Bolland set to unveil his first profit rise at M&S

Marks and Spencer is poised to unveil its first increase in full-year profit under the stewardship of chief executive Marc Bolland, paving the way for the retailer to hand a cash bonus to shareholders.

M&S said last year that it would update investors on its balance sheet with its full-year results next Wednesday.

The announcement is likely to include guidance on a potential cash return, according to people close to the situation. The company already pays a regular dividend.

Analysts said M&S could deliver an extra £200m to investors. However, they said it was possible that it may not specify how much it could pay out, and whether this would be via a share buy-back or special dividend.

Fraser Ramsan, an analyst at Nomura, said M&S had scope to return £250m.

Richard Chamberlain, an analyst at RBC Capital Markets, said: "The full-year results would be the obvious time for M&S to give an update on cash returns. Now that the trading outlook has improved, capital expenditure has stabilised and the pension deficit is lower, we expect it to indicate it will return excess cash to shareholders over time."

Another analyst said: "If there is not an actual repatriation [of capital], I think there will be a firm indication."

The potential cash return is expected to be underpinned by an improvement in profitability in M&S's clothing after the retailer brought in Mark and Neal Lindsey, the architects of rival Next's supply chain.

M&S has said it expects the gross margin - the difference between the price at which it buys and sells goods - for clothing and homewares to increase by between 1.5 and 2 percentage points in the year to March 2015.

M&S declined to comment. It last announced a £1bn buyback in November 2007, the financial year in which its profits hit £1bn, under Mr Bolland's predecessor, Sir Stuart Rose.

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However, some headhunters have suggested that the improving performance, together with a rising share price, could make this an opportune moment for Mr Bolland to think about his next career move. He has just completed five years in the role, joining in May 2010.

M&S is expected to announce underlying pre-tax profit of about £650m in the year to end of March, compared with £623m in the year to March 2014.

The increase is the first step up in annual profit since the year to March 2011, when Mr Bolland was chief executive for part of the time.

The improving performance is also likely to translate into a bonus for M&S executives, including Mr Bolland, who could receive up to £2m.

No bonus can be paid unless a threshold level of underlying profit has been achieved. Last year, Mr Bolland received no bonus as profits fell short of the threshold.

It could also mean a payout for M&S staff, who also missed out on a bonus last year.

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