Annual Financial Report of Marks & Spencer for Paperpedia Pvt Ltd.

The United Kingdom is a birth-place and home of many Brobdingnagian brands, which are now, nationally and internationally, recognized by the world. Among the gargantuan retail brands of the U.K., Mark & Spencer is an every house-hold name in the United Kingdom, as same as, Walmart in the United States.

Company’s Overview
Originally, Mark & Spencer was established by Michael Marks and Thomas Spencer in Leeds in 1884. Now, the company has moved its headquarter to the City Of Westminster, London. The company was inaugurated with the idea of “only selling British goods”, and eventually made its long-term policy. The company had started their operations with their own manufacturing and selling of the goods, under their brand name, but as the time passed by, the company made more diversification to its brand-umbrella, and include the products of other brands. One of the examples is of selling Kellogg’s Corn Flakes, by the company in 2008.

From the date of foundation stone in 1884, since then, till year 2016, M&S has 852 national and worldwide stores, with most of them internationally in India, Tukey, Russia, Greece, Ireland, France, Poland, Hungary, Finland, and Spain.

Company’s Operations and Strategic
Mark & Spencer, generally, deals in retail sector. It is a public limited company. Mark & Spencer is registered as LON:MKS under London Stock Exchange (LSE), and as MAKSY in the OTC market (OTCQX). The company’s operation model clearly enunciates that, the company serves a particular section - upper and middle class. According to the company policies, it is their “target audience”. The products are manufactured and sold by keeping in mind the “customer baseline”, which means, the company has made its roots in to the “cost conscious segmentation”. It has been seen that the company is trying to make its product to be available to every potential customer as a “high-quality product”, as they want to position their product among its customers.

It is quite fascinating that, in the year 1998, the company had become first company in the whole U.K., to make a pre-tax profit of over £1 billion. But this state of the company did not see the sun for more than a day. A surprise loss to the company made its investor – a colossal loss, from which they all are succumbing of. This financial position of the company took the company to a graveyard and still, the investor’s hope in the company’s investments is not rekindled.

Financial Position of M&S
M&S has enjoyed its idyllic time to its fullest. The seeds of the M&S were well planted by its founders that, it has grown substantially in a span of time, considering the profits and expansion, nationally and internationally, achieved by Mark & Spencer. If we put a gaze on the financial position of the company from the year 1997, then the company has surely made prodigious growth. The stars of M&S were high, but suddenly slurp in the profits in late 1998, tarnished the company’s image in the eyes of the stakeholders. A colossal loss of £145 million was recorded from year 1998 to 2001. This was the period when the company’s stars were totally shattered.

M&S has gone through many rough patches. The road is not smooth for M&S.

Considering the financial position of M&S in 2015, the company has reported a profit of £10.300 billion, which was 10 times more than the profit in 1998 – a sense of doing remarkably well, if we look at the old book. The operating profit, which is basically earnings before interest and taxes, reported by the company was £762.5 million in 2015.

The number of employees have also rise with the Mark & Spencer. Till 2015, M&S has 83,069 in its boat to row the diversified operations of the company. As at 2^nd April 2016, total employees were 80,041, in which 57,841 (72%) were females and 22,200 (28%) were males. Total senior managers were 168, in which 70 (42%) were females and 98 (58%) were males. The Board Of Directors consist of 13 members, in which 5 were female (38%) and 8 (62%) were male.

The price of per share of Mark & Spencer on 24^th December, 2016 was 352.00 GBX (Great British Pence). The high was 355.63 and the low was 348.90, with a variance of -0.85%. The P/E ratio, or simply price earning per share, is 22.86.

Investments Thesis
Mark & Spencer had invested £400 million in its IT and supply chain management. M&S spokesperson gave a statement about the investment, "We will spend £400m in 2009/10, shifting the focus of our capital expenditure from our property portfolio, where we have made considerable investment over the last three years, to our IT and supply chain infrastructure."

This investment decision made a significant rise in sales of M&S, by 0.4 percent. This type of investment was the need of hour, as the company’s slow growth in its share market was allaying the investors from investing in the company. A grand amount of £400 million was superfluous to its investors.

Annual Report 2016

According to the Mark & Spencer’s official annual report for 2016, they have published the below report:

· The operating profit for M&S has increased from 762.5 in 2015 to 784.9 in 2016, means an increase of +22.4 to the company.

· The profit before tax has also seen a rise from 661.2 in 2015 to 689.6 in 2016, which means +28.4 more profit to the company.

· The intangible assets have decreased from 858.2 in 2015 to 802.8 in 2016, which means -52.8 in the intangible assets of the company.

· The current assets have increased from 797.8 in 2015 to 799.9 in 2016, which means an increase of +2.1 to the current assets of the company.

· The current liabilities have decreased from 1624.6 in 2015 to 1617.7 in 2016, which a decrease of -6.9 to the liabilities of the company.

· The profit for the year has decreased from 481.7 in 2015 to 404.4 in 2016, which means a decrease of -77.3 from the profits of the company.

· The profit before taxation has decreased from 600 in 2015 to 488.8 in 2016, which means a decrease of -111.2 to the company.

· Profit attributable to equity shareholders of the company has decreased from 486.5 in 2015 to 406.9 in 2016, which means -79.6 to the company.

(All the above figures are in GBP Millions)

If we look through a layman’s eye onto the current (2016) financial position of Marks & Spencer, it is seen that, it is not a good option for investors to invest in this company, as we have seen the decrease in the current assets of the company with the decrease in the profits, both – operating profit and profit for the year, has been decreased.

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