Course: MSc.

International Business(MSIB)
Module Name: Finance for International Business(7Bsp1245-0901)

Submitted By:
Bandam Ranjith-18055743
Ramidi Ravi Teja-18055746
Submitted to:
Module Leader:Dr David Fairclough
Seminor Leader:Dr.Marion Storm
Tutor:Dr.Nurgul Chambers

Topic:-Evaluate the financial performance of

Marks &Spencer PLC
MARKS & SPENCER PLC
 INTRODUCTION
 Company Name: Marks &Spencer PLC
 Type: Public Limited Company
 Founded:1884
 Founder: Michael Marks, Thomas Spencer
 Industry : Retail
 Headquarters:London,United Kingdom
 Traded as: London Stock Exchange(LSE)
 No.Locations: 1463(2019)
 Areas Served: Worldwide
 Key People : Achie Norma(Chairman)
 Steve Rowe(Chief Executive)
 Products Specialized in: High Quality Clothing, Home Products and Food
Products
Quality Analysis of M&S
Revenue £10,377.3 million (2019)

Operating income £601.0 million (2019)

Net income £37.3 million (2019)

Number of employees 80,787 (2018)

Subsidiaries M&S Bank (owned by HSBC)

Website marksandspencer.com
Finacial Performance of Marks and Spencer PLC

30/03/201 31/03/201 01/04/201 02/04/201 28/03/201

Income Statement:
9 8 7 6 5
£ £ £ £ £
(Millions) (Millions) (Millions) (Millions) (Millions)
Revenue: 10,377.30 10,698.20 10,622.00 10,555.40 10,311.40
Operating Profit / (Loss): 162.40 156.50 253.20 584.10 701.30
Net Interest: (77.80) (89.70) (76.80) (95.30) (101.30)
Profit Before Tax: 84.60 66.80 176.40 488.80 600.00
Profit after tax from
37.30 29.10 115.70 404.40 481.70
continuing operations:
Discontinued Operations:
Profit after tax from
n/a n/a n/a n/a n/a
discontinuing operations:
Profit for the period: 37.30 29.10 115.70 404.40 481.70
Attributable to:
Equity holders of
33.50 25.70 117.10 406.90 486.50
parent company:

Minority Interests /
3.80 3.40 (1.40) (2.50) (4.80)
Other Equity:

Total Dividend Paid: c n/a c n/a c n/a c n/a c n/a

Retained Profit /
(Loss) for the c n/a c n/a c n/a c n/a c n/a
Financial Year:

Earnings per Share:

Basic: 2.01p 1.53p 6.88p 23.80p 28.39p
Diluted: 2.01p 1.53p 6.88p 23.71p 28.20p
Adjusted: 24.28p 26.57p 29.06p 33.46p 31.64p
Dividend per Share: 13.90p 18.70p 18.70p 23.30p 18.00p
Balance Sheet: 30/03/2019 31/03/2018 01/04/2017 02/04/2016 28/03/2015
£ (Millions) £ (Millions) £ (Millions) £ (Millions) £ (Millions)
Assets:
Non-Current
Assets:
Property, Plant &
4,028.50 4,393.90 4,837.80 5,027.10 5,031.10
Equipment:
Intangible Assets: 499.90 599.20 709.00 802.80 858.20
Investment
15.50 15.50 15.50 15.50 15.60
Properties:
Investments: 4.00 7.00 7.00 6.90 12.20
Other Financial
9.90 9.90 59.80 77.00 78.80
Assets:
Other Non-
1,152.00 1,206.80 940.10 1,085.70 745.20
Current Assets:
5,709.80 6,232.30 6,569.20 7,015.00 6,741.10
Current Assets:
Inventories: 700.40 781.00 758.50 799.90 797.80
Trade and Other
322.50 308.40 318.60 321.10 321.80
Receivables:
Cash at Bank & In
285.40 207.70 468.60 247.60 205.90
Hand:
Current Asset
n/a n/a n/a n/a n/a
Investments:
Other Current Assets: 182.10 20.80 177.60 92.80 129.50
1,490.40 1,317.90 1,723.30 1,461.40 1,455.00
Other Assets: n/a n/a n/a n/a n/a
Total Assets: 7,200.20 7,550.20 8,292.50 8,476.40 8,196.10
Liabilities:
Current Liabilities:
Borrowings: 513.10 125.60 518.00 297.50 279.40
Other Current
1,715.30 1,700.40 1,850.00 1,807.30 1,832.20
Liabilities:
2,228.40 1,826.00 2,368.00 2,104.80 2,111.60
Net Current Assets: c n/a c n/a c n/a c n/a c n/a
Non-Current
Liabilities:
Borrowings: 1,279.50 1,670.60 1,711.70 1,774.70 1,745.90
Provisions: 468.50 448.80 395.30 389.60 347.40
Other Non-Current
542.90 650.60 667.10 763.90 792.40
Liabilities:
2,290.90 2,770.00 2,774.10 2,928.20 2,885.70
Other Liabilities: n/a n/a n/a n/a n/a
Total Liabilities: 4,519.30 4,596.00 5,142.10 5,033.00 4,997.30
Net Assets: 2,680.90 2,954.20 3,150.40 3,443.40 3,198.80
Capital & reserves:
Share Capital: 406.30 406.20 406.20 405.80 412.00
Share Premium
416.90 416.40 416.40 411.30 392.40
Account:
Other Reserves: (4,379.30) (4,426.30) (4,314.40) (4,299.40) (4,275.30)

Retained Earnings: 6,237.10 6,560.40 6,648.10 6,927.50 6,670.50

Shareholders
2,681.00 2,956.70 3,156.30 3,445.20 3,199.60
Funds:

Minority Interests /
(0.10) (2.50) (5.90) (1.80) (0.80)
Other Equity:

Total Equity: 2,680.90 2,954.20 3,150.40 3,443.40 3,198.80

 Financial Performance of Marks and Spencer
PLC can be analyzed by following ratios:

Liquidity Ratio:
• Liquidity or short-term solvency means ability of the business to pay its
short-term liabilities. Short term lenders and creditors of a business are very
much interested to know its state of liquidity because of their financial
stake.
a)Current Ratio:
• The main question this ratio addresses is:”Does your business have enough
current assets to meet the payment Schedule of its current debts with a
margin of safety for possible losses in current assets?”
• Current Ratio=Current assets/Current Liabilities
• Current Assets=Inventories+sundry debtors+Cash and Bank
Balances+Receivables+Loans and advances+disposable investments+any
other current assets.
Current liabilities=Creditors for goods and services+short-term loans+bank
overdraft+cash credit+Outstanding expenses+Prov. For tax+Proposed and
unclaimed dividend any other current liabilities.

Year 31.03.19 31.03.18 31.03.17 31.03.16 31.03.15

Current 1490.4 1317.9 1723.3 1461.4 1455

Assets

Current 2228.4 1826 2368 2104.8 2111.60

Liabilities

Current 0.67 0.72 0.73 0.69 0.69

Ratio
 b)Quick Ratio:
=Quick assets/current liabilities
Quick Assets=current Assets-inventories

Year 31.03.19 31.03.2018 31.03.2017 31.03.2016 31.03.15

Quick 790 536.9 964.8 661.5 657.2

assets
Current 2228.4 1826 2368 2104.8 2111.60
Liabilities
Current 0.35 0.29 0.41 0.31 0.31
Ratio
M&S’s quick ratio liquidity falls much below the ideal rate of 1;similarly
current ratio should be far in excess of 1.from these considerations the
ratios indeed highlight shortcomings of M&S’s ability to meet short term
financial obligations, suggesting potential issues with covering outstanding
debt. However ‘ideal’ liquidity rates are not accurate benchmarks across all
companies, but nevertheless a low liquidity ratio cause short-term lenders
and suppliers to become anxious.
Profitability Ratios: The profitability ratio measures the profitability or the
operational efficiency of the Company. Management attempts to maximize these
ratios to maximize company value.
a)Gross Profit Ratio:
=Gross Profit/Sales*100

Year 31.03.2019 31.03.2018 31.03.2017 31.03.2016 31.03.2015

10377. 10698. 10555. 10311.

Sales 10622
30 20 40 40

Gross
3830.1 4047.3 4087.8 4128.4
Profit

GP
37% 38% 38% 39%
margin
b)Net Profit Ratio:
=Net Profit/sales*100 or earnings after tax/sales*100

Year 31.03.2019 31.03.2018 31.03.2017 31.03.2016 31.03.2015

10377. 10698. 10555. 10311.
Sales 10622
30 20 40 40

Net
37.30 29.10 115.70 404.40 481.70
profit

GP
0.36% 0.27% 1.09% 3.83% 4.67%
margin
c)Operating Profit Ratio:
=Operating profit/Sales*100 OR earnings before interest and taxes/Sales

Year 31.03.2019 31.03.2018 31.03.2017 31.03.2016 31.03.2015

10377. 10698. 10555. 10311.
Sales 10622
30 20 40 40

Operatin
162.40 156.50 253.20 584.10 701.30
g profit

Operatin
g profit 1.56% 1.46% 2.38% 5.53% 6.80%
margin
 d)Return on capital employed:
=Net Profit after tax/capital employed*100
Where, capital employed=Total assets-current liabilities

Year 31.03.2019 31.03.2018 31.03.2017 31.03.2016 31.03.2015

ROCE 0.75% 0.51% 1.95% 6.34% 7.91%

Overall Analysis of Profitability Ratio:

Generally, a high net profit ratio will ensure positive results of the business.M&S’s Net
profit margin is gradually decreasing from year to year. This indicates an inability for the
company to successfully control their expenses.Furthermore,if the downward trend in
operating profit continues,M&S’s may face difficulty in the future covering their fixed
costs.Therefore,it is recommended that M&S should focus on unnecessary expenses and
decline in ROC also due to decline in net profit .
Investor Ratios:
Earning per share=Net profit available to shareholders/Number of equity shares
outstanding
Price/Earning Ratio= Share price/earnings per share
The profitability of a firm from the point of view ordinary shareholder can me
measured in terms of number of equity share holders.
year 2019 2018 2017 2016 2015
Share
266.75p 258.42p 322.31p 388.50p 511.68p
Price
EPS 2.01P 1.53P 6.88P 23.80P 28.39P
P/E Ratio 132.71 168.91 46.85 16.32 18.02
Dividend Yield=(Dividend Per Share/Share price)*100
The dividend yield is a financial ratio that measures the amount of cash
dividends distributed to common shareholders relative to the market value per
share
year 2019 2018 2017 2016 2015
Share 266.75p 258.42p 322.31p 388.50p 511.68p
Price
DPS 13.90P 18.70P 18.70P 13.30P 13.00P
Dividend 5.21 6.92 5.55 4.59 3.40
yield
Dividend Cover=Earnings per share/dividends per share
This ratio measures the no. of times that a company can pay dividends to
it’s shareholders

year 2019 2018 2017 2016 2015

EPS 2.01P 1.53P 6.88P 23.80 P 28.39 p

DPS 13.90p 18.70P 18.70P 13.30P 13.00P

Dividend
0.14 0.08 0.37 1.02 1.57
Cover

Overall Analysis of Efficiency Ratio:

EPS has been suddenly declined from year 2017 due to low net profit. In
2019,P/E ratio is 132.71.It means that investors are willing to pay a higher
share price today because of growth expectations in the future. Dividend Yiels
is just 5.21%(2019).This indicates that M&S stocks are low dividend yielding
stocks
Gearing Ratio:This ratio indicates long term solvency positions.Gearing
represents companies leverage,meaning howmuch of the business funding
comes from borrowed lendors vs company owners.

Capital Gearing=Long Term Debt(LTD)/Equity Employed

year 2019 2018 2017 2016 2015
LTD 1279.50 1670.60 1711.70 1774.70 1745.90
CE 4971.8 5724.2 5924.5 6371.6 6084.5
Capital
Gearing 0.26 0.29 0.29 0.28 0.28
Ratio

Debt/Equity =LT Debt/Share holdersEquity

Year 31.03.2019 31.03.2018 31.03.2017 31.03.2016 31.03.2015

Ratio 47.72% 56.50 54.23% 51.51% 54.57%

Overall Analysis of Gearing Ratio:
M&S has became less risky as a gearing ratio decreases to 47.72% in 2019 compared
to 2 years with 56.50% and 54.23% in 2018 /2017 respectively.This reflects the ability of
M&S to meet it’s debit usng it’s own capital and also capital gearing ratio is decreased to
26%.So as an overall it is less risky from lenders point of view i.e.,creditors feel the owners
fund can help absorb possible losses of income and capital.

Efficiency Ratios:
This ratios are employed to evaluate the effeiciecy with which the firm
manages and utilizes it’s assets ie., inventory turnover ratio/payable turnover
ratio /receivable turnover ratio is also relevant to examine the liquidity of an
organization.
a)Total Asset Turnover Ratio
=Sales/Total assets

Year 31.03.2019 31.03.2018 31.03.2017 31.03.2016 31.03.2015

Ratio 1.44 1.42 1.28 1.25 1.26

b)Inventory turnover Ratio

=Cost of goods sold/Average inventory

Year 31.03.2019 31.03.2018 31.03.2017 31.03.2016 31.03.2015

Ratio 8.84 8.64 8.44 8.04 12.92

 c)Trade Payable Days=(Accounts payable/Cost of Goods sold)*365
This days indicates the days to be taken for payment to suppliers.
year 2019 2018 2017 2016 2015
Accounts
1461.3 1495.9 1553.8 1617.7 1642.4
payable
Cost of goods
6547.2 6650.9 6534.2 6427.0 6325.9
sold
Trade
81.47 77.15 86.80 91.87 94.77
payable days
d)Inventory Days=(Inventory/Cost of GoodsSold)*365
This days indicates that in howmany days the stock can be converted into
sales.
year 2019 2018 2017 2016 2015
Inventory 700.40 781 758.50 799.70 767.80
CGS 6547.2 6650.9 6534.2 6427.0 6325.9
Inventory
39 43 42 45 46
Days
 (d)Trade receivable Days=(Trade Receivables/Revenue)*365
This days indicates the days to be taken for collection from customers

. year 2019 2018 2017 2016 2015

Trade 322.50 308.40 318.60 321.10 321.80
Receivables
Revenue 10377.30 10698.20 10622 10555.40 10311.40
Days 11 11 11 11 11

(E)Cash conversion Cycle=inventory days+ receivable days–payable days

(E)Cash conversion
year 2019 Cycle=inventory
2018 days+receivable
2017 2016–payable 2015
days days
Days (31) (23) (33) (35) (37)

Overall Analysis for Efficiency Ratio:

The ratio indicates that, inventories are sold in 39 days(2019) and on other days it
is capable of collecting its receivable within 11 days. However though M&S collection
from customers is fasters it’s payment to suppliers is slightly slow. This might sign a
efficiency in working capital management.
Conclusion:
From the above financial ratios M&S need to improve itself in profitability, liquidity
and leverage.M&S average operating margin was only around 1.56%,it means it needs to
cut it’s operating costs to match it’s profitability with the industry. The company liquidity is
below the alert level which had been persistent over last 4 years. Although for very large
and established companies it is not a big concern.However,in terms of poor economic
conditions such scenario might lead companies to bankruption.Therefore ,M&S should give
priority to manage it’s liquidity with proper management of it’s costs. The company can
achieve higher profitability, liquidity and gearing performance.

References:

https://www.hl.co.uk/shares/shares-search-results/m/marks-and-spencer-group-plc-
ordinary-25p/financial-statements-and-reports

https://fame4-bvdinfo-com.ezproxy.herts.ac.uk/version-201993/fame/1/Companies/Report
Thank You!!