A Very Quick Look at Marks & Spencer's Earnings

LONDON -- Right now I'm trawling through the FTSE 100 and double-checking for blue chips that may be flattering their profits.

You see, many companies these days report "underlying" earnings, which are calculated by excluding costs the firm deems to be "exceptional." Trouble is, some companies are more cavalier than others when it comes to sweeping awkward expenses away from the headline figures.

Today I'm looking at Marks & Spencer  (LSE: MKS.L  ) to see if its reported earnings have been distorted significantly by exceptional, one-off, or unusual items. I've extracted the following statistics courtesy of S&P Capital IQ:

Year to March

2008

2009

2010

2011

2012

Profit before unusual items (million pounds)

1,007

604

708

714

706

Restructuring charges (million pounds)

-

(136)

-

(16)

(18)

Goodwill impairment

-

-

-

-

(34)

Gain on sales of assets and investments (million pounds)

27

6

8

57

16

Asset writedowns

-

-

-

(6)

(10)

Other unusual items (million pounds)

95

231

(14)

31

-

While annual figures can provide some insight into how a business has performed, I reckon looking back over several years provides a better view of possible problems in relation to one-off costs.

So between 2008 and 2012, my stats tell me Marks & Spencer reported cumulative profits before exceptional items and tax of 3,739 million pounds. However, aggregate exceptional costs came to 237 million pounds -- equivalent to just 6% of cumulative "underlying" profits.

Looking at our summary table, Marks & Spencer, which reports its half-year results tomorrow, seems to have a fairly clean profit and loss account. Most of its one-off items were quite small in relation to total profits.

The main exceptions were a fairly hefty restructuring charge back in 2009, which was mostly property-related. Marks & Spencer also took two sizable credits to its profit-and-loss account in 2008 and 2009, both in relation to its company pension scheme, where the future benefits payable were made less generous.

Somebody who always studies earnings numbers in detail is Neil Woodford, the U.K.'s leading equity income fund manager. Woodford's portfolios thrashed the FTSE 100 during the 15 years to 2011, and this exclusive Motley Fool report -- which can be downloaded free today -- reviews his favorite blue chip shares for 2013 and beyond.

Are you looking to profit from this uncertain economy? "10 Steps to Making a Million in the Market" is the very latest Motley Fool guide to help Britain invest. Better. We urge you to read the report today -- it's free.

Further Motley Fool investment opportunities:

Stuart Watson does not own any share mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2095378, ~/Articles/ArticleHandler.aspx, 4/17/2014 7:09:21 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement