Shares in Marks and Spencer (M&S) are poised to soar to their highest value in a decade, despite the FTSE 100 heavyweight grappling with a significant cyber attack.
Following the release of the British institution’s annual results, market analysts are forecasting that M&S shares will climb to over 420p each, as reported by City AM.
The last time the retailer’s shares traded at this level was back in December 2015.
Currently, they stand at 366p, having taken a tumble after news of the cyber attack first broke in April.
In May, City AM reported a six per cent rise in M&S’s revenue to £13.8bn during its most recent financial year.
However, its pre-tax profit took a near 24 per cent hit, dropping to £511.8m over the same timeframe.
M&S also announced plans to hike its annual dividend by 20 per cent to 3.6p per share this year.
The cyber attack is projected to set M&S back around £300m.
Earlier in June, City AM revealed that the surge in M&S’s share price prior to the major cyber attack contributed to a hefty increase in the CEO’s remuneration, pushing it past the £7m mark.
Stuart Machin pocketed just over £7m for the retailer’s latest financial year, a substantial increase from the £5m he earned in the previous 12 months.
The uptick in M&S’s share price during the financial year ending March this year played a key role in boosting the pay package as the retailer’s turnaround strategy began to bear fruit.
M&S experienced a surge in share price during its latest financial year, opening at approximately 260p and closing the period at around 356p, resulting in a significant addition to the company’s market value.
Are M&S shares really set to jump?
Post-analysis of M&S’s annual results and the cyber-attack repercussions shows that analysts are now focusing on the potential trajectory of the retailer’s share price.
Keith Bowman of Interactive Investor commented: “For investors, an expected hit to operating profit of £300m from its cyber-attack incident is an overhang.”
Additionally, he noted: “Both sales (-seven per cent) and profit (-three per cent) for the international business retreated over this latest financial year.”
Bowman highlighted the issues with the joint venture with Ocado, mentioning: “Its 50:50 joint venture with Ocado continues to lose money, while a forecast dividend yield of 1.6 per cent compares to 3.5 per cent or more at fellow retailers Tesco and Sainsbury’s.”
On a positive note, he added: “On the upside, improving sales continue to beef up the group’s balance sheet, with cash held prior to store lease liabilities increasing almost ten-fold year-over-year to £438m and net debt including store leases falling 17 per cent to £1.79bn.”
He concluded with the potential silver lining regarding the recent cybersecurity events: “Insurance payouts may yet reduce the hit from cyber-crime to below £300m, with the attack also speeding up its technology changes and investment.
“Group transformation plans are ongoing including new management at the international business, while cost savings of £120m were made over the past year, with the ambition to achieve cumulative savings of over £500m by March 2028. “.
“In all, and while the impact of the cyber attack injects some caution, strengthening group finances and a consensus analyst estimate of fair value sat above 420p provide room for longer-term optimism.”
