On 6 November 2007 we announced a programme to repurchase up to 10% of the Company’s issued share capital, representing around £1bn, using the authority given by shareholders at the AGM held in July 2007. The buy back programme was to be financed in the short term out of existing resources. In due course we expect to raise additional finance to complete the programme and maintain appropriate liquidity levels going forward.
The £1bn buy back programme was over and above the 31.7% increase in the 2007 interim dividend and an addition to the £1bn planned for investment in the business in 2007/08 and the similar amount planned in 2008/09.
The objective was to create shareholder value by improving the balance sheet efficiency (debt/equity ratio) and reducing the overall weighted average cost of capital. It also increases the earnings per share and indirectly returns value to existing shareholders by increasing the percentage of the Company that they own, through there being fewer shares in issue.
For more information regarding-close periods please see the FAQs
In its simplest terms, a buy-back is a company buying back its own shares. It can do this in one of two ways. The first, and by far the most common, is when a company instructs its broker to buy its shares on the open market, just as a private investor does when they buy shares through a broker. A company has to get authority from its shareholders in order to buy back its shares. This is usually done at its Annual General Meeting. Marks & Spencer obtains this authority at the AGM each year.
Secondly, and far less common, a company can announce a tender offer. This involves all shareholders submitting a price they would be prepared to accept for their shares. In both instances once the company buys back the shares it will normally cancel them.
In 2004 Marks & Spencer returned £2.3bn by way of a tender offer and bought back some 28% of the shares in issue. This time we are instructing our brokers to buy shares in the open market. These will then be cancelled.