The sales figures may not be great, but don’t write off M&S just yet


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Don’t be fooled by the negative sales figures at Marks & Sparks.

As rag traders are fond of saying: sales are vanity, profit is sanity.

Marc Bolland has taken great leaps forward in getting the company back on a profit growth footing. As my colleague Simon Neville points out opposite, this will only be improved in the coming months by the supply chain magic of the secretive Lindsey brothers.

Now the weirdly hot weather is over, expect sales to pick up strongly in the coming weeks, as people finally get around to sorting out their winter wardrobes. And that is before the Christmas rush.

Meanwhile, when those sales do start coming on strong, remember: thanks to those increased margins in the past half-year, every pound in the till equates to 1.5p more going through to the bottom line.

Why Rolls-Royce flew into trouble with its money man

Under Sir John Rose, the aero engine maker Rolls-Royce could do no wrong, it seemed. A corporate hero, he was loved by politicians, investors and the media.

How times change. The past year has been a shambles of miscommunication about Rolls-Royce’s future earnings, including two profit warnings. And on Tuesday, when its finance director Mark Morris walked the plank in what looked like paying the price for the mess, Rolls-Royce still bungled its communication. Rather than declare, as most big companies do these days, how much they would be paying their departing numbers man, the company declined to give details.

Complaints inevitably followed about corporate governance and transparency. After all, this is a business currently under investigation by the Serious Fraud Office over allegations of bribery and corruption in China and Indonesia.

Under questioning, Rolls-Royce finally gave off-the-record “guidance” to the City on Tuesday evening. All eminently deniable, of course, it stated that Mr Morris would get a payoff of about £700,000.

But the communication was misleading again, and yesterday morning – two and a half hours after most company announcements are made – it slipped out a Stock Exchange statement that it had now disclosed his full payoff. But instead of publishing it in that statement, the company snootily advised investors to visit a somewhat obscure sub-section of its website.

Those who found it learned the actual payoff (including share options and £40,000 to help him find a new job elsewhere) was at least £100,000 more than the previous day’s guidance.

The pity of it is that the total sum isn’t vast for an executive who has been with the company for 27 years. But rather than make that point clearly, Rolls treated us to another fumbled message.

Having said all that, it looks as though chief executive John Rishton – like Marc Bolland at Marks & Spencer – is finally grappling with the company’s key problem: low profit margins compared with its main rivals. In Mr Rishton’s case, he is measured against General Electric, where margins are nearly double those of Rolls.

Mr Rishton is ready for the fight. But with more big efficiency moves ahead, he must make a better fist of explaining them.

Please don’t chase GE in every way, Mr Rishton

 A quick point on GE, while we’re on the subject. In the United States, it is something of a byword in corporate tax avoidance. This newspaper described at the start of the year how its massive aeroplane leasing business, Gecas, paid barely any corporate taxes on its $1.3bn (£814m) profit, cleverly siting its tax base in Shannon, Ireland, with subsidiaries in offshore havens.

The parent company is cannier still, structuring itself through a web of companies around the world that collectively hold around $110bn of GE’s cash pile overseas, meaning they avoid US corporate taxes. That is more by far than any other US multinational (in second place is Microsoft with $76bn, according to Bloomberg). 

Aggressive accounting is an oft-used flight path to boosting post-tax margins, but one we should hope Rolls-Royce doesn’t take as it plays catch-up.

Cheers to the Wetherspoons boss, who’s no bar-room bore

It’s hard not to like Tim Martin. The Wetherspoon boss runs a business making profits of more than £80m a year with little fuss, decent prices and a rather good range of well-kept ales.

He’s also not one to line up behind the tediously predictable business lobby groups, being pretty much the only corporate captain to criticise their hectoring of undecided Scots ahead of the referendum.

Yesterday he went against the grain once more, highlighting his decision to hike his staff’s pay by more than four times the rate of inflation. The shares fell, but Mr Martin said it made long term sense to keep his staff happy. Incidentally, I didn’t hear him whingeing excessively about changes to holiday pay, either.

He’s been running these pubs for 30 years. I dare say he knows more about it than the twentysomething City analysts who were tut-tutting yesterday. And I know who I’d rather go for a pint with.