Marks & Spencer shares jumped on Wednesday after the retailer released surging profits that beat expectations and reinstated the dividend.

M&S delivered a bumper performance in the half year to 30th September, with profit before tax and adjusting items reaching £360.2m, up 75% from £205.5m in the prior year.

Statutory profit before tax also rose significantly to £325.6m, up from £208.5m.

Marks & Spencer shares were 9.9% higher at the time of writing.

The M&S food business was a major source of growth as demand for their premium range proved resilient despite concerns about the cost of living crisis.

Food sales were up 14.7%, driving an adjusted operating profit of £164.9m – a substantial increase from £71.8m in the same period last year.

The Clothing & Home business has been the laggard for M&S in recent years yet shareholders will be pleased with recent performance in the segment. Sales rose 5.7% while producing an adjusted operating profit of £223.4m, an improvement of £171.7m in the last year.

“Good progress in Clothing and Home, where Marks & Spencer has struggled in recent years, has to be commended. It shows the extent to which the company has regained its style credentials and it is particularly admirable given the pressure on sales of discretionary items amid the cost-of-living crisis,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

Chiekrie continued to explain that although Home & Clothing was good, food was the main event for investors.

“M&S food was the standout performer in the first half, with demand here arguably more protected from high levels of inflation. At a more premium end of the market, M&S’ core customers aren’t as sensitive to price,” said Chiekrie

“Coupled with impressive margin growth, total underlying operating profits jumped significantly. There’s also been good headway on the group’s reshape programme, which looks to pivot to new locations and refresh existing stores to create a more productive estate. Full-year guidance has been maintained, albeit performance is expected to be weighted towards the first half, with the group likely wanting to get through the Christmas period any potential move of the dial on expectations.”

While the sales numbers for both the clothing and the food businesses were very respectable, the most positive takeaway from today’s update is the reinstatement of the M&S dividend, which was scrapped in 2019.

After a long wait for the turnaround strategy to filter through to earnings, M&S is rewarding shareholders with a 1p interim dividend.

There was a tone of caution in the company’s outlook as they highlighted the geopolitical environment, interest rates and tough comparables going forward.

“However, pressure on the UK consumer could intensify heading into 2024 as the impact of higher interest rates really starts to bite. This, combined with tougher comparatives means M&S is striking a tone of caution looking ahead to the second half. This may disappoint investors,” said Wealth Club’s Charlie Huggins.

The FTSE 100 whipsawed on Tuesday as any hopes of lower borrowing costs in the near term were hit by comments by a Federal Reserve official, and Chinese data curtailed sentiment.

The Federal Reserve’s highly accommodative monetary policy involving ultra-low interest rates and quantitative easing in the wake of the financial crisis was often referred to as a ‘punch bowl’ for markets due to the associated bullishness and asset price inflation.

The beginning of the tightening cycle nearly two years ago marked an end to this period, and the world has endured steadily increasing borrowing costs since. 

However, last week, we saw a glimmer of what may be to come when the Federal Reserve eventually cuts rates again. A weaker US jobs reports had some raising the question of rate cuts early next year, and global equities surged.

Interest rate hopes dashed

Unfortunately for the bulls, the prospect of the ‘punch bowl’ of easier monetary policy returning was dealt a blow on Monday after Fed official Neel Kashkari alluded to additional rate hikes by saying: “We haven’t completely solved the inflation problem. We still have more work ahead of us to get it done.”

Equities whipsawed in what was a tentative European session. The FTSE 100 was down 0.1% at the time of writing while US futures were pointing to a lower open across the pond.

Poor Chinese economic data was also dragging on the FTSE 100 with Antofagasta, Anglo American and Glencore making up the top three fallers.

“While signs of a softer economy in the US are typically taken as a positive by markets as they anticipate an end to their trial by interest rate hikes, weak economic data from China is just bad news,” said AJ Bell investment director Russ Mould.

“Worse-than-expected Chinese trade data prompted a gloomy start to proceedings on Tuesday as some of the euphoria from rate pauses in the US and UK ebbed away. Helping to sour sentiment was news of Australia’s central bank going against the grain and increasing rates for the first time in five months.”

AB Foods was the FTSE 100’s best performer after announcing strong sales growth at Primark as the retailer took the decision to maintain a competitive pricing, despite input cost inflation.

AB Foods shares were 7% higher at the time of writing.

UK housebuilders

Housebuilders were among the gainers after Persimmon increased their full-year completions target and Halifax said UK house prices rose 1.1% in October.

“House prices have proven fairly resilient. They’re down 3.2% in a year, but we’re still sitting on enormous gains since the onset of the pandemic,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

“And while prices are likely to drift further south in the coming months, they’re holding up impressively in the face of horrible pressure – actually rising in October. 

“However, this isn’t because buyers are rushing back to the market: they’re still horribly thin on the ground. The resilience of house prices is due to the fact that so many sellers have decided to stay away for now too. According to Rightmove, it takes around 60 days to agree a sale at the moment – roughly double the time it took during the pandemic boom.”

Quantum Blockchain Technologies shares have resumed their rally after management jumped on the opportunity to raise £2m at 1.5p following a strong rally culminating in 52-week intraday highs around 3.5p.

The company is developing Bitcoin mining technologies that enhance the efficiency of Bitcoin mining while reducing the amount of electricity used to mine Bitcoin.

Quantum Blockchain Technologies rally coincides with resurgent interest in Bitcoin amid regulatory approvals for crypto ETFs in the US.

The company’s success hinges on its ability to commercialise two formats of their software known as Method A and Method B.

Each Method possesses individual attributes, but essentially, the software can be applied to existing Bitcoin mining rigs to enhance their mining activities.

Representing a clear path to revenue generation, Quantum Blockchain Technologies’ offering is available as a SaaS (Software as a Service) client-server cloud application that can be uploaded to mining rigs.

The SaaS offering overcomes issues with the company not wanting sharing source code with its partners and should open up the door to wider adoption of the technology.

Investors will await news of commercial agreements to gauge long-term value creation capabilities of the technology.

Whether Quantum Blockchain Technologies can retest will depend on additional news related to engagement with potential customers, and the performance of Bitcoin.

Should the Bitcoin price continue towards $50,000, expect Quantum Blockchain Technologies shares to jump on its tailcoats. It goes without saying interest in the stock will fall with a drop in Bitcoin.

Quantum Blockchain Technologies is a high-risk play but a solid option for a prolonged rally in Bitcoin.

Associated British Foods shares were sharply higher on Tuesday as investors cheered stronger Primark sales amid the cost of living crisis.

Associated British Foods’ sugar and food business often plays second fiddle to Primark in the eyes of investors, and looking at today’s update, it is easy to see why.

Although AB Foods enjoyed growing sales and operating profit in the grocery and ingredients business, the Primark unit accounted for a large proportion of the group’s 17% increase in operating profit to £1,383m.

AB Foods shares were 6.7% higher at the time of writing and were by far the best performing FTSE 100 shares on Tuesday morning.

Sugar operating profit fell 27% due to crop issues and Agriculture profits fell amid tough market conditions.

Primark’s sales jumped 17% to £9bn on an actual currency basis, accounting for a little under half of the group’s £19.75bn total revenue. The company has taken the decision to pass on only a part of their input cost inflation customers, which has helped customers through the door during the cost of living crisis.

“The key Primark business has benefitted from a changing retail landscape over the past few years, especially with the demise of Debenhams and Topshop,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

“That’s helped sales grow 15% at Primark, up to £9.0bn for the full year, with 27 new store openings and an improved website helping Primark to ring more cash through the tills. Margins here fell slightly as the group chose not to pass the full extent of inflated input costs onto consumers in order to keep its price-sensitive customers happy amidst the current cost-of-living crisis.  

“One of ABF’s key strengths is its diversified portfolio of businesses, which includes many well-known food brands such as Kingsmill, Ryvita and Patak’s. This diversification helps to spread out risk, ensuring the company isn’t overly reliant on any one product or division.

“That’s been a benefit in recent times as unhelpful weather in the prior year dented performance at the group’s African sugar business, Illovo. But after strong pricing actions and much-improved production levels, sugar revenue soared nearly 30%. The strong financial performance means there’s plenty of room to return excess cash to shareholders, with a special dividend and new £500m buyback programme on the way.”

Persimmon shares were comfortably higher on Tuesday after the housebuilder increased their completions guidance for the year amid a slight uptick in activity.

The company said full-year completion guidance had been increased to 9,500 from 9,000 as private sales rates have improved to 0.59 over the past 5 weeks, up from 0.45 in the same period last year.

Persimmon shares were 3.8% higher at the time of writing.

Persimmon’s rally extended as the session progressed on Tuesday as investors ponder the dire situation the housebuilder is in and how much is already priced into shares. Notwithstanding a minor increase in completion guidance, Persimmon’s New Home Completions were 37% lower in Q3 2023 despite a ramping up of incentives.

“New home buyers are clearly exercising greater caution, and frankly who can blame them,” said Wealth Club’s Charlie Huggins.

“Mortgage payments for first time buyers have soared over the past 18 months. When combined with the limited availability of high loan to value mortgages and the end of the Help to Buy scheme in England, it’s no surprise that the housing market has seen a marked slowdown.

“How much worse can things get? Well, interest rates are widely considered to have peaked meaning the first interest rate cut is a matter of if not when. It can’t come soon enough for Persimmon. And it could mark the beginning of a strong recovery.

“We probably need to see a few interest rate cuts to entice first time buyers back into the housing market. But with inflation moderating that point has probably been brought forward.

“The one fly in the ointment could be house prices themselves. Prices have held up so far but this could be because there have been very few transactions. If the economy weakens further from here house prices could easily register further declines, causing further pain for Persimmon and its peers.”

The group said they see a ‘highly uncertain’ 2024 and are taking action on costs by renegotiating labour pricing and controlling material costs.