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			<h1>Press releases</h1>
			<p class="reference"><a href="/investors/press_releases">Back to press releases index</a></p>
	
			<p>08 November 2005</p>
			<h2>Marks & Spencer Interim Results</h2>
	
			<div id="pr_article">
				
<h2>Highlights:</h2>
<ul class=bullet>
<li>UK sales at &#163;3,302.3m down 0.2% (last year &#163;3,307.6m); 
<li>International sales &#163;348.5m up 8.6% (last year &#163;321.0m); 
<li>Group operating profit before exceptional items up 27.1% at &#163;367.7m (last year &#163;289.4m); 
<li>Group profit before tax and exceptional items up 19.6% at &#163;308.2m (last year &#163;257.8m); Group profit before tax, after exceptional items, up 74.3% at &#163;308.2m (last year &#163;176.8m); 
<li>Adjusted* earnings per share from continuing operations 12.8p, up 70.7% (last year 7.5p); Basic earnings per share 12.8p (last year 5.7p); 
<li>Interim dividend of 4.8p per share, up 4.3% (last year 4.6p); and 
<li>The Board announces the appointment of one executive director and two non-executive directors </li></ul>
<p><em>* adjusted for exceptional items</em></p>
<p><strong>Outlook</strong> <br>When we updated the market on 11 October 2005, we said that the trading environment remained very difficult. This view has not changed. We have the important Christmas trading period ahead which was very promotionally driven last year. We will continue to deliver outstanding quality and value. Customer feedback on new product and pricing is positive. </p>
<p><strong>Paul Myners, Chairman, commented:</strong></p>
<p>"The Company has made progress in a difficult environment. The Board is proposing an interim dividend of 4.8p, representing a 4.3% increase on last year. </p>
<p>We are pleased to announce the appointment of Steven Sharp to the Board as executive director Marketing, E-commerce, Store Design and Development. </p>
<p>We are also announcing the appointment of two additional non-executive directors. Lady Patten and Jeremy Darroch will be joining as non-executive directors in February 2006. I am delighted to welcome Louise and Jeremy to the Board. We plan to appoint a further new non-executive director before the end of this financial year".</p>
<p><strong>Chief Executive's Statement: </strong><br>This is an encouraging first half performance with Group sales up 0.6% on the year and an improvement of 27.1% in Group operating profit before exceptional charges. We are pleased with the progress we are making but much remains to be done. </p>
<p>Our focus on full price profitable sales, better buying, control of stock, commitments and costs has enabled us to deliver the targets we set out in July 2004. Full price sales have continued to improve and in General Merchandise were up 0.4% in the second quarter against a decrease of 2.4% in the first quarter. Our plan is to continue to deliver outstanding Product, Environment and Service.</p>
<p><strong>Product</strong> <br>We will focus on delivering value, styling, quality and competitiveness in all areas of the business. Customer perceptions on value are improving. Value will continue to be a key driver across all price points. </p>
<p>Our buying is now much more flexible. We have opened sourcing offices in Hong Kong, Turkey, Bangladesh and India and this will deliver further efficiencies. The introduction of Open To Buy will mean more newness in stores and will improve our ability to chase trends at speed. We continue to manage our stocks and commitments tightly. </p>
<p>In September, we ran a TV advertising campaign for Womenswear. This was well received, encouraging customers into store and driving improving perceptions on styling and the brand.</p>
<p>In Food we have launched 140 new lines to our already successful 'Cook!' range which is unique in being totally preservative and additive free. We have made recipe changes to 450 lines within our ready meals food range to remove all artificial flavourings, artificial colourings and hydrogenated fats: most of these lines have no artificial preservatives. We have also extended the Eat Well campaign into new recipes. Innovation and reacting to consumer trends will be a key driver for the coming year. Our TV advertising campaign is reinforcing our quality credentials with customers. </p>
<p><strong>Environment</strong> <br>Five new stores were opened in retail parks. We have modernised 13 more stores as part of our extended store modernisation trial. This programme will be accelerated next year. Group capital expenditure for 2006/07 is expected to rise to between &#163;450m to &#163;500m. </p>
<p>Our plans to broaden the reach of our Food business continues and six Simply Foods were opened in the first half. Since the half year, we have opened six trial stores on BP Connect forecourts: a further two stores open this week. Initial performance has been encouraging. We are also opening a number of new initiatives in some existing Food Halls offering 'Hot Food to Go', an eat-over delicatessen counter and a new bakery concept.</p>
<p>We launched a number of initiatives to improve service during the half. We have overhauled pay rates for our customer assistants and introduced better career progression plans. Around 40,000 store staff have attended a specially designed training programme this half. We are starting to see improvements in customer service, although with the increasing sales volumes we are now driving through the business we still need to make further progress in this area. </p>
<h2>Board and Organisational changes </h2>
<p>In order to accelerate the pace of change and to better align responsibilities, we are today announcing further changes to our Board, management and operations. </p>
<p>We have appointed one executive director and two additional non-executive directors to the Board. </p>
<p>Steven Sharp is appointed executive director Marketing, E-commerce, Store Design and Development, with immediate effect. In addition to his previous responsibilities, Steven will now be responsible for the delivery of the store modernisation programme and for the M&amp;S Money relationship with HSBC. </p>
<p>There will now be three executive directors on the Board, Stuart Rose, Ian Dyson and Steven Sharp. Ian Dyson is responsible for Finance, International, IT, Logistics and Property. Stuart Rose will continue to manage buying and merchandising in addition to his other responsibilities. </p>
<p>We are pleased to announce that George Davies will continue to run per una on a full time basis until the end of June 2006. He will be working with us to implement an orderly succession before becoming Chairman of per una from 1 July 2006, when it is expected he will devote at least two days a week to per una. George is fully committed to working with us to further develop the successful per una brand. </p>
<p>We are reorganising our Childrenswear business. Boyswear, Schoolwear and Nightwear will now be managed by Menswear, while Girlswear and Babywear will be managed by Womenswear. As a result of this restructure, Fiona Holmes, Business Unit Director, Childrenswear, will leave the business. </p>
<p>In order to explore new opportunities to develop and broaden the reach of our Food business we are forming a new Food development unit. </p>
<p>Lady Patten and Jeremy Darroch will be joining the Board as non-executive directors in February 2006. Louise Patten is Chairman of Brixton plc and a non-executive director of Bradford &amp; Bingley plc, GUS plc and Somerfield plc, as well as senior advisor to Bain &amp; Co. She brings a wide range of consumer and retail experience to the Board and will join the Remuneration Committee. </p>
<p>Jeremy Darroch, CFO of BSkyB plc, and ex-Group Finance Director of Dixons Stores Group plc, brings consumer, retail and financial experience to the Board and will join the Audit Committee. </p>
<p>The Board will now consist of three executive directors, six non-executive directors and a Chairman. </p>
<h2>Financial Review:</h2>
<h3>Summary of Results </h3>
<table border=1>
<tbody>
<tr>
<th class=corner-cell></th>
<th id=h1><strong>2005/06 <br>&#163;m</strong></th>
<th id=h2><strong>2004/05 <br>&#163;m </strong></th>
<th id=h3><strong>% inc</strong></th></tr></tbody>
<tbody>
<tr>
<td id=r1>Total Revenue(excl. VAT)</td>
<td headers=r1-h1>3,650.8</td>
<td headers=r1-h2>3,628.6</td>
<td headers=r1-h3>0.6</td></tr>
<tr>
<td class=tab-indent id=r2>UK</td>
<td headers=r2-h1>3,302.3</td>
<td headers=r2-h2>3,307.6</td>
<td headers=r2-h3>-0.2</td></tr>
<tr>
<td class=tab-indent id=r3>International</td>
<td headers=r3-h1>348.5</td>
<td headers=r3-h2>321.0</td>
<td headers=r3-h3>8.6</td></tr>
<tr>
<td id=r4>Operating profit before exceptional charges</td>
<td headers=r4-h1>367.7</td>
<td headers=r4-h2>289.4</td>
<td headers=r4-h3>27.1</td></tr>
<tr>
<td class=tab-indent id=r5>UK</td>
<td headers=r5-h1>335.2</td>
<td headers=r5-h2>260.2</td>
<td headers=r5-h3>28.8</td></tr>
<tr>
<td class=tab-indent id=r6>International</td>
<td headers=r6-h1>32.5</td>
<td headers=r6-h2>29.2</td>
<td headers=r6-h3>11.3</td></tr>
<tr>
<td id=r7>Profit before tax and exceptional charges</td>
<td headers=r7-h1>308.2</td>
<td headers=r7-h2>257.8</td>
<td headers=r7-h3>19.6</td></tr>
<tr>
<td id=r8>Exceptional charges </td>
<td headers=r8-h1>-</td>
<td headers=r8-h2>(81.0)</td>
<td headers=r8-h3>-</td></tr>
<tr>
<td id=r9>Adjusted EPS from continuing operations</td>
<td headers=r9-h1>12.8</td>
<td headers=r9-h2>7.5</td>
<td headers=r9-h3>70.7</td></tr>
<tr>
<td id=r10>Dividend per share</td>
<td headers=r10-h1>4.8</td>
<td headers=r10-h2>4.6</td>
<td headers=r10-h3>4.3</td></tr></tbody></table>
<h2>UK</h2>
<p>UK sales for the 26 weeks ended 1 October 2005, were &#163;3,302.3m, down 0.2% and down 2.3% on a like-for-like basis. A breakdown by business area, by quarter is shown below: </p>
<table border=1>
<tbody>
<tr>
<th id=t1><strong>Sales</strong> </th>
<th id=h1-1 headers=t1><strong>Q1 (14 weeks)</strong> </th>
<th id=h2-1 headers=t1><strong>Q2 (12 weeks)</strong> </th>
<th id=h3-1 headers=t1><strong>H1%</strong> </th></tr>
<tr>
<td class=tab-indent id=r1-1 header="t1">Clothing</td>
<td headers="r1-1 h1-1 t1">-9.2</td>
<td headers="r1-1 h2-1 t1">0.2</td>
<td headers="r1-1 h3-1 t1">-4.9</td></tr>
<tr>
<td class=tab-indent id=r2-1 header="t1">Home</td>
<td headers="r2-1 h1-1 t1">-22.3</td>
<td headers="r2-1 h2-1 t1">2.1</td>
<td headers="r2-1 h3-1 t1">-11.2</td></tr>
<tr>
<td class=tab-indent id=r3-1 header="t1">General Merchandise</td>
<td headers="r3-1 h1-1 t1">-10.3</td>
<td headers="r3-1 h2-1 t1">0.4</td>
<td headers="r3-1 h3-1 t1">-5.5</td></tr>
<tr>
<td class=tab-indent id=r4-1 header="t1">Food</td>
<td headers="r4-1 h1-1 t1">5.0</td>
<td headers="r4-1 h2-1 t1">6.3</td>
<td headers="r4-1 h3-1 t1">+5.6</td></tr>
<tr>
<td class=tab-indent id=r5-1 header="t1">Total</td>
<td headers="r5-1 h1-1 t1">-3.1</td>
<td headers="r5-1 h2-1 t1">3.3</td>
<td headers="r5-1 h3-1 t1">-0.2</td></tr></tbody></table>
<table class=fin_table title="A breakdown by business area, by quarter - Like-for-Like Sales" width="100%" border=1>
<tbody>
<tr>
<th id=t1-1><strong>Like-for-Like Sales</strong> </th>
<th id=h1-2><strong>Q1 (14 weeks)</strong> </th>
<th id=h2-2><strong>Q2 (12 weeks)</strong> </th>
<th id=h3-2><strong>H1% </strong></th></tr>
<tr>
<td class=tab-indent id=r1-2>General Merchandise</td>
<td headers="r1-2 h1-2 t1-1">-11.2</td>
<td headers="r1-2 h2-2 t1-1">-0.2</td>
<td headers="r1-2 h3-2 t1-1">-6.1</td></tr>
<tr>
<td class=tab-indent id=r2-2>Food</td>
<td headers="r2-2 h1-2 t1-1">0.7</td>
<td headers="r2-2 h2-2 t1-1">2.7</td>
<td headers="r2-2 h3-2 t1-1">+1.6</td></tr>
<tr>
<td class=tab-indent id=r3-2>Total</td>
<td headers="r3-2 h1-2 t1-1">-5.4</td>
<td headers="r3-2 h2-2 t1-1">1.3</td>
<td headers="r3-2 h3-2 t1-1">-2.3</td></tr></tbody></table>
<p>Clothing sales were down 4.9% in total for the half but the performance improved substantially in the second quarter with sales up 0.2%. This was driven by improvements in Womenswear, where we took action on opening price points to restore our competitiveness. This more competitive stance, and focus on better styling and quality, is starting to reflect in improving customer perceptions of our offer. We also took action on opening price points in Lingerie and Menswear, particularly on essentials. Childrenswear remains a difficult market, but our schoolwear market share has remained stable. Home showed a significant improvement through the course of the half, driven primarily by furniture. This business has been refocused in terms of styling and value and is responding well in a difficult market.</p><br>
<p>Food sales for the first half were up 5.6% on last year, up 1.6% on a like-for-like basis with a similarly improving trend between quarter one and quarter two. We continue to benefit from additional footage as we extend the Simply Food format. </p>
<p>UK operating profit for the 26 weeks to 1 October 2005 was &#163;335.2m, up 28.8% (last year &#163;260.2m). This growth reflects the benefits of the actions taken last year to improve supplier terms and control stock and commitment, which have contributed to an increase in the UK gross margin of 3.6 percentage points to 42.6% (last half year 39.0%). </p>
<p>UK operating costs of &#163;1,073.4m, were up 4.3% on the year, reflecting the impact of new space and the provision for a staff bonus of &#163;29.7m. Excluding the bonus, costs were up 1.4%. </p>
<p>The UK operating profit includes a contribution of &#163;2.4m from Financial Services, representing the Group's continuing economic interest in M&amp;S Money which was sold to HSBC in November 2004. We expect the full year contribution from Financial Services to be around &#163;11m. This is in line with our previous guidance but excludes the profit contribution from our captive insurance business which is now included within UK operating costs. </p>
<h2>International</h2>
<p>We continue to make progress with sales up 8.6% and operating profit up 11.3%. Our first store in Moscow opened on 4 November and our existing franchisees are continuing to invest in new footage. </p>
<p>In our wholly owned businesses, sales in the Republic of Ireland were ahead of last year helped by store openings in the second half of last year in Blanchardstown and Dundrum, and continued improvement in the performance of our existing stores. Sales and profit in Hong Kong were affected by loss of space following the surrender of leases to the landlord for redevelopment. Kings Super Markets had a satisfactory half with sales up 0.3%. </p>
<h2>Net interest expense</h2>
<p>Net interest expense was &#163;59.5m compared to &#163;31.6m last year. This largely reflects a significant increase in average net debt following the Tender Offer last year. The average rate of interest on gross borrowings during the period was 5.8% (last year 5.5%). The increase in other finance income has been driven by additional contributions made into the Defined Benefit Pension Scheme of &#163;64m in 2004/05 and &#163;51m at the beginning of 2005/06. </p>
<h2>Taxation</h2>
<p>The tax charge reflects an effective tax rate for the first half of 31%, compared to 30.6% (before exceptional items) for the last full year. </p>
<h2>Shareholder returns and dividends </h2>
<p>Adjusted earnings per share from continuing operations, which excludes the effect of exceptional items, has increased by 70.7% to 12.8p per share. The average number of shares in issue during the period was 1,660.5m, reflecting the impact of the Tender Offer last year. </p>
<p>The Board is proposing an interim dividend of 4.8p per share (last year 4.6p per share), an increase of 4.3%. </p>
<h2>Capital expenditure</h2>
<p>Group capital additions for the half were &#163;171.2m compared to &#163;118.7m last year, reflecting the trial store modernisation programme. Group capital expenditure for the full year 2005/06, adjusted for IFRS, is expected to be between &#163;350m and &#163;400m. For the full year we expect to add 1.4% to our total footage, representing an increase of 1% in General Merchandise and 2.4% in Foods. Group capital expenditure for 2006/07 is expected to rise to between &#163;450m to &#163;500m. </p>
<h2>Cash flow and net debt</h2>
<p>The Group generated a net cash inflow for the period of &#163;246.3m compared with &#163;642.8m last year, a decrease of &#163;396.5m. Last year's cashflow included &#163;711.5m from the now discontinued M&amp;S Money business. Cash inflow from continuing operations increased by &#163;207.2m reflecting higher operating profits of &#163;78.3m, together with lower investment in working capital of &#163;83.1m and lower exceptional cash outflows of &#163;35.8m. Stock levels were 11.4% down on the year, reflecting the tighter stock controls across the business.</p>
<p>Free Cash Flow was &#163;358.1m, compared to &#163;778.5m last year. At the end of the period, net debt was &#163;2,025.5m, a decrease of &#163;251.7m since the year end, giving rise to gearing of 76.6% (last year end 75.6%). </p>
<h2>Pensions</h2>
<p>The Group paid &#163;51m of additional contributions into the UK Defined Benefit Pension Scheme in April 2005. These payments are reflected in the net post-retirement liability of &#163;778.4m at 1 October 2005 (last year &#163;676.0m). The &#163;102.4m increase in the level of this liability since the year end has been driven by movements in AA corporate bond rates. </p>
<p><em>Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences and prospects are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect Marks &amp; Spencer's current expectations concerning future events and actual results may differ materially from current expectations or historical results. Any such forward-looking statements are subject to various risks and uncertainties, including failure by Marks &amp; Spencer to predict accurately customer preferences; decline in the demand for products offered by Marks &amp; Spencer; competitive influences; changes in levels of store traffic or consumer spending habits; effectiveness of Marks &amp; Spencer's brand awareness and marketing programmes; general economic conditions or a downturn in the retail or financial services industries; acts of war or terrorism worldwide; work stoppages, slowdowns or strikes; and changes in financial and equity markets. </em></p>
<h2>For further information, please contact:</h2>
<h3>Investor Relations:</h3>
<p>Amanda Mellor +44 (0)20 8718 3604 <br>Sarah McGlyne +44 (0)20 8718 1563 <br></p>
<h3>Media enquiries:</h3>
<p>Corporate Press Office: +44 (0)20 8718 1919 </p><br>
<h3>Investor &amp; Analyst webcast:</h3>
<p>There will be an investor and analyst presentation at 09.30 (GMT) on Tuesday 8 November 2005: This presentation can be viewed live on the Marks and Spencer Group plc website on <a title="Marks &amp; Spencer" href="http://www.marksandspencer.com/">www.marksandspencer.com </a></p>
<h3>Fixed Income Investor Conference Call: </h3>
<p>This will be hosted by Ian Dyson at 14.30 (GMT) on Tuesday 8 November 2005: <br>Dial in number: +44 (0) 20 7162 0125 </p>
<p>A recording of this call will be available until Tuesday 15 November 2005: <br>Dial in number: +44 (0) 20 7031 4064 <br>Access Code: 682872 </p>
<ul>
<li><a title="Marks &amp; Spencer Interim Results" href="/documents/press_releases/2005/interim_results_2005" target=_blank>Click here&nbsp;to view the financial statements and notes</a></li></ul>
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