Essay Sample: Financial Performance and Position of Marks and Spencer plc (M&S) in the UK Retail Industry

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Dividend yield which measures the percentage return to the shareholders in respect of the market price of share was 2.02% in 2006 and was 2.09% interim financial results (17/11/2006). It does not seem to be very high, so if an investor is looking for more regular income, the Marks and Spencer may not be the first choice fir investment.

Retail gearing has gone down slightly form 75.8% in 2005 to 69.7% in 2006 mainly because of 41.8% reduction in borrowing form £1948.5m in 2005 to 1133.8m in 2006. Although the retirement benefits liability as has gone up by 17.58%, £794.9m in 2006 from £676.0 m 2005.Interest cover has gone up to 5.57 times in 2006 than 4.59 times in 2005. Interest payment on bank borrowing went down by 90% from £43.2m in 2005 to £4.2m n 2006 because of reduction in borrowing.

Stock Turnover was 12:1 in 2006 and 14.41:1 in 2005. This shows how many times your stock had been replaced in a year. Price earning ratio (P/E) which indicates how highly the market “rates” or “values” a business was 17.95 in 2006 and for 2007 is 16.26.

After analysing the group consolidated cash flow, I have notice that the company’s net cash flow has gone up to 282.4m (2006) from 149.3m (2005). Although the cash outflow from capital expenditure and financial investment had gone up more than 100% from 113.5m (2005) to 266.3m (2006), the group has managed a net cash flow as of increased cash generated from operating activities (continuing), 1,183.6m (2006) from 874.4m (2005).

3.0 Marks and Spencer Competitive Position
M&S is facing competition from the Tesco, Asda, Next, bhs and Waitrose. The retail market is characterised by the stiff competition, changing customer needs and rising interest rate. Marks and Spencer with a rich history is again establishing its position as premium UK retail brand, offering good quality clothing, and fashionable products at very competitive prices to all ages. Marks and Spencer food business has positioned itself as of premium quality and shown care for environment and fair-trade.

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