Marks & Spencer has reported a 7 per cent increase in profits during the first half of the year, as chief executive Steve Rowe said the high street giant was “rebuilding the foundations of the future M&S”.

Pre-tax profits rose 7.1 per cent to £127m, from £118m, while revenues fell 3 per cent from £5.13bn to £4.97bn. The group reduced net debt from £2bn to £1.78bn.

The results come after a testing period for M&S, which announced plans to close 100 stores in May and almost lost its spot in the FTSE 100.

The company said on Wednesday that clothing and home revenue was down 2.7 per cent in the first half due to the impact of 21 store closures so far.

Mr Rowe said: “In May, I set out in our ‘Facing the Facts’ presentation, the challenges we face and the steps we are taking in this the first phase of our transformation programme. Against the background of profound structural change in our industry, we are leaving no stone unturned and reshaping our business, its organisation and culture. 

“This phase is about rebuilding the foundations of the future M&S and we are judging progress as much by the pace of change as the trading outcomes. Already, we have reorganised into a family of strong businesses in the biggest change to our structure for decades. We now have a largely new, very determined and energetic management team in place. M&S is becoming a faster, more commercial and more digital business.”

He added: “We are on track to restructure our store portfolio with over 100 full-line closures and expect to see newly remodelled stores open next year. We are fixing the basics of our online channel and there are very early signs of improvement. Every aspect of our ranges, how we trade, our supply chain and marketing is undergoing scrutiny and change.”

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Despite the rise in profits, M&S shares dropped more than 3 per cent on Wednesday, as analysts pointed to the 2.9 per cent drop in food sales as a bad sign for the group.

“Only a short time ago the food business looked to be the jewel in the crown of the M&S empire, though today it’s looking pretty jaded,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.

“The most recent missive from M&S makes for grim reading, despite the headline rise in profits. However, expectations are already low, and while there are few signs of relief in its latest numbers, the broad direction of travel at M&S won’t come as a shock to anyone.”

Meanwhile, Tom Stevenson, investment director from Fidelity Personal Investing’s share dealing service, said: “Reading through M&S’s half year results is like taking a cold shower. The company is ruthlessly honest about the massive challenge it faces. It is reinventing itself on no less than nine different fronts, acknowledging that it has a mountain to climb in both clothing and food, that its management has been weak, its website clunky and its stores old-fashioned.

“The half-year figures were as expected. Sales are still declining, in the context of which flat profits is not a bad result. The outlook remains unchanged, so shareholders can look forward to a full year of modestly lower underlying profits with the expectation of another difficult 12 months to come after that.”

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