Marks&Spencer PLC

The stable outlook reflects our expectation that despite the uncertainties surrounding the post-pandemic market recovery and the near-term pressure from broad cost inflation and supply chain disruptions, M&S will remain on track in executing its transformation plan, maintain its robust performance, and focus its financial policy on strengthening its balance sheet. This should enable the group to maintain adjusted debt to EBITDA of 3.0x-3.5x and FFO to debt of about 25% in the next 12-24 months. We could lower the ratings if: Adjusted leverage approaches 4.0x; Adjusted FFO to debt falls to less than 20%; or Reported FOCF after lease payments weakens substantially or turns negative for a prolonged period. These things could happen if M&S fails to maintain its

...After strong results in the six months to October 2021, we now expect M&S to close FY2022 with stronger credit metrics and robust cash flow generation. Despite the pandemic disrupting M&S' trading at its C&H stores and its hospitality outlets over the fiscal year ended April 3, 2021 (FY2021) and the first half of FY2022, the group managed to leverage its revamped food offering and online presence to surpass the pre-pandemic revenue it posted in the first half of FY2020 by 5%. Although we anticipate that supply chain challenges and broad cost inflation will slow the group's revenue growth and constrain its profitability over the second half of the fiscal year, we now expect the group to end FY2022 with revenue of about ú10.5 billion, versus ú10.2 billion in FY2020 and ú9.2 billion in FY2021, and adjusted EBITDA of more than ú1.0 billion, broadly in line with FY2020, and up from ú721.0 million in FY2021....

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