Marks and Spencer Group PLC (LSE:MKS) shares hit their highest level since the summer of 2018 after the retailer reported a bigger-than-expected jump in annual profits in a year when the dividend was restored after a four-year gap.
Profit before tax and adjusting items came to £716.4 million in the year to 30 March, up 58% on the previous year to the highest level in a decade and beating analyst forecasts.
Sales rose 9.4% to £13.1 billion, with the food division increasing sales 13% and clothing & home sales rising 5.3%.
Free cash flow from operations also more than tripled to £413.7 million, which allowed debt to be cut and the dividend to be reinstated.
“Two years into our plan to Reshape for Growth we can see the beginnings of a new M&S," said chief executive Stuart Machin, hailing 12 consecutive quarters of sales growth for both the food and clothing & home units.
With “wind in our sails, and confidence that our plan is working”, the strength of the balance sheet and the sustained performance improvement, “means we have the headroom and confidence to invest for future growth as well as introduce a 3p dividend".
He said the five-year growth plan was being stepped up with 2028 cost-cutting targets increased from £400 million to £500 million with increases in staff pay offset by “structural cost reductions and other efficiencies”, which were not explained in more detail.
The dividend was restored at the interim stage, with a 2p final dividend resulting in a 3p total.
Analysts hailed the significant strategic progress and said they were hiking forecasts for the new financial year.