Marks & Spencer Regulatory News (MKS)

This announcement contains inside information

Issued: 8 November 2016

MARKS AND SPENCER GROUP PLC

HALF YEAR RESULTS FOR 26 WEEKS ENDED 1 OCTOBER 2016

AND STRATEGIC UPDATE

1 Underlying results are consistent with how business performance is measured internally. 2 Refer to note 3 for further details.

Summary

· Good progress against strategic priorities set out in May.

· As expected, underlying profits down in the half due to lower Clothing & Home sales. Non-underlying items include significant charge relating to pension changes.

· Proposal to focus International business on a franchise model, exiting our loss-making owned business across ten markets, at a non-underlying cost of £150m-£200m over the coming 12 month period, thereby eliminating annual losses of £45m.

· Five-year plan to improve productivity of UK Store Estate by repositioning c.25% of Clothing & Home space with costs of c. £50m per annum for the first three years and continued rollout of our Simply Food stores. Total number of M&S stores will increase.

· Interim dividend maintained.

· Decision not to make an additional return of cash to shareholders in the second half given costs of strategic change and uncertain market conditions.

CEO Statement:

Steve Rowe, M&S CEO, said: "In May, we laid out a number of questions which we would answer as part of our strategic review. We committed to creating a simpler business with customers at its heart, and taking action to start to recover our Clothing & Home business and continue to grow in Food.

"Our aim is to build a sustainable business which will delight our customers, provide a robust foundation for future growth and deliver value for our shareholders in the long term. We have made good progress on our plans and customers are already noticing a difference, particularly in Clothing & Home.

"In addition, we have made major steps towards fairer pay and pension arrangements, streamlined our senior management team and our plans to implement a simpler Head Office structure are well underway.

"We have now completed a forensic review of our estate both in the UK and in our International markets. Over the next five years we will transform our UK estate with c.60 fewer Clothing & Home stores, whilst continuing to increase the number of our Simply Food stores. In the future, we will have more inspiring stores in places where customers want to shop that complement our growing digital offer.

"Internationally, we propose to cease trading in ten loss making owned markets, but intend to continue to develop our presence through our strong franchise partners.

"These are tough decisions, but vital to building a future M&S that is simpler, more relevant, multi-channel and focused on delivering sustainable returns."

 HALF YEAR REVIEW

Group Revenue - constant currency

1 Memo only on a constant currency basis.

Like-for-like is the movement in sales from stores that have traded continuously and where there has been

no significant change in footage for at least 52 weeks; includes online sales

Recovering and growing Clothing & Home

In a tough market, we are seeing early signs that our actions to recover our Clothing & Home business are working. We are restoring our price integrity and have seen strong volume improvements, particularly in opening price points, as we ensure we are price competitive. Nevertheless, total sales declined 5.3%.

We moved the summer sale to quarter two and reduced promotions to focus on full price sales. In the most recent 12 week period to 25 September 2016, full price value share was up by over 30bps with further improvements in volume share, although we saw a 20bps decline in overall value share. (Figures according to Kantar World Panel).

Product is key to recovering and growing Clothing & Home and we are focused on delivering contemporary wearable style and being famous for quality wardrobe essentials. We now have 10% fewer clothing lines that we have bought with greater authority and we have introduced a more contemporary colour palette for autumn. We also delivered on our commitment to improve the 'fit' of wardrobe essentials and saw strong performances in core areas such as bras and T-shirts.

For autumn launch, availability was up eight percentage points and we made further improvements to core availability. This is making a difference even in areas where we already lead the market. For example, school uniform sales were up c.10% year-on-year in quarter two.

We've also changed the layout of our stores to reflect how our customers like to shop, with more of our clothes grouped together in product categories, rather than in brand co-ordinated departments. We've hired 3,300 new customer assistants to work in areas that really matter to our customers such as fitting rooms and till points. As a result, our customer satisfaction levels are the highest they have been for over three years.

We continue to improve our core M&S brand and simplify product choices by focusing on the brands that are most relevant to our customers, such as Autograph, per una and Blue Harbour. As a result, we will remove Indigo, Collezione and North Coast sub-brands.

Clothing & Home gross margin was up 10bps to 56.7%. Gains from buying and reduced promotions more than offset increased currency pressure and higher markdown costs as difficult market conditions resulted in a greater level of sale stock.

Continuing to grow Food

We delivered another good performance from our Food business as we continue to outperform the market. Our market share increased by 20 basis points in the most recent 12 week period ending 9 October 2016. (Figures according to Kantar World Panel). Total sales increased by 4.0% with like-for-like sales down 0.9% in a competitive market. We also further improved availability.

Every year around 25% of our Food catalogue is comprised of new or improved products. During the period we relaunched our 'Cook' range and introduced more options to tap into the consumer trend for healthy but convenient meals. We also continued to expand our offer of gluten and lactose free products as we meet our customers' demands for specialist dietary ranges.

Our Food to Order - entertaining and gifting products - continued to perform well with sales up double digits on the year.

We opened 21 net new stores as we continue to expand the reach of our food offer. The performance of new Simply Food stores was ahead of expectations with stores opened in the past year exceeding sales forecasts by 17%.

Food gross margin was up 10bps on the year at 32.6%. Buying margin was slightly down partly driven by an increase in promotional sales. This was more than offset by benefits realised from volume growth and ongoing efficiencies within our supply chain.

Full year guidance 2016/17

· Given the further depreciation of sterling, we now expect to deliver year-on-year growth in Clothing & Home gross margin of between 0 and 50 basis points

· Capex is now expected to be c.£400m

· Non underlying costs are expected to include a charge relating to our proposed exit of a number of International markets of between £150m and £200m

· All other full year guidance remains unchanged

STRATEGY UPDATE

We have concluded the review that we started in April and now have a more complete picture of the actions needed to return M&S to sustainable profitable growth. M&S remains a strongly cash generative business and we have reviewed our approach to capital investment to improve the reliability of delivering projected returns.

Building a sustainable, profitable International business

· Focusing on developing our customer proposition with our established franchise partners

· Commitment to JVs in India & Greece and owned stores in Ireland, Hong Kong & Czech Republic

· Proposal to close 53 stores as we exit 10 loss-making owned markets

In 2015/16 our owned International business delivered a loss of £31.5m and in total our International operating profits were down 39.6% to £55.8m. This is not sustainable and we have undertaken a comprehensive review of our International business.

Our International business consists of two parts: an owned business that is loss making in a number of markets and a profitable franchise business which made a profit of £87.3m last year. Our review has looked at the performance and potential of each of our international markets.

In the future, we propose to operate with fewer wholly-owned markets and have a greater focus on our established joint ventures and franchise partnerships. We will use our local market customer insights to build a more sustainable international business by focusing on improving our customers' experience and driving profitability.

We have 267 franchise stores in 34 markets, as well as established joint ventures in Greece and India. Working together with our partners here, we will leverage their scale, infrastructure and local expertise. We will also continue to develop our franchised Food business in France where there is demand for our quality, innovative products at convenient locations.

We will continue to operate owned businesses in the Republic of Ireland, Hong Kong and Czech Republic, which are profitable with strong brand awareness, established store estates and loyal customers.

We also trade online in 21 markets reaching customers through our fully localised owned and operated websites, via established marketplaces such as Myntra in India and Zalando in Europe and with our established franchise partners.

Last year our owned businesses in ten other markets made a loss of £45m on revenues of £171m, some markets have now been loss making for at least five years. Our review has found this is due to a number of factors including our fragmented owned-store portfolio and lack of scale. Additionally, there is limited opportunity for future growth in these markets.

We are proposing to close all of our 53 wholly-owned stores in these ten markets, including ten in China and seven in France, as well as all of our stores in Belgium, Estonia, Hungary, Lithuania, the Netherlands, Poland, Romania and Slovakia. We are therefore today starting consultation with c.2,100 employees about our proposals.

We are fully committed to complying with all local employment legislation. This includes informing and consulting with employees and/or the appropriate bodies, for example, the European Works Council, national unions and employee work councils in each country about these proposals.

If, following the outcome of the consultation, we go ahead with these proposals, we will incur estimated non-underlying costs in the range of c.£150m to £200m, of which the vast majority will be cash, largely driven by property-related costs and redundancy costs.

In summary we remain fully committed to an international strategy and we believe our proposals would create a more sustainable, profitable and customer-focused International business for M&S.

Improving our UK Store Estate

· Continue to expand our successful Simply Food business with over 200 new stores by the end of 2018/19

· Improve the quality and productivity of our Clothing & Home space by trading from fewer, better locations

Stores are and will remain important to our customers alongside a fully integrated online offer. We aim to give customers a relevant and convenient UK store estate and have therefore carried out a full review of our UK store portfolio.

We will continue with our previously announced Simply Food store opening plans which will see us opening over 200 new stores by the end of 2018/19.

We have 304 'full line' stores selling both Clothing & Home and Food. Together with our Outlet stores, these account for around two thirds of our UK selling space. As customer shopping patterns change and customers migrate online, we need to manage our estate proactively to ensure that our Clothing & Home space is relevant for our customers and profitable for our shareholders.

We have developed a five year programme to improve our store estate to better meet our customers' needs. The result will be fewer, more inspirational Clothing & Home stores that offer customers better range authority in more convenient locations with higher space productivity.

Our programme will touch more than 100 stores, accounting for 25% of our space. This will result in a net reduction of c.10% of Clothing & Home space with 60 fewer full line stores.

These changes will include a combination of approximately 30 full line closures, and downsizing or replacing around 45 full line stores to Simply Food stores. We will relocate some of our other stores and also open some new full line stores in underserved areas. We will improve the quality of the remaining Clothing & Home estate by rebalancing our space allowing us to offer greater range authority.

The associated costs include exiting leases and the write down of store equipment. We therefore expect non-underlying costs of this programme to be c.£50m per annum for the next three years rising to c.£100m in years four and five. About half of these costs will be cash. Opening a new store typically takes around three years and as a result costs are weighted towards the end of the programme. The exact phasing will depend upon market conditions. This programme replaces the store closure programme announced in November 2015. The net capital investment required for new stores, relocations and upgrading our full line stores is c.£50m per annum over five years which will be delivered within previous capex guidance.

Uncertain market conditions require more disciplined investment decisions, so going forward we will be assessing investments with a greater emphasis on payback. In addition, we will be looking to shorten our lease terms to provide additional strategic flexibility in the context of changing customer shopping patterns.

In summary, at the end of five years, we will operate from fewer, better Clothing & Home stores, but from substantially more Simply Food stores. In total, M&S expects to have more stores, in more convenient locations for our customers, offering greater employment opportunities for employees.

All store numbers are quoted as at 1st October 2016.

Simplifying our organisation:

· Plans well underway to reduce our UK Head Office costs

· Good progress on implementation of pay and pension plans

· New operating model with clear Clothing & Home and Food Business Unit accountability

During the half we outlined proposals to simplify our UK Head Office structure and lower our costs. We are reducing headcount by c.525 and also the number of roles based in central London by c.400. We have reported a non-underlying cost of £16m for changes to our management structure and UK Head Office in the period. Annualised cost savings are expected to be c.£30m of which around half is included in this year's cost guidance.

In May we announced proposals for a fairer, simpler and more consistent approach to pay and pensions. We have now completed the group consultation and over 99% of colleagues have accepted the changes. As part of these plans we will be closing the UK defined benefit pension scheme to future accrual. We have reported a non-underlying cost of £154.2m in the period to reflect these changes. The Group anticipates making further transition payments in relation to the closure of the defined benefit scheme, expected to be c.£25m over the next three years.

We have implemented a new operating model giving clear accountability to our Clothing & Home and Food businesses and made changes to our senior management structure, which is now leaner and more efficient.

Shareholder returns

We have continued to improve our investment disciplines and remain committed to a strong balance sheet and maintaining an investment grade credit rating. We are announcing an unchanged interim dividend of 6.8p today. We returned £74.5m to shareholders in the first half in the form of a special dividend. However, given the potential cash costs associated with our strategic changes and uncertain market conditions we believe it is prudent not to make an additional return of cash to shareholders in the second half under our enhanced shareholder returns programme.

M&S is a strongly cash generative business and we remain committed to delivering sustainable shareholder returns.

-Ends-

We will update on our third quarter sales on 12 January 2017.

For further information, please contact:

Investor Relations:

Fraser Ramzan: +44 (0)20 8718 4625

Helen Cox: +44 (0)20 8718 8491

Media enquiries:

Corporate Press Office: +44 (0)20 8718 1919

Investor & Analyst webcast:

Investor and analyst presentation will be held at 10.30am on 8 November 2016. This presentation can be viewed live on the Marks and Spencer Group plc website.

Fixed Income Investor Conference Call:

This will be hosted by Helen Weir, Chief Finance Officer at 2pm on 8 November 2016:

Dial in number: +44 (0)20 3427 1904 Access code: 8600945

A recording of this call will be available until 18 November 2016:

Dial in number: +44 (0)20 3427 0598 Access code: 8600945

FINANCIAL REVIEW

UK OPERATING COSTS

UK operating costs were up by £29.2m (1.8%), with higher depreciation accounting for £12.8m of the increase.

Staffing costs were up slightly as the costs associated with the increase in selling space and the annual pay review were mostly offset by cost initiatives implemented in the second half of last year.

Other store costs reflect the costs of new space and rental inflation partly offset by savings from lower interchange fees.

Distribution costs were up as a result of higher food volumes due to new store openings and also slightly higher Clothing & Home warehousing costs from the dual running of our newly opened Bradford warehouse.

The decrease in marketing costs was due to the annualisation of the Sparks launch last year and lower costs of the spring/summer campaign this year.

Central costs were up largely due to increases in IT costs and higher depreciation.

UNDERLYING UK OPERATING PROFIT

Underlying UK operating profit was £250.3m, 18.3% down on last year, driven by a reduction in Clothing & Home gross profit as well as higher operating costs as we open new space.

M&S Bank profits were down £7.8m as a result of the reduction in interchange fees which came into effect during the second half of last year.

INTERNATIONAL

Profits in our franchise business were down primarily reflecting lower shipments and support given to our franchise partners in several markets. Losses in our owned business reduced as lower pre-opening costs and better buying helped offset transactional currency pressures.

The markets we have announced that we are proposing to exit generated sales of £91.2m and made a loss of £24.4m in the half.

NET FINANCE COSTS

Net finance costs reduced by 20.3% or £9.5m largely due to increased pension net finance income as a result of the higher net retirement benefit surplus at the start of the year. Net interest payable was down 3.8% to £45.4m due to a decrease in the average cost of funding to 5.2% (last year 5.6%).

PROFIT BEFORE TAX

Group underlying profit before tax was £231.3m, down 18.6% on last year. Profit before tax was £25.1m, down from £216.0m last year.

NON-UNDERLYING ITEMS

The Group continues to incur charges in relation to M&S Bank insurance mis-selling provision.

During the period, the Group completed a consultation with respect to our pay and pensions arrangements. We will be closing our UK defined benefit (DB) pension scheme to future accrual effective from 2 April 2017. This has resulted in a one-off income statement charge of £127.0m.

In respect of pay where we will be increasing our base level of pay to £8.50 per hour as well as harmonising premia, the Group has committed to transition payments of £24.0m. A provision for these payments has been taken in the half.

On 5 September 2016, the Group announced proposed changes to the UK Head Office structure. The proposals will result in a net reduction of c.525 Head Office roles. The anticipated cost recognised in the period of implementing these changes is c.£16m.

A £10.6m charge has been recognised in relation to UK store closures as part of our previous programme to improve the quality of the store estate. Going forward, this programme will be incorporated into our five year plan to improve the productivity of the UK Store Estate announced today.

As a result of underperformance £7.5m of International store impairments have been recognised in the period, partially offset by the reversal of impairment charges (£4.2m) previously recognised within Ireland.

TAXATION

The underlying effective tax rate was 20.0% (last year 19.0%). After non-underlying items the effective tax rate was 36.7% (last year 21.0%). The statutory effective tax rate was higher than last year mainly due to the impact of disallowable non-underlying costs.

UNDERLYING EARNINGS PER SHARE

Underlying basic earnings per share decreased by 18.4% to 11.5p. The weighted average number of shares in issue during the period was 1,622.4m (last year 1,644.2m).

CAPITAL EXPENDITURE

UK store environment spend was down due to completion of a number of instore schemes last year, primarily in Lingerie and Kidswear. This year spend included investment in increasing the flexibility of our in-store layout and new store fascias.

New UK store spend was slightly down as a result of phasing of spend. In the first half we opened 18 owned stores and expect the pace of openings to ramp up in the second half of the year.

The greatest proportion of our investment continues to be on improving our supply chain and IT infrastructure. The total spend has reduced as we have completed some of our larger infrastructure projects and commercial systems development. During the half we invested in our Food supply chain, opening a new logistics depot in Enfield to support our ongoing growth.

Going forward, we expect our annual capital investment to be c. £450m p.a.

CASH FLOW AND NET DEBT

The business delivered free cash flow pre shareholder returns of £173.9m. After the payment of dividends to shareholders, including a special dividend of £74.5m, overall net debt was up £43.1m on last half year. The reduction in free cash flow reflects the weaker business performance, with underlying EBITDA of £555.8m, down £47.4m (-7.9%) on last year. Working capital outflow increased by £53.2m on last year driven by higher inventory levels in Clothing & Home, together with an increase in pension funding of £8.8m and higher non-underlying cash outflows of £9.4m. These movements are partially offset by capital expenditure cash payments which reduced by £35.3m. Capital expenditure cash payments are higher than reported capital expenditure due to year end accruals which are paid in the first half of the year.

PENSION

At 1 October 2016, the IAS 19 net retirement benefit surplus was £571.2m (last full year £824.1m). The decrease in the net surplus is largely due to an increase in the present value of the UK defined benefit liabilities. This is a result of two factors; a decrease in the discount rate from 3.4% to 2.3% which reflects the reduction in corporate bond yields; and the changes that we have announced to the UK Defined Benefit scheme. The decision to close the scheme to future service accrual triggers a one-off curtailment charge in the period of £127.0m. This is largely because when current active members become deferred members, the annual increase in their pensionable salary is linked to CPI as opposed to being capped at 1%.

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 & 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 & Spencer to predict accurately customer preferences; decline in the demand for products offered by Marks & Spencer; competitive influences; changes in levels of store traffic or consumer spending habits; effectiveness of Marks & 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.

- Ends -

Principal risks and uncertainties

The principal risks and uncertainties which could impact the Group's long-term performance remain those detailed on pages 27-29 of the Group's 2016 Annual Report and Financial Statements. Information on financial risk management is also set out on pages 112-115 of the Annual Report, a copy of which is available on the Group's website www.marksandspencer.com. These key risks are:

- Clothing and home transformation;

- Changing consumer behaviours;

- Business transformation;

- Clothing and home supply chain and logistics network;

- IT integration;

- Food competition;

- Food safety and integrity;

- Clothing and home ethical sourcing;

- Cyber/information security;

- International; and

- M&S.com business resilience

On 23 June 2016, the United Kingdom (UK) held a referendum on its membership of the European Union (EU), resulting in a vote for the UK to leave the EU. The impact of exit on the economic outlook for the UK and for the Group remains uncertain. The implications for the Group could include, but are not limited to:

- volatility in currency and corporate bond rates which could have an impact on the Group's trading performance and pension valuation and charges;

- changes in consumer confidence which may impact the Group's ongoing trading performance;

- tightening of the labour market arising from changes to the EU principles of freedom of movement; and

- uncertainty on international trade tariffs.

The Board continues to monitor the risks and uncertainties associated with the exit of the UK from the EU and the impact on the Group's results and financial position in the current and future financial years.

Statement of directors' responsibilities

The directors confirm that, to the best of their knowledge, this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.4R, DTR 4.2.7R and DTR 4.2.8R, namely:

- the condensed set of financial statements, gives a true and fair view of the assets, liabilities, financial position and profit or loss of the issuer, or the undertakings included in the consolidation;

- an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

- material related party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of Marks and Spencer Group plc are consistent with those listed in the Group's 2016 Annual Report and financial statements with the exception of Laura Wade-Gery who resigned from the board on 12 September 2016. A list of current directors is maintained on the Group's website: www.marksandspencer.com.

By order of the Board

Steve Rowe

Chief Executive

1The 'Other reserve' was originally created as part of the capital restructuring that took place in 2002. It represents the difference between the nominal value of the shares issued prior to the capital reduction by the Company (being the carrying value of the investment in Marks and Spencer plc) and the share capital, share premium and capital redemption reserve of Marks and Spencer plc at the date of the transaction.

Notes to the financial statements

1 General information and basis of preparation

General information

This condensed consolidated interim information for the period does not constitute statutory financial statements within the meaning of s434 of the Companies Act 2006.

The summary of results for the year ended 2 April 2016 is an extract from the published Annual Report and Financial Statements which were approved by the board of Directors on 24 May 2016, have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report on the Annual Report and Financial Statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under s498 (2) or (3) of the Companies Act 2006.

Basis of preparation

The financial information has been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations, as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The condensed financial statement for the 26 weeks ended 1 October 2016 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34 Interim Financial Reporting as adopted by the European Union.

The comparative figures for the financial year ended 2 April 2016 and the half year ended 26 September 2015 are consistent with the Group's annual financial statements and half year financial statements respectively.

Going concern basis

Based on the Group's cash flow forecasts and projections, the Board is satisfied that the Group will be able to operate within the level of its bank facilities for the foreseeable future. For this reason the Group continues to adopt the going concern basis in preparing its financial statements.

Accounting policies

The results for the first half of the financial year have not been audited and are prepared on the basis of the accounting policies set out in the Group's 2016 Annual Report and Financial Statements, except as described below.

There have been no significant changes to accounting under IFRS which have affected the Group's results. The only changes to the IFRS, IFRS IC interpretations and amendments that are effective for the first time in this financial year and impact the Group are the Annual Improvements to IFRSs: 2012-2014 cycle. These have not had a material impact on the financial statements.

The following IFRS have been issued but are not yet effective:

- IFRS 16 'Leases' was issued on 13 January 2016 and is effective for periods beginning on or after 1 January 2019. Early adoption is permitted if IFRS 15 'Revenue from Contracts with Customers' has also been applied. The standard is yet to be endorsed by the EU. The standard represents a significant change in the accounting and reporting of leases for lessees as it provides a single lessee accounting model, and as such, requires lessees to recognise assets and liabilities for all leases unless the underlying asset has a low value or the lease term is 12 months or less. Accounting requirements for lessors are substantially unchanged from IAS 17. The impact of the standard on the Group is currently being assessed and it is not yet practicable to quantify the effect of IFRS 16 on these consolidated financial statements;

- IFRS 9 'Financial Instruments' replaces all phases of the financial instruments project and IAS 39 'Financial Instruments: Recognition and Measurement'. The standard is effective from 1 January 2018 and introduces: new requirements for the classification and measurement of financial assets and financial liabilities; a new model based on expected credit losses for recognising provisions; and provides for simplified hedge accounting by aligning hedge accounting more closely with an entities risk management methodology. It is not yet practicable to quantify the effect of IFRS 9 on the Group. Work on the impact of the new recognition, impairment and general hedge accounting requirements is in its early stages and we expect new processes and changes to the existing IT systems may be required to aid the Group's implementation of the standard; and

- IFRS 15 'Revenue from Contracts with Customers' is effective for periods beginning on or after 1 January 2018 with early adoption permitted. It has not yet been endorsed by the EU. The standard establishes principles based approach for revenue recognition and is based on the concept of recognising revenue for obligations only when they are satisfied and the control of goods or services is transferred. It applies to all contracts with customers, except those in the scope of other standards. It replaces the separate models for goods, services and construction contracts under the current accounting standards. Based on the Group's preliminary assessment from work performed to date, the Group believes that the adoption of IFRS 15 will not have a material impact on the consolidated results but work is still ongoing to fully quantify its impact.