Debt investors

"Our priority continues to be strengthening our balance sheet, so that we remain resilient against market shocks and have the financial flexibility and capacity to invest for the future. We will do this by targeting a Debt Ratio of around 3x and holding a significant liquidity balance."

Patrick Lewis, Group Finance Director, 2018 Annual Report and Accounts

Financial sustainability and KPIs

Financial sustainability is one of the three strands of our Partnership strategy.  We measure our financial sustainabilty through three KPIs; Return on invested capital, Profit per average FTE and Debt ratio.

Debt Ratio – Total net debts as a multiple of cashflow

Total net debts represents the total borrowings of the Partnership including net debt adjusted for an estimate of non-liquid cash, the IAS 19 pension deficit net of deferred tax, and the present value of future rentals payable under operating leases. Cash flow used in the Debt Ratio is cash generated from operations before exceptional items and Partnership Bonus less spend on tax and total finance costs, which includes implied interest on operating leases. 

Debt ratio graph

Return on invested capital (ROIC) %

Post tax profit, adjusted for non-operating and exceptional items as a proportion of average operating net assets, adjusted to reflect a deemed capital value for property lease rentals

Return on invested capital (ROIC) %

Partnership profit per average FTE £000

Profit before Partnership Bonus, tax and exceptional items, divided by the average number of full time equivalent.

Partnership profit per average FTE £000
 
 
Further information on our Financial Sustainability strategy can be found in the John Lewis Partnership Annual Report and Accounts 2018.

The principal financial risks that we are exposed to relate to the capital structure and long term funding of the Partnership and also to the markets and counterparties we are exposed to in our operations. They can be summarised as:

  • Pension risk
  • Capital and long term funding risk
  • Liquidity risk
  • Interest rate risk
  • Foreign currency risk
  • Credit risk
  • Energy risk

 

Details can be found in the John Lewis Partnership Annual Report and Accounts 2018.