This is not just a dividend, it's a...
The business news that matters
Hello everyone and welcome to the latest edition of Off to Lunch…
Shares in Marks & Spencer are up more than 10 per cent today after the retailer said it would pay a dividend to investors for the first time in four years.
M&S announced the dividend as it reported better-than-expected half-year results. These results showed that revenues rose 11 per cent year-on-year to £6.1 billion for the six months to the end of September. Pre-tax profits 56 per cent to £326 million. This performance included an 11.7 per cent rise in like-for-like food sales and a 5.5 per cent rise in like-for-like clothing and home sales. International sales rose by 3.9 per cent while sales from M&S’s joint venture with Ocado to sell groceries online rose by 6.9 per cent, although that venture posted a net loss of £23.4 million.
The company said it will pay a dividend of 1p per share to investors on January 12.
The results from M&S are the latest stage of the turnaround of the 139-year-old company. The rise in M&S shares today means the share price has nearly doubled this year (they are up 96 per cent), which puts the company on course for its best-ever annual performance on the stock market. However, as the graph below shows, shares in M&S are still well below the highs they reached just before the financial crisis (and after a bid battle with Sir Philip Green)…
M&S’s turnaround strategy has been driven by narrowing its clothing range and improving the quality of its fashion while promoting its upmarket food offering, modernising its online operations and closing ageing shops.
The table below shows how the company is gradually shrinking the number of shops it has. The table is from a presentation by M&S to investors today….
This table shows its plans for the next five years…
You can find the presentation in full here
For more details about the turnaround of M&S check-out our podcast interview with Archie Norman, the chairman, here, and Richard Price, the managing director for clothing and home, here
Stuart Machin, chief executive of Marks & Spencer, said today:
“I am clear that if we serve our customers well, we serve our shareholders well, and our unrelenting focus on trusted value is matched by disciplined capital allocation. We have further strengthened our balance sheet and net debt position, with an interim dividend payment being made to shareholders for the first time in four years.
“Looking ahead, trading momentum has been maintained through October, with customers responding positively to our Christmas ranges. There will be challenges and headwinds in the year ahead and progress won't be linear, but we are ambitious for future growth and are driving what is in our control.”
That warning about “challenges and headwinds” is also reflected in statements by ITV and Reach today.
ITV has warned that advertising revenue is likely to be down 8 per cent this year and that its content will be hit by strikes in Hollywood. Shares in ITV are down 5 per cent following the results, which you can find here.
Meanwhile, Reach, the owner of The Mirror and a collection of local newspapers, has announced it is cutting 450 jobs - about 10 per cent of its workforce. Jim Mullen, the chief executive, said: "Our industry has a history of change and the future will undoubtedly involve yet more. That's why it's essential we set ourselves up to win, by making our operations suited to an increasingly fast-paced, competitive and customer-focused digital world." You can find that statement here
Other stories that matter…
1. Could Adam Neumann rescue WeWork out of bankruptcy? Apparently so, according to the Newcomer tech newsletter. Neumann co-founded WeWork but was forced out as chief executive in 2019. You can read more here
2. Scale-up businesses in the UK will generate £500 billion of revenue this year and employ 1 million people, according to new research from the Social Market Foundation and OakNorth. These scale-ups are small and medium-sized businesses that have grown by at least 20 per cent a year over the last three years and therefore have the potential to become big businesses. A large collection of the scale-ups are concentrated in the health and social work sector, IT, wholesale and retail, according to the report, which you can find here
3. The government is planning to introduce new regulations to cover how companies are given scores for their environmental, governance and social (ESG) performance. At present companies are given scores by index providers such as MSCI. These scores can determine whether the companies qualify for investment from fund managers. However, the practice is largely unregulated. The Financial Times has the story here
4. The economist Paul Krugman has written a fascinating column for The New York Times about the need for his profession to address why it got its forecasts about inflation so wrong. “I’m not necessarily asking for mea culpas similar to those issued by some of us who got the first phase of this inflation cycle wrong, although it would be nice,” he writes. “Instead, I’d like to see some hard thinking about how so many of my colleagues got this story so wrong, and maybe even a bit of introspection about their motivations.” You can find that piece here
5. Fortune has produced a new Fortune 500 Europe list that ranks all the companies in Europe by their annual revenue. Shell is top of the list. Germany has the most companies in the list with 80, with the UK at 76 and France at 71. You can find the list here. The drug company Novo Nordisk is 151st on the list but is likely to rise up thanks to the success of its weight loss drug Ozempic. The Wall Street Journal has published a fascinating case study on the success of the business - which is valued on the stock market at nearly $500 billion (£408 billion), making it the most valuable in Europe. The piece says: “Part of the secret to Novo’s success, its executives and employees say, is the warm and communal Danish work culture, and a decades-long focus on one area, diabetes, which created room for scientific breakthroughs to take root and thrive—rather than a narrow focus on short-term wins.” You can read that case study here
And finally…
Tom Rowley, who runs the Backstory bookshop in London and writes a newsletter about his experiences running a business, has published a list of the top books of 2023. These books are recommendations by all the Backstory staff. In Memoriam by Alice Winn is top. You can find the list here
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Best
Graham