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Marks and Spencer’s pre-tax profits have plunged by 62.1% to £66.8m for the year, with performance hit by tightening food margins and the cost of store closures.

Following yesterday’s announcement that the retail giant would close a further 14 shops, bringing closures to 100, Steve Rowe said a “new organisation” model will be largely in place at the company by July as it looks to create a “more digital” business with profitable growth in three to five years.

M&S sales increased marginally by 0.7% to £10.7bn in the year ending March 31, highlighting the recent high street downturn.

The company’s profits before tax and exceptional items dropped 5.4% on the previous year, to £580.9m, impacted by the decrease in food gross margin.

A significant increase in the cost of exceptional items, largely related to store closure plans, meant that profit after tax fell considerably from £115.7m to £29.1m, a fall of almost 75%.

Pre-tax profits dropped 62.1% from to £176.4m to £66.8m

Adjusting items of £514m were driven by the £321.1m cost of the UK store estate closure programme.

At the company’s half-year results, it highlighted the need for accelerated change, and the company has suffered from short-term costs as result, said CEO Steve Rowe.

“At our half year results in November I outlined the need for accelerated change at M&S. The first phase of our transformation plan, restoring the basics, is now well under way and the actions taken have increased the velocity of change running through our business. These changes come with short term costs which are reflected in today’s results,” said the CEO.

“There are a number of structural issues to address and we are taking steps towards fixing these. The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business. This is vital as we start to leverage the strength of the M&S brand and values across a family of businesses to deliver sustainable, profitable growth in three to five years.”

M&S said it is moving ahead rapidly with the transformation plan, aiming to reduce costs by at least £350m, while providing a platform for future growth through improving its website to drive online sales.

Food sales grew by 3.9%, which it said is driven by new store openings, but profits were affected as gross margin sunk 140bps.

Like-for-like food sales, previously the company’s star performer, were down 0.3% with like-for-like sales in clothing and home down 1.9%. International sales also significantly dropped, falling 7.9% to £1.08bn in revenues.

The company’s reorganisation plan continued this week as it announced the appointment of Katie Bickerstaffe, formerly UK and Ireland boss of electricals seller Dixons Carphone, and Pip McCrostie, who previously led accounting giant EY’s corporate finance business, as new non-executive directors at the retailer.

M&S shares closed at 292p on Tuesday and were up 5.6% to 308p in early trading.

Morning Update

Dairy Crest (DCG) sales have jumped 10% in the year ending 31 March, driven by the continued strong performance of the Cathedral City brand.

The dairy product manufacturer saw sales drive up to £456.8m, with adjusted profits before tax moving up 3% to £62.3m for the full year, but revenue growth over the year slowed, with cream prices increasing.

The company, which receives milk from 330 farmers in Cornwall and Devon, saw growth driven by market-leading brand Cathedral City.

Revenues for the cheese brand increased 6% for the year, with brands Clover and Frylight both also growing revenues, by 7% and 13% respectively.

The butters and spreads division saw overall growth, but the company admitted that it had been a “challenging year” for the Country Life brand, which saw a volume decrease of 20%.

Despite volatility in the dairy market, the company says that its operating margin has remained fairly stable over the year

“This has been a year of considerable progress for Dairy Crest. We have delivered a strong performance, broadly maintaining our industry-leading margins against a backdrop of unprecedented cost inflation in the butters market,” said chief executive Mark Allen.

“Our brands are in good shape. Cathedral City has had a good year growing value, volume and market share, and we see plenty of room for further growth for this industry-leading brand. We have seen good momentum in revenue growth going into the new financial year.

“We will continue to invest in our brands, supply chain and infrastructure to ensure that we are well positioned to capitalise on future growth opportunities.”

Britvic (BVIC) heralded a “strong first half performance” which saw revenue increase 4.5% to £733.2m.

Adjusted profits after tax at the drinks manufacturer rose 12% to £49.8m for the half-year ending 15 April.

The company recorded strong growth in the second quarter, overcoming poor weather in the UK, and absorbing Palmer & Harvey’s bad debt provision of £3.3m.

Despite the predicted impact of the soft drink levy in the UK, Britvic said it has “strong momentum” with Robinsons back in growth and PepsiMAX continuing to “perform well” in its competitive category.

“We have delivered a strong first half performance with solid revenue, margin and earnings growth. We have also made good progress in innovating to meet consumer needs, growing our international presence and transforming our supply chain,” said CEO Simon Litherland.

“While it is too soon to guide on the ongoing consumer impact of the soft drinks levy, early indications of the competitor and customer response are broadly as we anticipated. We have exciting commercial plans in place for the second half and I remain confident of continuing to make progress this year.”

Food manufacturer Bakkavor has announced that sales have grown 1.5% for the 19 weeks up to 12 May ahead of its AGM later today.

The company said that trading has been “in line with management expectations” as it is affected by ongoing retail price inflation in the UK.

In a trading announcement ahead its AGM today, it added that it expects improving market conditions will benefit revenues.

International sales in the period have been “strong”, as a result of new product development and increased consumer demand it said.

Hilton Food Group (HFG) said that trading from 1 January has been “in line with expectations” and continuing to grow ahead of its AGM today.

Turnover in the UK has grown relative to last year in the red meats sector, alongside “encouraging top line growth” in Ireland.

The company said it has seen good progress in a number of Western European markets, as well as an improvement in performance in central Europe.

Seachill, which makes Saucy Fish Co products and was purchased last year, has had a good start to the year according to today’s trading announcement.

Marks & Spencer and Britvic have both risen strongly this morning, up 3.8% to 302.8p and 6.2% to 805.6p respectively.

with other early risers including Premier Foods (PFD), up 1.9% to 38.5p, Majestic Wine (WINE), up 1.9% to 449.3p and Greencore (GNC) up 1.4% to 167p after yesterday’s better than expected results.

This morning’s fallers include Dairy Crest (DCG), down 6.7% to 500.3, as well as Nichols (NICL), down 0.6% to 1,530p, Greene King (GNK) down 0.6% to 587.6p and SSP Group (SSPG), down 0.4% to 646.2p.

Yesterday in the City

Greencore (GNC) jumped up 6% to 164.6p despite posting a half-year loss of £18.1m, following a positive outlook from the group as well as strong sales from the Peacocks Food arm of the company acquired in 2016. After profit warnings resulting from a slump in the US business in March, the company beat some analysts’ predictions to post sales growth of 22%.

Ocado (OCDO) continued its rise, moving up another 3.2% to reach the heady heights of 901.6p as its positive week continued after sealing its partnership deal with US grocery giant Kroger.

Fresh food supplier Cranswick (CWK) moved up 2.2% to 3,236p, after export growth drove it to increase sales by 17% for the year ending March 31.

Other gains included Fever-Tree (FEVR) drinks, up 2.3% to 2,882p, Whitbread (WTB) up 1.1% to 4,233p and Britvic (BVIC) up 1.1% to 758.5p.

Retailer Pets at Home Group fell 13% to 137.4p as it saw sales increase by 7.8% as it announced its annual figures, but underlying profit before tax fell 12.3% to £84.5m.

Fallers included butchers Crawshaw (CRAW) group which fell 20.6% to 9.25p, Greggs (GRG) slumped 1.4% to 1,070p and Tesco (TSCO) fell 1.1% to 247.5p.