Daily Stock Market Report (Wed 21 May 2025) - TMO, ZIG, MAB1, MKS, JD., AVON, REVB, MEX

Good morning and welcome to Wednesday's report! It's another busy day for updates.

The Agenda is complete.

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Companies Reporting

Name (Mkt Cap)	RNS	Summary	Our view (Author)
SSE (LON:SSE) (£19.9bn)	Full Year Results	Adj PBT -3% to £2.1bn, EPS flat at 160.9p. “Record” capex of £2.9bn. Outlook: FY26 EPS of 175-200p.
Severn Trent (LON:SVT) (£8.1bn)	Full Year Results	EBIT +15% to £590m. Adj EPS +41% to 112p. “Record” £1.7bn capex (+40% YoY). Outlook: +ve.
Marks and Spencer (LON:MKS) (£7.6bn)	Full Year Results	Revs +6%, adj PBT +22% to £876m. Cyber impact c.£300m on FY26 op profit, before mitigation. Shore Capital estimates 32% pro forma hit to FY26 earnings due to cyber attack.	AMBER (Roland) The retailer’s FY25 results were excellent, but performance this year is likely to be significantly more difficult due to the ongoing impact of April’s cyber attack. There’s still no clear schedule for a return to normal operations and broker estimates suggest a big hit to profits. I think there’s the potential for a sluggish return to normal customer behaviour and perhaps some extra costs. I’m staying neutral for now, but would hope to turn positive again later this year.
Intermediate Capital (LON:ICG) (£6.0bn)	Final Results	AUM +14% to $112bn, PBT -11% to £532m due to lower investment returns. NAVps +9% to 859p.
JD Sports Fashion (LON:JD.) (£4.8bn)	Full Year Results	Rev +10% to £11,457m, adj PBT -4% to £923m. YTD in line with exps but tariff uncertainty remains.	AMBER/GREEN (Megan) Trading in the new financial year hasn’t started brilliantly, which maybe explains the poor response to these numbers. The quality metrics remain though, which makes a forecast PE ratio of 7x look pretty tempting.
RS (LON:RS1) (£2.9bn)	Full Year Results	FY25 in line. Rev -1%, PBT -15% to £206m. Markets challenging, maintaining medium-term targets.
HICL Infrastructure (LON:HICL) (£2.3bn)	Full Year Results	NAVps -3.2% to 153.1p, divi unch 8.25p. Underlying return of 7.7%., targeting £200m of disposals.
Ithaca Energy (LON:ITH) (£2.1bn)	Q1 Results	PBT +169% to $367.2m reflecting ENI UK merger. Hedging through 2027. FY25 guidance reiterated.
Currys (LON:CURY) (£1.41bn)	FY Trading Update	UK/Ire EBIT to be in line. FY adj PBT to be c.£162m (+37% YoY). Net cash >£180m. Resuming divis.
Great Portland Estates (LON:GPE) (£1.4bn)	Full Year Results	NAVps +4.4% to 494p, EPRA EPS in line. Rent roll +15%, new lettings 10.6% above Mar24 ERV.
Hammerson (LON:HMSO) (£1.30bn)	Brent Cross, Trading and Guidance Update	Now expect FY25 GRI growth of 10%, FY25 adjusted earnings to be c.£95m (prev. £93.7m).
Coats (LON:COA) (£1.25bn)	Trading Update	YTD rev +2%. H1 adj EBIT margin 19-21%, tariff uncertainty remains. FY outlook in line with exps.
Playtech (LON:PTEC) (£1.09bn)	AGM Trading Update	Caliplay software fees: “strong growth”. US: “very strong revenue growth”. YTD trading in line.
Integrafin Holdings (LON:IHP) (£1.09bn)	Half-year Report	Net inflows +7% annualised, FUD +8% to £65.9bn. Adj PBT +13% to £37.9m. FY25 guidance unch.
4imprint (LON:FOUR) (£989m)	AGM Statement	YTD revenue in line with 2024. Order intake -2% vs 2024. Tariff uncertainty remains.
ZIGUP (LON:ZIG) (£768m)	Trading Update	FY25 to be “modestly” ahead of exps. Closing vehicles on hire +6% YoY. Conditions normalised.	AMBER/GREEN (Roland) I have tentatively upgraded my view on this business today, based on the evidence that profits are as expected following the normalisation of supply chain conditions. It’s not a business for which I’d pay a high multiple, but with the stock at a discount to book value and yielding nearly 8%, I think there could be some value here.
Close Brothers (LON:CBG) (£557m)	Trading Update	Updated loan book growth expectations and upgraded forecasts for CET1 capital ratio above target range of 12% to 13%. Further guidance maintained.
Mortgage Advice Bureau (Holdings) (LON:MAB1) (£476m)	AGM Trading Statement	Increased mortgage applications following decline in cost of borrowing. Trading in line with board’s expectations.	GREEN (Graham) One of my favourite stocks is enjoying better macro conditions than last year, which I hope will feed through to a much improved financial result and a strong foundation for continued growth.
Avon Technologies (LON:AVON) (£473m)	Interim Results	Orders -10% in the period, but order book growth improves confidence in the outlook. Guidance confirmed for FY25.	AMBER (Graham) [no section below] We’ve been neutral on this - e.g. in March - but I’m wondering if it’s due an upgrade given impressive H1 growth in revenues (24%) that feeds through to a very large improvement in adj. PBT (+70% to $14.8m). What’s holding me back is the observation that $8.4m of costs were adjusted out (costs relating to a site consolidation programme for Avon’s helmet company, Team Wendy). If profits were clean and/or if the company held net cash then perhaps I’d feel compelled to upgrade this, but as things stand I think I can afford to stay a little cautious.
Foresight Solar Fund (LON:FSFL) (£418m)	Trading & Strategic Option Considerations updates	Electricity production: UK above budget, Spain below. Evaluating all options to maximise value.
Helical (LON:HLCL) (£290m)	Full Year Results	EPRA earnings £2.7m, EPRA net tangible assets 348p (vs. share price 240.8p).
Essentra (LON:ESNT) (£287m)	2025 AGM Trading Update	Trading in line with expectations. Revenue -1.3% in first four months amid difficult trading conditions.
Central Asia Metals (LON:CAML) (£283m)	Acquisition of New World Resources	Acquisition of Australian-listed mining group for AUS$185m, funded out of cash and a new credit facility. NWR has a high grade copper deposit in Arizona.
Science (LON:SAG) (£209m)	AGM Update	Profitability slightly ahead in the first four months of the year.
Stelrad (LON:SRAD) (£173m)	AGM Trading Update	Trading in 2025 is in line with mgmt exps. Full year outlook unchanged.
Carr's (LON:CARR) (£138m)	Proposed Tender Offer (£70m)	£70m returned at 163p. Up to 45% of the company’s shares bought at a 16% premium.
Time Out (LON:TMO) (£104m)	Trading Update	Profit warning? Adj. EBITDA now expected to be £11-13m. Media revs affected by conditions in US.	BLACK (RED) (Graham) Forecast guidance is withdrawn as the company reviews its options for its Media division, which appears to be facing structural issues to do with consumer behaviour.
STV (LON:STVG) (£76m)	Capital Markets Event and Q1 2025 Trading Update	Advertising revenue -3% in Q1, -18% in Q2. FY26 targets updated, including £30m digital revenues.
Shoe Zone (LON:SHOE) (£53m)	Interim Results	H1 rev -6.5%, pre-tax loss £2.6m. Full-year PBT forecast £5m. Trading environment is difficult.
Staffline (LON:STAF) (£51m)	AGM Trading Update	Strong momentum continues. Gross profit +6.2%. On track to deliver recently revised exps.
Artisanal Spirits (LON:ART) (£36m)	AGM Statement	Positive start, double-digit revenue growth. On track to meet 2025 consensus EBITDA of £1.5m.
Revolution Beauty (LON:REVB) (£17m)	Funding Options, Possible Offer & Sale Process	SP +34% Exploring equity raise. Received approach for entire company (identity of the potential buyer unknown). Formal sale process launched to investigate sale of the company.	PINK (RED) (Graham) [no section below] The news of a bid is a pleasant surprise but I believe this stock remains in a high-risk category until more funding (which it needs) has been definitively secured. The launch of an FSP makes sense to find more possible buyers and create a bidding war.
Tortilla Mexican Grill (LON:MEX) (£15m)	Final Results	2024: the pre-tax loss increases to £3.3m due to c. £3m of exceptional items and impairments. Q1 2025: UK LfL sales +5.9%, UK outlook in line. France: delays.	RED (Graham) [no section below] I'm not inclined to give MEX too much slack for today's exceptional items. They include the abandonment of a new site that was planned, some unspecified "restructuring costs", and the impairment of six stores to reflect "tough market  conditions". With the company hoping to become a "pan-European fast casual Mexican restaurant business", I would expect many more costs like these to be encountered in the years ahead. Tangible assets are negative and the company has a net debt position before considering leases. I wish it well but in my experience the restaurant sector does not treat investors well, and I don't see why this particular offering will be different - it looks to me like "Burrito bonds" Mark II.
RTC (LON:RTC) (£12m)	AGM Trading Update	Q1: positive trading and cash generation. Q2: witnessing impact of higher NICs/min wage.

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Graham's Section

Time Out (LON:TMO)

Down 10% to 26p (£93m) - Trading Update - Graham - BLACK (RED)

Time Out Group plc (AIM: TMO), the global media and hospitality business, today announces a trading update for the year-ended 30 June 2025 ("FY25").

We’ve always been a bit sceptical of this one, due to the dismal track record:

Investors should also be aware of the concentrated shareholder register:

The business has two divisions: Time Out Markets (food courts) and Time Out Media (travel magazines).

Today’s update for FY June 2025 is unfortunately a profit warning.

Markets - this is growing in line with expectations. Six owned sites, five franchised, and another six contracted to open by 2027.

Media - revenues now expected approx 20% lower than last year, “primarily due to local commercial conditions in the USA”. The company explains that traditional advertising revenue has declined since the US election, as consumers switch “from web to social media and AI”.

The strategy at this division is now under review, “to maximise the return on capital expenditure and improve the quality and forward visibility of revenues”. It sounds to me like they are facing a permanent, structural problem. The CEO says they are “right-sizing” the division.

Outlook (emphasis added):

The Group remains focused on the contracted growth that the Market proposition will deliver. Converting a strong pipeline of potential new Market sites, whilst driving like-for-like growth in existing Markets through out-of-home advertising, loyalty programmes and a growing and valuable customer database. The goal of which is to double Markets EBITDA profit over the next two years.

Whilst management review the future Media strategy, forecast guidance is withdrawn. This review will enable Time Out to deliver sustainable Media division profitability, through effective monetisation of unique content and growing global audience, whilst also driving customers and revenue to our Markets.

They have made £7m of annualised savings, “ensuring the company remains cash generative” - this is a bit of a stretch, as cash generation has not traditionally been a strong point of the company.

Graham’s view

Despite being listed for nearly a decade, this remains a Sucker Stock according to Stockopedia calculations, and it’s difficult to disagree:

Given that it’s a Sucker Stock that has just issued a profit warning, and withdrawn forecast guidance, I almost have to put a RED on this.

However, before I do, I’d like to say a few words about the balance sheet.

After many years of poor financial performance, the company ended the calendar year 2024 with financial borrowings of nearly £40m, offset by cash of £5m. It also had substantial lease liabilities.

It has since borrowed £4.5m from a company that’s part of the Oakley Capital family of companies, plus another £0.5m from its CEO. The cost of that debt is 8% over the benchmark interest rate, but Time Out does have sole discretion as to whether or not to convert the loan into equity (at 50p). That’s a valuable option for the company - if I understand it correctly, Time Out will be not be required to repay this loan in cash.

However, the other c. £40m of borrowings are less forgiving. The main item is a €35m loan from an alternative lender, charging 8.5% plus the euro benchmark rate, and expiring at the end of 2026.

There is no asset support on the balance sheet, with the interim results showing the company with a negative tangible net worth.

So from pretty much every angle this stock is a clear RED. That doesn’t mean the stock can't do well. But let's just say I'll be surprised if it does. And I don't know why the market is still valuing it at £90m+.

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Mortgage Advice Bureau (Holdings) (LON:MAB1)

Up 1% to 830p (£481m) - AGM Trading Statement - Graham - GREEN

Mortgage Advice Bureau (Holdings) plc (AIM: MAB1.L), a leading technology-driven UK mortgage network and broker, will hold its Annual General Meeting at 1pm today during which Chair, Mike Jones, will make the following statement

This stock is a favourite of mine; let’s check in on the latest update.

The key point is that trading is in line.

There’s some helpful colour on the state of the property market, with interest rates on a downward path and purchase activity having improved compared to last year:

Mortgage completions were particularly strong in Q1 2025, boosted by the pull-forward of some property transactions ahead of the 31 March 2025 changes to Stamp Duty Land Tax (SDLT) relief. Purchase activity remains stronger year on year, underpinned by improving buyer affordability and an increased supply of new properties coming onto the market. If mortgage rates remain stable or decline further, we expect purchase activity in 2025 to continue to outperform 2024.

Refinancings provide an anchor to MAB’s overall activity and that side of the business is also in good health, with refinancings expected to accelerate in H2 2025/2026 as a wave of fixed year mortgages expire.

Adviser numbers in the MAB network are up 3% so far this year.

Graham’s view

I’ve been a fan of this one for some time, reckoning that if it can perform very well in a bad year for the property market, then we can get excited about how it might perform in a good year.

White it’s true that property prices rose in 2024, transaction volumes were down significantly compared to prior years. For MAB, I think it's fair to say that volumes are a lot more important than prices.

Today’s update echoes what the company has been saying in recent months (see Feb and March), with a generally positive sector outlook. EPS estimates have wobbled over the past year but have held up well overall, rising in recent months:

The company has some serious growth ambitions and I believe it’s in a strong position to work on them. As such, MAB1 remains a favourite of mine - its quality and strong prospects reflected in an above-average valuation.

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Megan's Section

JD Sports Fashion (LON:JD.)

Down 8% to 85p (£4.8bn) - Final results - Megan - AMBER/GREEN

There is an awful lot of detail in JD Sports’ annual results (for the year to January 2025). Headline numbers that are worth watching include:

• Sales up 10% on a reported basis - largely thanks to the contribution of acquisitions and store expansion. Like-for-like sales were almost flat (+0.3%) and the store expansion contributed 5.5% growth. The acquisitions of US sporting goods retailer Hibbett (completed in April) and Paris-based retailer Courir (November) added £713m and £139m of revenue respectively, making a total contribution to revenue growth of 8.5%.

• Gross margins were slightly impacted by the two acquisitions, but on a like-for-like basis remained resolute at 48% (unlike its peers JD Sports has refrained from excessive discounting).

• Operating costs have risen by 12%, sending operating margins dipping below 8%. The rise in operating costs is attributed mainly to store expansion and a delay in the opening of the company’s new distribution centre. Administrative expenses have ticked up owing to greater investment in cyber security (which feels well worth it on the day M&S has revealed the cost of its recent cyber breach).

As Mark pointed out in his recent detailed analysis on JD Sports, management is prone to making heavy adjustments in its ‘headline’ numbers. And it is no different this time around. Of the £208m in total adjustments, £45m came from acquisition related costs. The company booked £112m of impairments including £76m from the closure of the Derby distribution centre and £29m in anticipation of the closure of underperforming European stores.

Geographically, the US has become the company’s largest division thanks to the acquisition of Hibbett, while the UK continues to report a disappointing decline. Europe is also struggling to grow without the contribution of acquisitions and store expansion. But aggressive expansion should be treated with caution. Following a strategic review, the company now plans to close 46 of its stores in Europe.

A changing market

I buy an awful lot of sports kit, but I rarely shop at JD Sports (In fact my one and only JD Sports purchase was my Tottenham Hotspur FC replica shirt for the 2019 Champions League final. It’s a great shirt, but the football kit I am wearing today definitely wasn’t purchased at JD Sports - everything must be done differently for tonight’s European final).

Aside from perfectly legitimate football superstitions, there are reasons why the substantial investment I make in sports kit doesn’t end up on the revenue line at JD Sports.

The first is that it is no longer a painful experience to buy directly from the brands’ websites. Nike, Lululemon, Adidas, Under Armour and their peers have invested a lot in their direct sales channels, both in store and online. And their shelves are stocked with the latest kit. Which means when I wanted the latest carbon fibre trainers to run the London Marathon in, I bought them directly from Nike. This means that JD Sports is now in competition with its suppliers, which is a risky place to be. Nike isn’t going to be prioritising sales through JD Sports channels.

The second is that the goods are expensive. This means there is no real purpose in buying from JD Sports, rather than the brand itself. By contrast, if I don’t have a specific item in mind, I can find massive discounts by shopping at the likes of Sports Direct or Sports Shoes.

The upshot is that JD Sports are missing out at both the top end (because customers are going directly to the brands) and the bottom end (where they’re being undercut on price).

A change in fortune?

The last few weeks have seen JD Sports’ share price climb from a 10 year low of 63p. Despite repeated cuts to the 2025 and 2026 earnings forecasts (the latter now falling below the numbers announced today), shares are trading on a very reasonable 7.1x forecast earnings.

That is certainly tempting for contrarian investors. Despite its growth problems, this remains a quality stock. The company is highly cash generative (£1.2bn of operating cash inflows in FY2025) and uses most of that cash to invest in organic and inorganic growth opportunities.

Management also clearly has faith, and senior executives have been ready buyers of the stock in the last few years.

Megan’s view:

Today’s financial results have not been well received, perhaps because of the company’s warning about the potential impact of tariffs. Steps are being taken to mitigate the potential fallout, but the disruption isn’t great in what has become JD Sports’ biggest market. What’s more, like-for-like sales declined slightly in the first 13 weeks of 2025.

I agree that these results don’t instill a lot of confidence, but there is no denying the tempting price.

The recent surge from its low point doesn’t look like it’s going to be sustained, so contrarian investors may have longer to wait for the recovery. But at these levels I think it’s worth being cautiously positive. AMBER/GREEN 

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Roland's Section

ZIGUP (LON:ZIG)

Up 3% to 351p (£790m) - Pre-Close Trading Update - Roland - AMBER/GREEN

… we expect to finish the year modestly ahead of market expectations when our full year results are announced, scheduled for 9th July 2025.

Today’s pre-close update from the van hire and claims management group is short and includes a modest upgrade to full-year expectations.

There’s no specific guidance on the likely increase to profits, but use of the word “modestly” suggests to me that the upgrade will be no more than 5%.

While this is a short update, I think the commentary on underlying business conditions is worth considering. The main points are:

“Strong demand for our rental products” - the company says that the number of vehicles on hire was up by 6% year-on-year at the end of April.

Zigup does not seem to be seeing any slowdown in demand for rental vehicles (mainly vans) despite general reports of sluggish economic conditions in the UK and EU.

There’s obviously some correlation between economic conditions and demand for van hire. But I think it’s also worth remembering the ongoing trend for companies to switch from owning or directly-leasing vans to sourcing them from long-term hire specialists such as Zigup’s Northgate division. This is still good for Northgate, but not necessarily a sign of underlying economic growth.

Disposal profits: as a market leader, Northgate was able to source and supply vans in 2022/23, when global supply chains gummed up and new vehicle availability was limited. This situation also allowed the group to enjoy exceptional profits on the sale of ex-rental vehicles.

Today’s update confirms that both vehicle supply and disposal profits have now “normalised” – i.e. disposal profits are now lower. We saw the initial impact of this in H1, when average disposal profits per van fell by nearly 20%.

Claims & Services: management says performance improved during the second half of the year for this business.

The group’s Redde division provides claims management services, including courtesy cars for drivers whose vehicles are being repaired. Profits from this business fell by 33% during the first half of the year as repair times normalised, resulting in a reduction in demand for courtesy vehicles.

Zigup has continued to expand this business into the insurance and fleet sectors, reporting a contract extension with Direct Line and “new insurance and broker partners”.

Leverage/refinancing: the company expects to report net debt/EBITDA leverage of 1.8x at the end of April, up from 1.6x at the end of October 2024.

I commented on leverage here previously, taking the view that it was slightly higher than I’d like relative to net assets.

However, the company’s lenders appear happy as they’ve agreed new financing terms through to 2030:

… high levels of support and demand from our lenders, allowing us to refinance with extended maturities out to beyond 2030 on improved commercial terms.

Roland’s view

I last covered Zigup on 4 December when I took a neutral view on the company’s half-year results. Checking back, the shares fell sharply on that day after the company reported a c.40% drop in profits to reflect the normalised conditions I’ve mentioned above.

The shares haven’t yet recovered from that fall, but today’s update suggests that conditions in the second half of the year were as expected, which is reassuring.

The 7.8% dividend yield is also tempting, with forecasts suggesting 2x earnings cover. Historic data suggests the payout should just about be covered by free cash flow.

On the other hand, I think the overall outlook may still be quite flat. There’s no mention of FY26 expectations today and I note that consensus forecasts are currently slightly lower for next year:

It’s also worth remembering this is a business with rather average quality metrics and a fairly high level of capital intensity:

In my view, a fair value would probably be around 1x book value. That does suggest some upside from current levels, with Stockopedia showing a book value per share of 461p:

I’m tempted to maintain my neutral AMBER view from December. However, given that the valuation looks reasonable and there are some signs of improving momentum, I’m going to move up one notch to AMBER/GREEN today, ahead of July’s full-year results.

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Marks and Spencer (LON:MKS)

Up 1.8% to 374p (£7.5bn) - Full Year Results - Roland - AMBER

The market reaction to today’s results from M&S has been muted, despite the company warning it could face a £300m hit to profits from the ongoing cyber attack. One reason for this may be that the company expects to be able to reclaim an unspecified level of losses from its cyber insurer – press reports (FT paywall) suggest up to £100m

The other reason for today’s muted reaction may be that today’s results for the year ended 31 March 2025 are pretty good, with adjusted earnings ahead of consensus expectations. Prior to the attack, this business was clearly performing very well.

In the meantime, the market has already priced in some damage. M&S shares touched a nine-year high of 417p on 22 April – the same day the cyber attack was reported to the market… Since then, the stock has fallen by around 12%, wiping nearly £900m from its market cap:

I’ll return to the cyber attack shortly, but first let’s take a quick look at today’s results.

2024/25 results summary: these are healthy numbers. Revenue rose by 6% to £13.8bn last year, lifting adjusted pre-tax profit by 22% to £875.5m.

Adjusted earnings rose by 29.7% to 31.9p per share, ahead of Stockopedia’s consensus forecasts figure of 29.0p.

To the company’s credit, today’s results also include a prominent report of (adjusted) return on capital employed, which rose by 2.3% to 16.4% last year. The company plans to increase capex to £600-650m this year, which seems fair to me if it’s able to continue generating such attractive returns.

Cash generation was also good. Free cash flow of £443m represented over 80% of after-tax profit, after adding back in the impairment charge discussed below. This was broadly flat from last year and helped to increase the group’s net cash position (excluding leases) to £437.8m.

The only real blot on the results was a £248.5m impairment of the group’s stake in Ocado Retail (which it acquired for £750m in 2019 under previous management). It looks like M&S may have overpaid for its stake in this joint venture, which contributed a £28.7m loss to the group’s results for the year.

However, I don’t think this should detract from the strong progress CEO Stuart Machin has made with the group’s two core businesses:

• Food: sales up 8.7% to £9.0bn, adj op profit +25% to £484m (5.4% margin)

• Fashion, Home & Beauty: sales up 3.5% to £4.2bn, adj op profit up 8.6% to ££475m (11.2% margin)

The company says that its new Food and Full Line stores are generating payback ahead of their hurdle rates and reports cost savings of £120m for 24/25. Cumulative savings of over £500m are planned by 27/28, although I have to wonder if managing the cyber attack will make hitting this target more difficult.

All in all, though, I think these results suggest that one of the UK’s oldest and largest retailers was in good shape last year.

Cyber attack update: CEO Stuart Machin says the company is learning from the events and hopes to exit the incident as a stronger business:

We are seeking to make the most of the opportunity to accelerate the pace of improvement of our technology transformation and have found new and innovative ways of working.

He has to be positive, but the disruption from this incident has been significant and is still ongoing. Today’s results confirm:

• Food: there have been anecdotal reports of empty shelves in M&S Food and the company confirms that its sales have been affected by reduced availability. Q1 profits were also hit by increased waste and logistics costs (due to manual processes).

• Fashion, Home & Beauty: online shopping remains suspended after a month, with disruption expected to continue into June and July as the group restarts its operations. Store sales are said to have been resilient, but online drove 34% of sales for this division last year.

The overall impact on this year’s profits is expected to be significant:

Therefore, our current estimate before mitigation is an impact on Group operating profit of around £300m for 2025/26, which will be reduced through management of costs, insurance and other trading actions.

Outlook: Mr Machin is keen to emphasise that the cyber attack is a “bump in the road” for a 140-year-old retailer that has weathered many previous storms.

Today’s outlook statement reiterates his commitment to the company’s existing turnaround and growth strategy and suggests that by H2 (September-March), performance will have returned to normal:

Overall, our strategy remains the same and there is no change to our longer-term plans to reshape M&S for growth. We are confident that we will enter the second half with a strong customer proposition, returning to the performance we were delivering immediately prior to the incident and throughout 2024/25, which is outlined in the following sections.

Estimates: M&S house broker Shore Capital has made an updated note available on Research Tree today. It’s unusual for private investors to get access to broker notes for larger companies, so this is very helpful.

Shore’s estimates suggest it sees a 32% hit to earnings this year due to the cyber attack, before a return to growth from FY27:

• FY25 actual EPS: 30.9p

• FY26E pro forma EPS: 32p (without cyber attack)

• FY26E EPS: 21.7p

• FY27E EPS: 34.4p

These estimates put the stock on a FY26 P/E of 17, falling to a P/E of 10.6 for FY26.

I think it’s also worth pointing out that Shore’s analysts were clearly already expecting growth to slow this year. On a pro forma basis, FY26 earnings growth was expected to be just 3.6%.

Roland’s view

On a longer view, I expect that the current issues will indeed be a bump in the road for M&S.

However, it’s also true that after a month of disruption, M&S still isn’t providing specific guidance on when it expects operations to return to normal. Nor is there any detail in today’s update on the hit to sales so far.

I think there’s still some scope for a further downgrade to expectations this year, due to a combination of higher costs and the risk that it will take time for customer behaviour to return to pre-cyber attack patterns – especially as the company has suffered a data breach affecting customer data.

At current levels, Marks & Spencer shares trade on 17 times FY25 free cash flow. Given the uncertain outlook for earnings this year, I am going to remain neutral for now, at least until the company’s operations have returned to normal. (AMBER)