Marks and Spencer Group plc

Hello everyone and welcome to the Marks and Spencer 2025 annual results. So, we ended last year in fine fettle and I felt after years of incredibly hard work, the business was starting to show its true potential. But in business life, just as you think you're onto a good streak, events have a way of putting you on your backside. And I'm sure that a lot of people today just want to talk about the cyber incident which happened after the year end. And of course that's understandable because it is interesting, important and different. After all, it's not every day you get a bunch of criminals, probably the other side of the world, trying to bring down one of Britain's most popular companies. As a result, last year's results seem like ancient history. But we should talk about them. because they demonstrate what a reshaped M&S can achieve. Exceptional performance in sales, market share, profits and cash flow. And we're only halfway through our programme of reshaping the business, so there's so much more to come. So yes, the cyber attack has given us pause for thought and yes, we will need to bring forward some of our technology programmes to make sure the business is very resilient in the future. But I'm very confident that in the great sweep of time, this will prove to have been a bump in the road. A painful bump, maybe, but a bump in the road. And I can tell you that everyone at M&S is just longing to get back to trading the business again. And we will come back. And we are coming back now, stronger and more resilient. Lastly, I don't want this moment to pass without saying just a huge thank you from me and from the whole board to all the colleagues in the stores that have been trading the business throughout, despite the normal system support, to the colleagues in the DCs who kept working throughout, and of course to our technology colleagues who've done a magnificent job for us. So that's it from me. Stuart is now going to take you through the results. Jeremy will go through the financial detail and Stuart will sum up. Thank you.

Well thank you Archie and good morning everyone. Welcome to our fall year results. The presentation I'm doing today is here in Oxford Street, our Marble Arch store. Let me tell you why I've chosen Marble Arch. Well this store has been here for nearly 100 years. and this time next year we will be redeveloping this store into a flagship store that will last for a further 100 years. So I'm looking forward to coming back in a few years time and presenting results in what will be one of London's biggest and best food and fashion stores. But now let's crack on with last year's results. If you're watching on Wednesday, the 21st of May, there will be a conference call for analysts and investors at 9.45am, where Jeremy and I will be available to answer your questions. There are four parts to today's presentation. First, I will start by updating you on our headline performance over the last year, as it's really important we don't lose sight of what a strong year we had. I will give you some perspective on our progress on how we're reshaping M&S for growth across the business and, of course, over the last three years. Jeremy, our CFO, will then walk you through the financials from last year in some detail. Before I close, I will of course update you on the recent cyber incident and give you a view of the outlook for this financial year. Last year, we delivered a strong performance with profit before tax and adjusting items of £875.5 million, which was an increase of 22%. We grew free cash flow from operations to $443 million and closed the year with net funds of over $400 million, while continuing to grow returns to shareholders through an increased dividend. We are now in the best financial health we've been for nearly 30 years. We continue to make progress in our quality and value credentials in food and in fashion, home and beauty. We've made good progress in improving style perceptions and broadening our appeal. Last year, I said we were at the beginnings of a new M&S. I said this deliberately because while we continue to make progress in transforming M&S, we still have so much to do and there are so many opportunities ahead of us in future years to drive growth. But let me now turn to the businesses. In food, sales increased by 8.7%, with like-for-like growth of 8.6%, driven by volume growth, which has outperformed the market now for over three years. During the year, we upgraded the quality of more than 1,000 products and launched over 1,400 new lines. This consistent drumbeat of innovation has driven increased customer interest and frequency. Our continued investment in quality and innovation is paying off through sales value and volume growth. And it's this virtuous cycle that enables us to continue investing in price and quality for our customers. These actions have enhanced customer perception of M&S value, which has reached a 10-year high. Our mission is to become a shopping list retailer, and we're seeing more customers choose us more often for their everyday shopping. Our focus is to continue on fixing the backbone of M&S food, as this is going to be critical to our future growth. This means making sure we have the right long term agreements with our supplier partners, the right systems and the right capacity in our network to get ahead of the growth curve. And the team are making good progress on this. We continue to sign long-term supplier agreements, which allow partners to invest and grow capacity. At the year end, we completed the rollout of our forecast ordering and allocation system, which helps us get the right stock to the right stores at the right time. And we've taken the first step in modernising our logistics network with plans to open a new modern distribution centre in Bristol next year. In summary, we're on track. Alex and the food team are making really good progress, but we have a lot more headroom to grow. And I believe we're well on our way to doubling the size of our food business. Turning now to fashion, home and beauty. Sales increased 3.5% with like-for-like growth of 4.4%. We've now outperformed the market for over three years. Our commitment to offering customers first price, right price as part of our trusted value strategy meant full price sales mix was broadly level on last year. An example of this is kidswear. where we've removed our promotions but invested in lower prices on everyday essential items. And we have continued to improve our style credentials further, particularly in womenswear and menswear, which has been reinforced with strong seasonal campaigns and some brilliant collaborations. Today, we are broadening customer appeal and attracting new customers across our fashion, home and beauty business. We've made good progress over the past few years, but now our focus turns to addressing the backbone of our fashion, home and beauty business. Recently, we appointed John Little into the role of Managing Director. And John will help us face into those big things in transforming our supply chain, merchandising, planning and ranging, and also accelerating our online growth. Since John's arrival, he spent his first month working in our stores and across our distribution centres to get a feel for the M&S business and the opportunities ahead. In summary, we're on track, but we need to knuckle down and execute this next phase to deliver further growth and profitability. Moving now to international, we had a pretty challenging year. Our sales were down 8.5% owing to the performance in India and a softer fashion, home and beauty order book in our franchise markets. It did get better in the second half of the year. Over this next year, we are resetting our joint venture in India under new leadership. We will also be implementing new operating principles and updating all of our commercial terms with our franchise partners. This will enable us to move to a more trusted value position because we're going to invest not only in style, but also in value across our international markets. In summary, international continues to be a growth opportunity in the medium term. Our strategy remains the same, to build a capital-light global omnichannel business that brings the best of M&S to the world. Turning to Ocado, just to remind you, last year's results for Ocado Retail are reported separately by Ocado Group. But I wanted just to give you a very quick update. Sales were strong in the year, with growth of over 15%, driven by sales of M&S products, which grew over 20%. Today, M&S volumes represent over 30% of Ocado retail volume. While the top line is an improved position, profitability remains limited by high service delivery costs and continuing high fees for the old Hatfield site. In the year ahead, there will be an increased focus to improve delivery efficiency and to maximise capacity from the existing network. It's critical we improve the productivity and the profitability of Ocado Retail before investing in new capacity. Finally, from this financial year, we will be consolidating Ocado Retail's financials into M&S as part of the terms of the original joint venture agreement. This has no impact on our share of the business. I will now share with you some thoughts on where we are with our overall transformation. In October 22, we set out a plan for reshaping M&S for growth. Our objective was to protect the magic of M&S and modernise the rest of the business. What this means is making sure we protect all of those great things in our heritage, like quality, value, service, innovation and trust, while modernising the areas that are holding us back from growth, like our legacy store estate, our end-to-end supply chain and our aged technology. Nearly three years on, we've now delivered three years of growth in sales value and volume, growth in market share, growth in profits and improved return on capital. But to make sure we sustain this growth, one of our key priorities was to strengthen the balance sheet. Over these three years, our free cash flow from operations has increased from 182 million to 443 million. And our net debt, including our lease liabilities, has reduced from 2.6 billion to 1.8 billion. Given the progress we've made in strengthening our financial position, both S&P and Moody's upgraded us to investment grade status. This gives us the capacity to further invest in M&S. This year, we will invest CapEx net of disposals of between 600 and 650 million. 400 to 450 million will be invested in our three strategic areas for growth which i've mentioned previously store estate end-to-end supply chain and our technology foundations in store rotation we're stepping up the pace we're stepping up the openings we have plans to open two four-line stores and at least nine food stores and two extensions In our supply chain, we have our first new distribution centre in Bristol, with plans to modernise the network in the coming years, creating capacity for future growth. In technology, as we said at last year's Capital Markets Day, we need to upgrade our legacy technology infrastructure, our networks, our store technology and our supply chain systems. We are making use of the recent disruption to bring forward that investment and deliver the two year plan of changing technology in just six months. The remaining 200 million to 250 million will be invested in essential maintenance, looking after the upkeep of our store estate, upgrading our logistics fleet and replacing outdated assets. We will continue to invest in a very disciplined way to make sure we achieve our hurdle rates. With a strong balanced sheet, we can invest with confidence but also manage any short-term setbacks. So, in summary, last year was another strong year of performance across M&S. We've now delivered three years of growth in sales value and volume, growth in market share, growth in profits and improved return on capital. While we've made progress across so many of our priorities, we are clear there remains so much more to do. We look at this as a positive. These future opportunities provide future growth and that is what energises us. Our consistent performance demonstrates our momentum and I'm confident that with continued focus on our plan and the execution of our plan, we will deliver future growth.

Thanks, Stuart. Before I take you through the full year financial performance, I wanted to confirm that recent events relating to the cyber incident took place after the financial year end. And therefore, the following results relate to business as usual trading to the end of March 2025. This overview will not touch on the financial impact of recent events, and Stuart will provide an update on this year's financial outlook. So let me start with the group headlines, which highlight another strong performance during the financial year as we continue to reshape M&S for growth. Group sales were £13.9 billion, up 6.1% on last year, with profit before tax and adjusting items of £875.5 million, up 22.2% on last year. We continued to focus on strengthening the balance sheet and as a result delivered £443 million of free cash flow from operations, improving our net funds excluding the lease position to £438 million. Our improved financial position means we now have an investment grade credit rating from both our rating agencies. I'll now take you through the results in more detail by business area. The food business grew sales by 8.7% with performance in Q4 growing 10% despite no Easter in the reporting year. Life-like sales were slightly lower at 8.6% growth as the impact of full line closures in the year took effect. UK food volumes grew by 6.7%, supported by growth in larger basket shopping missions as we progress towards becoming a shopping list retailer. Food adjusted operating margin improved by 0.7 percentage points. Gross margin decreased by 0.1 percentage points, as investment in value and quality was largely offset by cost reductions from sourcing programmes. Operating costs increased 5.4%, which was lower than sales growth of 8.7%, resulting in operational cost leverage of 0.8 percentage points. Operating cost increases in the year related to retail investment in colleague pay and in-store services partly offset by structural cost savings. Supply chain investment in colleague pay and costs associated with additional volumes offset by structural cost savings and efficiencies. increased investment in digital and technology core infrastructure, with central costs being broadly level on the year. In fashion, home, and beauty, sales grew 3.5% as quality, value, and style perceptions grew year on year. Full price mix remained broadly level in a more promotional market. Sales were driven by online as we started to invest in the digital experience for customers, performing particularly well with new season campaigns and collaborations. Fashion, home and beauty adjusted operating margin improved by 0.5 percentage points. Gross margin increased 1.2 percentage points, driven by better buying and currency-related gains, which more than offset supplier labour cost headwinds. Operating costs increased 5.1%, which was higher than sales growth of 3.5%, resulting in operational cost deleverage of 0.7 percentage points. Operating cost increases in the year related to logistics costs associated with growth in online orders, investment in core infrastructure in digital and technology, increased central costs associated with marketing, website improvements and transformation. And conversely, retail costs decreased in the year as investment in colleague pay was offset by cost savings. Moving now to international, which this year has been resetting and refocusing for growth. Sales in the year were down 8.5% with lower fashion, home and beauty shipments following actions taken to reduce stock levels by franchise partners and ongoing challenging trading conditions in owned stores in India. Adjusted operating profit declined in the year due to the reduction in sales, partially offset by improved cost control in owned markets. Looking ahead, we remain confident in our plans for international to become a growth opportunity in the medium term. As set out in our Capital Markets Day in October 2022, one of our objectives is to permanently remove costs from the business. Two years into the programme and £300 million of savings have been achieved, with approximately £120 million saved in the last 12 months, predominantly in retail and supply chain. And we remain confident of delivering savings of over £500 million by 2028. The overall group performance shows a movement in year-on-year profit before tax, driven by food and fashion, home and beauty, partly offset by decline in international. Sales grew in Ocado Retail with M&S products driving strong growth, although there remained some way to go to get back to a profit contribution. I note for the reporting period 24-25, Ocado Retail was accounted for as an associate interest, as we have previously reported. From financial year 25-26, Ocado Retail will be consolidated in the results of M&S in accordance with the Joint Venture Agreement. Details relating to this will be shared over the summer. Financial services and other reflects the updated arrangement between M&S and HSBC UK. Adjusting items in the year include a fair value re-measurement of the carrying amount of the group's interest in Ocado retail prior to the consolidation. Other adjusting items include the UK store rotation plans and the M&S financial services transformation. Overall, the group generated £443 million of free cash flow from operations, slightly ahead of last year. Growth in operating profit before adjusting items was partly offset by a planned working capital outflow and increased capex net of disposals. The working capital outflow was driven by a change of payment terms in fashion, home and beauty from 90 days to 75 days at the end of the prior year. Increased food inventory was offset by growth in payables, partly due to Easter timing. Net capital expenditure increased with the focus on investment in the group's key strategic areas of store rotation, supply chain and digital and technology. For the forthcoming year, we expect to spend £600 to £650 million net of disposals across our key areas of investment, with £400 to £450 million spent in growth and cost-out areas and £200 to £250 million in maintenance. Tax increased due to higher profit before adjusting items in the year. And the reduction in financial interest paid was driven by the repurchase of medium term notes. And so to summarise the last 12 months, another strong year with sustained trading momentum driven by positive top line and bottom line performance across food and fashion, home and beauty. The structural cost programme remains on track and we remain confident to deliver savings of over £500 million by 2028. We remain committed in our focus on delivering sustainable and consistent free cash flow and balance sheet capacity. Over the last three years, our debt position has improved by £900 million to a net funds position of over £400 million today. Our return on capital employed continues to improve and stands at 16.4% for the year. This gives us confidence to continue investing in our transformation across our key strategic areas, store rotation, supply chain and digital technology. And we expect to spend capex of £600 to £650 million net of disposals in the year ahead. all while paying an increased dividend to our shareholders. I'll now hand you back to Stuart.