Marks and Spencer : ANNUAL REPORT 2022

Shaping the

FUTURE

The next phase of M&S' transformation

STRONGER TEAM, STRONGER BUSINESS,

STRONGER BALANCE SHEET

Marks and Spencer Group plc

Annual Report & Financial Statements 2022

AT A GLANCE

M&S IS A LEADING BRITISH RETAILER, WITH A UNIQUE HERITAGE AND STRONG BRAND VALUES.

We operate as a family of businesses, selling high-quality,great-value,own-brand products and services, alongside a carefully selected range of third-party brands.

We do this through a network of 1,487 stores and

98 websites globally, and together, across our stores, support centres, warehouses and supply chain, our 65,000 colleagues serve over 30 million customers each year.

FOOD

 p10

INTERNATIONAL

CLOTHING

• HOME
   p16

 p24

PEOPLE

• CULTURE
   p26

Marks and Spencer Group plc

Cover

Inside M&S Stevenage, a strong example of how we're modernising our store estate to be fit for the future.

Group revenue

£10.9bn (19/20: +6.9%)

Basic earnings per share

15.7p	(19/20: 1.3p)
No dividend paid for 21/22

APM

Alternative performance measures

The report provides alternative performance measures ("APMs") which are not defined or specified under the requirements of UK-adopted International

Group overview

Group profit before tax

£391.7m(19/20: +482.9%)

APM Group profit before tax and adjusting items

£522.9m(19/20: +29.7%)

APM Net debt excluding lease liabilities

£420m (19/20: -71.2%)

APM Adjusted earnings per share

21.7p	(19/20: +29.9%)
Year-on-year comparison

Percentage of UK Clothing & Home sales online

34%	(19/20: 23%)
Group: Net promoter score1
+29	(new metric)
Digital: Net promoter score1
+5	(new metric)
Stores: Net promoter score1
+81		(20/21: 81)

REPORT STRATEGIC

Accounting Standards. We believe these APMs provide readers with important additional information on our business. We have included a glossary on pages 192 to 197 which provides a comprehensive list of the APMs that we use, including an explanation of how they are calculated, why we use them and how they can be reconciled to a statutory measure where relevant.

The impact of Covid-19 in 2020/21 renders comparisons to the prior year less meaningful. To aid understanding, throughout this document we are showing the 52 weeks to

28 March 2020 as the comparative period, unless stated otherwise.

Net promoter score

This year we launched a new Voice of the Customer programme, including Net Promoter Scores (NPS), which established a new measurement framework. This includes several new measures, including a M&S Group NPS metric, which for the first time provides a total view of our customers and a new Digital NPS metric, which tracks customer sentiment across M&S.com and our app. We will continue to benchmark our performance against the new framework in future reports.

Strategic report

Governance

Financial statements

02	Chairman's letter	56	Chairman's governance overview
05	Chief Executive's statement	58	Leadership and oversight
07	The next phase of transformation	59	Board composition and
09	Business model		meeting attendance
26	People & culture	60	Our Board
30	Sustainability	63	Board activities
31	Non-financial	65	Board review
	information statement	66	Nomination Committee report
32	Engagement & decision-making	70	ESG Committee report
35	Key performance indicators	78	Audit Committee report
36	Financial review	85	Remuneration overview
45	Risk management	89	Remuneration in context
47	Principal risks and uncertainties	91	Summary of Remuneration Policy
		95	Remuneration report
All references to sales, a new APM, throughout this	108	Other disclosures
document are statutory revenue plus the gross value	113	Independent auditor's report
of consignment sales excluding VAT.

1. Consolidated financial statements

1. Notes to the financial statements

1. Company financial statements

1. Notes to the Company financial statements

1. Group financial record

1. Glossary

198 Notice of Annual General Meeting

1. Shareholder information1

1. Index

1. Shareholder information forms part of the Directors' Report.

Annual Report & Financial Statements 2022

01

but the strategy is now clear, and our results this year have exceeded most expectations. Steve Rowe, in his remarkable tenure as Chief Executive grasped many of the nettles and addressed the underlying drift of previous decades. The change in leadership is

not likely to herald a change of direction but rather a significant acceleration and a bolder approach to investment and growth.

However, with M&S, life is never plain sailing. On top of the transformation programme, the last four years have seen the businesses buffeted by a series of external shocks, Brexit, the pandemic, and the invasion of Ukraine. We live in an era of hyper-activegovernment

and expect increases in tax on profits and employment this year, alongside

Archie Norman, Chairman

STRATEGIC REPORT

CHAIRMAN'S LETTER

Dear shareholder,

Marks and Spencer ends the 2022 financial year at an inflection point in its history. Not only have we emerged from the pandemic a stronger business, but we are also at the end of the "fixing the basics" phase of our transformation. And we have a very dynamic new leadership team taking over from Steve Rowe,

our longstanding Chief Executive. Their mandate is now to reshape M&S

as a growth business capable of exploiting the power of our global brand.

I want to be clear that on doing so we are not declaring victory. Whilst we can now see more than glimpses of the potential in both Clothing & Home and Food, there are many aspects of both main businesses that require improvement,

''WE HAVE A VERY DYNAMIC NEW

LEADERSHIP TEAM TAKING OVER FROM

STEVE ROWE, OUR LONGSTANDING CHIEF EXECUTIVE. THEIR MANDATE IS NOW TO RESHAPE M&S AS A GROWTH BUSINESS CAPABLE OF EXPLOITING ''

THE POWER OF OUR GLOBAL BRAND.

new regulatory pressures notably on food content and store layout. In the next eight months we expect the strongest reduction in consumer real income for decades.

The test of the quality of a business is not whether it encounters storms, but how resilient it is to ride them out. Of course, a dramatic reduction in real income will impact our profits. But with the changes we have made, M&S is in much stronger shape and we start from a rising trend

in sales. We have moved to a faster, less hierarchical, more commercial organisation and culture. We are more digital and geared to an omni-channel future, with Clothing & Home online sales penetration double that at the outset of our transformation and the Ocado joint venture well positioned for growth.

Look Behind the Label

As part of our Plan A reset in September, we relaunched the iconic Look Behind the Label campaign, inviting customers to find out more about the action M&S is taking to do right by the planet.

Alongside this, customers were encouraged to visit our new hub through social channels, where we set out everyday actions customers can take to help reduce their carbon footprint.

02 Marks and Spencer Group plc

Our international franchises are in good shape and we are rapidly growing our "global" online business. Both our main UK businesses have achieved market share growth in recent months and are well placed on value.

We have strong new store formats

and a good pipeline of store relocations and rebuilds. Our balance sheet is commercially stronger than at any recent time.

So, our approach to the likely consumer recession will be unwavering. Our ambition is to become a growth business. M&S was founded in 1884 and we are striving to build a great business for the next

100 years. We expect to increase our investment in digital, technology and the store estate in the year ahead.

For that reason and because of the macroeconomic uncertainty, we are reserving our position on future dividend payments. There will come a time

to review the return of capital for shareholders, but it is not now.

I believe that the role of the Board in a transformation is not just to oversee good governance. It is to be the guardian of the strategy and values of the business, and the debating partner of the executive, and to be available to provide impartial advice to accelerate the transformation.

A good Board is an engaged Board. In the last year with the pandemic, the succession of leadership and other issues, we have had a stable team, robust discussion and great engagement.

This year, Andy Halford, who has now served nine years, will hand over Chairmanship of the Audit Committee to Evelyn Bourke and we expect to appoint a successor to his role as Senior Independent Director (SID).

Most importantly, Steve Rowe is leaving us after spending almost all his career at M&S, starting on the shop floor and rising to Chief Executive, leading the business through the last six years.

He has been heart and soul M&S and

goes with the thanks and affection of everyone in the business. He has helped us plan the succession to Stuart Machin as Chief Executive and Katie Bickerstaffe as Co-Chief Executive alongside Eoin Tonge as Group CFO & Chief Strategy Officer. They represent a very strong and balanced team with the experience

and energy to drive the next phase of change - "shaping the future".

Finally, M&S is a unique employee brand and the principles of equal respect, engagement and care of our colleagues run deep in our history. This year has been a testing one for everyone. Next year will be different but also challenging. We are deeply grateful to all our colleagues for their commitment, loyalty and hard work.

Archie Norman Chairman

REPORT STRATEGIC

Boosting our digital & data skills

To consistently deliver great products and services to our customers,

we need to be forward thinking and data driven.

Having the right skills, capabilities and culture across the business to harness the insights we generate isn't just a nice-to-have - it's a necessity for our transformation. Which is why we've been investing in the skills of our teams, with over 1,000 colleagues from across the business having been upskilled through our data skills pathway, which we launched in 2018 with retail's first ever data academy in partnership with Decoded. Today

we have four separate streams, including our most recently launched L7 Data Science & AI apprenticeship, all equipping our teams with the tools and skills they need to stay one step ahead of our customers. We want to establish our reputation as a data led organisation - and these programmes are a big part of how we're doing that.

Forward

THINKING

1,000+

Number of colleagues upskilled through our data academies

Annual Report & Financial Statements 2022

03