Marks & Spencer on Wednesday reported a swing to profit for the year ended April 2, but the clothing, homewares and food retailer cautioned on profit in the year ahead, amid the war in Ukraine and investment plans.
Revenue for the recently ended financial year climbed 19% to £10.89 billion from £9.17 billion.
M&S swung to a pretax profit of £391.7 million from a £209.4 million loss. Adjusted pretax profit jumped to £522.9 million from £50.3 million.
Like last year, M&S did not declare a dividend.
Trading in the first six weeks of the new financial year has improved annually.
Looking ahead, the retailer warned: ‘This year the business will not receive business rates relief and International will not have the profit contribution from Russia. As we invest in capacity growth at Ocado Retail, we anticipate a minimal contribution of share of net income to group results.
‘Consequently, we start 2022-23 from a lower adjusted profit base. The business is now much better positioned and has had an encouraging start to the year. However, given the increasing cost pressures and consumer uncertainty we do not currently expect to progress from this lower profit base in 2022-23.’
M&S said it is preparing for an ‘adverse impact on volumes due to price inflation’. It said price inflation will slow ‘the rate of sales growth’.
It expects capital expenditure to increase to around £400 million in the coming year, from £300.2 million.
‘M&S’s premium brand positioning [for food] means they are less vulnerable to the pressure from discounters and many of the shoppers they do lose will be replaced by new customers trading down from eating out,’ commented Ross Hindle, an analyst at research house Third Bridge.
He added: ‘As M&S continues its transformation programme, benefits are expected to continue to flow to shareholders. However, one concern does remain around M&S’s clothing range which once again finds itself in no-mans land between affordable and premium clothing.’
M&S shares were up 0.3% early Wednesday. The wider FTSE 250 was up 0.7%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.5% at 7,524.82
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Hang Seng: up 0.9% at 20,292.64
Nikkei 225: closed down 0.3% at 26,677.80
S&P/ASX 200: closed up 0.4% at 7,155.20
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DJIA: closed up 48.38 points, or 0.2%, at 31,928.62
S&P 500: closed down 32.27 points, or 0.8%, at 3,941.48
Nasdaq Composite: closed down 270.83 points, or 2.4%, at 11,264.45
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EUR: down at $1.0699 ($1.0725)
GBP: up at $1.2553 ($1.2518)
USD: up at JP¥127.05 (JP¥126.67)
Gold: down at $1,857.55 per ounce ($1,866.09)
Oil (Brent): up at $114.53 a barrel ($113.97)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday’s key economic events still to come
0700 EDT US MBA weekly mortgage applications survey
0830 EDT US advance report on durable goods
1030 EDT US EIA weekly petroleum status report
1400 EDT US Federal Open Market Committee meeting minutes
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The German economy expanded 0.2% quarter-on-quarter in the first quarter of 2022, in line with a prior estimate, figures from Destatis showed. In the fourth quarter of 2021, Germany’s economy had shrunk by 0.3%. Adjusting for price and calendar effects, German GDP was 4.0% higher year-on-year in the first quarter, quickening from a 1.8% hike in the fourth quarter of 2021. First-quarter GDP was 0.9% lower than three years earlier, before the onset of the pandemic. ‘War in Ukraine and the continuing Covid-19 pandemic have intensified existing distortions, including interruptions in supply chains and rising prices,’ Destatis analyst Georg Thiel said. ‘Despite difficult framework conditions in the global economy, the German economy started 2022 with a slight growth.’
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In the UK, the full report into the lockdown-busting parties in No 10 and Whitehall is expected to be published in full on Wednesday. The highly-anticipated report, carried out by senior civil servant Sue Gray, comes nearly five months after a shortened version was published while the Metropolitan Police carried out its own investigation. The Met’s probe concluded last week, with a total of 126 fines being issued to 83 people.
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BROKER RATING CHANGES
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Goldman Sachs raises Imperial Brands to ’buy’ (neutral) - price target 2,150 (1,750) pence
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Goldman Sachs raises British American Tobacco price target to 4,000 (3,800) pence - ’buy’
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JPMorgan cuts Hikma Pharma to ’neutral’ (overweight) - price target 1,900 (2,900) pence
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COMPANIES - FTSE 100
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Power utility SSE reported rising earnings and lifted its payout. In the financial year that ended March 31, revenue climbed 42% to £16.91 billion from £11.87 billion. Pretax profit rose 44% to £3.48 billion from £2.42 billion. Adjusted earnings per share grew by 22% to 95.4 pence, within guidance, from 78.4p. The adjusted EPS figure has been tipped to rise to ‘at least’ 120p for the new year. For the five-year period to financial 2026, it expects compound annual adjusted EPS growth of between 7% and 10%. SSE hiked its payout by 5.8% to 85.7p from 81.0p. SSE recently kicked off plans for a sales process for its SSEN Transmission arm. This is expected to formally begin in the summer. SSE plans to sell a 25% stake in the electricity transmission network unit.
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British Gas-owner Centrica and chemical firm Johnson Matthey are set to return to the FTSE 100 index next month, replacing television broadcaster ITV and postal operator Royal Mail, according to indicative changes released by FTSE Russell on Tuesday. All four companies have been in and out of London’s blue-chip list in recent years. Meanwhile, online fashion retailer Asos will join the FTSE 250, following its move to the London Main Market from AIM. JLEN Environmental Assets Group replaced Clipper Logistics in the FTSE 250 on Tuesday, after GXO Logistics completed its acquisition of Clipper.
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COMPANIES - FTSE 250
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Pets at Home revealed a record annual profit haul as it capitalised on the boom in pet ownership and vowed to keep prices competitive despite cost pressures. The group posted a 65% surge in underlying pretax profit to £144.7 million for the year to March 31 on like-for-like sales up 16%. Reported pretax profit on a 53-week basis rose to £148.7 million, up from £106.3 million the previous year. The company said it is ‘not immune to current industry-wide inflationary pressures, in particular the impact of raw material, energy and freight costs’. But it added: ‘We have clear plans in place to keep our pricing competitive for customers, while doing everything we can to reduce our own costs.’
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IT services firm Softcat expects yearly profit to top expectations. In the third quarter ended April 30, it saw ‘double-digit year-on-year growth in revenue, gross profit and operating profit’. ‘Growth was broad-based across all technology segments, reflecting strong and stable customer demand. The supply chain situation remains challenging but consistent with the first half,’ Softcat said. ‘The board is pleased with the progress and, because of the strong income performance in the period, now expects that operating profit for the full year will be slightly ahead of its previous expectations.’
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Mediclinic International said annual profit doubled on the back of increased client activity as the hospital operator managed to exceed pre-pandemic profitability and restored dividend. The Stellenbosch, South Africa-based private hospitals operator boosted its pretax profit two-fold to £211 million for the year ended March 31 from £104 million the year before. Revenue rose 8% to £3.23 billion from £3.00 billion, helping lift adjusted earnings before interest, taxes, depreciation and amortisation to £522 million, up 23% from £426 million. In 2020, adjusted Ebitda stood at £480 million, while revenue was at £3.08 billion. Mediclinic reinstated its dividend, paying out 3.00 pence per share, having skipped it the year before.
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COMPANIES - SMALL CAP
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Fresh food producer Bakkavor said revenue climbed 12% annually to £485.4 million in the first quarter ended March 26. UK revenue rose 8.7%, US revenue surged 41%, while in China, growth was more muted at 5.5%. ‘In China, regional restrictions have significantly impacted performance from March onwards,’ Bakkavor cautioned. It cautioned that more price increases in the UK will hit volumes, while in China, it said the ‘near-term outlook’ amid the nation’s strict Covid-19 eradication policy. Bakkavor still forecasts a full-year result in line with management expectations.
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COMPANIES - GLOBAL
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US pharmaceutical firm Pfizer said it will sell its patented drugs at a not-for-profit basis to the world’s poorest countries, as part of a new initiative announced at the World Economic Forum in Davos. ’An Accord for a Healthier World’ focuses on five areas: infectious diseases, cancer, inflammation, rare diseases and women’s health – where Pfizer currently holds 23 patents, including the likes of Comirnaty and Paxlovid, its Covid vaccine and oral treatment. ‘This transformational commitment will increase access to Pfizer- patented medicines and vaccines available in the US and the EU to nearly 1.2 billion people,’ Angela Hwang, group president of Pfizer Biopharmaceuticals Group told AFP.
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Wednesday’s shareholder meetings
Access Intelligence PLC - AGM
Amur Minerals Corp - AGM
Aston Martin Lagonda Global Holdings PLC - AGM
Bakkavor Group PLC - AGM
Bango PLC - AGM
Bodycote PLC - AGM
Eleco PLC - AGM
International Public Partnerships Ltd - AGM
Intertek Group PLC - AGM
M&G PLC - AGM
Manx Financial Group PLC - AGM
Mortgage Advice Bureau Holdings PLC - AGM
Property Franchise Group PLC - GM re final 2021 dividend
Regional REIT Ltd - AGM
Sabre Insurance Group PLC - AGM
Trustpilot Group PLC -AGM
Tullow Oil PLC - AGM
Zenova Group PLC - AGM
Zotefoams PLC - AGM
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