It’s fair to say that it hasn’t been the best year for the Footsie, which is currently down 1.37% year to date at the time of writing. However, two of the standout stocks propping up the FTSE 100 have been Marks & Spencer (LSE:MKS) and Rolls-Royce (LSE: RR). Let’s take a look at the ins and outs.
M&S sparkles in 2023
It’s clear that the Great British consumer has fallen back in love with Marks & Spencer. Yes, they fell out of love. Indeed, M&S — one of the original members of the FTSE 100 since its inception in 1984 — was relegated from the index for the first time. However, after a four-year absence, it has now made a comeback, signifying a major recovery for the high-street giant.
The latest earnings call tells a story of a 75% surge in profit, smashing expectations. The retailer showed a significant rise in food sales and a resurgence in its clothing lines.
This success led to M&S shares jumping up almost 10% on Wednesday 8 November, marking a 94% rise over the year. While in-store clothing sales have shown notable growth, M&S’s partnership with Ocado Retail faced challenges, with its share of net loss escalating to £23.4m.
Rolls-Royce revs its engines
As the year almost comes to a close, another noteworthy stock propping up the FTSE 100 is Rolls-Royce, which had a remarkable ascent in 2023. This storied British marque, once heavily impacted by the pandemic, has made a dramatic comeback in the stock market this year, soaring 136% since the start of the year.
Along with a major cost-cutting initiative, including plans to eliminate as many as 2,500 positions worldwide, management has launched a major reorganisation aimed at simplifying how the company works and improving profits.
Rolls-Royce’s financial performance in the first half of the year surpassed expectations, with underlying operating profits reaching £660m to £680m, well above the forecasted £328m, and a healthy free cash flow of between £340m and £360m. These strong financial results led to an upgrade from Fitch Ratings in November 2023.
Rolls-Royce still carries a substantial amount of debt, despite having made significant progress in reducing it. It managed to lower its net debt from £5.2bn to £3.3bn in 2022, but as of the first half of 2023, it still had a net debt of £2.8bn, including leases.
Dividends aren’t everything
While Marks & Spencer Group and Rolls-Royce both have plans regarding dividend payments, their approaches differ.
During the Covid-19 pandemic, M&S halted dividend payments to conserve funds. The retailer has now announced the reinstatement of a modest dividend of 1p per share, set for January 2024.
Rolls-Royce plans to resume cash dividends to shareholders, but the timeline is unconfirmed. Currently, it offers C Shares, a tradable alternative, issued biannually.
Too late to get on the train?
In 2023, M&S and Rolls-Royce emerged as some of the top gainers in the FTSE 100, defying the overall downward trend of the index with their remarkable growth. For me, they are definitely worthy of further analysis as I consider adding them to my portfolio.
