47;
– (f) resilience of the business model and
strategy, taking into consideration different
CR scenarios, on pages 52 to 53;
– (g) targets used to manage CR risks and
realise CR opportunities and performance
against targets, on page 55 and in the
Sustainability Report on pages 57 to 65;
and
– (h) KPIs used to assess (g) targets above and
calculations on which these are based, on
page 54 and in the Sustainability Report
on pages 57 to 65.
Our Commitment
EMPLOYEES
We are committed to providing our
colleagues with a safe and healthy working
environment and an organisational culture
which promotes inclusivity, 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.
Dedicated corporate website area:
– Sustainability: Our People
Go to corporate.marksandspencer.
com/sustainability/our-people
ENVIRONMENTAL MATTERS
M&S is committed to becoming a net zero
business across the entire value chain by
2040. An ambitious roadmap has been
established and will ensure M&S plays its
part in limiting global warming to 1.5°C.
This year, to support us on our journey
to net zero, we had our 2030 corporate
greenhouse gas emissions reduction
target approved by the SBTi (see official
science based target on page 55).
M&S is a supporter of the Task Force on
Climate-Related Financial Disclosures
(“TCFD”) which provides a framework for
our approach to identifying, assessing and
managing our climate-related risks and
opportunities.
Dedicated corporate website area:
– Plan A: Our Planet
Go to corporate.marksandspencer.
com/sustainability/plan-a-our-
planet
– Look Behind the Label hub
Go to www.marksandspencer.com/c/
look-behind-the-label
42
Marks and Spencer Group plc
STRATEGIC REPORT Our Commitment
COMMUNITIES AND SOCIAL MATTERS
M&S has been committed to supporting
local communities throughout its 139-year
history. We aim to take a progressive
approach to our community engagement
and actions that make a big difference on
some of the most pressing causes in many
parts of the world.
Dedicated corporate website area:
– Our Communities
Go to corporate.marksandspencer.
com/sustainability/our-communities
– Our Products
Go to corporate.marksandspencer.
com/sustainability/our-products
HUMAN RIGHTS
M&S is committed to respecting human
rights in the UK and internationally;
ensuring people in our business and
supply chain are always treated fairly.
To support this, we are committed to
continuous improvement by building
knowledge and awareness on human
rights for all of our colleagues and
suppliers, as well as ensuring there are
methods of speaking up through our
improved “Worker Voice” technology
platform.
Dedicated corporate website area:
– Human Rights & Our Supply Chain
Go to corporate.marksandspencer.
com/sustainability/human-rights-
our-supply-chain
ANTI-BRIBERY AND ANTI-CORRUPTION
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. We set 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.
PRINCIPAL RISKS
We are committed to maintaining an
agile approach to risk management with
effective processes in place to proactively
identify and manage risks that may impact
the achievement of our business strategy
and objectives.
Relevant policies, documents, or reports
that set out our approach
Sections within the Annual Report to read more
about the outcomes and related non-financial KPIs
of Our Commitment
– Charity Partnerships
& Fundraising Policy
– Trading Standards & Consumer
Our contributions towards, and consideration of,
communities is integrated throughout the report
and can also be found in:
– Stakeholder engagement, on pages 9 and 11
– S.172 Statement, on pages 80 to 82
– ESG Committee Report, on pages 90 to 91
– Stakeholder Engagement, on page 11
– ESG Committee Report, on pages 90 to 91
Protection Policy
– Food & Product Safety
& Integrity Policy
– Farm Animal Health
& Welfare Policy
– Groceries Supply Code
of Practice (“GSCOP”)
Compliance Report
– Responsible Marketing
Principles
– Sustainability Report 2023
– 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
– Anti-Bribery &
Corruption Policy
– Code of Conduct
– Audit & Risk Committee Report, on page 95
– Risk Management Policy
– Risk Management Framework, on pages 56
to 57
– Overview of Principal Risks and Uncertainties,
on pages 58 to 65
– TCFD: Climate-related risks, on pages 44
to 55
Annual Report & Financial Statements 2023
43
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES REPORT
This section sets out our climate-related financial disclosures,
aligned to the Task Force on Climate-related Financial Disclosures
(“TCFD”) recommendations and LR 9.8.6R.
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, save for
our work on financial quantification
which will continue over the next
year, expanding to other risk and
opportunities currently identified
as“not yet quantified”. This will enable
us to provide fuller disclosure of
resilience and of the financial
impacts of all climate-related
risks and opportunities in line
with strategy B & C. Financial
quantification work to date has
focussed on the areas provisionally
identified as potentially having the
most material impacts.
For ease, the index provides a guide to
the disclosure including where
information is set out elsewhere in this
report. Further information can also be
found in our separate Sustainability
Report providing more comprehensive
reporting of our climate strategy and
progress. The Sustainability Report was
published on 6th June and is available at
marksandspencer.com/sustainability
report2023
44
Marks and Spencer Group plc
TCFD DISCLOSURES INDEX
TCFD PILLARS
TCFD RECOMMENDATION
REFERENCE
Governance
A) Describe the board’s oversight
of climate-related
risks and opportunities.
Read more on
pages 45-46
B) Describe management’s role
in assessing and managing climate-
related risks and opportunities.
Read more on page 52
in the Sustainability
Report
Strategy
A) Describe the climate-related
risks and opportunities the
organisation has identified over
the short, medium, and long term.
B) Describe the impact of climate-
related risks and opportunities
on the organisation’s businesses,
strategy, and financial planning.
C) Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-
related scenarios, including a 2°C
or lower scenario.
Risk Management A) Describe the organisation’s
process for identifying
and assessing climate risk.
B) Describe the organisations
processes for managing
climate-related risks.
C) Describe how processes for
identifying, assessing and
managing climate-related
risks are integrated into the
organisation’s overall risk
management.
Metrics and Targets A) Disclose the metrics used by
the organisation to assess
climate-related risks and
opportunities in line with its
strategy and risk management
process.
B) Disclosure scope 1, 2 and,
if appropriate scope 3
greenhouse gas emissions
and the related risks.
C) Describe the targets used
by the organisation to manage
climate-related risks and
opportunities and performance
against targets.
Read more on
pages 47-53
Read more in the
Sustainability Report
Read more on page 54
Read more on
pages 56-65 in the Risk
Management section
Read more on
pages 54-55
Read more in the
Sustainability Report
STRATEGIC REPORT OUR TCFD JOURNEY
Launched Plan A,
our sustainability
programme
Set an ambition to
be carbon neutral in
operations by 2012
Achieved carbon
neutrality in
International
operations
Signed up to British
Retail Consortium’s
Climate Action
Roadmap
Published our Roadmap towards
Net Zero
Develop detailed
financial framework
Started quantitative scenario
analysis
Disclosed scope 3 footprint
Issued first compliant disclosure
against the recommendations
of TCFD
Work towards plan
for transition in line
with TPT guidance
Enhance scope 3
reporting
2007
2012
2014
2017
2019/20
2020/21
2021/22
2022/23
NEXT
YEAR
Achieved carbon
neutrality in UK
own operations
Signed up as a
TCFD supporter
Began preparations
for the future adoption
of TCFD reporting
Strengthened governance
with the creation of our
ESG Committee
Undertook climate-related business
wide risk and opportunity review
Published quantitative
scenario analysis
Enhanced governance with
the introduction of an ESG
Business Forum
* Transition Plan Taskforce: https://transitiontaskforce.net/
Executive Committee (ExCo) members
are individually responsible for reviewing
and confirming risks in their own
areas and subsequently reviewing the
Group’s principal risks at the half year
and year end. This process provides the
Audit & Risk Committee with assurance
that significant risks are appropriately
monitored and managed throughout
the year.
This year, we have enhanced our
ESG governance process with the
introduction of an ESG Business Forum,
to replace the Plan A (Net Zero) Steering
Group. This forum, which is chaired by
a member of the ExCo, meets on a
quarterly basis and is made up of the
accountable business leaders for ESG
related issues. Quarterly updates from
these meetings are provided to the ExCo
and the ESG Committee.
GOVERNANCE
A) DESCRIBE THE BOARD’S
OVERSIGHT OF CLIMATE-RELATED
RISKS AND OPPORTUNITIES.
The Board has ultimate responsibility for
both risk management and ESG matters,
including those risks and opportunities
related to climate change. The Board is
also responsible for reviewing and
guiding significant strategic programmes
and expenditure and, as set out below,
relies on the support and advice of the
ESG and Audit & Risk Committees in
doing so.
Responsibilities in relation to ESG
matters are discharged to the ESG
Committee. The ESG Committee is
responsible for ensuring the Company’s
ESG strategy and associated governance,
including management of climate-
related issues, is fit for purpose and
appropriate metrics and targets are
in place and reported on. The ESG
Committee oversees progress against
these targets via a quarterly ESG report.
Responsibilities in relation to risk
management are discharged to the
Audit & Risk Committee, who review
the principal risks twice a year, of which
climate change and environmental
responsibility is one.
However, as the ESG Committee has
oversight of activities addressing our
climate change and environmental
responsibility risks, it supports the risk
management process by reviewing and
providing the Audit & Risk Committee
with recommendations on all ESG-
related risks. All members of both the
ESG and Audit & Risk Committees are
Non-Executive Directors (Committee
membership and meeting attendance
is outlined in the respective Committee
Reports on page 90 for the ESG
Committee and page 92 for the
Audit & Risk Committee).
An overview of our risk management
governance, including that relating to
climate change, is set out on page 57.
B) DESCRIBE MANAGEMENT’S ROLE
IN ASSESSING AND MANAGING
CLIMATE-RELATED RISKS AND
OPPORTUNITIES.
As outlined in our risk management
process (see page 56), ESG risks,
including those climate change risks
identified via our business-wide risk
and opportunities review, are considered
as part of each business’ risk register.
Each business area considers the capital
expenditure required for projects to
mitigate the likely short term climate-
related risks within the annual budget.
Annual Report & Financial Statements 2023
45
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT TCFD REPORT CONTINUED
GOVERNANCE STRUCTURE
BOARD
Ultimate responsibility for both Risk Management and ESG matters,
including those risks and opportunities related to climate change. Approves the Company’s
ESG strategy, including the group-wide target to become net zero.
EXECUTIVE COMMITTEE
BOARD COMMITTEES
– The CEO/Co-CEO are responsible for overseeing the
development of group-wide ESG strategic goals and are
accountable for the delivery of the Company’s group-
wide ESG programme (including the roadmap towards
net zero). The Executive Committee members are
individually responsible for setting ESG strategy in their
respective areas of the business to achieve group-wide
strategic goals (overseen by the ESG Committee and for
ultimate approval by the Board) and putting in place
mechanisms to deliver their strategy, in turn managing
the climate-related risks and opportunities impacting
their business areas.
– The Executive Committee members are individually
responsible for reviewing and confirming risks in their
own areas as part of our risk management process,
including climate risks.
ESG COMMITTEE
– Responsible for ensuring the Company’s ESG strategy
and associated governance is fit for purpose, and that
plans are in place and reported on.
– Advises the Audit & Risk Committee on ESG-related risks
and opportunities, including climate-related issues.
AUDIT & RISK COMMITTEE
– Responsible for ensuring the effectiveness of the risk
management process.
– Receive updates from the business leadership on how
principal risks and uncertainties of the business are
being appropriately addressed.
– Reviews the principal risks twice a year, of which climate
change and environmental responsibility is one.
MANAGEMENT FORUMS
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.
– Responsible for ensuring climate-related opportunities
are realised as part of their ESG strategy.
ESG BUSINESS FORUM
– Accountable for driving progress against the
workstreams/targets of the Company’s ESG programme,
which mitigate our climate risks. Meets quarterly to
review progress and agree the right metrics and targets
on a forward-looking basis.
– Updates the Executive Committee and ESG Committee
on a quarterly basis on progress against targets.
– Accountable for managing climate-related risks and
opportunities. Includes representatives from Group
Finance and Group Risk to ensure ESG considerations are
being appropriately reviewed and considered within risk
management and financial planning.
46
Marks and Spencer Group plc
STRATEGIC REPORT STRATEGY
A) DESCRIBE THE CLIMATE-RELATED
RISKS AND OPPORTUNITIES THE
ORGANISATION HAS IDENTIFIED
OVER THE SHORT, MEDIUM, AND
LONG TERM.
We know physical and transition climate-
related risks and opportunities can
manifest themselves to different
proportions over a longer-term time
horizon. To ensure we have a resilient
organisation fit for the future, it is
important that the management of our
climate-related risks and opportunities
is not only integrated into our existing
three-year strategy and planning
processes as an ongoing consideration
but also that we supplement current
processes with reviews focused on an
extended time horizon. This process
better informs our assessment of
emerging risks and opportunities and
identifies the appropriate actions to
strengthen business resilience.
We have used the following definitions
of time horizons for the purposes of
identifies and managing our climate risks
and opportunities. These time horizons
are informed by the Paris Agreement
which influences global policy responses,
the UNFCC data on physical risks and our
own company’s science aligned net zero
targets.
TIME HORIZONS
Short
<3 years
Aligned to our risk management and
financial planning processes.
Medium 3-10 years
Captures transition risk and opportunities,
linked to both our science-based target
and the emerging risks included in our risk
management disclosure.
Long
> 10 years
Captures physical risks and opportunities
over the long term. Linked to our long-term
net zero goals and the emerging risks
included in our risk management disclosure.
Processes used to determine which risks
and opportunities could have a material
financial impact on the organisation.
This year, we supplemented our risk
management process with a detailed
business-wide review of climate risks and
opportunities over the short, medium
and long term. This review included
workshops with risk, finance and
sustainability leads across the
accountable businesses to identify key
risks and opportunities. As part of this
review, we utilised this groups insight to
map potential impact and likelihood over
the different time horizons to determine
relative materiality.
Determining materiality
The business determines the severity
of a risk by considering two factors:
the likelihood of the risk materialising
in a given timeframe and the potential
impact(s) such as financial, reputational,
operational or regulatory. A combination
of these two factors provides an overall
risk severity score of either ‘minor’,
‘moderate’, ‘major’ or ‘critical’ which aids
the business in determining the
materiality of a risk. We applied this
approach to our climate focused
business-wide reviews to determine the
materiality of risks and opportunities
identified.
The review considered two scenarios:
– A low-carbon transition scenario
focusing 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.
– A physical climate impact scenario
assuming limited policy or regulatory
support for emission reduction,
leading to a world with increasing
physical climate change impacts.
A summary of this review can be found
in Table 1. Table 1 categorises the risks
and opportunities in line with TCFD
Guidance Table A1.1 and A1.2. We agreed
that our business risks and opportunities
are most appropriately considered from
a sectoral perspective. For M&S that is
predominately agricultural, food and
clothing & home and property. We built
up a group wide view following individual
workshops with our businesses. We have
highlighted the relevance of our risks
and opportunities in Table 1. Given this
sectoral focus is of most relevance to our
organisation, this year we have not felt it
appropriate to break risks and
opportunities down geographically.
B) DESCRIBE THE IMPACT OF
CLIMATE-RELATED RISKS AND
OPPORTUNITIES ON THE
ORGANISATION’S BUSINESSES,
STRATEGY, AND FINANCIAL
PLANNING.
This year, our workshops across the
business identified potential implications
of climate risks and opportunities on our
products and services, our supply chain,
our adaptation and mitigation activities
and own operations. Climate-related
risks and opportunities specifically
associated with the acquisition of Gist
have been considered (more information
can be found on page 32 of our
Sustainability Report) and, other
acquisitions are in line with our sectoral
risks of clothing and home. Our focus on
research and development is embedded
in our Food and Clothing & Home
businesses. During the year our
innovation teams have included a focus
on climate-related opportunities as part
of their horizon scanning processes and
investment, and we have also relaunched
our climate focused innovation fund, the
‘Plan A Accelerator Fund’ (see Sustainability
Report page 16). We know having an
automated system in place to manage
and report on our greenhouse gas (GHG)
emissions data is key to managing risks
on a ongoing basis. This year, we have
implemented Sphera, a system that
we are now using to collect, analyse
and report data on Scope 1 and 2 GHG
emissions.
In addition to summarising the risks and
opportunities identified, Table 1 outlines
our business response to the impact on
our businesses, strategy, and financial
planning in line with the considerations
outlined above. We have also mapped
our targets to the impact areas to
highlight how we are building resilience
into our business strategy.
The above actions are reflected in the
inclusion of net zero in our corporate
strategy and transformation priorities,
in the strengthened governance now
in place for ESG and net zero and in the
roadmap towards net zero influence on
our financial planning processes of our
budget and three-year plan.
Annual Report & Financial Statements 2023
47
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT TCFD REPORT CONTINUED
Quantified
Immaterial
Not yet quantified
Short-term:
Medium-term: 3-10 years
> 10 years
Long-term:
<3 years
TABLE 1: BUSINESS WIDE RISK AND OPPORTUNITY SUMMARY
RISK/OPPORTUNITY
& CLASSIFICATION
SECTOR
TIME
HORIZON
POTENTIAL FINANCIAL
IMPACT ON THE BUSINESS1
BUSINESS RESPONSE2
Icons relate to Net Zero Priorities – see page 51
TARGETS
TRANSITION RISK
– Policy and Legislation
Group wide
Agriculture
Foods
Clothing
& Home
Property
Fleet
1. Current and new
environmental
compliance including
legislation and tax.
Examples include the
introduction of a
carbon tax to M&S
or our supply chain
sectors (agriculture,
food production,
clothing & home) and
the decarbonisation
of our estate and fleet
driven by legislation.
– 55% reduction
in absolute
Scope 1 & 2
emissions
by 2029/30
from 2016/17
base year.
– 55% reduction
in absolute
Scope 3
emissions
by 2029/30
from 2016/17
base year.
Increase in operating costs
to manage environmental
compliance such as
carbon tax.
Summary of relevant
quantitative scenario analysis
which looked at the impact
across different sectors
(Food, Clothing and Home
and Property) can be found
in Table 2.
Group – mitigation
- Validated our science-based target, for 2030
which guides our goal setting process for net
zero targets as part of our business
transformation.
Supply Chain – mitigation
- Built net zero as a consideration into our
sourcing strategy for Food and Clothing
& Home.
- Identified the suppliers who have greatest
impact on emissions in our supply chain as
a key focus for engagement.
Increase in capital
expenditure required to
address emissions areas in
M&S owned assets such as
refrigeration, energy
consumption and diesel fleet.
Capital expenditure on
LED lighting, store controls
upgrades, voltage
optimisation, fridge doors,
electric vehicles and other
areas can be found in page 179
of the Financial Statement.
- Communicated our expectations – measure
and report emissions, develop net zero plans
and switch to renewable energy sourcing.
- Continued our partnership with the HIGG Index
to support the management of supply chain
emissions in Clothing & Home. Foods have
signed up to Manufacture 2030 to support
the management of supply chain emissions.
See Sustainability Report pages 23 to 25.
Our operations – capital investment
- Planned asset replacement process in place
and integrated into our 3-year financial plan
to phase out our F gas refrigeration systems.
Foods
Clothing
& Home
TRANSITION RISK
– Market and Reputation
OPPORTUNITY
– Products and Services
2. Ability to keep
pace with customer
trends and behaviours
as we see an increase
in consumer
preferences towards
more sustainable
product choices.
Short/Medium Term –
Revenue opportunity from
climate conscious customers
who want to choose low
carbon products.
Sales from plant-based
protein found in the
Sustainability Report
(page 47).
Medium Term – Revenue loss
if we do not keep pace with
customer trends and develop
suitable low carbon product
offerings.
Our own brand food and clothing
& home products and services
- Sustainable preferences and perceptions are
integrated into our customer insights tracker.
- Ongoing investment in innovation and new
product and proposition development to
ensure we develop suitable low carbon
products to maximise customer preferences.
- Current focus areas are alternative protein in
Food, and alternative raw materials in Clothing
& Home. We are testing and trialling new
business models such as clothing rental and
resale however we have identified this as a
medium term opportunity and therefore
does not appear as a revenue stream.
See Sustainability Report pages 31 and 47.
– Increase sales
of plant-based
products to
£75m by
24/25.
– 100% of cotton
used in C&H
products
from more
sustainable
sources by
25/26.
– 100% of
polyester
used in
C&H products
from more
sustainable
sources by
25/26.
– 100% of
MMCF used in
C&H products
from more
sustainable
sources by
25/26.
1 Quantification of financial impact will focus on short term risks and opportunities in line with our current financial planning process.
2 More information on specific programmes can be found in our Sustainability Report.
48
Marks and Spencer Group plc
STRATEGIC REPORT TABLE 1: BUSINESS WIDE RISK AND OPPORTUNITY SUMMARY
Quantified
Immaterial
Not yet quantified
Short-term:
Medium-term: 3-10 years
> 10 years
Long-term:
<3 years
RISK/OPPORTUNITY
& CLASSIFICATION
SECTOR
TIME
HORIZON
POTENTIAL FINANCIAL
IMPACT ON THE BUSINESS1
BUSINESS RESPONSE2
Icons relate to Net Zero Priorities – see page 51
TARGETS
Group wide
Property
Fleet
TRANSITION RISK
– Technology
3. Availability of
technological solutions
and infrastructure to
support low carbon
activities for example
low and zero carbon
fleet options.
Increase in capital and
operational expenditure
required to source the
necessary low carbon
technology and infrastructure
to achieve our net zero goals.
Group – mitigation
- Short term rapid decarbonisation target for
2025/26, to focus on investigating the need
for new low carbon technological solutions
and infrastructure to support our journey
to net zero.
– 2.1 million
tonne
reduction
in carbon
emissions
in 2025/26.
Our operations
- Through our acquisition of Gist, we are able
to work more closely with the wider logistics
industry and manufacturers to ensure we have
a transition plan for a net zero fleet. This year,
we have expanded our LNG fleet to 35 vehicles.
See Sustainability Report page 34.
TRANSITION RISK
– Market
OPPORTUNITY
– Resource Efficiency
and Energy Source
4. Energy efficiency
and resilience in
our operations and
supply chain.
Group wide
Property
Foods
Clothing
& Home
Increase cost of fuel caused
by climate-related market
disruption. Potential risk of
blackouts and brownouts
which in turn impact trade
and waste.
Supply chain – mitigation
- Working with suppliers to reduce energy
consumption and move to the use of renewable
energy. Examples of this include our
participation in the Carbon Leadership
Programme and the use of the HIGG Facility
Environmental Module.
See Sustainability Report page 25.
Reduction in operational
costs if energy consumption
is effectively managed.
Opportunity to reduce
reliance of grid electric by
facilitating on-site renewable
energy generation.
TRANSITION RISK
– Reputation
Group wide
5. Failure to meet our
public climate change
commitments.
Reputational impact due to
failure to meet our net zero
targets. Leads to lower sales
and makes it harder to attract
and retain customers and
colleagues.
Our operations
- Continue to integrate energy efficiency
measures such as improved metering across
property estate and investment in energy
efficiency projects to lower energy
consumption in lighting and fridges.
See Sustainability Report page 33.
Group
- Net zero goal has been incorporated into the
strategic pillars of our Business Transformation
with a set of clear metrics for accountable
business leaders.
- Enhanced ESG governance process with
the introduction of an ESG Business Forum.
See Governance Structure on page 46 for more
information.
- Relaunch of our climate focused innovation
fund, the ‘Plan A Accelerator Fund’
– 55% reduction
in absolute
Scope 1 & 2
emissions
by 2029/30
from 2016/17
base year.
– 55% reduction
in absolute
Scope 3
emissions
by 2029/30
from 2016/17
base year.
– 55% reduction
in absolute
Scope 1 & 2
emissions
by 2029/30
from 2016/17
base year.
– 55% reduction
in absolute
Scope 3
emissions
by 2029/30
from 2016/17
base year.
– 2.1 million
tonne
reduction
in carbon
emissions
in 2025/26.
– 55% reduction
in absolute
Scope 1 & 2
emissions
by 2029/30
from 2016/17
base year.
– 55% reduction
in absolute
Scope 3
emissions
by 2029/30
from 2016/17
base year.
1 Quantification of financial impact will focus on short term risks and opportunities in line with our current financial planning process.
2 More information on specific programmes can be found in our Sustainability Report.
Annual Report & Financial Statements 2023
49
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT TCFD REPORT CONTINUED
Quantified
Immaterial
Not yet quantified
Short-term:
Medium-term: 3-10 years
> 10 years
Long-term:
<3 years
TABLE 1: BUSINESS WIDE RISK AND OPPORTUNITY SUMMARY CONTINUED
RISK/OPPORTUNITY
& CLASSIFICATION
SECTOR
TIME
HORIZON
POTENTIAL FINANCIAL
IMPACT ON THE BUSINESS1
BUSINESS RESPONSE2
Icons relate to Net Zero Priorities – see page 51
TARGETS
TRANSITION RISK
– Market
Group wide
Increase capital and
operational expenditure
required to meet our net
zero goals e.g. increased
cost in renewable energy
procurement if grid
decarbonisation is
not delivered.
Group
- Collaborate closely with the industry to ensure
we are working towards the same goals. As part
of this, we are on the Steering Committee of the
British Retail Consortium’s Climate Action
Roadmap and lead on the Logistics Pathway.
- Proactively engage with government to ensure
that broader policy and infrastructure will
support us on our net zero journey. Examples
include input into the Independent Review of
Net Zero led by Chris Skidmore, and signatories
on a letter to support the decarbonisation of the
grid in line with our operational net zero target.
International
Reputational impact due
to failure to meet the
requirements of our partners.
Loss of revenue from not
being able the provide
necessary stock to partners.
Our operations
- Apply learnings from both the COVID-19
pandemic and the invasion in Ukraine as to how
we are able to adapt our supply chain to ensure
we are able to meet partner requirements,
irrelevant of the cause of the distribution.
Agriculture
Foods
Clothing
& Home
Increase in sourcing costs
based on supply chain
disruption caused by
increased likelihood of
extreme weather.
Supply chain – adaptation
- Strengthened our focus on supporting
producers as they transition to net zero. We’re
putting a greater emphasis on resilience in our
standards and partnerships like Fairtrade.
Summary of relevant
quantitative scenario analysis
can be found in Strategy c).
- Increased focus on regenerative agriculture,
through our Farming with Nature programme
and work with the Better Cotton Initiative.
See Sustainability Report pages 19 and 21
Maintain 100%
fairtrade-
certified tea
and coffee.
100% of cotton
used in C&H
products from
more sustainable
sources by
2025/26.
Loss of revenue if we are
not able to source specific
products due to the impact
of physical climate risks.
OPPORTUNITY
– Policy
6. Reliance on third
parties, local
government and
broader infrastructure
to achieve our
mitigation actions.
TRANSITION RISK
– Reputation
PHYSICAL RISK
– Acute & Chronic
7. Failure to meet the
requirements of our
franchise partners
based on the impact
of climate change on
our supply chain.
PHYSICAL
– Acute & Chronic
8. Volatility in the
supply of raw materials
caused by the impact
of climate change.
Group wide
Property
Fleet
PHYSICAL
– Acute
9. Managing
infrastructure and
operations (both owned
and supply chain) in
extreme weather.
Loss of revenue from increased
likelihood of extreme weather
events (e.g., flooding, extreme
temperatures) leading to
closures of shops, distribution
centres and key transport hubs.
Our operations
- To support with the management of extreme
weather events in stores, distribution centres
and key transport hubs such as Chittagong
port, Bangladesh, we have in place robust
business continuity procedures.
Summary of relevant
quantitative scenario analysis
can be found in Strategy c).
How climate-related issues serve as an
input to our financial planning process
Where required, the spend associated
with certain projects linked to climate-
related risks and opportunities is
incorporated into the FY2023/24 budget
and the three-year financial planning
process, both approved by the Board.
We have done so by 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.
For example our capital investment in
replacing fridges and freezers to become
compliant with the F gas Regulation, as
well as other operational efficiencies
included in our 3 year budget.
This financial planning process form the
cash flow projections within our going
concern and impairment assessments
(see page 157 for more details). The
financial framework will be developed
during 2023/24 to align with the overall
climate strategy and net zero target.
For required spend in years subsequent
to FY2023/24 to meet interim and
2029/30 targets, this is currently
included within capital expenditure and
operating cost increase assumptions in
the three-year financial plan rather than
being included specifically. This spend
will be built into future budget
specifically each year. This is due to the
three-year financial plan being built from
the FY2023/24 budget as a base year
with years 2 and 3 being built on
assumptions.
50
Marks and Spencer Group plc
STRATEGIC REPORT Our Transition Plan
Since its launch in 2007, Plan A,
our sustainability programme, has
underpinned the resilience of our
organisation’s strategy, ensuring
that we are proactively managing the
environmental and ethical risks and
opportunities we face as a business,
including climate-related issues.
In 2021, we reinvigorated our approach
to sustainability and outlined our
ambition to become a net zero business
across our entire value chain by 2040.
This ambition is supported by a set of
interim targets that align with climate
science to limit global warming to 1.5°c
(see roadmap below). This year, to
support us on our journey to net zero,
we had our 2029/30 reduction target
validated by the Science Based
Targets initiative.
Our initial transition plan is focussed
on the short term to mobilise the
organisation, reduce emissions across
key hotspots and start to build capability
to address the opportunities identified.
Our roadmap towards net zero contains
the key milestones which are reflected in
our group strategy and transformation
priorities. This is supported by enhanced
governance, improved tracking and
measurement, collaboration and
innovation funding.
The 10 roadmap workstream icons can
be found on Table 1 to highlight how
the specific priority areas support the
impacts identified.
NET ZERO TRANSITION ROADMAP
OUR BASELINE
6.2m
tonnes of carbon emitted
in 2016/171
Short-term: <3 years
Medium-term: 3-10 years
Long-term: > 10 years
2025/26 TARGET
2029/30 TARGET
2034/35 TARGET
2039/40 TARGET
2.1m
tonnes (34%) reduction
in carbon emissions
55% reduction
in carbon emissions versus
our baseline
Net zero
across our own
business
Net zero
across entire
value chain
SBTi APPROVED2
TEN IMMEDIATE PRIORITY AREAS FOR TRANSFORMATION
PLANET
HOW WE SOURCE
OUR PRODUCTS
HOW WE MAKE
OUR PRODUCTS
HOW WE ARE REDUCING
WASTE AND PROTECTING
RESOURCES
DRIVING EFFICIENCY
ACROSS OUR STORE
ESTATE
Zero deforestation
– 100% of soy to be sourced
from verified deforestation
and conversion-free regions
by 2025/26.
Increasing the range of
plant-based protein
Double the sales of vegan
and vegetarian products
by 2024/25.
Circular economy
Enhancing our clothes
recycling scheme with new
incentives for Sparks
members.
Zero emissions property
Deliver a more efficient
store estate.
– 100% segregated
responsibly sourced palm
oil by 2025/26.
Sustainable sourcing
100% verified recycled
polyester by 2025/26.
Suppliers and business
partners on net zero journey
Looking beyond our own
operations to spark change
and support decarbonising
across our full value chain.
Reduce food waste
– 100% of edible surplus
to be redistributed
by 2025/26.
– Food waste reduced
by 50% by 2029/30.
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.
Reduce and recycle
packaging
– 100% of packaging to be
recyclable by 2025/26.
– Remove 1bn units of plastic
packaging by 2027/28.
1Restated in line with methodological changes and Gist acquisition.
2See Metrics and Targets C) for official science based target wording.
Annual Report & Financial Statements 2023
51
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT TCFD REPORT CONTINUED
This year’s business-wide review of
climate-related risks and opportunities
endorsed the selection of specific areas
for quantitative scenario analysis,
highlighting the policy and legislation
risk of environmental compliance on both
our operations and our supply chain in a
transition scenario (Table 1 – Risk 1). In last
year’s disclosure we identified carbon
pricing mechanisms as the greatest
environmental compliance risk we face in
the medium term. The acquisition of Gist
during the year resulted in us reviewing
our Scope 1 and 2 emissions to include
those previously excluded from M&S
operational emissions. As this increased
Scope 1 and 2 emissions by c.20%, we
extended our existing quantitative
scenario analysis of this transitional
risk from financial year 2021/22 to include
the non-dedicated elements of Gist
(dedicated elements previously included),
and expanded our analysis to cover M&S
(including Gist) fleet.
We ratified our scenario analysis for
cotton and protein and this year have
disclosed the potential financial impact
to the business if no actions were taken
to mitigate the risks. The results of the
scenario analysis are included in Table 2.
We have aligned our financial impact
criteria to our group risk assessment
criteria as follows:
FINANCIAL IMPACT
Critical
>5% impact on sales
>10% impact on PBT
Major
3-5% impact on sales
5-10% impact on PBT
Moderate
1-3% impact on sales
1-5% impact on PBT
Minor
<1% on sale and PBT
C) DESCRIBE THE RESILIENCE OF
THE ORGANISATION’S STRATEGY,
TAKING INTO CONSIDERATION
DIFFERENT CLIMATE-RELATED
SCENARIOS, INCLUDING A 2°C
OR LOWER SCENARIO.
Quantitative scenario analysis
Quantitative scenario analysis is a
valuable tool to explore the potential
impact of risks and opportunities
identified by the business. Last year we
undertook scenario analysis on three
areas of our business, Property, Protein
and Cotton. 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.
The analysis looked at the impact of two
plausible future states – a low-carbon
transition scenario (average global
temperature increases of 1.5˚C due to
climate change by 2100) and a physical
climate impact scenario (average global
temperature increases of 4˚C due to
climate change by 2100).
TABLE 2: QUANTITATIVE SCENARIO ANALYSIS SUMMARY
AREA & SCOPE
RISK/OPPORTUNITY
CATEGORY
(AS IDENTIFIED
IN TABLE 1)
RISK
MODELLED
QUANTIFICATION
OF IMPACT
TARGETS IN PLACE TO
MANAGE THESE RISKS
IMPACT OF
CLIMATE RISK ON
OUR ORGANISATION’S
FINANCIAL
PERFORMANCE
IN 2030, ASSUMING
NO MITIGATION ACTIONS
PROPERTY
(Updated
following Gist
acquisition)
UK Property
Estate
(including Gist
properties)
FLEET
(Added
following Gist
acquisition)
UK fleet
TRANSITION RISK
– Policy and
Legislation
Carbon tax on
Scope 1 and 2
emissions
Potential operating
profit impact of
£20m to £30m
55% reduction in absolute
Scope 1 and 2 emissions by 2029/30
from 2016/17 base year.
Current and new
environmental
compliance including
legislation and tax.
PHYSICAL
– Acute
Managing
infrastructure and
operations (both
owned and supply
chain) in extreme
weather.
Flood risk
Immaterial
N/A
TRANSITION RISK
– Policy and
Legislation
Carbon tax on
Scope 1 and 2
emissions
Potential operating
profit impact of
£15m to £25m
55% reduction in absolute
Scope 1 and 2 emissions by 2029/30
from 2016/17 base year.
Current and new
environmental
compliance including
legislation and tax.
52
Marks and Spencer Group plc
STRATEGIC REPORT
TABLE 2: QUANTITATIVE SCENARIO ANALYSIS SUMMARY CONTINUED
AREA & SCOPE
RISK/OPPORTUNITY
CATEGORY
(AS IDENTIFIED
IN TABLE 1)
RISK
MODELLED
QUANTIFICATION
OF IMPACT
TARGETS IN PLACE TO
MANAGE THESE RISKS
IMPACT OF
CLIMATE RISK ON
OUR ORGANISATION’S
FINANCIAL
PERFORMANCE
IN 2030, ASSUMING
NO MITIGATION ACTIONS
PROTEIN
UK and Ireland
sourced beef,
lamb, pork,
chicken and
turkey products
TRANSITION RISK
– Policy and
Legislation
Current and new
environmental
compliance including
legislation and tax.
Carbon tax on
agricultural
emissions (to the
farm-gate)
Potential operating
profit impact of
£35m to £50m
55% reduction in absolute
Scope 3 emissions by 2029/30
from 2016/17 base year.
Increase sales of plant-based
products to £75m by 2024/25.
Immaterial
N/A
PHYSICAL
– Acute & Chronic
Volatility in the
supply of raw
materials caused
by the impact of
climate change.
Extreme weather
events and chronic
climate change
impact on
agricultural
production
COTTON
Globally
sourced raw
material used in
our clothing
TRANSITION RISK
– Policy and
Legislation
Current and new
environmental
compliance including
legislation and tax.
Carbon tax on
agricultural (seed
to farm-gate) and
manufacturing
(all steps in cotton
production)
emissions
Potential operating
profit impact of
£45m to £60m
55% reduction in absolute
Scope 3 emissions by 2029/30
from 2016/17 base year.
100% of C&H Tier 1 & Tier 2 suppliers
with Level 1 Higg FEM module result
by second annual audit.
Immaterial
N/A
PHYSICAL
– Acute & Chronic
Volatility in the
supply of raw
materials caused
by the impact of
climate change.
Extreme weather
events and chronic
climate change
impact on
agricultural
production
Resilience of our business
Our scenario analysis identified transition
risks as material in 2030, with a potential
operating profit impact across Property,
Fleet, Protein and Cotton associated
with the introduction of a carbon tax of
between £115m and £165m assuming
no mitigation.
Identification of such risks in the
medium term highlights the continued
importance of meeting our 2029/30
science-based target. As an own
brand retailer with in excess of 94%
of our emissions in our value chain it
is important we focus on supply chain
emissions reduction. It is with this
focus that we are ensuring that our
2029/2030 target is influencing our
strategic sourcing strategy to ensure
we are working with suppliers who have
the capability to reduce emissions.
We have strengthened our governance
approach and internal tracking as well as
investing in a system to digitally capture
Scope 1 and 2 GHG data. Finally, to support
the requirement for greater collaboration
and research and development we have
relaunched a climate focused innovation
fund, the ‘Plan A Accelerator Fund’.
These actions in the short term all play
a role in strengthening the resilience
of our organisation’s strategy to the
climate-related risks and opportunities
we have identified.
Moreover, even if there were to be
significant issues that meant we were
unable to deliver on our mitigations such
as lack of technological solutions, given
the health of our balance sheet, we
would be able to absorb the impact a
carbon tax as calculated in Table 2.
We also quantified the physical risks
outlined in the table above and the
analysis has identified the financial
exposure to 2030 to be immaterial.
Our business-wide review did highlight
volatility in the supply of raw materials
caused by climate change and the
management of infrastructure and
operations (both owned and supply
chain) in extreme weather as key
physical risks. Therefore we will consider
focusing further quantitative scenario
analysis on these areas next year to
better understand the implication of
this beyond the current risk of volatility
in supply chains that we have been
managing for other issues e.g. Covid,
Brexit, the invasion in Ukraine.
Annual Report & Financial Statements 2023
53
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT
TCFD REPORT CONTINUED
C) DESCRIBE HOW PROCESSES
FOR IDENTIFYING, ASSESSING
AND MANAGING CLIMATE-RELATED
RISKS ARE INTEGRATED INTO THE
ORGANISATION’S OVERALL RISK
MANAGEMENT.
The process for managing climate-
related risks is integrated into our group
risk management process. Climate
change and environmental responsibility
continues to be called out as a principal
risk see page 64, as the Audit & Risk
Committee and accountable businesses/
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.
B) DISCLOSURE SCOPE 1, 2 AND,
IF APPROPRIATE SCOPE 3
GREENHOUSE GAS EMISSIONS
AND THE RELATED RISKS.
This year we have implemented Sphera,
a system that we are now using to collect,
analyse and report data on Scope 1 and 2
GHG emissions. Our Scope 1 and 2
carbon emissions, reported in line with
the Greenhouse Gas Protocol are on
page 55 as part of response to the
Streamlined Energy and Carbon
Reporting requirements.
These are verified by DNV Business
Assurance Services UK Limited –
more information can be found in the
Sustainability Report Independent
Assurance Statement.
METRICS AND TARGETS
SCOPE 3 EMISSIONS
A) DISCLOSE THE METRICS USED
BY THE ORGANISATION TO ASSESS
CLIMATE-RELATED RISKS AND
OPPORTUNITIES IN LINE WITH
ITS STRATEGY AND RISK
MANAGEMENT PROCESS.
Our Sustainability Report outlines all
of our metrics used to assess our ESG
performance. Those relevant to
assessing our climate-related risks and
opportunities have been identified in
the data tables on pages 57 to 69 of
the Sustainability Report.
Having undertaken a review of the
cross-industry, climate-related metrics,
this year we have continued to focus our
metrics disclosure on our GHG emissions
which can be found in our data tables
referenced above. Tables include
performance across this year, last year
and where appropriate our base year
(2016/17). We do not currently use
an internal carbon price but continue to
investigate its potential application to
our business.
Details of the methodologies used to
calculate performance against targets
and metrics can be found in the 2023
Basis of Reporting https://corporate.
marksandspencer.com/basis-of-
reporting-2023.
Integrating sustainability metrics
in remuneration
Information on the current position
of inclusion of sustainability metrics
in remuneration can be found in the
Remuneration Committee Report
on page 100.
This year we have included our
FY2022/23 Scope 3 emissions data
(see page 55). More information
on the evolution of our Scope 3
emissions can be found on page 15
of our Sustainability Report. In line
with our transformation, growth in
our business has increased the scope
of our emissions, which has been offset
by emissions reductions programmes
we are able to quantify in our total
reported emissions. However, due to
the modelling approach for supply
chain carbon emissions (which uses
industry average benchmarks),
a number ofprogrammes that we
have in place to deliver emissions
reductions cannot yet be seen in our
disclosed emissions. This is something
we are looking to address through
the implementation of new systems
and measurement processes to get
access to and manage primary data
collected from our supply base.
For our Foods business, we expect
to have these systems (Mondra and
Manufacture 2030) fully operational
in the next Financial Year. For our
Clothing & Home business we
are currently working with our Digital
and Technology Team to establish
how we integrate data from the
HIGG Index into our Clothing & Home
footprint. Management is monitoring
progress towards our carbon
reduction targets via our ESG
Business Forum on a quarterly basis.
More information can be found on
page 52 of our Sustainability Report.
RISK MANAGEMENT
A) DESCRIBE THE ORGANISATION’S
PROCESS FOR IDENTIFYING AND
ASSESSING CLIMATE RISK.
We consider risks relating to climate
change as part of the group risk
management process. To further
understand our business-wide climate-
related risks at a more granular level,
we supplemented our group risk
management process by undertaking
a detailed business-wide review of
climate risks and opportunities with risk,
finance and sustainability leads across
the accountable businesses to identify
key risks and opportunities over the
short, medium and long term as outlined
on page 47. We utilised stakeholder
insight to assess the potential size and
scope of the climate risks. The summary
of these risks can be found in Table 1.
B) DESCRIBE THE ORGANISATIONS
PROCESSES FOR MANAGING
CLIMATE-RELATED RISKS.
The business-wide reviews of climate
risks and opportunities used the TCFD
Guidance Table A1.1 and A1.2 to ensure
a comprehensive view of the issues
impacting our business. Prioritisation
of risks was then assessed based on
materiality and time horizon. Due to the
recognised uncertainty of longer term
climate-related risks we prioritised our
scenario analysis on the short-term risks
– details regarding the financial impact
criteria and the outputs can be found on
pages 52 and 53.
The businesses have considered how
climate-related issues may impact their
strategy both in the short term and
beyond, and therefore will continue to
design and implement the required
mitigating controls to manage these.
Ongoing management of these climate
risks forms one of the accountabilities
of the ESG Business Forum. Alignment
with the group risk management process
ensures that each climate-related risk
at a business/function level, has a
designated risk owner and oversight
from the leadership team, as well as
using the risk assessment criteria
(including parameters for risk scoring)
and actions tracking to ensure risks are
treated appropriately. More information
on our risk management process can
be found on page 56, which includes the
consideration of climate-related risks.
54
Marks and Spencer Group plc
STRATEGIC REPORT STREAMLINED ENERGY AND CARBON REPORTING
Energy consumption (GWh)
Greenhouse gas emissions (000 tonnes CO2e)
2022/23
2021/22^ % change
2022/23
2021/22^ % change
UK Operations
1,402
1,382
1%
Scope 1 emissions
of which UK
Scope 2 emissions
(location-based)
of which UK
Total location-based scope 1&2
emissions
of which UK
GHG intensity per 1,000 sq ft
of salesfloor
Scope 2 emissions from procured
renewable electricity (location-
based)
Total market-based scope 1&2
emissions
of which UK
International Operations
74
62
Group
1,477
1,445
20%
2%
^ Performance for last year has been re-stated, in line with the GHG Protocol and
M&S’ emissions re-statement policy, to account for the acquisition of Gist in 2022
and data improvements identified through the implementation of a new digital ESG
reporting platform. Previously, following the operational control reporting
boundary, Gist’s secondary logistics operations (which account for the majority of
energy use and reported emissions) were reported on, since these operations were
dedicated to M&S. Gist’s primary logistics operations, which were previously not
reported on, have now come into M&S’ reporting boundary, and figures have been
re-stated accordingly.
ENERGY EFFICIENCY INITIATIVES IMPLEMENTED
THIS YEAR
– LED Lighting: Continued investment in installation of LED
lighting, with 24 schemes implemented in UK stores in
2022/23, and installations now complete across all Gist
retail distribution operations.
– Automated Meter Readers: Now installed in 80% of UK
stores (project started February 2022).
– Initiatives implemented in Q4, with savings to be realised
from next year, included trials of adding doors to fridges,
moves to 100% electric stores using heat pumps to reduce
gas usage, voltage optimisation projects and
implementation of aerofoils.
– Behaviour change: Energy efficiency has been a focus in
our communications to colleagues this year, reminding
colleagues to use night blinds, switch off lights, and review
bakery schedules. At Gist, all drivers have completed
SAFED training on fuel efficient driving.
226
218
137
113
363
332
17.3
234
228
142
120
376
348
18.2
-3%
-4%
-3%
-6%
-3%
-5%
-5%
117
125
-6%
246
219
250
229
-2%
-4%
CURRENT SCOPE 3 EMISSIONS
6.1m tonnes
CO2e
Sourcing
Operations
Manufacturing
Franchise
Packaging
Investments
C) DESCRIBE THE TARGETS USED BY
THE ORGANISATION TO MANAGE
CLIMATE-RELATED RISKS AND
OPPORTUNITIES AND PERFORMANCE
AGAINST TARGETS.
This year, we had our 2030 corporate
greenhouse gas emissions reduction
target approved by the Science Based
Targets initiative:
Marks and Spencer PLC commits to
reduce absolute Scope 1 and Scope 2
GHG emissions 55% by 2030 from a
2017 base year. Marks and Spencer
PLC also commits to reduce absolute
Scope 3 GHG emissions 55% within
the same time frame.
Our net zero ambition builds on
our absolute science-based target,
aligned to the UN ambition to limit
global warming to 1.5˚C:
2034/35 target
– Net zero across our own business.
2039/40 target
– Net zero across our entire value
supply chain.
To support our net zero ambition
we included a short term rapid
decarbonisation target to reduce
emissions by 34% by 2025/26. Based on
our revised baseline, management have
translated this into a 2.1 million tonne
reduction target. We now have clear line
of sight, based on projects that are
resourced and underway, to 62% of the
2.1 million emissions reduction we are
committed to deliver in 25/26.
2025/26 target
2.1 million tonne (34%) reduction
in carbon emissions.
It is important to note that we will, on
an ongoing basis, continue to review
our externally communicated carbon
targets. This will allow us to reflect
ongoing business change (similar to the
approach taken this year following the
acquisition of Gist), the evolution of
carbon measurement techniques and
guidance and the impact of emerging
technologies over the coming years.
Our Sustainability Report outlines all
of our targets used to manage our
ESG performance. Those relevant to
managing our climate-related risks and
opportunities have been identified in
the data tables on pages 57 to 69 of
the Sustainability Report. We have also
mapped these targets to the risks and
opportunities identified in Tables 1 and 2.
Annual Report & Financial Statements 2023
55
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT RISK MANAGEMENT
Maintaining a dynamic and effective risk management process
is vital to support and strengthen business operations as we
reshape the company and manage the impact of a challenging
external environment.
APPROACH TO RISK MANAGEMENT
Our approach to risk management
remains consistent with previous years.
The Audit & Risk Committee, under
delegated authority from the Board, is
accountable for overseeing the
effectiveness of our risk management
process. This includes identification of
the principal risks facing M&S, monitoring
compliance with the risk management
policy and periodically reviewing risk
appetite. To support this, underlying
processes are in place which remain
aligned to the M&S operating model, with
each business and function responsible
for the identification, tracking and
management of specific risks. In addition,
risk activities at our joint ventures are
captured as part of the monitoring
processes in place.
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 Policy was last
reviewed and approved by the Audit
& Risk Committee in September 2022.
The key activities captured by the
Policy include:
– the development and maintenance
of Board approved risk appetite
statements which align with the
business strategy, three-year plan,
core operating activities and the
business purpose and values. Our risk
appetite statements include strategic
and transformational priorities,
operational activities and core policy
areas. The statements are used to
define and set appropriate risk-taking
parameters for business activity;
– identification, measurement and
reporting of risks against a
consistently applied criteria
considering both the likelihood of
occurrence and potential impact
to the Group, with clear ownership
allocated to relevant members of
the leadership team;
– maintenance of detailed risk registers
and mitigation plans. These are
completed by each business and
function, approved by their leadership
teams and the appropriate Executive
Committee members. The output is
also incorporated into other related
governance processes. For example
climate related risks are reported at
the Environmental, Social and
Governance (ESG) committee and fire,
health and safety risks at the Group
Safety Committee;
– proactive monitoring of emerging
risks by each business and function
where the full extent and implications
may not be fully understood but need
to be tracked. This is an integrated
element of the processes outlined
above;
– swift action to evaluate changes to
the risk profile triggered by new or
unexpected events, working in
conjunction with support functions
such as the business continuity and
legal teams;
– ongoing assessment of the overall
risk profile to reflect changes in the
business operating model,
accountabilities and reporting – for
example to incorporate the acquisition
of our logistics business, Gist;
– a formal half-yearly review of all risk
registers by the Group Risk team to
provide independent challenge and
support cross-business alignment;
– direct reporting to the Audit & Risk
Committee by each of our business
and functional leadership teams on
a rolling, scheduled basis – flexed to
respond to changes or potential
emerging issues; and
– the compilation of an overarching
view of group risks, combining both
top-down and bottom-up
perspectives which consider the
impact of changes in the external
environment, our business 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 as part of
our interim and year-end reporting
processes. Following this, the principal
risks and uncertainties are submitted to
the Audit & Risk Committee for review
and approval prior to being
recommended to the Board for approval.
An overview of this process is presented
in the diagrams on the following page.
Details of how the principal risks and
uncertainties interact with the strategic
priorities of the business are shown on
page 59.
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, incorporating
scenarios based on the principal risks
and uncertainties is set out on pages 66
to 67 and on page 134.
56
Marks and Spencer Group plc
STRATEGIC REPORT INTRODUCTION
STRATEGIC REPORT
GOVERNANCE
FINANCIAL STATEMENTS
RISK MANAGEMENT PROCESS AND GOVERNANCE OVERVIEW
The diagrams below provide an overview of the risk management process and activities that allow the business to maintain an
appropriate risk culture to support operations and support the Board in complying with obligations under the Corporate
Governance Code 2018.
Monitoring,
reporting
and escalation
Risk response and
action tracking
4
5
1
Ongoing
communication
and feedback
Setting and
periodic review
of risk appetite
2
Risk identification
and ownership
Risk assessment
3
INTERNAL REPORTING
EXTERNAL REPORTING
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 & Risk
Committee
BUSINESS AND FUNCTIONAL RISK REGISTERS
– Development and ongoing maintenance of risk
registers, including consideration of emerging
risks, by business owners and leadership teams
– Review and challenge of risk content and the
quality of mitigation plans by the Group Risk team
– Monitoring of risks associated with our
joint ventures
– Review and challenge of risks at leadership forums
EMERGING RISKS AND ISSUES
– Monitoring emerging areas of change or issues
that may become significant at a Group level
TOP-DOWN
Parties involved:
– M&S Board
– Audit & Risk
Committee
– Executive
Committee
– Group Risk team
Parties involved:
– Group Risk team
– Business and
functional
leadership teams
– Policy and
process owners
BOTTOM-UP
PRINCIPAL RISKS
AND UNCERTAINTIES
– Review and approval
by the Board and
Audit & Risk
Committee
– Full disclosure of
principal risks and
uncertainties
MAINTAINING AN EFFECTIVE RISK FRAMEWORK
In complying with the process and policy described above, examples of how risk management has kept pace with change during
the year include:
– Evolving the Audit
Committee to be formally
designated as the
‘Audit & Risk Committee’,
strengthening the profile
of risk management in our
governance framework.
– Completing a review and
refresh of risk appetite
statements, with full
Audit & Risk Committee
and Executive team
participation, to maintain
alignment with strategy and
the ongoing transformation
activities, as well as meeting
the core requirements of
business operations.
– Refining the suite of
– Integrating a new risk
underlying business and
functional risk registers to
mirror today’s operating
model such as the
acquisition of Gist.
management tool across
the business to enhance
risk reporting capabilities
and provide greater
transparency and
consistency across
business level and
Group-wide risks.
Annual Report & Financial Statements 2023
57
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES
Our principal risks and uncertainties have been assessed in accordance with the methodology outlined on the previous
pages which allows the business to remain flexible and respond to a dynamic risk landscape.
MONITORING EMERGING RISKS
Our risk profile will continue to evolve
as a result of future events and
uncertainties. The emerging risks arising
from these are monitored to understand
the potential impact on our business and
to allow timely decision-making.
Examples of emerging risks include:
– The pace of change in relation to
environmental and other ESG matters
as well as evolving consumer
expectations; and
– The impact on our business from
changes to the legal and regulatory
landscape, for example the anticipated
government legislation on the Border
Target Operating Model setting out the
basis for how the UK trades with Europe.
OVERALL RISK ENVIRONMENT
At an overarching level, a complex set
of external factors continue to have a
pervasive impact across the business.
These include the ongoing cost-of-living
challenges, the continued consequences
of Russia’s invasion of Ukraine, and whilst
diminishing, the legacy of Covid-19.
In addition, the associated economic
uncertainties triggered by these
combined events add a further risk
dimension.
These factors form the basis of our first
principal risk, ‘An uncertain trading
environment’, which captures the
aggregated consequences of this
suite of events, such as:
– cost of goods inflation (including
the impact of sterling’s value
against the US dollar);
– energy price volatility;
– increasing interest rates;
– the impact of industrial action;
– structural instability in the global
financial system;
– a potential decline in consumer
spending;
– supplier resilience and viability;
– labour constraints;
– supply chain pressures and disruption
to the supply of materials and
products (including concerns from
animal disease);
– further global socio-political tensions
and fragility;
– the risk of recession;
– changes in central government and/
or regional policies; and
– the threat of new Covid-19 variants
and/or other widespread health events.
All of these factors, individually or in
aggregate, may negatively impact
future trading performance and have
an overarching affect across our suite
of principal risks and uncertainties.
KEY CHANGES TO OUR RISK PROFILE
The following key changes have been
made to our risk profile during the year:
– We acquired the food logistics
business, Gist. The impact of the
acquisition has been reflected in a
number of our existing principal risks.
Most significantly this includes:
– Business transformation;
– Business continuity and resilience;
– Talent, culture & capability;
– Information security;
– Corporate compliance and
responsibility; and
– Climate change and environmental
responsibility.
– The previous ‘Ocado Retail’ risk which
focused solely on our online food retail
investment with Ocado Group has
been expanded to cover our wider joint
venture investments. This change
recognises our ambition to expand
global activities and, as part of this,
the contribution of our joint venture
in India with Reliance Industries. The
risks associated with our investment in
Ocado Retail and the relationship with
Ocado Group remain consistent with
our previous disclosure.
– Our business transformation risk
has been expanded to reflect the
importance of delivering a compelling
omni-channel experience and to
transition the business to a simpler
and more cost-effective structure.
The focus on the store transformation
programme, investment in our
technology capabilities and
improvements in supply chain remain
consistent with previous disclosures.
Our principal risks and uncertainties are
set out in more detail on pages 60 to 65.
These are set out in the order of current
priority for the business, with
the movement in their ranking since
our interim disclosure also shown.
58
Marks and Spencer Group plc
STRATEGIC REPORT LINKING RISKS WITH OUR STRATEGIC PRIORITIES
The table below shows how our principal risks align with the strategic priorities described on pages 12 to 27.
Deliver
profitable
sales
Improve
operating
margins
Disciplined
investment
choices
Drive
shareholder
returns
Exceptional
product,
trusted brand
Leading in
Omni-channel
including
Ocado
Expanded
global
reach
Structurally
lower
cost base
High
performance
culture
Accelerating
store
rotation
Modernised
supply chain
Compelling
customer
ecosystem
Disciplined
capital
allocation
1.
An uncertain
trading
environment
2. Business
transformation
3. Joint venture
investments
4. Business
continuity
and resilience
5. Product safety
and integrity
6. Talent, culture
and capability
7.
Information
security
8. Corporate
compliance and
responsibility
9. Climate change
and environmental
responsibility
10. Liquidity, funding
and financial
markets
11. EU border
challenges
Annual Report & Financial Statements 2023
59
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
1. AN UNCERTAIN TRADING ENVIRONMENT
The business continues to operate in an environment impacted by an increasingly complex set of external factors. The ongoing cost-of-
living crisis, the invasion in Ukraine and continued consequences of the pandemic, along with the potential for further geopolitical
and economic uncertainties have combined to create a difficult and unpredictable trading environment which could negatively
impact performance.
Context
The broader context of this risk is detailed on page 58. While
not repeated in full, key aspects impacting this risk include:
– cost of goods inflation (including foreign exchange
movements);
– energy price volatility;
– increasing interest rates;
– the impact of industrial action;
– structural instability in the global financial system;
– a potential decline in consumer spending; and
– supplier resilience and viability.
Oversight by the Board and Executive Committee
2. BUSINESS TRANSFORMATION
Mitigations
– A strong, varied and complementary senior leadership team.
– An established operating model with a family of accountable
businesses who share M&S brand values, support functions,
technology and customer data.
– A three-year plan maintained to remain relevant to the current
challenges, including an effective budgeting process,
incorporating sensitivity analysis to anticipate the impact of
external uncertainty.
– Formal operating reviews enabling effective executive oversight,
governance and alignment of each business.
– Prioritised focus and discipline across the business on cost,
range, trusted value and availability.
– Effective business continuity and crisis management processes
to respond to issues as they arise.
– A proactive, structured supplier engagement programme to
anticipate and support management of escalating business-
critical issues such as cost inflation.
– Frequently reviewed policy and procedure framework aligned
to risk appetite in key risk areas such as foreign exchange, energy
and interest rate management.
Ongoing business transformation is dependent on our ability to prioritise capital spend and resources to accelerate and successfully
implement the suite of critical strategic projects to deliver our medium- and longer-term growth ambitions.
Context
The business continues to manage a number of significant
change programmes that underpin our transformation objectives.
These include:
Mitigations
– Transformation programmes aligned to the business strategy
and prioritised as part of our three-year planning process.
– Board approved risk appetite statements aligned to our
– modernising our supply chain and logistics operations (including
the integration of Gist);
– improving our IT infrastructure, underlying systems and digital
capabilities;
– reshaping and modernising our UK store estate;
– delivering a compelling omni-channel experience; and
– transitioning the business to a simpler and more cost-effective
structure.
While each initiative is individually significant and has its own set of
inherent risks, the aggregate impact of simultaneously delivering
these challenging projects creates further risks to successful
implementation.
Oversight by Executive Committee and, where appropriate,
supporting sub-committees
key initiatives.
– Transformation programmes underpinned by bespoke delivery
plans and leadership-led governance structures.
– Dedicated strategy and transformation roles to support focus
and track delivery of the programmes.
– Programme governance principles applied for core projects,
with clear accountabilities and milestones.
– The implementation of specific Strategy & Transformation
leadership reporting, including ongoing benefits tracking
in line with spend targets and value outcomes.
– Periodic reporting on key business and functional initiatives
to the Audit & Risk Committee.
Change in priority
No movement
Increased
Decreased
60
Marks and Spencer Group plc
STRATEGIC REPORT 3. JOINT VENTURE INVESTMENTS
Successful achievement of any joint venture’s long- term performance is inherently complex due to the ownership structure
and the need to align different shareholder perspectives.
Context
The value of our investment in Ocado Retail Limited (ORL),
achievement of our multi-channel food strategy, protection of
our brand and delivery of anticipated trading performance is
dependent on maintaining effective strategic and operational
relationships with both ORL and Ocado Group.
Similarly, linked to the planned growth of global sales, business
performance in India will be shaped by the ability to maintain
strategic alignment and harmonised ways of working with
Reliance Industries.
Mitigations
– M&S nominated directors form part of the JV boards at ORL and
M&S Reliance (MSR), with collaborative sign-off on strategic and
investment plans directing the growth of the business such as:
– expanding the M&S range at Ocado Retail and optimising
the national footprint of customer fulfilment centres; and
– to maintain store opening plans in India.
– Appropriately aligned operational and people structures,
for example:
– a dedicated M&S Ocado delivery team to coordinate
sourcing, product development, ranging, customer data
and marketing; and
– oversight from our International leadership team and/or
secondments of UK resources to support activities at MSR
in India.
– Monitoring of internal audit and risk management processes
at JVs by the Audit & Risk Committee.
Oversight by Ocado Retail Board and M&S Reliance Board
4. BUSINESS CONTINUITY AND RESILIENCE
A major operational or resilience failure at a key business location, including any of our key global sourcing or supply locations (such
as Bangladesh and China), at Castle Donington (our primary online Clothing & Home distribution centre), in our food supply chain or
logistics operations, or at a critical third party outsourced provider could result in business interruption.
More broadly, an inability to effectively respond to large, disruptive global events (such as the pandemic, geopolitical tensions, trade
sanctions or natural disasters) or national issues (such as industrial action) could also impact trading performance.
Context
The business has continued to demonstrate resilience throughout
the full range of recent externally driven events and economic
uncertainties. However, risks to business continuity remain, such
as:
– a sustained period offline or an inability to fulfil online orders
due to a major incident at Castle Donington;
– the loss of, or major disruption at dedicated warehouses in the
UK or overseas, at primary supply countries, or at support
facilities (such as IT);
Mitigations
– An experienced Business Continuity (BC) team with established
Group crisis and incident management processes.
– Risk-based BC assessments for stores, sourcing offices and
warehouses along with validation of key supplier arrangements
and disaster recovery plans for technology infrastructure.
– Up-to-date BC plans for key activities and scenarios across our
operations, including offices, warehouses and IT sites that evolve
in response to new threats.
– Proactive testing of plans for key scenarios, with support from
– dependency on key third parties means that significant incidents
critical third parties where needed.
and long-term resilience issues for our suppliers could also
impact our own operations;
– A digital platform to support the BC governance programme.
– Active engagement with external organisations including the
– a major issue impacting one or more of our significant franchise
partnerships, either domestically or internationally, could impact
future performance and growth;
– unexpected or unplanned shortage of ingredients or materials
as a result of external events (such as animal disease or
inclement weather) could affect the quantity and quality of
our products;
– continued industrial action in the UK; and
– future unknown/new Covid variants or similar widespread
health events.
Oversight by Executive Committee and Crisis Management Team
Retail BC Association, government-led forums and membership
of the National Counter Terrorism Information Exchange.
Annual Report & Financial Statements 2023
61
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
5. PRODUCT SAFETY AND INTEGRITY
A failure to prevent and/or effectively respond to a major food or product safety incident, or to maintain product integrity, could impact
customer confidence in our brand and business performance.
Context
The safety of our products – food and all other product categories
– remains vital for our business. We need to manage the potential
risks to customer health, safety and consumer confidence that
face all retailers.
In doing this, along with maintaining effective internal processes
for managing product safety, the business remains focused on how
external pressures on the food, clothing and homeware industries
could impact the availability, quality, provenance and integrity of
our products. These include:
– animal disease;
– inflationary pressure;
– the impact of the invasion of Ukraine;
– cross-border regulatory divergence;
– climate related events; and
– the related pressures in the supply chain.
Oversight by Executive Committee, Group Safety Committee and
Consumer Brand Protection Committee
6. TALENT, CULTURE AND CAPABILITY
Mitigations
– Group-wide assessment of all safety risks, with allocated
Executive and business ownership.
– Safety Policy and Compliance Standards, Terms of Trade and
product safety specifications with clear accountability, including
for overseas requirements and within contracts with third party
brands.
– Established governance, assurance and risk management
processes to monitor and support the safety and integrity
of our products, such as:
– risk-based store, supplier and warehouse audit programmes,
including for our franchise operations;
– monitoring of product quality and customer complaints
with corrective action taken where required; and
– crisis management planning for safety incidents.
– Qualified Food and Product Technology teams with access
to external experts where required.
– Regular engagement with expert bodies to understand and
respond to changes in safety standards.
The ongoing success of the business is dependent upon an ability to: attract, retain and develop the right talent, skills and capabilities;
achieve cultural change to support efficient and effective working; meet the financial and wellbeing expectations of our colleagues;
respond to labour cost pressures; and work collaboratively with our Business Involvement Group and unions.
Any shortfall in executing against these objectives could impact the delivery of core operational activities and longer-term strategy,
including aspects of our transformation programme.
Context
The business employs more than 64,000 talented and passionate
people and remains an attractive brand to future colleagues.
However, key challenges exist due to ongoing pressures:
– managing our investment in competitive pay for colleagues
in an inflationary environment;
– a tight labour market in specialist areas, including digital,
technology and data science;
– integrating the Gist workforce following acquisition of our
logistics partner;
– adapting to a post-pandemic hybrid working model;
– demonstrating a cultural alignment in areas such as
sustainability, diversity and ethical values; and
– maintaining investment in modern technology
and underpinning processes to support a high
performance culture.
Oversight by Executive Committee
Mitigations
– Continued investment in pay and wellbeing benefits, supported
by external benchmarking.
– Investment in internal and external talent to strengthen
capability in key roles, develop future leaders and drive internal
career progression, including:
– an established colleague skills framework to support
performance, development and progression;
– maintenance of succession plans for key roles;
– delivery of improvements in core people management
systems and processes to drive consistency and improve
decision-making, such as performance management; and
– continued focus on driving digital literacy and
capability building.
– A well-established Business Involvement Group which is actively
involved in business-wide colleague engagement and
representation at Board meetings.
– Active monitoring of gender, ethnicity, disability and
age profiles.
Change in priority
No movement
Increased
Decreased
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Marks and Spencer Group plc
STRATEGIC REPORT 7. INFORMATION SECURITY
A significant or wide-reaching data breach or cyber-attack, directly or at a related third party, could adversely impact our reputation,
result in legal exposure including 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, highlighting an escalating
information security threat. This is further exacerbated by the
increased threat of cyber warfare linked to current global
uncertainties.
The profile of information security and the overall threat
landscape for our business is also changing as we use data more
intelligently, introduce new technology and digital solutions,
transition to the cloud, enhance omni-channel experiences,
adopt hybrid working, and build a broader ecosystem.
Our reliance on key third parties for selected services and/or
hosting of data also exposes us to risks from vulnerabilities in their
cyber and data controls.
Oversight by Executive Committee and Data Leadership Committee
Mitigations
– Information security and data protection policies with
mandatory training for colleagues.
– A dedicated information Security function, with multidisciplinary
specialists, 24-hour security operations centre, active
monitoring of our threat environment and mature incident
management plan.
– Dedicated Group Data Protection Officers team and a network
of Data Protection Managers in priority business areas.
– Access to specialist third party resources, as required.
– Prioritised investment in response to increased security events,
breaches and potential threat of cyber-attacks.
– Focused security assurance around our digital product lifecycle,
operations model and significant change activities, like omni-
channel and new technologies.
– 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.
8. CORPORATE COMPLIANCE AND RESPONSIBILITY
A failure to consistently 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 and trusted by our customers and other stakeholders.
Context
The increasingly broad and rigorous legal and regulatory
framework for retailers creates pressure on business performance
and market sentiment, requiring frequent changes or
improvements in how we operate.
Changes in the external environment and challenging economic
conditions also leave ethical and social responsibilities open to a
heightened risk of mismanagement or exploitation, particularly
through our supply chains.
The business also continues to monitor and plan for new and
evolving regulatory requirements, including:
– further restrictions on the promotion of goods high in fat,
sugar and salt;
– anticipated changes in UK corporate governance requirements;
and
– extended producer responsibility for plastic packaging
recycling targets.
Non-compliance may result in fines, criminal prosecution for M&S
or colleagues, litigation, investment to rectify breaches, disruption
or cessation of business activity, as well as impact our reputation.
Oversight by Executive Committee, Group Safety Committee,
Consumer Brand Protection Committee, Compliance Monitoring
Committee, Fraud and Loss Committee, ESG Committee and Data
Leadership Committee
Mitigations
– Code of Conduct in place and underpinned by policies and
procedures in core areas.
– 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, including specialist
solicitors and dedicated subject-area leaders embedded in the
business.
– Mandatory sourcing principles set and communicated
to our supply base and other third parties.
– Risk-based assurance and monitoring systems covering
legal and regulatory compliance, and ethical and social
considerations, including for our overseas operations
and suppliers.
– A confidential reporting line to allow colleagues and other
stakeholders to report areas of concern.
– 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.
Annual Report & Financial Statements 2023
63
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
9. CLIMATE CHANGE AND ENVIRONMENTAL RESPONSIBILITY
Our customers, colleagues, investors and other stakeholders have expectations for the business to operate in an environmentally
conscious manner. This includes reducing the environmental impact of our business over time, progressing towards our net zero targets
(including those linked to Gist and elsewhere within our supply chain) and effectively managing the consequences of climate-related
risks (such as extreme weather events). Failure to achieve this could impact our brand, future trading performance and other business
costs, including financing.
Context
There is increasing pressure from carbon-conscious customers,
investors and government bodies for the business to operate in
a more environmentally conscious manner where sustainability
forms a core part of decision-making. This includes our response
to the growth in the circular economy, waste reduction, low-carbon
products and use of recycled fabrics.
Mitigations
– Established Plan A programme with clear accountabilities
for each area of the business relating to our environmental
objectives.
– Net zero targets agreed with the Board, with the our
2030 corporate greenhouse gas emissions reduction target
approved by the SBTi (Science Based Targets Initiative.).
– 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 & Chemical Policy
in place for suppliers.
– Business-led forums established to oversee the delivery
of our carbon commitments and broader ESG risks.
– Early engagement and planning with partners and suppliers
to support their decarbonising activities.
– Business-wide climate risk and opportunity review undertaken
across all business areas, with risks and mitigations included
in business and functional risk registers as appropriate.
Future business performance will therefore be impacted by
our ability to effectively manage the transition to a low-carbon
economy while maintaining value for our customers, particularly
as they navigate the pressure of the current economic
environment. Key aspects of this include:
– balancing commercial decisions with environmental
responsibility and regulatory requirements;
– managing changes in customer preferences;
– managing the potential increase in costs associated with
sustainable materials, recycling and carbon pricing; and
– further technological and regulatory interventions like
developments in Taskforce on Climate-related Financial
Disclosures (TCFD) requirements and potential new reporting
under Taskforce on Nature-related Financial Disclosures
(TNFD).
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 potential impact
on trade and the income statement.
Oversight by ESG Committee
Change in priority
No movement
Increased
Decreased
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Marks and Spencer Group plc
STRATEGIC REPORT 10. LIQUIDITY, FUNDING AND FINANCIAL MARKETS
Barriers to maintaining affordable short- and long-term funding to meet business needs or an inability to effectively manage associated
risks (such as foreign exchange and/or interest rate changes) could impact our ability to transform at pace, as well as have an adverse
impact on business performance and/or viability.
Future fragility in the financial markets could also impact the business directly (such as heightening counterparty risk or restricting
access to capital), or indirectly (such as triggering liquidity or funding support for the M&S Pension Scheme).
Context
As the business continues to navigate a turbulent economic
climate, focus on our liquidity and funding requirements through
active management of cash, liquidity and debt remains a priority.
Availability of, and access to, appropriate sources and levels of
funding remain vital for the continued operation of business and
transformation activities.
The business is exposed to a number of movements in the financial
markets that require active management. They include:
– foreign exchange volatility due to the significant volumes
of product sourced from overseas;
– energy cost fluctuations relating to the operation of our estate;
and
– changes in interest rates, impacting the cost of debt.
Our ability to repay debt and fund working capital, capital
expenditures and other expenses is dependent on our operating
performance, ability to generate cash and to refinance existing
debt, where necessary.
Mitigations
– A £850m undrawn, revolving credit facility and £1,067.9m 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.
– Board-approved Treasury Policy, including hedging policies
to assist in mitigating future fluctuations in foreign exchange
and energy price volatility.
– Strong discipline over capital allocation decisions and scrutiny
and challenge of discretionary spend.
– Focus on working capital to improve cash flow and reduce
reliance on bank facilities.
– Monitoring and stress testing of projected cash and debt
capability, covenants and other rating metrics.
– Frequent engagement and dialogue with the market and
rating agencies.
– Active monitoring and management of our pension fund
commitments, including regular engagement with the Trustees.
Oversight by the Board and Executive Committee
11. EU BORDER CHALLENGES
The cost consequences and operational friction from the complexity of border arrangements between the UK and the European Union
(EU) could impact trading performance generally and our Irish business specifically.
Context
The business continues to manage the following challenges
as a result of the UK’s exit from the EU:
– adhering to labelling requirements for both imports and exports
to the UK and Ireland;
– monitoring and implementing solutions for any long-term
divergence of UK and EU rules that may add additional cost
and complexity to the business, such as the Border Target
Operating Model;
Mitigations
– Regular engagement with the Board to discuss the actions being
undertaken to manage evolving border challenges by our
accountable businesses.
– Broadening our local sourcing scheme in the Republic of Ireland
to expand product ranges and reduce cost.
– Strengthening the management and accountabilities of Irish
operations to support targeted mitigation of costs, including
opportunities for local sourcing.
– further increases in the cost base following the introduction of
– Operation of a virtual customs warehouse environment and
checks to inbound goods from the EU to UK and the consequent
pressure on the supply chain including additional sourcing
requirements and impacts on product availability; and
– managing the consequences of introducing more locally
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.
sourced products.
Oversight by Executive Committee
Annual Report & Financial Statements 2023
65
GOVERNANCEFINANCIAL STATEMENTSSTRATEGIC REPORT 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 8), our strategy (see pages 12
to 27), approach to risk management
(see pages 56 to 57) and our principal
risks and uncertainties (see pages 58
to 65).
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 maturity of its December 2023
and June 2025 bonds.
The Group continues to maintain a
robust financial position with available
liquidity of £1.9bn, including cash and
cash equivalents of £1.1bn and access to
a committed revolving credit facility
(“RCF”) of £850.0m.
In December 2022, the Group
successfully extended its RCF which now
expires in June 2026. The 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.
For the purpose of assessing the Group’s
viability, the Board identified that,
although all of the principal risks
detailed on pages 58 to 65 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:
– An uncertain trading environment.
– Business transformation.
– Joint venture investments.
– 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 2023/24,
resulting in a decline in sales of 2.0
– 2.5% and a decline in gross profit
margin of 0.5 – 1.0% across both Food
and Clothing & Home business units.
– A delay on transformation benefits
results in incremental sales expected
from the transformation declining by
7.5%, 15% and 30% respectively across
the three-year period across all three
business units.
– In addition, Ocado Retail Limited
experiences limited customer demand,
with no volume growth in 2023/24 and
volumes remaining subdued in
2024/25 and 2025/26.
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 pages 44 to 55, 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, deferring or cancelling
discretionary spend (including
discretionary bonuses) and reducing
capital expenditure.
66
Marks and Spencer Group plc
STRATEGIC REPORT 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, meet 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 134.
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 &
Risk 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 exhausting the Group’s
total liquidity. 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 more
than 15% per annum over the three-year
assessment period compared to the
Budget and Three-Year Plan before total
liquidity is exhausted. Further, it only
includes very limited mitigations,
comprising the removal of bonus,
utilisation of centrally held contingency,
removal of dividends and a modest
reduction in growth capex. 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.
The Strategic Report, including pages 2 to 67, was approved by a duly authorised
Committee of the Board of Directors on 23 May 2023 and signed on its behalf by
Stuart Machin,
Chief Executive
23 May 2023
Annual Report & Financial Statements 2023
67
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CHAIRMAN’S GOVERNANCE OVERVIEW
The Board’s focus during the year has been the
accelerated transformation of the business, ensuring
it is set up for long-term, sustainable success.”
Archie Norman
Chairman
As outlined in my Chairman’s letter on
pages 2 to 3, this has been a pivotal year
for the business; our new and energised
executive leadership team has
accelerated the pace of change in
reshaping M&S. My role, and that of the
Board, has been to guide and support
management through this acceleration,
ensuring they are relentlessly focused on
delivering sustainable growth and return
for our shareholders.
The Board has been highly engaged this
year, being flexible with our time to
challenge a refreshed Executive
Committee, but also remaining ready to
respond to external factors. Given events
in recent years, combatting turbulence in
our macro-environment is the new
normal, and the business has continued
to demonstrate its ability to respond
effectively. This year, the Board’s
activities have included a focus on our
longer-term strategic objectives, and we
held two separate strategy away days.
Naturally, we continue to fulfil our other
core duties to oversee M&S’ governance,
culture, financial controls, risk and
change management.
Further details on the Board, its
Committees and our governance
framework are available at
corporate.marksandspencer.com.
BOARD ACTIVITIES AND
CONSIDERATION OF STAKEHOLDERS
The Board’s focus during the year has
been the accelerated transformation
of the business, ensuring it is set up for
long-term, sustainable success, while
navigating through headwinds created
by the wider environment. A number of
key decisions have been made in pursuit
of this: the acquisitions of Gist, our Food
logistics supplier, and the intellectual
property of Thread, to help accelerate
our personalisation capability; the
investment in store renewals and
rotations; the review and increase in
front-line colleague pay, to name a few.
We remain mindful of the impact of
decisions made on the business’ various
68
Marks and Spencer Group plc
stakeholders and on its long-term,
sustainable success, in line with S.172(1)
of the Companies Act 2006 (“S.172”).
An overview of the range of matters that
the Board discussed and debated at its
meetings during the year can be found
on pages 75 to 79. How we engaged with
our stakeholders and their priorities is
summarised on pages 8 to 11. The
Company’s S.172 statement is available
on pages 80 to 82.
NEW LEADERSHIP
With the appointments of Stuart Machin
and Katie Bickerstaffe as Chief Executive
Officer and Co-Chief Executive Officer,
respectively, at the start of the year, the
Board chose to promote internal talent
to provide the stability, pace and
knowhow required to accelerate M&S’
transformation. In the remainder of the
year, the Board has been focused on
ensuring its composition is correct and
able to support the new executive team.
As reported in last year’s Annual Report,
Andy Halford stood down as a non-
executive director (“NED”) and our
Senior Independent Director (“SID”) in
December 2022, and we are grateful
for his continued service as SID during
the initial transitionary period for our
new executive leaders. Recognising
Andy’s skills and experience, we looked
to make new NED appointments to
provide additional bench strength in
areas integral to our transformation;
we appointed Ronan Dunne in August
2022 and Cheryl Potter in March 2023.
We also appointed Andrew Fisher as
our new SID in December 2022.
Also at the end of 2022, Jeremy
Townsend joined the business as Chief
Finance Officer, taking up a position
on our Executive Committee. The Board
and I are pleased Jeremy will now
be remaining with the business until
May 2025.
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 85 to 89. Board and
Executive Committee biographies can
be found on pages 72 to 74.
DIVIDEND
In this final phase of balance sheet
strengthening, the Board and I believe,
on balance, that non-payment of a
dividend continues to be appropriate for
the 2022/23 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. As our operating
performance improves, we will look to
restore a modest annual dividend
payment starting with an interim
dividend at the results in November.
DIGITAL ENGAGEMENT
There are countless examples
throughout this Annual Report of
the business harnessing the power
of digital to make a better M&S.
Our shareholder engagement is no
different. Shareholders will know how,
in recent years, our Annual General
Meeting (“AGM”) has been held digitally.
We continue to see how digital meetings
are both more engaging and democratic,
with participation levels trebling since
our last physical meeting. As a result,
our 2023 AGM will be held in the same
manner and Anita Anand will act once
again as your shareholder advocate,
sharing your views and questioning me
and the Board on your behalf. I look
forward to hearing from you all then.
Full details on how to participate
electronically, both in advance and on
the day, can be found in our Notice of
Meeting on pages 218 to 229.
Digital transformation is not limited
to our AGMs; we want all our
shareholders to benefit from closer,
digital engagement with the Company.
We are, however, constrained by
outdated company law and a
shareholding framework that is
distancing our shareholders from us,
with nominee platforms who are not
GOVERNANCE obliged to pass on our shareholder
communications. I wrote an open letter
to the Business Secretary in April,
recommending we give all shareholders
a voice by reforming company law and
bringing it into the 21st century as part of
our “Share Your Voice” campaign. I would
urge all shareholders interested in having
their voices heard to support our
campaign by signing our petition to
government, requesting changes to the
Companies Act 2006. Our campaign
open letter and link to sign the petition
are available on our corporate website.
corporate.marksandspencer.com
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 2022/23.
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 this Governance section and elsewhere in this
Annual Report as set out below.
1.
Board Leadership and Company Purpose
A. Effective Board
B. Purpose, values and culture
C. Governance framework
D. Stakeholder engagement
E. Workforce policies and practices
2. Division of Responsibilities
F. Role of Chairman
G.
Independence
H. External commitments and conflicts of interest
I. Board resources
3. Composition, Succession and Evaluation
J. Appointment to the Board
K. Board skills, experience and knowledge
L. Annual Board evaluation
4. Audit, Risk and Internal Control
M. External Auditor and Internal Auditor
N. Fair, balanced and understandable review
O.
Internal financial controls and risk management
5. Remuneration
P. Linking remuneration to purpose and strategy
Q. Remuneration policy review
R. Performance outcomes in 2022/23
Pages
72, 73
8, 9, 12, 13, 28-31
70, 71
10, 11, 80-82, 129
28-31
71
84, 86
72, 73
70
86, 87
72, 73, 86
83, 84
95, 96, 99
94
93, 95, 96
103, 108-114
108-114
116-125
Our full Corporate Governance Statement outlining our compliance is available
online at corporate.marksandspencer.com.
Annual Report & Financial Statements 2023
69
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE
OUR GOVERNANCE FRAMEWORK
Our Governance Framework supports the development
of good governance practices across the Group.
THE BOARD OF DIRECTORS
The Board is responsible for establishing a clear purpose and for setting the strategic direction of the
M&S Group. They ensure our culture is aligned with our strategy, oversee our conduct and affairs, and
promote the success of M&S for the benefit of our members and stakeholders. As at the date of this
Annual Report, the Board comprises the Chairman, CEO, Co-CEO and eight non-executive directors.
To see the full
breakdown of their
responsibilities
please visit our website
The effective working relationship between the Board
and ExCo facilitates support and challenge through
regular dialogue. The Board receives reports from the
ExCo at each of its meetings.
The Board delegates certain matters
to its four main sub-committees.
At each Board meeting, the Chairs
of the Committees provide an update
on their Committee activities.
EXECUTIVE COMMITTEE
The Executive Committee (“ExCo”), led by
the CEO, is our internal leadership team
responsible for:
– day-to-day execution of strategy including
reviewing strategic opportunities and initiatives
from the Group’s key businesses and
centralised functions;
– management of M&S’ core business units
ensuring strong executive alignment on
business priorities, investments and actions;
– management of all colleague matters,
including the structure and operation of
the HR function throughout the business,
the development and monitoring of culture
and values, reviewing talent and leadership
development as well as succession plans
below ExCo level.
More information on our ExCo can be
found on page 74.
BOARD COMMITTEES
AUDIT & RISK COMMITTEE
Responsible for monitoring
the integrity of the financial
statements, reviewing the
effectiveness of the internal
audit function, assessing the
Group’s risk framework, internal
controls and maintaining the
auditor relationship.
REMUNERATION
COMMITTEE
Responsible for remuneration
policy, performance-related
pay schemes and share-based
incentive plans.
Read more on
pages 92-99
Read more on
pages 100-129
NOMINATION COMMITTEE
Responsible for reviewing
Board and Committee
composition including
diversity, proposing new Board
appointments and monitoring
the Board’s succession needs.
ESG COMMITTEE
Responsible for ensuring the
Group’s ESG strategy remains
fit for purpose, and plans are
in place and reported on.
Advises the Audit & Risk
Committee on ESG-related
risks, including climate-
related issues.
Read more on
pages 85-89
Read more on
pages 90-91
Underlying this governance framework between the Board, its sub-committees and the ExCo, there are
a number of senior management forums strengthening our governance and improving Board oversight.
SENIOR MANAGEMENT FORUMS
These bodies support on specific projects, business needs, or strategic priorities, meeting as and when required. Decision-making
is delegated to them by the Group Delegation of Authority or Board approved terms of reference. These include:
PROPERTY
COMMITTEE
DISCLOSURE &
OVERSIGHT
COMMITTEE
FRAUD & LOSS
COMMITTEE
SHARES &
DEALING
COMMITTEE
COMPLIANCE
MONITORING
COMMITTEE
ESG BUSINESS
FORUM
Each of the Group’s key business units also have regular meetings with a streamlined leadership and management team.
For the upcoming financial year, these will take the form of Business Boards. Each Business Board will manage, monitor
and provide executive input to support strategic and operational decisions, improving the speed and efficiency of decision-
making and aiding the delivery of the transformation plan:
CLOTHING & HOME
FOOD
INTERNATIONAL
RETAIL & PROPERTY
OMNI-CHANNEL & CONNECT
PEOPLE
70
Marks and Spencer Group plc
GOVERNANCE DIVISION OF RESPONSIBILITIES AND MEETING
ATTENDANCE
CEO and Co-CEO
In May 2022, a new leadership team was appointed to accelerate progress with our transformation. This new structure consists
of a CEO, supported by a Co-CEO.
Our CEO, Stuart Machin, is responsible for the overall performance and day-to-day management of the Group. This includes
monitoring: the Group’s current trading; progress against strategic initiatives; the ever-changing competitive landscape;
emerging risks; ExCo performance; and succession planning for key roles within the business. He is also responsible for
overseeing the development of business strategies for Board approval and achieving timely and effective implementation.
Our Co-CEO, Katie Bickerstaffe, reports into the CEO, and is accountable for specific business areas and the delivery of Board
approved operating and capital plans. She has a particular focus on driving the global omni-channel and digital future of the
business, alongside maintaining responsibility for the Clothing & Home, International and Financial Services businesses.
Chairman
The Chairman of our Board, Archie Norman, is responsible for leading the Board and for promoting the highest standards of
corporate governance, assisted by the General Counsel & Company Secretary. Importantly, he is responsible for establishing
effective shareholder engagement and building strong relationships with our wider stakeholders.
Senior Independent Director (SID)
The SID, Andrew Fisher, provides a sounding board for the Chairman, supporting on all governance issues including the annual
Board Review and Chairman’s review. Additionally, the SID provides a communication channel between the Chairman and
non-executive directors and, when required, principal shareholders including representative bodies.
Non-executive directors (NEDs)
Independent NEDs assess, challenge and monitor the executive directors’ delivery of strategy within the risk and governance
structure agreed by the Board. As Board Committee members, they also review the integrity of the Company’s financial
information, consider ESG issues, recommend appropriate succession plans, and set the directors’ remuneration.
A full breakdown of the roles and responsibilities of our Board is available
on our corporate website, corporate.marksandspencer.com.
BOARD MEETING ATTENDANCE IN 2022/23
During the 2022/23 financial year, the Board held 11 scheduled meetings for which individual attendance is set out below.
Sufficient time is provided, periodically, for the Chairman to meet privately with the SID and NEDs to discuss any matters arising.
For information on key board activities, see pages 75 to 79.
CHAIRMAN
Archie Norman*
EXECUTIVE DIRECTORS
Stuart Machin
Katie Bickerstaffe
Eoin Tonge**
NON-EXECUTIVE DIRECTORS
Full Year
Evelyn Bourke
Fiona Dawson
Andrew Fisher
Andy Halford***
Tamara Ingram
Justin King
Sapna Sood
Appointed in 2022/23
Ronan Dunne
Cheryl Potter
Attended
Maximum possible
Independent
11
9
9
8
11
11
11
8
11
11
11
7
1
11
9
9
8
11
11
11
8
11
11
11
7
1
*Considered independent on appointment.
**Attended all meetings until he stood down from the Board on 9 December 2022.
***Attended all meetings until he stood down from the Board on 31 December 2022.
Annual Report & Financial Statements 2023
71
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OUR BOARD
CHAIR AND EXECUTIVE DIRECTORS
ARCHIE NORMAN
CHAIRMAN
RN
STUART MACHIN
CHIEF EXECUTIVE OFFICER
KATIE BICKERSTAFFE
CO-CHIEF EXECUTIVE OFFICER
Appointed: September 2017
Appointed: May 2022
Appointed: May 2022
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 Global
Counsel and Senior Independent
Director of Bridgepoint Group plc.
Stuart took over as CEO in May 2022,
having joined M&S as Food MD in 2018.
Prior to his appointment as CEO, Stuart
was joint COO where in addition to leading
M&S Food he also took responsibility for
property and store development, store
operations, HR and IT. Prior to M&S, Stuart
held senior roles across the UK and
internationally, starting his career in
Sainsbury’s and British Home Stores, Tesco
and then Asda. Stuart spent 10 years in
Australia as part of Wesfarmers as COO
and CEO of Coles supermarkets and
Target department stores respectively
before returning to the UK as CEO of
Steinhof UK. Stuart attended the three-
month residential Harvard AMP program
in 2013 and CEO program in 2023. Stuart is
also a director of Ocado Retail Limited.
Katie has held a number of roles at M&S
including Non-Executive Director, Chief
Strategy and Transformation Director
and most recently, joint COO. On 25 May
2022, she rejoined the Board as Co-CEO.
Katie is currently a Non-Executive
Director of Barratt Developments PLC
and at the England and Wales Cricket
Board. She 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 of
leading consumer-focused businesses.
NON-EXECUTIVE DIRECTORS
ANDREW FISHER, OBE
SENIOR INDEPENDENT DIRECTOR
RN
EVELYN BOURKE
NON-EXECUTIVE DIRECTOR
NA
TAMARA INGRAM, OBE
NON-EXECUTIVE DIRECTOR
E
NR
Appointed: December 2015
Appointed: February 2021
Appointed: June 2020
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 trustee at the
Royal Marsden Cancer Charity.
72
Marks and Spencer Group plc
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 has extensive
experience in financial services having
spent three and a half years as Bupa’s
CFO and in leadership roles at Standard
Life and Friends Provident. Evelyn has
been a Non-Executive Director of Bank
of Ireland since May 2018 and chairs the
Audit Committee there. She joined the
Board of Admiral PLC as a Non-Executive
Director on 30 April 2021, and chairs the
Remuneration Committee. She joined the
board of AJ Bell Plc on 1 July 2021 and is
also their Senior Independent Director.
Tamara had 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 and CEO of J Walter
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
Reckitt Benckiser Group plc, Marsh
MacLennan and Intertek Group.
GOVERNANCE Committees key
A Audit & Risk
E ESG
N Nomination
R Remuneration
Committee Chair
NON-EXECUTIVE DIRECTORS CONTINUED
FIONA DAWSON, CBE
NON-EXECUTIVE DIRECTOR
NR
JUSTIN KING, CBE
NON-EXECUTIVE DIRECTOR
NA
SAPNA SOOD
NON-EXECUTIVE DIRECTOR
NE
Appointed: May 2021
Appointed: January 2019
Appointed: June 2020
Fiona retired in July 2021 from Mars Inc.,
after more than three decades. Her last
role was Global President Food, Multisales
and Global Customers, and she was also a
member of the Global Leadership Team.
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. She is a Trustee of The Social
Mobility Foundation, Chair of the Women’s
Business Council and President elect of
the Chartered Management Institute.
Fiona is also a Non-Executive Director
of LEGO and joined Kerry Group plc as a
Non-Executive Director in January 2022.
Justin has over 30 years of experience
in large retail operations and
transformations, and now acts as
an adviser to a range of businesses.
He holds the Chair positions at Allwyn
Entertainment, Dexters Group and,
more recently, Itsu Grocery. 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.
Sapna joined The Adecco Group in
June 2021 and on 1 May 2023, was
appointed as President, Adecco APAC.
She was previously the 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. 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.
NON-EXECUTIVE DIRECTORS APPOINTED IN 2022/23
LEAVERS THIS YEAR
CHERYL POTTER
NON-EXECUTIVE DIRECTOR
N
RONAN DUNNE
NON-EXECUTIVE DIRECTOR
NA
Appointed: March 2023
Appointed: August 2022
As the former head of the global
consumer team at private equity firm,
Permira, Cheryl brings a strong
shareholder value focus to the Board.
Cheryl currently serves as a Non-
Executive Director on the Board of
German company, Best Secret, and has
done since April 2017. Cheryl is also a
passionate advocate for women in
leadership, as both a founding Patron
of The Prince’s Trust Women Supporting
Women scheme and as the current Chair
of Level 20, a not-for-profit organisation
focused on getting more women into
senior investing roles in the Private
Equity industry.
A commercial leader with extensive
international experience in the digital
telecoms industry, Ronan also has
financial expertise having held Chief
Financial Officer roles previously. He has
led businesses through technological
and people transformation both as CEO
of Verizon Consumer Group and CEO of
Telefónica UK (O2). Ronan is currently
Non-Executive Chairman of Six Nations
Rugby as well as a Trustee of the John
King Brain Tumour Foundation.
On 25 May 2022, Steve Rowe, who
was Chief Executive for six years
from 2016-2022, stepped down from
the Board, leaving after 40 years
with M&S.
Eoin Tonge stepped down from his
position as Group CFO & Chief
Strategy Officer on 9 December 2022
having joined M&S two years prior.
Andy Halford, Senior Independent
Director and Audit Committee Chair,
stood down from the Board with
effect from 31 December 2022,
having been appointed in 2013.
Read more on the Board’s skillset
on page 86
Annual Report & Financial Statements 2023
73
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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.
Alongside Stuart and Katie,
Richard, Sacha and Nick
were members throughout
the year. Jeremy, Alex,
Victoria and Sarah joined
the Committee part-way
through the year.
JEREMY TOWNSEND
CHIEF FINANCE OFFICER
RICHARD PRICE
MANAGING DIRECTOR
OF CLOTHING & HOME
ALEX FREUDMANN
MANAGING DIRECTOR
OF FOOD
Jeremy joined M&S on 22
November 2022 and brings a
wealth of financial leadership
experience. Jeremy has held
senior financial and non-
executive roles across several
public companies and was the
Group CFO of Rentokil Initial
Plc. Jeremy is currently a
Non-Executive Director of PZ
Cussons plc, parkrun Global
Limited and at NHS England,
where he is the Chair of the
Audit & Risk Assurance
Committee.
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.
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.
Alex joined the team at M&S
as Managing Director of Food
on 7 November 2022 from
Australian beer, wine and
spirits retailer, Dan Murphy’s.
Alex has a wealth of experience
having worked in food retailing
for nearly two decades,
previously leading both
Grocery and Fresh Foods at
Coles, one of Australia’s largest
retailers. Prior to Coles, Alex
worked for Tesco in the UK.
SACHA BERENDJI
OPERATIONS DIRECTOR
VICTORIA MCKENZIE-GOULD
COPORATE AFFAIRS
DIRECTOR
SARAH FINDLATER
GROUP HR DIRECTOR
NICK FOLLAND
GENERAL COUNSEL &
COMPANY SECRETARY
Victoria has been a part
of the leadership team as
Corporate Affairs Director
since 2019, heading-up
colleague communications,
external communications,
public affairs and, since 2022,
sustainability. Victoria is also
the Executive Sponsor for
Inclusion & Diversity across
the business. Victoria is a
Non-Executive Director on
the Board of Allwyn UK and
a member of the Advisory
Board for her alma mater,
University of Liverpool
Management School.
Sarah has been Group HR
Director since March 2022.
She joined M&S in 1998
through the HR Graduate
programme and undertook
HR Business Partner roles in
stores and regions across the
country, before joining our
Support Centre in 2010
leading various functions
including Organisational
Development and Talent.
Sarah sits on the Prince’s Trust
Retail Leadership Group and
is G20 EMPOWER alliance
advocate, a Private Sector
Alliance for the
Empowerment and
Progression of Women’s
Economic Representation.
Nick has 30 years of legal and
governance experience, and
has been General Counsel &
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 joined HMPPS
as a non-executive member of
its Audit and Risk Assurance
Committee in May 2021, and in
April 2023, joined the Board of
Defence Equipment and
Support as a Non-Executive
Director and Chair of the
Audit and Risk Assurance
Committee.
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 is
currently Operations Director,
looking after stores and store
operations, property and
store development for UK and
Ireland. On 1 February 2023,
Sacha was appointed to the
Board at Adnams plc as a
Non-Executive Director,
where he is also a member of
the Remuneration and Audit
Committees.
74
Marks and Spencer Group plc
GOVERNANCE
BOARD ACTIVITIES
The following pages outline the key topics the Board has
been engaged on, in support of Reshaping M&S.
KEY MILESTONES
2022
Board approves preliminary
results statement 2021/22,
announcing new CEO and
Co-CEO leadership team.
Board attends the
digital Annual General
Meeting (“AGM”), listening
and responding to
shareholder views.
Ronan Dunne joins the
Board as a non-executive
director.
Completion of Gist
acquisition.
25 May
22-24 June
5 July
21 July
1 August
Board attends strategy
away days to consider
and finalise the
strategic priorities for
upcoming months.
Plans to acquire Gist
are announced.
21 September
30 September
Our £15m investment
in colleague pay is
announced, to support
colleagues through the
cost-of-living crisis.
12 October
Board approves Half Year
Results trading statement.
8 November
31 December
2023
1-2 February
28 February
Board attends strategy away
days to discuss strategic
priorities for 2023/24.
Cheryl Potter joins the Board
as a non-executive director,
making the Board a 55%
female majority.
1 March
Board members speak
to institutional investors
on the Group’s
investment case at our
Capital Markets Day.
Andy Halford steps
down from the Board.
Andrew Fisher is
appointed as the new
Senior Independent
Director.
A further £57m
investment in
our colleague pay is
announced, increasing
it for a second time in
response to the ongoing
cost-of-living crisis.
BREAKDOWN OF BOARD ACTIVITIES
Meeting agendas, agreed in advance by
the Chairman, CEO and Company
Secretary, combine a balance of regular
standing items as outlined below:
Strategy
44%
23%
Deep dives
Executive updates 12%
Governance
21%
STRATEGY
The Board considers key areas of
strategy during these updates,
advising on strategic direction and
focus. This year, these sessions were
also used for refining our strategic
priorities.
DEEP DIVES
Deep dive sessions are presented on
areas of importance and focus from
Business Unit heads. Over the year,
these have included updates on
omni-channel, the People Plan and
culture, and the role of health in our
Food business.
EXECUTIVE UPDATES
Executive directors provide high-level
operational and financial updates,
presenting the key challenges and
actions taken during the reportable
month, as well as a look forward at
priorities for the next month.
GOVERNANCE AND
COMMITTEE REPORTS
The General Counsel & Company
Secretary provides an update,
summarising the legal activities from
the period alongside upcoming events
or regulatory changes. Contracts for
approval outside the Board-approved
delegated authorities are presented
for consideration, as well as year-end
statutory reporting for publication.
Committee Chairs also provide
regular updates on their recent
Committee meetings, highlighting
any decisions and key issues for the
Board’s attention.
Annual Report & Financial Statements 2023
75
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
BOARD ACTIVITIES CONTINUED
Agenda items for discussion
correspond to the Group’s strategic
priorities, and have taken into
consideration the impact on
stakeholders; these are highlighted
in the key below.
STAKEHOLDER GROUPS
6
1
5
2
4
3
1 Shareholders
2 Colleagues
3 Customers
4 Communities
5 Suppliers
6 Partners
Read more on pages 10-11
STRATEGIC PRIORITIES
Deliver
profitable
sales growth
Disciplined
investment
choices
Improve
operating
margins
Drive
shareholder
returns
Read more on pages 12-27
76
Marks and Spencer Group plc
STRATEGY AND TRANSFORMATION
Modernised supply chain
Acquisition of Thread
2
3
5
1
3
The Board received regular updates
on the acquisition of intellectual
property developed by the personalised
fashion marketplace, Thread, enabling us
to advance in our personalisation
strategy. The Board considered and
approved the approach, recognising the
benefit of buying, not building key
technology developments.
Store of the future
1
2
3
4
The Board considered and approved the
rotation and renewal of legacy stores,
including approving trials for new café
and Beauty concept offers; all driving
either sales or operating efficiency. The
Board debated and approved a longer-
term plan to reduce the number of full
line stores from 247 to 180 and open
another 100 Food stores (to 420) by
FY25/26. The associated £480m
investment will generate over 3,400 new
jobs across the country and aims to
create a fit for the future M&S store
estate with a seamless experience for
customers every time they shop. The
Board also monitored progress towards
net zero emissions from stores by 2035
due to the store renewal scheme.
Sustainability
1
3
4
Sustainability and net zero targets
remain at the forefront of the Board’s
decision-making considerations and this
year included maintaining an overall
focus on ensuring stores are carbon
efficient. Alongside store rotation plans,
the Board approved the implementation
of high-speed electric vehicle charging
points at 70 M&S stores. The Board also
considered management’s plans on how
to map and reduce the Group’s carbon
footprint and received updates from the
ESG Committee on workstreams across
the business and progress against
corresponding sustainability metrics.
Read more on page 32-33
Over the year, the Board heard updates
on the end-to-end transformation of
the Clothing & Home operating model.
The Board debated and approved
elements of the new model, enabling
the business to improve global
operations and deliver an efficient
omni-channel customer proposition.
Additionally, the Board provided
guidance on the further implementation
of Vangarde, leading to the business
successfully executing the principles for
the first time through peak trading, with
improved stock flow to stores.
Acquisition of Gist
1
2
3
5
The Board considered, debated and
ultimately approved the acquisition of
Gist, enabling the business to take full
control of our food supply chain for the
first time in M&S history and invest in a “fit
for the future” logistics network. They
received regular updates from the
Project Delivery team, steering
management on acceptable transaction
parameters and risk appetite, as well as
discussing the benefits and challenges
the acquisition would bring to the
business. This included the benefits
arising from elimination of contractual
fees and costs, allowing for investment
elsewhere to drive shareholder returns
and keep prices low for customers. The
Board continues to receive updates on
the integration of the Gist business and
its colleagues into M&S.
Read more on page 26
Ocado
1
3
6
This year, the Board has assessed and
debated the ways in which we can
maximise the value of our joint venture
(“JV”) with Ocado Retail and foster the
relationships between both leadership
teams. Ocado Retail CEO, Hannah
Gibson, was introduced to each NED
personally following her appointment,
and the Board heard her plans for her
first 100 days in post and discussed the
future of the JV. Hannah was also invited
to present at the Board’s strategy away
day in February 2023, where the Board
advised that Ocado Retail’s senior
management talent plan needed
strengthening to improve organisational
processes.
GOVERNANCE STRATEGY AND TRANSFORMATION
OPERATIONAL AND FINANCIAL UPDATES
Introduction of Sparks globally
3
6
The Board discussed the potential
positive impact of globalising the
already successful Sparks loyalty
scheme. They received updates and
supported the launch of the scheme
throughout FY22/23: in Republic of
Ireland in May, France in September
and in October, India, Australia and
across 25 M&S international flagship
websites serving target markets.
Third-party brands
1
3
5
The Board reviewed third-party
brand proposals and received
updates on performance of existing
third-party brands online and in
stores such as Nobody’s Child and
Ted Baker. The Board provided
guidance on the benefit of third-
party brands, advising that brands
that complement our own label can
provide broader appeal and
improved growth, and should be
considered when developing the
refresh of our home and furniture
offering.
Budget and financial
performance monitoring
1
2
5
The Board monitored financial
performance versus budget on a regular
basis throughout the year, alongside
reviewing and approving the budget
for FY2023. The Board highlighted the
importance of preparedness for
potential decline from future headwinds.
Disciplined capital allocation
1
2
3
The Board agreed to prioritise
strengthening the balance sheet and
investing in colleagues by not paying
a final dividend for the year, but continue
to monitor and discuss the resumption of
dividend payments in the near future.
The Board emphasised to management
the importance of disciplined capital
allocation, including prioritising spend
that provides greater shareholder
returns in the long term.
Marketing the M&S brand
1
2
3
4
5
6
The Board discussed and highlighted the
need for improvement in the way we
communicate the M&S brand to potential
consumers, noting the production of the
ITV show “Inside M&S at Christmas” to
improve value and quality perception.
Supplier agreements
3
5
The Board was involved in assessing
key supplier agreements, including
approving a renewed agreement with
Greencore as supplier of sandwiches,
wraps, rolls and sushi in stores and
M&S Cafés.
HOW THE BOARD IS
MAKING STRATEGIC
DECISIONS TO BUILD
A RESHAPED M&S
Strategy Days
WHEN
The Board attended dedicated
strategy away days in June 2022
and February 2023, discussing short-
and long-term strategic goals, and
determining the choices the business
needs to make to achieve them.
DISCUSSION THEMES
The main discussion themes over both
sessions were:
– Identifying the appropriate
strategic priorities and short-term
choices required to steer the
business towards these;
– Structurally shifting M&S’ cost
base to improve efficiency;
– Using data and metrics to drive
a more granular and fact-based
understanding of business
performance; and
– Making cultural change and
innovation the key to growth.
OUTCOMES
The Board’s key conclusions included:
– A more compelling investor
narrative to be developed, with a
laser focus on communicating how
we will deliver consistent returns
for shareholders;
– Growth should be a key focus;
by investing in projects that
guarantee future returns whilst
working to achieve growth in our
BAU activities; and
– Our costs should be restructured,
to ensure efficient treatment across
our operating costs, investments
and working capital.
FUTURE
Regular strategy away days will
continue to be arranged. The Board
and management agreed the sessions
were extremely productive and will be
beneficial as the business continues
to transform.
Annual Report & Financial Statements 2023
77
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS ORGANISATIONAL CULTURE
AND COLLEAGUES
Supporting colleagues through
the cost-of-living crisis
2
4
The Board discussed and agreed ways to
help colleagues with the cost-of-living
crisis, including reviewing benefits
packages. The Board received regular
updates from management and the
Remuneration Committee, ultimately
approving the recommendation for
out-of-cycle inflationary pay rises for
colleagues in both September and
February, as well as a £250 voucher to
help lower paid colleagues with the costs
of the Christmas period. They also
debated how to communicate these
increases to colleagues and externally.
Read more on page 81
The Board directed a full withdrawal
of all M&S business from Russia
including approving the closure of
48 stores and the online proposition.
Principal and emerging risks
1
2
3
4
5
6
The Board heard updates from the
Audit & Risk Committee Chair on
principal and emerging risks, in
particular highlighting the threat of
cyber security attacks and the need for
investment to prevent these. The Board
reviewed and approved the Group’s
refreshed risk appetite statements,
as recommended by the Audit & Risk
Committee.
Read more on pages 58-65
Structured talent plan
1
2
The Board received detailed talent
succession plans for all leadership roles
and senior management, with an
emphasis on the importance of retaining
top talent. The Board considered ways in
which individuals could progress through
the organisation, proposing increased
investment into growing talent internally.
BOARD ACTIVITIES CONTINUED
RISK MANAGEMENT AND MACRO IMPACTS
Energy price increase
1
3
4
Russia
2
3
4
6
The Board has been working to address
this macro challenge, both to minimise
the cost impact as well as to support the
delivery of our net-zero commitments.
The Board agreed a short-term goal to
reduce consumption, targeting an
initial 5-10% reduction in 2023/24
through a variety of tactical moves in
store, including a temperature reduction
and a review of bakery operational times.
The Board also discussed the importance
of investment in refrigeration
replacement and energy efficiency,
highlighting the need to begin a
programme to remove natural gas from
our store estate as soon as possible.
FX hedging
1
5
The decline of sterling against the US
dollar, among other factors, caused an
increase in the underlying cost of
Clothing & Home product. The Board
discussed and agreed to hedge forward
volumes through the year to mitigate
purchasing exposures.
Inflation
3
4
5
As the level of inflation increased,
the Board recognised the need for
price investment into a high quality,
core value range for customers.
The Board supported the “Remarksable
Range” and “Price Lock” initiatives, noting
the importance of value perception to
the strategy, and debated how to
communicate this to consumers.
The marketing team were engaged in
order to align the expectations of the
Board to their campaigns. Additionally,
our inflation mitigation activity has
formed a central part of the Investor
Relations narrative, especially in Food.
78
Marks and Spencer Group plc
GOVERNANCE ORGANISATIONAL CULTURE
AND COLLEAGUES
Embedding the Closer to
Customers programme
2
3
The Board supported the new initiative
for Support Centre colleagues to spend
seven days a year working in stores,
assisting colleagues during peak trading
as well as reflecting on learnings and
innovations required to improve
customer experience and store
operations. During September 2022,
executive directors managed our
Bluewater store alongside the leadership
team, to be closer to colleagues and
closer to customers; using the
experiences in store to gain feedback,
insight and data and to drive visible
improvements in store.
Your Voice survey
1
2
The Board carefully considered the
results of the colleague “Your Voice”
survey, aimed at understanding the
areas in which the organisation’s culture
can be improved. The Board agreed
that listening to colleagues is critical to
delivering M&S’ strategic transformation.
Based on feedback from the survey, the
Board highlighted the need for increased
empowerment across the organisation to
drive faster decision-making.
Business Involvement Group
1
2
The elected Chair of BIG continues to
engage regularly with the Board and
attended the April 2022 Board meeting
to feedback key messages from
colleagues for the Board to discuss.
The two key topics considered were the
cost-of-living crisis and how this affects
colleagues, as well as how Covid-19
impacts are now part of everyday life
in the retail sector and the challenges
faced by vulnerable colleagues. This
feedback contributed to the decision to
invest in colleague pay twice this year,
in both September and February.
Read more on page 29
GOVERNANCE AND OVERSIGHT
AGM
1
The Board continued to support the
evolution of our digital AGM format.
Following our 2022 AGM, the directors
provided post-meeting feedback that
the event had been a positive one and
was clearly a successful demonstration
of using digital tools to increase
shareholder engagement.
Share Your Voice Campaign
1
The Board received updates on digital
shareholder engagement during the
year, culminating in the launch of the
“Share Your Voice” campaign. The
campaign calls for updates to the
Companies Act 2006 to revitalise
shareholder democracy.
Read more on pages 68-69
Shareholder engagement
1
The Board was kept up to date with
institutional investor engagement
throughout the year on topics including
strategic direction and director
remuneration. Members of the Board
attended a Capital Markets Day held
at our Waterside Support Centre,
where investors heard from executive
directors on our longer-term strategic
priorities. Feedback on these priorities
subsequently contributed to the Board’s
discussions during their February
strategy away days.
NED recruitment and succession
1
2
The Board carefully considered and
approved the appointment of two new
non-executive directors and the
succession of the Senior Independent
Director and the Audit Committee Chair,
on recommendations from the
Nomination Committee.
Read more on pages 85-87
Financial Reporting
1
2
3
4
5
6
The Board reviewed and approved the
2021/22 Annual Report and Accounts
and the 2022/23 Half Year results, on
recommendation from the Audit & Risk
Committee that these were a fair,
balanced and understandable
representation of the Group’s
performance and financial position.
Board Committee updates
1
2
The Board reviewed changes to the
Audit Committee terms of reference,
agreeing to it becoming the Audit & Risk
Committee. The Board also reviewed
and approved changes to the Disclosure
Committee’s terms of reference to
detail explicitly the Committee’s
oversight of non-financial information
as well as financial data, and agreeing
to its renaming to the Disclosure &
Oversight Committee.
HFSS regulation
2
3
4
5
Executive members of the Board
were proactive in reacting to The Food
(Promotion and Placement) (England)
Regulations 2021 brought in this year,
engaging with several members of
parliament to discuss the legislation
which is aimed at reducing the
availability of products high in fat,
salt and sugar in high footfall areas
and bought through promotions.
The Board discussed the important role
that health plays in the business and
regularly discussed how to best adhere
with, and anticipate, further regulation.
Board Review
1
2
The Board were involved in an internal
review, in which the Chairman held
structured interviews with each of the
non-executive directors and sought
feedback from executive directors.
The purpose of the review was to
assess overall performance including
balance of board expertise and quality of
constructive and transparent dialogue.
Read more on pages 83-84
Annual Report & Financial Statements 2023
79
SHARE YOURVOICESTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS S.172 STATEMENT
Decisions made by the Board must balance the sometimes
conflicting needs and priorities of our stakeholders, whilst
also ensuring they promote the long-term success of M&S
and protect our reputation. This duty is enshrined in Section
172(1) (a) to (f) of the Companies Act 2006 (“S.172”).
Engagement therefore plays a key role
in ensuring directors fully understand
stakeholder needs and can make well
informed decisions that have addressed
differing priorities. Our overview of
stakeholder engagement that has taken
place during the year can be found
on pages 10 to 11.
The following pages comprise our
S.172 statement and detail how the Board
has fulfilled its duty this year to have
regard to the matters set out in S.172.
Examples of three key decisions taken
by the Board during the year on pages
81 to 82 detail how the Board considers
stakeholder needs in practice and how
this impacted decisions.
The below table outlines other areas of
this report which detail how the directors
have had regard to the S.172 factors.
HOW THE DIRECTORS FULFIL THEIR S.172
DUTY UNDER THE COMPANIES ACT 2006:
Diverse set of skills, knowledge and
experience
– The Board has a diverse set of skills,
knowledge and experience which
assists it in making informed
decisions promoting the long-term
success of the Company whilst
considering the needs of our
stakeholders.
– Further information on our Board
composition, including the skills
and experience of our directors, can
be found in Our Board on pages 72 to
73 and in the Nomination Committee
Report on pages 85 to 89.
Board information and monitoring
– The Board receives detailed papers
and in-person updates from
management, including stakeholder
priority and outcome analysis, which
they query, challenge, and debate, to
ensure conflicting views are carefully
considered.
– Updates on the progress of actions
and decision implementation are
also provided, to allow the Board to
review and alter where appropriate as
situations (and stakeholder priorities)
inevitably evolve.
– Further information on the Board’s
activities can be found on pages
75 to 79.
Board discussion
– All directors are expected to
constructively challenge and
contribute to discussions, as well as
offer additional perspectives, advice
and strategic guidance.
– Further information can be found
within the Division of Responsibilities
and Meeting Attendance section on
page 71, and the Board Review on
pages 83 to 84.
Strategic direction and culture
– The Board is responsible for
setting the strategic direction,
values and culture of the Company.
It sets the tone of how business is
done throughout M&S and has
embedded expectations that
stakeholder considerations are
central to decision-making at all
levels of the organisation.
– Further information on culture can
be found on pages 28 to 31, and
further information on our strategy
can be found on pages 12 to 27.
S.172 FACTOR
FURTHER INFORMATION
CAN BE FOUND:
S.172 FACTOR
FURTHER INFORMATION
CAN BE FOUND:
(a) The likely
consequence of
any decisions in
the long term
(b) Interest of
employees
(c) Fostering
the Company’s
business
relationships
with suppliers,
customers
and others
Our Business Model: pages 8-9
Our Strategic Priorities: pages 12-27
Stakeholder Considerations: pages 81-82
(d) Impact of
operations on the
community and
environment
CEO & Co-CEO Q&A: page 6
Our Business Model: pages 8-9
Stakeholder Engagement: page 10
People & Culture: pages 28-31
Stakeholder Considerations: pages 81-82
Remuneration Committee Report: page 106
CEO & Co-CEO Q&A: pages 6-7
Our Business Model: pages 8-9
Stakeholder Engagement: pages 10-11
Our Strategic Priorities: pages 14, 18-21,
and 25
Stakeholder Considerations: pages 81-82
Our Business Model: pages 8-9
Stakeholder Engagement: page 11
Our Strategic Priorities: page 15 and 18
TCFD Report: pages 44-55
Stakeholder Considerations: pages 81-82
ESG Committee Report: page 91
marksandspencer.com/
sustainabilityreport2023
(e) Maintaining a
reputation for
high standards of
business conduct
Our Business Model: pages 8-9
TCFD: pages 45 and 54
Risk Management: pages 56-57
Stakeholder Considerations: pages 81-82
Audit Committee Report: page 95
(f) Acting fairly
between members
of the company
Our Business Model: pages 8-9
Stakeholder Engagement: page 10
Our Strategic Priorities: page 27
Stakeholder Considerations: pages 81-82
Remuneration Committee Report: page 106
80
Marks and Spencer Group plc
GOVERNANCE STAKEHOLDER CONSIDERATIONS
SUPPORTING
STAKEHOLDERS
THROUGH THE
cost-of-
living crisis
1
2
3
5
“Cost-of-living is the most
talked about issue amongst
our colleagues … We are
pleased our leadership team
has listened to colleagues
and responded.”
Graham Bennett
Chair, National Business
Involvement Group
“Everyone across the country
is feeling the pressure of rising
costs. We want to do what we can
to help ease some of that strain;
that’s why we have invested in
price to deliver better value for
our customers and why we are
investing in our colleague base pay
for the second time this year.”
Stuart Machin
CEO
MACRO EVENTS
24 February
Conflict in Ukraine begins, exacerbating inflationary
pressures, particularly for food and energy, which are
two key sectors driving much of the high inflation.
15 September
The Bank of England’s Monetary Policy Committee
gives its latest update on interest rates. Having
already pushed them up to 1.75% in August, they
raise them again to 2.25%.
23 September
The “Mini Budget” is unveiled and causes turmoil
on financial markets.
17 November
The government releases its Autumn Statement
to tackle the cost-of-living crisis and rebuild the
economy; a plan to raise taxes and cut spending in
a bid to fill what they call a £50bn “fiscal black hole”.
15 March
Spring Budget is announced.
2022
M&S DECISION
11 April
M&S Food invests in delivering trusted value for
customers, introducing lower prices on the
“Remarksable Value” range.
21 September
M&S sets out £15m investment to support colleagues
in response to the cost-of-living crisis.
2 November
M&S announces price lock extension and guarantees
trusted value for customers.
2023
28 February
M&S announces a further £57m investment in store
colleague pay; this new commitment means hourly rate
of pay has increased 20% over the last two years.
11 April
M&S extends price lock until summer as part of trusted
value promise.
The cost-of-living crisis has been felt
across the business and by all our
stakeholders. The topic has frequently
featured on Board agendas and directors
have discussed in detail how best to
strike the balance between supporting
those impacted, whilst delivering on M&S’
growth ambitions to promote the
long-term success of the business.
The central theme of Board discussions
has been managing the increasing costs
caused by inflation. The Board and senior
management have noted the progress
made in recent years to build value
credentials with customers, while
upholding quality and sustainable
practices with suppliers. Passing too
much cost on to customers and suppliers
could jeopardise these relationships and
our reputation. However, investing too
much in price for customers and
suppliers could come at the expense of
shareholders and colleagues; by failing
to sustain sufficient margin to drive
value for shareholders, or jeopardising
potential pay adjustments for front-line
colleagues.
Following extensive consideration of the
issues faced by each stakeholder group,
the Board carefully balanced these
conflicting priorities and made the
following decisions:
– At a time when family budgets were
under stress, it was deemed a priority
to sustain our “trusted value” status
amongst customers. In April 2022,
our Remarksable Value range was
relaunched, focusing investment on
everyday lines. The decision was made
to price lock 100 family favourites.
The Board kept this approach under
constant review, agreeing that
investing in products highly valued by
customers was the right approach.
This decision to support and preserve
our standing with customers has since
proven to drive volume growth, which
should create long-term benefit for
shareholders. The investment made
in Remarksable Value resulted in a 40%
increase in sales, with products now
featuring in c.20% of customer baskets.
– The Board worked closely with
colleague representatives in our
Business Involvement Group (“BIG”)
to ensure our benefits package
accurately reflected the changing
needs of colleagues. The Chair
of National BIG attended the
Remuneration Committee (“RemCo”)
meeting in September 2022 to
communicate the key issues facing
colleagues. As a result, RemCo
agreed a £15m inflationary pay rise for
colleagues, as well as a £250 voucher
to help lower paid colleagues with
the costs of the upcoming Christmas
period. The RemCo has since carefully
monitored inflation and the consequent
ongoing challenges being experienced
by colleagues. Recognising that for
M&S to succeed in the longer term
our colleagues must feel supported
and appreciated, in February 2023,
the RemCo agreed to a further
investment of £57m in store colleague
pay, meaning hourly rates of pay have
increased 20% over the last two years.
Annual Report & Financial Statements 2023
81
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS STAKEHOLDER CONSIDERATIONS CONTINUED
EV Charging
CONTRACT WITH BP
1
3
4
6
In September 2022, the Board approved
an exclusive agreement with bp pulse to
expand its national charging network with
high-speed electric vehicle (“EV”) charge
points at 70 M&S stores. The Board’s view
in making this decision was that the
agreement would benefit our key
stakeholders and the business in the
longer term as the UK converts to EV
ownership in the coming years.
70
M&S stores to have EV chargers installed
– The agreement further enhances and
cements our relationship with bp as
a franchise partner.
– The installation of charging points
adds a new revenue stream for the
business. This will not only offset the
cost of installation and maintenance;
it will increase footfall in M&S stores
and provide us with a competitive edge
over other retailers who do not have
such facilities. Ultimately the Board
believes this will benefit shareholders
and the long-term success of the
business.
– EV charge points provide a better
experience for our customers who
own electric vehicles as they can
charge while they shop.
– Providing EV charging facilities
demonstrates our commitment to the
environment as well as our willingness
to support sustainable transportation,
which helps improve our reputation.
Acquisition
OF GIST
1
2
3
5
The acquisition of Gist was a key agenda
item in Board meetings this year. Having
restored M&S Food to an industry-
leading position on volume growth in
recent years, the Board’s discussions
centred on vertical integration in Food as
a means of creating a more effective and
efficient supply chain. Gist was identified
as an acquisition target, having worked
with M&S as its principal Food logistics
supplier, and the Board considered the
potential supply chain benefits: the
ability to invest in the network and
reduce the cost to serve, and the ability
to update legacy systems and improve
automation. The Board recognised the
potential the acquisition had to generate
immediate benefits to M&S through
these operational synergies, including
the ability to build on the successful
implementation of the “Vangarde”
supply chain optimisation programme.
Alongside these cost savings and
operational benefits, the Board
considered the needs of other key
stakeholders, and the benefits the
acquisition might create for them.
Having additional control of the
network had potential benefits for
customers and colleagues.
82
Marks and Spencer Group plc
The reduction in costs would provide
M&S with flexibility to maintain product
prices, while the increased network
control could create colleague
efficiencies through more joined up
ways of working, and improvements to
forecasting, ordering and allocation.
The Board unanimously agreed the
acquisition would be a critical enabler
of our end-to-end supply chain
transformation, helping to drive long-
term returns for shareholders, as well as
providing benefits to a number of other
key stakeholders. The Board noted,
following completion, it would be
important to manage the integration
process carefully, ensuring Gist
colleagues felt part of the M&S family.
As a result, a comprehensive integration
plan is underway and is being closely
monitored by the Board to ensure
successful delivery of the transaction’s
strategic objectives, particularly the
realisation of stakeholder benefits.
£145m
initial consideration paid
GOVERNANCE BOARD REVIEW
The Board reflects on its performance
and effectiveness annually. This year, our
evaluation was facilitated internally by
the Chairman, with support from the
General Counsel & Company Secretary.
Our last externally facilitated Board
Review took place in 2021. In accordance
with the principles of the UK Corporate
Governance Code, we intend to externally
facilitate next year’s Board Review.
One-to-one discussions were held with
each of the directors, covering a broad
range of topics relating to the Board, its
committees and the directors’ individual
contributions. The Senior Independent
Director met with each of the directors to
review the Chairman’s performance and
the feedback was subsequently shared
with the Chairman.
The review focused on:
– Board: composition, diversity
and expertise, dynamics, time
management, stakeholder focus
and strategic oversight.
– Committees: effectiveness of the
committee chairs and the committees
themselves, focus of agendas,
composition and time management.
– Chairman: relationships and
communication, meeting
management, as well as managing
relationships with shareholders.
– Individuals: preparation for and
attendance at meetings, time
commitment, director relationships,
knowledge, experience and overall
contribution.
IMPACT OF THE 2022/23 ACTION PLAN
The outcomes and actions agreed following last year’s review were a focus for
the Board throughout the year, and progress was assessed in the review.
2022/23 Action
Examples of action taken in the year
Review the Board’s
informal engagement
opportunities, as well as
the Board’s Involvement
Programme, to be closer
to stakeholders
– The directors have connected frequently in informal
settings such as breakfasts and dinners.
– Each of the NEDs met individually with Hannah
Gibson, CEO Ocado Retail, and Hannah also
attended the Board’s strategy away day in
February 2023.
– The executive directors ran the Bluewater store for
a week in September 2022 to get closer to both
customers and store colleagues.
More information on stakeholder engagement
can be found on pages 10-11.
Focus on strategic issues
and consider future trends
– The Board attended two strategy away days in June
2022 and February 2023.
Review the Board’s
composition and identify
Andy Halford’s successor
as SID
– The Board considered, debated, and approved
the acquisitions of Gist and the intellectual property
of Thread.
– The Board assessed and debated ways in which
the value of our joint venture with Ocado Retail
could be maximised and how best to foster
relationships between both leadership teams.
More information on the Board’s strategic
discussions and decisions can be found on
pages 75-82.
– The Chair of the Nomination Committee consulted
with all members of the Committee, and it was
unanimously agreed Andrew Fisher should
succeed Andy Halford as SID.
– Ronan Dunne was appointed as a NED to increase
financial, international and commercial focus.
– Cheryl Potter was appointed as a NED to bring
additional shareholder-value focus to the Board.
More information on the Nomination
Committee’s discussions can be found on
pages 85-89.
Annual Report & Financial Statements 2023
83
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE BOARD REVIEW CONTINUED
BOARD REVIEW INSIGHTS
Board Performance
– The overall sentiment following
the review was generally positive in
terms of how the Board operates.
The directors believed there was a
good variety of expertise around the
table and the dynamics between each
of them were positive.
– The directors thought the new
executive directors had transitioned
to their roles successfully.
Communication between Stuart,
Katie and the rest of the Board was
clear and transparent.
– All directors were considered to
be working effectively and had
sufficient time to commit to their role.
The newest members of the Board
were settling in and building strong
relationships with the other directors
and the business.
Chairman and Senior
Independent Director
– Feedback from the directors
emphasised the Chairman continued
to demonstrate strong leadership and
his performance and contribution
remained impactful.
– The Board noted Andy Halford
provided a suitable handover of
responsibilities to his successor,
Andrew Fisher. Andrew had taken on
the additional duties and remained
a trusted and valued colleague among
directors.
Committee Performance
As part of the 2022/23 review, each of the
committees’ performance was assessed
following the same informal discussion
format. The appraisals found each of the
committees were performing effectively,
with strong leadership from the
committee chairs. Each committee was
considered to be operating within the
scope of their terms of reference.
– Feedback from ESG Committee
members recognised meetings
were frequent, but agreed this was
useful in driving the importance of
sustainability with management.
– Nomination Committee members
agreed they had worked in an agile
manner and with pace to successfully
lead the recruitment and appointment
of two new non-executive directors.
– The Audit & Risk Committee was
considered to be functioning
effectively under its expanded terms
of reference, which recognised the
Committee’s increased focus on risk
management. Committee members
agreed the transition to a new
Committee Chair was handled well and
Evelyn had shown strong leadership in
her first few months as Chair.
– Matters discussed by the
Remuneration Committee during
the year continued to fulfil the
Committee’s remit, with members
agreeing agenda items were
thoughtfully debated in the context
of internal and external factors.
2023/24 ACTION PLAN
– Continue to build on and develop the relationships between the Board
and ExCo members.
– Maintain focus on ensuring the customer is at the heart of activity across
the business.
– Continue to guide the business towards a strengthened and sustainable balance
sheet, including reintroduction of dividends and an improved credit rating.
MONITORING NON-EXECUTIVE
DIRECTOR INDEPENDENCE
AND TENURE
As part of the annual review, the
Board monitors the independence
and tenure of each of the directors.
Following each of his discussions,
the Chairman and General Counsel
& Company Secretary concluded each
of the non-executive directors remain
independent.
Neither the Chairman, nor any of the
current non-executive directors, have
exceeded the maximum nine-year
recommended term of appointment,
as set out in the UK Corporate
Governance Code. Andy Halford’s
tenure had exceeded nine years when
he stepped down from the Board in
December 2022. As we reported in last
year’s Annual Report, the Nomination
Committee agreed Andy remained
independent in both character and
judgement, and would provide the
Board with a key point of stability
during the executive transition.
The Board therefore concluded the
non-executive directors have the
ability, through their independence,
to sufficiently challenge management,
balanced against a need to ensure
continuity.
More information on the Board’s
composition can be found on
pages 72-73.
More information on director
tenures can be found on page 86.
84
Marks and Spencer Group plc
GOVERNANCE NOMINATION COMMITTEE REPORT
This year, we continued
our work to embed the
new executive leadership
structure and appraise the
senior talent pipeline.”
Archie Norman,
Chair of the Nomination Committee
COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE
The Committee comprises the non-executive directors and is chaired by
Archie Norman. Individual meeting attendance and changes to membership
are detailed below.
Committee members
Member since
Resigned
Number of
meetings attended
Archie Norman
Evelyn Bourke
Fiona Dawson
Andrew Fisher
Tamara Ingram
Justin King
Sapna Sood
Andy Halford
Ronan Dunne
Cheryl Potter
1 Sep 2017
1 Feb 2021
25 May 2021
1 Dec 2015
1 Jun 2020
1 Jan 2019
1 Jun 2020
1 Jan 2013
1 Aug 2022
1 Mar 2023
* Unable to join due to prior business commitments.
31 Dec 2022
6/6
6/6
6/6
5*/6
6/6
6/6
6/6
4/4
4/4
1/1
ROLE AND RESPONSIBILITIES
– Regularly reviewing the composition, structure and diversity of the Board and
its committees; while considering the longer-term leadership and succession
needs of the business in light of challenges and opportunities facing the
Group.
– Assessing the range of skills, attributes and experience on the Board, ensuring
it remains effective, balanced and suited to the Group’s strategic and
transformation priorities.
– Overseeing a formal, rigorous and transparent procedure for the nomination,
induction, evaluation and orderly succession of directors.
– Keeping under review other directorships held by the Board, taking account
of demands on directors’ time.
The full Terms of Reference for the Committee can be found at
corporate.marksandspencer.com.
NOMINATION COMMITTEE EFFECTIVENESS REVIEW
The Committee’s performance was reviewed as part of the 2022/23 internal
Board Review, details of which can be found on pages 83 to 84. The review
established the Committee functions well in terms of supporting the orderly
succession to Board roles and other senior leadership positions.
REVIEW OF THE YEAR
The Committee had a busy year
continuing its focus on succession
planning, and overseeing a number of
Board changes. We also continued our
work on firmly embedding the new
executive leadership structure and
appraising the Group’s senior
management and talent pipeline.
Following Steve Rowe’s departure from
the Board on 25 May 2022, we started the
year with the comprehensive induction
of Stuart Machin and Katie Bickerstaffe
as they began their new roles as CEO
and Co-CEO. The induction’s focus was
to provide a robust understanding of
their additional responsibilities as leaders
of the business and as statutory directors
of a premium listed company.
We selected appropriate successors
for Andy Halford as Audit Chair and as
Senior Independent Director (“SID”).
Andy stepped down as Audit Committee
Chair in June 2022, the Committee
having identified Evelyn Bourke as his
successor. Recognising Andy’s deep
financial knowledge and experience, we
oversaw the selection and appointment
process for a new non-executive director
with recent and relevant financial
experience. This led to the Committee
identifying and recommending Ronan
Dunne as a valuable addition to the
Board. A successor was also required
for Andy’s role as SID. I consulted with
all members of the Committee and,
given his position as a trusted and
valued colleague, it was unanimously
agreed Andrew Fisher should succeed
Andy as SID.
As announced on 21 July 2022, Eoin Tonge
stepped down as Group CFO and Chief
Strategy Officer on 9 December 2022.
The process to appoint and induct a new
CFO involved reviewing both the internal
talent pipeline and working with an
independent executive search firm which
is a signatory to the Voluntary Code of
Conduct for Executive Search Firms.
The search culminated in Jeremy
Townsend being welcomed to the
business as Interim CFO in November
2022, taking up a position on the
Executive Committee. Jeremy will now
remain with the business until May 2025.
Most recently in March 2023, we welcomed
Cheryl Potter to the Board as our newest
independent non-executive director.
With her background in private equity,
she brings experience in commercial
operating improvement and a clear focus
on shareholder value delivery. Cheryl’s
appointment brings us to a female
majority Board, with representation
up to 55% as at 1 April 2023.
Annual Report & Financial Statements 2023
85
FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE NOMINATION COMMITTEE REPORT CONTINUED
BOARD COMPOSITION AND SUCCESSION PLANNING
RESHAPING FOR GROWTH
We believe that Board members should
bring a blend of expertise and skills with
a variety of perspectives, to facilitate
constructive discussions and effective,
balanced decision-making. This
underpins the FTSE Women Leaders
Review (formerly the Hampton-
Alexander Review) and the Parker Review,
which emphasise the importance of
ensuring Boards are diverse in gender,
as well as ethnic and social background.
The Committee endorses this view and
ensures diversity factors strongly in
its work on succession planning.
The Committee monitors the internal
and external pipeline of talent to ensure
it meets current and future business
needs, and its focus this year was
forward-looking in line with shifting
Board priorities. After an intense period
of Board involvement and concentration
on operational issues, this year the Board
was focused on longer-term strategic
issues. As such, consideration was given
to the competencies highlighted in the
below skills matrix which we believe
enable the Board to deliver against our
strategic priorities. Particular emphasis
was given to additive knowledge which
culminated in a revised internal and
external pipeline being developed by
the Committee. The revised pipeline
informed this year’s CFO succession
and NED appointment process and has
ensured the Board is fully equipped to
continue reshaping M&S.
SKILLS AND EXPERIENCE OF THE BOARD
Retail and
consumer
Food and
beverage
Supply
chains
Marketing
and media
Data and
digital
Trans-
formation
and strategy
Finance
Risk
management
Property
and real
estate
Organisational
design and
corporate
culture
Sustainability
Corporate
transactions,
legal and
regulatory
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In making these appointments the
Committee worked with independent
executive search firms Russell Reynolds,
MBS and MWM. In line with our Board
Diversity Policy, these firms are
signatories to the Voluntary Code
of Conduct for Executive Search
Firms and, other than the provision
of search services, do not have any
other connections to the Company
or its directors.
NON-EXECUTIVE DIRECTOR
APPOINTMENT PROCESS
During the year, the Committee led the
recruitment and appointment process
for two new non-executive directors,
Ronan Dunne and Cheryl Potter. The
process is designed to ensure the search
for, and appointment of, our NEDs is
thorough and inclusive with a focus
on character, merit and chemistry with
the Board. The Committee focuses on
additive knowledge to ensure the Board
has a balance of skills supporting the
Company’s strategic priorities now
and into the future. Inductions aim to
provide an effective introduction to M&S;
both to the business as a whole and to
the boardroom.
Stuart Machin
Katie Bickerstaffe
Archie Norman
Evelyn Bourke
Fiona Dawson
Ronan Dunne
Andrew Fisher
Tamara Ingram
Justin King
Cheryl Potter
Sapna Sood
Eoin Tonge
Andy Halford
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DIRECTOR TENURE AND
INDEPENDENCE
Director tenure and independence was
reviewed as part of the annual Board
Review. No current directors’ tenure
exceeded nine years and it was concluded
that each NED remained independent
and continues to make a significant
contribution to the Board. More
information can be found on page 84.
DIRECTOR TENURE
0-3 years
4-6 years
7-9 years
67%
22%
11%
86
Marks and Spencer Group plc
GOVERNANCE
OUR NED APPOINTMENT PROCESS
1. SEARCH CRITERIA
PROCESS IN ACTION - RONAN DUNNE
The Chairman, working with the General Counsel & Company
Secretary, determines the search criteria using a skills matrix
reflective of the one on page 86, considering the long-term
strategic priorities of the business. This is provided to an
executive search firm who is asked to ensure the search includes
a diverse range of candidates from various backgrounds and
industries, including individuals with little or no FTSE board
experience.
SEPTEMBER 2021
Search criteria developed for Andy Halford’s successor,
which included:
– Recent and relevant financial experience
– Additive knowledge (in areas including data and digital)
JANUARY 2022
Executive search firm engaged
2. REVIEW AND IDENTIFY
The executive search firms review the specification and
produce a long list of candidates for the Committee to review.
The Chairman identifies a shortlist of candidates, following
feedback from the SID and other members of the Committee.
These candidates are contacted to establish interest.
FEBRUARY 2022
Committee received a long list of candidates.
MARCH 2022
Shortlisted candidates contacted, including Ronan Dunne.
Ronan’s experience:
– Chartered Accountant
– International experience in the digital telecoms industry
– Leading technological and people transformation
3. ASSESS
Candidates are interviewed by the Chairman and assessed in
line with the candidate specification. Informal meetings with
other Committee members, the CEO and Co-CEO are also
conducted with preferred candidates to determine chemistry
and interpersonal dynamics and assess whether their skills
and experience would be additive to the Board as a whole.
APRIL – MAY 2022
Interviews and meetings.
4. APPOINT
The Committee reconvenes to consider and discuss feedback
received. Once a decision has been made, the successful
candidate is recommended for appointment to the Board
and the General Counsel & Company Secretary is tasked with
the formalities.
JUNE 2022
Committee meeting to discuss the proposal to appoint Ronan
Dunne, with subsequent recommendation to the Board and
approval of his appointment. Ronan is offered and accepts
the appointment as NED to commence from 1 August 2022.
5. INDUCTION
The final step is to provide our new directors with a robust
induction, tailored to suit their individual needs. This is an
invaluable step to not only support directors in meeting their
statutory duties, but also give them a comprehensive
introduction to the business and its strategic priorities.
JUNE 2022 ONWARDS
The below provides a snapshot of the activities and introductions
arranged for Ronan’s induction, bringing him closer to decision-
makers and those tasked with running the day-to-day
management of the business:
Within the first month:
– Introduced to business
unit leadership teams
and centralised functions
including introductions
to Investor Relations,
Corporate Communications
and Plan A
Before arrival:
– Attended June Board
strategy away days
– Met with our General
Counsel & Company
Secretary on UK listed
company requirements
and corporate governance
– Provided with
comprehensive pre-read
of Board and relevant
Committee papers from
the previous 12 months
Within the first three months:
– Visited store, including a
morning working in store
– Introduced to key partners
Within the first year:
– Will attend a National BIG
meeting and colleague
services and HR overview
and external auditor
– Will visit customer
services centre and
M&S Company Archive
– Will attend management
meetings and product
previews
– Will visit supply chain
depot, Castle Donington
distribution centre
Annual Report & Financial Statements 2023
87
FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE NOMINATION COMMITTEE REPORT CONTINUED
EXECUTIVE COMMITTEE COMPOSITION
We seek to foster and develop internal
talent across the business. Last year’s
promotion of two senior leaders to the
Board as CEO and Co-CEO was the
outcome of a long planned process.
Wider talent and succession programmes
remained a key focus of the Board and
Committee during the year. This was
reflected in the Committee’s support
for the organisation’s cultural reset,
with the Executive Committee (“ExCo”)
introducing high-performance culture
as a strategic priority to support talent
management across the business.
Read more on pages 23 and 29-30.
The Committee supported the expansion
of the ExCo to include additional
members of the senior leadership team,
ensuring the ExCo comprises a wider
range of specialist skills and improving the
efficiency and effectiveness of decision-
making. The expansion also supports M&S’
ambition to improve gender diversity
within the leadership talent pipeline, with
an additional two women now included
in the ExCo’s membership.
The balance of skills and experience on
our ExCo is set out below.
Members of the Committee continued
to act as mentors to the ExCo, available
to advise the ExCo in its review of senior
leadership and succession planning.
The Committee has emphasised in its
advice the importance of identifying
candidates for critical roles that would
support the reshaping business and
continue to make progress against M&S’
diversity ambitions.
SKILLS AND EXPERIENCE OF THE EXECUTIVE COMMITTEE
Retail and
consumer
Food and
beverage
Supply
chains
Marketing
and media
Digital
and Data
Trans-
formation
and strategy
Finance
Risk
management
Property
and real
estate
Organisational
design and
corporate culture Sustainability
Stuart Machin
Katie Bickerstaffe
Jeremy Townsend
Sacha Berendji
Sarah Findlater
Nick Folland
Alex Freudmann
Victoria McKenzie-
Gould
Richard Price
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Corporate
transactions,
legal and
regulatory
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OUR COMMITMENT TO DEVELOPING A DIVERSE WORKFORCE
DIVERSE LEADERSHIP
Throughout the year, and in line with our
Board Diversity Policy, the Committee
ensured appointments to our Board and
its sub-committees contributed to the
Group-wide inclusion and diversity
ambitions. The Board met each of the FCA
Listing Rules and FTSE Women Leaders
Review targets of maintaining a minimum
of 40% female representation on the
Board, ahead of the 2025 deadline. With
the appointment of Katie Bickerstaffe as
Co-CEO we made progress towards the
additional target of having at least one
senior Board position held by a female.
We also achieved the Parker Review and
FCA Listing Rules targets of ensuring at
least one Board member is from an ethnic
minority background. Nonetheless, the
Committee recognises these are the
beginnings of a journey to increase all
forms of diversity.
The Board and senior leadership’s gender
identity and ethnicity data presented in
accordance with Listing Rule 9.8.6R(10)
can be found on page 131.
Our Board Diversity Policy is
available on our corporate website at
corporate.marksandspencer.com
88
Marks and Spencer Group plc
BOARD GENDER IDENTITY
EXCO GENDER IDENTITY
Female
Male
55%
21/22: 45%
45%
21/22: 55%
Female
Male
33%
21/22: 14%
67%
21/22: 86%
BOARD ETHNICITY
EXCO ETHNICITY
Ethnic minority
White
9%
21/22: 9%
82%
21/22: 91%
Not specified/
prefer not to say
9%
21/22: N/A
Ethnic minority
White
Not specified/
prefer not to say
11%
21/22: 14%
78%
21/22: 86%
11%
21/22: N/A
GOVERNANCE
– Continued active involvement in
key campaigns including LGBTQ+
Pride 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.
– Continued to support a range of
diverse charity partnerships through
Sparks, including Albert Kennedy
Trust, Blue Print for All, The Black
Curriculum and Scope.
– Continued to drive and improve
mandatory Inclusion & Diversity
training across the business, with a
particular focus on line managers.
Read more on inclusion and
diversity in the wider organisation
on pages 28 to 31, and in
our Sustainability Report.
DIVERSE WORKFORCE
The balance of individuals reporting
into ExCo members who identify as
female has once again seen improvement
this year, whilst ethnic diversity in this
population has seen a decrease.
We acknowledge there is still work
to be done and remain committed to
enhancing the ethnic diversity of our
talent pipeline. The Committee believes
progress should be led by example and
the Board’s ethnic diversity, as well as the
Committee’s focus on this, is evidence of
this commitment.
In addition to our commitments to
promote gender and ethnic diversity in
succession planning, our Board Diversity
Policy covers inclusion initiatives taking
place across the business which are
sponsored and endorsed by the Board.
During the year, these have included:
– A reset for the seven employee-led
networks and surrounding framework
to maximise the potential of these
networks to the members and the
business – Gender Equality,
Menopause, Culture and Heritage,
LGBTQ+, Family and Carers, Armed
Forces Community, and Ability 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.
– 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 to 24 year olds on Universal Credit
who are at risk of long-term
unemployment.
– Launched our Diversity Insights
Programme targeted at students in
the early stages of their degrees who
are from black heritage and/or low
socio-economic backgrounds.
Successful students are offered
internships which may lead to
graduate role opportunities in 2024.
Annual Report & Financial Statements 2023
89
FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE ESG COMMITTEE REPORT
Plan A is core to M&S
delivering exceptional
products and upholding
our trusted brand.”
Tamara Ingram,
Chair of the Environmental,
Social & Governance Committee
COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE
The Committee comprises Tamara Ingram as Chair and Sapna Sood. Regular
attendees include the Company Chairman and the CEO, with business leaders
and relevant subject matter experts attending when required. Individual
meeting attendance is detailed in the table below. More information on the skills
and experience of Committee members can be found on page 86.
Tamara Ingram
Sapna Sood
By standing invite
Archie Norman
Stuart Machin
Steve Rowe*
Eoin Tonge*
* Meetings attended before leaving the business.
Member since
16 Dec 2020
16 Dec 2020
N/A
N/A
N/A
N/A
Number of
meetings attended
7/7
7/7
6/7
3/3
2/2
4/4
ROLE AND RESPONSIBILITIES
– Ensuring the Company has an Environmental, Social, and Governance
strategy that is both inspiring and differentiates M&S, while also remaining fit
for the future, anticipating and responding to changing consumer and wider
societal needs and expectations.
– Reviewing the effectiveness of the strategy, including the governance
arrangements for ensuring the successful delivery of targets and monitoring
overall performance.
– Approving and recommending all ESG reporting for the Board’s approval,
including the Company’s Sustainability Report and Task Force on Climate-
related Financial Disclosures (“TCFD”) Report.
– Advising the Audit & Risk Committee on ESG-related risks, including climate-
related issues.
The full Terms of Reference for the Committee can be found at
marksandspencer.com/thecompany.
ESG COMMITTEE EFFECTIVENESS REVIEW
The Committee’s performance was reviewed as part of the 2022/23 internal
Board Review, which is covered on pages 83 to 84. The review found the
Committee was operating well to maintain momentum and galvanise the
business to embed sustainability more deeply.
90
Marks and Spencer Group plc
REVIEW OF THE YEAR
Our priority last year was the deeper
integration of Plan A to drive
performance against newly agreed
targets, including our goals for a 2.1m
reduction in carbon emissions by
2025/26, and to be a net zero business by
2040. Throughout the course of 2022/23,
our focus has turned to developing
milestones and monitoring progress
along our net zero roadmap; ensuring
there is adequate governance and
reportable metrics in place.
The Committee has also continued to
highlight the importance of ensuring
our ESG activities, including Plan A, are
understood and are able to demonstrate
visible, meaningful change to our
stakeholders. The progress made on
reducing food waste, plastic packaging,
and raising the bar in animal welfare
standards are particularly encouraging,
as we know these issues really matter to
our customers and colleagues.
To see our Clothing & Home supply chain
and sourcing in action, I visited Turkey
and Bangladesh in July. I was impressed
by the extensive knowledge the local
teams and suppliers possessed. This
solidified my belief that building,
maintaining and valuing long-term
supplier relationships is vital as we seek
to maintain our high-quality credentials,
drive improvements across our supply
chain and tackle the challenges
presented by climate change.
Management has been pursuing this
strategic approach, recognising that
without an engaged and strategically
aligned supplier base, we will not achieve
our net zero ambition.
There have, of course, been external
factors to contend with, which has
widened the range of social issues our
stakeholders expect us to act on: the
devastating earthquakes in Turkey and
Syria; the ongoing war in Ukraine; the
cost-of-living crisis and how this
continues to impact our colleagues,
customers and communities alike. In
considering cost-of-living impacts, we
remained alert to conflicting pressures,
ensuring that short-term cost pressures
do not negatively impact the progress
made so far in plans to source more
recycled polyester, reduce plastic
packaging, or increase animal welfare
standards.
We closed the year’s activities with a
review of our approach to sustainability,
being one-year post reset of Plan A. As a
Committee, we agreed that our Plan A
ambitions are the right ones; for us as a
business, for our community, customers,
and for the planet.
GOVERNANCE WHAT WAS ON THE COMMITTEE’S AGENDA 2022/23
Delivery of Strategy and ESG Reporting
The Committee received progress
updates from members of the Executive
Committee (“ExCo”) and senior
leadership against delivery of our ESG
programme and key sustainability
initiatives. Key updates included:
– Progress against Clothing & Home’s
net zero roadmap, highlighting
engaging suppliers in garment and
fabric manufacturing and chemistry
as areas where good progress has been
made. Fabric traceability, particularly
the need to build stronger strategic
partnerships with fewer suppliers, was
identified as a priority area for
improvement.
– A deep-dive into the end-to-end
journey of clothing hangers and plans
to prevent hangers ending in landfill.
Including consideration of how these
plans might impact productivity at
Castle Donington.
– An overview of Food’s sustainability
strategy and the solid progress made
to date. The Committee agreed with
management that, given cost
pressures, a priority for the strategy is
finding ways to reduce waste in our
operations and to also help customers
reduce food waste while saving money.
The Food team have also been working
collaboratively with suppliers on their
roadmaps for carbon reduction, noting
their substantial contribution to our
Scope 3 carbon emissions.
– Progress with the ethical audit
compliance programme and human
rights due diligence in supply chains.
The Committee discussed increasing
risks arising from labour shortages in
the UK, the changes to the Seasonal
Agricultural Workers Scheme and how
the Food business acted together with
suppliers, the wider industry and
government, to tackle the issue of
modern slavery.
– Progress and challenges across the
property estate to deliver our net zero
ambitions and the need to invest in
improved energy efficiency data on
a store-by-store basis.
– Plans to overhaul the Community
strategy, with the Committee providing
constructive feedback to reshape and
embed this into the Group’s business
model and ways of working.
– Gist’s integration into the Group,
adopting our net zero ambition and
aligning to our ESG programme. The
Committee heard about the
sustainability research and trials
underway on new trailers, vehicles
and alternative fuels, and discussed
the reputational and emissions
implications of acquiring Gist.
Delivery of sustainability objectives was
also monitored via centrally compiled
targets and metrics spanning all ESG
activities, including ethical trade and
human rights. This collated ESG
reporting was tracked, reviewed and
challenged by the ESG Business Forum,
chaired by a member of ExCo, to
enhance accountability and provide the
Committee with assurance that progress
is consistently monitored. The
Committee discussed the importance
of improving controls for non-financial
metrics, particularly relating to
assurance of metrics linked to the
Company’s Revolving Credit Facility.
Stakeholder Communications
Alongside monitoring delivery of
our ESG programme, the Committee
has been focused on how we best
communicate our sustainability
programme of activities to stakeholders.
It has heard updates on:
– Development of a quarterly customer
insights survey, to better understand
customer perspectives on ESG issues
and track how that changes over
time. The intention is to use these
insights to ensure our messaging on
sustainability resonates in our product
and marketing plans, and in doing so,
equip our customers to make better
choices on issues that matter to them.
– 2021/22 ESG reporting, to review and
verify the processes behind proposed
disclosures, as well as recommend
for Audit & Risk Committee or Board
approval: Energy & Carbon reporting,
TCFD report, Modern Slavery
Statement, Sustainability Report.
– Integration of ESG messaging into
product marketing and plans that
demonstrate visible change to
customers and colleagues on ESG
focus points, such as plastic packaging
removal and charity partnerships.
“Outside In” and Risks
As part of its horizon scanning of
sustainability issues and stakeholder
expectations, the Committee has been
keen to hear from diverse voices and
perspectives on sustainability matters.
It has heard from a host of external
speakers and will continue this practice
in the coming year:
– A scientific adviser providing
insight on the UK government’s
expectations of businesses to
deliver new environmental targets,
and the framework under
development for nature-related
financial disclosures (Taskforce on
Nature-related Financial Disclosures).
– Chief Commercial Officer of a key
supplier, on the importance of
embedding sustainability strategy
into the culture of a business,
highlighting how investing in long-
term relationships with suppliers
can contribute to achieving our
Scope 3 targets, by helping suppliers
to prioritise their own sustainability
initiatives.
– Chief Sustainability Officer for a
multinational technology company,
providing insight on how their
increased focus on sustainability
has produced strategic commercial
opportunities. As well as how an
internal carbon charge helped to drive
sustainability focused culture change.
Throughout the year, the Committee
has also requested updates on external
ESG issues:
– Following the Myanmar coup in
February 2021, due diligence in
factories increased to ensure ethical
sourcing, and the Committee
discussed the balance between
trying to be a force for good for
workers depending on the garment
industry and responding to the
ongoing situation. Ultimately, the
Committee has supported and
advised management in its decision
to exit the region, ensuring this exit
is responsibly managed to minimise
impact on workers.
– In response to the war in Ukraine
and earthquakes in Turkey and Syria,
cash and inventory contributions
were made to UNHCR and UNICEF.
Finally, the Committee has
discussed and assessed ESG risks
and opportunities, for onward
advisement to the Audit & Risk
Committee in their half year and full
year review of principal risks.
Read more on our climate-related
risks and opportunities in our full
TCFD Report on pages 44-55.
Read more in our
Sustainability Report
marksandspencer.com/
sustainabilityreport2023
Annual Report & Financial Statements 2023
91
FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE REVIEW OF THE YEAR
During the year, the Committee’s core
duties remained largely unchanged and
our usual cadence of activities relating
to financial reporting, risk, assurance
and internal controls remained in place.
However, in recognition of the
Committee’s increased focus on risk
management we reviewed and updated
our Terms of Reference, formalising our
Board advisory role and updating our
Committee name to include “Risk”.
As such, navigating risks remained a
key component of Committee activities,
with handling macroeconomic factors
a recurring discussion topic. Detail on
our risk management activities can be
found on pages 56 to 65.
The Committee plays an important role
in the Group’s governance framework,
providing valuable independent
challenge and oversight across all
financial reporting and internal control
procedures. Ultimately, it ensures
shareholders’ interests are protected,
ouraccelerated transformation is
supported and long-term value is
created. This year, our oversight has been
focused particularly on the accounting
judgements being made in support of
M&S’ Reshaping: the fair value treatment
of the Ocado contingent consideration
payment; the business combination
accounting for the Gist acquisition; and
the treatment of charges and reversals
associated with our store rotation
programme. More detail on these is
provided in our Significant Issues section
on pages 97 and 98.
A final challenge for the Committee this
year was the management of our
external auditor tender process. While we
invited firms to participate, only one
participant, our incumbent auditor,
responded positively. I met with
representatives from the Financial
Reporting Council (FRC) alongside
management to discuss our situation
and potential next steps. This culminated
in our successful application to the FRC
to extend the maximum duration of our
existing audit engagement. Read more
on page 99.
AUDIT & RISK COMMITTEE REPORT
The Committee provides
independent challenge
and oversight; ensuring
our transformation is
supported.”
Evelyn Bourke,
Chair of the Audit & Risk Committee
COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE
The Committee solely comprises independent non-executive directors. In its
2022/23 internal Review, the Board confirmed 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. More information on the skills and experience of all Committee
members can be found on page 86.
Regular attendees include the Company Chairman, CEO and CFO, with
members of senior management invited to attend and present as and when
specialist technical knowledge is required. The Committee meets without
management present where required before meetings. It also meets privately
with the lead external audit partner, and separately with the Head of Internal
Audit & Risk, as and when necessary after meetings.
Committee members
Member since
Resigned
Number of
meetings attended
Evelyn Bourke
Andy Halford
Justin King
Ronan Dunne
1 Feb 2021
1 Jan 2013
4 Nov 2019
1 Aug 2022
31 Dec 2022
5/5
3/3
5/5
4/4
ROLE AND RESPONSIBILITIES
– Monitoring the integrity of the annual and interim financial statements as well as
any formal announcements relating to the Group’s financial performance,
reviewing the significant financial reporting judgements within them.
– Maintaining an appropriate relationship with the external auditor and reviewing
the independence, objectivity, and effectiveness of the audit process, taking
account of the relevant professional and regulatory requirements.
– Reviewing the internal audit programme and any significant findings, as well as
the effectiveness and independence of the Internal Audit & Risk function.
– Considering and advising the Board on risk management activities, including the
identification and mitigation of principal and emerging risks and the risk appetite
statements.
– Reviewing and assessing the effectiveness of systems of internal control,
including financial, operational and compliance controls, in addition to the
framework for fraud risk management.
The full Terms of Reference for the Committee can be found at
corporate.marksandspencer.com.
AUDIT & RISK COMMITTEE EFFECTIVENESS REVIEW
The Committee’s performance was reviewed as part of the 2022/23 internal
Board Review, which is covered on pages 83 to 84. The review found that the
Committee functions effectively, with significant issues and risk discussions
dealt with in a thoughtful, clear and rigorous manner. The review noted that
the transition to a new Committee Chair was handled professionally and
without disruption.
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GOVERNANCE WHAT WAS ON THE COMMITTEE’S AGENDA 2022/23
FINANCIAL REPORTING
Being responsible for the integrity
of financial reporting, the Committee
monitors the Group’s financial
information and key accounting
treatments. This year, this has included:
– Review of regular trading and
performance updates, including
scrutiny of the statutory financial
statements and interim results ahead
of recommendation to the Board.
– Consideration of key accounting and
reporting judgements, including the
appropriateness of the business
combination accounting method for
the Gist acquisition, recognition of
store impairments and the accounting
impact of the store rotation
programme.
– Discussion of the accounting
treatment for the Ocado contingent
consideration, particularly the fair
value assessment and probability
weightings applied to the consideration
trigger scenario analysis.
RISK MANAGEMENT
The Committee received detailed risk
and control 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 activities,
emerging risks being monitored and
outstanding actions from Internal Audit
reviews completed. Management also
confirmed their key control and
assurance activities. These presentations
are scheduled on a rolling 12-month
basis, with additional matters identified
by the Committee or by recommendation
from Internal Audit added throughout
the year as they arise.
Clothing & Home
– Evaluated the risks and management
of the sourcing strategy, particularly
in areas of over-reliance on specific
suppliers and locations.
– Discussed ongoing uncertainties
from inflationary pressures in raw
materials, labour and freight, as well as
the record high US dollar to Sterling
exchange rate.
Food
– Reviewed the practices and risk
mitigations in place to monitor value
and inflationary pressures, supplier
resilience and quality perception.
– Monitored progress and risks
associated with implementing the
replacement Food forecasting and
allocation system.
– Considered the changing regulatory
landscape and action plans in relation
to HFSS, Deposit Return Scheme, and
Extended Producer Responsibility.
GSCOP
– Reviewed progress against the
Groceries Supply Code of Practice
(“GSCOP”) improvement plan, noting
the significant improvement to be
ranked third in 2022 (11th of 13
regulated retailers in 2020 and 2021).
Gist
– Discussed risks relating to integrating
Gist into the Group, and how to manage
business stability during peak trading.
– Considered the impact of the Gist
acquisition on the Group’s risk
landscape.
Group Asset Protection
– Monitored improvements to reduce
stock loss and discussed loss
prevention methods.
Bank & Services
– Following a reset to the M&S Bank
strategy, considered the resulting
increased regulatory responsibilities
alongside the reduced reputational
and financial risks. Received assurance
from the Financial Services
Compliance Monitoring Committee on
the controls and oversight in place to
address the increased regulatory
responsibilities.
– Discussed the increasing risks and
uncertainty resulting from the war in
Ukraine, including the volatility of
energy markets and the impact on
M&S Energy.
Digital & Technology
– Following an organisational
restructure combining the Digital
and Technology teams, discussed
risks associated with talent and
capabilities, including third-party
provider capability.
– Discussed risk appetite and ethics
around data use.
– Reviewed the outcome of the
Technology Disaster Recovery internal
audit, including actions required to
address immediate risks, and
discussed the growth in cyber-attacks
across the retail industry.
People
– Monitored compliance with HR-related
requirements, including national
minimum wage, right to work and
GDPR.
– Considered findings from the project
implementation review of the MyHR
system, noting the need for a cultural
reset amongst line managers to unlock
the system’s benefits.
– Reviewed progress against actions to
address colleague discount misuse.
INTERNAL CONTROLS
The Committee received regular updates
on internal control matters from the
Internal Audit team and the Finance
Change & Control team, 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 Committee or the
Board, and the resulting improvement
plans were monitored by the Committee.
Management updates
In line with the Group Risk Management
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
Committee through annual updates
provided directly by management,
as summarised on this page.
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.
Annual Report & Financial Statements 2023
93
FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE AUDIT & RISK COMMITTEE REPORT CONTINUED
FAIR, BALANCED AND UNDERSTANDABLE
At the request of the Board, the Committee has considered whether, in its opinion, the 2023 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 is therefore
essential that the Committee ensures these messages are fairly summarised and are both clear and reflective of the Group
as a whole, to provide stakeholders with transparent disclosures.
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:
IS THE REPORT FAIR?
– 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?
– Are the KPIs disclosed at an appropriate level based on the financial reporting?
IS THE REPORT BALANCED?
– Is there a good level of consistency between the narrative reported 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 key judgements referred to in the narrative reporting and the significant issues reported in this Audit & Risk
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 the external auditor plans to include in its report?
IS THE REPORT UNDERSTANDABLE?
– Is there a clear and understandable framework to the report?
– 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 2023 Annual Report & Financial Statements are representative of
the year and present a fair, balanced and understandable overview, providing shareholders with the necessary information to
assess the Group’s position, performance, business model and strategy.
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GOVERNANCE ASSURANCE AND INTERNAL CONTROL ENVIRONMENT
Key risks underpinning the internal audit
plan during the year included corporate
compliance and responsibility, business
transformation, information security, and
risks linked to our joint ventures (Ocado
Retail and M&S Reliance India).
2. Management updates and risk
deep dives
As part of the Committee’s annual
calendar, it receives updates on the
maturity of control and assurance
activities and risk management from
individual business areas and functions,
and on whistleblowing and fraud. These
updates are complemented by Internal
Audit’s independent audit work.
3. Functional assurance
A broad range of assurance activity has
been designed and established 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 & Risk
Committee.
4. Operational oversight
Senior management forums and
committees provide oversight and
challenge on key risk areas within
individual business areas, cross-business
programmes or activities, such as
business continuity, fire, health and
safety, ESG responsibilities, anti-bribery
and corruption, fraud risk management,
property, technology, data governance
and other areas of change. The output
from these discussions form part of the
cyclical updates provided to the Audit &
Risk Committee.
A summary of the above activities is
provided in the table on page 96.
ANTI-BRIBERY & CORRUPTION
A key element of our control
framework is our Anti-Bribery &
Corruption Policy (“ABC”) and
programme of controls. Our ABC
Policy outlines 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.
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; standard
contract clauses; and clear reporting
channels, including confidential
reporting.
All colleagues are required to
undertake mandatory ABC e-learning.
The Company will consider taking
disciplinary action against anyone
who fails to comply with its ABC
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 & Risk Committee.
Bribery Risk Assessments are
conducted on an annual basis
with outcomes reported to the
Audit & Risk Committee.
The Board, through delegated authority
assigned to the Audit & Risk Committee,
assumes ultimate responsibility for the
effective management of risk across the
Group, determining its risk appetite and
monitoring how 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 but 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
consequences of acquisitions like Gist,
changes triggered by new law or
regulation like HFSS, and the array of
significant external events seen over
the past few years.
See pages 58 to 65 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, policies and
procedures that cover financial planning
and reporting, preparing consolidated
accounts, capital expenditure, project
governance and information security
and a dedicated Financial Controls team.
SOURCES OF ASSURANCE
The Board has delegated responsibility
for reviewing the effectiveness of the
Group’s systems of internal control to
the Audit & Risk 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 through 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 is 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 & Risk
Committee and tracked through to
completion.
Annual Report & Financial Statements 2023
95
FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE AUDIT & RISK COMMITTEE REPORT CONTINUED
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 135 to 143. No other
significant failings or weaknesses were identified during the Committee’s review in respect of the year ended 1 April 2023 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 corporate.marksandspencer.com.
Source of information
Internal Audit
– Internal Audit Plan
– Regular reports against Plan
– Follow-up of remediation
Management
updates and risk
deep dates
Functional
assurance
Operational
oversight
– Updates on fraud, whistleblowing and other irregularity
– Ad hoc engagement with the business in response to new/
emerging risks or major incidents – e.g. the acquisition of our
logistics business
Papers submitted on a range of issues including:
– Information security
– Anti-Bribery and Corruption
– Code of Conduct
– GSCOP
– Financial control
– Business continuity
– Risk deep dives from individual business areas and functions
Functional audit activities undertaken, including:
– Food safety and integrity
– Ethical audits
– Trading safely and legally
– Compliance Monitoring Committee
– ESG Committee
– Group Safety Committee
– Customer & Brand Protection Committee
– Business Continuity Committee
– Business Unit Operating Reviews
Frequency/nature of reporting
Formal updates presented to the
Committee at each meeting.
Plus updates to the Audit & Risk
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.
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Marks and Spencer Group plc
GOVERNANCE ACQUISITION ACCOUNTING –
VALUATION OF ACQUIRED ASSETS
AND SETTLEMENT OF EXISTING
RELATIONSHIP
In September 2022 the Group
completed its acquisition of Gist from
Linde. The Committee has considered
the judgements and assessments made
in completing the acquisition accounting.
This has included understanding the
assumptions used in fair valuing the
assets and liabilities acquired, as well as
those included in the calculation of
settlement of the Group’s pre-existing
relationship with Gist. The Committee is
comfortable with the accounting for the
transactions and judgements applied.
See note 31 on page 201.
FAIR VALUATION OF CONTINGENT
CONSIDERATION PAYMENTS
The Committee has considered the
impact of developments during the year
on the future probability of the final
contingent consideration payment due
to Ocado Group plc being met. This
included understanding and challenging
management’s probability weighted
scenarios used in fair valuing the
contingent consideration liability
recognised on the balance sheet. Having
reviewed management’s calculations and
challenged the judgements made, the
Committee is comfortable with the fair
value of the liability recognised.
See notes 5 and 21 on pages 161 and 193
respectively.
SIGNIFICANT ISSUES
The Audit & Risk 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 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; net
charges associated with the acquisition
of Gist; impairment reversals and
write-offs of the carrying value of stores
and other property charges;
remeasurement of Ocado Retail Limited
contingent consideration; and, the
reduction in M&S Bank charges incurred
in relation to the insurance mis-selling
provision.
See note 5 on page 161.
UK STORE ESTATE PROGRAMME
(INCLUDING ASSET WRITE-OFFS,
ONEROUS LEASE CHARGES AND
USEFUL ECONOMIC LIVES)
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/sublet 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 pages 150, 161,
178 and 194 respectively.
IMPAIRMENT OF TANGIBLE ASSETS
The Committee has considered the
assessments made in relation to the
impairment and impairment reversals of
tangible fixed assets, including land and
buildings, and store 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 and reversals of tangible
assets have been recognised.
See notes 1, 5 and 15 on pages 150, 161 and
178-180 respectively.
Annual Report & Financial Statements 2023
97
FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE AUDIT & RISK COMMITTEE REPORT CONTINUED
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 page 150.
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 206). 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 the ongoing
cost-of-living crisis and continued
inflationary pressures on the business,
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 extension of its
revolving credit facility, which is now set
to run until June 2026.
The Committee is satisfied that these
measures have reduced liquidity risk.
See note 1 on page 150.
RETIREMENT BENEFITS
Following the decrease 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 page 168.
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 page 182.
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Marks and Spencer Group plc
GOVERNANCE
EXTERNAL AUDITOR
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.
On 10 May 2023 the FRC approved
a two-year extension to Deloitte’s
appointment as external auditor due to
exceptional circumstances relating to
the possibility of a competitive tender.
The Committee recommends that
Deloitte be reappointed as the
Company’s statutory auditor for the
2023/24 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 & Risk Committee,
which involves the solicitation of the
Committee’s 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 Chief Financial Officer, Director
of Group Finance, Director of Finance for
Clothing & Home and International and
Director of Finance for Food, Property &
Retail, Head of Investor Relations, Group
Financial Controller and Head of Finance
Business Services and Transformation.
The Committee was provided with a
summary of the responses received from
management to assist with its own
considerations.
Feedback from the target group
was positive overall. It was agreed
that the audit partners have a good
understanding of our business, as well
as the wider industry in which we
operate and the challenges we face.
This was especially felt in relation to
the challenges faced by the business
in relation to inflationary pressures,
as well as the accounting treatment
for the acquisition of Gist and the
fair value judgements in relation to
the Ocado Retail contingent
consideration payment.
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 continued common theme reflected
a desire for more focus on planning and
communication during certain aspects
of the audit cycle with opportunities for
improvement available particularly on
areas of the audit that can be brought
forward outside of the peak year-end.
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
corporate.marksandspencer.com.
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.
All non-audit work performed by
Deloitte, with fees in excess of £50,000,
was put to the Audit & Risk 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 &
Risk 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 on page 160.
The non-audit fees to audit fees ratio
for the financial year ended 1 April 2023
was 0.11:1, compared with the previous
year’s ratio of 0.09:1. The total non-audit
fees paid to Deloitte for the year was
£225,000. The majority of these fees
relate to assurance services provided
during the year.
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.
Annual Report & Financial Statements 2023
99
FINANCIAL STATEMENTSSTRATEGIC REPORTGOVERNANCE REMUNERATION COMMITTEE REPORT
ROLE AND 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.
The Board is committed to
ensuring that our remuneration
framework supports our strategy
and provides a balance between
motivating and challenging our
senior leaders.”
Andrew Fisher,
Chair of the Remuneration Committee
COMMITTEE MEMBERSHIP AND MEETING ATTENDANCE
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.
Committee members
Member since
Maximum
possible
meetings
Number of
meetings
attended
% of meetings
attended
Andrew Fisher
(Committee Chair)
1 October 2018
Archie Norman
3 November 2017
8
8
Tamara Ingram
11 September 2020 8
Fiona Dawson
16 January 2023
2
8
8
8
2
100%
100%
100%
100%
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, ensuring an independent review of remuneration policies
across the business; matters discussed during the year fulfil the Committee’s
remit and are thoughtfully debated in the context of internal and external
factors. An external review of the Committee will be conducted in 2023/24.
2023/24 ACTION PLAN
– Continued review of the implementation of the M&S Remuneration Policy to
ensure the Policy continues to accelerate the transformation and support the
long-term success of M&S; and is aligned with investor and other external
governance requirements, and emerging good practice.
– Continued review of the Annual Bonus Scheme (ABS) and Performance Share
Plan (PSP) incentive measures to ensure these remain aligned to the delivery
of our KPIs and strategic priorities.
– 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.
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Marks and Spencer Group plc
GOVERNANCE – 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.
The full Terms of Reference for
the Committee can be found at
marksandspencer.com/thecompany.
WHAT WAS ON THE COMMITTEE’S AGENDA 2022/23
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
2022/23 performance objectives for
executive directors and the Executive
Committee.
– Approval of targets for the 2023/24
ABS ensuring that the performance
conditions are transparent, stretching
and rigorously applied.
– Approval of the 2023/24 individual
performance objectives for executive
directors and the Executive
Committee.
– Noting of the total budgeted
expenditure for the ABS across M&S.
Long-term incentives
– Approval of 2023 PSP awards for the
executive directors and the Executive
Committee.
– Approve the 2023 PSP targets ensuring
appropriate alignment between
driving exceptional performance and
motivating and retaining top talent.
– Approval of the vesting level of the
2020 PSP 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
– 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 the appropriateness of the
senior remuneration framework in the
context of the rest of the organisation
and external governance.
– Approval of the Directors’
Remuneration Report for 2022/23
and review of the AGM voting
outcome for the 2021/22 report.
– Review of the Committee’s
performance in 2022/23, including
assurance that the principles of the
revised Terms of Reference and
broader remit of the Committee
are embedded.
– Continue discussions on
appropriateness of an environmental,
social and governance (ESG) measure
in Board pay arrangements.
– Assessment of the external market
when considering remuneration
arrangements for executive directors
and the Executive Committee.
– Review the effectiveness and
transparency of remuneration
reporting.
– Noting of direct feedback from the
Business Involvement Group (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.
Annual Report & Financial Statements 2023
101
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE
REMUNERATION COMMITTEE REPORT CONTINUED
INTRODUCTION
On behalf of the Board, I am pleased to
present our 2022/23 Remuneration
Report. We also present our proposed
Remuneration Policy (Policy) for which,
in line with regulations, we are seeking
shareholder support and approval at the
2023 AGM. A summary of the proposed
changes to the approved Remuneration
Policy is set out below and highlighted in
bold on pages 108 and 114 of this report.
The vote on the 2021/22 Remuneration
Report at last year’s AGM highlighted
some shareholder concerns. As Chair of
the Remuneration Committee, I have
proactively engaged our top 40
shareholders - covering 65% of our total
issued share capital - on this matter, to
discuss and understand these concerns.
As a result, I am clear that the majority of
those who voted against the Report did
so because of specific circumstances at
the time relating to the outgoing CEO
(Steve Rowe). The Board has reflected on
the feedback received, which was largely
supportive of the Company’s approach,
and continues to believe that it acted in
shareholders’ interests and in line with
the values and integrity of the business.
Having explained the rationale for last
year and reassured investors on our
overall approach, I am confident that
they are supportive of our remuneration
principles and operations.
The Remuneration Report provides
a comprehensive picture of the
structure and scale of our remuneration
framework, its alignment with the
business strategy and operation across
the workforce. It also details decisions
made by the Committee as a result of
business performance for this year and
the intended arrangements for 2023/24.
CONTEXT OF BUSINESS
PERFORMANCE
Of central interest and importance to
the Committee is ensuring the 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. Such
values became ever more important in
2022/23 as the business and our
colleagues faced significant cost
challenges.
It was with this backdrop in mind that all
decisions around remuneration in
2022/23 were made. Our colleague
response to such challenges is discussed
later in this letter and on page 106.
As detailed earlier in the Annual Report,
this year saw strong results in almost
all the main business areas with profit
before tax and adjusting items at
£482.0m and overall market share in
both Clothing & Home and Food growing.
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Marks and Spencer Group plc
Whilst at face value the PBT outcome
was 7.8% below last year’s outturn of
£522.9m, prior year results included
£59.8m of UK business rates relief and
a net rates charge of £139.7m compared
with a net rates charge of £186.6m in
2022/23. In the year we saw an
increasingly positive reaction to M&S
products. Customer ratings for style,
quality and value in clothing has
improved and, in Food, value perception
is the highest it’s been in six years.
The emerging power of our omni-
channel model has been demonstrated
by an uplift in sales in store and online,
supported by growth in Click & Collect
sales, active App users and Sparks
loyalty membership. As explained later
in this Remuneration Report (see pages
118, 119 and 121), the Committee was
mindful of this performance when
discussing and approving incentive
outcomes.
SINGLE FIGURE AND INCENTIVE
SCHEME OUTCOMES INCLUDING
APPLICATION OF DISCRETION
Throughout the year, the Committee has
carefully considered pay arrangements
and where it may, or may not, be
appropriate to apply discretion in the
context of business performance and
wider stakeholder experience.
As in previous years, the key priority of
the 2022/23 Annual Bonus Scheme (ABS)
remained 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 and
no individual element could be earned
until a threshold level of PBT was achieved.
Together with the individual objectives,
both throughout the year and at year-
end the Committee reviewed the PBT
targets to ensure they remained relevant
and appropriately stretching. As
announced on 21 July 2022, and
discussed in more detail on page 26,
M&S acquired Gist, the principal
contract logistics provider to M&S Food.
The 2022/23 ABS Group PBT targets
were set prior to the acquisition of Gist
therefore it was determined by the
Committee that, for the purpose of the
ABS, the PBT outturn should be reduced
by £20.5m, equivalent to the 2022/23 net
profit contribution for Gist. Taking this
adjustment into consideration, the
Committee was satisfied that the targets
set required stretching PBT performance.
77.3% of the financial element of the
bonus was achieved and the individual
measures could pay out to the extent
that executive directors achieved between
target and stretch performance against
their 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 pages 118 and 119, but the
Committee particularly noted the
significant progress in the transformation
and development of both the Clothing
& Home and Food supply chains;
redesigning of the M&S operating
model, simplifying activity and reducing
central costs across Clothing & Home
and Food; and ongoing work to develop
and embed a high performing and
engaged culture across the whole
of M&S, including the successful
establishment of effective ways of
working within the new executive team.
Along with the impact of business
decisions as described above, when
considering bonus outcomes the
Committee also took into account the
experience of wider stakeholders,
including our colleagues, customers and
shareholders. It was determined that the
outcome is reflective of a strong in-year
business performance together with
individual outstanding contributions
and, in this context, it is important that
colleagues including our executive
directors are recognised for this
performance. The Committee was in
agreement that it was appropriate to
award 27 out of 30 for individual
objectives for the CEO and 25 out of 30
for the Co-CEO, resulting in total bonus
awards of 81.1% and 79.1% of total
opportunity (being 200% of salary)
respectively.
Half of any bonus awarded to the
executive directors will be deferred into
M&S shares and will be released after a
three-year holding period; this treatment
ensures a long-term alignment with
shareholders’ interests along with
supporting our Director Shareholding
Policy, on which more information can
be found on pages 109 and 123.
Turning to the PSP, the Committee
considered the question of windfall gains
arising from the PSP awards that were
granted in 2020. At the time of grant,
M&S had experienced a material fall in
share price since awards were made in
2019 and so the Committee took decisive
action to significantly reduce
the quantum of the 2020 PSP award for
executive directors from 250% to 175%
of salary. To provide clarity and certainty
to participants and shareholders alike,
the Committee felt it appropriate to
make an upfront adjustment rather than
rely on a ‘wait-and-see’ approach.
GOVERNANCE
This reduction in grant value was
applied to all recipients of PSP awards.
Given their roles at the time of grant,
Stuart Machin and Katie Bickerstaffe’s
2020 PSP awards were proportionally
reduced from 200% of salary to 140%
of salary.
Notwithstanding the proactive approach
at the time of grant, at the end of the
performance period the Committee
thoroughly reviewed vesting outcomes
taking into consideration factors such
as overall business performance, share
price movements over the period and
impact of external factors, such as high
food inflation. The Committee was
satisfied that vesting achievements
were appropriate in the light of such
considerations and determined that
no additional application of discretion
was required. The 2020 PSP award vested
at 51.0%.
REMUNERATION POLICY
In line with corporate governance
requirements, our Policy is reviewed
every three years and approved by
shareholders. Shareholders approved
the current Policy at the AGM in 2020.
As such, the Company is required to seek
approval for the new Policy at the AGM
to be held on 4 July 2023. The Board
is committed to ensuring that our
remuneration framework supports
our strategy, and provides a balance
between motivating and challenging
our senior leaders to deliver our business
priorities and the long-term sustainable
success of M&S.
At the beginning of the year,
considerable time was spent reviewing
the current Policy including the incentive
structures, measures and targets.
The Committee consulted with our
major shareholders (representing nearly
60% of our total shares in issue) and,
given many of our stakeholders engage
their services, a number of shareholder
representative bodies. The Committee
reviewed and discussed all the
feedback and responses provided by
our shareholders and I would like to
thank them for their highly valued time.
Following this review and the feedback
received, the Committee concluded
that overall the current Policy remains
relevant, appropriate, and suitably
flexible to meet the needs of the
business whilst providing clarity,
simplicity and predictability for both
participants and investors alike.
Therefore, only two minor adjustments
to the existing Policy are being proposed.
First, the proposed Policy allows
executive directors to receive a 5% cash
payment in lieu of pension contributions,
subject to the Company’s agreement.
This provides alignment with the policy
for our wider colleague population, as
per the guidance from the Investment
Association.
Secondly, the proposed Policy includes
the ability to make payments of
Committee membership fees for
non-executive directors to align our
Policy with the Memorandum and
Articles of Association.
There are no current plans to pay
2022/23 BONUS PAYMENT TIMINGS (£000)
Stuart Machin
Katie Bickerstaffe
July 2023
£540.7
£494.4
One-year performance period
Three-year deferral period
2026
£540.7
£494.4
STRATEGIC ALIGNMENT OF REMUNERATION FRAMEWORK WITH KPIS
KPI/Strategic priority
KPI
See KPIs on
page 34
Adjusted earnings per share (EPS)
Return on capital employed (ROCE)
Group PBT before adjusting items (PBT)
Strategic
priority
Deliver Profitable Sales Growth
See Strategic
priorities on
pages 12
and 13
Improve Operating Margins
Drive Shareholder Returns
Disciplined Investment Choices
2022/23 PERFORMANCE
As measured by
Performance
Share Plan (PSP)
Annual Bonus
Scheme (ABS)
Financial
results
Achievement
against
objectives
ADJUSTED EARNINGS PER SHARE
RETURN ON CAPITAL EMPLOYED
GROUP PBT BEFORE ADJUSTING ITEMS
17.2p
Adjusted EPS in 2022/23 was 17.2p. This
was above the 13.0p threshold required
for vesting under this element of the
2020 PSP award.
10.4%
Final year ROCE performance was 10.4%.
This was above the 9% threshold required
for vesting under this element of the 2020
PSP award.
£482m
For the purpose of the ABS, reduced to
£461.5m reflecting net Gist profit
contribution. PBT of between ‘target’
and ‘maximum’ achieved for bonus
awards under the 2022/23 ABS.
Annual Report & Financial Statements 2023
103
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION COMMITTEE REPORT CONTINUED
additional membership fees, however we
would like flexibility in the Policy in case
it is considered appropriate in the future.
Pages 108 to 115 provide the full details
of the proposed Policy.
WIDER WORKFORCE PAY
ARRANGEMENTS
The Committee received regular updates
during the year relating to M&S’ pay
arrangements. Of key importance this
year was the response of the business to
the cost-of-living crisis. As a Committee
we were proud of the decision taken by
the business to announce a targeted
mid-year cost-of-living intervention,
representing a £15m investment. This
focused on our lowest-paid colleagues,
recognising that, in the main, these
colleagues were more likely to be
affected by the pressures of increasing
inflation and higher prices in key
household items such as energy, food
and fuel. Key aspects of the investment
included an out-of-cycle pay increase for
UK Customer Assistants and, for our
lower-paid salaried colleagues both in
store and support centres, an M&S gift
voucher of £250 which could be used in
conjunction with their M&S Colleague
Discount. These sat alongside non-
financial initiatives already in place to
support our colleagues.
The Committee welcomes continued
collaboration with BIG. At Committee
meetings we receive direct feedback on
colleagues’ views from the National Chair
of BIG and in turn the Head of Reward
attends National BIG Committee
meetings to share and discuss the
executive pay framework and its
relationship with that of 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.
Given the inflationary pressures being
felt by both M&S as a business and by our
colleagues, it was to be expected that a
significant amount of time was taken to
discuss the appropriate approach to the
annual pay review.
Recognising the need to balance financial
restraint with support for our colleagues,
the topic generated a robust debate. For
our hourly-paid colleagues, a further
investment in pay of £57m was agreed
representing an increase in the M&S
national rate for Customer Assistants of
9% when compared to the equivalent rate
in April 2022. For salaried colleagues, a
tailored approach was agreed with salary
increases ranging from 7-8% for our
lower-paid salaried colleagues and 3-6.5%
for management roles.
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Marks and Spencer Group plc
To demonstrate the importance the
Committee gives to the alignment of
executive pay with the wider workforce,
this year’s Remuneration Report
continues to provide expanded
disclosures on such pay arrangements.
Please see pages 106 and 107.
PAY ARRANGEMENTS FOR 2023/24
The Committee carefully considered the
executive director pay review,
particularly in the context of the
decisions for the wider workforce pay
arrangements, and approved an increase
of 3%. Whilst this is significantly below
the average pay increase within the wider
workforce, the Committee feel it is
appropriate when considering overall
executive director remuneration. This
will be effective 1 July 2023.
Reflecting on the existing variable
remuneration framework, it was agreed
that in 2022/23 the structures of the ABS
and PSP continue to effectively align pay
and strategy. As a result, no changes
have been proposed for 2023/24.
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.
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 2023 PSP will
maintain the financial measures applied
to the 2022 PSP awards, being 30%
adjusted EPS, 30% ROCE and 20% relative
total shareholder return (TSR). The
remaining 20% will continue to be subject
to the basket of three strategic measures.
This ensures all targets have been set to
be stretching yet motivating and are
detailed further on page 122.
Within the strategic measures, the
Committee has decided to replace the
‘store staff cost to sales ratio’ measure with
a broader ‘operating costs to sales ratio’.
This revised measure provides greater
focus on our simplification agenda and
better measures efficiency across the
whole of the business. It brings together
all aspects of our strategy, focusing not
only on our stores and their renewal, but
also our supply chain, exceptional
products, omni-channel operations and
expanding global reach.
As part of the review of the PSP
performance measures, the Committee
spent significant time debating the
appropriateness of the introduction of an
environmental, social and governance
(ESG) measure. M&S was an early pioneer
of championing sustainability and
continues to hold a leading position in
this field. We take our ESG responsibility
very seriously and the Committee is
confident that such considerations are
embedded within the behaviours of our
executive directors, as well as our
operations across the length and
breadth of our business. As further
detailed on pages 32, 33 and 55 this
includes our clear roadmap to reduce
absolute Scope one, two and three
Greenhouse Gas emissions by 55% by
2030. Such examples demonstrate that
our sustainability commitments sit at the
heart of our business operations and
inform decisions at all levels and across
all departments. Therefore, on balance,
the Committee determined that it would
not be appropriate to introduce an ESG
measure at this time.
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
July 2023. The Committee retains the
right to 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.
STRATEGIC ALIGNMENT OF PAY
As detailed above, the measures and
targets used in M&S’ incentive schemes,
namely those of the ABS and PSP, were
reviewed to ensure alignment with the
key performance indicators (KPIs) and
identified strategic priorities across the
business. The illustration on page 103
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 continues on its
transformation journey.
GOVERNANCE AGM
I would like to thank our shareholders
for their continued support and
engagement during the year. I hope
you will join the Board in supporting
our Remuneration Policy and Annual
Report on Remuneration at the AGM
on 4 July 2023. I will be available at the
AGM to answer any questions in relation
to this Remuneration Report.
Andrew Fisher
BOARD CHANGES
As disclosed last year, Steve Rowe
stepped down from his role as CEO of
the business in May 2022 after almost
40 years of loyal service. Final pay
arrangements for Steve were fully
disclosed in the 2021/22 Remuneration
Report. Any payment made in 2022/23
linked to his exit arrangements can be
found on page 126. Steve did not
participate in the 2022/23 ABS.
As announced at the time, in May 2022
we warmly welcomed to the Board
Stuart Machin and Katie Bickerstaffe
as CEO and Co-CEO respectively. Pay
arrangements upon appointment were
disclosed in the 2021/22 Remuneration
Report and details on remuneration for
2022/23 are detailed in this year’s Report.
It was announced in July 2022 that
Eoin Tonge had resigned. Following
the appointment of Jeremy Townsend
as CFO, Eoin stepped down from the
Board on 9 December 2022 and left
M&S on 19 January 2023. In line with the
Remuneration Policy, upon leaving
through resignation, all outstanding
share awards lapsed and no award
under the 2022/23 ABS was made.
On behalf of the Committee, I would
like to extend my very best wishes to
both Steve and Eoin in all their future
endeavours.
Annual Report & Financial Statements 2023
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STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE 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
changes to the Remuneration Policy as
well as the strategic measures and
targets to be applied to the PSP. The
feedback was shared with the
Committee, discussed and incorporated
into the Policy as necessary.
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 and 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 held and
views on a variety of topics, including
executive pay, are taken into account.
REMUNERATION IN CONTEXT
COLLEAGUE ENGAGEMENT
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 and gave input into
the approaches being taken to support
colleagues with the cost-of-living and
eligibility for incentive schemes. 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
Reward 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 pay increases for our UK Store
Customer Assistants in October 2022 and
April 2023 have totalled 9%. Effective
July 2023, salary increases ranging from
3% for our senior population and between
4.5% and 10% for the wider salaried
workforce have been awarded.
CONSIDERATION OF COLLEAGUE PAY
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.
Throughout the year, the Committee is
provided with information detailing pay
in the wider workforce, which gives it the
additional context needed to make
informed decisions. The Head of Reward
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.
This year the Committee also considered
the impact of rising inflation and the
cost-of-living crisis. Focus was placed on
supporting lower paid colleagues who
were more likely to feel additional
pressure. As a result the basic hourly rate
was increase from £10 per hour to £10.20
from 1 October 2022. In addition, salaried
non-bonus eligible colleagues were given
£250 M&S gift vouchers and support was
put in place for colleagues who “forgot
their lunch”, period products were also
available for all colleagues.
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.
Colleagues are encouraged to raise
questions throughout the year to the
CEO through the ‘Straight to Stuart’
programme and at live events.
All questions raised are answered,
and comments made during the year
through surveys or via BIG our network
of elected colleague representatives are
considered. The Head of Reward 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.
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Marks and Spencer Group plc
GOVERNANCE CEO PAY RATIO
Year
2023
2022
2021
2020
Methodology
25th percentile ratio
50th percentile ratio
75th percentile ratio
Option A
Option A
Option A
Option A
123:1
128 : 1
55 : 1
64 : 1
113:1
117 : 1
50 : 1
59 : 1
95:1
99 : 1
42 : 1
51 : 1
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 1 April 2023. 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 2022/23 financial year and does not
include the value of any deferred shares vesting in the year;
– 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 1 April 2023.
The table above shows the ratio of CEO pay in 2022/23, using the sum of the single total figure remuneration as disclosed in
Figure 8 (page 116) for Steve Rowe and Stuart Machin, 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 decrease in pay ratio this year is the combined result of the reduced remuneration package for the new CEO
and, in response to the cost-of-living crisis, the focus on pay for lower paid colleagues.
Pay data
CEO remuneration
UK colleague 25th percentile
UK colleague 50th percentile
UK colleague 75th percentile
Salary (£000)
Total pay and
benefits
(£000)
Salary (£000)
Total pay and
benefits
(£000)
Salary (£000)
Total pay and
benefits
(£000)
2020/21
2020/21
2021/22
2021/22
2022/23
2022/23
834
18
20
24
1,068
20
21
25
841
19
21
25
2,630
21
22
26
809
21
22
27
2,690
22
24
28
GENDER PAY GAP
The M&S median gender pay gap for the year to April 2022 is 6.5%, compared with 7.6% for the Retail sector. The M&S mean
gap for the same period is 12.5%.
Our Inclusion and Diversity strategy is built on two pillars, driving diverse representation at all levels of our business, and
developing a continually evolving inclusive culture. Our colleagues have been central to the design of all our plans and our
Inclusion and Diversity networks have been at the heart of bringing our communities together, providing a voice for the
colleagues they represent and guiding the business. Our Gender Equality, Menopause and Family & Carers networks are the
fastest growing with over 4,500 members to date.
We’ve developed tools and resources to support business unit leadership teams to drive plans in the respective areas. Teams
have access to a live dashboard which help them identify opportunities to increase representation and address barriers within
resourcing and talent mapping. We’ve also launched a twice-yearly review process with each business unit to track progress,
provide support and share best practice from internal and external sources.
Our future leaders’ programmes have been redesigned using the principles that our women value most, with flexibility and
bite-size content imbedded throughout. We aim to build on the 60% female representation that we had on all our
development programmes last year and will continue to drive a diversity lens through all of our performance and talent
management forums.
Providing a safe space for colleagues is a fundamental principle, we are very clear that any forms of discrimination,
harassment, bullying or victimisation are not tolerated here. We have processes in place to ensure allegations are handled
effectively and provide mandatory inclusion training for all colleagues to ensure expectations are clear.
As part of our ambition to be the leading employer for women in retail, we remain committed to promoting flexible working
options, supporting those taking and returning from family leave and providing support for women’s health and life changes,
particularly those approaching, going through and coming out of the menopause.
Annual Report & Financial Statements 2023
107
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION POLICY
Shareholders approved the
Remuneration Policy at the
AGM in 2020. As such, the
Company is required to seek
approval for the new Policy at
the AGM to be held on 4 July
2023, from which date the
updated Policy will apply.
The Committee reviewed
the senior remuneration
framework during the year
to ensure that it remains fit
for purpose, providing an
appropriate framework to
fulfil M&S’ reward philosophy
which is, in turn, designed to
support and drive the
business strategy.
The Policy remains largely
unchanged from the one
approved by shareholders in
2020; for transparency, where
amendments have been made
these are highlighted. Once
approved, this Policy may
operate for up to three years.
The Policy 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
Base salary
Benefits
Pension benefits
PURPOSE AND LINK
TO STRATEGY
To attract, retain and motivate
high-calibre executives needed to
deliver our strategy and drive business
performance.
PURPOSE AND LINK
TO STRATEGY
To provide market-competitive
benefits which drive employee
engagement and commitment
in our business.
OPERATION
Directors are eligible to receive
benefits in line with our policies
which may include:
– A car or cash allowance.
– A driver.
– Life assurance.
Where appropriate, our Global/
Domestic Mobility Policy may apply.
This may include, but not be limited to,
travel, relocation and tax equalisation
allowances.
Directors are offered a number of
other benefits in line with all other
colleagues, such as colleague discount
and salary sacrifice schemes such as
Cycle2Work.
Directors may participate in a Save
As You Earn Scheme and a Share
Incentive Plan and any other all-
employee share schemes on
the same terms as other colleagues.
MAXIMUM OPPORTUNITY
While there is no set maximum, any
benefits will be provided at a rate
commensurate with the market.
Maximum participation in all-
employee share schemes is in line
with local statutory limits.
OPERATION
Payable in cash.
Reviewed annually by the Committee
considering a number of factors,
including:
– Salary increases awarded to
other colleagues in the wider
workforce which are typically
reviewed annually on a
similar basis.
– Comparable salaries in appropriate
comparator groups.
– Salaries reflect the experience,
responsibility and contribution
of the individual and role within
the Group.
MAXIMUM OPPORTUNITY
While there is no set maximum, any
increases are normally in line with
those in the wider workforce.
Individual adjustments in excess of this
may be made outside of this cycle at
the discretion of the Committee, where
appropriate.
Such circumstances can include:
– Where the role scope has
changed;
– Where comparable salaries
in the external market have
changed; or
– To apply salary progression
for newly appointed directors.
PURPOSE AND LINK
TO STRATEGY
To attract and retain
high-calibre executives
through a commitment
to responsible, secure
retirement funding in line
with our Company values.
OPERATION
Current directors may
participate in the Your
M&S Pension Saving Plan
(a defined contribution
arrangement) or an
alternative pension saving
vehicle that the Company
may offer, on the same
terms as all other
colleagues or receive a cash
supplement in lieu
of pension contributions
into this scheme.
MAXIMUM OPPORTUNITY
A maximum employer
contribution currently
of 12% of salary where the
employee contributes
6% of salary.
Change for 2023
To align with the wider
workforce, an alternative
cash payment capped at
5% of salary will be
available for executive
directors and any
future directors.
PERFORMANCE
CONDITIONS
N/A
PERFORMANCE
CONDITIONS
N/A
PERFORMANCE
CONDITIONS
N/A
108
Marks and Spencer Group plc
GOVERNANCE Annual Bonus Scheme including Deferred Share Bonus Plan (DSBP)
Performance Share Plan (PSP)
Shareholding Requirement
PURPOSE AND LINK TO STRATEGY
To drive annual profitability, strategic change and individual
performance in line with the business plan.
To recognise and reward individual contributions to the way
we do business.
The deferral into shares provides alignment with shareholders’
long-term interests following the successful delivery of short-
term targets.
OPERATION
Directors are eligible to participate in this non-contractual,
discretionary scheme.
Payments are made subject to the satisfaction of predetermined
targets set at the start of the year, as approved by the Committee.
Not less than 50% of any bonus earned is paid in deferred shares
under the DSBP, with the remainder payable in cash.
Deferred shares vest after a period of three years subject to continued
service, but no further performance conditions.
Clawback and malus rules apply to cash and DSBP awards respectively;
see explanatory notes (pages 110 to 111) for more information.
Good leaver and change of control provisions apply to the deferred
shares (see explanatory notes).
The value of any dividends during the deferred period may be
payable (see explanatory notes).
The Committee retains the right to exercise discretion, both upwards
and downwards, to ensure that the level of award payable is appropriate
and fair in the context of the director’s individual performance and the
Company’s overall performance. Where exercised, the rationale for this
discretion will be fully disclosed to shareholders in the subsequent
Annual Report.
MAXIMUM OPPORTUNITY
A maximum annual potential of up to 200% of salary.
PURPOSE AND LINK TO STRATEGY
Measured against the key financial drivers
of the business plan to deliver sustainable
value creation.
To encourage long-term shareholding to
retain directors, and provide greater
alignment with shareholders’ interests.
PURPOSE AND LINK
TO STRATEGY
To drive long-term,
sustainable decision-making
for the benefit of the Company
and our shareholders.
OPERATION
The Company’s principal long-term
incentive scheme, approved by
shareholders in 2020.
Directors are eligible to participate in this
non-contractual, discretionary plan.
Directors may receive an annual award
which vests after three years subject to
predetermined performance conditions.
Clawback and malus rules apply to awards
(see explanatory notes).
Good leaver and change of control
provisions apply (see explanatory notes).
The value of any dividends during
the vesting period may be payable (see
explanatory notes).
Awards are subject to a further two-year
holding period after the vesting date.
Directors may sell sufficient shares to
satisfy the respective tax liability but must
retain the net number of shares until the
end of this two-year period.
As with the bonus scheme, the Committee
retains the right to exercise discretion in
the same manner to ensure
appropriateness of outcomes.
MAXIMUM OPPORTUNITY
The maximum value of shares (at grant)
which can be made under an award to an
individual in respect of a financial year is
300% of salary.
OPERATION
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.
MINIMUM REQUIREMENT
For the CEO and Co-CEO,
this requirement is 250% of
salary. For all other executive
directors the requirement
is 200%.
Post-cessation holding
requirement
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.
PERFORMANCE CONDITIONS
N/A
PERFORMANCE CONDITIONS
Quantifiable one-year performance measures and targets are set by
the Committee around financial and individual objectives linked with
the sustainable delivery of the business plan.
Financial performance measures comprise at least 50% of awards and
may include, but not be limited to Group PBT.
Typically, no payment for individual objectives can be earned unless a
‘threshold’ level of Group PBT has been achieved. This threshold level is
set by the Committee taking into account the previous year’s
performance and the business operating plan for the current year.
For achievement of individual objectives no more than 40% (currently
30%) of the maximum bonus potential is paid for threshold
performance, and no more than 60% for target performance. However,
the Committee retains the flexibility to amend the pay-out level at
different levels of performance for future bonus cycles. This is based on
its assessment of the level of stretch inherent in the set targets, and the
Committee will disclose any such determinations appropriately.
PERFORMANCE CONDITIONS
Performance is measured over a
three-year period against a balanced
scorecard of appropriate measures as
determined by the Committee each year.
This currently includes EPS, ROCE, TSR
and strategic measures. These are chosen
as those measures which support and drive
top-line and bottom-line performance in
line with business strategy.
Financial measures comprise at least
50% of awards.
The threshold level of vesting is 20%
of the maximum.
For performance between threshold
and maximum, awards vest on a straight-
line basis.
Annual Report & Financial Statements 2023
109
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION POLICY CONTINUED
FIGURE 2: POLICY TABLE
Executive directors may be in receipt of awards under share plans outside of the current remuneration framework detailed on
page 109; these may have been awarded upon recruitment or prior to their appointment as an executive director. While awards
under these plans do not form part of a forward-looking policy, for transparency, details of the plans are set out in the table
below.
Restricted Share Plan (RSP)
ELEMENT
PURPOSE AND LINK
TO STRATEGY
To enable the recruitment of key directors who are necessary to the delivery of business strategy.
OPERATION
Restricted awards may be granted for the recruitment of directors.
Awards vest after a restricted period, which can vary by award but is typically between one and three years.
Malus provisions, good leaver and change of control provisions apply (see explanatory notes below).
The value of any dividends during the restricted period may be payable (see explanatory notes below).
While there is no maximum set in the rules, the Committee considers the scale and structure of awards
on an individual basis.
The Committee may choose to apply no formal performance conditions save for continued service.
MAXIMUM
OPPORTUNITY
PERFORMANCE
CONDITIONS
Executive Share Option Scheme (ESOS)
ELEMENT
PURPOSE AND LINK
TO STRATEGY
Measured against the key drivers of our business plan to deliver sustainable value creation.
To encourage long-term shareholding to retain directors, and provide greater alignment with
shareholders’ interests.
OPERATION
Approved by shareholders and HMRC in 2015, the Committee may choose to award share options
to directors if appropriate.
Malus provisions, good leaver and change of control provisions apply (see explanatory notes below).
Options are normally exercised between the third and tenth anniversaries of grant, subject to the
achievement of any performance conditions set by the Committee.
Awards are capped at 250% of salary in respect of any financial year of the Company but in recruitment
circumstances awards may be granted up to a higher limit of 400% of salary.
Awards vest subject to at least three-year predetermined performance conditions.
MAXIMUM
OPPORTUNITY
PERFORMANCE
CONDITIONS
EXPLANATORY NOTES
The Committee reserves the right to
make any remuneration payments
notwithstanding that they are not in line
with the Policy set out above, where the
terms of the payment were agreed at a
time when the relevant individual was
not a director of the Company, or under
a prior approved policy and, in the
opinion of the Committee, the payment
was not in consideration of the individual
becoming a director of the Company.
For these purposes, payments include
the Committee satisfying awards of
variable remuneration and, in relation
to an award over shares, the terms of
the payment are agreed at the time
the award is granted.
Awards granted under the PSP, DSBP,
and RSP can be made in the form of
conditional share awards, forfeitable
shares, options or rights with the same
economic effect. In addition, awards
may be settled in cash. Awards may
incorporate the right to receive (in cash
and/or shares) the value of dividends,
including any dividend tax credit where
applicable, between grant and vesting
on the shares that vest. This amount
may be calculated on a cumulative basis,
assuming the reinvestment of dividends
into shares.
Any performance conditions applicable
to PSP, RSP and ESOS awards may be
amended by the Committee if an event
occurs which causes it to consider
that the performance condition would
not achieve its original purpose and
the amended performance condition
is, in the opinion of the Committee,
no less difficult to satisfy but for the
event in question.
In the event of a variation of the
Company’s share capital or a demerger,
special dividend or other event which in
the Committee’s opinion may affect the
price of shares, the Committee may alter
the terms of awards and the number of
shares subject to them. The terms of
awards may be amended in accordance
with the relevant plan rules (which were
formally approved by shareholders on
3 July 2020).
Our long-term incentive plans provide
the Committee with discretion with
respect of vesting outcomes that affect
the actual level of reward payable to
individuals, such discretion would only
be used in exceptional circumstances
and, if exercised, the rationale for this
discretion will be fully disclosed to
shareholders in the subsequent
Annual Report.
110
Marks and Spencer Group plc
GOVERNANCE PERFORMANCE CONDITIONS
AND TARGET SETTING
The Committee reviews annually the
measures, weightings and targets for the
incentive arrangements for the executive
directors. In doing so, the Committee
considers a number of factors which
assist in forming a view. These include,
but are not limited to, the strategic
priorities for M&S over the short to long
term, shareholder feedback, the risk
profile of the business and the
macroeconomic climate.
The Annual Bonus Scheme is measured
against a balance of profitability
and the delivery of key strategic
areas of importance for the business.
The profitability measure used is Group
PBT before adjusting items as this is used
internally to report and assess business
performance by the Board and Executive
Committee. Refer to the glossary on
pages 213 to 217 for the definition
of Group PBT before adjusting items,
and to note 5 of the financial statements
for a description of adjusting items.
The PSP is assessed against a balance
of measures identified as those most
relevant to driving both sustainable
top-line and bottom-line business
performance, as well as providing
value for shareholders, and strategic
alignment with the business.
This is reflected in the EPS and ROCE
measures which focus on a balance
of profitability, cost control and the
efficient use of capital investment.
The value delivered to shareholders
is reflected by Relative TSR which is
measured against a bespoke group of
retail companies which are believed to
provide a balanced portfolio of those
most likely to be alternative investment
choices for M&S shareholders.
Targets are set against the respective
annual and long-term operating
plans taking into account analysts’
forecasts, M&S’ strategic plans, prior
year performance, estimated vesting
levels and the affordability of pay
arrangements. Targets are set to provide
a sustainable balance of risk and reward
to ensure that, while being motivational
for participants, maximum payments are
only made for exceptional performance.
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. In addition, all UK
colleagues are provided with life
insurance and colleague discount,
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 annual bonus, the outcome of
which is partially determined by Group
PBT performance. For all participants,
part of the bonus is deferred into shares
for three years.
Around 140 of M&S’ top senior executives
may be invited to participate in the PSP,
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.
CLAWBACK AND MALUS
M&S is committed to ensuring its
remuneration arrangements motivate
participants to strive for exceptional
performance while also protecting
shareholder value from the Company
taking unnecessary risks. As such,
clawback and malus provisions apply
to the executive directors’ incentive
arrangements. All share awards granted
from 2013 onwards are subject to malus
provisions. These provisions allow the
Committee, in its absolute discretion,
to determine at any time prior to the
vesting of an award to reduce the
number of shares, cancel an award or
impose further conditions on an award in
circumstances for which the Committee
considers such action to be appropriate.
Such circumstances may include, but not
be limited to, a material misstatement of
the Company’s audited results.
In addition, clawback provisions were
introduced in 2015 and apply to cash
payments made under the Annual Bonus
Scheme. Awards made under any of the
Company’s other executive share plans
(including the PSP) in 2015 and onwards
will similarly be subject to clawback
provisions. These provisions enable the
Committee, in its absolute discretion, to
reclaim awards paid to individuals for up
to three years after the respective
vesting or payment date (or up to two
years in the case of PSP awards) where
specified events occur. The specified
events that would trigger clawback
include the discovery of a material
misstatement resulting in an adjustment
in the audited consolidated accounts of
the Company, the assessment of any
performance condition, terms or
conditions in respect of an award or
payment that were based on error, or
inaccurate or misleading information, the
discovery that any information used to
determine the number of shares subject
to an award or amount payable was
based on an error, or inaccurate or
misleading information, the action or
conduct of a participant which, in the
reasonable opinion of the Committee,
amounts to gross misconduct or a
material breach of the participant’s
service contract that falls short of gross
misconduct, and events or behaviour of a
participant that have had a significant
detrimental impact on the reputation of
any member of the Group, provided that
the Committee is satisfied that the
relevant participant was responsible for
the reputational damage and that the
reputational damage is attributable to
the participant. Clawback may be
effected, among other means, by
requiring the transfer of shares, payment
of cash or reduction of awards.
Annual Report & Financial Statements 2023
111
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION POLICY CONTINUED
FIGURE 3: RECRUITMENT POLICY & SERVICE CONTRACTS
The table below sets out 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 in exceptional circumstances 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. For example, for internal promotional appointments to
the Board, the Committee would honour any pre-existing contractual remuneration arrangements; these arrangements may be
outside of the Policy detailed on pages 108 to 110.
ELEMENT
APPROACH
SERVICE CONTRACT
– 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.
– There are no further obligations which could give rise to a remuneration or loss of office payment
other than those set out in the Remuneration Policy and the Termination Policy.
– The directors’ service contracts are available for shareholder inspection at the Company’s
registered office.
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.
– For new appointments to the Board, the Committee may set the rate of pay at the lower end of the range
for other directors and/or other comparable roles within the market with the intention of applying
staged increases.
BENEFITS
– The Committee will offer a benefits package in line with our benefits policy for executive directors.
PENSION BENEFITS
– Maximum contribution in line with our policy for future executive directors (currently up to 12% of salary).
An alternative cash in lieu of pension capped at 5% of salary is also offered.
ANNUAL BONUS
SCHEME
PSP
– Eligible to take part in the Annual Bonus Scheme 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.
BUY-OUT AWARDS
– Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous
employer as a result of their appointment with M&S, 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 Committee in its judgement normally intends that any such payments are made on a like-for-like basis
and considers issues such as the plan type, time horizons and valuation of the forfeited awards. The
Committee’s intention would be to ensure that the expected value awarded will be no greater than the
expected value forfeited by the individual.
– Where appropriate, the Committee may choose to apply performance conditions to any of these awards.
112
Marks and Spencer Group plc
GOVERNANCE FIGURE 4: TERMINATION POLICY
The Company may choose to terminate
the contract of any executive director
summarily in accordance with the terms
of their service agreement, on payment
in lieu of notice of a sum equal to salary,
benefits and pension as per their
contractual notice entitlement (see
page 126).
The Company can make a series of
phased payments which are paid in
monthly instalments, subject to
mitigation. This mechanism allows for
the amount of any phased payments
to be reduced by the income from any
alternative position secured by the
former director during the phased
payments period.
Service agreements may be terminated
without notice and without any payments
in certain circumstances, such as gross
misconduct. The Company may require
the individual to work during their notice
period, or may choose to place the
individual on garden leave.
Such a decision would be made to ensure
the protection of the Company’s and
shareholders’ interests where the
individual has had access to
commercially sensitive information.
The table below sets out key provisions
for directors leaving the Company under
their service contracts and the incentive
plan rules.
The Company’s policy towards exit
payments allows for a variety of
circumstances whereby a director may
leave the business. In some cases, where
deemed suitable, the Committee
reserves the right to determine exit
payments, where the director leaves by
mutual agreement. In all circumstances,
the Committee does not intend to
‘reward failure’ and will make decisions
based on the individual circumstances.
The Committee’s objective is that any
such agreements are determined on
an individual basis and are in the
best interests of the Company and
ELEMENT
APPROACH
shareholders at that time, and reflect
the director’s contractual and other
legal rights.
CORPORATE EVENTS
In the event of a change of control or
winding up of the Company, unvested
share awards will normally vest on the
date that the Board notifies participants
of such an event. The number of shares
which may vest under awards in these
circumstances will be subject to any
relevant performance conditions and,
in the case of PSP awards, unless the
Committee determines otherwise, time
pro-rating. In the event of a demerger,
special dividend or other event which,
in the opinion of the Committee affects
the price of shares, the Committee may
allow some or all of an award to vest.
BASE SALARY,
BENEFITS AND
PENSION BENEFITS
ANNUAL BONUS
SCHEME
– Payment made up to the termination date in line with contractual notice periods.
– There is no contractual entitlement to payments under the Annual Bonus Scheme. If the director is under
notice or not in active service at either the relevant year end or on the date of payment, there will be no
entitlement to any bonus payment, either in cash or shares. The Committee may use its discretion as
described above to make a bonus award, which is normally pro-rated for time worked during the relevant
financial year and based on performance assessed at the end of the bonus period.
LONG-TERM
INCENTIVE AWARDS
– Where a director ceases to be an officer or employee of the Group before the end of the relevant vesting
period, the treatment of outstanding awards is determined in accordance with the plan rules.
– In some circumstances, where a director leaves due to retirement, injury, ill-health, death or the sale of the
director’s employing company or business out of the Group, or any other reason at the discretion of the
Committee and in accordance with the plan rules, DSBP awards normally vest in full on cessation; PSP and
ESOS awards which have been held for at least 12 months normally vest when the level of performance has
been assessed and agreed at the end of the three-year performance period. RSP awards are considered on
an individual basis but would typically be pro-rated for the time held and vest on cessation. The Committee
may determine these awards vest upon cessation as permitted in the plan rules. In either circumstance, any
relevant performance conditions would still apply to the PSP and ESOS awards and unless the Committee
determines otherwise, would be time pro-rated and subject to the two-year holding period post-vesting.
REPATRIATION
– M&S may pay for repatriation where a director has been recruited from overseas.
LEGAL EXPENSES AND
OUTPLACEMENT
– Where a director leaves by mutual consent, M&S may reimburse for reasonable legal fees and pay for
professional outplacement services.
Annual Report & Financial Statements 2023
113
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION POLICY CONTINUED
FIGURE 5: NON-EXECUTIVE DIRECTORS’ REMUNERATION POLICY
(TO BE APPROVED ON 4 JULY 2023)
The table below sets out our Policy for the operation of non-executive director fees and benefits at the Company. Changes are
highlighted below. Once approved, this Policy may operate for up to three years.
The Committee takes into account a number of factors when determining an appropriate fee level for the Chairman. The CEO and
executive directors determine appropriate fee levels for the non-executive directors and take into account the time commitment,
role responsibility and market practice in our comparator groups when doing so.
The Company may offer benefits to the Chairman and non-executive directors as detailed in the non-executive director policy
table below.
All non-executive directors have letters of appointment for an initial three-year term, these are available for inspection at the
Company’s registered office. The Chairman’s agreement requires six months’ notice by either party. The non-executive directors’
appointments may be terminated by either party giving three months’ notice.
ELEMENT
PURPOSE AND LINK TO STRATEGY
OPERATION AND OPPORTUNITY
CHAIRMAN’S FEES
To provide a fair fee at a level that
attracts and retains a high-calibre
Chairman.
– Fees are determined by the Remuneration Committee.
– Total fee comprises the non-executive director basic fee and the
additional fee for undertaking the role.
– Paid in equal monthly instalments; may be made in cash and/
NON-EXECUTIVE
DIRECTOR’S
BASIC FEE
To provide a fair basic fee at a rate
that attracts and retains high-
calibre non-executive directors.
ADDITIONAL FEES
To provide compensation to
non-executive directors taking on
additional Board responsibilities.
BENEFITS
To facilitate the execution of
responsibilities and duties required
by the role.
or shares.
– Fees reflect the time commitment, demands and responsibility
of the role.
– Reviewed annually, taking into account market practice in
appropriate comparator groups, e.g. major retailers, similar-sized
listed companies.
– The maximum aggregate fees for the non-executive directors’ basic
fees, including the Chairman’s basic fee, is £750,000 p.a. as set out
in our Articles of Association.
– Fees are determined by the Chairman and executive directors.
– Paid in equal monthly instalments; may be made in cash and/
or shares.
– Fee level recognises the scope of the role and time commitment
required.
– Reviewed annually, taking into account market practice in
appropriate comparator groups, e.g. major retailers, similar-sized
listed companies.
– The maximum aggregate non-executive director basic fees,
including the Chairman, is £750,000 p.a. as set out in our Articles
of Association.
– Additional fees may be paid for undertaking the extra
responsibilities of:
– Board Chairman.
– Senior Independent Director.
– Committee Chairman.
– Committee Member.
– Change for 2023
– Committee membership fees included in the policy
but not currently implemented.
– In line with our other colleagues, the Chairman and non-executive
directors are entitled to receive colleague discount.
– 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.
– The Chairman and non-executive directors do not participate in
pension or performance-related schemes.
114
Marks and Spencer Group plc
GOVERNANCE FIGURE 6: 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. The Committee believes this mixture of short- and long-term incentives and 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
ANNUAL
BONUS
SCHEME
– Up to 100% salary
(cash)
– One-year performance
– Clawback provisions apply
PSP
– Maximum 300% of salary
– Three-year performance
– Malus provisions apply
– Up to 100% salary
(deferred shares)
– Three-year deferral
period
– No further performance
conditions
– Malus provisions apply
– Two-year holding period
post-vesting
– No further performance conditions
– Clawback provisions apply
APPLICATION OF REMUNERATION POLICY
The charts below provide an illustration of what could be received by each of the executive directors in 2023/24 under the Policy.
These charts are illustrative as the actual value which will ultimately be received will depend on business performance in the year
2023/24 (for the cash element of the Annual Bonus Scheme) and in the three-year period to 2025/26 (for the PSP), as well as share
price performance to the date of the vesting of the share element of the Annual Bonus Scheme and PSP awards in 2026.
DIRECTORS
Stuart Machin
£000
£4,630
44%
36%
20%
£2,158
19%
38%
43%
£5,660
55%
29%
16%
Target
Maximum
Maximum
+50%
£922
100%
Fixed
Katie Bickerstaffe
£000
£4,287
45%
36%
19%
£1,969
20%
39%
41%
£5,253
55%
29%
16%
Target
Maximum
Maximum
+50%
£811
100%
Fixed
BASIS OF CALCULATIONS AND KEY
Fixed
Target
– Fixed remuneration only.
– 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.
Maximum
– 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.
Maximum
+50%
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 2022/23 year end.
FIXED REMUNERATION
Includes all elements of fixed remuneration:
– Base salary (effective 1 July 2023, as shown in the table on page 117).
– Pension benefits as detailed on page 117.
– Benefits (using the value for 2022/23 included in the single figure table on page 116). For Katie Bickerstaffe, her travel expenses
have been excluded as these do not form part of her “normal” remuneration arrangements.
ANNUAL BONUS SCHEME (ABS)
Represents the potential value of the annual bonus for 2023/24. 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 2023, which would vest in 2026 subject to the relevant
performance targets. Awards would then be held for a further two years.
Annual Report & Financial Statements 2023
115
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE
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 awards 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 34 and 12 and 13 respectively.
The diagram below (Figure 7) 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 8) and
later in this report.
FIGURE 7: REMUNERATION STRUCTURE 2022/23
FIXED PAY
BASE SALARY
BENEFITS
PENSION BENEFITS
+ ANNUAL BONUS
+ PSP
= TOTAL PAY FOR 2022/23
200% of salary maximum
bonus opportunity
(with 50% deferral)
Measured against a balance
of Group PBT before
adjusting items and
individual performance
175% of salary awarded
in 2020
Measured against adjusted
EPS, average ROCE , TSR
and Strategic measures
Total payments
are c.71% of
maximum potential
Salaries were determined
on appointment to Board
in May 2022.
Awards made are between
79.1% -81.1% of maximum
bonus opportunity
51% of award vested
Read more on
pages 118-119
Read more on
page 121
Bonus awards are prorated for the 10 months Stuart and Katie were CEO and Co-CEO respectively. The quantum of the 2020 PSP Awards was reduced by 30% of maximum for all PSP
recipients recognising the material fall in share price in the year prior to grant. The awards for Stuart Machin and Katie Bickerstaffe were made prior to Board appointment at a level
of 140% (typically 200%) of salary.
FIGURE 8: TOTAL SINGLE FIGURE REMUNERATION (AUDITED)
Salary
£000
Benefits
£000
Total
bonus
£000
Total PSP
vested
£000
Pensions
benefits
£000
Total
pay
£000
Total
fixed pay
£000
Total
variable pay
£000
Director
Stuart Machin
(from 25 May 2022)
Year
2022/23
2021/22
Katie Bickerstaffe1
2022/23
(from 25 May 2022)
Steve Rowe2
(until 25 May 2022)
Eoin Tonge3
(until 19 January 2023)
2021/22
2022/23
2021/22
2022/23
2021/22
669
–
626
–
140
841
487
605
0
–
16
–
5
53
3
24
1,081
–
989
–
0
1,601
0
1,151
704
–
563
–
0
0
0
0
80
–
31
–
11
135
58
73
2,534
–
2,225
–
156
2,630
548
1,853
749
–
673
–
156
1,029
548
701
1,785
–
1,552
–
0
1,601
0
1,151
1. Katie Bickerstaffe’s salary also reflects a more flexible four day working pattern.
2. Steve Rowe stepped down from the Board on 25 May 2022 and ceased full-time employment with M&S at the conclusion of the AGM on 5 July 2022. Steve agreed to remain as
an adviser to the new leadership team for up to 12 months. Details of his remuneration for the period 26 May 2022 to 1 April 2023 are disclosed on page 126 under the section
“Payment for loss of office”.
3. Following Eoin Tonge’s resignation, he stepped down from the Board on 9 December 2022 and left M&S on 19 January 2023. No payments were made to Eoin for loss of office.
116
Marks and Spencer Group plc
GOVERNANCE
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, on 25 May 2022 Stuart Machin was appointed CEO on a salary of £800,000. On the same day,
Katie Bickerstaffe was appointed Co-CEO on a salary of £750,000, reflecting her different working pattern.
For salaries effective July 2023, the Committee has awarded an increase of 3% to both Stuart Machin and Katie Bickerstaffe.
This increases their salaries to £824,000 and £772,500 respectively. Across the wider population, salary increases ranged from 3%
to 10% for the wider salaried population and 9% for Customer Assistants.
The next annual salary review for the executive directors will be effective in July 2024.
The table below details the executive directors’ salaries as at 25 May 2022 and salaries which will take effect from 1 July 2023.
Stuart Machin
Katie Bickerstaffe
Annual salary
as of 25 May 2022
£000
Annual salary
as of 1 July 2023
£000
Change in salary
% increase
800.0
750.0
824.0
772.5
3%
3%
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. Neither Stuart Machin or Katie Bickerstaffe receive a car or cash allowance. As agreed in March 2020 to
facilitate Katie Bickerstaffe’s recruitment to Chief Strategy and Transformation Director, and prior to her appointment to the
Board, she is permitted to claim travel and accommodation costs between home and her normal work location until 25 May 2024.
The taxable value of these benefits in kind was detailed in Figure 8 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)
Stuart Machin is a member of the Your M&S Pension Savings Plan, as described on page 108. Stuart contributes 6% of his salary
into the scheme, and the Company matches this with a 12% contribution. This is the maximum level of contribution offered by M&S
and is consistent with the terms available to all other colleagues.
During the year, Katie Bickerstaffe received a 5% of salary cash payment in lieu of participation in an M&S pension scheme,
this arrangement was in place prior to her appointment to the Board on 25 May 2022 and is consistent with the terms available
to other colleagues.
Prior to his exit on 19 January 2023, Eoin Tonge contributed 6% of his salary into the Your M&S Pension Savings Plan, and the
Company matched this with a 12% contribution.
The value of the Company’s contribution in the year for Stuart, Katie and Eoin is shown in the single figure table in Figure 8
on page 116.
During the year, Steve Rowe received a cash payment in lieu of participation in an M&S pension scheme. For 2022/23, the CEO’s
total annual cash supplement was reduced to £67,500 until Steve Rowe ceased employment with the business at the AGM on
5 July 2022. Details of these payments are reflected in the single figure table in Figure 8 on page 116.
Steve Rowe is a deferred member of the Marks & Spencer UK Pension Scheme. Details of the pension accrued are shown
in Figure 9 below.
FIGURE 9: PENSION BENEFITS (AUDITED)
Accrued
pension
entitlement
as at year end
£000
Normal
retirement
age
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
Steve Rowe
60
181.2
0
16.6
0
3,516
The accrued pension entitlement is the deferred pension amount that Steve Rowe would receive at age 60. 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 Report & Financial Statements 2023
117
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION REPORT CONTINUED
ANNUAL BONUS SCHEME 2022/23 (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 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 level of PBT was achieved.
ANNUAL BONUS SCHEME
PBT outturn for the year was £482.0m. However, as the 2022/23 ABS Group PBT targets were set prior to the acquisition of Gist
it was determined by the Committee that, for the purposes of the ABS, the PBT outturn should be reduced by £20.5m, equivalent
to the 2022/23 net profit contribution by Gist. This resulted in a PBT outturn for the purpose of the ABS of £461.5m which was
above the target set to trigger awards under both the corporate and individual elements of the scheme. As shown in Figure 11
below, executive directors were awarded 77.3% of maximum opportunity under the corporate element of the scheme and 83%
– 90% of the maximum for individual performance. Overall bonus achievement was 81.1% of opportunity for the CEO and 79.1% for
the Co-CEO.
The Committee reviewed achievement to ensure that total awards 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.
Figures 10 and 11 set out the extent to which each director achieved their six individual objectives, worth a total of 30% of
maximum bonus opportunity, along with the achievement against Group PBT targets comprising 70% of awards. Total awards
shown directly correspond to the figure included in the single figure table on page 116.
FIGURE 10: INDIVIDUAL OBJECTIVES (AUDITED)
Director
Individual
Stuart Machin
Lead and develop a successful rhythm and effective ways of working with new executive team. Leadership and
governance of Executive Committee. Established regular cadence with Co-CEO, CFO and Executive Committee
to review, discuss, and agree topical business items. New Executive Committee formed, meeting monthly to
discuss key topics including performance, talent, and strategy. Managed relationships and ways of working under
the new Executive structure. Led the recruitment of Jeremy Townsend as CFO following Eoin Tonge’s resignation.
Implement a simplified and effective organisational structure. Redesigned the operating model to remove
people costs and create a simpler business across the two accountable businesses (Food and Clothing & Home)
with Support teams operating as a service function to the two accountable businesses. Identified and delivered
savings across the business through organisational design changes aligning to the strategic direction of M&S.
Evolve the Ocado Retail joint venture and strategic plan. Endorsed the appointment of Ocado Retail CEO
Hannah Gibson. Reset working relationship and strategic plans with Ocado Retail management. Continued
to play an active role on the Ocado Retail Board and recommended the appointment of two further M&S
non-executive directors.
Deliver the Food supply chain transformation. Successfully acquired Gist Limited, the principal
logistics provider to M&S Food, allowing full end-to-end visibility and control of the Food logistics cost base.
Since completion, savings have materialised through productivity efficiencies and the removal of Gist
management fees.
Deliver the Property store rotation and renewal programme. Significant advances in the year across new store
openings, renewals and closures. Plans in place to further accelerate store rotation in the forthcoming financial
year including the opening of five brand defining full line stores in major cities.
Create a high performing and engaged culture across the whole of M&S. Led the people and talent agenda
with a hands-on approach. Top 150 and fast track colleagues discussed on a regular basis at Executive Committee
and Board. Played an active role in all senior hires. Developed the ‘Closer to Customers and Closer to Colleagues’
programme, requiring support centre colleagues to complete seven days working in stores to develop a
customer-first mindset. Launched ‘Straight to Stuart’ scheme allowing colleagues to share views and ideas
directly to the CEO to improve M&S.
118
Marks and Spencer Group plc
GOVERNANCE Director
Individual
Katie Bickerstaffe
Deliver the MS2 and omni-channel strategy and performance. Online sales performance supported by growth
in click & collect sales, active App users and Sparks loyalty membership. Roll out of digital click & collect and
frictionless returns in stores.
Improvement in Sparks active members, engagement, personalisation and payment. Use of the M&S App
and associated Sparks memberships continued to grow with average active App users increasing supported by
sign-up campaigns where users can gain access to exclusive offers and rewards. Sparks Pay launched during
the year. M&S Connect created, putting M&S Bank & Services and Sparks under one leadership.
Achieve International growth and strategy for India expansion. International performance driven by Clothing
& Home sales from continued robust demand from partners in the Middle East and new store opening in India,
partly offset by the closure of the Russia business. Online international sales growth led by India and via European
marketplaces in H2.
Deliver end to end clothing supply chain (phase 1). Warehouse rationalisation and investment in automation
at the Bradford warehouse in Clothing & Home, alongside changes to returns processing. Donington capacity
and throughput increased and operations stabilised. Growth in in-store fulfilment.
Deliver digital and data capability and put at the heart of the delivery of the next phase of growth
transformation. Product led operating model in place across channels and now being rolled out across the
organisation. The technology, digital product and data teams brought together as one function.
Clothing category management and effective ways of working. End-to-end planning platform in-flight post
completing the planning phase and now entered the mobilisation phase. Refreshed leadership team and key
appointments in the Clothing & Home leadership team.
FIGURE 11: ANNUAL BONUS SCHEME 2022/23 (AUDITED)
CORPORATE GROUP PBT (70%)
INDIVIDUAL (30%)
TOTAL AWARD
Target/performance
Performance
Achievement
Director
Min £400m
Max £480m
% of salary
Stuart Machin
77.3% of max opportunity
90.0% of max opportunity
162%
£000
£1,081
Katie Bickerstaffe
77.3% of max opportunity
£461.5m
£461.5m
83.3% of max opportunity
158%
£989
The information in the table above represents the bonus earned for the period that they served as an executive director following
their appointment on 25 May 2022. The actual PBT of £482.0m was adjusted for the gain from Gist (£20.5m) to result in the
outcome of £461.5m.
FIGURE 12: DSBP AWARDS IN RESPECT OF 2022/23
DEFERRED SHARE BONUS PLAN (AUDITED)
Currently 50% of any bonus award is compulsorily deferred into a conditional share award. These awards vest after three years,
subject to continued employment as well as malus provisions. Consistent with the reporting requirements, the value shown in the
table above for the 2022/23 bonus awards and in the single figure table on page 116 represents the bonus earned for the period
that they served as executive directors following their appointment on 25 May 2022.
ANNUAL BONUS SCHEME FOR 2023/24
During the year, the Committee reviewed the 2023/24 scheme, considering the next phase of transformation together with bonus
arrangements elsewhere in the business.
The Committee was satisfied that the structure of the ABS, as detailed on page 109 in the Policy table and unchanged from
2022/23, remains appropriate. Subject to the achievement of stretching targets, set in line with the 2023/24 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 award 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.
Annual Report & Financial Statements 2023
119
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION REPORT CONTINUED
The performance targets for the 2023/24 scheme are deemed by the Board to be too commercially sensitive to disclose
at this time. 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 awards made reflect overall business and individual performance
during the year. Any discretion applied will be clearly disclosed and justified.
FIGURE 13: EXECUTIVE DIRECTOR OBJECTIVES FOR 2023/24 ANNUAL BONUS SCHEME
Director
Stuart Machin
CORPORATE TARGETS
Group PBT before adjusting
items PBT
Scorecard of
individual
measures
% bonus
% bonus
Measures
INDIVIDUAL OBJECTIVES
70%
30%
– Continued leadership and governance of the
Executive Committee and developing a high
performing leadership team.
– Embed simplified organisational structure
changes and realise financial benefits.
– Solidify ways of working with Ocado to recover
and grow online presence as identified through
three-year plan.
– Delivery of the next phase of the end-to-end
supply chain across Foods and Clothing & Home.
– Accelerate the property store rotation programme
targeting 5 years into 3. Continued rollout of renewal
programme with an omni-channel focus.
– Step change digital plans to benefit customer
engagement and experience through efficient
use of capital investment which delivers financial
efficiencies.
Katie Bickerstaffe
70%
30%
– Increase online sales penetration and improve
operating margin to ensure we can make channel
agnostic decisions.
– Drive customer engagement through
M&S Connect.
– Deliver step-change in omni-channel experience.
– Drive growth in Clothing & Home market share.
– Commence restructure of the international business
operating model for growth.
– Integrate the initial phase of Clothing & Home
to reset category management and end-to-end
forecasting technology solution.
– Deliver digital and technology return on
investment.
PERFORMANCE SHARE PLAN (PSP)
PSP AWARDS MADE IN 2022/23 (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
2022 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 12 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 15.
For the 2022 PSP a grant of 250% of salary was approved by the Committee, the grant was made on 5 July 2022.
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 element of this award shall vest if the targets are 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 14.
120
Marks and Spencer Group plc
GOVERNANCE FIGURE 14: PERFORMANCE CONDITIONS FOR PSP AWARDS MADE IN 2022/23 (AUDITED)
2022/23 award measures
Adjusted EPS in 2024/25 (p)
ROCE in 2024/25 (%)
Relative TSR
Strategic measures
FIGURE 15: TSR COMPARATOR GROUP 2022/23 AWARDS
ASOS
Dunelm Group
J Sainsbury
B&M European
Frasers
Kingfisher
30%
30%
20%
20%
Next
Tesco
WEIGHTING
THRESHOLD
DETAILS
MAXIMUM
27p
14.0%
18p
11.5%
Median
Upper quartile
M&S.com growth
Food like-for-like sales
Store staff cost to sales ratio
Dixons Carphone
JD Sports Fashion
N Brown Group
WHSmith
FIGURE 16: PSP AWARDS MADE IN 2022/23 (AUDITED)
Stuart Machin
Katie Bickerstaffe
Basis of award
% of salary
250%
250%
Threshold
level of
vesting
20%
20%
Face value of
award £000
End of
performance
period
Vesting date
2,000
1,875
29/03/2025
05/07/2025
29/03/2025
05/07/2025
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 2022 award,
the share price was calculated as £1.39, being the average share price between 28 June 2022 and 4 July 2022.
FIGURE 17: PSP AWARDS VESTING IN 2022/23 (AUDITED)
For directors in receipt of PSP awards granted in 2020, the awards will vest in July 2023 based on three-year performance over
the period to 1 April 2023. Performance has been assessed and it has been determined that 51.0% 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 below.
The total vesting values shown in Figure 18 directly correspond to the figure included in the single figure table on page 116.
Final Year
Adjusted EPS
(%)
Final Year
EPS
(%)
TSR
(Relative
Ranking)
Target and weighting
Threshold performance
Maximum performance
Actual performance achieved
Percentage of maximum achieved
30%
13.0p
30%
9.0%
22.0p
12.0%
17.2p
17.2%
10.4%
17.1%
20%
Median
Upper
quartile
Below
median
0%
Strategic Measures
M&S.com
growth
Food like-
for-like
Store staff
cost: Sales
n/a
20%
n/a
n/a
15.0%
1.5%
10.8%
Overall
vesting
22.2%
6.7%
5.1%
6.7%
10.0%
3.3%
51.0%
Despite achieving the store staff cost to sales ratio target, this measure is also underpinned by no significant increase in central
headcount over the period. Therefore, the Committee considered the impact of additional central costs and determined that the vesting
outcome of this strategic measure should be reduced by 50%.
For threshold performance 20% of the 2020/21 award would have vested, increasing to 100% on a straight-line basis between threshold
and maximum performance.
FIGURE 18: VESTING VALUE OF AWARDS VESTING IN 2022/23 (AUDITED)
On grant
At the end of performance period (1 April 2023)
Number
of shares
granted
909,599
727,679
% of salary
granted
140%
140%
Dividend
equivalents
accrued during
the
performance
period
–
–
Number
of shares
vesting
463,895
371,116
Number
of shares
lapsing
445,704
356,563
Impact of
share price
performance
Total vesting
of award
£000
51.7%
51.7%
£704
£563
Stuart Machin
Katie Bickerstaffe
Total vesting values are based on a share price of £1.52 (the average share price from 3 January 2023 to 31 March 2023). No dividends were paid
during the performance period, dividend equivalents accrued during the performance period is therefore zero as shown in the table above.
Annual Report & Financial Statements 2023
121
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION REPORT CONTINUED
PSP AWARDS TO BE MADE IN 2023/24
During the year, the Committee reviewed the long-term incentive framework at M&S, assessing the extent to which it remained
suitable. While the 2023 PSP will maintain the measures used for the 2022 PSP awards (30% adjusted EPS, 30% ROCE, 20% relative
TSR and 20% strategic measures), a small amendment has been made to one of the strategic measures.
In 2020, to support the business transformation and to focus our senior leaders on truly making M&S great again, three core
strategic measures were introduced; M&S.com growth, Food like-for-like sales and store staff cost to sales ratio. Since then,
the business has faced unprecedented external pressures resulting from rising costs, increasing rates of inflation, escalating
energy prices and other global events.
For the 2023 PSP the store staff costs to sales efficiency measure will be replaced with a broader metric monitoring overall
business cost as a percentage of sales. In making this decision, the Committee was mindful of the need to ensure a strong focus
on reducing overall costs to protect M&S’ financial performance in these challenging times. 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.
The strategic targets are deemed too commercially sensitive to disclose but will be reported at the time of vesting.
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 12 companies, as detailed in Figure 15, was thoroughly reviewed to ensure the constituents
remained appropriate and aligned to M&S’ business operations. The TSR comparator group of 12 companies can be found in
Figure 20.
Following a review of M&S’ share price performance since the 2022/23 PSP was awarded in July 2022, a grant of 250% of salary was
approved for the 2023 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 19 below, with 20% of awards vesting for threshold performance and 100%
for maximum.
FIGURE 19: PERFORMANCE CONDITIONS FOR PSP AWARDS TO BE MADE IN 2023/24
2023/24 award measures
Adjusted EPS in 2025/26 (p)
ROCE in 2025/26 (%)
Relative TSR
Strategic measures
WEIGHTING
THRESHOLD
DETAILS
MAXIMUM
25.7p
14.0%
16.7p
11.5%
Median
Upper quartile
M&S.com growth
Food like-for-like sales
Operating cost to sales ratio
30%
30%
20%
20%
FIGURE 20: TSR COMPARATOR GROUP 2023/24 AWARD
ASOS
Dunelm Group
J Sainsbury
B&M European
Frasers
Kingfisher
Next
Tesco
Currys
JD Sports Fashion
N Brown Group
WHSmith
EXECUTIVE DIRECTORS’ REMUNERATION
FIGURE 21: 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 1 April 2023. 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 or the date they ceased to be an employee and 23 May 2023. No director had an interest
in any of the Company’s subsidiaries at the statutory end of the year.
Unvested
With performance
conditions
Without performance conditions
Stuart Machin
Katie Bickerstaffe
Steve Rowe
(until 5 July 2022)
Eoin Tonge
(until 19 January 2023)
Shares owned
outright
Performance
Share Plan
Deferred Share Bonus
Plan
Restricted
Share Plan
Vested unexercised
options
230,867
28,009
3,336,953
3,065,498
401,900
393,439
450,000
700,000
556,983
1,428,657
573,528
277,999
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
122
Marks and Spencer Group plc
GOVERNANCE FIGURE 22: 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 and Co-CEO, this requirement is 250% 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 1 April 2023. For Stuart
Machin and Katie Bickerstaffe, their shareholding requirement is measured from their date of appointment to CEO and Co-CEO.
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 £1.34, with resultant shareholdings illustrated in the chart below.
Stuart Machin
Katie Bickerstaffe
115%
250% of salary
109%
Shares owned outright
Unvested DSBP/RSP shares
EMPLOYEE SHARE SCHEMES
ALL-EMPLOYEE SHARE SCHEMES (AUDITED)
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 173 to 175.
DILUTION OF SHARE CAPITAL BY EMPLOYEE SHARE PLANS
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 1 April 2023
is shown in Figure 23 and 24:
FIGURE 23: ALL SHARE PLANS
Actual
Limit
FIGURE 24: EXECUTIVE SHARE PLANS
Actual
Limit
8.18%
10%
2.62%
5%
Annual Report & Financial Statements 2023
123
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION REPORT CONTINUED
FIGURE 25: EXECUTIVE DIRECTORS’ INTERESTS IN THE COMPANY’S SHARE SCHEMES (AUDITED)
Maximum
receivable at
3 April 2022
Awarded
during
the year
Exercised
during
the year
Lapsed during
the year
Dividend
equivalents
accrued
Maximum
receivable at
1 April 2023
Stuart Machin
Performance Share Plan
Deferred Share Bonus Plan
Restricted Share Plan
SAYE
Total
Katie Bickerstaffe
Performance Share Plan
Deferred Share Bonus Plan
Restricted Share Plan
SAYE
Total
Steve Rowe
Performance Share Plan
Deferred Share Bonus Plan
SAYE
Total
Eoin Tonge
Performance Share Plan
Deferred Share Bonus Plan
Restricted Share Plan
SAYE
Total
2,519,703
1,432,562
–
401,900
–
–
703,120
21,951
–
–
253,120
–
615,312
–
–
–
3,244,774
1,834,462
253,120
615,312
1,722,471
1,343,027
–
393,439
700,000
21,951
–
–
2,444,422
1,736,466
3,861,479
–
–
573,528
21,951
–
3,883,430
573,528
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,432,822
–
21,951
2,454,773
3,213,912
412,363
263,084
21,951
1,181,863
412,363
2,032,049
–
789,252
21,951
–
–
526,168
–
2,843,252
1,594,226
526,168
3,911,310
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,336,953
401,900
450,000
21,951
4,210,804
3,065,498
393,439
700,000
21,951
4,180,888
1,428,657
573,528
–
2,002,185
–
–
–
–
–
The market price of the shares at the end of the financial year was £1.67; the highest and lowest share prices during the financial
year were £0.93 and £1.67 respectively.
Figure 26 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 26: VESTING SCHEDULE OF EXECUTIVE DIRECTORS’ OUTSTANDING DISCRETIONARY SHARE AWARDS
Maximum
receivable at
1 April 2023
(all discretionary
schemes)
2023/24
2024/25
2025/26
Maximum
receivable
Lapsed
Maximum
receivable
Lapsed
Maximum
receivable
Lapsed
Stuart Machin
Performance
Share Plan
Deferred Share
Bonus Plan
Katie Bickerstaffe Performance
Share Plan
Deferred Share
Bonus Plan
3,336,953
463,895
445,704
994,792
Restricted Share Plan
450,000
50,000
401,900
–
–
–
401,900
400,000
3,065,498
371,116
356,563
994,792
Restricted Share Plan
700,000
200,000
393,439
–
–
–
393,439
500,000
Steve Rowe
Performance
Share Plan
Deferred Share
Bonus Plan
1,428,657
496,308
476,846
455,503
573,528
–
–
573,528
–
–
–
–
–
–
–
–
1,432,562
–
–
1,343,027
–
–
–
–
–
–
–
–
–
–
–
As reported on page 121, the 2020 PSP awards included within the totals shown in Figure 25 will vest at 51.0% in July 2023. This has been
reflected above in the 2023/24 Maximum receivable / Lapsed columns.
124
Marks and Spencer Group plc
GOVERNANCE FIGURE 27: 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.
TSR
£
200
150
100
50
0
CEO single figure
(£000)
Annual bonus
payment (% of
maximum)
PSP vesting
(% of maximum)
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
2022/23
Marks and Spencer Group plc
FTSE 100 index
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
01/04/23
CEO
Stuart Machin
Steve Rowe
–
–
–
–
–
–
Marc Bolland
1,568
2,095
2,015
Stuart Machin
Steve Rowe
–
–
–
–
–
–
Marc Bolland 0.00%
30.55%
31.90%
Stuart Machin
Steve Rowe
–
–
–
–
–
–
–
–
–
–
–
–
2,534
1,642
1,123
1,517
1,205
1,068
2,630
–
–
–
–
–
–
–
–
–
–
–
–
36.98%
0.00%
0.00%
0.00%
0.00%
95.0%
–
–
–
–
–
–
–
–
–
–
–
–
0.00%
8.20%
34.0%
11.20%
0.00%
0.00%
156
–
81.1%
–
–
51.0%
51.0%
–
Marc Bolland
7.60%
4.70%
4.80%
–
–
–
–
–
–
FIGURE 28: PERCENTAGE CHANGE IN DIRECTORS’ REMUNERATION
2022/23
2021/22
2020/21
% change 2021/22-2022/23
% change 2020/21-2021/22
% change 2019/2020-2020/21
2021/22
Base
salary/
fees
Benefits
Annual
bonus
2020/21
Base
salary/
fees
Benefits
Annual
bonus
2019/20
Base
salary/
fees
Benefits
Annual
bonus
Stuart Machin
Katie Bickerstaffe
Steve Rowe (until 25 May 2022)
Eoin Tonge (until 19 January 2023)
Archie Norman
Andy Halford
Andrew Fisher
Justin King
Tamara Ingram
Sapna Sood
Evelyn Bourke
Fiona Dawson
Ronan Dunne
Cheryl Potter
UK colleagues (average FTE)
–
–
0%
9%
3%
3%
3%
3%
3%
3%
3%
3%
–
–
6%
–
–
15%
61%
-100%
–
-100%
–
–
–
-100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1%
1%
1%
1%
1%
1%
1%
1%
1%
1%
–
–
0%
-6%
2%
–
–
-20%
-33%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0%
0%
0%
0%
0%
0%
0%
0%
–
–
–
–
–
–
-37%
–
–74%
–
–
–
–
–
–
–
–
–
100%
0%
0%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The table is blank for Stuart Machin and Katie Bickerstaffe as there is no prior year single figure to compare to as they were not executive directors in 2021/22.
1.
2. Steve Rowe and Eoin Tonge left M&S in 2022/23, no bonus was paid in respect of 2022/23, however it is not possible to display a percentage increase due to no bonus being paid in 2020/21.
3. Eoin Tonge only received salary and benefits to his departure on 19 January 2023, the arrangements for Steve Rowe are fully disclosed in the paymentsfor the loss of office section on
page 126.
4. See figure 31 on page 127 for details of Non-Executive Director Remuneration which support the percentage changes above.
Annual Report & Financial Statements 2023
125
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION REPORT CONTINUED
FIGURE 29: RELATIVE IMPORTANCE OF SPEND ON PAY
The table below 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.
Total colleague pay
Total returns to shareholders
Group PBT before adjusting items
Group PBT before adjusting items as disclosed on page 103.
2021/22
£m
1,487.5
Nil
522.9
2022/23
£m
1,586.2
Nil
482.0
% change
6.6%
–
-7.8%
FIGURE 30: 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.
Stuart Machin
Katie Bickerstaffe
Date of appointment
Notice period
25/05/2022
12 months/6 months
25/05/2022
12 months/6 months
CHANGES TO EXECUTIVE MEMBERSHIP OF THE BOARD DURING 2022/23
DIRECTORS APPOINTED TO THE BOARD
As reported in the 2021/22 report, on 25 May 2022 Stuart Machin and Katie Bickerstaffe were appointed to the Board as CEO and
Co-CEO, respectively. Remuneration arrangements upon appointment were fully disclosed in the 2021/2022 report.
PAYMENTS FOR THE LOSS OF OFFICE (audited)
As reported in the 2021/22 report, Steve Rowe stepped down as CEO after the preliminary results on 25 May 2022 and ceased
full-time employment with M&S on 5 July 2022. As reported in the single figure table on page 116 he was paid £156,012 for the
period that he served as a director in the 2022/23 financial year. For the period 26 May to 5 July where Steve was employed but no
longer a director he received salary and benefits (car and pension) of £75,862. Steve did not participate in the 2022/23 ABS.
Remuneration terms on leaving were in line with the approved Termination Policy. Steve was contractually entitled to receive
salary, and benefits (car and pension), by way of phased monthly payments from 6 July 2022 for a maximum of 12 months, subject
to mitigation. In respect of 2022/23 Steve received £695,358 comprising nine months phased payments. In line with his
contractual arrangements, Steve also received a payment of £173,758 in respect of accrued but untaken holiday as per the
Company’s standard holiday policy for leavers.
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 were time pro-rated to 5 July 2022. As reported last year, the PSP awards granted in 2019
vested in June 2022 at 0%, resulting in the award lapsing in full. As detailed earlier in the report on page 121, 51.0% of PSP awards
granted in 2020 will vest in July 2023. For Steve Rowe, the award is pro-rated so 496,308 shares will vest at an estimated value of
c.£753,147 based on the average share price of £1.52 between 3 January 2023 and 31 March 2023.Steve has one further unvested
PSP award (455,503 shares), granted in 2021. To the extent that performance conditions are met, the subsequent vesting of this
award will be reported in next year’s report.
As announced in July 2022, Eoin Tonge resigned from his position of CFO, he stepped down from the Board on 9 December 2022
and ceased full-time employment with M&S on 19 January 2023. As reported in the single figure table on page 116 he received
£548,154 in fixed pay up to the date of his departure and for the purposes of his share awards was treated as a bad leaver so all
awards lapsed on leaving. No payment was made in respect of the of 2022/23 ABS.
PAYMENTS TO PAST DIRECTORS (audited)
There were no payments made to past directors during the period.
EXTERNAL APPOINTMENTS
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.
Katie Bickerstaffe is a non-executive director of the England and Wales Cricket Board (ECB) and Barratt Developments plc.
Katie received fees of £20,000 from the ECB and £92,974 from Barratt Developments in 2022/23 in respect of these external
appointments.
126
Marks and Spencer Group plc
GOVERNANCE FIGURE 31: 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 2022/23 and 2021/22 are detailed in the table below.
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 below 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 3% to £74,380 with effect from 1 July 2022. The Board Chairman
was similarly awarded an increase of 3% with effect from 1 July 2022. The total aggregate fee for the Board Chairman increased
to £636,540.
In line with pay increases across the business, non-executive director fees will increase by 3% to £76,611 with effect from
1 July 2023. The Board Chairman was also awarded an increase of 3% bringing the total aggregate fee to £655,636.
Fee levels will again be reviewed in the year, ahead of any changes which would be effective 1 July 2024.
Director
Archie Norman
Andy Halford
(until 31 December 2022)
Andrew Fisher
Justin King
Tamara Ingram
Sapna Sood
Evelyn Bourke
Fiona Dawson
Ronan Dunne
(from 1 August 2022)
Cheryl Potter
(from 1 March 2023)
Year
2022/23
2021/22
2022/23
2021/22
2022/23
2021/22
2022/23
2021/22
2022/23
2021/22
2022/23
2021/22
2022/23
2021/22
2022/23
2021/22
2022/23
2021/22
2022/23
2021/22
Basic fees
£000
Additional
fees £000
Benefits
£000
Total £000
74
72
55
72
74
72
74
72
74
72
74
72
74
72
74
62
50
0
6
0
558
544
23
31
28
17
0
0
20
17
0
0
16
0
0
0
0
0
0
0
0
10
0
0
0
1
0
0
0
0
0
0
0
1
0
0
0
0
0
0
632
626
78
103
102
90
74
72
94
89
74
72
90
73
74
62
50
0
6
0
Annual Report & Financial Statements 2023
127
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE REMUNERATION REPORT CONTINUED
FIGURE 32: NON-EXECUTIVE DIRECTORS’ SHAREHOLDINGS (AUDITED)
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 below details the shareholding of the non-executive directors who served on the Board during the year as
at 1 April 2023 (or upon their date of retiring from the Board), including those held by connected persons.
Changes in the current non-executive directors’ interests in shares in the Company and its subsidiaries between the end
of the financial year and 23 May 2023 (or upon their date of retiring from the Board) are shown in the table below.
Director
Archie Norman
Andy Halford
Andrew Fisher
Justin King
Tamara Ingram
Sapna Sood
Evelyn Bourke
Fiona Dawson
Ronan Dunne
Cheryl Potter
Number of shares held
as at 1 April 2023
Number of shares held
as at 23 May 2023
148,600
25,200
4,243
64,000
2,000
2,000
50,000
12,352
25,000
–
No change
No change
No change
No change
No change
No change
No change
No change
No change
No change
FIGURE 33: 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 below sets out these terms for all current members of the Board.
Director
Archie Norman
Andrew Fisher
Justin King
Tamara Ingram
Sapna Sood
Evelyn Bourke
Fiona Dawson
Ronan Dunne
Cheryl Potter
Date of appointment
Notice period
01/09/2017
6 months/6 months
01/12/2015
3 months/3 months
01/01/2019
3 months/3 months
01/06/2020
3 months/3 months
01/06/2020
3 months/3 months
01/02/2021
3 months/3 months
25/05/2021
3 months/3 months
01/08/2022
3 months/3 months
01/03/2023
3 months/3 months
NON-EXECUTIVE DIRECTOR CHANGES TO THE BOARD DURING 2022/23
ROLE CHANGES WITHIN THE BOARD
As reported in the 2021/22 report Andy Halford retired as the Chair of the Audit Committee on 7 June 2022; and on 31 December 2022
he retired from the role of Senior Independent Director and stepped down from the Board.
Andrew Fisher became Senior Independent Director with effect 31 December 2022, he continues in his role of Chair
of the Remuneration Committee. His fee increased from £94,380 to £125,380 (£127,611 from 1 July 2023).
Fiona Dawson became a member of the Remuneration Committee with effect 16 January 2023. No additional fees were
payable on joining the Committee.
During the year Ronan Dunne joined the Board on 1 August 2022 and Cheryl Potter on 1 March 2023.
128
Marks and Spencer Group plc
GOVERNANCE REMUNERATION COMMITTEE
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. During the year, PwC charged £62,000 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, Co-CEO, CFO, General Counsel & Company Secretary, Group HR
Director, Head of Organisational Effectiveness and the Head of Reward 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.
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
Reward, 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 2021/22 DIRECTORS’ REMUNERATION REPORT
At the Annual General Meeting on 5 July 2022, 70.89% of shareholders voted in favour of the advisory resolution to approve
the Directors’ Remuneration Report for 2021/22. The Committee noted the number of votes cast against the resolution, and
proactively engaged with the top 40 shareholders to understand the reasons why some shareholders voted against the resolution.
An update on the engagement was published to our corporate website in January 2023, and for the purposes of Provision 4 of the
UK Corporate Governance Code, this is the final summary on the vote. The feedback received from shareholders was largely
supportive of the Company’s approach, and the concerns raised by a minority of shareholders related to the specific leaving
arrangements for outgoing CEO, Steve Rowe. The Board believes strongly that it acted in shareholders’ interests and consistent
with the values and integrity of the business. There is no expectation that this set of circumstances will be repeated, and therefore
the Board believes this 29% vote against an AGM resolution to be an isolated occurrence.
FIGURE 34: VOTING OUTCOMES FOR THE REMUNERATION POLICY AND 2021/22 REMUNERATION REPORT
Member
% Votes for
% Votes for
Votes against
% Votes against
Votes withheld
Remuneration Policy (at the 2020 AGM)
2021/22 Remuneration Report (at the 2022 AGM)
1,125,697,134
930,901,466
97.14%
33,187,602
70.89%
382,304,226
2.86%
29.11%
942,792
27,809,219
APPROVED BY THE BOARD
Andrew Fisher Chair of the Remuneration Committee
London, 23 May 2023
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.
Annual Report & Financial Statements 2023
129
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE OTHER DISCLOSURES
INFORMATION TO BE DISCLOSED UNDER LR 9.8.4R
Listing Rule
Detail
9.8.4R (1) (2) (5-14) (A) (B)
Not applicable
9.8.4R (4)
Long-term incentive schemes
Page
reference
N/A
102-104,
115-116,
120-126
BOARD OF DIRECTORS
The membership of the Board and biographical details of the directors are provided
on pages 72 and 73. 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 121 to 124 and 128. Options
granted to directors under the Save As You Earn (“SAYE”) and Executive Share Option
Schemes are shown on page 124. Further information regarding employee share
option schemes is provided in note 13 to the financial statements on pages 173 to 175.
Name
Departures
Steve Rowe
Eoin Tonge
Andy Halford
Appointments
Stuart Machin
Katie Bickerstaffe
Ronan Dunne
Cheryl Potter
Role
Effective date of departure/
appointment
Executive Director
Executive Director
Non-Executive Director
Executive Director
Executive Director
Non-Executive Director
Non-Executive Director
25 May 2022
9 December 2022
31 December 2022
25 May 2022
25 May 2022
1 August 2022
1 March 2023
The appointment and replacement of directors is governed by the Company’s
Articles of Association (the “Articles”), the UK Corporate Governance 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’ 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
1 April 2023 comprises pages 68 to 134
and pages 230 to 231 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 67, as the Board considers
them to be of strategic importance.
Specifically, these are:
– Future business developments
(throughout the Strategic Report).
– Risk management on pages 56 to 57.
– Details of branches operated by the
Company on pages 8 to 9.
– Information on how the directors
have had regard for the Company’s
stakeholders, and the effect of that
regard, on pages 10 to 11.
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 184
to 194 and is incorporated by reference.
For information on our approach to
social, environmental and ethical
matters, please see our ESG Committee
report on pages 90 to 91, our TCFD
Report on pages 44 to 55, and our
Sustainability Report available on the
dedicated sustainability section of our
website: corporate.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 corporate.
marksandspencer.com.
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.
130
Marks and Spencer Group plc
GOVERNANCE NUMERICAL DIVERSITY DATA AS AT 1 APRIL 2023
Our gender identity and ethnicity data in accordance with Listing Rule 9.8.6R(10) in
the format set out in LR 9 Annex 2.1. At year end, Board and ExCo members are asked
to complete a diversity disclosure to confirm which of the categories set out in the
below they identify with:
Number of
Board
members
% of the
Board
Number of senior
positions on the board
(CEO, CFO, SID and
Chair)
Number in
ExCo
% of ExCo
Gender identity
Women
Men
Non-binary
6
5
–
Not specified/prefer
not to say
–
55
45
–
–
1
3*
–
–
3
6
–
–
33
67
–
–
*The CFO is a member of ExCo but not a member of the Board
Ethnic background
White British or other
White (including
minority-White
groups)
Mixed/Multiple
Ethnic Groups
Asian/Asian British
Black/African/
Caribbean/Black
British
Other ethnic group,
including Arab
Not specified/prefer
not to say
Number of
Board
members
% of the
Board
Number of senior
positions on the board
(CEO, CFO, SID and Chair)
Number in
ExCo
% of ExCo
9
–
1
–
–
1
82%
–
9%
–
–
9%
3
–
–
–
–
1
7
1
–
–
–
1
78%
11%
–
–
–
11%
DIRECTORS’ CONFLICTS OF INTEREST
The Company has procedures in place for
managing conflicts of interest. All
directors are required to avoid situations in
which they have, or could have, a direct or
indirect interest that conflicts, or possibly
may conflict, with the interests of the
Company. Should a director become
aware that they, or any of their connected
parties, have an interest in an existing or
proposed transaction with the Company
or its subsidiaries, 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 and officers.
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 1 April
2023 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 1 April 2023 for
the benefit of the Trustees of the Marks &
Spencer UK Pension Scheme, both in the
UK and the Republic of Ireland.
PROFIT AND DIVIDENDS
The profit for the financial year, after
taxation, amounts to £364.5m (last year
£309.0m). 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 2022/23
(last year no proposed dividend)
£m
–
–
–
SHARE CAPITAL
The Company’s issued ordinary share
capital as at 1 April 2023 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, 258,244 ordinary
shares in the Company were issued under
the terms of the United Kingdom
Employees’ SAYE Share Option Scheme.
16,106 shares were issued at a price of 151p,
113,379 shares at a price of 82p, and a
further 128,759 ordinary shares were
issued at their nominal value of 1p.
In addition, during the period, 5,770,343
ordinary shares were issued at their
nominal value of 1p to satisfy employee
share awards under the Company’s
Restricted Share Plan.
Details of movements in the Company’s
issued share capital can be found in note
24 to the financial statements on page 196.
RESTRICTIONS ON TRANSFER
OF SECURITIES
There are no specific restrictions on the
transfer of securities in the Company,
which are 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.
VARIATION OF 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 2022 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 1 April 2023 and up to the
date of this report.
This standard authority is renewable
annually; the directors will seek to renew
it at the 2023 AGM.
The directors were granted authority at
the 2022 AGM to allot relevant securities
up to a nominal amount of £6,529,881.95.
This authority will apply until the
conclusion of the 2023 AGM. At this year’s
Annual Report & Financial Statements 2023
131
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OTHER DISCLOSURES CONTINUED
AGM, shareholders will be asked to grant
an authority to allot relevant securities (i)
up to a nominal amount of £6,550,886.24
and (ii) comprising equity securities up to a
nominal amount of £13,101,772.49 (after
deducting from such limit any relevant
securities allotted under (i)), in connection
with a pre-emptive offer (the Section 551
amount), such Section 551 amount to
apply until the conclusion of the AGM to
be held in 2024 or on 1 October 2024,
whichever is sooner.
At the 2022 AGM, two separate special
resolutions were passed empowering
the directors to allot equity securities
for cash without first offering them to
existing shareholders in proportion
to their existing holdings. A special
resolution will be proposed at the 2023
AGM to renew and enhance the directors’
powers – in line with the latest
institutional shareholder guidelines –
to make non-pre-emptive issues for
cash only and otherwise up to a nominal
amount of £1,965,265.87. In addition,
a separate special resolution will be
proposed to authorise directors to
make non-pre-emptive issues for cash in
connection with acquisitions or specified
capital investments, up to a further
nominal amount of £1,965,265.87. In both
cases an additional follow-on offer, up to
a nominal amount equal to 20% of any
allotment made under either special
resolution can be made to existing
holders of securities not allocated shares
under the allotment, as envisaged
by paragraph 3 of Section 2B of the
Statement of Principles on Disapplying
Pre-Emption Rights issued by the
Pre-Emption Group in November 2022.
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 196,526,587 ordinary shares
and sets the minimum and maximum
prices which would 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
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 1 April 2023,
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 it was 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
Voting rights
% of capital disclosed Nature of holding as per disclosure
Schroders plc
90,153,730
5.549*
Indirect interest (5.547%),
CFD (0.001%)
Citadel LLC and
its group
97,679,549
5.00052**
Equity swap
Blackrock, Inc.
106,621018
5.42***
Indirect interest (4.77%), securities
lending (0.48%), CFD (0.17%)
Redwheel (formerly
RWC Asset
Management LLP)
104,965,660 5.38
Indirect interest
Norges Bank
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 the same day notifying the Company that
Citadel’s holding had decreased below the 5% notifiable threshold, which did not state the new position.
*** Disclosed on 16 January 2023. A further disclosure was made on 20 March 2023 notifying the Company that
Blackrock’s holding had decreased below the 5% notifiable threshold which did not state the new position.
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 and
amended and restated on 1 March 2005
and 1 February 2012), between HSBC UK
Bank plc, Marks and Spencer Financial
Services plc (“M&S Bank”) and the
Company’s wholly owned subsidiary,
Marks and Spencer plc (“M&S plc”) 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 M&S plc. Where a
third-party arrangement is in place
for the supply of financial services
products to existing customers of the
new controller, M&S plc 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 M&S plc
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.
132
Marks and Spencer Group plc
GOVERNANCE 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 8 to 10,
28 to 31, and 80 to 82.
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 a Share
Incentive Plan. As at 1 April 2023, 14,934
colleagues were participating in the
Company’s SAYE Scheme. Full details
of all schemes are given on pages 173
to 175.
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.
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. Last year, as part of
the reset of our inclusion and diversity
strategy we set the aim to reach 50%
female representation and 15% ethnic
minority representation on the M&S
senior management team by 2025.
We have made great progress in driving
female representation at this level and
throughout our talent pipelines, and we
are continuing to address the barriers
and identify opportunities to attract and
develop ethnic minority talent. 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 28 to 31, and page 89.
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 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 and Clothing & Home offers,
enabling the development of better
products. Further information is
available on our corporate website:
corporate.marksandspencer.com
and our Sustainability Report 2023.
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 & Risk
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 3 April 2022 to 1 April 2023
to the Audit & Risk Committee on 11 May
2023. It was approved on 18 May 2023.
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 nine 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 seven of
them have been resolved or closed,
with two issues remaining open. One
additional Code reference made by a
supplier before 3 April 2022 was also
closed during the reporting period.
A detailed summary of the compliance
report is available on our website.
POLITICAL DONATIONS
The Company did not make any political
donations or incur any political expenditure
during the year ended 1 April 2023. 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.
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 12 to 27, the
financial position of the Group, its cash
flows, liquidity position and borrowing
facilities as set out in the Financial Review
on pages 35 to 41, 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 58 to 65.
Annual Report & Financial Statements 2023
133
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OTHER DISCLOSURES CONTINUED
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”) as
adopted by the UK. 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.
The directors are responsible for
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 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
72 to 73, 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.
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 they
are aware, there is no relevant audit
information of which the Company’s
auditor is unaware and that they have
taken all the steps that they ought
to have taken as a director to make
themselves 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 23 May 2023
and signed on its behalf by
Nick Folland
General Counsel & Company Secretary
London, 23 May 2023
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 2026. 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 pages 66 to 67.
AUDITOR
Resolutions to reappoint Deloitte LLP as
auditor of the Company and to authorise
the Audit & Risk Committee to determine
its remuneration will be proposed at the
2023 AGM.
ANNUAL GENERAL MEETING
The AGM of Marks and Spencer Group plc
will be broadcast online from M&S’
Waterside House support centre on
4 July 2023 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 218
to 229.
DIRECTORS’ RESPONSIBILITIES
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 &
Risk Committee review the Annual
Report and provide its opinion on
whether the report is fair, balanced and
understandable. The Audit & Risk
Committee’s opinion is on page 94.
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Marks and Spencer Group plc
GOVERNANCE INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF MARKS AND SPENCER GROUP PLC
Report on the audit of the financial statements
1. OPINION
In our opinion:
– the financial statements of Marks
and Spencer Group plc (the ‘Parent
Company’) and its subsidiaries (the
‘Group’) give a true and fair view of the
state of the Group’s and of the Parent
Company’s affairs as at 1 April 2023 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 Parent Company financial
statements have been properly
prepared in 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;
– the Consolidated and Parent Company
Statements of Financial Position;
– the Consolidated and Parent Company
Statements of Changes in Equity;
– the Consolidated and Parent Company
Statements of Cash Flows; and
– the related notes 1 to 33 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 Parent
Company financial statements, as
applied in accordance with the provisions
of the Companies Act 2006.
2. BASIS FOR OPINION
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.
We are independent of the Group and the
Parent 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 Parent
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 Parent Company.
We believe that the audit evidence
we have obtained is sufficient and
appropriate to provide a basis for
our opinion.
3. SUMMARY OF OUR AUDIT APPROACH
Key audit matters
Materiality
Significant changes in our approach
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 £24.0m which was
determined by considering a number of
different metrics used by investors and
other readers of the financial statements.
These included:
– inventory provisions within UK
Clothing & Home; and
– disclosure of adjusting items as part
– profit before tax;
– profit before tax & adjusting items;
– earnings before interest, tax,
No significant changes apply for the
current period.
of alternative performance
measures.
These are all consistent with, and
represent a similar level of risk as,
last year.
depreciation and amortisation (‘EBITDA’);
and
– revenue.
Scoping
We have performed a full-scope audit on the
UK component of the business, Balances
subject to full scope audit represents 93%
(2022: 95%) of the group revenue, 90% (2022:
88%) of profit before tax and adjusting items,
81% (2022: 93%) of profit before tax, 78%
(2022: 80%) of total assets and 84% (2022:
88%) of total liabilities. We perform specified
audit procedures in relation to the India
business and analytical procedures on
residual balances.
Annual Report & Financial Statements 2023
135
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE INDEPENDENT AUDITOR’S REPORT CONTINUED
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 Parent
Company’s ability to continue to adopt
the going concern basis of accounting
included:
– obtaining 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;
– obtaining management’s board-
approved three-year cash flow forecasts
and covenant compliance forecasts,
including the sensitivity analysis;
– reviewing management’s assessment
of going concern and viability, including
the three-year plan, as set out in their
paper to the Audit & Risk Committee;
– assessing 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 the availability of the Group’s
financing arrangements;
– assessing the impact of macro-
economic conditions on the business;
and
– considering the results of the
sensitivity analyses performed; and
– evaluating the Group’s disclosures on
going concern in the financial
statements 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 Parent 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.
5. KEY AUDIT MATTERS
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.
5.1. Impairment and impairment reversal of UK store assets
Key audit matter description
As at 1 April 2023 the Group held
£3,452.5 million (2022: £3,379.4 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 £17.3 million
(2022: £6.9 million) and a reversal of
previously recognised impairment
charges of £33.1 million (2022:
£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 notes 1 and 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 & Risk Committee considers
this to be a significant matter. Their
consideration is on page 97.
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 impact of macro-
economic conditions on the store assets
and future forecast assumptions;
– assessed the appropriateness of
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 valuations
specialists and compared the rates
applied with our 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
– assessed the completeness and
accuracy of disclosures within the
financial statements in accordance
with IFRS.
136
Marks and Spencer Group plc
FINANCIAL STATEMENTS 5.1. Impairment and impairment reversal of UK store assets continued
Key observations
We are satisfied that the judgements
applied, impairment charges and
reversals recorded and disclosures within
the financial statements are appropriate.
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 £819.0 million. A further net charge
of £51.3 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 1,5
and 15 to the financial statements and
page 24 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
How the scope of our audit responded to the key audit matter
rate, store closure costs, freehold sale
proceeds, leasehold surrender costs and
expected sublet income, lease incentives
and void periods.
The Audit & Risk Committee considers
this to be a significant matter. Their
consideration is on page 97.
– with the involvement of our real estate
– 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.
specialists, we evaluated the
appropriateness of management’s
judgements for a representative
sample of properties and
benchmarked 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;
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;
Key observations
We are satisfied that the Group’s estimate
of the store exit charges and the
associated disclosures are appropriate.
Annual Report & Financial Statements 2023
137
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE INDEPENDENT AUDITOR’S REPORT CONTINUED
5.3. Inventory provisions within UK Clothing & Home
Key audit matter description
As at 1 April 2023, the Group held UK
Clothing & Home inventories of £470.7
million (2022: £458.6 million), inclusive
of a provision of £53.1 million (2022:
£48.3 million).
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
of inventory provisions within UK
Clothing & Home to require the most
judgement due to historical trading
performance and the quantum of
gross inventory.
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:
– assessed the mechanical accuracy and
logic of the models underpinning the
provisions;
– obtained an understanding of relevant
controls relating to inventory
management and the review and
approval of the inventory provisions;
– assessed the validity, accuracy and
completeness of the information used
by management in computing the
provisions;
– understood the changes in the
provisioning methodology and
challenged the appropriateness
thereof;
– challenged and validated the key
assumptions applied by management
in estimating the provisions, 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 provisions for UK
Clothing & Home is appropriate.
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.
– 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.
138
Marks and Spencer Group plc
FINANCIAL STATEMENTS 5.4. Disclosure of adjusting items as part of alternative performance measures
Key audit matter description
The Group has presented an alternative
performance measure being profit
before tax and adjusting items of
£482.0 million (2022: £522.9 million),
which is derived from profit before tax of
£475.7 million (2022: profit before tax of
£391.7 million) adjusted for a number of
items totalling £6.3 million (2022: £131.2
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.
(cid:124)
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(cid:122)
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(cid:103)(cid:119)(cid:123) (cid:126)(cid:122)(cid:119)(cid:158)(cid:113)(cid:111)(cid:130)(cid:119)(cid:125) (cid:124)
(cid:85) (cid:114)(cid:120)(cid:131)(cid:129)(cid:130)(cid:115) (cid:114)(cid:3)(cid:126)(cid:128)(cid:125) (cid:158)(cid:130)
(cid:112) (cid:115)(cid:116)(cid:125)(cid:128)(cid:115)(cid:3)(cid:130)(cid:111)(cid:134)
In determining profit before tax and
adjusting items, 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 & Risk Committee on page 97.
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
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
other transactions outside of the
normal course of business, or which
display characteristics of being material,
significant or one-off in nature;
– considered the impact of adjusting
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.
Annual Report & Financial Statements 2023
139
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE INDEPENDENT AUDITOR’S REPORT CONTINUED
6. OUR APPLICATION OF MATERIALITY
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:
6.2. 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.
Group financial statements
Parent Company financial statements
Materiality
£24.0 million (2022: £25.0 million) £21.6 million (2022: £22.5 million)
Basis for
determining
materiality
We consider the following
metrics in the current and
prior period:
Rationale
for the
benchmark
applied
– profit before tax and
adjusting items;
– earnings before interest, tax,
depreciation and amortisation
(‘EBITDA’); and
– revenue.
In the current period we also
considered profit before tax.
Using professional judgement,
we determined materiality to be
£24.0m.
In determining our benchmark
for materiality, we considered a
number of different metrics
used by investors and other
readers of the
financial statements.
Metric
Profit before tax
Profit before tax
and
adjusting items
EBITDA
Revenue
%
5.0
5.0
2.3
0.2
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 Parent
Company operates primarily as a
holding company for the Group
and we therefore consider this as
the key metric for the Parent
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
Parent Company’s result in the
Group financial statements.
Group financial statements
Parent Company financial statements
Performance
materiality
65% (2022: 65%) of
Group materiality
65% (2022: 65%) of Parent
Company materiality
Basis and
rationale for
determining
performance
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.
6.3. Error reporting threshold
We agreed with the Audit & Risk
Committee that we would report to the
Committee all audit differences in excess
of £1.2 million (2022: £1.3 million), as well
as differences below that threshold that,
in our view, warranted reporting on
qualitative grounds. We also report to
the Audit & Risk Committee on disclosure
matters that we identified when
assessing the overall presentation
of the financial statements.
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 and India businesses which
were subject to full audit procedures and
specified audit procedures on individual
balance sheet accounts respectively. We
have performed our full audit scope of
the UK component using a materiality of
£21.6 million (or 90% of Group materiality)
(2022: £22.5 million), and our specified
audit procedures in India using a
materiality of £3.5 million (or 14.6% of
Group materiality (2022: specified audit
procedures were not performed).
140
Marks and Spencer Group plc
FINANCIAL STATEMENTS 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
£43.5 million (2022: £18.6 million) and
was subject to specified audit procedures.
At a Group level, we tested the
consolidation and performed analytical
review procedures over components not
in scope.
REVENUE
Full audit scope 93%
Specified audit
procedures
Review at
group level
0%
7%
ADJUSTED PROFIT BEFORE TAX
Full audit scope 90%
Specified audit
procedures
Review at
group level
0%
10%
PROFIT BEFORE TAX
TOTAL ASSETS
TOTAL LIABILITIES
Full audit scope 81%
Specified audit
procedures
Review at
group level
0%
19%
Full audit scope 78%
Specified audit
procedures
Review at
group level
<1%
22%
Full audit scope 84%
Specified audit
procedures
Review at
group level
0%
16%
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.
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.
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.
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 44 to 55.
This assessment focused on property,
fleet and two of the Group’s key
resources: 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
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.
7.4. Working with other auditors
We have two component audit teams:
ORL; and Deloitte India. We have issued
detailed instructions to both component
audit teams 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 27 November 2022
and the reporting received from the
component auditor for the period
subsequent to 27 November 2022.
We have engaged regularly with the
component auditors 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.
8. OTHER INFORMATION
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.
Annual Report & Financial Statements 2023
141
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE INDEPENDENT AUDITOR’S REPORT CONTINUED
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 Parent 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 Parent Company or to
cease operations, or have no realistic
alternative but to do so.
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.
142
Marks and Spencer Group plc
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.
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 judgement, 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.
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 the directors,
management, internal audit and the
Audit & Risk 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 internal controls established
to mitigate risks of fraud or
non-compliance with laws and
regulations; and
– 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.
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
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
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 &
Risk 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
FINANCIAL STATEMENTS – 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.
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 Parent 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 pages 133 to 134;
– 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 pages 66 to 67;
– the directors’ statement on fair,
balanced and understandable set
out on page 134;
– the board’s confirmation that it has
carried out a robust assessment of
the emerging and principal risks set
out on page 134;
– the section of the annual report that
describes the review of effectiveness of
risk management and internal control
systems set out on pages 56 to 65;
and
– the section describing the work of the
Audit & Risk Committee set out on
pages 92 to 99.
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 Parent Company, or
returns adequate for our audit have
not been received from branches not
visited by us; or
– the Parent 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 respect
of these matters.
15. OTHER MATTERS WHICH WE ARE
REQUIRED TO ADDRESS
15.1 Auditor tenure
Following the recommendation of
the Audit & Risk 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 9 periods, covering the
periods ending 28 March 2015 to
1 April 2023.
Consistency of the audit report with
the additional report to the Audit & Risk
Committee
Our audit opinion is consistent with the
additional report to the Audit & Risk
Committee we are required to provide
in accordance with ISAs (UK).
16. USE OF OUR REPORT
This report is made solely to the Parent
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 Parent 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 Parent Company
and the Parent 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 will 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
23 May 2023
Annual Report & Financial Statements 2023
143
STRATEGIC REPORTFINANCIAL STATEMENTSGOVERNANCE CONSOLIDATED INCOME STATEMENT
Revenue
52 weeks
ended
1 April 2023
52 weeks
ended
2 April 2022
Total
£m
Total
£m
11,931.3
10,885.1
Notes
2, 3
Share of result in associate – Ocado Retail Limited
3, 29
(43.5)
(18.6)
2, 3, 5
515.1
572.2
5, 6
5, 6
4, 5
7
8
8
5
8
8
166.1
(205.5)
475.7
(111.2)
364.5
363.4
1.1
364.5
33.9
(214.4)
391.7
(82.7)
309.0
306.6
2.4
309.0
18.5p
17.9p
15.7p
15.1p
475.7
6.3
482.0
391.7
131.2
522.9
18.1p
17.5p
21.7p
20.9p
Operating profit
Finance income
Finance costs
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Owners of the parent
Non-controlling interests
Earnings per share
Basic earnings per share
Diluted earnings per share
Reconciliation of profit before tax & adjusting items:
Profit before tax
Adjusting items
Profit before tax & adjusting items – non-GAAP measure
Adjusted earnings per share – non-GAAP measure
Adjusted basic earnings per share
Adjusted diluted earnings per share
144
Marks and Spencer Group plc
FINANCIAL STATEMENTS CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
Profit for the year
Other comprehensive (expense)/income:
Items that will not be reclassified subsequently to profit or loss
Remeasurements of retirement benefit schemes
Tax credit/(charge) 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 on cash flow hedges
Other comprehensive (expense)/income for the year, net of tax
Total comprehensive (expense)/income for the year
Attributable to:
Owners of the parent
Non-controlling interests
52 weeks
ended
1 April 2023
52 weeks
ended
2 April 2022
£m
364.5
£m
309.0
Notes
11
21
21
(622.8)
158.0
–
(464.8)
4.3
–
77.0
(14.4)
(18.6)
48.3
(416.5)
(52.0)
(53.1)
1.1
(52.0)
357.0
(127.6)
(3.7)
225.7
(13.5)
(0.5)
91.3
(10.5)
(14.7)
52.1
277.8
586.8
584.4
2.4
586.8
Annual Report & Financial Statements 2023
145
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment property
Investments in joint ventures and associates
Other financial assets
Retirement benefit assets
Trade and other receivables
Derivative financial instruments
Deferred tax assets
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
As at
1 April 2023
As at
2 April 2022
Notes
£m
£m
14
15
29
16
11
17
21
23
16
17
21
18
19
12
20
21
22
11
19
12
20
21
22
23
24
21
21
163.1
5,203.7
11.8
767.9
7.9
482.0
298.7
0.1
7.6
6,942.8
764.4
13.0
280.6
22.6
6.5
1,067.9
2,155.0
9,097.8
2,048.8
73.0
444.0
58.1
44.0
38.5
2,706.4
4.6
181.3
51.8
3,184.0
7.1
75.4
72.3
3,576.5
6,282.9
2,814.9
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
19.8
910.7
2,680.4
(31.9)
4.2
(6,542.2)
(69.6)
5,839.1
2,810.5
4.4
2,814.9
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
The financial statements were approved by the Board and authorised for issue on 23 May 2023. The financial statements also comprise
notes 1 to 33.
Stuart Machin, Chief Executive Officer
Katie Bickerstaffe, Co-Chief Executive Officer
146
Marks and Spencer Group plc
FINANCIAL STATEMENTS
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
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
2.4
309.0
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
–
–
–
–
–
–
–
-
–
–
–
–
–
–
–
–
–
–
–
–
-
–
–
–
–
–
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
–
–
38.8
3.6
38.8
3.6
–
–
–
–
0.3
–
38.8
3.6
Buy back and cancellation of
own shares3
(469.9)
Credit for share-based
payments
Deferred tax on share schemes
–
–
–
–
–
469.9
–
–
As at 2 April 2022
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
Annual Report & Financial Statements 2023
147
STRATEGIC REPORTGOVERNANCEFINANCIAL 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
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
76.2
0.8
(14.4)
–
(18.4)
43.4
(0.2)
0.6
43.4
0.6
(123.9)
31.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
363.4
363.4
1.1
364.5
4.3
–
4.3
–
–
–
–
–
(622.8)
(622.8)
158.0
158.0
–
–
–
77.0
(14.4)
(18.6)
4.3
(464.8)
(416.5)
–
–
–
–
–
–
–
4.3
(622.8)
158.0
77.0
(14.4)
(18.6)
(416.5)
4.3
(101.4)
(53.1)
1.1
(52.0)
–
–
–
–
–
–
–
–
(123.9)
–
(123.9)
–
–
31.0
–
31.0
–
(0.9)
(0.9)
(0.1)
0.1
(0.1)
(0.1)
38.0
38.0
4.8
4.8
–
–
–
–
0.1
(0.1)
38.0
4.8
As at 3 April 2022
Profit for the year
Other comprehensive
(expense)/income:
Foreign currency translation
– movements
recognised in other
comprehensive income
Remeasurements of
retirement benefit schemes
Tax charge 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:
Transactions with non-
controlling shareholders
Shares issued in respect of
employee share options
Purchase of shares held by
employee trusts
Credit for share-
based payments
Deferred tax on
share schemes
As at 1 April 2023
19.8
910.7
2,680.4
(31.9)
4.2 (6,542.2)
(69.6) 5,839.1 2,810.5
4.4 2,814.9
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 1 ordinary share of £0.01 and 1 deferred share of £0.24. All deferred shares were then bought back for a 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.
148
Marks and Spencer Group plc
FINANCIAL STATEMENTS 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 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
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 (outflow)/inflow from activities
Effects of exchange rate changes
Opening net cash
Closing net cash
Notes
26
52 weeks
ended
1 April 2023
£m
52 weeks
ended
2 April 2022
£m
1,100.5
(70.6)
1,029.9
1,385.7
(7.7)
1,378.0
1.1
(325.8)
(84.5)
5.3
(4.2)
0.2
–
(102.8)
(30.0)
24.1
(516.6)
(212.5)
(189.9)
(231.8)
(66.0)
–
(0.1)
56.5
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
–
–
(643.8)
(595.9)
(130.5)
0.5
1,197.9
1,067.9
536.4
(8.2)
669.7
1,197.9
31
28
24
27
1 Last 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.
2 Current year includes £102.8m on the acquisition of Gist Limited, being consideration of £170.6m net of cash acquired of £67.8m. Last year includes £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 £5.9m (last year: £nil), interest paid on lease liabilities of £121.9m (last year:
£128.3m), and interest paid of £2.2m (last year: £nil) in relation to deferred consideration for the acquisition of Gist Limited.
Annual Report & Financial Statements 2023
149
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS
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 1 April 2023 (last year: 52 weeks ended 2 April 2022) 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 12 to 27, the
financial position of the Group, its cash flows, liquidity position and
borrowing facilities as set out in the Financial Review on pages 35
to 41, 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 58
to 65.
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 1 April 2023, the Group had
available liquidity of £1,942.9m (last year: £2,072.9m), comprising
cash and cash equivalents of £1,067.9m, an undrawn committed
syndicated bank revolving credit facility (“RCF”) of £850.0m (set to
mature in June 2026), and undrawn uncommitted facilities
amounting to £25.0m.
In December 2022, the Group successfully extended its RCF, which
now expires in June 2026. The 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 biannually.
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 its outlook on the future financial performance,
the Board considered a variety of downsides that the Group might
experience, such as a sustained economic recession and an
inability for the Group to execute the transformation plan.
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 modelled a severe, but plausible, downside scenario.
This downside scenario assumes that:
– There will be a period of economic recession in the UK in 2023/24,
resulting in a decline in sales of 2.0 – 2.5% and a decline in gross
profit margin of 0.5 – 1.0% across both Food and Clothing &
Home business units.
– A delay in transformation benefits results in incremental sales
expected from the transformation declining by 7.5%, 15% and
30% respectively across the three-year period across all three
business units.
– In addition, Ocado Retail Limited experiences limited customer
demand, with no volume growth in 2023/24 and volumes
remaining subdued in 2024/25 and 2025/26.
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 is 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
to determine the decline in sales that the Group could absorb
before exhausting the Group’s total liquidity. Such a scenario,
and the sequence of events which could lead to it, are considered
to be extremely 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 3 April 2022:
– Amendments to IAS 37: Onerous Contracts – Cost of Fulfilling
a Contract.
– Amendments to IFRS 3: Reference to the Conceptual Framework.
– Amendments to IAS 16: Property, Plant and Equipment
– Proceeds before Intended Use.
– 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.
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.
New accounting standards in issue but not yet effective
New standards and interpretations that are in issue, but not yet
effective, are listed below:
– 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.
150
Marks and Spencer Group plc
FINANCIAL STATEMENTS – Amendments to IFRS 10 and IAS 28: Sale or Contribution of
– Remeasurement of Ocado Retail Limited
Assets between an Investor and its Associate or Joint Venture.
contingent consideration.
The adoption of the above standards and interpretations is not
expected to lead to any changes to the Group’s accounting policies
nor 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 sales
growth; adjusted operating profit; adjusted operating margin;
profit before tax and adjusting items; adjusted basic earnings per
share; net debt; net debt excluding lease liabilities; free cash flow;
free cash flow from operations; capital expenditure; and return on
capital employed. Each of these APMs, and others used by the
Group, is 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 over the total expected life of the programme 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
1 April 2023:
– 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 adjusted operating profit where they relate to
stores not previously impaired or do not otherwise meet the
Group’s adjusting items policy.
– 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.
– Directly attributable gains and expenses resulting from
the Covid-19 pandemic.
– Significant costs relating to the acquisition of Gist Limited.1
– Net finance costs incurred in relation to Gist Limited deferred
and contingent consideration.1
1 As a result of the acquisition of Gist Limited during the year, these items have been
included within adjusting items for the first time.
Refer to note 5 for a summary of the adjusting items.
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 nor 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
Annual Report & Financial Statements 2023
151
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
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.
Revenue from the rendering of supply chain services is recognised
when a performance obligation is satisfied.
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. 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-judgmental, fixed rate supplier
charges are not included in the Group’s definition of supplier
income.
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Marks and Spencer Group plc
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 net 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
FINANCIAL STATEMENTS 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.
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 10-50 years.
– Fixtures, fittings and equipment – three 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
Annual Report & Financial Statements 2023
153
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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, money market funds 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”).
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
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Marks and Spencer Group plc
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.
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 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
Loans to related parties
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
16
17
17
17
17
18
21
20
19
19
19
19
20
21
FVTPL1
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Amortised cost
FVTPL
Amortised cost
Amortised cost
Amortised cost
FVTPL
Amortised cost
Amortised cost
FVTPL
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 fair value through other
comprehensive income (“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 loans
receivable, venture capital investments and short-term
investments with a maturity date of more than 90 days. Financial
assets that do not meet the criteria for being measured at
amortised cost are measured at fair value through profit or loss
(“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.
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
Annual Report & Financial Statements 2023
155
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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.
Critical accounting judgments
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
judgment 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.
The Group does not use derivatives to hedge income statement
translation exposures.
Note 5 provides further details on current year adjusting items
and their adherence to Group policy.
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 judgments and key sources of estimation
uncertainty
The preparation of consolidated financial statements requires
the Group to make estimates and judgments that affect the
application of policies and reported amounts.
Critical judgments 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 judgments 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.
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 1 April 2023.
Following consultation with external advisers, the directors have
made the judgment 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 £482.0m 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 judgment 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
judgment 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.
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Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 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 judgment 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,
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
In preparing the consolidated financial statements, the Group
has considered the impact of climate change, particularly in the
context of the TCFD disclosures set out on pages 44 to 55 and the
Group’s sustainability targets. The Group’s existing fixed asset
replacement programme is phased over several years and
therefore any changes in the requirements associated with climate
change would not have a material impact in any given year. The
costs expected to be incurred in connection with the Group’s
commitments are included within the Group’s budget and
three-year plan which have been used to support the impairment
reviews of non-current assets and the going concern and viability
assessments. Further disclosures in relation to the impact of
climate change on the impairment assessment of intangibles and
property, plant and equipment are included in notes 14 and 15.
Given the identified risks are expected to be present in the medium
to long term, the impact of climate change on the going concern
period and viability of the Group over the next three years is not
expected to be material and is therefore not currently classified as
a key source of estimation uncertainty.
UK store estate programme
The Group is undertaking a significant strategic programme to
review its UK store estate, resulting in a net charge of £51.3m (last
year: £161.4m) in the year. A significant level of estimation has been
used to determine the charges to be recognised in the year. The
most significant judgment 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.
– 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 of 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.
Impairment of property, plant and equipment
Property, plant and equipment are reviewed for impairment if
events or changes in circumstances indicate that the carrying
amount may not be recoverable. 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 note 15 for further details on the Group’s 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.
Remeasurement of Ocado contingent consideration
Contingent consideration, resulting from the investment in Ocado
Retail Limited, is remeasured at fair value at each reporting date.
The fair value of the contingent consideration has been estimated
using the expected present value technique and is based on
probability weighting possible scenarios and applying an
appropriate discount rate to reflect the timing of the possible
payment. The Group has considered a range of scenarios reflecting
current market uncertainty, taking into account Ocado Retail
Limited’s most recent trading update in March 2023. The Group has
determined a fair value of £64.7m (last year: £172.6m). See note 21
for full details.
Annual Report & Financial Statements 2023
157
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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, UK Food franchise operations and UK supply chain services, 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 adjusted operating profit.
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 1 April 2023
52 weeks ended 2 April 2022
UK
Clothing
& Home
£m
UK Food
£m
International
£m
Ocado
£m
All
other
segments
£m
UK
Clothing
& Home
£m
Group
£m
UK Food
£m
International
£m
Ocado
£m
All
other
segments
£m
Group
£m
Sales1
Revenue
3,715.0 7,218.0
3,658.3 7,218.0
1,055.0
1,055.0
–
–
– 11,988.0 3,332.2 6,639.6
– 11,931.3 3,308.3 6,639.6
937.2
937.2
–
–
– 10,909.0
– 10,885.1
Adjusted operating
profit/(loss)2
Finance income
before adjusting
items
Finance costs before
adjusting items
Profit/(loss) before
tax and adjusting
items
Adjusting items
Profit/(loss)
before tax
323.8
248.0
84.8 (29.5)
(0.5) 626.6
330.7
277.8
73.6
13.9
13.0
709.0
58.1
(202.7)
28.3
(214.4)
323.8
248.0
84.8 (29.5)
(0.5) 482.0
330.7
277.8
73.6
13.9
13.0
522.9
(6.3)
(131.2)
323.8
248.0
84.8 (29.5)
(0.5) 475.7
330.7
277.8
73.6
13.9
13.0
391.7
1 Sales is revenue stated prior to adjustments for UK Clothing & Home brand consignment sales of £56.7m (last year: £23.9m).
2 Adjusted operating profit/(loss) is stated as gross profit less operating costs prior to adjusting items. At reportable segment level costs are allocated where directly attributable
or based on an appropriate cost driver for the cost.
158
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 2 SEGMENTAL INFORMATION CONTINUED
Other segmental information
52 weeks ended 1 April 2023
52 weeks ended 2 April 2022
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
170.4
221.1
29.9
–
– 421.4
139.2
163.7
18.5
–
–
321.4
(267.9)
(274.8)
(35.7)
10.2
6.1
(1.9)
–
–
– (578.4)
(268.1)
(248.8)
(35.0)
–
14.4
(37.2)
10.7
(8.0)
–
–
– (551.9)
–
(34.5)
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
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 £3.1m (last year: £0.2m) depreciation and impairments 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
2023
Total
£m
11,931.3
(7,786.7)
4,144.6
(3,609.2)
23.2
(43.5)
515.1
2022
Total
£m
10,885.1
(7,130.3)
3,754.8
(3,244.1)
80.1
(18.6)
572.2
The figures above include £111.5m (last year: £136.8m) adjusting item charges within operating profit (see note 5). These are further
analysed against the categories of cost of sales (£nil; last year: £17.0m gain), selling and administrative expenses (£103.8m; last year:
£155.9m), other operating income (£6.3m; last year: £34.6m) and share of results of Ocado Retail Limited (£14.0m; last year: £32.5m).
The selling and administrative expenses are further analysed below:
Employee costs1
Occupancy costs
Repairs, renewals and maintenance of property
Depreciation, amortisation and asset impairments and write-offs2
IT costs
Marketing costs
Other costs3
Selling and administrative expenses
2023
Total
£m
2022
Total
£m
1,546.5
1,420.6
463.9
111.2
574.7
228.6
220.2
464.1
344.3
122.2
586.4
212.1
209.4
349.1
3,609.2
3,244.1
1 There are an additional £58.7m (last year: £65.1m) employee costs recorded within cost of sales. These costs are included within the aggregate remuneration disclosures in
note 10A.
2 Includes £0.2m (last year: £0.2m) depreciation and £2.9m (last year: £nil) impairment charged on investment property.
3 Includes costs such as logistics, professional fees and sundry costs.
Adjusting items categorised as selling and administrative expenses are further analysed as employee costs £19.0m (last year £0.1m);
occupancy costs £8.2m (last year: £5.9m); depreciation, amortisation and asset impairments and write-offs £43.0m (last year: £64.9m);
and other costs £33.6m (last year: £85.0m).
Annual Report & Financial Statements 2023
159
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 4 PROFIT BEFORE TAXATION
The following items have been included in arriving at profit before taxation:
Net foreign exchange losses/(gains)
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 equipment2
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: £0.2m) depreciation charged on investment property.
2 Includes £2.9m (last year: £nil) impairment charged on investment property.
2023
£m
6.7
6,751.3
266.0
310.5
180.9
87.0
31.7
(40.2)
14.8
(14.9)
2022
£m
(14.5)
6,086.3
197.6
290.5
167.8
93.6
100.1
(62.1)
25.4
(28.9)
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
2023
£m
2.0
0.7
2.7
0.3
0.3
3.0
2022
£m
1.7
0.6
2.3
0.2
0.2
2.5
160
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 5 ADJUSTING ITEMS
The total adjusting items reported for the 52-week period ended 1 April 2023 is a net charge of £6.3m (last year: £131.2m). The adjustments
made to reported profit before tax to arrive at adjusted profit are:
Included in operating profit
Strategic programmes – UK store estate
Strategic programmes – Structural simplification
Strategic programmes – Organisation
Strategic programmes – UK logistics
Strategic programmes – International store closures and impairments
Store impairments, impairment reversals and other property charges
Acquisition of Gist Limited
Amortisation and fair value adjustments arising as part of the investment in Ocado
Retail Limited
M&S Bank charges incurred in relation to the insurance mis-selling provisions
Franchise restructure
Directly attributable gains resulting from the Covid-19 pandemic
Included in net finance income/(costs)
Remeasurement of Ocado Retail Limited contingent consideration
Net finance costs incurred in relation to Gist Limited deferred and contingent consideration
Adjustments to profit before tax
Notes
15, 22
22
17
15, 22
22
15, 22
29
2023
£m
(51.3)
(16.4)
(10.7)
(10.5)
–
15.1
(22.1)
(14.0)
(2.0)
0.4
–
2022
£m
(161.4)
–
14.3
21.9
0.4
60.0
–
(32.5)
(16.0)
(41.3)
17.8
(111.5)
(136.8)
108.0
(2.8)
105.2
5.6
–
5.6
(6.3)
(131.2)
Strategic programmes – UK store estate (£51.3m)
In November 2016, the Group announced a strategic programme to transform and rotate the UK store estate with the overall objective
to improve our store estate to better meet our customers’ needs. The Group incurred charges of £870m up to April 2023 under this
programme primarily relating to closure costs associated with stores identified as part of the strategic transformation plans.
The Group has recognised a charge of £51.3m in the period in relation to those stores identified as part of the rotation plans. The charge
primarily reflects the latest view of store closure plans and latest 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 most recent approved exit routes.
Further charges relating to the closure and rotation of the UK store estate are anticipated over the next eight years as the programme
progresses, the quantum of which is subject to change throughout the programme period as the Group gets greater certainty of
circumstances that need to be in place to make closure financially viable. Future charges will not include Foodhall closures at a lease
event where there is opportunity for a better location, as this is not in the scope of the programme.
As at 1 April 2023, the total closure programme now consists of 206 stores, 108 of which have already closed. Further charges of c.£165m
are estimated within the next eight financial years, bringing anticipated total programme costs since 2016 to c.£1bn. In addition, where
store exit routes in the next eight 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. The anticipated total programme costs to date do not
include any costs that may arise in relation to a further c.30 stores currently under consideration for closure within the next eight 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.
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 programme includes all stores within the
programme to be closed by 2030/31, but charges in the year, and future charges, did not include Foodhall closures at a lease event
where there is opportunity to secure a better location.
Annual Report & Financial Statements 2023
161
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 5 ADJUSTING ITEMS CONTINUED
Strategic programmes – Structural simplification (£16.4m)
During 2022/23, the Group committed to a structural reduction
of its operating costs and a desire to simplify the organisation
and prioritise to mitigate cost increases faced by the business.
As part of this objective, a thorough review has been performed to
restructure and right size the organisation with an in-year focus on
the support functions. As part of the programme, the Group has
incurred £1.3m of consultancy costs. The review of structures has
resulted in a reduction of c.700 roles versus plan across central
support centres, management and stores, with a charge of £16.4m
recognised in the period primarily for redundancy and exit costs
associated with these changes. The provision is expected to be
fully utilised during 2023/24. Further charges of c.£17m are
expected in 2023/24 bringing the total programme cost to
c.£33.4m.
These costs are considered to be adjusting items as the costs are
part of the strategic programme, significant in value and would
distort the year-on-year profitability of the business.
Strategic programmes – Organisation (£10.7m)
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 the period, an impairment
charge of £10.7m has been recognised (last year: £14.3m impairment
reversal). This relates to the updating of assumptions and market
fluctuations over the life of the sub-let of previously closed offices.
Total costs of centralising our London Head Office functions into
one building incurred to date are c.£97m. Any future charges/
reversals will relate to the updating of assumptions and market
fluctuations over the life of the sub-let lease to September 2040.
These charges are reported as adjusting items as they are
significant in value, relate to a strategic initiative, are not
considered to be normal operating costs of the business and are
consistent with the disclosure of costs previously recognised.
Strategic programmes – UK logistics (£10.5m)
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, Hertfordshire. 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.
In January 2023, the closure of a further distribution centre was
announced for 2023/24. A net charge of £10.5m has been
recognised in the period, reflecting the view of estimated closure
costs. Total programme costs to date are £28.4m with further net
charges of £30.2m expected over the next two financial years.
These charges 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.
Store impairments, impairment reversals and property
charges (£15.1m 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.
The Group has performed impairment testing based on the latest
Board approved budget and three year plan 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 £18.0m
(last year: £2.9m) has been incurred primarily in respect of the
impairment of assets associated with these stores. In addition, a
credit of £33.1m (last year: £63.4m) has been recognised for the
reversal of store impairments incurred 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.
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. Any future charges or reversals relating to stores
not previously impaired within adjusting items or otherwise
meeting the Group’s adjusting items policy will be recognised in
the underlying results.
Acquisition of Gist Limited (£22.1m)
On 30 September 2022 the Group completed the acquisition of
Gist Limited from Storeshield Limited, a subsidiary of The BOC
Group Limited, as part of M&S’ multi-year programme to
modernise its Food supply chain network to support growth. As
part of the transaction the Group has incurred £28.3m of one-off
charges that are not considered to be day-to-day operational costs
of the business. Transaction costs of £6.8m have been incurred and
£3.3m of other costs, mainly retention bonuses, along with £18.2m
of charges relating to the settlement of our pre-existing
relationship with Gist Limited. This was offset by a £6.2m gain on
bargain purchase. See note 31 for further details.
These costs are adjusting items as they relate to a major
transaction and, but for the transaction, the business would not
have incurred these costs and as a result are not considered to be
normal operating costs of the business. Further costs are expected
in 2023/24 in relation to the acquisition, such as retention bonuses.
Amortisation and fair value adjustments arising as part of the
investment in Ocado Retail Limited (£14.0m)
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 £17.1m recognised
in the period and a related deferred tax credit of £3.1m.
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 judgments 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 (£2.0m)
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
162
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 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 £2.0m (last year: £16.0m).
The treatment of this in adjusting items is in line with previous
charges in relation to settlement of 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 £324.7m which exceeds the total offset against profit
share of £255.8m to date and this deficit will be deducted from the
Group’s share of future profits from M&S Bank.
Franchise restructuring (£0.4m credit)
In September 2021 the Group announced the closure of 11 franchise
stores in France in response to increased EU border costs.
Consequently, the Group recognised a charge of £10.3m for
closure costs in 2021/22. A provision release of £0.4m has been
recognised during the period in relation to the stores in France.
No future costs are expected.
The costs/credits are considered to be adjusting items as they are
one-off in nature and significant in value in total to the results of
the Group and to the International segment.
Remeasurement of contingent consideration including
discount unwind (£108.0m 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
2021/22, £33.8m of contingent consideration was settled, following
the achievement of the first and second performance targets. A
credit of £108.0m has been recognised in the period, representing
the revaluation of the contingent consideration payable to £64.7m
(£57.8m plus interest). See note 21 for further details. 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 determined in 2024/25.
Net finance costs incurred in relation to Gist Limited deferred
and contingent consideration (£2.8m)
Deferred consideration, resulting from the acquisition of Gist
Limited, is held at amortised cost, whilst the contingent
consideration is remeasured at fair value at each reporting date
with the changes in fair value recognised in profit or loss. A charge
of £2.8m has been recognised in the period, representing the
discount unwind of the deferred consideration and revaluation of
the contingent consideration payable. See note 21 for further
details. The discount unwind and 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 discount unwind and
remeasurement will be recognised in adjusting items until the final
payments are made in 2025/26.
Annual Report & Financial Statements 2023
163
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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 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 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
2023
£m
22.9
0.9
28.7
5.6
58.1
108.0
166.1
(6.4)
(4.5)
(65.4)
(116.7)
(5.4)
(4.3)
(202.7)
(2.8)
(205.5)
(39.4)
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)
2023
£m
2022
£m
67.6
(3.8)
63.8
9.9
(3.6)
70.1
26.5
8.1
6.5
41.1
111.2
66.8
(1.0)
65.8
9.6
2.2
77.6
14.9
0.7
(10.5)
5.1
82.7
164
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 7 INCOME TAX EXPENSE CONTINUED
B. Taxation reconciliation
The effective tax rate was 23.4% (last year: 21.1%) and is explained below.
Profit 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
Impact of tax rate differential
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
Adjusting items:
– UK store and strategic programme impairments and other property charges where no tax relief
is available
– Cost incurred on acquisition of Gist
– 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
– Release of Ocado contingent consideration
– Adjustments to the current and deferred tax charges in respect of prior periods
Total income tax expense
The effective tax rate in respect of the profit before adjusting items was 25.9% (last year: 18.2%).
2023
£m
475.7
90.4
6.2
(7.9)
16.7
5.5
–
6.6
0.4
0.3
5.4
2.7
3.6
2.7
2.7
(19.4)
(4.7)
111.2
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
On 20 December 2021, the OECD published its 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. On 23 March 2023, the UK government introduced draft legislation in Finance (No. 2) Bill 2022-23 to
implement Pillar 2 of the OECD/G20 inclusive framework. The new rules are expected to take effect from 2024 onwards.
There remains a considerable amount of uncertainty with respect to the detailed operation of the rules and their impact. Further details
and guidance are due in the course of 2023. From an initial review of the Group’s business and tax profile, the rules are not expected to
have a material impact on the Group’s tax rate or tax payments. There is no impact on the Group’s results for FY23.
Annual Report & Financial Statements 2023
165
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 7 INCOME TAX 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 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 from those of the UK
Joint venture results accounted for as profit after tax
Utilisation or increase of unrecognised losses
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
– Other strategic programme income and expenses that are not taxable nor allowable for tax purposes
– Cost incurred on acquisition of Gist
– Amortisation arising as a part of the investment in Ocado Retail Limited
– Release of Ocado contingent consideration
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)
2023
£m
475.7
90.4
55.8
(77.9)
5.8
7.6
0.4
5.5
0.3
(2.7)
2.7
2.7
3.6
2.7
(19.4)
77.5
67.6
9.9
77.5
(3.8)
(3.6)
70.1
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
8 EARNINGS PER SHARE
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.
166
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 8 EARNINGS PER SHARE CONTINUED
Details of the adjusted earnings per share are set out below:
Profit 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
Weighted average number of ordinary shares in issue
Potentially dilutive share options under Group’s share option schemes
Weighted average number of diluted ordinary shares
Basic earnings per share
Diluted earnings per share
Adjusted basic earnings per share
Adjusted diluted earnings per share
2023
£m
363.4
6.3
(13.7)
356.0
Million
1,963.5
70.4
2,033.9
2022
£m
306.6
131.2
(12.6)
425.2
Million
1,958.1
73.0
2,031.1
Pence
Pence
18.5
17.9
18.1
17.5
15.7
15.1
21.7
20.9
9 DIVIDENDS
The Group suspended dividend payments at the start of the pandemic to protect the balance sheet. This enabled it to invest in its
transformation priorities and trusted value. Consistent with that announcement, the Board does not expect to pay a dividend in 2022/23.
However, with the business generating an improved operating performance and having a strengthened balance sheet with credit metrics
consistent with investment grade, the Board plans to restore a modest annual dividend to shareholders starting with an interim dividend
with the results in November.
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 £19.0m (last year: £0.1m) (see notes 3 and 5).
Details of key management compensation are given in note 28.
2023
£m
2022
£m
1,351.4
1,256.0
93.7
75.9
32.7
47.4
(14.9)
84.6
69.0
30.2
54.1
(6.4)
1,586.2
1,487.5
Annual Report & Financial Statements 2023
167
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
10 EMPLOYEES CONTINUED
B. Average monthly number of employees
UK stores
– management and supervisory categories
– other
UK support centre
– management and supervisory categories
– other
UK operations
– management and supervisory categories
– other
Overseas
Total average number of employees
2023
2022
4,823
50,019
3,823
822
682
6,856
5,291
72,316
4,570
51,585
3,275
660
124
1,667
5,205
67,086
The average number of full-time equivalent employees is 52,092 (last year: 47,108).
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), 49,634 deferred members (last year: 51,444) and pensioners 53,634 (last year: 53,270).
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 50,901 active members (last year: 46,560) and some 45,908 deferred members (last year: 45,778).
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 £36.4m (last year: £55.9m). Of this, income of £24.1m (last year: income of £8.8m) relates to
the UK DB Pension Scheme, costs of £57.4m (last year: costs of £62.0m) to the UK DC plan and costs of £3.1m (last year: costs of £2.8m) 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 2021 and showed a funding surplus of
£687m. This is an improvement on the previous position at 31 March 2018 (funding surplus of £652m), 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).
168
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED
11 RETIREMENT BENEFITS CONTINUED
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
2023
£m
2022
£m
6,781.9
10,090.7
(6,299.9)
(9,046.8)
482.0
1,043.9
(2.2)
(2.4)
(2.6)
(3.1)
477.4
1,038.2
482.0
(4.6)
477.4
1,043.9
(5.7)
1,038.2
In the event of a plan wind-up, the pension scheme rules provide Marks and Spencer plc 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 £2,964.1m (last year: loss of £9.0m).
2023
£m
2022
£m
10,090.7
10,442.9
267.0
(3,231.1)
(38.2)
38.1
(344.9)
(4.6)
4.9
204.4
(213.4)
(19.4)
41.8
(359.3)
(4.6)
(1.7)
6,781.9
10,090.7
Annual Report & Financial Statements 2023
169
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 11 RETIREMENT BENEFITS CONTINUED
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
Interest cost
Benefits paid
Actuarial loss – experience
Actuarial (gain)/loss – demographic assumptions
Actuarial (gain) – 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
The average duration of the defined benefit obligation at 1 April 2023 is 14.0 years (last year: 17.3 years).
2023
£m
9,052.5
0.1
0.2
238.3
(344.9)
250.3
(205.4)
(2,691.4)
4.8
2022
£m
9,811.5
0.2
0.2
191.2
(359.3)
153.9
89.0
(832.7)
(1.5)
6,304.5
9,052.5
6,299.9
9,046.8
2.2
2.4
2.6
3.1
6,304.5
9,052.5
170
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES 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 94% of interest rate movements and 111% 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:
2023
2022
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
Debt investments
– Government bonds net of repurchase agreements1
2,023.7
(196.6)
1,827.1
3,482.9
(1,185.2)
2,297.7
– 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
12.0
–
–
41.6
109.5
–
12.0
–
7.0
–
4.0
–
–
–
1.2
443.6
122.8
–
–
287.0
316.3
171.9
88.6
21.4
206.2
13.2
443.6
122.8
41.6
109.5
287.0
328.3
171.9
95.6
21.4
210.2
2,150.0
998.3
–
2,150.0
998.3
–
6.0
–
–
550.3
113.7
5.4
25.8
5.9
15.6
–
5.9
–
–
–
950.0
365.9
193.5
–
–
308.7
324.7
223.6
406.9
(40.0)
168.1
956.0
365.9
193.5
550.3
113.7
314.1
350.5
229.5
422.5
(40.0)
174.0
2,910.0
2,910.0
1,121.6
150.8
1,121.6
150.8
2,209.8
4,610.7
6,820.5
4,211.5
5,898.6
10,110.1
1 Repurchase agreements were £196.6m (last year: £1,184.0m).
2 The difference between the total assets of £6,820.5m above compared to £6,781.9m is £38.6m.This relates to the cap applied to the Irish DB scheme and therefore the £38.2m
actuarial gain is not recognised and £0.4m net interest income 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 nil (last year: 33,210) ordinary
shares in the Company through its investment in UK Equity Index Funds.
Annual Report & Financial Statements 2023
171
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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 (RPI)
Long-term healthcare cost increases
2023
%
2022
%
2.2-3.2
2.3-3.6
4.75
3.25
7.30
2.70
3.70
7.70
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 2021. The UK post-retirement mortality assumptions are based on an analysis of the pensioner mortality trends under the
scheme for the period to March 2021. 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)
– male
– female
Future pensioners – currently in deferred status (at age 65)
– male
– female
2023
22.0
24.4
23.6
26.1
2022
22.3
25.1
24.0
26.9
G. Sensitivity analysis
The table below summarises the estimated impact of reasonably possible 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 discount rate of 2.50%
Increase in scheme surplus caused by an increase in the discount rate of 2.50%
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
2023
£m
(25.0)
(45.0)
(235.0)
200.0
(30.0)
(60.0)
130.0
2022
£m
(20.0)
(30.0)
(150.0)
100.0
(70.0)
(130.0)
270.0
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. The sensitivities reflect the range of recent assumption
movements and illustrate that the financial assumption sensitivities do not move in a linear fashion.
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
Net interest income
Total
Remeasurement on the net defined benefit surplus:
Actual return on scheme assets excluding amounts included in net interest income
Actuarial (gain)/loss – demographic assumptions
Actuarial loss – experience
Actuarial gain – financial assumptions
Actuarial loss – asset ceiling
Components of defined benefit expense/(income) recognised in other comprehensive income
172
Marks and Spencer Group plc
2023
£m
0.1
4.8
(28.7)
(23.8)
3,231.1
(205.4)
250.3
(2,691.4)
38.2
622.8
2022
£m
0.2
4.8
(13.2)
(8.2)
213.4
89.0
153.9
(832.7)
19.4
(357.0)
FINANCIAL STATEMENTSNOTES 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: £1.3bn) 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) entitles the Pension Scheme to receive £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 £124.8m (last year: £192.3m) 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 1 April 2023, an interest charge of £4.3m (last year: £4.4m) 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 £122.8m (last year: £193.5m).
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 £32.7m was recognised for share based payments (last year: charge of £30.2m). Of the total share-based payments
charge, £15.2m (last year: £14.9m) relates to the UK Save As You Earn Share Option scheme, £7.0m (last year: charge of £6.7m) relates to
Performance Share Plans, £3.4m (last year: £8.2m) relates to Restricted Share Plans, £6.9m relates to Deferred Share Bonus Schemes (last
year: £0.2m) and the remaining charge of £0.2m relates to Republic of Ireland Save As You Earn Share Option Scheme (last year: £0.2m).
In addition, a charge of £5.3m was recognised in relation to Annual Bonus Schemes under the Deferred Share Bonus Scheme. The Annual
Bonus for 2022/23 is due to be granted in July 2023. Further details of the option and share schemes that the Group operates are
provided in the Remuneration Report.
A. Save As You Earn scheme – £15.2m
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 His 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
2023
2022
Number of
options
Weighted
average
exercise price
Number of
options
Weighted
average
exercise price
110,562,961
14,349,909
(690,665)
100.9p
119,151,406
99.0p
111.1p
11,526,149
(208,238)
(14,390,102)
124.9p (12,207,656)
(2,779,680)
220.0p
(7,698,700)
107,052,423
94.3p 110,562,961
6,309,033
144.2p
11,945
99.4p
189.0p
138.2p
102.6p
206.5p
100.9p
186.8p
For SAYE share options exercised during the period, the weighted average share price at the date of exercise was 144.1p (last year: 206.3p).
Annual Report & Financial Statements 2023
173
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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
2023
2022
3-year plan
3-year plan
2021 modified1
3-year plan
Dec 22
Dec 22
123p
99p
123p
189p
3 years
3 years
3.3%
51.0%
0.0%
43p
n/a
3.3%
51.0%
0.0%
26p
17p
Dec 21
235p
189p
3 years
0.5%
49.3%
0.0%
81p
n/a
1 In the current year, there was a modification to the 2021 scheme relating to employees cancelling awards from previous years in substitution for awards granted under the 2023
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
2023 options being 43p, and the fair value of repriced previous awards, calculated using 2021 award assumptions, keeping the initial exercise price consistent. The fair value of the
modified options, being 17p for 2021 modified options was recognised in operating profit.
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 27% (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 2018
January 2019
February 2020
February 2021
February 2022
February 2023
Number of options
2023
–
2022
5,441
13,016
2,399,413
5,732,723
8,006,941
81,037,194 89,284,282
6,333,538 10,866,884
13,935,952
–
107,052,423 110,562,961
Weighted average remaining
contractual life (years)
2023
–
(0.8)
0.3
1.3
2.3
3.3
1.6
2022
Option price
(0.8)
0.2
1.3
2.3
3.3
–
2.3
251p
238p
151p
82p
189p
99p
94p
1 For the purpose of the above table, the option granted date is the contract start date.
B. Performance Share Plan* – £7.0m
The Performance Share Plan (“PSP”) is the primary long-term incentive plan for approximately 165 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 2022/23 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, 22,498,271 shares (last year: 19,374,217) were awarded under the plan. The weighted average fair value of the shares
awarded was 139.6p (last year: 155.1p). As at 1 April 2023, 47,532,523 shares (last year: 44,534,437) were outstanding under the plan.
174
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 13 SHARE-BASED PAYMENTS CONTINUED
C. Deferred Share Bonus Plan* – £12.2m
The Deferred Share Bonus Plan (“DSBP”) was first introduced in 2005/06 as part of the Annual Bonus Scheme and was reapproved 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 29,630,372 shares (last year: no shares) have been awarded under the plan in relation to the annual bonus. As at 1 April
2023, 26,794,048 shares (last year: 190,596) were outstanding under the plan.
D. Restricted Share Plan* – £3.4m
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 the plan was reapproved 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, 2,624,496 shares (last year: 2,441,809) have been awarded under the plan. The weighted average fair value of the shares
awarded was 76.9p (last year: 158.7p). As at 1 April 2023, 5,557,542 shares (last year: 10,368,217) 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 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: no options granted). As at 1 April 2023, 1,264,131 options (last year: 1,439,954) were
outstanding under the scheme.
F. Marks and Spencer Employee Benefit Trust
The Marks and Spencer Employee Benefit Trust (the “Trust”) holds 166,057 (last year: 264,779) shares with a book value of £0.0m (last year:
£0.0m) and a market value of £0.3m (last year: £0.4m). 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.
Annual Report & Financial Statements 2023
175
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 14 INTANGIBLE ASSETS
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
Year ended 1 April 2023
Opening net book value
Additions
Acquired through business combinations
Transfers and reclassifications
Asset write-offs
Amortisation charge
Exchange difference
Closing net book value
At 1 April 2023
Cost
Accumulated amortisation, impairments and write-offs
Net book value
Goodwill
£m
Brands
£m
Computer
software
under
development
£m
Computer
software
£m
1,539.6
(1,362.2)
177.4
177.4
0.9
29.6
(0.6)
(93.0)
–
114.3
1,570.1
(1,455.8)
114.3
114.3
5.3
1.5
35.6
(0.7)
(86.4)
–
69.6
135.7
(112.0)
23.7
23.7
4.8
–
–
–
0.1
28.6
140.6
(112.0)
28.6
118.6
(112.5)
6.1
6.1
0.1
–
–
(0.6)
–
5.6
118.7
(113.1)
5.6
28.6
5.6
–
–
–
–
(0.6)
–
5.0
–
–
–
–
–
(0.2)
28.4
140.6
(112.2)
28.4
118.7
1,612.5
(113.7)
(1,542.9)
5.0
69.6
Total
£m
1,850.8
(1,618.8)
232.0
232.0
69.6
(15.0)
(0.6)
(93.6)
0.1
56.9
(32.1)
24.8
24.8
63.8
(44.6)
–
–
–
44.0
192.5
76.1
(32.1)
44.0
44.0
79.1
1.2
(64.2)
–
–
–
60.1
92.2
(32.1)
60.1
Other
£m
0.7
–
0.7
1,905.5
(1,713.0)
192.5
192.5
84.4
2.7
(28.6)
(0.7)
(87.0)
(0.2)
163.1
1,964.0
(1,800.9)
163.1
Total
Goodwill
£m
28.6
(0.2)
28.4
Goodwill related to the following assets and groups of cash generating units (CGUs):
Net book value at 2 April 2022
Exchange difference
Net book value at 1 April 2023
per una
£m
16.5
–
16.5
India
£m
6.6
(0.2)
6.4
Sports
Edit
£m
4.8
–
4.8
176
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES 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 £6.4m (last year:
£6.6m), Sports Edit £4.8m (last year: £4.8m) 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 is 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: 1.6%), which is a reduction from
the overall Group long-term growth rate of 2.0% (last year: 2.0%). The Group’s current view of achievable long-term growth for India is
5.5% (last year: 5.5%).
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 13.4% for per una (last
year: 10.8%) and 15.4% for India (last year: 11.3%).
The immediately quantifiable impacts of climate change and costs expected to be incurred in connection with our net zero
commitments, are included within the Group’s budget and three-year plan which have been used to support the impairment reviews,
with no material impact on cash flows.
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.
Annual Report & Financial Statements 2023
177
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 15 PROPERTY, PLANT AND EQUIPMENT
The Group’s property, plant and equipment of £5,203.7m (last year: £4,902.3m) consists of owned assets of £3,747.7m
(last year: £3,486.5m) and right-of-use assets of £1,456.0m (last year: £1,415.8m).
Property, plant and equipment – owned
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
Year ended 1 April 2023
Opening net book value
Additions
Acquired through business combinations
Transfers and reclassifications
Disposals
Impairment reversals
Impairment charge
Asset write-offs
Depreciation charge
Exchange difference
Closing net book value
At 1 April 2023
Cost
Accumulated depreciation, impairments and write-offs
Net book value
Land and
buildings
£m
Fixtures,
fittings and
equipment
£m
Assets in the
course of
construction
£m
2,809.9
5,450.2
(787.5)
(3,959.3)
2,022.4
1,490.9
2,022.4
1,490.9
0.9
3.0
(15.9)
34.5
(57.6)
0.9
(34.2)
(1.7)
17.7
175.8
(1.9)
27.6
(31.4)
(11.4)
(256.1)
–
67.5
(18.2)
49.3
49.3
238.0
(164.3)
–
–
–
–
–
–
Total
£m
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)
1,952.3
1,411.2
123.0
3,486.5
2,764.8
5,275.7
(812.5)
(3,864.5)
1,952.3
1,411.2
141.2
(18.2)
123.0
8,181.7
(4,695.2)
3,486.5
1,952.3
1,411.2
0.8
150.5
15.0
(2.2)
25.8
(22.5)
2.2
(59.9)
5.5
40.0
38.7
292.3
(2.2)
14.4
(9.3)
1.5
(250.4)
1.6
123.0
296.2
3.8
(280.7)
–
–
–
–
–
0.1
3,486.5
337.0
193.0
26.6
(4.4)
40.2
(31.8)
3.7
(310.3)
7.2
2,067.5
1,537.8
142.4
3,747.7
2,911.4
5,532.3
160.6
8,604.3
(843.8)
(3,994.6)
(18.2)
(4,856.6)
2,067.6
1,537.7
142.4
3,747.7
Asset write-offs in the year include assets with gross book value of £240.9m (last year: £383.3m) and £nil (last year: £nil) net book value
that are no longer in use and have therefore been retired.
178
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES 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
At 3 April 2021
Additions
Transfers and reclassifications
Disposals
Impairment reversals
Impairment charge
Depreciation charge
Exchange difference
At 2 April 2022
Additions
Acquired through business combinations
Transfers and reclassifications
Disposals
Impairment reversals
Impairment charge
Depreciation charge
Exchange difference
At 1 April 2023
Land and
buildings
£m
1,444.7
72.7
0.5
(7.7)
28.9
(25.4)
(146.2)
0.9
1,368.4
198.0
6.7
2.1
(27.8)
14.9
(14.8)
(159.0)
1.3
1,389.8
Fixtures,
fittings and
equipment
£m
51.3
17.9
–
(0.2)
–
–
(21.6)
–
47.4
37.3
14.1
(0.1)
(10.7)
–
–
(21.9)
0.1
66.2
Total
£m
1,496.0
90.6
0.5
(7.9)
28.9
(25.4)
(167.8)
0.9
1,415.8
235.3
20.8
2.0
(38.5)
14.9
(14.8)
(180.9)
1.4
1,456.0
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 reversal 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 detailed fully in note 5. The immediately quantifiable impacts of climate change and costs expected to be incurred in connection
with our net zero commitments, are included within the Group’s budget and three-year plan which have been used to support the
impairment reviews, with no material impact on cash flows. We also expect any potential store refurbishments to be phased over multiple
years and therefore any changes required due to climate change would not have a material impact in any given year and the warehouse
and support centres located in areas which we would not expect to be physically impacted by climate change. As a consequence there
has been no material impact in the forecast cash flows used for impairment testing.
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 12.5% to 18.1%
(last year: 9.8% to 15.8%). 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.
Annual Report & Financial Statements 2023
179
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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 £17.3m and impairment reversals of £33.1m as a result of UK store
impairment testing unrelated to the UK store estate programme (last year: impairment charge of £6.9m and impairment reversals of
£63.4m). Impairment charges of £17.3m and impairment reversals of £33.1m have been recognised within adjusting items (see note 5). The
impaired stores were impaired to their value-in-use recoverable amount of £109.8m, which is their carrying value at year end. The stores
with impairment reversals were written back to the lower of their value-in-use recoverable amount, and the carrying value if the
impairment had not occurred, of £159.7m.
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 12.5% (last year: 9.8%).
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 increase the impairment charge by £24.2m and a 25 basis points
reduction in the gross profit margin from year 3 onwards would increase the impairment charge by £1.8m. In combination a 5% reduction
in sales and a 25 basis point reduction in gross profit margin would increase the impairment charge by £30.3m. A 250 basis points
increase in the discount rate would increase the impairment charge by £28.8m.
A reduction in sales of 5% from the three-year plan in year 3 would reduce the reversal by £7.0m and a 25 basis points reduction in the
gross profit margin from year 3 would reduce the reversal by £1.1m. In combination a 5% reduction in sales and a 25 basis point reduction
in gross profit margin would reduce the reversal by £8.0m. A 250 basis points increase in the discount rate would reduce the reversal
by £7.6m.
Impairments – UK store estate programme
During the year, the Group has recognised an impairment charge of £28.6m and impairment reversals of £22.0m relating to the ongoing
UK store estate programme. These stores were impaired to their value-in-use recoverable amount of £307.2m, 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 changes to expected store closure dates and improved trading expectations
compared to those assumed at the end of the prior year end.
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 12.5% (last year: 9.8%).
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.
A delay of 12 months in the date of each store exit would result in a decrease in the impairment charge of £70.9m. A 5% reduction in
planned sales in years 2 and 3 (where relevant) would result in an increase in the impairment charge of £12.2m.
Neither a 250 basis point increase in the discount rate, a 25 basis point reduction in management gross profit 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 year the Group recognised an impairment charge of £0.7m (last year: £nil) in Ireland as a result of store impairment testing.
180
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 16 OTHER FINANCIAL ASSETS
Non-current
Other investments1
Current
Other investments2
1. Includes £7.3m (last year: £3.1m) of venture capital investments managed by True Capital Limited.
2. Includes £5.6m (last year: £8.8m) of money market deposits held by Marks and Spencer plc in an escrow account.
17 TRADE AND OTHER RECEIVABLES
Non-current
Trade receivables
Lease receivables – net of provision for impairment
Other receivables
Loans to related parties (see note 28)
Prepayments
Current
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Lease receivables – net of provision for impairment
Other receivables
Prepayments
Accrued income
2023
£m
7.9
7.9
13.0
13.0
2023
£m
–
64.6
2.5
30.0
201.6
298.7
128.3
(5.4)
122.9
0.9
36.8
97.0
23.0
280.6
2022
£m
4.5
4.5
17.6
17.6
2022
£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
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 £8.8m (last year: £7.7m) of accrued supplier income
relating to rebates that have been earned but not yet invoiced. An immaterial 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 sub-let for the remaining duration of the lease.
Annual Report & Financial Statements 2023
181
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 17 TRADE AND OTHER RECEIVABLES CONTINUED
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 to four years
Between four to 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
2023
£m
4.7
4.7
6.1
7.8
7.8
113.3
144.4
(68.2)
76.2
(10.7)
65.5
2022
£m
4.8
4.7
4.7
6.1
7.8
121.1
149.2
(73.7)
75.5
–
75.5
Included within trade and other receivables is £0.4m (last year: £1.1m) 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.
18 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are £1,067.9m (last year: £1,197.9m). The carrying amount of these assets approximates their fair value.
The effective interest rate on short-term bank deposits is 4.1% (last year: 0.7%). These deposits have an average maturity of 18 days (last
year: 39 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
2023
£m
801.7
560.0
85.3
554.5
47.3
2022
£m
732.8
523.5
59.1
595.2
50.3
2,048.8
1,960.9
166.6
14.7
181.3
174.4
13.8
188.2
Included within current other payables is £7.2m (last year: £nil) of deferred and contingent consideration and within non-current other
payables £100.6m (last year: £nil) of deferred and contingent consideration, both relating to the acquisition of Gist Limited. Also included
in non-current other payables is £64.7m (last year: £172.6m) 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
2023
£m
189.6
415.9
(416.3)
189.2
2022
£m
198.1
404.2
(412.7)
189.6
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.
182
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 19 TRADE AND OTHER PAYABLES CONTINUED
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 1 April 2023, £303.9m (last year: £330.0m) of trade payables were amounts owed under these arrangements. During the year the
maximum facility available at any one time under the arrangements was £442.6m (last year: £404.1m).
20 BORROWINGS AND OTHER FINANCIAL LIABILITIES
Current
Lease liabilities
3.00% £300m Medium Term Notes 20231
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% £250m Medium Term Notes 20271
7.125% US$300m Medium Term Notes 20373,4
Revaluation of Medium Term Notes5
Lease liabilities
Total
2023
£m
2022
£m
216.7
185.3
42.0
444.0
–
330.0
298.9
248.6
251.8
(10.2)
200.2
–
47.0
247.2
299.1
409.4
298.6
248.3
192.3
34.8
2,064.9
3,184.0
3,628.0
2,078.5
3,561.0
3,808.2
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, £6.1m (last year: £10.5m) of fair value adjustment for terminated hedges to
be amortised over the remaining debt maturity.
3 Interest on these bonds is payable biannually.
4 US$300m Medium Term Note exposure swapped to sterling (fixed-to-fixed cross-currency interest rate swaps).
5 Revaluation consists of foreign exchange gain on revaluation of the 7.125% US$300m Medium Term Notes 2037 of £10.2m (last year: £34.8m loss).
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
Acquisitions
Additions
Interest expense relating to lease liabilities
Payments
Disposals
Exchange difference
Current
Non-current
The maturity analysis of lease liabilities is disclosed in note 21A.
2023
£m
2022
£m
2,278.7
2,405.9
21.3
249.4
121.0
(353.8)
(39.0)
4.0
2,281.6
216.7
2,064.9
–
100.6
124.1
(344.3)
(8.1)
0.5
2,278.7
200.2
2,078.5
Annual Report & Financial Statements 2023
183
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 20 BORROWINGS AND OTHER FINANCIAL LIABILITIES CONTINUED
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 £2,281.6m 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
21 FINANCIAL INSTRUMENTS
2023
£m
13.2
–
4.9
2022
£m
5.9
1.4
4.4
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 cross-currency 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.
The Group has a committed syndicated bank revolving credit facility of £850m with a current maturity date of 13 June 2026. The 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 biannually. The Group was not in breach of this metric at the
reporting date.
The revolving credit facility includes four sustainability metrics where the margin payable on the facility is adjusted to reflect the Group’s
performance against ESG targets material to the Group’s “Plan A” objectives.
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 £1.1bn (last year: £1.3bn) 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 or decreases from the next interest payment date following a relevant credit rating downgrade or upgrade. 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.
184
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 21 FINANCIAL INSTRUMENTS CONTINUED
Ocado Retail Limited, an associate of the Group, has entered into a £30m revolving credit facility provided by BNP Paribas. The Group,
along with Ocado Group plc, jointly guarantee the facility.
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 £1,910.3m (last year: £1,853.3m) 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) and deferred consideration of £7.2m (last
year: £nil) is expected to become payable within one year and £165.3m (last year: £190.8m) between two and five years.
Partnership
liability to
the Marks
& Spencer
UK Pension
Scheme
(note 12)
£m
Total
borrowings
and other
financial
liabilities
£m
Cash inflow
on derivatives2
£m
Cash
outflow on
derivatives2
£m
Total
derivative
liabilities
£m
(71.9)
(73.0)
(54.4)
–
(460.6)
(727.8)
(1,704.7)
(3,750.5)
330.2
30.9
–
–
(333.6)
(31.1)
–
–
(3.4)
(0.2)
–
–
Medium
Term
Notes
£m
(75.5)
(375.5)
(864.3)
(668.4)
Lease
liabilities1
£m
(313.2)
(279.3)
(786.0)
(3,082.1)
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
(1,983.7)
(4,460.6)
(199.3)
(6,643.6)
361.1
(364.7)
(3.6)
Effect of discounting
At 2 April 2022
Timing of cash flows
Within one year
Between one and two years
Between two and five years
More than five years
454.2
2,181.9
7.0
2,643.1
(1,529.5)
(2,278.7)
(192.3)
(4,000.5)
(252.7)
(59.3)
(1,002.2)
(318.8)
(320.4)
(805.2)
(415.6)
(2,982.1)
(73.0)
(54.4)
–
–
(644.5)
(434.1)
(1,807.4)
(3,397.7)
1,062.3
(1,120.6)
145.8
26.0
207.8
(147.4)
(26.0)
(214.7)
Total undiscounted cash flows
(1,729.8)
(4,426.5)
(127.4)
(6,283.7)
1,441.9
(1,508.7)
Effect of discounting
At 1 April 2023
383.4
2,144.9
2.6
2,530.9
(1,346.4)
(2,281.6)
(124.8)
(3,752.8)
(58.3)
(1.6)
–
(6.9)
(66.8)
1 Total undiscounted lease payments of £750.6m 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, £60.8m 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.
Annual Report & Financial Statements 2023
185
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 21 FINANCIAL INSTRUMENTS CONTINUED
Other investments1
Derivative assets2
At 2 April 2022
Other investments1
Derivative assets2
At 1 April 2023
AAA
£m
AA+
£m
–
–
–
AAA
£m
99.4
–
99.4
–
–
–
AA+
£m
–
–
–
AA
£m
–
–
–
AA
£m
–
–
–
Credit rating of counterparty
AA-
£m
A+
£m
A
£m
158.5
288.6
462.0
–
31.9
24.4
158.5
320.5
486.4
AA-
£m
A+
£m
A
£m
95.5
360.2
287.4
–
10.0
7.4
95.5
370.2
294.8
A-
£m
89.0
8.7
97.7
A-
£m
65.0
5.0
70.0
BBB
£m
–
–
–
Total
£m
998.1
65.0
1,063.1
BBB
£m
Total
£m
–
907.5
0.3
0.3
22.7
930.2
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 £173.4m (last year: £217.4m).
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.
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 £128.3m (last year: £103.0m), lease
receivables £65.5m (last year: £75.5m), other receivables (including loans to related parties) £69.3m (last year: £30.5m), cash and cash
equivalents £1,067.9m (last year: £1,197.9m) and derivatives £22.7m (last year: £65.0m).
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, UK franchise, food, 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 more than 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.
186
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 21 FINANCIAL INSTRUMENTS CONTINUED
As at 2 April 2022
Gross carrying amount – trade receivables
Expected loss rate
Lifetime expected credit loss
Net carrying amount
Current
£m
Up to 30 days
past due
£m
31-60 days
past due
£m
61-90 days
past due
£m
91-180 days
past due
£m
76.7
2.9%
2.2
74.5
15.8
4.9%
0.8
15.0
–
0.0%
–
–
1.9
5.7%
0.1
1.8
7.5
7.8%
0.6
6.9
As at 1 April 2023
Gross carrying amount – trade receivables
Expected loss rate
Lifetime expected credit loss
Net carrying amount
Current
£m
Up to 30 days
past due
£m
31-60 days
past due
£m
61-90 days
past due
£m
91-180 days
past due
£m
98.5
0.8%
0.8
97.7
22.1
3.2%
0.7
21.4
2.9
27.6%
0.8
2.1
1.9
31.6%
0.6
1.3
The closing loss allowances for trade receivables reconciles to the opening loss allowances as follows:
Trade receivables expected loss provision
Opening loss allowance
Increase 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
Increase/(decrease) in loss allowance recognised in profit and loss during the year1
Closing loss allowance
181 days
or more
past due
£m
1.1
100.0%
1.1
–
181 days
or more
past due
£m
1.3
1.6
69.2%
100.0%
0.9
0.4
1.6
–
2023
£m
4.8
5.5
(4.9)
5.4
2023
£m
–
10.7
10.7
Total
£m
103.0
4.6%
4.8
98.2
Total
£m
128.3
4.2%
5.4
122.9
2022
£m
3.7
1.5
(0.4)
4.8
2022
£m
11.9
(11.9)
–
1 Relates to the sub-let 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 Clothing & Home foreign currency exposures principally using forward foreign exchange contracts
progressively based on dynamic forecasts from the business. Hedging is generally carried out in the six months before the period
when purchase orders are entered into.
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 £1,785.7m (last year: £1,865.7m) 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 1 April 2023 will be
reclassified to the income statement at various dates over the following 14 months (last year: 15 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.
Annual Report & Financial Statements 2023
187
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 21 FINANCIAL INSTRUMENTS CONTINUED
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 to apply credit/debit valuation
adjustments. 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 November 2022).
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 £1.8m loss (last year: £0.3m gain) in the income statement. As at the
balance sheet date, the gross notional value of intercompany loan hedges was £125.8m (last year: £166.8m).
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
2023
2022
Fixed rate
£m
Floating rate
£m
Total
£m
Fixed rate
£m
Floating rate
£m
Total
£m
3,419.6
106.8
101.6
3,628.0
–
–
–
–
3,419.6
3,610.6
106.8
101.6
104.3
93.3
3,628.0
3,808.2
–
–
–
–
3,610.6
104.3
93.3
3,808.2
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: 5.1%) and the weighted average time for which the rate is fixed is five years (last year: five years).
(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 £3,628.0m (last year: £3,808.2m) representing the public bond issues and
lease liabilities, amounting to 100% (last year: 100%) 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
2023
%
N/A
5.1%
5.1%
2022
%
N/A
5.1%
5.4%
188
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES 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 instrument
Change in fair value of hedged item used to determine
hedge effectiveness
Weighted average hedge rate for the year
2 April 2022
Current
Non Current
Forward foreign
exchange contracts
£m
Forward foreign
exchange contracts
£m
Cross-currency
swaps
£m
Forward foreign
exchange contracts
£m
Cash flow
hedges
1,536.9
43.0
(2.3)
FVTPL
166.8
0.6
(0.9)
Cash flow
hedges
Cash flow
hedges
193.5
18.5
–
162.0
2.9
(0.4)
to Sep 2022
to May 2022
to Dec 2037
to Apr 2023
100%
n/a
100%
100%
Highly probable
transactional FX
exposures
Inter-company
loans/deposits
USD fixed rate
borrowing
Highly probable
transactional FX
exposures
60.1
(60.1)
11.1
(10.8)
26.7
(25.4)
4.8
(4.8)
GBP/USD 1.37;
GBP/EUR 1.18
–
GBP/USD 1.55
GBP/USD 1.34;
GBP/EUR 1.17
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
–
(32.0)
–
0.3
–
–
(0.1)
9.5
(5.0)
–
2.5
–
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
1 April 2023
Current
Non Current
Forward foreign
exchange contracts
£m
Forward foreign
exchange contracts
£m
Cross-currency
swaps
£m
Forward foreign
exchange contracts
£m
Cash flow
hedges
1,504.7
22.6
(56.0)
FVTPL
125.8
–
(2.1)
Cash flow
hedges
Cash flow
hedges
252.9
0.1
(5.3)
155.2
–
(1.8)
to Jul 2023
to Jun 2023
to Dec 2037
to May 2024
100%
n/a
100%
100%
Highly probable
transactional FX
exposures
Inter-company
loans/deposits
USD fixed rate
borrowing
Highly probable
transactional FX
exposures
49.6
(49.6)
(2.1)
0.3
30.9
(30.0)
(4.3)
4.3
GBP/USD 1.20;
GBP/EUR 1.14
–
GBP/USD 1.19
GBP/USD 1.22;
GBP/EUR 1.12
Amounts recognised within finance costs in profit and loss
Balance on cash flow hedge reserve at 1 April 2023
Balance on cost of hedging reserve at 1 April 2023
–
47.3
–
(1.8)
–
–
0.9
(7.0)
(5.8)
–
1.8
–
Annual Report & Financial Statements 2023
189
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 21 FINANCIAL INSTRUMENTS CONTINUED
1 April 2023
2 April 2022
Notional Value
Fair Value
Notional Value
Fair Value
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
559.2
945.6
22.6
(56.0)
1,348.8
188.1
43.0
(2.3)
8.0
117.7
567.2
1,063.3
–
22.6
(2.1)
(58.1)
37.2
1,386.0
129.6
317.7
0.6
43.6
(0.9)
(3.2)
125.0
127.9
0.1
(5.3)
193.5
–
18.5
–
18.1
137.1
–
(1.8)
131.1
30.9
2.9
(0.4)
Current
Forward
foreign
exchange
contracts
Non-current
Cross-
currency
swaps
Forward
foreign
exchange
contracts
– cash flow
hedges
– FVTPL
– cash flow
hedges
– cash flow
hedges
The Group’s hedging reserves disclosed in the consolidated statement of changes in equity, relate to the following hedging instruments:
143.1
265.0
0.1
(7.1)
324.6
30.9
21.4
(0.4)
Cost of
hedging
reserve
CCIRS1
£m
Deferred
tax
£m
Total
cost of
hedging
reserve
£m
Hedge
reserve
FX
derivatives
£m
Hedge
reserve
CCIRS
£m
Hedge
reserve
gilt locks
£m
Deferred
tax
£m
Total
hedge
reserve
£m
Opening balance 4 April 2021
(5.8)
1.2
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 2 April 2022
–
0.8
–
–
–
(5.0)
–
–
–
–
0.2
1.4
(4.6)
–
0.8
–
–
0.2
(3.6)
42.7
25.4
0.1
(13.4)
(65.7)
(26.4)
–
(6.5)
–
–
(29.5)
–
–
10.5
–
9.5
–
–
–
–
–
0.1
–
–
–
–
15.7
2.3
Opening balance 3 April 2022
(5.0)
1.4
(3.6)
(29.5)
9.5
0.1
2.3
54.8
(92.1)
–
(6.5)
10.5
15.7
(17.6)
(17.6)
(76.2)
–
123.9
14.4
–
(45.3)
(30.9)
(0.8)
–
–
0.2
(4.2)
–
123.9
–
–
–
–
14.4
–
–
–
–
–
–
–
–
–
–
49.1
(7.0)
0.1
(10.3)
31.9
(12.6)
(12.6)
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 1 April 2023
1 Cross-currency interest rate swaps
2 Other comprehensive income
–
(0.8)
–
–
–
(5.8)
–
–
–
–
0.2
1.6
190
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 21 FINANCIAL INSTRUMENTS CONTINUED
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 £0.9m gain (last year: £1.3m
gain) as the loss on the hedged items was £30.0m (last year: £25.4m loss) and the movement on the hedging instruments was a £30.9m
gain (last year: £26.7m gain).
Movement in hedged items and hedging instruments
Net gain in fair value of cross-currency interest rate swap
Net loss on hedged items
Ineffectiveness
2023
£m
30.9
(30.0)
0.9
2022
£m
26.7
(25.4)
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 represent reasonably possible changes.
However, this analysis is for illustrative purposes only. The directors believe 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 2 April 2022
Impact on income statement: (loss)/gain
Impact on other comprehensive income: (loss)/gain
At 1 April 2023
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
(19.2)
(4.2)
(17.2)
3.0
19.2
3.3
17.2
(2.3)
–
–
243.5
(243.5)
–
–
227.9
(227.9)
Annual Report & Financial Statements 2023
191
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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 set off 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 2 April 2022
Trade and other receivables
Derivative financial assets
Trade and other payables
Derivative financial liabilities
At 1 April 2023
Trade and other receivables
Derivative financial assets
Trade and other payables
Derivative financial liabilities
Gross financial
assets/
(liabilities)
£m
Gross financial
(liabilities)/
assets set off
£m
Net financial
assets/
(liabilities) per
statement of
financial
position
£m
Related
amounts not
set off 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
Gross
financial
assets/
(liabilities)
£m
Gross
financial
(liabilities)/
assets set off
£m
Net financial
assets/
(liabilities)
per statement
of financial
position
£m
Related
amounts not
set off in the
statement of
financial
position
£m
19.2
22.7
41.9
(317.3)
(65.2)
(382.5)
(16.5)
–
(16.5)
16.5
–
16.5
2.7
22.7
25.4
(300.8)
(65.2)
(366.0)
–
(18.0)
(18.0)
–
18.0
18.0
Net
£m
2.9
61.6
64.5
(259.8)
(0.2)
(260.0)
Net
£m
2.7
4.7
7.4
(300.8)
(47.2)
(348.0)
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 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.
192
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES 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:
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
Liabilities measured at fair value
Financial liabilities at fair value through profit or loss
– derivatives held at FVTPL
– Ocado contingent consideration2
– Gist contingent consideration3
Derivatives used for hedging
2023
2022
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
–
–
–
–
–
–
–
–
12.3
22.7
–
8.6
–
–
20.9
22.7
(2.1)
–
(2.1)
–
–
(64.7)
(64.7)
(25.0)
(25.0)
(63.1)
–
(63.1)
–
–
–
–
–
–
–
0.6
17.6
64.4
–
4.5
–
0.6
22.1
64.4
(0.9)
–
(0.9)
–
–
(2.7)
(172.6)
(172.6)
–
–
–
(2.7)
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 £7.3m of venture capital investments, managed by True Capital Limited, measured at FVTPL (last year: £3.1m) (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. 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. Last year, £33.8m was settled, relating to the first two targets. The final target
relates to Ocado Retail Limited achieving a specified target level of earnings in the financial year ending November 2023, with any resulting payment due in 2024 following
completion of the Ocado Retail Limited audited FY23 statutory accounts. The performance target is binary, meaning that a payment of £156.3m plus interest will be made if the
performance target is met. Should the target not be met, no consideration would be payable. The fair value of the contingent consideration was estimated using an expected
present value technique and was based on probability-weighting possible scenarios and applying an appropriate discount rate to reflect the timing of the possible payment.
The Group has considered a range of scenarios reflecting current market uncertainty, taking into account Ocado Retail Limited’s most recent trading update in March 2023, and
determined a fair value of £64.7m (last year: £172.6m). If the level of earnings assumed in the probability-weighted scenarios was 10% higher or lower, the fair value of liability
would increase or decrease by £17.5m respectively. A discount rate of 6.4% (last year: 4.2%) was used. During the period, a gain of £108.0m was recognised in profit or loss in relation
to the remeasurement (see note 5).
3. As part of the investment in Gist Limited, the Group has agreed to pay the former owners of Gist Limited additional consideration of up to £25.0m plus interest when freehold
properties are disposed of under certain conditions (for other consideration payable please see note 19). There is no minimum amount payable. The Group has the ability to retain
the properties should it wish to do so, in which case the full amount of £25.0m plus interest will be payable on the third anniversary of completion.
The fair value of the contingent consideration arrangement of £25.0m was estimated by calculating the present value of the future expected cashflows. The estimates are based
on a discount rate of 6.1%. A 2.5% change in the discount rate would result in a change in fair value of £1.4m.
The Marks & Spencer UK Pension Scheme holds a number of financial instruments which make up the pension asset of £6,781.9m
(last year: £10,090.7m). Level 1 and Level 2 financial assets measured at fair value through other comprehensive income amounted to
£2,754.7m (last year: £4,945.8m1). Additionally, the scheme assets include £4,027.2m (last year: £5,144.9m1) of Level 3 financial assets. See
note 11 for information on the Group’s retirement benefits.
Annual Report & Financial Statements 2023
193
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
21 FINANCIAL INSTRUMENTS CONTINUED
The following table represents the changes in Level 3 instruments held by the Pension Schemes:
Opening balance
Fair value (loss)/gain recognised in other comprehensive income1
Cash withdrawals
Closing balance
2023
£m
2022
£m
5,144.9
4,996.9
(401.8)
(715.9)
191.6
(43.6)
4,027.2
5,144.9
1 Last year restated to reflect the deferred payment due from the Marks and Spencer Scottish Limited Partnership (see note 12).
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 £1,346.4m (last year: £1,529.5m); the fair value of this debt
was £1,264.3m (last year: £1,549.6m) 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 £124.8m (last year: £192.3m) and the fair
value of this liability is £121.9m (last year: £187.9m).
Capital policy
The Group’s objectives when managing capital are to fund investment in the transformation and deliver financial performance at an
investment grade level, 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.
In doing so, the Group’s strategy is to sustain a capital structure that supports 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: five 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 will consider the appropriate level of dividends paid to shareholders and
options to return capital to shareholders, issue new shares or sell assets to reduce debt.
22 PROVISIONS
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
Other
£m
76.7
23.5
5.3
(8.4)
(5.1)
–
3.8
95.8
28.5
38.0
–
(2.8)
(28.2)
(0.1)
–
35.4
12.1
6.2
–
(3.0)
(0.9)
(0.2)
–
14.2
Total
£m
117.3
67.7
5.3
(14.2)
(34.2)
(0.3)
3.8
145.4
53.6
91.8
194
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 22 PROVISIONS CONTINUED
At 3 April 2022
Acquired through business combinations
Provided in the year – charged to profit or loss
Released in the year
Utilised during the year
Exchange differences
Discount rate unwind
At 1 April 2023
Analysed as:
Current
Non-current
Property
£m
Restructuring
£m
Other
£m
95.8
1.8
25.3
(46.0)
(3.5)
–
5.4
78.8
35.4
-
14.0
(0.2)
(32.3)
–
–
16.9
14.2
1.5
12.3
(0.6)
(3.8)
0.1
–
23.7
Total
£m
145.4
3.3
51.6
(46.8)
(39.6)
0.1
5.4
119.4
44.0
75.4
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
transition to a single-tier UK distribution network; 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 restructure of certain International
franchise operations; and cost savings and transformation relating to the acquisition of Gist. 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 the restructure of certain International 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 £100.3m at 1 April 2023 (last year: £124.9m), with a net charge in the year of £3.9m (last year:
£48.2m) (see note 5).
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 25%
(last year: 19% and 25% as applicable) 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 4 April 2021
(Charged)/credited
to income statement
(Charged)/Credited
to equity/other
comprehensive income
At 2 April 2022
At 2 April 2022
Credited/(charged)
to income statement
Credited/(charged)
to equity/other
comprehensive income
Acquisition of Gist
At 1 April 2023
Land and
buildings
temporary
differences
£m
Capital
allowances in
excess of
depreciation
£m
(50.3)
(15.4)
22.6
3.7
Pension
temporary
differences
£m
(148.7)
(14.7)
IFRS 16
adjustment
£m
104.9
12.6
Other
short-term
temporary
differences
£m
30.6
7.7
Total UK
deferred tax
£m
Overseas
deferred tax
£m
(40.9)
(6.1)
(1.4)
1.0
Total
£m
(42.3)
(5.1)
–
–
(128.7)
–
(14.1)
(142.8)
3.0
(139.8)
(65.7)
(65.7)
3.7
26.3
26.3
(36.4)
(292.1)
(292.1)
(7.4)
–
–
158.0
117.5
117.5
(5.7)
–
–
(11.5)
(73.5)
(1.0)
(11.1)
1.0
(140.5)
111.8
24.2
24.2
4.9
(189.8)
(189.8)
(40.9)
2.6
2.6
(0.2)
(187.2)
(187.2)
(41.1)
17.6
175.6
(0.6)
175.0
0.1
46.8
(11.4)
(66.5)
–
1.8
(11.4)
(64.7)
Annual Report & Financial Statements 2023
195
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 23 DEFERRED TAX CONTINUED
Other short-term temporary differences relate mainly to employee share options and financial instruments.
The deferred tax liability on land and buildings temporary differences is reduced by the benefit of capital losses with a gross value of
£230.5m (last year: £236.6m) and a tax value of £57.6m (last year: £58.6m). The gross carried forward capital losses are £348.0m (last year:
£364.7m) with a tax value of £87.0m (last year: £91.2m) and are inclusive of the gross £230.5m of losses used to reduce the deferred tax
liability on land and buildings.
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 £5.2m (last year: £5.6m) and a tax value of £1.3m (last year: £1.4m).
No deferred tax is recognised in respect of undistributed earnings of overseas subsidiaries and joint ventures with a gross value of £46.1m
(last year: £34.2m) 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 £4.4m (last year: £3.1m) however this has not been recognised on the
basis that the distribution can be controlled by the Group, and it is not probable that the temporary difference will reverse in the
foreseeable future.
24 ORDINARY SHARE CAPITAL
2023
Ordinary shares
of £0.01 each
Shares
£m
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
Issued and fully paid
At start of year
1,958,905,344
19.7
1,956,513,591
489.2
1,266,035
0.3
–
–
–
–
–
–
–
–
Shares issued in
respect of employee
share option schemes
Subdivision of
ordinary share capital
Repurchase of
deferred shares
Shares issued in
respect of employee
share option schemes
–
–
–
–
–
–
6,028,587
0.1
At end of year
1,964,933,931
19.8
(1,957,779,626)
(489.5)
1,957,779,626
19.6
1,957,779,626
469.9
–
–
–
–
–
–
–
–
(1,957,779,626)
(469.9)
1,125,718
0.1
1,958,905,344
19.7
–
–
–
–
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 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 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 6,028,587 (last year: 2,391,753) ordinary shares having a nominal value of £0.1m (last year: £0.4m) 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 £0.1m (last year: £0.3m).
196
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 25 CONTINGENCIES AND COMMITMENTS
A. Capital commitments
Commitments in respect of properties in the course of construction
Software capital commitments
2023
£m
100.8
6.1
106.9
2022
£m
59.8
6.1
65.9
Last year, the Group 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.
At 1 April 2023, the Group had invested £7.5m (last year: £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 no
material 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.
26 ANALYSIS OF CASH FLOWS GIVEN IN THE STATEMENT OF CASH FLOWS
Cash flows from operating activities
Profit on ordinary activities after taxation
Income tax expense
Finance costs
Finance income
Operating profit
Share of results of Ocado Retail Limited
Increase in inventories
Increase 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
2023
£m
364.5
111.2
205.5
(166.1)
515.1
29.5
(58.5)
(33.7)
82.1
523.2
38.0
(36.8)
(67.9)
(2.0)
111.5
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
1,100.5
1,385.7
1 Excludes £11.5m (last year: £5.6m) 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, UK structural simplification programme, the utilisation of
the provisions for International store closures and impairments, and legal costs related to the acquisition of Gist Limited.
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.
Annual Report & Financial Statements 2023
197
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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
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
Cash
flow
£m
4.7
531.7
536.4
(0.8)
244.0
344.3
–
–
588.3
(208.7)
Changes
in fair
values
£m
Lease
additions and
remeasurements
£m
Exchange
and other
non-cash
movements1
£m
–
–
–
–
–
–
–
26.6
26.6
(26.6)
–
–
–
–
–
(100.6)
–
–
(100.6)
–
–
(8.2)
(8.2)
–
(91.4)
(116.5)
(2.4)
–
(210.3)
221.0
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)
63.3
Net debt
(3,515.9)
915.2
–
(100.6)
2.5
(2,698.8)
Net debt
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
At
3 April
2022
£m
1,197.9
1,197.9
17.6
(1,529.5)
(2,278.7)
(187.9)
18.5
(3,977.6)
63.3
Cash
flow
£m
(130.5)
(130.5)
(5.3)
262.3
353.8
66.0
(57.4)
624.7
(171.7)
Changes
in fair
values
£m
Lease
additions and
remeasurements
£m
Exchange
and other
non-cash
movements1
£m
–
–
–
–
–
–
33.7
33.7
(33.7)
–
–
–
–
(270.7)
–
–
0.5
0.5
0.7
(79.2)
(86.0)
–
–
(270.7)
–
(165.2)
179.1
At
1 April
2023
£m
1,067.9
1,067.9
13.0
(1,346.4)
(2,281.6)
(121.9)
(5.2)
(3,755.1)
37.0
Net debt
(2,698.8)
317.2
–
(270.7)
15.1
(2,637.2)
1 Exchange and other non-cash movements includes interest paid on Medium Term Notes of £65.4m (last year: £79.6m), interest paid on lease liabilities of £116.7m (last year:
£121.1m) and interest paid on the Partnership liability to the Marks & Spencer UK Pension Scheme of £4.3m (last year: £4.4m).
198
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 27 ANALYSIS OF NET DEBT CONTINUED
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)
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 note 12 and 21)
Interest payable included within related borrowing and the partnership liability to the Marks & Spencer UK
Pension Scheme
Net debt
28 RELATED PARTY TRANSACTIONS
2023
£m
2022
£m
1,067.9
13.0
(1,356.6)
(2,281.6)
(124.8)
1,197.9
17.6
(1,494.7)
(2,278.7)
(192.3)
(2,682.1)
(2,750.2)
44.9
51.4
(2,637.2)
(2,698.8)
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
The following transactions were carried out with Ocado Retail Limited, an associate of the Group.
Loan to Ocado Retail Limited
Opening balance
Loans advanced
Interest charged
Closing balance
2023
£m
–
30.0
0.9
30.9
2022
£m
–
–
–
–
The loan matures during 2039/40 and accrues interest at Sterling Overnight Index Average (“SONIA”) plus an applicable margin.
Parent guarantee
Ocado Retail Limited has entered into a £30.0m revolving credit facility provided by BNPP, of which £25.0m was drawn at 1 April 2023 (last
year: undrawn). The Group, along with Ocado Group plc, jointly guarantee the facility.
Sales and purchases of goods and services
Sales of goods and services
Purchases of goods and services
2023
£m
35.7
0.1
2022
£m
36.1
0.2
Included within trade and other receivables is a balance of £2.9m (last year: £1.9m) owed by Ocado Retail Limited.
Nobody’s Child Limited
Nobody’s Child Limited became an associate of the Group in November 2021.
During the year, the Group made purchases of goods amounting to £6.3m (last year: £1.2m)
At 1 April 2023, there was no balance included within trade and other payables (last year: £0.2m) owed to Nobody’s Child Limited,
and a £0.7m balance included within other financial assets (last year: £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.
Annual Report & Financial Statements 2023
199
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
28 RELATED PARTY TRANSACTIONS CONTINUED
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
2023
£m
14.3
4.8
19.1
2022
£m
15.3
2.1
17.4
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 was owned by Mr. Justin King, a Non-Executive Director of the Group (the “JK TSE Shares”). Following shareholder approval,
the Group acquired the JK TSE Shares from Mr. Justin King at a total purchase price of £0.3m in July 2022.
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 control 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 had a financial year end date of 27 November 2022, 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 28 February 2022 to 26 February 2023. There were no significant events or transactions
in the period from 27 February 2023 to 1 April 2023.
The carrying amount of the Group’s interest in Ocado Retail Limited is £756.9m (last year: £800.4m). The Group’s share of Ocado Retail
Limited losses of £43.5m (last year: loss of £18.6m) includes the Group’s share of underlying losses of £29.5m, which includes £13.2m of
exceptional income before tax related to insurance receipts (last year: share of underlying profit: £13.9m) and adjusting item charges of
£14.0m (last year: £32.5m) (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
(Loss)/profit for the period
Other comprehensive income
Total comprehensive (loss)/income
200
Marks and Spencer Group plc
As at
26 Feb 2023
£m
As at
27 Feb 2022
£m
220.0
618.7
(267.7)
(421.7)
149.3
291.2
590.1
(223.3)
(449.8)
208.2
28 Feb 2022 to
26 Feb 2023
£m
29 Feb 2021 to
27 Feb 2022
£m
2,222.0
2,248.8
(59.0)
–
(59.0)
27.8
–
27.8
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 29 INVESTMENTS IN JOINT VENTURES AND ASSOCIATES CONTINUED
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
1 Apr 2023
£m
As at
2 Apr 2022
£m
149.3
74.6
449.1
236.2
67.1
(75.8)
5.7
756.9
208.2
104.1
449.1
242.7
77.7
(78.9)
5.7
800.4
In addition, the Group holds immaterial investments in joint ventures and associates totalling £11.0m (last year: £10.5m). The Group’s
share of profits totalled £0.5m (last year: £0.7m loss).
30 GOVERNMENT SUPPORT
The Group benefited from business rates relief of £nil in the year (last year: £62.2m (including UK: £59.8m)).
There are no unfulfilled conditions or contingencies attached to these grants.
31 BUSINESS COMBINATION
On 30 September 2022, the Group completed the acquisition of 100% of the issued share capital and voting rights of Gist Limited (“Gist”), a
non-listed logistics and supply chain business based in the UK, thereby obtaining control. Gist provides the majority of M&S Food logistics
services via a network of primary and secondary distribution centres located across the UK and the Republic of Ireland, including a number
of freehold warehouses. The acquisition is expected to accelerate the Group’s multi-year plan to modernise its Food supply chain network to
support growth.
The acquisition has been accounted for as a business combination using the acquisition method of accounting in accordance with IFRS 3
Business Combinations and consequently the Gist assets acquired, and liabilities assumed, have been recorded by the Group at fair value.
Fair value of consideration transferred
Cash
Deferred consideration
Contingent consideration
Settlement of pre-existing relationship
Total consideration transferred
Fair value of identifiable net assets
Intangible assets
Property, plant and equipment1
Inventories
Trade and other receivables2
Cash and cash equivalents
Trade and other payables
Borrowings and other financial liabilities
Provisions
Deferred tax liabilities
Total identifiable net assets acquired
Gain on bargain purchase
Net cash outflow arising on acquisition
Cash consideration
Less: cash and cash equivalents acquired
As at
30 Sep 2022
£m
170.6
83.5
23.7
(18.2)
259.6
2.7
213.8
3.3
88.0
67.8
(74.1)
(21.3)
(2.9)
(11.5)
265.8
(6.2)
170.6
(67.8)
102.8
1 Property, plant and equipment principally comprises the distribution warehouses which were fair valued following a review undertaken by RICS registered valuers.
2 The fair value of trade and other receivables is considered equivalent to the gross contractual amount and the Group expects to collect substantially all of these.
Annual Report & Financial Statements 2023
201
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 31 BUSINESS COMBINATION CONTINUED
The acquisition resulted in a gain on bargain purchase due to the estimated fair value of the identifiable net assets acquired exceeding
the element of the purchase price treated as consideration. The gain has been recognised within adjusting items (see note 5).
A bargain purchase has arisen as a result of a combination of factors including the previous owner’s decision to sell Gist and the element
of the acquisition price relating to settling the pre-existing relationship, as opposed to forming part of the purchase consideration.
The Group incurred acquisition-related costs of £6.8m, predominantly transaction costs, which have been recognised within adjusting
items (see note 5).
Since the acquisition date, Gist, as a standalone entity, contributed £84.2m of revenue and £0.1m of loss before tax to the Group’s results.
If the acquisition had occurred on 3 April 2022, the Group estimates that consolidated pro-forma revenue would have been c.£100m
higher and profit before tax would have been c.£1m higher. In determining these amounts, the Group has assumed that the fair value
adjustments that arose on the date of acquisition would have been the same if the acquisition had occurred on 3 April 2022.
Settlement of pre-existing relationship
The Group and Gist were parties to a long-term supply contract under which Gist supplied the Group with logistics services at agreed
contract rates. This pre-existing relationship was effectively terminated at the acquisition date.
The Group has attributed £18.2m of the consideration transferred to the settlement of the pre-existing relationship. The fair value of the
settlement has been determined based on an assessment of the difference between current market rates and the rates previously
agreed in the higher cost legacy supply contract. This amount has been recognised within adjusting items (see note 5).
32 CONTINGENT ASSETS
The Group is currently seeking damages from an independent third party following its 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 judgments in similar claims. The value of the claim is confidential and is therefore
not disclosed.
33 SUBSEQUENT EVENTS
The Board has approved a tender offer to repurchase c.£225m of the Group’s Medium Term Notes which will be announced on 24 May 2023.
202
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED 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
1 April 2023
£m
As at
2 April 2022
£m
Notes
C6
8,006.9
8,006.9
9,403.7
9,403.7
2,541.0
2,541.0
5,465.9
19.8
910.7
2,680.4
–
1,855.0
5,465.9
2,541.2
2,541.2
6,862.5
19.7
910.6
2,680.4
870.9
2,380.9
6,862.5
C7
C7
C7
The Company’s loss for the year was £1,429.5m (last year: loss of £357.3m).
The financial statements were approved by the Board and authorised for issue on 23 May 2023. The financial statements also comprise
the notes C1 to C7.
Stuart Machin Chief Executive Officer
Katie Bickerstaffe Co-Chief Executive Officer
Registered number: 04256886
COMPANY STATEMENT OF CHANGES IN
SHAREHOLDERS’ EQUITY
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 from merger reserve
At 2 April 2022
At 3 April 2022
Loss for the year
Capital contribution for share-based payments
Shares issued on exercise of employee share options
Reclassification from merger reserve (see note C7)
At 1 April 2023
Ordinary
share
capital
£m
489.2
–
–
0.4
(469.9)
–
19.7
19.7
–
–
0.1
–
19.8
Share
premium
account
£m
Capital
redemption
reserve
£m
Merger
reserve
£m
910.4
2,210.5
1,262.0
Retained
earnings
£m
2,316.9
(357.3)
30.2
–
–
–
–
–
–
–
–
–
(391.1)
870.9
870.9
391.1
2,380.9
2,380.9
32.7
–
(870.9)
870.9
Total
£m
7,189.0
(357.3)
30.2
0.6
–
–
6,862.5
6,862.5
32.7
0.2
–
(1,429.5)
(1,429.5)
–
–
0.2
–
–
910.6
910.6
–
–
0.1
–
–
–
–
469.9
–
2,680.4
2,680.4
–
–
–
–
910.7
2,680.4
–
1,855.0
5,465.9
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 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) remained unchanged.
Annual Report & Financial Statements 2023
203
STRATEGIC REPORTGOVERNANCEFINANCIAL 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
1 April 2023
£m
52 weeks
ended
2 April 2022
£m
–
–
–
0.2
(0.2)
–
–
–
33.8
(33.8)
–
0.6
(0.6)
–
–
–
204
Marks and Spencer Group plc
FINANCIAL STATEMENTS 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 is 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 £1,273,406 (last year: £1,174,790). 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
The Company suspended dividend payments at the start of the pandemic to protect the balance sheet. This enabled it to invest in its
transformation priorities and trusted value. Consistent with that announcement, the Board does not expect to pay a dividend in 2022/23.
However, with the business generating an improved operating performance and having a strengthened balance sheet with credit metrics
consistent with investment grade, the Board plans to restore a modest annual dividend to shareholders starting with an interim dividend
with the results in November.
C5 RELATED PARTY TRANSACTIONS
During the year, the Company did not receive a dividend from Marks and Spencer plc (last year: £33.8m) and decreased its loan from
Marks and Spencer plc by £0.2m (last year: £0.6m). The outstanding balance was £2,541.0m (last year: £2,541.2m) and is non-interest
bearing. There were no other related party transactions.
Annual Report & Financial Statements 2023
205
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS C6 INVESTMENTS
A. Investments in subsidiary undertakings
Beginning of the year
Contributions to subsidiary undertakings relating to share-based payments
Additions
Impairment charge
End of year
2023
£m
2022
£m
9,403.7
9,730.8
32.7
–
(1,429.5)
8,006.9
30.2
33.8
(391.1)
9,403.7
Shares in subsidiary undertakings represent the Company’s investment in Marks and Spencer plc, Marks and Spencer Holdings Limited
and Marks and Spencer (A2B) Limited.
During last 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 prior 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 1 April 2023, the market capitalisation of the Group was significantly below
the carrying value of its investment in Marks and Spencer plc of £8,830.2m, indicating a potential impairment, despite strong
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 1 April 2023, reflecting the latest budget and forecast cash flows covering a three-year
period. The pre-tax discount rate of 12.5% (last year: 9.8%) 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: 2.0%), 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 £7,400.7m and as a result has
recognised an impairment of £1,429.5m. This impairment primarily relates to the impact of market volatility on the discount rate as a
result of changes in the macro-economic environment.
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 £374.6m;
– A 50-basis point decrease in the long-term growth rate would result in an additional impairment charge of £286.4m; and
– A 250-basis point increase in the discount rate would result in an additional impairment charge of £1,403.9m.
In the event that all three were to occur simultaneously, an additional impairment charge of £1,881.6m would be recorded.
206
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE 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 1 April 2023 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
Share class
Founders Factory
Retail Limited
Registered office: Founders
Factory (Level 7) Arundel
Street Building 180 Strand,
2 Arundel Street, London
WC2R 3DA
£0.0001 ordinary (25.001% of
total capital)
£0.0001 preferred (74.999% of
total capital)
Hedge End Park Limited
£1 ordinary A
Registered Office: 33
Holborn, London, EC1N 2HT
(50% of total capital)
£1 ordinary B
(50% of total capital)
Marks and Spencer Company
Archive (CIC) (ii)
N/A
Marks and Spencer Guernsey
Investments LLP
Marks and Spencer Pension
Trust Limited (iii) (v)
Partnership interest
£1 ordinary A
£1 ordinary B
£1 ordinary C
Marks and Spencer plc (v)
£0.25 ordinary
Partnership interest
Marks and Spencer Scottish
Limited Partnership (iv)
Registered Office: 2-28 St
Nicholas Street,
Aberdeen, AB10 1BU
Proportion of
shares held
(%)
Name
0.004
Ocado Retail Limited
100
Registered Office: Apollo
Court 2 Bishop Square,
Hatfield Business Park,
Hatfield, Hertfordshire,
AL10 9NE
Share class
£0.01 ordinary
Proportion of
shares held
(%)
50
Amethyst Leasing
(Holdings) Limited
–
£1 ordinary
M & S Limited
£1 ordinary
100
Manford (Textiles) Limited
£1 ordinary
–
100
100
–
–
100
100
Marks and Sparks Limited
£1 ordinary
Marks and Spencer (Northern
Ireland) Limited
£1 ordinary
Registered Office: C/O
Pricewaterhousecoopers,
Waterfront Plaza, 8
Laganbank Road, Belfast,
BT1 3LR
Marks and Spencer Property
Developments Limited
£1 ordinary
Nobody’s Child Limited
£0.01 ordinary
Registered Office: 10-11
Greenland Place, Camden,
London, NW1 0AP
(72.910% of total capital)
£0.01 Preference
(27.090% of total capital)
St. Michael (Textiles) Limited £1 ordinary
100
100
100
100
100
100
–
100
100
Annual Report & Financial Statements 2023
207
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 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 1 April 2023. 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: 2 Semple Street,
Edinburgh EH3 8BL
Marks and Spencer
(Property Ventures) Limited
Marks and Spencer 2005
(Brooklands Store) Limited
Marks and Spencer 2005
(Chester Satellite Store) Limited
(in liquidation)
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
100
100
100
100
100
100
100
100
100
100
Company
Number
4246934
4411320
SC315365
5502513
5502608
5502519
Name
Marks and Spencer International
Holdings Limited
Marks and Spencer (Investment
Holdings) Limited
Marks and Spencer (A2B) Limited(v)
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)
5502542
Marks and Spencer Hungary Limited
(in liquidation)
5502598
Marks and Spencer Investments
Marks and Spencer Property Holdings Limited
5502546
5502538
Ruby Properties (Cumbernauld) Limited
Ruby Properties (Hardwick) Limited
Ruby Properties (Long Eaton) Limited
5502478
Ruby Properties (Thorncliffe) Limited
5502523
5502520
Ruby Properties (Tunbridge) Limited
Simply Food (Property Investments)
Simply Food (Property Ventures) Limited
Marks and Spencer (Bradford) Limited
4039568
Marks and Spencer (Jaeger) Limited
4739922
Marks and Spencer Pearl (1) Limited
Marks and Spencer Pearl (Daventry) Limited
5502582
5174129
5502548
Gist Limited
St. Michael Finance Limited
The Sports Edit Limited
Proportion of
shares held
(%)
Company
Number
100
2615081
100
13587353
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
14228803
5502588
5502544
5502502
11845975
8540784
4903061
2100781
4922798
4716018
4716031
4716110
4716032
5502543
2239799
10011863
13098074
14276824
14267865
502669
1339700
82.583
9331295
The Company will guarantee the debts and liabilities of the above UK subsidiary undertakings at the balance sheet date of £89.5m 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)
(iii)
(iv)
(v)
No share capital, as the company is limited by guarantee. Marks and Spencer plc is the sole member.
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.
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.
Interest held directly by Marks and Spencer Group plc.
208
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE FINANCIAL STATEMENTS CONTINUED C6 INVESTMENTS CONTINUED
B. RELATED UNDERTAKINGS CONTINUED
International subsidiary undertakings(i)
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
Czech
Republic
Greece
€3 Ordinary
€3 Preference
Guernsey
£1 Ordinary
100
100
100
100
80(ii)
100
100
Name
Marks &
Spencer
(Portugal) Lda.
M.S. General
Insurance L.P.
Marks and
Spencer (Hong
Kong)
Investments
Limited
Marks and
Spencer (India)
pvt Limited
Marks and
Spencer
Reliance India
pvt Ltd
Registered
address
Avenida da
Liberdade 249,
8º, 1250-143,
Lisbon, Portugal
Heritage Hall, Le
Marchant Street,
St Peter Port,
GY1 4JH,
Guernsey
Suites 807-13,
8/F, South Tower,
World Finance
Centre, Harbour
City, Kowloon,
Hong Kong
Plot No 64, 2nd
Floor, Holly
Hocks, Sector
44, Gurgaon –
122 002,
Haryana, India
4th Floor, Court
House,
Lokmanya Tilak
Marg, Dhobi
Talao, Mumbai,
400 002, India
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 16/F,
Eco City 1788,
1788 West Nan
Jing Road,
Shanghai, China
Jemnická 1138/1,
Michle, Praha 4,
140 00,
Czech Republic
Marks and
Spencer
Services S.R.O
Marks and
Spencer
Marinopoulos
Greece SA
Jemnická 1138/1,
Michle, Praha 4,
140 00,
Czech Republic
33-35 Ermou
Street, Athens
10563, Greece
Ignazia Limited Heritage Hall, Le
Marchant Street,
St Peter Port,
GY1 4JH,
Guernsey
Teranis Limited Heritage Hall, Le
Marchant Street,
St Peter Port,
GY1 4JH,
Guernsey
Marks and
Spencer
(Singapore)
Investments
Pte. Ltd.
Marks and
Spencer (SA)
(Pty) Limited
100
–
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.
Marks and
Spencer BV
Marks and
Spencer
Stores BV
24/27 Mary
Street, Co.
Dublin, D01
YE83, Ireland
24-27 Mary
Street, Dublin 1,
Ireland
Ireland
Ordinary of
€1.25
Ireland
N/A(iii)
Netherlands €100 Ordinary
100
Netherlands €450 Ordinary
100
Netherlands €100 Ordinary
100
Netherlands €450 Ordinary
100
Basisweg 10
1043 AP
Amsterdam
Netherlands
Basisweg 10,
1043 AP,
Amsterdam,
Netherlands
Basisweg 10,
1043 AP,
Amsterdam,
Netherlands
Basisweg 10,
1043 AP,
Amsterdam,
Netherlands
Marks and
Spencer
Romania SA
(in liquidation)
Marks and
Spencer
Clothing
Textile
Trading J.S.C.
Gist
Distribution
Limited
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
Havalani Karsisi
istanbul Dunya
Ticaret Merkezi
A3 Blok, Kat:11
Yesilkoy,
Bakirkoy
Istanbul
Turkey
24-27 Mary
Street, Dublin 1,
Ireland
Country
Share class
Proportion of
shares held
by subsidiary
(%)
Portugal
€1 Ordinary
100
Guernsey
Partnership
Interest
Hong
Kong
No Par Value
Ordinary
100
100
India
INR10
100
Ordinary
India
INR 10 Class A
(14.619% of
total capital)
INR 10 Class B
(43.544% of
total capital)
INR 5 Class C(iv)
(41.837% of
total capital)
51
100
0
100
100
South Africa ZAR 2 Ordinary
100
Romania
RON 18.30
Ordinary
Turkey
TRL 25.00
Ordinary
100
100
Ireland
€1 Ordinary
100
Guernsey
£1 Ordinary
100
Aprell Limited
24/29 Mary
Street, Dublin 2,
Ireland
Ireland
€1.25 Ordinary
Singapore
SGD NPV
NOTE: A number of the companies listed are legacy companies which no longer serve any operational purpose.
(i)
(ii)
(iii)
(iv)
The shares of all international subsidiary undertakings are held by companies within the Group other than the Company (Marks and Spencer Group plc).
20% of ordinary shares are owned by JV partner
No share capital as the company is limited by guarantee
INR 5 Class C shares 100% owned by JV partner.
Annual Report & Financial Statements 2023
209
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS
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) remained 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 2019/20, 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 2020/21, 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 prior year, an amount equal to the impairment of £391.1m
was transferred from the merger reserve to retained earnings in accordance with TECH 02/17. In the current year, an amount equal to the
remaining merger reserve balance of £870.9m has been transferred from the merger reserve to retained earnings, as part of the
£1,429.5m impairment charge for the year.
210
Marks and Spencer Group plc
FINANCIAL STATEMENTSNOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED GROUP FINANCIAL RECORD
Income statement
Revenue1
UK Clothing & Home
UK Food
Total UK
International
Revenue before adjusting items
Adjusting items included in revenue
Revenue
Adjusted operating profit/(loss)1
UK Clothing & Home
UK Food
Ocado
Other
Total UK
International
Total adjusted operating profit
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
2023
52 weeks
£m
2022
52 weeks
£m
2021
53 weeks
£m
2020
52 weeks
£m
2019
52 weeks
£m
3,658.3
7,218.0
10,876.3
1,055.0
11,931.3
–
3,308.3
6,639.6
9,947.9
937.2
10,885.1
2,239.0
6,138.5
8,377.5
789.4
9,166.9
3,209.1
6,028.2
9,237.3
944.6
3,499.8
5,903.4
9,403.2
974.1
10,181.9
10,377 .3
–
(11.2)
–
–
11,931.3
10,885.1
9,155.7
10,181.9
10,377.3
323.8
248.0
(29.5)
(0.5)
541.8
84.8
626.6
(111.5)
515.1
(173.3)
28.7
(144.6)
105.2
(39.4)
482.0
475.7
(111.2)
364.5
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
(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)
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
Annual Report & Financial Statements 2023
211
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Basic earnings per share1
Basic earnings/Weighted average
ordinary shares in issue
Adjusted basic earnings
per share1
Adjusted basic earnings/Weighted
average ordinary shares in issue
Adjusted earnings per share/
Dividend per share
Operating profit before
depreciation/Fixed charges
Dividend per share declared
in respect of the year
Dividend cover
Retail fixed charge cover3
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
2023
52 weeks
18.5p
2022
52 weeks
15.7p
2021
53 weeks
(10.1p)
2020
52 weeks
1.3p
2019
52 weeks
2.5p
18.1p
21.7p
1.4p
16.7p
23.7p
–
–
–
–
–
–
3.7x
3.5x
2.0x
3.9p
13.3p
4.3x
3.4x
1.8x
3.6x
2,814.9
2,637.2
402.8
1,064
16.8
406
4.8
2,917.9
2,698.8
300.2
2,285.8
3,515.9
146.9
3,708.5
3,950.6
332.0
2,469.2
3,981.5
294.5
1,035
16.7
452
5.0
1,037
16.8
472
5.1
1,038
1,043
16.8
483
5.0
17.2
445
4.9
47,266
4,826
42,550
4,558
44,423
4,754
49,094
4,894
50,578
4,862
The above results are prepared under IFRS for each reporting period on a consistent basis, with the exception of 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.
3. Calculated on Marks and Spencer Group plc’s consolidated basis.
212
Marks and Spencer Group plc
FINANCIAL STATEMENTSGROUP FINANCIAL RECORD CONTINUED 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.
Alternative performance
measure (“APM”)
Closest equivalent
statutory measure
Reconciling items to
statutory measure
Definition and purpose
Income Statement Measures
Sales
Revenue
Consignment
sales
Clothing & Home
store / Clothing &
Home online sales
None
Not applicable
Sales includes 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 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.
The growth in sales 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 sales
Consignment sales
Total UK Clothing &
Home revenue
2022/23
£m
2021/22
£m
2,538.6
2,209.5
(21.4)
(8.6)
2,517.2
2,200.9
1,176.4
(35.3)
1,141.1
1,122.7
(15.3)
1,107.4
3,715.0
(56.7)
3,332.2
(23.9)
%
14.9
14.4
4.8
3.0
11.5
3,658.3
3,308.3
10.6
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.
Annual Report & Financial Statements 2023
213
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Alternative performance
measure (“APM”)
Closest equivalent
statutory measure
Reconciling items to
statutory measure
Definition and purpose
Like-for-like
sales growth
Movement in revenue
per the income
statement
Revenue from non
like-for-like stores
Consignment sales
The period-on-period change in sales (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
Total UK Food sales
UK Clothing & Home
Like-for-like
Net new space
Total UK Clothing &
Home sales
2022/23
£m
2021/22
£m
6,872.2
345.8
7,218.0
6,519.2
120.4
6,639.6
3,647.0
68.0
3,715.0
3,280.4
51.8
3,332.2
%
5.4
8.7
11.2
11.5
1 UK Food net new space includes Gist third-party revenue.
Total sales through the Group’s online platforms. These sales are
reported within the relevant UK Clothing & Home, UK Food and
International segment results. The growth in sales 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 sales through International online platforms. These
sales are reported within the International segment results. The
growth in sales 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 sales
Stores
Online
At reported currency
2022/23
£m
2021/22
£m
874.5
180.5
1,055.0
764.7
172.5
937.2
%
14.4
4.6
12.6
The period-on-period change in sales retranslating the previous
year sales 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 sales
At constant currency
Impact of
FX retranslation
2022/23
£m
2021/22
£m
1,055.0
–
948.3
(11.1)
%
11.2
At reported currency
1,055.0
937.2
12.6
M&S.com sales /
Online sales
None
Not applicable
International online
None
Not applicable
Sales growth at
constant currency
None
Not applicable
214
Marks and Spencer Group plc
FINANCIAL STATEMENTSGLOSSARY CONTINUED Alternative performance
measure (“APM”)
Closest equivalent
statutory measure
Reconciling items to
statutory measure
Definition and purpose
Adjusting items
None
Not applicable
Adjusted operating
profit
Operating profit
before adjusting
items
Operating profit
Adjusting items
(See note 5)
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.
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.
Adjusted operating
margin
None
Not applicable
Adjusted operating profit as a percentage of sales.
Operating margin
before adjusting
items
Finance income
before adjusting items
Finance income
Adjusting items
(See note 5)
Finance costs before
adjusting items
Finance costs
Adjusting items
(See note 5)
Net interest payable
on leases
Finance income/costs Finance income/costs
(See note 6)
Net financial interest Finance income/costs Finance income/costs
(See note 6)
EBIT before
adjusting items
EBIT1
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)
Adjusted basic
earnings per share
Earnings per share
Adjusting items
(See note 5)
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.
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.
Annual Report & Financial Statements 2023
215
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Alternative performance
measure (“APM”)
Closest equivalent
statutory measure
Reconciling items to
statutory measure
Definition and purpose
Adjusted diluted
earnings per share
Diluted earnings per
share
Adjusting items
(See note 5)
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.
Effective tax rate
before adjusting items
Effective tax rate
Adjusting items and
their tax impact
(See note 5)
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.
Bought-in margin
None
Not applicable
Difference between landed cost of stock and selling value,
expressed as a percentage of total exc VAT sales.
Balance Sheet Measures
Net debt
None
Reconciliation of net
debt (see note 27)
Net debt excluding
lease liabilities
None
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.
Cash Flow Measures
Free cash flow from
operations
Operating profit
See Financial Review Calculated as operating profit less adjusting items within operating
profit, depreciation and amortisation before adjusting items, cash
lease payments, working capital, defined benefit scheme pension
funding, capex and disposals, financial interest, taxation,
employee-related share transactions, share of (profit)/loss from
associate, adjusting items in cashflow and loans to associates.
Free cash flow
Operating profit
See Financial Review Calculated as free cash flow from operations less acquisitions,
investments and divestments. 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.
Free cash flow after
shareholder returns
Other Measures
Operating profit
See Financial Review Calculated as free cash flow less dividends paid.
This measure shows the cash retained by the Group in the year.
Capital expenditure None
Not applicable
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.
216
Marks and Spencer Group plc
FINANCIAL STATEMENTSGLOSSARY CONTINUED Alternative performance
measure (“APM”)
Closest equivalent
statutory measure
Reconciling items to
statutory measure
Definition and purpose
Return on capital
employed (“ROCE”)
None
Not applicable
Calculated as being adjusted operating profit divided by the
average of opening and closing capital employed. The measures
used in this calculation are set out below:
Operating profit
Adjusting items included in
operating profit (see note 5)
Adjusted operating profit
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
2022/23
£m
515.1
111.5
2021/22
£m
572.2
136.8
626.6
709.0
2,814.9
2,917.9
124.8
192.3
72.3
3,184.0
187.2
3,561.0
4.6
42.5
38.5
(11.8)
–
5.7
–
34.0
(15.0)
(61.4)
Retirement benefit assets
(482.0)
(1,043.9)
Current tax assets
Deferred tax assets
Net operating assets
Add back: Provisions related to
adjusting items
Capital employed
Average capital employed
ROCE %
(6.5)
(7.6)
5,773.7
100.3
5,874.0
5,888.4
10.6%
–
–
5,777.8
124.9
5,902.7
5,788.3
12.2%
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.
1 EBIT is not defined within IFRS but is a widely accepted profit measure being earnings before interest and tax.
Annual Report & Financial Statements 2023
217
STRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTICE OF
ANNUAL GENERAL
MEETING 2023
TUESDAY 4 JULY 2023 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.
218
Marks and Spencer Group plc
NOTICE OF MEETING 2023
DEAR SHAREHOLDER
I am pleased to announce the 22nd Annual
General Meeting of Marks and Spencer Group
Plc will be held on 4 July 2023.”
Nick Folland
General Counsel & Company Secretary
ANNUAL GENERAL MEETING (“AGM”)
The AGM is a key date in the Board’s calendar, providing you,
as shareholders, with an opportunity to vote on key aspects
of the Company’s business, and to hear updates on the
Company’s performance and strategy progress throughout
the year. It also provides the directors with the opportunity
to hear directly from you and respond to any questions
you may have.
The success of our AGM format over the past three years
has demonstrated the power a digitally-enabled meeting has
to drive shareholder engagement, with participation levels
trebling in 2022 vs 2019. We are therefore confident that
our approach to a digitally-enabled AGM makes it far more
accessible, and is the most democratic way for the directors
and shareholders to interact and engage.
For this reason, the 2023 AGM will again be a fully digitally-
enabled meeting, broadcast from M&S’ Waterside House
Support Centre at 11am on Tuesday 4 July 2023.
Anita Anand, leading radio and television broadcaster,
journalist and author, will again be joining this year’s meeting
to act as your shareholder advocate. Anita’s role is to 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/161-121-785. 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 pages 228
and 229.
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 pages 228 and 229 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 services offered by
Proxymity or 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).
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; or
(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 30 June 2023. 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 11am on Friday 30
June, 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 30 June 2023. 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 230.
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 2023
219
NOTICE OF MEETING 2023 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
227 to 229 for instructions on how to join the meeting and
submit your votes and questions on the day.
VOTING RESULTS
The results of the voting will be announced through a
Regulatory Information Service and will be published on our
website, corporate.marksandspencer.com, on 4 July 2023, or
as soon as reasonably practicable thereafter.
Voting on all resolutions on the day will be by way of a poll.
The Lumi website will reopen at 9.30am on Tuesday 4 July 2023,
and 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. Questions may be submitted via Lumi,
either in advance, to be received before 5pm on Friday 30 June
2023, or on the day (please refer to pages 227 to 229 for further
details).
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; full
details and instructions will be provided on the Lumi AGM
platform on the day of the AGM. You can also 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 30 June 2023.
In 2022, all resolutions were passed at the meeting with votes
ranging from 70.89% to 99.99% 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 221 and 222.
M&S WEBSITE
Our corporate website, corporate.marksandspencer.com,
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
1 TO RECEIVE THE REPORT AND ACCOUNTS
The Board asks that shareholders receive the Annual Report
and Financial Statements for the 52 weeks ended 1 April 2023.
2 APPROVAL OF THE DIRECTORS’ REMUNERATION REPORT
The Directors’ Remuneration Report sets out the pay and
benefits received by each of the directors for the year ended 1
April 2023. In line with legislation, this vote is advisory and the
directors’ entitlement to remuneration is not conditional on it.
At the Annual General Meeting on 5 July 2022, 70.89% of
shareholder votes were cast in favour of the advisory
resolution to approve the Directors’ Remuneration Report for
2021/22. The Remuneration Committee noted the number of
votes cast against the resolution, and proactively engaged
with the top 40 shareholders to understand the reasons why
some shareholders voted against the resolution. An update
on this engagement was published in January 2023 on our
corporate website, and a final summary can be found on
page 129 of the Annual Report.
3 APPROVAL OF THE DIRECTORS’ REMUNERATION POLICY
The Directors’ Remuneration Policy (the “Policy”) is set out on
pages 108 to 115 of the Annual Report. It sets out the Company’s
policy on remuneration and potential payments to directors in
the future. The Policy must be approved by shareholders (by
means of a separate resolution) at least once every three years.
The current Policy was approved by shareholders at the AGM in
2020 and is therefore due for renewal. The Policy for which we
are seeking your approval this year is largely unchanged from
that approved by shareholders in 2020. Where changes have
been made, these are highlighted in the Policy. Once the Policy
is approved, the Company will not be able to make a
remuneration payment to a current or future director or a
payment for loss of office to a current or past director unless
that payment is consistent with the Policy or has been approved
by a resolution of the members of the Company.
4-14 ELECTION OF DIRECTORS
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).
Ronan Dunne joined the Board as a non-executive director on
1 August 2022. Ronan is a commercial leader with extensive
international experience in the digital telecoms industry, has
led businesses through technological and people
transformation, and has significant financial expertise. Cheryl
Potter also joined the Board as a non-executive director on 1
March 2023. Cheryl has an extensive background in private
equity and brings a strong shareholder value focus to the
Board, as well as being a passionate advocate for women in
leadership.
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 72 to 73
of the Annual Report, with further details available on our
website, corporate.marksandspencer.com. It is the Board’s
view that the directors’ biographies illustrate why each of their
contributions are, and continue to be, important to the
Company’s long-term sustainable success.
220
Marks and Spencer Group plc
NOTICE OF MEETING 2023 NOTICE OF MEETING 2023
15-16 APPOINTMENT AND REMUNERATION OF AUDITOR
On the recommendation of the Audit & Risk Committee, the
Board proposes in resolution 15 that Deloitte LLP be
reappointed as auditor of the Company.
Resolution 16 proposes that the Audit & Risk Committee be
authorised to determine the level of the auditor’s
remuneration.
17 AUTHORITY TO MAKE POLITICAL DONATIONS
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.
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, this resolution is
put to shareholders annually rather than every four years as
permitted by the 2006 Act.
18 RENEWAL OF THE POWERS OF THE BOARD TO
ALLOT SHARES
Paragraph (A) of this resolution 18 would give the directors the
authority to allot ordinary shares of the Company up to an
aggregate nominal amount equal to £6,550,886.24
(representing 655,088,624 ordinary shares of £0.01 each).
This amount represents approximately one third (33.33%) of
the Company’s issued ordinary share capital as at 23 May
2023, the latest practicable date before the publication of
this Notice.
In line with the latest guidance issued by the Investment
Association in February 2023, paragraph (B) of this resolution
would give the directors authority to allot ordinary shares in
connection with a pre-emptive offer in favour of ordinary
shareholders up to an aggregate nominal amount equal to
£13,101,772.49 (representing 1,310,177,249 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 23 May
2023, 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 2024 or
on 1 October 2024, 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.
19-20 AUTHORITY TO DISAPPLY PRE-EMPTION RIGHTS
Resolutions 19 and 20 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, two separate special resolutions were
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 that these
authorities be renewed and enhanced in line with the latest
institutional shareholder guidelines, including the revised
Statement of Principles on Disapplying Pre-Emption Rights
issued by the Pre-Emption Group in November 2022 (the
“2022 Statement of Principles”). The 2022 Statement of
Principles is supportive of companies who wish to seek
authority for the annual disapplication of pre-emption rights
to include: (i) 10% of a company’s issued ordinary share capital
to be issued on an unrestricted basis; and (ii) an additional 10%
of a company’s issued ordinary share capital to be used for
either an acquisition or specified capital investment. In both
cases an additional follow-on offer, up to a nominal amount
equal to 20% of any allotment made under (i) or (ii), can be
made to existing holders of securities not allocated shares
under such allotment, as contemplated by paragraph 3 of
Section 2B of the 2022 Statement of Principles. Whilst there is
no current intention to make use of these authorities, the
Board believes it is in the best interests of shareholders for
the directors to have the flexibility to take advantage of these
authorities if required.
Consequently, if approved, resolution 19, which follows
the Pre-emption Group’s template resolution, will authorise
the directors, in accordance with the 2022 Statement of
Principles, to issue shares in connection with pre-emptive
offers (paragraph (A) of the resolution), or otherwise to issue
shares and/or sell treasury shares for cash:
1)
2)
under paragraph (B) of the resolution, up to an aggregate
nominal amount of £1,965,265.87 (representing
196,526,587 ordinary shares), being approximately 10% of
the Company’s issued ordinary share capital as at 23 May
2023 (the latest practicable date before the publication
of this Notice); and
under paragraph (C) of the resolution, up to an additional
aggregate amount equal to 20% of any allotment under
paragraph (B) of the resolution, for the purposes of
making a follow-on offer to existing shareholders as
described in the 2022 Statement of Principles. The
maximum additional nominal amount that could be
issued under paragraph (C) of the resolution (based on
the authority under paragraph (B) being used in full) is
£393,053.17 (representing approximately 2% of the
Company’s issued ordinary share capital as at 23 May
2023).
Annual Report & Financial Statements 2023
221
NOTICE OF MEETING 2023
NOTICE OF MEETING 2023 CONTINUED
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 106,820,843
million ordinary shares, representing 5.44% of the Company’s
issued ordinary share capital as at 23 May 2023, the latest
practicable date before the publication of this Notice.
If the existing authority given at the 2022 AGM and the
authority now being sought by this resolution were to be fully
used, these options would represent 6.04% of the Company’s
ordinary share capital in issue at that date.
22 NOTICE OF GENERAL MEETING
In accordance with the 2006 Act, the notice period for general
meetings (other than the 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 the 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 22 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.
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 & Company Secretary
London, 23 May 2023
The total maximum nominal amount of equity securities to
which resolution 19 relates is £2,358,319.04 (representing
approximately 12% of the Company’s issued ordinary share
capital as at 23 May 2023).
The purpose of resolution 20, which also follows the Pre-
emption Group’s template resolution and reflects the 2022
Statement of Principles, is to authorise the directors to allot
new shares and other equity securities pursuant to the
allotment authority given by resolution 18, or sell treasury
shares for cash, without first being required to offer such
securities to existing shareholders:
1)
2)
under paragraph (A) of the resolution, up to a further
nominal amount of £1,965,265.87 (representing
196,526,587 ordinary shares), being approximately 10%
of the Company’s issued ordinary share capital as at 23
May 2023 (the latest practicable date before the
publication of this Notice), to be used only in connection
with an acquisition or specified capital investment of
a kind contemplated by the 2022 Statement of Principles,
and which is announced contemporaneously with the
allotment, or which has taken place in the preceding
12-month period and is disclosed in the announcement
of the issue; and
under paragraph (B) of the resolution, up to an additional
aggregate amount equal to 20% of any allotment under
paragraph (A) of the resolution, for the purposes of
making a follow-on offer to existing shareholders as
described in the 2022 Statement of Principles. The
maximum additional nominal amount that could be
issued under paragraph (B) of the resolution (based on
the authority under paragraph (A) being used in full) is
£393,053.17 (representing approximately 2% of the
Company’s issued ordinary share capital as at 23 May
2023).
The total maximum nominal amount of equity securities to
which resolution 20 relates is £2,358,319.04 (representing
approximately 12% of the Company’s issued ordinary share
capital as at 23 May 2023).
The authority granted by resolution 20 would be in addition to
the general authority to disapply pre-emption rights under
resolution 19. The maximum nominal value of equity
securities that could be allotted if both authorities were used
would be £4,716,638.08, which represents approximately 24%
of the Company’s issued ordinary share capital as at 23 May
2023, being the latest practicable date before the publication
of this Notice.
The Board confirms that, should it exercise the authorities
granted by resolutions 19 or 20, it intends to follow best
practice as regards their use, including (i) following the
shareholder protections in Part 2B of the 2022 Statement of
Principles; and (ii) in respect of any follow-on offer, following
the expected features set out in paragraph 3 of Part 2B of the
2022 Statement of Principles.
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 2024
or on 1 October 2024, whichever is sooner.
21 AUTHORITY FOR THE COMPANY TO PURCHASE ITS
OWN SHARES
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.
222
Marks and Spencer Group plc
NOTICE OF MEETING 2023 NOTICE OF MEETING 2023
NOTICE OF MEETING 4 JULY 2023
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 227, on Tuesday 4 July 2023 at 11am (the “AGM”)
for the purposes set out below.
Resolutions 1 to 18 will be proposed as ordinary resolutions, and
resolutions 19 to 22 will be proposed as special resolutions.
1.
2.
To receive the Annual Report and Financial Statements
for the 52 weeks ended 1 April 2023.
To approve the Directors’ Remuneration Report for the year
ended 1 April 2023, as set out on pages 100 to 129 of the
Annual Report (excluding the Directors’ Remuneration
Policy set out on pages 108 to 115).
3.
To approve the Directors’ Remuneration Policy as set out
on pages 108 to 115 of the Annual Report.
To re-elect the following directors who are seeking annual
re-election in accordance with the UK Corporate Governance
Code:
4. Archie Norman
5. Stuart Machin
6. Katie Bickerstaffe
7. Evelyn Bourke
8. Fiona Dawson
9. Andrew Fisher
10. Tamara Ingram
11. Justin King
12. Sapna Sood
To elect the following directors appointed to the Board since
the last Annual General Meeting:
13. Ronan Dunne
14. Cheryl Potter
15. 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.
16. To resolve that the Audit & Risk Committee determine the
remuneration of the auditor on behalf of the Board.
17. 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 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 2024 or on
1 October 2024, 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.
18. DIRECTORS’ AUTHORITY TO ALLOT SHARES
To resolve that the directors 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:
(A) up to a nominal amount of £6,550,886.24 (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 £13,101,772.49 (such amount to be reduced by any
allotments made under paragraph (A) above) in connection
with a pre-emptive offer:
(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;
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 2024 or on 1 October 2024,
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.
19. GENERAL DISAPPLICATION OF PRE-EMPTION RIGHTS
To resolve as a special resolution that, subject to the passing of
resolution 18, the directors be empowered to allot equity
securities (as defined in Section 560(1) of the Companies Act
2006) for cash under the authority given by that resolution 18
(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) to the allotment of equity securities 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 18, by way of
a pre-emptive offer 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;
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
Annual Report & Financial Statements 2023
223
MARKS AND SPENCER GROUP PLC
NOTICE OF MEETING 4 JULY 2023 CONTINUED
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 18 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 £1,965,265.87; and
(C) to the allotment of equity securities or sale of treasury
shares (otherwise than under paragraph (A) or paragraph
(B) above) up to a nominal amount equal to 20% of any
allotment of equity securities or sale of treasury shares
from time to time under paragraph (B) above, such
authority to be used only for the purposes of making
a follow-on offer which the Board of the Company
determines to be of a kind contemplated by paragraph
3 of Section 2B of the Statement of Principles on
Disapplying Pre-Emption Rights most recently published
by the Pre-Emption Group prior to the date of this Notice
of Meeting,
and shall expire at the conclusion of the AGM to be held in 2024
or on 1 October 2024, 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. ADDITIONAL DISAPPLICATION OF PRE-EMPTION
RIGHTS
To resolve as a special resolution that, subject to the passing of
resolution 18, the directors be empowered in addition to any
authority granted under resolution 19 to allot equity securities
(as defined in Section 560(1) of the Companies Act 2006) for
cash under the authority given by that resolution 18 (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) to the allotment of equity securities or sale of treasury
shares up to a nominal amount of £1,965,265.87, such
authority to be used only for the purposes of financing (or
refinancing, if the authority is to be used within 12 months
after the original transaction) a transaction which the
directors of the Company determine to be either an
acquisition or a specified capital investment of a kind
contemplated by the Statement of Principles on
Disapplying Pre-Emption Rights most recently published
by the Pre-Emption Group prior to the date of this Notice of
Meeting; and
(B) to the allotment of equity securities or sale of treasury
shares up to a nominal amount equal to 20% of any
allotment of equity securities or sale of treasury shares
made under paragraph (A) above, such authority to be
used only for the purposes of making a follow-on offer
which the Board of the Company determines to be of a
kind contemplated by paragraph 3 of Section 2B of the
Statement of Principles on Disapplying Pre-Emption Rights
most recently published by the Pre-Emption Group prior to
the date of this Notice of Meeting,
and shall expire at the conclusion of the AGM to be held in 2024
or on 1 October 2024, 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.
21. 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 196,526,587 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 2024 or until 1 October 2024,
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.
22. CALLING OF GENERAL MEETINGS ON 14 DAYS’ NOTICE
To resolve as a special resolution that a general meeting other
than the Annual General Meeting may be called on no fewer
than 14 clear days’ notice.
By order of the Board
Nick Folland
General Counsel & Company Secretary
London, 23 May 2023
Registered office Waterside House, 35 North Wharf Road,
London W2 1NW.
Registered in England and Wales
No. 4256886.
224
Marks and Spencer Group plc
MARKS AND SPENCER GROUP PLC
NOTES
1.
Biographies of the directors seeking election (or re-
election) are given in the Annual Report on pages 72 and 73,
including their membership of the principal Board
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; the
Chairman has a letter of appointment which requires six
months’ notice by either party; other non-executive
directors also have letters of appointment. In accordance
with the Remuneration Policy their appointments can be
terminated on three months’ notice by either party.
2.
3.
4.
5.
6.
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.
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/161-121-785.
Instructions are available on pages 228 and 229 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 30 June 2023. If you return paper and electronic
instructions, those received last by the Registrar before
11am on Friday 30 June 2023 will take precedence.
Electronic communication facilities are available to all
shareholders and those that use them will not be
disadvantaged.
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).
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.
To be valid, any proxy form or other instrument appointing
a proxy delivered by post or by hand (during normal
business hours only) must be received at Equiniti, Aspect
House, Spencer Road, Lancing, West Sussex BN99 6DA no
later than 11am on Friday 30 June 2023.
7.
8.
The appointment of a proxy electronically, the return of a
completed paper proxy form, other such instrument or any
CREST/Proxymity proxy instruction (as described on the
following page) will not prevent a shareholder from
attending and voting at the meeting if they wish to do so.
You must inform the Company’s Registrar in writing of any
termination of the authority of a proxy.
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 30 June 2023 (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.
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.
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 23 May 2023 (the latest practicable date before the
publication of this Notice), the Company’s issued share
capital consists of 1,965,265,874 ordinary shares carrying
one vote each. No shares are held in treasury. Therefore, the
total voting rights in the Company as at 23 May 2023 are
1,965,265,874.
Annual Report & Financial Statements 2023
225
MARKS AND SPENCER GROUP PLC
NOTICE OF MEETING 4 JULY 2023 CONTINUED
15. CREST members who wish to appoint a proxy or proxies
20. Any corporation that is a member can appoint one or more
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.
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:
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 30 June 2023. 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, 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.
(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.
Shareholders are reminded that unacceptable behaviour
will not be tolerated at the meeting and will be dealt with
appropriately by the Chairman of the meeting.
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.
23. A copy of this Notice, and other information required by
Section 311A of the Companies Act 2006, can be found
at corporate.marksandspencer.com.
24. Please see the letter dated 23 May 2023 from the General
Counsel & Company Secretary on pages 219 to 220 for
further explanatory notes.
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 30 June 2023
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.
226
Marks and Spencer Group plc
MARKS AND SPENCER GROUP PLC
INFORMATION FOR THE DAY
TIMINGS
Date:
9.00am
Tuesday 6 June 2023
Registration opens for vote casting and question
submission in advance of the meeting.
Date:
11.00am
Friday 30 June 2023
Opportunity to submit votes and questions in
advance of the meeting closes.
Date:
9.30am
Tuesday 4 July 2023
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
approx
AGM closes. The results of the poll will be
released to the London Stock Exchange once
collated.
PHYSICAL ATTENDANCE
Following the continued success of the Company’s
digitally-enabled 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 pages 228 to
229 for details of how to join and participate in the meeting
electronically.
ELECTRONIC PARTICIPATION
Shareholders are encouraged to view and participate in the
2023 AGM electronically. This can be done by accessing the
AGM website: https://web.lumiagm.com/161-121-785
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/161-121-
785 on the day.
LOGGING IN
Go to https://web.lumiagm.com/161-121-785 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 6 June 2023 until
11am on 30 June 2023. Access to the AGM website will
reopen to participate on the day from 9.30am on 4 July
2023.
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 live question direct to
the Board.
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 pages 228 to 229.
As noted in the Company Secretary’s letter on pages 219 to
220 of this Notice, Anita Anand will be posing your questions
to the Board during the meeting. If you would like to ask your
question yourself 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 30 June 2023. 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.
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 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 6 June 2023, and
details on the different methods for voting in advance are set
out in the Company Secretary’s letter on pages 219 to 220 of
this Notice.
A step-by-step guide to voting via the Lumi website live on
the day, and in advance, is on pages 228 to 229.
PROXIES & CORPORATE REPRESENTATIVES
If you are a duly appointed proxy or corporate
representative, please contact the Company’s Registrar,
Equiniti, before 11am on Monday 3 July 2023 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 219.
Mailboxes are monitored 9.00am to 5.00pm Monday to
Friday (excluding public holidays in England & Wales).
Annual Report & Financial Statements 2023
227
ONLINE USER GUIDE TO THE DIGITAL 2023 ANNUAL GENERAL MEETING
ONLINE USER GUIDE TO THE DIGITAL
2023 ANNUAL GENERAL MEETING
LUMI AGM PLATFORM GUIDE: BEFORE THE AGM
1
Go to https://web.lumiagm.com/161-
121-785. 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 30 June 2023.
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.
228
Marks and Spencer Group plc
ONLINE USER GUIDE TO THE DIGITAL 2023 ANNUAL GENERAL MEETING
LUMI AGM PLATFORM GUIDE: ON THE DAY
7
The AGM will commence at 11am on
Tuesday 4 July 2023. It can be
accessed through the same platform:
https://web.lumiagm.com/161-121-
785. 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
11
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”.
You can vote for all resolutions 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
resolutions 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 2023
229
SHAREHOLDER INFORMATION
ANALYSIS OF SHARE REGISTER
Ordinary shares
As at 1 April 2023, the Company had 131,726 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
Number of shareholders
Percentage of total
shareholders
Number of ordinary shares
Percentage of issued share
capital
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
70,177
24,308
19,008
12,970
3,335
1,493
271
164
131,726
53.28
18.45
14.43
9.85
2.53
1.13
0.21
0.12
100
13,024,822
18,103,922
27,108,515
39,498,233
22,845,033
31,833,429
108,122,110
1,704,397,867
1,964,933,931
0.67
0.92
1.38
2.01
1.16
1.62
5.50
86.74
100
Category of shareholder
Number of shareholders
Percentage of total
shareholders
Number of ordinary shares
Percentage of issued share
capital
Private
Institutional and corporate
Total
130,395
1,331
131,726
98.99
1.01
100
144,955,305
1,819,978,626
1,964,933,931
7.38
92.62
100
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
Registrar/shareholder queries
Equiniti Limited, Aspect House,
Spencer Road, Lancing, West Sussex
BN99 6DA, United Kingdom
Telephone +44 (0)345 609 0810. Please use the country code
when contacting from outside the UK.
Online: help.shareview.co.uk (from here, you will be able
to securely email Equiniti with your enquiry).
2023/24 FINANCIAL CALENDAR AND KEY DATES
4 July 2023
8 November 2023*
11 January 2024*
Annual General Meeting (11am)
Results, Half Year†
Results, Quarter 3 Trading Update†
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 corporate.marksandspencer.com.
Additionally, the Annual Report (which contains the Strategic
Report) is available for download in pdf format at corporate.
marksandspencer.com.
Nick Folland
General Counsel & Company Secretary
† Those who have registered for electronic communication or news alerts at corporate.marksandspencer.com will receive notification by email when this is available.
* Provisional dates.
230
Marks and Spencer Group plc
SHAREHOLDER INFORMATION
SHAREHOLDER QUERIES
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 230. 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 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.
DIVIDENDS
The Board will not be making a final dividend payment for the
2022/23 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.
AGM
This year’s AGM will be held at, and broadcast from, Waterside
House on 4 July 2023. The meeting will start at 11am.
The 2023 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/161-121-785. Further details can be found
on page 227 of the Notice of Meeting and in the user guide
on pages 228 to 229.
The meeting will also be available to view online after the event
at corporate.marksandspencer.com.
M&S reserves the right to retain and use footage or stills for any
purpose, including Annual Reports, marketing materials and
other publications.
Annual Report & Financial Statements 2023
231
A
Accounting policies
Adjusting items
Appointment and retirement
of directors
Audit and Risk Committee Report
Auditor
Auditor’s remuneration
Auditor’s report
Annual General Meeting
Page
150
161
72, 130
92-98
99
160
135-143
218-229
B
Board
Borrowing facilities
Business model
Business combination
C
Capital commitments
Capital expenditure
Colleague involvement
Conflicts of interest
Corporate governance
Cost of sales
Critical accounting judgements
72-74
183
08
201
197
40
133
131
68
159
156
D
Deadlines for exercising voting rights
Deferred tax
Depreciation
Derivatives
Diluted earnings per share
Directors’ indemnities
Directors’ interests
Directors’ responsibilities
Directors’ single figure
of remuneration
Disclosure of information to auditor
Dividend cover
Dividend per share
132
195
153, 178
184
166, 167
131
124
134
E
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
Page
166
167
133
133
90-91
164
181
154, 184
183
35
212
G
Glossary of alternative
performance measures
Going concern
Goodwill
Groceries Supply Code of Practice
213
133, 150
176
133
H
Hedging reserve
I
Income statement
Intangible assets
Interests in voting rights
International Financial
Reporting Standards
Inventories
Investment property
K
Key performance
indicators
147
144
176
132
150
154
146
15, 17, 18, 34
L
Lease liabilities
N
Nomination Committee Report
P
Principal risks and uncertainties
Profit and dividends
Power to issue shares
Political donations
R
Risk management
Remuneration Policy
Remuneration Committee
Remuneration Report
Page
183
85-89
58
131
131
133
56
108
100
116
S
Segmental information
Shareholder information
Share capital
Share schemes
Significant agreements
Statement of cash flows
Statement of comprehensive income
Statement of financial position
Strategic priorities
Subsidiary undertakings
158
230
196, 210
173
130
149
145
146
12
206
T
Taxation
Total shareholder return
Trade and other payables
Trade and other receivables
Transfer of securities
V
Variation of rights
Viability statement
164
125
182
181
131
131
66
184
194
195
196
197
197
198
199
200
201
201
202
202
203
205
211
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
Borrowings and other
20
financial liabilities
164
166
167
167
168
173
173
176
178
181
181
182
182
183
21 Financial instruments
22 Provisions
23 Deferred tax
24 Ordinary share capital
25 Contingencies and commitments
Analysis of cash flows given in
26
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 Business combination
32 Contingent assets
33 Subsequent events
Company financial statements
Notes to the Company
financial statements
Group financial record
116
134
212
34
144
145
146
147
149
150
158
159
160
161
164
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
Accounting policies
1
Segmental information
2
3
Expense analysis
4 Profit before taxation
5 Adjusting items
6
Finance income/costs
232
Marks and Spencer Group plc
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