Marks & Spencer’s saw full-year revenues rise 9.6% to £11.9bn, reflecting growth in all business segments.
Operating profit fell by 11.6% to £626.6m. Food profits were hampered by the removal of the UK business rates relief, while Clothing & Home profits also declined due to higher goods costs.
Net debt fell slightly from £2.7bn to £2.6bn. Free cash flow fell by £635.6m to £63.6m due to higher capital expenditure and the non-repeat of a change in payment terms in the Clothing & Home division which boosted prior year cash flows.
This year, revenues are expected to grow modestly. Cost inflation of around £150m is expected to be offset by more than £150m worth of from the structural cost reduction programme.
The group plans to restore a “modest annual dividend”, beginning with an interim dividend at the results in November.
The shares rose 12.4% following the announcement.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown:
“Marks & Spencer’s full-year revenues continue to climb higher, with all divisions ringing higher numbers through their tills. Demand for M&S food remains strong, and is arguably more protected from the high levels of inflation we’re seeing at the moment. At a more premium end of the market, M&S’ core customers aren’t as sensitive to price. Good progress in Clothing and Home where M&S has struggled in recent years has to be commended, particularly given the pressure on sales of discretionary items amid the cost-of-living crisis, but the M&S brand, focused on quality and value, has succeeded in drawing shoppers in.
Under the hood, higher goods costs are negatively impacting margins. Continued cost inflation is expected to bite throughout the rest of the year, but a significant cost-cutting programme is expected to more than offset this. The announcement that dividends will be reinstated later in the year was the icing on the cake, giving investors plenty to be cheerful about and the shares jumped higher on the news.”
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