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TWST: I would like to revisit some of the companies that you touched on previously. Talking about Marks & Spencer, you were saying that they are currently hurt by the Sterling exchange rate. However, that hopefully seems to be a temporary phenomenon. If you compare that and contrast it to the price deflation coming on through Wal-Marts and those companies which are probably here to stay, what do you think then to be the fundamental prospects of Marks & Spencer?

Mr. Shiret: I think it's in an interesting phase because it's moved a lot of its sourcing overseas. It has gone through the supply chain trying to make it more flexible. The whole management structure is being modernized. However, the product going in to the shop is still fairly indifferent. Whilst they're doing this, pricing has been moving away from them. They've been bringing their prices down by 5% per annum over the last year and half; whereas, someone like the Dorothy Perkins chain, which is a large middle-of-the market women's wear chain, has brought its prices down by 25% over the last two years. So they're not really being quite dynamic enough at the moment in a fast-moving market. The ranges have not been particularly well received. They are probably not covering the move to casualization quickly enough; they've got too much tailored product in their assortment still. I mean casualization of men's and women's wear has been going on through the whole of the '90s, but it's just accelerated a bit recently. They are not really covering that yet. But the point is that they have got a dominant market share. They should be able to make scale pay. To give you an idea, Marks & Spencer sells food and it also sells non-food, and in the year just gone by, their annual sales per square foot of serving area, last year I reckon were just under £530. Two years ago they were £625. Over the two-year period they've gone down 15% in their sales density. That includes everything, but non-food has gone down worse than food. Food is about 40% of their product mix. If you look at their non-food sales density their current last year, year to March 2000, it was £390 on our estimate. Two years ago it was £490. That has gone down by 20% over two years, and it's still dropping.

TWST: Do you still think just by virtue of scale they will still be able to move themselves successfully through the market?

Mr. Shiret: They stand a chance. They should once they've adjusted their product base. They stand a chance of being able to re-achieve price superiority rather than having to be a price taker like a lot of people in the market. But essentially, I'm saying it's a hold because there is no evidence, as yet, of delivery of improved financials. My main feeling is that it has a certain degree of asset backing at this level, but the fundamentals aren't coming through yet. Its asset backing is that it has got about £3 billion Sterling of retail properties. The financial services division is worth £1.5 to £2 billion Sterling. Currently the price is about £2.20 or something like that, and that gives it a market cap of about £6.4 billion. It's got about £1.5 billion of debt, so it's got about £7 billion of enterprise value and within that you've got about £4.5 billion of things that you might call realizable assets. The value of its retail business is trading on about spot 4, spot 5 times sales, which is sort of a low valuation, I think. It reflects people's uncertainty about the margin prospects and the sales growth prospects for the year's quarters.