20th May 2020 10:25
(Alliance News) - Marks & Spencer Group PLC on Wednesday reported a sharp drop in annual profit as the retailer deals with the Covid-19 pandemic.
"During the crisis we have all had to work differently, and customers have rapidly changed habits and may never shop the same way again. We intend to use the learning from the crisis and have drawn up our 'never the same again' agenda to accelerate transformation," M&S said.
In the 52 weeks to March 28, the FTSE 250-listed retailer reported pretax profit of GBP67.2 million, down 20% on the GBP84.2 million recorded in the same period to March 30, 2019.
The pretax profit figure included adjusting items of GBP335.9 million, with GBP212.8 million of this for costs and stock write-downs due to Covid-19.
Revenue was down 1.9% year-on-year to GBP10.18 billion from GBP10.38 billion. UK Food sales were up 2.1% to GBP6.03 billion, but this was offset by an 8.3% drop in UK Clothing & Homes sales to GBP3.2§ billion.
On a like-for-like basis, food sales were up 1.9% while clothing & home sales fell 6.2% - the latter including an estimated 2.2% hit from Covid-19 in March.
Chief Executive Steve Rowe said the results reflect a year of "substantial progress" with some "green shoots" in its clothing arm in the second half.
"However, they now seem like ancient history as the trauma of the Covid crisis has galvanised our colleagues to secure the future of the business," said Rowe.
The Covid-19 crisis started to impact the business in the first week of March with reductions in Clothing & Home sales across all its markets. While Food sales were resilient, "we did not experience the stockpiling performance of the supermarkets", M&S noted.
M&S in a "Covid-19 scenario" is assuming a 70% decline in UK Clothing & Home revenue for the four months to July and only a gradual return to original budgeted levels by February 2021, which will hit annual revenue by GBP1.5 billion. In UK Food, it expects a 20% decline in revenue in the period to July with sales "level" thereafter.
"This scenario has been stress tested and even in the event of a longer and deeper impact on trading, the group maintains sufficient liquidity. Although we will be drawing on our available credit facilities in the coming year, under the scenario the business will have significant liquidity headroom throughout the next 18 months. We are pleased to note that in the first 6 weeks of the new year, sales and cash have substantially outperformed the scenario," M&S said.
M&S decided against paying a final dividend, and does not anticipate making any payout in its 2021 financial year.
Free cash flow in the period was GBP225.0 million, 61% lower than GBP580.8 million the year before.
Rowe added: "From the outset we recognised that we were facing a crisis whose effects and aftershocks will endure for the coming year and beyond: Whilst some customer habits will return to normal others have changed forever, the trend towards digital has been accelerated, and changes to the shape of the high street brought forward. Most importantly working habits have been transformed and we have discovered we can work in a faster, leaner, more effective way. I am determined to act now to capture this and deliver a renewed, more agile business in a world that will never be the same again."
Shares in Marks & Spencer were 6.9% higher in London on Wednesday morning at 91.72 pence each.
By Paul McGowan; [email protected]
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