M&S shores up finances, flags prospect of no 2021 divi

Marks & Spencer said on Tuesday that it has completed its steps to secure liquidity for the likely duration of the Covid-19 coronavirus crisis - preparing shareholders for the prospect of no dividend in 2021.

It said that, as part of the planning for a tighter time ahead, and in order to provide for the uncertain outlook as a result of the pandemic, it was not anticipating a dividend for the 2021 financial year, generating a cash saving of around £210m.

The FTSE 250 retailer said it was planning for its clothing and home business to be “severely constrained” during lockdown, along with “highly uncertain” trading conditions in a prolonged exit period from that lockdown.

In the absence of a clear basis for forecasting, its scenario planning and stress tests were based on materially subdued trading for the balance of 2020 in clothing and home.

“M&S benefits from having a strong food business and the transition to Ocado supply is on track to proceed in September to form a multi-channel food operation,” the board said in its statement.

“However, food trading has been adversely affected by lockdown due to the closure of cafes and slowdown in travel and some city centre locations.

“We have therefore taken steps to maximise liquidity for the likely duration of the crisis and recovery period beyond.”

It said a formal agreement has been reached with its lending syndicate of banks, providing the £1.1bn revolving credit facility to substantially relax or remove covenant conditions for the tests arising in September 2020, March 2021, and September 2021.

M&S has also been confirmed as an eligible issuer under the UK government's Covid Corporate Financing Facility (CCFF), providing “significant” further liquidity headroom.

It said the agreement with the banks, combined with other measures it had taken, meant that under its base planning scenarios and even more adverse assumptions, the business would have significant undrawn credit available for the 18 months ahead.

“The crisis has created a very different way of working and rapid learning for the business at all levels.

“At the time of the results presentation we will also outline measures being taken to accelerate the transformation programme and change ways of working permanently under our ‘never the same again’ programme currently being prepared for implementation.

“We are scheduled to report preliminary full year results on 20 May and will at that stage provide a further update on the very significant measures being taken to reduce costs and protect cash flow during the crisis period.”

At 0942 BST, shares in Marks & Spencer Group were down 0.36% at 94.02p.