Final Results - Part 1

MFI Furniture Group PLC 19 March 2001 PART 1 MFI Furniture Group Plc Preliminary results for the 52 weeks to 30 December 2000 Financial Highlights * Turnover on continuing operations up 16.8% to £901m * UK Retail up 12.3% to £671.4m * Howdens up 51.4% to £145.2m * France up 8.4% to £79.7m * Pre-exceptional pre-tax profit up 55.5% to £45.4m * Pre-exceptional earnings per share up from 4.1p to 5.5p * Dividend per share 1.9p (1.4p) * Net cash £36m (£8m) Operational Highlights * Stabilisation and degearing of the Group now completed * Rejuvenation of core business proceeding well, with sales of kitchens particularly strong * Significant investment in new formats: * an excellent performance from new High Street store format, with 20 further openings scheduled in 2001 * continued Howdens growth with more than 50 openings in 2001 * new Speke store by Conran Design producing exciting early results * £8m of savings achieved, on track for £15m in 2001 * Senior management team complete with appointment of new finance director John Hancock, Chief Executive, said: 'This is an encouraging result, despite more disruptive trading conditions in the second half of the year. Most importantly, we have achieved significant progress, ahead of schedule, in the revitalisation of the Group. We are making excellent headway in building low-risk organic growth based on the Group's core strengths, and are now able to look further ahead for longer-term growth opportunities'. Contacts: MFI Furniture Group Plc John Hancock, Chief Executive 020 8913 5319 Martin Clifford-King, Finance Director 020 8913 5350 Brunswick Group Limited Charlotte Elston / William Cullum 020 7404 5959 Review Of The Year The 52 weeks to 30 December 2000 was a year of rapid and sustained progress. The year saw the successful completion of the first milestone of our corporate plan which was to establish a sound financial foundation on which we can build our future. We have made significant progress towards our second milestone, which is to develop both our retail and manufacturing businesses in a profitable and orderly fashion and with a low level of risk. Initiatives such as the High Street stores, the Hygena at Currys outlets and the continuing growth of Howdens all capitalise on our underlying strengths. We have a new and highly-motivated management team in place; we have restructured the company so that it now acts as one organisation rather than as separate businesses; and we have made significant progress in staff training and development which will underpin the quality of our products and stores with industry-leading and impeccable standards of customer service. We have also realised cost savings of some £8 million in the course of 2000, and will be looking for further efficiencies in 2001. Results The UK furniture market continued to grow in 2000 and showed an increase of 5% on the previous year. Within this the kitchen category was almost static. The ongoing popularity of home improvement TV and magazines has had a positive impact on the furniture market. Against this background, MFI's turnover for the 52 weeks was £901 million, up 16.8% on a continuing operations basis compared to the previous year. Pre exceptional profit before tax was £45.4 million compared to a pro forma profit of £29.2 million for the 52 week period last year, a 55.5% increase.Pre- exceptional earnings per share have grown 34.1% from 4.1 pence per share to 5.5 pence per share . Dividend The Board recommends a final dividend of 1.0 pence per share (1999 - 0.7 pence) which, together with the interim dividend, gives a full dividend of 1.9 pence per share compared to 1.4 pence per share in the previous year. This increase of 35.7% reflects the Board's confidence in the Group's strategy and underlying growth prospects. The final dividend will be paid on 15 June 2001 to shareholders on the register as at 1 June 2001. The year by business activity - * Furniture Centres Improved sales were partly driven by improvements to the design of our kitchen and bedroom ranges, with 37% of turnover coming from products introduced within the last two years. The opening in February 2001 of our Conran Design styled store at Speke represents an important step forward. We will continue to extend the trial with five further furniture centres to open in the new look during the year. We will update the market as to our progress at the Interims but initial results are encouraging. - * Howdens Howdens continued to grow strongly through a mixture of geographical expansion and new customer acquisition. 58 new depots were opened during the year and more than 50 are planned in 2001. We increased registered trade accounts by 50% to 75,000 and are opening new accounts at the rate of 600 per week. The big virtue of the Howden operation is that it allows us to make use of Group manufacturing and distribution while running a devolved and dedicated business which is totally geared to satisfying its particular market segment - the building trade. - * High Street stores We opened a further 2 stores in the second half at Clapham and Staines in addition to Chiswick. All these stores performed above expectations, and we plan to roll out another 20 in carefully-selected locations during 2001.If these continue to be successful then we see a potential for 50 such stores by 2003. - * Currys concessions In December, we took over and began the conversion of another 37 concessions from United Kitchens, to add to the original 19. This initiative is designed to unlock the potential in our Hygena brand which market research has shown to be attractive to consumers as a desirable brand in its own right and separate to the MFI brand. We are looking to extend this venture with Currys nationally and we expect it to break even this year. - * e-commerce This continues to play a modest but growing role, with nearly £3 million of internet and telesales being carried out during 2000. - * France Hygena Cuisines recorded a 8.4% sales increase in the year. Six new branches were opened and four closed. This business continues to contribute useful experience to our UK High Street operation. Our sales performance in the second half of the year showed a significant improvement. Manufacturing The focus in the year was on reorganising and developing our manufacturing resources including a review of our capacity utilisation, manufacturing efficiency and working practices; transitioning to a make/buy strategy allowing us to make the most cost-effective choice between in-house manufacturing and bought-in products. This will allow us to provide the best products at the lowest prices, and to focus our production on products that are globally competitive. The manufacturing and marketing functions now work much more closely to develop products with customer appeal. People and values Our collective objectives are: * Customers' needs and concerns served by offering quality products, affordable prices and outstanding service. * Shareholders served by receiving superior returns. * MFI known in the corporate 'community' as an admired, respected and chosen employer. Outlook The results for the period show major progress for the Group during a year when retail sales were disrupted by the fuel crisis and by flooding. Whilst our fortunes will continue to be determined in part by UK retail demand, one of our objectives is to become more responsive to market changes and more aware of business risk so that our results become appreciably less cyclical. We continue to focus on new product development, new routes to market and cost improvements. We believe that our business is well positioned to deliver significant growth. We plan a higher level of capital expenditure during 2001, and already have the solid financial base upon which we can grow. Current trading Sales orders since Boxing Day for the Group are 10.5% higher than last year. The sales performance for each of the main businesses is as follows. Like for like Total % % UK Retail 5.3 7.0 Howdens 21.0 48.3 France (local currency) 3.4 5.0 Total 6.4 10.5 CONSOLIDATED PROFIT AND LOSS ACCOUNT For the 52 weeks ended 30 December 2000 52 Weeks to 30 December 2000 Total Exceptional operations Pre- items Total exceptional Notes (note 4) £m £m £m Turnover 3 900.6 - 900.6 Cost of sales (453.7) - (453.7) ------- ------- ------- Gross profit 446.9 - 446.9 Selling and distribution costs (350.5) 12.2 (338.3) Administration costs (55.5) (4.0) (59.5) ------- ------- ------- Operating profit 3 40.9 8.2 49.1 Net profit on disposal of fixed assets 0.5 - 0.5 Profit on disposal of discontinued operations - 11.2 11.2 ------- ------- ------- Profit on ordinary activities before interest 41.4 19.4 60.8 Interest receivable and similar income 4.8 - 4.8 Interest payable and similar charges (0.8) - (0.8) ------- ------- ------- Profit on ordinary activities before taxation 45.4 19.4 64.8 Tax 5 (12.7) (2.6) (15.3) ------- ------- ------- Profit for the financial period 32.7 16.8 49.5 Dividends 6 (11.2) - (11.2) ------- ------- ------- Amount transferred to 7 reserves 21.5 16.8 38.3 ------- ------- ------- Earnings per share Basic earnings per 8.3p 10p ordinary share 5.5p 2.8p ------- ------- ------- Diluted earnings per 8.2p 10p ordinary share 5.4p 2.8p ------ ------- ----- Pro-forma 52 Weeks to 1 January 2000 Continuing Discontinued Total Operations Operations Restated Notes Unaudited Unaudited Unaudited £m £m £m Turnover 3 770.9 26.0 796.9 Cost of sales (380.3) (17.5) (397.8) ------- ------ ------- Gross profit 390.6 8.5 399.1 Selling and (318.7) (4.4) (323.1) distribution costs Administration costs (42.2) (0.6) (42.8) ------- ------- ------- Operating profit 3 29.7 3.5 33.2 Net profit on 4.1 0.1 4.2 disposal of fixed assets Profit on disposal of - - - discontinued operations ------- ------- ------- Profit on ordinary 33.8 3.6 37.4 activities before interest ======= ======== Interest receivable 2.7 and similar income Interest payable and (10.9) similar charges ------- Profit on ordinary 29.2 activities before taxation Tax 5 (5.0) ------- Profit for the 24.2 financial period Dividends 6 (8.3) ------- Amount transferred to 15.9 reserves 7 ======= Earnings per share Basic earnings per 10p ordinary share 4.1p ======= Diluted earnings per 10p ordinary share 4.1p ======= 36 Weeks to 1 January 2000 Continuing Discontinued Total Operations Operations Restated Notes (note 5) £m £m £m Turnover 3 514.3 18.0 532.3 Cost of sales (258.6) (12.5) (271.1) ------- ------- ------- Gross profit 255.7 5.5 261.2 Selling and (216.9) (3.0) (219.9) distribution costs Administration costs (30.5) (0.4) (30.9) ------- ------- ------- Operating profit 3 8.3 2.1 10.4 Net profit on 4.7 0.1 4.8 disposal of fixed assets Profit on disposal of - - - discontinued operations ------- ------- ------- Profit on ordinary 13.0 2.2 15.2 activities before interest ======= ======= Interest receivable 1.8 and similar income Interest payable and (7.9) similar charges ------- Profit on ordinary 9.1 activities before taxation Tax 5 1.3 ------- Profit for the 10.4 financial period Dividends 6 (8.3) ------- Amount transferred to 7 2.1 reserves ======= Earnings per share Basic earnings per 10p ordinary share 1.7p ====== Diluted earnings per 10p ordinary share 1.7p ====== Consolidated Balance Sheet As at 30 December 2000 1 Jan 2000 30 Dec 2000 Restated (note 5) Notes £m £m Fixed Assets Tangible assets 275.9 315.6 Investments 10.6 9.2 ------- ------- 286.5 324.8 ------- ------- Current Assets Stocks 127.2 92.6 Debtors 86.9 71.2 Investments 0.3 0.4 Cash at bank and in hand 39.6 30.2 ------ ------ 254.0 194.4 Creditors Amounts falling due within one year 8 184.2 188.3 ------ ------ Net Current Assets 69.8 6.1 ------ ------ Total Assets Less Current Liabilities 356.3 330.9 Creditors Amounts Falling Due After More Than One Year 9 1.3 4.6 Provisions For Liabilities And Charges 10 8.4 17.1 ------ ------ Net assets 346.6 309.2 ====== ====== Capital And Reserves Called up share capital 59.5 59.5 Share premium account 43.9 43.9 Revaluation reserve 42.1 44.3 Other reserves 19.4 17.0 Profit and loss account 7 181.7 144.5 ------ ------ Equity Shareholders' Funds 346.6 309.2 ====== ====== Consolidated Cash Flow Statement For the 52 weeks ended 30 December 2000 52 weeks to 36 weeks to 30 Dec 2000 1 Jan 2000 Notes £m £m Net cash inflow from operating activities 11 25.4 11.6 Returns on investments and servicing of finance 11 3.9 (6.5) Taxation 1.4 (0.3) Capital expenditure and financial investment 11 (2.9) 117.1 Proceeds from sale of subsidiary 12 13.7 - Equity dividends paid (13.6) - ---------- ---------- Cash inflow before use of liquid resources and financing 27.9 121.9 Management of liquid resources 0.1 0.2 Financing 11 (18.6) (144.5) ---------- ---------- Increase / (decrease) in cash in the period 11 9.4 (22.4) ===== ===== Reconciliation Of Net Cash Flow To Movement In Net Cash 52 weeks 36 weeks to to 30 Dec 1 Jan 2000 2000 Notes £m £m Increase / (decrease) in cash in the period 11 9.4 (22.4) Cash movement on : debt and lease financing cash flow from decrease in 11 18.6 144.5 liquid resources (0.1) (0.2) ---------- ---------- Change in net debt resulting from cash flows 27.9 121.9 Effect of foreign exchange rate changes 11 - (0.3) ---------- ---------- Movement in net debt in the period 27.9 121.6 Net cash / (debt) at the beginning of the period 11 7.6 (114.0) ---------- ---------- Net cash at the end of the period 11 35.5 7.6 ======= ========= MORE TO FOLLOW

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