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* Full-year profit before tax and one-offs up 6.1 pct
* Dividend raised by 5.9 pct to 18 pence
* Plans 150 mln stg share buyback
* Shares up 0.3 pct, 35 pct rise in 9 months (Adds CEO, analyst comments, updates shares)
By James Davey
LONDON, May 20 (Reuters) - British retailer Marks & Spencer raised hopes that it has finally rediscovered a winningformula as it reported a rise in annual profit for the firsttime in four years and pledged to return excess cash toshareholders.
After a poor Christmas, the results ease the pressure onMarc Bolland, chief executive since 2010. Some observers havesuggested that recent improvement in the M&S share price offeran opportunity for him to leave on a relative high, but he saidhe had no plans to depart any time soon, telling reporters he"absolutely" expected to present results this time next year.
"The coming years there's a lot to do and I'm enjoying it,"he said on Wednesday.
M&S said it expected to deliver better gross margins - thedifference between the price it buys goods and the price itsells them - in its key clothing business over each of the nextthree years as it benefits from sourcing more goods directlyfrom suppliers and lower levels of discounting.
Britain's biggest clothing retailer, which also sellshomeware and upmarket food, posted a profit before tax andone-off items of 661.2 million pounds ($1 billion) in the yearto March 28, up 6.1 percent and above a consensus analysts'forecast of 648 million pounds.
M&S, one of Britain's best-known shopping chains, raised itsdividend 5.9 percent to 18 pence and announced the start of aprogramme of enhanced shareholder returns with a 150 millionpound share buyback for 2015/16.
For the second year running, however, the outcome was lessthan the annual profit at clothing rival Next and wellshort of the 1 billion pounds made by M&S in its 2007/08financial year.
Shares in M&S have risen over a third over the past ninemonths and hit an eight-year high on Wednesday, They were up 0.3percent at 588 pence by 1303 GMT, against a flat FTSE 100 index.
The rises reflect hopes that the billions of pounds spent byBolland on the redesign of products, stores, supply chainlogistics and the website is paying off and addressing decadesof underinvestment in the 131-year-old business.
RIGHT DIRECTION
"We clearly made a step in the right direction," said theDutchman. "You cannot think that you can trade a business hardwhen you don't have the infrastructure."
Bolland has focused on boosting profit margins and delivered a rise in the 2014/15 gross margin for general merchandise --spanning clothing, footwear and homeware -- of 1.9 percentagepoints. He is targeting further growth of 1.5 to 2 percentagepoints this financial year and further, unquantified, gains overthe following two years.
Last month M&S said fourth-quarter sales of generalmerchandise rose 0.7 percent at stores open more than a year,the division's first positive performance in 15 quarters. Itreckons spring/summer 2015 ranges are "bang on trend", with a199 pound suede skirt a major hit.
"With general merchandise now positive and...set to remainso for much, if not all, of 2015-16, more exciting times couldbe ahead for shareholders," Shore Capital analyst Clive Blacksaid.
However, some analysts say it's too early to predict alasting turnaround at M&S.
"It would be wrong in our view to over interpret theseresults as being 'all the problems are sorted'," said BESIResearch analyst Tony Shiret.
Underlying sales in the M&S food business have outperformedthe wider market with 22 consecutive quarterly rises.
Gross margin on food rose 0.3 percentage points in 2014/15and is forecast to grow up to a tenth of a point in 2015/16. M&Sraised the target for new Simply Food stores from 200 to 250 inthe three years to March 2017.
M&S cautioned that its international business will be hit inthe short term by the weaker euro and macroeconomic backdrop,particularly in its Middle East region, but flagged long-termopportunities across several markets, including France andIndia.($1 = 0.6454 pounds) (Editing by Kate Holton and David Goodman)
