Stock Market Valuation Of Marks Spencer Accounting Essay

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In 1999 stock market valuation of Marks & Spencer was 19 billion, on 8th of the June 2006 it was at £8.94 billion. Now is not that part of the reason that why Phillip Green was prepared to buy the company for around £9 billion.

In 1997 profits at Marks & Spencer peaked at just over £ 1 billion on sales of £8 billion something like half of the entire UK population wears Marks & Spencer underwear's, by 1997 half of the UK population shopped at Marks & Spencer every week.

The traditional Ratio analysis Derived from Marks& Spencer's published sources. Here are the basis ratio analysis of year 2004 to 2006 based on the available information.

IFRS

UK GAAP

Operating Profit(percentage)

2006

2005

2005

2004

EBIT(Percentage)

10.90%

7.98%

7.78%

9.92%

ROTA(EBIT)

16.32%

12.29%

17.39%

10.59%

Current Ratio

0.57

0.67

0.65

2.05

Working Capital

-874.9

-405.1

-451.8

1984.8

Gearing(NCL)

176.42%

299.24%

368.18%

102.67%

Stock turnover(days)

19.7

17.9

16.9

19.4

Depreciation as percentage of total Gross Assets

7.00%

6.60%

7.60%

6.80%

Income Tax as Percentage of EBT

30.20%

29.70%

21.20%

29.30%

Operating profitability has improved.

EBIT and ROTA based profitability have improved on an IFRS more significantly that it might have done on an FRS basis.

The Current ratio is currently very low and that is normal for a retailer. However why the massive change from 2004 to 2005. there was a very large long term debtor in the balance sheet in 2994, relating to their pension fund no longer in the balance sheet.

Stock turnover is worsening.

Depreciation as a percentage of total gross assets looks as if it has changed qs a result of the implementation of IFRS.

Income tax as a percentage of EBT(tax profits)has dramatically changed.

Marks & Spencer Accounts

IFRS

UK GAAP

RATES OF CHANGE

2006

2005

2005

2004

IFRS 05-

IFRS 06

FRS 2005

IFRS 2006

Sales

7797.7

7490.5

7942.3

8301.5

4.10%

-1.82%

Operating profit

850.1

598.1

618

823.9

42.13%

37.56%

EBIT

850.1

598.1

745.3

781.6

42.13%

14.06%

Retained Earning

247

N/A

383.7

289.1

N/A

-35.63%

Depreciation for the year

247

255

250.4

238.9

7.45%

9.42%

EBT

745.7

505.1

745.3

781.6

47.63%

0.05%

Income tax

225.1

150.1

158.3

229.3

49.97%

42.20%

EPS

31.4

29.1

29.1

24.2

7.90%

7.90%

Total Assets

5210.5

4867.3

4285

7377.1

7.05%

21.60%

Tangible Gross Assets

3904.9

3871.5

3316.1

3497.6

0.86%

17.76%

Current Assets

1142.1

832.3

837.5

3869.5

37.22%

96.37%

Current Liabilities

20170

1237.4

1289.3

1884.7

63.00%

56.44%

Stocks

374.3

338.9

339.7

398

10.45%

10.19%

Non current liabilities

2038.2

2720.7

1919.7

2519.6

-25.09%

6.17%

Shareholder's fund

11553.3

909.3

521.4

2454

27.07%

121.58%

Marks & Spencer Share prices 2004 and 2005:-

Marks & Spencer Share prices from 2005 to 2011:-

Year

Share price change

Total return

Difference

2011

-8.75%

-8.75%

0.00%

2010

-8.21%

-8.17%

0.04%

2009

87.19%

87.28%

0.09%

2008

-61.65%

-61.62%

0.03%

2007

-21.90%

-21.87%

0.02%

2006

41.98%

42.02%

0.04%

2005

47.23%

47.2%

0.05%

2004

18.69%

18.72%

0.049%

Marks & Spencer's Earning per share:-

2010

£ Millions

2009

£ Millions

Earning after tax

526.3

508.6

Property disposals(net of tax)

(8.1)

(6.4)

Exceptional costs (net of tax)

-

105.7

Exceptional Pension credit ( net of tax)

-

(166.6)

Adjusted earning after tax

518.2

440.7

Weighted average number of ordinary shares in issue

1572.2

1573.2

Potentially dilutive share options under groups share options

14.3

0.8

Weighted average number of diluted ordinary shares

1586.5

1574.0

Basic Earning per share:-

Pence

Pence

Basic Earning per share

33.5

32.3

Property disposal per share

(0.5)

(0.4)

Exceptional Costs per share

-

6.7

Exceptional pension credit per share

_

(10.6)

Adjusted basic earning per share

33.0

28.0

Diluted Earning per Share:-

Pence

Pence

Diluted earning per share

33.2

32.3

Property disposal per share

(0.5)

(0.4)

Exceptional Costs per share

-

6.7

Exceptional pension credit per share

-

(10.6)

Adjusted Diluted earning per share

32.7

28.0

On the market study of share valuation, earning per share, company's assets, revenues etc of Marks & Spencer's I will recommend not to sell the shares of the company to Arcadia. The study showed that the Marks & Spencer is making a huge profit and attracting more and more customers at the rate of high profit there is no need to the company to sell its shares as it is making a huge profit. Although the Arcadia is also a well known, established company but on the other hand side M&S has brand loyalty and has brand loyal customers who are stick with M&S. The Brand image of M&S, itself help the company to maximise its profits in a long term. By diversifying it will progress their existing segments with new skills. Marks and Spencer have done a good customer loyalty which helps them to look for other areas where marks and Spencer can specialize in at the same time improving the products and services.

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