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John Lewis Partnership plc Interim Report 2009


Chairman’s statement

By the beginning of this year we had adjusted to the severe recessionary conditions and anticipated that 2009 would be another very difficult trading year. The economic environment has turned out to be better than we originally expected and although conditions remain challenging, we have seen an encouraging response to the steps we have taken to reposition the Partnership to the new retail environment.

In the first half of the year we have speeded up the pursuit of profitable growth opportunities, accelerated our brand development and strengthened customer trust, while controlling costs tightly and managing our cash efficiently. These initiatives and confident trading by our 69,000 Partners are reflected in today’s results.

In every area of our business we have generated considerable forward momentum, which will reap rewards for Partners in the future. This is evident in our ambitious investment in multi-channel, new online concepts, new shops and formats, new products and increased collaboration between John Lewis and Waitrose in every aspect of our business.

As the retail landscape undergoes rapid change and we see technology accelerating change in how people shop, the Partnership is well placed to meet customers’ heightened expectations and to gain market share.

Financial results

The Partnership reported gross sales of £3.39bn for the first half of the year, an increase of £114.0m, or 3.5% on last year.

Operating profit, before property profits, was £126.2m, an increase of £0.3m, or 0.2% on last year, representing an operating profit margin of 3.73% (2008/09 3.85%).

Including property profits, operating profit decreased by £4.0m, or 3.1% on last year, representing an operating profit margin of 3.73% (2008/09 3.98%).

Profit before Partnership Bonus and tax was £86.3m, a decrease of £21.0m, or 19.6%, on last year, driven by net finance costs which were £39.9m, £17.0m, or 74.2% higher than last year.

We have changed the presentation of pension and long leave costs, with comparative periods restated accordingly, to bring us into line with common practice. Operating profit continues to include the cost of providing pension and long leave benefits for existing Partners. The financing element, which depends on the external markets and can change materially from one year to the next, particularly in volatile markets, has increased by £15.6m to £20.4m and is now included within financing costs.

During the first half we invested about £100m in Partner benefits, such as pension, long leave, shopping discount, catering subsidy and leisure spending, including costs for our new holiday centre at Bala Lake in Wales and Partners in Sport.