M&S chief rules out any more acquisitions: Stores group grants pay rise of almost 6 per cent, sends retail task force to Japan and turns in 737m pounds profit

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The Independent Online
SIR Richard Greenbury vowed yesterday that Marks & Spencer would not make another acquisition while he remained chairman, as the retail group reported record annual profits of pounds 737m before tax.

Future expansion, which is to be stepped up this year, would all be organic, Sir Richard pledged, describing past acquisitions as 'not terribly successful'.

M&S reported a 25 per cent increase in re-stated pre-tax profits for the year to 31 March, wrongfooting City analysts, whose forecasts ranged from pounds 720m to pounds 735m.

However, the shares were marked down 91 2 p to 3451 2 p, as investors took profits after the recent strong run in the share price, and partly because M&S announced a costlier than expected staff pay deal.

Speaking before the annual results presentation, Sir Richard said: 'While I'm chairman we'll never make another acquisition.' He also revealed that he planned to retire in six years, when he will be 62.

Although M&S is not acquisitive, it has never before categorically ruled out purchasing other businesses. With a rock-solid balance sheet and gearing down to 4 per cent, it could finance virtually any purchase and is sometimes mooted as a prospective buyer on the Continent.

In the past it has admitted it paid too much for Brooks Brothers in the US and that its acquisitions in Canada have not been successful.

Sir Richard said the group planned to expand in the UK, on the Continent as sites became available, and increasingly in the Far East. 'As far as footage expansion is concerned we're in an extremely aggressive mood again.'

There appeared to be 'a slow fragile recovery' in the UK. 'We're very much on the front foot as we see the customer coming out of the trenches.' The opening of new space would be accelerated in the current year.

While Europe remained a key element in expansion plans, M&S is taking a more cautious view because of the depressed economies. However, the Far East may take up the slack.

Sir Richard said: 'There is no country in the Far East, including China, that is not asking us to open M&S shops or franchises or in some cases both.'

A task force has been despatched to Tokyo to examine retail opportunities for M&S in Japan, where Brooks Brothers already operates more than 40 shops in conjunction with the local firm Daidoh.

In the UK and Eire group operating profit grew 7 per cent to pounds 684m in the year to 31 March. Non-food sales grew by 2 per cent to pounds 2.76bn, accelerating in the second half after the launch of a value-for-money campaign.

Food sales grew by 1.5 per cent to pounds 2.25bn, but have been running at about 5 per cent ahead since December.

Financial activities, including the sophisticated treasury arm and the credit card and unit trusts division, lifted operating profit by 44 per cent to pounds 33m. Continental Europe, the main focus of expansion last year, lifted operating profits from pounds 23.8m to pounds 27.3m. The US contribution grew from pounds 14.5m to pounds 18m, Canada moved into a pounds 100,000 profit from a pounds 3m loss and the Far East grew from pounds 6.3m to pounds 10.6m.

Earnings per share grew 33 per cent. A final dividend of 5.9p, to be paid on 30 July, makes an 8.1p total, up 14 per cent. Sir Richard said a pay deal had been announced to staff giving them a pay increase of 'just under 6 per cent' in addition to profit share. The total wages bill would go up by 5 per cent, he said. The prior-year figures were re-stated to comply with the new FRS3 accounting rules.

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