Annual General Meeting 2005 Annual General Meeting 2005 Paul Myners - - PDF document

Annual General Meeting 2005

Annual General Meeting 2005

Paul Myners - Chairman

Annual General Meeting 2005

WELCOME

Introduction Operational Review Q&A Resolutions

Agenda

Your Board

Paul Myners Chairman Stuart Rose Chief Executive Charles Wilson Executive Director, IT, Logistics and Property Ian Dyson Group Finance Director Kevin Lomax Senior Independent Director Lord Burns Deputy Chairman (from October) Graham Oakley Group Secretary and Head of Corporate Governance Anthony Habgood Non-executive Director Steven Holliday Non-executive Director Jack Keenan Non-executive Director

The year in review

Rejected ‘virtual’ offer Bought per una and sold Financial Services Returned £2.3bn to shareholders Contributed to pension fund Focused on our core values

The year in review

Sales £7.03bn (down 1.7%) Profits £618.5m (down 19.0%) Full year dividend 12.1p per share (up 5.2%)

Your views count

Shareholder voucher scheme Customer assistants at the Annual General Meeting Store environment New return & refund policy

We are listening

chairman@marks-and-spencer.com Marks and Spencer Group plc Waterside House 35 North Wharf Road London W2 1NW Customer services: 0845 302 1234

Annual General Meeting 2005

Stuart Rose – Chief Executive

Focus - 2004/05 Drive - 2005/06 Broaden - 2006/07

Actions completed

• New management structure

Jul - Nov 04

• Focus on core values – Your M&S

Jul 04

• per una acquired

Jul 04

• Cut 21 initiatives

Jul 04

• Head office restructure

Sept 04

• New supplier terms introduced

Sept 04

• £2.3bn returned to shareholders

Oct 04

• Financial Services sold

Nov 04

• Lifestore exited

Jan 05

• Tightened cash and costs

July - March 05

• Stock & commitments down £1.3bn

July - March 05

Group financial summary 2004/05

Retail sales £7.7bn, -1.5% Profit before tax (pre-exceptionals) £618.5m (LY £763.2m), -19.0% Operating profit (pre-exceptionals) £709.4m, -13.8% Adjusted earnings per share 21.9p (LY 23.4p), -6.4% ROI (pre-exceptionals) increased to 31.1% Operating cashflow from continuing activities £857.5m (LY £602.3m) Final dividend of 7.5p per share (LY 7.1p), up 5.6%

Divisional performance 2004/05

% TY £m LY* £m

Turnover UK Retail 7,034.7 7,159.8 (1.7) International Retail 675.6 665.0 1.6 Financial Services 232.0 330.0 (29.7) Operating profit** UK Retail 612.1 722.1 (15.2) International Retail 65.0 44.2 47.1 Financial Services 32.3 56.6 (42.9)

* 52 weeks ** Before exceptional items

UK Retail performance

Gross margin down 1% Operating costs down 0.1%

UK Retail – margins and costs

Achievements vs July 2004 presentation (£m) Supplier terms, phase 1 complete 120 40 80 120 Downstream supply chain & systems 15 20 10 30 Head Office restructure 35 10 25 35 Non-merchandise 30 20 10 30 Hard Savings 200 90 125 215 Further margin improvements Clothing markdown 40 (60) 100 40 Lower food waste 10

• 5

5 TOTAL 250 30 230 260

To be delivered by 05/06 05/6 vs 03/4 Delivered in 04/5 To come 05/06

Quarter 1 trading to 9 July 2005

UK Retail Sales down 3.1%

– Food up 5.0% – General merchandise down 10.3%

Full price sales of General Merchandise down 2.4% Summer sale to start 18 days later, with 40% less stock

Better product Better service Better environment

Focus on the customer

Product

Better choice Better buying Better value

Product

Better choice

– listening to our customers – brand rationalisation – range construction

Product

Better buying

– people – process – targets/controls – supply chain

Product

Better value

– OPP/Good, Better & Best – giving customers a treat

20,000 interviews/surveys per annum Customer panels – 360 customers surveyed on two subjects every month Focus groups and accompanied shops

Choice: listening to our customers

Choice:

listening to our customers

High-leg knicker sales

May 05 Autumn 04

• 29%

+12%

Focus on customer

Classic Collection

Better fabric and styling Increasing share of over 55 market

Focus on customer

Petite

£4bn market 33 stores now 80 stores by autumn

Choice: brand rationalisation

MENSWEAR NOVEMBER 2004 MENSWEAR MAY 2005

8 3

Brand clarity adding to sales

Choice: range construction

Number of ways reduced across all areas Over 1,500 less lines

• 14.0%
• 18.8%
• 16.0%
• 20.0%
• 17.0%

Womens Mens Lingerie Childrens Home (ex Lifestore) Total

% reduction in number of ways level

Buying better

People Process Targets/controls

– stocks & commitments – open to buy – availability

Sourcing

– sourcing & regional offices – ways of buying

Buying: stocks & commitment

Stocks & commitment down £1.3bn, over 35% Faster decision-making Shorter lead times – greater flexibility Improved product hit rate More full price sales Lower markdowns Improved cost effectiveness Improving margins – lowering markdowns

Buying: open to buy

Improving flexibility Chasing fast sellers and new trends Introducing newness Improving transition between seasons Reducing markdowns

Buying: sourcing

Sourcing directors recruited to:

– act as a support to our UK buying teams – provide one approach to buying direct – act as eyes and ears on the ground – manage the process, from approving new factories and fabrics to managing the movement of goods

Regional offices

– Turkey, India and Hong Kong

Values: clear message on value

Focus on value

– particular focus on OPP/Good, Better & Best – benchmarked to competition – using variable margin to deliver on value

Clear price architecture Giving customers a treat Overall better value and maintained quality Re-establishing our value credentials

Value: OPP/Good, Better, Best

23% 12% 17% 54% 65% 63% 23% 23% 20% 1998 Last year This year

Value: £6 T-shirt

Price Sales Volume Margin

£9 £8 £6

• 33%

+63% +150% +50%

Value: giving customers a treat

Men’s essentials: Socks £10 £7: £1 a pair Sales uplift >55% Volumes up >120%

Value: giving customers a treat

Men’s cashmere 100% machine washable 8 week lead time Flexibility on colour

£69 £99

2002 2004

Service: management

Team now restructured Two ‘flagship’ divisions – focus on largest 34 stores Key senior managers appointment to flagships Streamlined entire management structure and reporting process

Service: our people

Customer Assistants’ career path Clear and competitive pay structures Training and development

Service: in store

Better staff scheduling Simplified communications Extended opening hours Better Saturday tilling Driving availability New refund policy Mystery shopping

Environment

Trial store programme Retail parks / out of town New openings

Environment: trial stores 2004/05

Store remodelled trial in four new store and four existing stores Modern and contemporary environment, easy to navigate, greater product segmentation Footage rebalances: increasing general merchandise footage, allowing increased cataloguing Introduced new product lines – per una, Limited Collection New look for Food and Café Revive

Environment: trial stores 2005/06

21 stores opening September 2005 – February 2006 Three major stores including Bromley 15 high streets, e.g. Mansfield, Haywards Heath and Stafford Reduced cost per square foot New options, e.g. hot Food To Go Refurbishing c.1 million square feet

Environment: Birmingham store

More choice across our offer New store frontage Free-flow walkways Contemporary fitting room New Café Revive Hot Food To Go Due to re-launch this autumn

Environment: retail parks

Three opened in 2004/05 c.10 openings this year:

– Westwood Cross June – Monks Cross June – Coventry Arena August – Birmingham Fort September – Valley Retail Park, Croydon September

Environment: new stores

Over 40 openings this year including:

– 10 retail parks – 30 Simply Foods

London Victoria – Cardinal Place opens October 2005 Increasing total space by

– 1.2% General Merchandise – 3.3% Food

Food

Product

– clearer offer – product innovation – first to market – building authority in key trends – strengthening position on quality

Service

– improving availability, tilling, queuing

Environment

– store design and in-store ambiance

Developing new opportunities

Making core Food offer better - technology

Product ranges Omega 3 Milk Muir Den pigs Customer convenience New product development Innovation

Environment: Simply Food

31 stores opened last year 30 planned for 2005/06 Plans to extend Simply Food into BP forecourts Reach out to new audiences e.g. Edinburgh

Edinburgh

• 2 to 9 stores in 2½ years
• Food market share +3.7ppts
• Food sales +73%

4. 4.9% 9% 8. 8.6% 6%

Original stores Stores following SF

• pening programme

www.marksandspencer.com

Online

• Amazon link-up
• New opportunities

e.g. food delivery

Marketing

One brand

– de-cluttered stores – consistent brand handwriting – better promotional planning – link windows to Point of Sale

Clear messages

– Clothing: style, value, price – Food: quality, features & benefits

Marketing: clothing – style & value

Marketing: clothing – price

Marketing - food

Clear message on quality Focus on quality and value TV and in-store marketing Driving category sales in:

– Oakham chicken – Chocolate pudding – Wild Alaskan smoked salmon – Aberdeen Angus steak

Trust

Our customers expect us to do business in a responsible way e.g.

– animal welfare – non-GM food – labour standards – fish sourcing – pesticides

Value and fashion, but not at any price

How are we doing?

Womenswear:

Strong value messages Improved availability, service and environment Progress on formal Classic Collection & Petites per una very strong People in place

How are we doing?

Menswear:

Large market share Clearer offer Values improved Focus on shopping experience

How are we doing?

Lingerie:

Clear plan Less clutter Concentration on availability Re-establishing values

How are we doing?

Childrenswear:

Market share stabilised Prices very competitive Availability improving Strong Back To School offer

How are we doing?

Home:

Back on track Clearer offer – back to basics Focus on value Focus on service

DITSY FLORAL TEA SET SHOT TO COME

How are we doing?

Food:

Making core food better Introducing real innovation Building authority in key areas Improving the shopping experience Developing new opportunities

Outlook

Difficult environment Deflation Competitive threat – race for space Interest rates

Summary

Focused the business in 2004/05 On track to deliver £250m margin and cost improvements by the end of 2005/06 2005/06

– Driving on product – Driving on service – Driving on environment

2006/07 onwards – Broaden…….

Annual General Meeting 2005

Annual General Meeting 2005

Resolutions

Annual General Meeting 2005

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After the event

Annual General Meeting 2005

Resolutions

Resolution 1

To receive the directors’ report, financial statements and report of the auditors.

Resolution 2

To approve the remuneration report.

Resolution 3

To declare a final dividend on the ordinary shares.

Resolution 4

To elect Ian Dyson.

Resolution 5

To elect Anthony Habgood.

Resolution 6

To elect Steven Holliday.

Resolution 7

To re-elect Jack Keenan.

Resolution 8

To propose the appointment of Lord Burns as Deputy Chairman.

Resolution 9

To re-elect PricewaterhouseCoopers LLP as auditors

• f the Company.

Resolution 10

To propose that the audit committee determine the remuneration of the auditors.

Resolution 11

To seek shareholder authority for the board to allot shares.

Resolution 12

To seek authority for the Company to allot shares for cash other than to existing shareholders in proportion to their holdings.

Resolution 13

To seek authority for the Company to purchase its own shares.

Resolution 14

To seek authority to amend the Articles of Association

• f the Company in relation to the indemnification
• f Directors.

Resolution 15

To seek the approval of the Marks and Spencer Group Performance Share Plan 2005 and authorises the directors to make any necessary modifications.

Annual General Meeting 2005