Multinational retailer Marks & Spencer (M&S) saw pre-tax profits fall by almost two thirds (63.9%) to £176 million last year, amid a slump in clothing & home sales, and higher costs from opening stores. However, the group also incurred £44.1 million of charges in relation to an M&S Bank insurance mis-selling provision.
“As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt,” said M&S CEO Steve Rowe in a statement.
The firm has an economic interest in M&S Bank, a wholly owned subsidiary of HSBC, by way of an agreement that entitles the former to a 50% share of the profits of M&S Bank after appropriate deductions.
“Since the year ended December 31, 2010, M&S Bank has recognised in its audited financial statements an estimated liability for redress to customers in respect of possible mis-selling of financial products. The Group’s income from M&S Bank has been reduced by the deduction of our share of the estimated liability in both the current and prior years. The deduction in the period is £44.1 million,” said M&S in a statement.
The bank set aside £128 million last year to pay out successful claims on mis-sold payment protection insurance, according to several reports. This marked a rise from £83 million during the previous year. In addition, the bank expects to eventually receive a total of 231,500 PPI complaints which is about 43% of the policies it has sold,
The Mail reported.
Looking ahead, Row said M&S will continue its programme of self-help in a “tough” trading environment.
“We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future,” he said.
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