Results round-up

Although sales remained steady, Marks & Spencer reported a 64% plunge in profits for the year to 1 April after taking a £437.4m hit mainly from changes to its pension scheme, international stores, and UK head office.

As well as maintaining the full year dividend at 18.7p thanks to continued strong cash generation, there were other causes for shareholder optimism as the general merchandise arm's market share started to stabilise and the food business continued to grow like topsy, while pre-exceptional profits were better than the market expected.

Group revenues increased by a very modest 0.6% to £10.62bn as food like-for-like sales fell 2.1% in the final three months of the year and GM sales by 5.9%, partly due to Easter falling outside the financial year.

This saw UK LFL store sales in the fourth quarter fall by a worse than expected 3.6%, which when combined with quarterly international LFL sales down 1.8% and online sales up 7.6%, to drag total UK LFL sales to a 1.9% decline for the full year.

With there being no Easter in the 2016/17 financial year, management estimated this had a negative effect of roughly 0.3% on GM sales and circa 0.5% on food sales.

While GM revenue was down 2.8% for the full year this was due to planned reduction in promotions and clearance sales, which saw gross margins improve 105 basis points with full price sales growth of 2.7%.

Food revenue growth of 4.2% for the year was driven by new stores.

Group profit before the significant one-off charges and tax was down 10.3% to £613.8m, while the trading profits of £691m were better than many analysts forecast.

"As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt," said chief executive Steve Rowe.

He said improvements to GM products and proposition, "our customers have noticed; we are starting to stabilise market share and importantly have seen full price market share growth, as we removed excessive discounting".

"Looking ahead, we will continue our programme of self-help in a tough trading environment. We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future."

Guidance for the new financial year included the addition of roughly 90 new Simply Food stores, though gross margins will be slightly dented by cost inflation, while capital expenditure is expected to be around £400m.

Total UK stores costs will grow 2.5-3.5% as a result of the new space, cost inflation and the annualisation of investment in customer service, which will all be weighted towards the first half.

The performance of the GM business was a "sobering moment for M&S shareholders, calendar effects aside, showing the difficulties in this core category" said analysts at Shore Capital, though the trading profit was well ahead of its estimate.

Pennon Group posted its full-year results for the 12 months to 31 March on Wednesday, with revenue rising 0.1% to £1.353bn on an underlying basis.

The FTSE 250 company said underlying EBITDA improved 8.4% to £486m, while adjusted EBITDA was 7.4% firmer at £546.2m.

Its operating profit was up 16.3% at £304.6m, while profit before tax surged 18.3% on an underlying basis to £250m.

Earnings per share were 19% higher at 47p.

On a statutory basis, profit before tax rose 2% to £210.5m, profit after tax increased 7.2% to £180.5m, and earnings per share were 7.6% higher at 39.8p.

The board confirmed a dividend per share of 35.96p, an improvement of 7.1% year-on-year.

"Pennon has delivered a strong performance in 2016/17 across its water and waste businesses," said chief executive Chris Loughlin.

"South West Water's Return on Regulated Equity continues to lead the sector while Viridor is growing through its Energy Recovery Facility portfolio, delivering EBITDA of £107m, ahead of our £100m target."

Across the group, Loughlin said Pennon was investing for growth while driving efficiency to keep costs low for the benefit of customers.

"We have delivered savings of £129m in total expenditure at South West Water since the beginning of the current regulatory period, cementing our commitment to reduce the real cost of water bills to 2020.

"We believe Pennon is well positioned now and for the future and our performance underpins our long established sector-leading 10 year dividend policy of 4% growth per annum above RPI inflation out to 2020."