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LONDON (Alliance News) - Marks & Spencer Group PLC on Wednesday reported a moderate decline in revenue but double-digit profit growth in its recently-ended financial year, thanks to its transformation programme.
In addition, the FTSE 100-listed firm is to launch a rights issue, setting out to raise over GBP600 million to fund its joint venture with online grocer Ocado Group PLC.
The homeware, clothing and food retailer said pretax profit in the year to the end of March rose 27% to GBP84.6 million from GBP66.8 million a year earlier, thanks to the company's ongoing transformation programme.
The objective of M&S's cost saving plan is to create a profitable, growing family of businesses within three to five years.
"We are deep into the first phase of our transformation programme and continue to make good progress restoring the basics and fixing many of the legacy issues we face," said Chief Executive Steve Rowe.
Last year, the company set out targets for cost savings of at least GBP350 million by the end of its 2021 financial year. In its most recent financial year, M&S said it has made "good progress", delivering savings of GBP100 million.
Meanwhile, the retailer's revenue declined by 3.0% during the year to GBP10.38 billion from GBP10.70 billion reported a year earlier. The company highlighted that sales in the final quarter of its financial year were hurt by store closures in the UK and the timing of Easter.
On a divisional basis, revenue in the UK Food unit decreased 0.6% over the year to GBP5.90 billion due to a change in product mix and reduced promotions. On a like-for-like basis, revenue dropped 2.3%.
In the UK Clothing & Home division, revenue declined by 3.6% to GBP3.54 billion year-on-year, partly driven by store closures, while like-for-like sales were down 1.6%.
"M&S is changing faster than at any time in my career - substantial changes across the business to our processes, ranges and operations and this has constrained this year's performance, particularly in Clothing & Home," explained Rowe.
The International unit saw over a 13% fall in revenue at constant currency to GBP936.6 million. Excluding exited markets and Hong Kong, revenue at constant currency increased 1.1%.
M&S Bank income before adjusting items was down GBP12.7 million to GBP27.6 million as a result of an increase in bad debt provisioning due to revised forward estimates of economic indicators.
Looking ahead, the company said it expects net store closures to reduce sales by 1% in its UK Food division, while in the UK Clothing & Home unit, sales are anticipated to fell by 3% in the recently-commenced financial year.
M&S cut its interim payout by 26% to 13.9 pence from 18.7p paid the year before.
In a separate statement Wednesday, M&S said it intends to raise GBP601.3 million through a rights issue, which will result in the issue of 325.0 million new shares at a price of 185 pence each.
The rights issue represents 20% of the existing issued share capital of M&S and 17% of the enlarged share capital immediately following admission of the rights issue shares.
The rights issue price represents a discount of 32% to Tuesday's closing price of 271.2p per share.
The fundraising was launched to finance the creation of a 50/50 joint venture with Ocado, announced in February.
Under the terms of the deal, M&S is acquiring a 50% share of Ocado's UK retail business, which will be supported by Ocado smart platform technology, for an initial consideration of GBP562.5 million and deferred consideration of up to GBP187.5 million, plus interest.
"We remain on track with our transformation and are now well on the road to making M&S special again," added Rowe.
