Annual General Meeting 2006

Annual General Meeting 2006Paul Myners - Chairman

Annual General Meeting 2006WELCOME

Introduction

Operational Review

Q&A

Resolutions

Agenda

Your Board

Jeremy Darroch

Non-Executive Director

David Michels

Non-Executive Director

Ian Dyson

Group Finance Director

Paul Myners

Chairman

Lord Burns

Deputy Chairman

Steven Sharp

Executive Director Marketing, E-Commerce, StoreDesign and Development

Louise Patten

Non-Executive Director

Kevin Lomax

Senior Independent Director

Stuart Rose

Chief Executive

Graham Oakley

Group Secretary and Head of Corporate Governance

Jack Keenan

Non-Executive Director

Steven Holliday

Non-Executive Director

The year in review

Significant progress made– much more to do

Increase in share price

Positive sales momentum

Talented management

Improved styling and more newness

Better store environment and new stores

Improved our service levels

Overhauled pay rates and career paths

Sold Kings in the US

B share buyback

Restored competitiveness in Clothing and Home

The year in review

Sales £7.8bn (up 4.1%)

Profit before tax £751.4m (up 35.1%)

Adjusted EPS 31.4p (up 63.5%)

Full year dividend 14.0p per share (up 15.7%)

Net cash flow £550.5m

Dividend

Final dividend: 9.2p

22.7%

Total dividend: 14p

15.7%

Responsible retailing

Tsunami Relief

Fairtrade Cotton

Annual General Meeting 2006Stuart Rose – Chief Executive

UK sales trends

% g

row

th

Q304/05

Q404/05

Q105/06

Q205/06

Q305/06

Q405/06

Q106/07

-15

-10

-5

0

5

10

15

GM LFLFood LFL

Group financial highlights

Sales* £7.8bn, +4.1%

Operating profit* £855.8m, +31.8%

Profit before tax* £751.4m, +35.1%

Adjusted earnings per share* 31.4p, +63.5%

Final dividend of 9.2p per share, up 22.7%; total dividend 14.0p, up 15.7%

Net cash flow £550.5m

*From continuing operations, before exceptional items and asset disposals

UK highlights

Operating profit up 34% to £790m

Growing sales momentum

Margin, markdowns and commitment

Better application of operating costs

Store modernisation programme

International highlights

Turnover up 15% to £523m

Operating profit up 8% to £66m

217 stores in 31 territories

25-30 further stores opening in 06/07

Kings sale completed April 2006

Group Capital Structure

Current position

Pension deficit of £795m (under IAS 19)

Property portfolio

* Pension adjusted

2005/06 2004/05Net debt £1,729m £2,277mFixed charge cover 4.6x 4.2xNet debt*/EBITDA 2.2x 3.1x

Summary

Improving sales trend

Margin and cost savings delivered

Strong profit performance

Strong cash flow

Strong returns on capital investment

Solid foundations to move forward

Plan

Drive

Broaden

July 04 05/06 06/07 07/08 and beyond

Focus

Drive 05/06 - progress to dateProduct

Customer research

Price architecture

New buying

Stock management

Markdowns

Brand rationalisation

Product innovation

Filling range gaps

Service

Management

Availability

Service levels

Multi-channel retailing

Environment

New store format

Simply Food

Space optimisation

Marketing

How are we doing?

Footfall

Conversion

Transactions

Basket Value

Q1 Q2

SOURCE: Footfall, Internal sales

What are the drivers?

Better product– Pricing, values

– Buying

– Styling, newness

Better environment

Better service

Price architecture

GM margin up 650 basis points

23%12% 17%

31%

54% 65% 63% 52%

23% 23% 20% 17%

1998 03/04 04/05 nowGood Better Best

Value Share - Clothing11.3

4.0

6.37.4

3.13.02.6

11.6

3.3

5.7

8.1

3.02.91.8

%£

04 A

pr 2

004

02 M

ay 2

004

30 M

ay 2

004

27 J

un 2

004

25 J

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22 A

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19 S

ep 2

004

17 O

ct 2

004

14 N

ov 2

004

12 D

ec 2

004

09 J

an 2

005

06 F

eb 2

005

06 M

ar 2

005

03 A

pr 2

005

01 M

ay 2

005

29 M

ay 2

005

26 J

un 2

005

24 J

ul 2

005

21 A

ug 2

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18 S

ep 2

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16 O

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005

13 N

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005

11 D

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005

08 J

an 2

006

05 F

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006

05 M

ar 2

006

02 A

pr 2

006

24 Week EndingM&S Arc.Grp inc. Bhs Next/Dir Debs Asda Matalan Tesco

11.1

3.6

6.0

7.7

3.12.81.9

Volume Share – Clothing 11.0

5.9

8.18.2

5.64.5

2.2

11.1

6.37.07.4

6.0

3.9

2.1

%Vol

04 A

pr 2

004

02 M

ay 2

004

30 M

ay 2

004

27 J

un 2

004

25 J

ul 2

004

22 A

ug 2

004

19 S

ep 2

004

17 O

ct 2

004

14 N

ov 2

004

12 D

ec 2

004

09 J

an 2

005

06 F

eb 2

005

06 M

ar 2

005

03 A

pr 2

005

01 M

ay 2

005

29 M

ay 2

005

26 J

un 2

005

24 J

ul 2

005

21 A

ug 2

005

18 S

ep 2

005

16 O

ct 2

005

13 N

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005

11 D

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08 J

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05 F

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05 M

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02 A

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M&S Asda Tesco Arc.Grp inc. Bhs Matalan Next/Dir Debs24 Week Ending

10.6

6.46.68.0

5.94.6

2.0

Apr2003

Nov2003

Oct2004

Apr2005

Nov2005

Mar2006

Mar2004

Market share at Full Price…

M&S Value Share Year on Year Change – Total Clothing & Footwear – Full Price Rolling 12 w/e Data to 02 April 2006

Full Price market share Aug 03 - Oct 05

0.80.4 0.3

-0.3 -0.2-0.5

0.10.4 0.2

-0.2-0.6 -0.5-0.4-0.6 -0.5

-0.8 -0.7-0.8-1.2 -1.4 -1.4

-0.9-0.7 -0.7

-1.7 -1.7-1.8

-1.2 -1.3-0.9 -0.7

-0.1

0.10.6

0 0

-0.1

1.31.7

2.52

1.6

-4

-3

-2

-1

0

1

2

3

4

%pt

Cha

nge

Full Price

Mar

...extending gains to better and best

Total Clothing & Footwear Full Price Market Share

OPP/Good

Best

Better

Jan Mar June Sept

2005

Dec Mar

2006

Home

SOURCE: Retailmap, Mar 06 – Original price, TNS omnibus

Value Perceptions Refocused ranges

Realigned prices

Offering better value

Introduced new products

Furniture strong

Apr

-05

May

-05

Jun-

05

Jul-0

5

Aug

-05

Sep-

05

Oct

-05

Nov

-05

Dec

-05

Jan-

06

Feb-

06

Mar

-06

Apr

-06

Better buyingInternational sourcing

Buying Academy

Flexibility

Open To Buy

Newness

Catalogue management

Stocks & commitment

International sourcingFive established overseas offices

New offices opening 06/07: Delhi, Shanghai

Platform for driving direct sourcing across the business

Improving competitiveness of existing supply base

Improving delivery of fast fashion

Adding flexibility

Create cost visibility

Assure social compliance

Extending open to buy

Catalogue & stock managementIncreasing sales

Lowering markdown risk

Improving availability

Increasing margin

Minimising way proliferation

Driving more newness

Maximising outfit statements

Better styling/quality/choice

Listening to our customers

Driving innovation

Brand changes completed

Focus now on:– Styling– Quality– Overall value

InnovationReal Cool Cotton

Machine washable silk

“Magicwear”

Seam free underwear

Weatherproof rattan

Fairtrade cotton

Fairtrade organic cotton

Machine washable suit

Brands – progress to date…In progress

Autograph – women

Limited Collection

Blue Harbour Vintage

Girls Boutique

Ceriso

Adored

Working well – On track

per una

Blue Harbour

Autograph – men

Collezione

Classics

Truly You

Body

per una

Now in 218 stores

c.500,000 sq ft; +17% LY

Strong sales growth

Working well with big potential

Needs to be planned with corewomenswear

Driving better brand perceptions

Consideration

Apr 06Apr 05 Aug 05

SOURCE: Footfall, Internal sales

Quality

Style

Innovation

Value

Love to Wear

Service

Womenswear Change on year

+13%

+6%

+22%

+31%

+80%

+14%

+2%

Food – a good year

LFL sales performance 05/06

Q1 05/06

Q3 05/06

%

Q2 05/06

Q4 05/06

0.7%

2.7%

5.1%5.6%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Transactions

Q3Q1 Q2

SOURCE: Footfall, Internal sales

Basket value

Basket size

Q4Food

How has this been delivered…

SOURCE: Internal Analysis, 2004-2006

-2

2

6

10

14% on Yr

IGD excluding M&S M&S

Food Performance vs IGD

Performance relative to market

Opportunity to grow share – better product, new space

Better productDriving innovation

Responding to new trends

Healthy eating– Eat Well

– Super foods

Fairtrade

Speciality

Better product

Better product

Better product

Simply FoodExtending brand reach

Delivering greater convenience to our customers

Attracting new customers

Densities and returns

Store openings continue

BP trial going well

16-34

35-44

45-5455-64

65+

16-34

35-44

45-54

55-64

65+

Simply FoodM&S Food

Service

Staffing levels

Management

Career & pay

Service training

Availability

Focus on conversion as footfall & volumes increase

50

60

70

80

90

January

Febru

aryMarc

hAprilMayJu

neJu

lyAugust

Septem

berOcto

berNove

mberDec

ember

Agree Strongly

The Staff Were Efficient & Knew What They Were Doing

EnvironmentEncouraging performance to date

Lessons learnt and reflected in 06/07 plan

60-70 additional stores to open by end of 06/07

Strong returns being generated

Annual General Meeting 2006

Marketing

Marketing

Food

Look behind the label

Additional pages will follow on the weekend in The Times and The Mail

strengthening brand appeal, bolstering awareness of ‘responsible’ messages

-6%

-3%

0%

3%

6%

9%

12%

Mar

-05

Apr

-05

May

-05

Jun-

05

Jul-0

5

Aug

-05

Sep-

05

Oct

-05

Nov

-05

Dec

-05

Jan-

06

Feb-

06

Mar

-06

Regular communication maintains improvementsin footfall ahead of the market in autumn

SOURCE: Footfall, FashionTrak, Superpanel

% Point Difference M&S and Market on Year

What next?UK - more of the same:

– Drive top line, market share, densities, margins– Drive better product– Refurbish store portfolio– Space optimisation– Drive better service & availability

Stretching the brand:– New product types– Extend reach of Simply Food– BP

Multi-channel: Amazon

Overseas

We are listening

chairman@marks-and-spencer.com

Marks and Spencer Group plc Waterside House35 North Wharf RoadLondonW2 1NW

Customer services: 0845 302 1234

Annual General Meeting 2006