M&S on a high as City braces for cash call

Marc Bolland is expected to inherit a 2 per cent sales growth and ask for £750m from investors
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The Independent Online

Outgoing M&S boss Sir Stuart Rose is expected to sign off as executive chairman on Thursday by telling the City the retailer enjoyed a strong end to its financial year.

Sir Stuart, who hands over the baton of chief executive to former Morrisons boss Marc Bolland in a month's time, has previously said he plans to stay on as chairman of the group for another year. But speculation is growing that he could quit the firm as early as the autumn.

He is also likely to be quizzed on whether Marks & Spencer will pursue a bumper rights issue later in the year amid rumours that the group could tap its investors in a £750m cash call.

"They were bleeding like a pig last year," said Greg Lawless, analyst at Collins Stewart. "A £750m rights issue would give Bolland the opportunity to speed up changes, get rid of Rose who would otherwise remain as non-executive chairman until March 2011 – and so earn his mega-millions for the year. This is exactly what he did at Morrisons."

The City expects M&S numbers to be an improvement on last year's disastrous results with sales likely to have grown by nearly 2 per cent. Analysts are predicting that like-for-like sales increased by 2.5 per cent in the clothes business and 1 per cent in food. Analysts at Deutsche Bank are forecasting a pre-tax profit for the year to March 2010 of £638m, down £64m on 2009's £702m figure. M&S finished the shortened trading week down 1.3p at 371.9p, valuing the retailer at around £5.8bn.

Recent numbers from competing clothes chain Next, and better-than -expected food market share numbers, have calmed City fears that M&S will disappoint shareholders at this week's announcement.

M&S has suffered badly during the recession with profits diving by 40 per cent in the year to March 2009. Increases in profits, though slight, will help bring down the curtain on Rose's time at the helm and set the stage for the arrival of Bolland.

Rose (pictured with Twiggy) will be hoping that the better-than-expected results will distract attention from investor anger that he will take a pay cut of only 25 per cent when he steps down from his role as executive chairman.

His pay will drop to £875,000 when he moves to a non-executive position in July. Tesco boss David Reid earns £657,000.

Following criticism of its response to the recession, M&S has introduced the budget Wise Buys line and a new line of clothes, Indigo. Industry experts have called on the company to target its clothes at younger customers as its current customer base ages. M&S struggled to hold on to market share during the downturn.