M&S to hold vote on chairman
By FashionUnited
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Shareholders in Marks & Spencer will stage the biggest revolt in recent City history this week when up to a third of them vote against or abstain from the election of Sir Stuart Rose as executive chairman. The proportion of rebels is unprecedented for a FTSE 100 group. A 5%-10% vote against would normally be regarded as high.
Rose will also be questioned over M&S's dire recent sales performance. Last week he revealed an unexpected 5.3% dip in sales, and warned of a two-year downturn in consumer confidence. M&S shares dived on the warning, finishing the week 32% down at 227p. In the past 12 months the shares have dropped 64%. This values the company at £3.6 billion. City institutions hold most of the retail group's shares. Yesterday City sources said the board was resigned to a revolt among 20% to 30% of shareholders, with about half of the rebels voting against Rose's election and half abstaining — a traditional City way of indicating displeasure without registering a no vote. A source close to Rose defended his decision to take up the dual role: “Stuart was genuinely undecided about whether he should go or stay. After discussions with the board he thought holding both posts would be a good interim solution, allowing him to step back to become chairman and find a successor. Leading City analyst Tony Shiret of Credit Suisse this weekend questioned the valuation of M&S and predicted the shares could plunge even further as the company comes under more scrutiny.
Shiret said M&S will have £3.4 billion of debt by the end of the year with ebitda (earnings before interest, taxes, depreciation and
amortisation) of £1.2 billion.
“We are talking about a ratio of three times debt to ebitda, which is looking highly borrowed,” he said. “The share buyback strategy and capital spending programme have eroded its cash position. “A lot of investors take comfort in M&S's property portfolio, but the value of property is falling and 40% of the portfolio is pledged to the pension fund. “The company has much less asset backing than is generally believed, and the danger for the shares is that they start to be valued on the same, low multiples as other clothing retailers with low asset backing.”
Image: M&S
Rose will also be questioned over M&S's dire recent sales performance. Last week he revealed an unexpected 5.3% dip in sales, and warned of a two-year downturn in consumer confidence. M&S shares dived on the warning, finishing the week 32% down at 227p. In the past 12 months the shares have dropped 64%. This values the company at £3.6 billion. City institutions hold most of the retail group's shares. Yesterday City sources said the board was resigned to a revolt among 20% to 30% of shareholders, with about half of the rebels voting against Rose's election and half abstaining — a traditional City way of indicating displeasure without registering a no vote. A source close to Rose defended his decision to take up the dual role: “Stuart was genuinely undecided about whether he should go or stay. After discussions with the board he thought holding both posts would be a good interim solution, allowing him to step back to become chairman and find a successor. Leading City analyst Tony Shiret of Credit Suisse this weekend questioned the valuation of M&S and predicted the shares could plunge even further as the company comes under more scrutiny.
Shiret said M&S will have £3.4 billion of debt by the end of the year with ebitda (earnings before interest, taxes, depreciation and
amortisation) of £1.2 billion.
“We are talking about a ratio of three times debt to ebitda, which is looking highly borrowed,” he said. “The share buyback strategy and capital spending programme have eroded its cash position. “A lot of investors take comfort in M&S's property portfolio, but the value of property is falling and 40% of the portfolio is pledged to the pension fund. “The company has much less asset backing than is generally believed, and the danger for the shares is that they start to be valued on the same, low multiples as other clothing retailers with low asset backing.”
Image: M&S