Annual Report and Accounts 2015
John Lewis Partnership plc
131
2 Non-GAAP measures
Our financial statements report measures which are required under accounting standards. We also report financial measures which we believe enhance the relevance and usefulness of the financial statements. These are important for understanding underlying business performance and they are described as non-GAAP measures. In this note, we have explained what the non-GAAP financial measures are and why we use them.
2.1 Gross sales
Gross sales represents the amounts receivable by the Partnership for goods and services supplied to customers, net of discounts but including sale or return sales and VAT. This measure shows the headline sales trend.
2.2 Exceptional items
Items which are both material and non-recurring are presented as exceptional items within their relevant consolidated income statement category. The separate reporting of exceptional items helps provide an indication of the Partnership’s underlying business performance.
2.3 Profit before Partnership Bonus and Tax
Profit before Partnership Bonus and Tax is presented as a separate financial statement caption within the consolidated income statement. This measure provides further information on the Partnership’s underlying profitability, and is a core measure of performance for Partners.
2.4 Net debt
Net debt incorporates the Partnership’s consolidated borrowings, bank overdrafts, fair value of derivative financial instruments and obligations under finance leases, less cash and cash equivalents and unamortised bond transaction costs. This measure indicates the Partnership’s overall debt position.
3 Exceptional item
Exceptional items are material, non-recurring items of income and/or expense arising from events or transactions that fall within the activities of the Partnership. We believe these exceptional items are relevant for an understanding of our underlying financial performance, and are highlighted separately on the face of the income statement. This note provides detail of the exceptional item reported in both the prior and current year.
In the prior year, the Partnership made an announcement regarding holiday pay payments. Following a review of the Partnership’s holiday pay policy, it became clear that Partners who receive certain additions to pay, such as premiums for working on Sunday or bank holidays, had not been paid correctly under the Working Time Regulations legislation. The Partnership Board therefore decided to make one-off additional payments to those affected.
An exceptional operating expense was recorded in the year to 25 January 2014 totalling £47.3m. This reflected estimated costs of £39.3m for payments to Partners and associated expenses for holiday pay dating back to 2006 which had not been calculated correctly. Future pension liabilities were also increased by £8.0m as a result.
In the year ending 31 January 2015, exceptional operating income has been recognised of £7.9m. This comprises a release of £3.4m from the pension liability and £4.5m released from other provisions since the estimated costs for correcting our systems for holiday pay and updating pension scheme members’ entitlements were lower than originally expected.
A tax charge of £1.7m was recognised on the exceptional item (2014: credit of £10.9m).
Introduction
Partnership difference
Principles
Strategy
Performance
Governance
Financial statements
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