Marks and Spencer Group plc

Hello everybody, it's Archie Norman here and I wanted to welcome you to the 2024 Marks and Spencer interim results. In a moment, Stuart is going to give you the strategic overview of the last six months. Jeremy Townsend, our finance director, is then going to talk through the detail of the financial performance and Stuart will come back and take you through the commercial performance of each businesses and say a few words about outlook. But for me, the most important thing about this period has not been the financial performance, which has been robust. If it hadn't been robust, you'd probably hear a bit more from me. But it's been the pickup in pace in terms of people, organization, and culture, which means that we have a now much more capable organization and means that we can move ahead to tackle the deep-lying problems around store rotation, technology and supply chain. And that means too that we can pick up the pace of investment which is required to create the high-performing growth business that we know M&S can become.

Thank you, Archie. Well, good morning everyone and welcome to our half-year results presentation. If you're watching this on Wednesday, the 6th of November, there will be a conference call for analysts and investors at 9.30am. Jeremy and I will be available then to answer your questions. So it's been a good first half and we are making progress as we consistently execute our strategy to reshape M&S for growth. We've delivered growth in sales value and volume plus market share while improving profitability, return on capital, and we've continued to reduce our net debt. At M&S, we have a very clear vision to be the most trusted retailer with quality products at the very heart of everything we do. And this half we've served more customers as we become more relevant to more people more of the time. As we've continued to invest in quality and value in our food business and quality, value and style across our clothing business. Profit before tax and adjusting items was $407.8 million, an increase of 17%. In food, volume growth outperformed the market and operating margin improved to 5.1% from 4.1%, as sales grew faster than costs, driving strong operating leverage. In clothing and home, over 80% of our sales were full price in a highly promotional market. Operating margin reduced 40 basis points to 12% as we invested in digital and technology, particularly online. Both our businesses are now consistently delivering growth and we've got good momentum as we step into Christmas. We're generating strong paybacks on store rotation well ahead of our hurdle rates, and we continue to make progress in our plans to reduce structural costs by 500 million by FY28. Our disciplined approach to capital allocation and focus on returns has increased our return on capital employed to 15%, demonstrating our ability to deliver value for shareholders. The easy thing for me to say is that these are good results. But in the spirit of being positively dissatisfied, we still have so much opportunity ahead of us that provides future growth. And that is what should excite us. We need to accelerate the pace of change, face into the thorny issues and seize the opportunities. Online continues to grow, but we need to reimagine our website and app experience. We need to improve availability and fulfilment across clothing, home and beauty, and bring the magic of M&S to customers whenever, wherever and however they want to shop with us. Over time, these improvements will drive growth towards our ambition of being 50% online. Along with that, we've also got an opportunity to rethink loyalty and drive even more personalisation. Another opportunity is the modernisation of our supply chain across both of our businesses to enable growth, create a faster and lower cost operation. The reset of our international business is underway as we look to bring the best of M&S to a global customer base. We remain confident international is a growth opportunity in the medium term. And in digital and technology under new leadership, we've now got a grip and we have a clear plan over the next three years. Although store rotation hasn't been as fast as we would like, we now have fresh momentum with the acquisition of 10 major sites, giving us future stores in high quality, high growth locations. So as ever, we've achieved a lot, but there is so much more to do over the 12 months and beyond, and that provides lots of opportunity for future growth. I'll now hand you to Jeremy to walk you through the financials.

Thanks, Stuart. I'll start with the Group headlines, which highlight a strong performance in the first half as we continue to reshape M&S for growth. Group sales were £6.5 billion, up 5.8% on last year, with profit before tax and adjusting items of £407.8 million, up 17.2% on last year. Free cash flow from operations was £16.3 million for the period, which was a small reduction on last year's first half. Net debt has continued to decrease and we remain in net funds, excluding the lease position. I'll now take you through the results in more detail by business area. The food business grew sales by 8.1% in H1, with Q1 growth being impacted by there being no Easter this financial year, and with Q2 growing by double digits. UK food volumes grew by 6.5%, supported by growth in larger baskets. Food adjusted operating margin improved by one percentage point. Gross margin was broadly level on the year as buying programme benefits were invested into quality and trusted value. Operating costs as a percentage of sales decreased across all cost areas as sales growth exceeded cost growth. Analysing the change in operating costs in the period, growth in store staffing costs and volume related headwinds were partly offset by cost savings. Other store costs in the period were primarily driven by store openings. Distribution and warehousing volume and inflation-related headwinds were partly offset by cost savings, and central costs include investment in digital and technology initiatives. In clothing and home, sales grew by 4.7% as we focused on full price sales, bought deeper into key lines and improved customer appeal. Sales were driven by online, which were particularly strong in Q2 as we invested in tech infrastructure, digital and online, to improve customer experience. Clothing and home adjusted operating margin declined by 0.4 percentage points. Stores margin increased, but this was more than offset by lower online margin in the period. Gross margin increased by 0.4 percentage points, driven by better buying, offsetting currency and labour cost headwinds. Operating costs as a percentage of sales increased, as sales growth was less than cost growth. Analysing the change in operating costs in the period, growth in store staffing pay and volume costs were partly offset by cost savings. Other store costs were broadly level due to energy and property efficiencies. distribution and warehousing volume, inflation and channel mix costs were only partly offset by cost savings. And central cost growth related to increased investment in tech infrastructure and digital improvements, planning platform and increased digital marketing costs. Moving now to international, results in the period were disappointing as sales were down 10.3%, continuing the trend from H2 last year, driven by India and a softer franchise partner order book. Operating profit margin reduced to 4.7% due to lower sales and full price mix, which was partly offset by a reduction in costs. With reset actions underway, we are confident that our international business remains a growth opportunity in the medium term. One of our objectives is to permanently remove £500 million of costs by FY28. During the first half, we saved around £60 million, predominantly in retail and logistics. 18 months into the programme, £240 million of costs have been removed, and we remain confident of achieving our target. This rolls up to the overall group performance, which shows a movement in year-on-year profit before tax, driven by food, but partly offset by international. Sales accelerated in Ocado with M&S products driving strong growth and improved profitability, although there remains some way to go to get back to a profit contribution. Financial services and other reflects the updated arrangement between M&S and HSBC UK. The decrease in net debt that I mentioned earlier helped deliver a reduction in interest costs in the half. Adjusting items in the period included the store estate programme and the financial services transformation, partly offset by a one-off legal settlement in the period. Overall, the Group generated £16.3 million of free cash flow from operations in the period. Growth in operating profit before adjusting items was offset by an increase in working capital. The working capital outflow in H1 has been higher than last year, the main driver being the reduction in payables terms in clothing and home from 90 days to 75 days. We expect the working capital outflow to largely reverse in H2 and expect an overall £50 million working capital outflow by the end of the year. There were no loans to associates in the period, although we expect around £20 million for the year, and financial interest and tax has reduced. Net capital expenditure increased, with the focus on investment in the Group's key strategic areas of store rotation, supply chain and data, digital and technology, which are generating strong returns. For the full year, we expect net £500 million spend across our key areas of investment. Return on capital employed was 15% in H1 compared to 13.2% in H1 last year. And so to summarise, During the first half, there has been sustained trading momentum driven by strong sales performance across food and clothing and home. The structural cost programme remains on track and has delivered around 50% of our £500 million target in 18 months. We remain committed to our focus on delivering sustainable and consistent free cash flow to deliver balance sheet capacity, fund investment in the reshaping M&S strategy, as well as to pay a nominal dividend. And taking all of this into account, we expect to make further progress in the second half, which Stuart will talk about later in more detail. I'll now hand you back to Stuart.