Annual Financial Report

To the London Stock Exchange Mothercare plc ("the Company") ANNUAL REPORT AND FINANCIAL STATEMENTS AND NOTICE OF ANNUAL GENERAL MEETING The Company has today published the following documents on its website, www.mothercareplc.com < http://www.mothercareplc.com/> : * The Annual Report and Accounts for the period ended 27 March 2010; * Form of Proxy; and * Chairman's letter and Notice of Meeting. The Company has also submitted two copies of each of the above documents to the Financial Services Authority ("the FSA"): These documents will shortly be available for inspection at the FSA's Document Viewing Facility at: The Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS The Company will be holding its Annual General Meeting at 10.30 on Thursday 15 July at the Company's office at Cherry Tree Road, Watford, Hertfordshire, WD24 6SH. In accordance with the requirements of Rule 6.3.5 of the Disclosure and Transparency Rules ("DTR") of the UK Financial Services Authority we also attach to this announcement a copy of the preliminary announcement, a description of the principle risk factors for the Company as set out in the Annual Report and Accounts for the period ending on 27 March 2010 and a responsibility statement as required by DTR 4.1.12. Enquiries: Clive E. Revett, Group Company Secretary. +44 (0) 1923 206185 Principal Risk Factors. Extracted from the Annual Report and Accounts for the Period ended 27 March 2010: In this section some of the principal risks and uncertainties that face the business are set out. This section also forms part of the business review requirements. The board recognises that the management of risk through the application of a consistent process during the year as required by Code provision C2 (Internal Control) is key to ensuring that a robust system of internal control is monitored by the business. The principal risks and uncertainties facing the Company may include some of those set out below. It should be borne in mind that this is not an exhaustive list and that there may be other risks that have not been considered or risks that the board consider now are insignificant or immaterial in nature, but that may arise and/or have a larger effect than originally expected. External risks <li> The group is reliant upon manufacturers in other countries, particularly China, India and the Far East. Global economic conditions (including global demand for goods and services affecting sales levels and the availability of credit lines for business to its key suppliers affecting product supply) will continue to affect the performance of the group's businesses as will the effect of exchange rate movements, principally the US dollar; cost price movements (including raw materials) and the difficulty of passing on input cost price increases, governmental and supra-national regulation affecting imports, taxation, duties and levies. <li> The failure to react appropriately to changes in the economic environment generally or consumer confidence issues affecting the group's core customers in the UK and in overseas markets, particularly from levels of unemployment or the reduction in real disposable incomes caused by, amongst other things, any contraction of the global economy, expected future increases in personal and indirect taxation, interest rate movements and the availability of consumer credit. <li> The failure to identify or react appropriately to changes in consumer demand for the group's products or services; competitor activity or new entrants within the markets in which group companies operate. <li> The group is potentially vulnerable to adverse movements in exchange rates as it pays for a large proportion of its goods in foreign currency, principally the US dollar. Whilst the group effects transactions, the effect of which seeks to hedge the exposure to adverse exchange rates, there is no guarantee that the transactions will be sufficient to cover all likely exposure. <li> With the continued expansion of the group's international franchise operations, the group may be exposed to sales concentration risk as certain franchise partners extend their activities in their own and additional territories. As at 27 March 2010 the group's largest franchisee represents approximately 9 per cent of group sales and receivables. The group's brands are potentially exposed to firstly the commercial risk in the default by franchisees of payment for amounts due on royalties and goods supplied, and secondly (whilst the group seeks to insure the receivables from franchisees) the group may be exposed to the liquidity of the credit insurance market and/or credit quality of the insurers or potential default of banks or insurance companies in providing security for franchisee primary default. International operations are also exposed to the possibility in some markets of political restrictions on remittance of funds to the UK or refusal to enforce the relevant brand's intellectual property rights against infringers. As the group grows its wholesale business a similar set of risks may, over time, become apparent. <li> The group continues to operate defined benefit pension schemes (albeit that they are now closed to new members). The volatility in movement of real asset and liability values together with those of the discount rate used for the accounting assumptions under IAS19 directly affect the net surplus or deficit in the schemes and the variability of the charge contained within the financial statements. Recent tax and legislative changes that are to be introduced in 2011 and 2012 may have implications for the funding and future operation of these and defined contribution schemes currently operated by the group. Internal risks <li> Both Early Learning Centre and Mothercare have a reputation for quality, safety and integrity. This may be seriously undermined by adverse press or regulatory comment on aspects of its business both in the UK and overseas, whether justified or not. To this end, the group takes all reasonable care to safeguard the reputation of its brands, particularly in product manufacture and supply areas, by engaging independent third parties to validate critical areas of its manufacturing and supply chain for compliance with its ethical code. <li> Any disruption to the relationship with or failure of key suppliers could adversely affect the group's ability to meet its sales and profit plans if suitable alternatives could not be found quickly Any failure of the group's logistics, distribution and information technology strategies or platforms may restrict the ability of the group to make product available in its worldwide stores network and Direct businesses thereby failing to meet customer expectations and adversely affect sales and profits. <li> A failure in any economic climate to invest appropriately in the group's infrastructure, people, tangible and intangible assets as it seeks to balance short and long term profitability drivers. <li> Financing. The Company and the group may be exposed to counterparty risk in respect of its hedging, banking, insurance or other finance based contracts and particularly in the ability of the relevant counterparties being able to continue to be able to meet their obligations. The group has sought to widen its banking relationships through the recent renewal of its facilities. Mothercare plc Preliminary Results "Mothercare worldwide network sales exceed Â£1 billion" Mothercare plc announces its preliminary results for the 52 weeks ended 27 March 2010. Financial Results * Group sales Â£766.4m, up 5.9% (2009: Â£723.6m) * Worldwide network sales((1)) Â£1.1bn, up 10.0% * Strong cash generation. Net cash balance Â£38.5m, up 55.2% (2009: Â£24.8m) * Total dividend 16.8p, up 15.9% (2009: 14.5p) * Underlying profit from operations before share based payments Â£52.0m, up 16.6% (2009: Â£44.6m) +-----------------------------------------------------------+------+-----+-----+ | | 2010| 2009| | | | | |((2))| | | Â£m| Â£m| | +-----------------------------------------------------------+------+-----+-----+ |Underlying profit from operations before share based | 52.0| 44.6| | |payments | | | | +-----------------------------------------------------------+------+-----+-----+ |- Financing | (0.4)|(0.1)| | +-----------------------------------------------------------+------+-----+-----+ |- Share based payments |(14.4)|(7.6)| | +-----------------------------------------------------------+------+-----+-----+ |Underlying profit before tax | 37.2| 36.9| | +-----------------------------------------------------------+------+-----+-----+ |- Non-underlying items | (4.7)| 5.1| | +-----------------------------------------------------------+------+-----+-----+ |Profit before tax | 32.5| 42.0| | +-----------------------------------------------------------+------+-----+-----+ |Basic underlying EPS | 31.5p|32.0p| | +-----------------------------------------------------------+------+-----+-----+ |Basic EPS | 28.0p|36.2p| | +-----------------------------------------------------------+------+-----+-----+ Key Highlights Record year for International: * Total International sales((1)) Â£490.9m, up 21.4%; underlying profit from operations up 40.6% * 119 new stores - total 728 overseas stores in 51 countries; retail space 1.5 million sq. ft., up 18.8% * Launched Mothercare in Australia and ELC in South Africa. Opened 50(th) store in Russia * 32 stores in India - to increase to 70 this year Two new strategic joint ventures: * JV in India with Delhi Land & Finance (announced in October) * JV in the UK with Boots to supply children's clothing to c. 400 stores (announced in February) Resilient performance in UK: * Positive like-for-like sales((1)) for fourth consecutive year at +3.0% * Property restructure ahead of plan. 10 parenting centres opened; 29 in-town stores closed Continuing growth in Direct: * Direct in Home sales Â£72.4m, up 16.3%; Direct in Store sales Â£54.4m, up 20.6% * Total Direct sales Â£126.8m, up 18.2% Ben Gordon, Chief Executive, said: "Mothercare has had another strong year with our worldwide network sales exceeding Â£1 billion for the first time. International had a record year and we ended the year with a total of 1,115 stores worldwide in 52 countries. UK performance was robust with positive like-for-like sales growth for the fourth consecutive year, and our property restructure is on track. As a result of the excellent performance of the group, we have again recommended a significant increase in the dividend. "The year finished with a more challenging consumer environment in the UK and strong growth in International. We expect this pattern to continue into 2010/11 and we are planning cautiously. However, overall we are well placed going forward, with our rapidly growing International platform, strong cash flow and debt free balance sheet." Enquiries to: Mothercare plc Ben Gordon, Chief Executive 01923 206001 Neil Harrington, Finance Director 01923 206187 Joanne Russell, Head of Investor Relations 01923 694900 Brunswick Group Limited Anita Scott/Catriona McDermott 020 7404 5959 Notes 1. For definitions of 'network sales', 'total International sales' and 'like-for-like sales' see Financial Review on pages 5 to 9. 2. Restated for Amendments to IAS 38 regarding treatment of catalogue costs. See note 11. CHIEF EXECUTIVE'S REVIEW RESULTS The Mothercare group delivered a strong performance in 2009/10 with underlying growth in sales and profits in both our UK and International businesses (for segmental analysis see page 5). Group sales for the year rose by 5.9% to Â£766.4 million (2008/09: Â£723.6 million). Underlying profit from operations, excluding the share based payments charge, increased by 16.6% to Â£52.0 million (2008/09: Â£44.6 million) and underlying profit before tax increased by 0.8% to Â£37.2 million (2008/09: Â£36.9 million). Group profit before tax decreased from Â£42.0 million last year to Â£32.5 million this year. However this is after charging Â£4.7 million of non-underlying items (credit of Â£5.1 million last year) mostly relating to the volatile non-cash adjustments where we revalue stock and commercial currency hedges to spot rate. These do not affect the cash flows or ongoing profitability of the group. The group generated Â£57.8 million of cash flow from operations and ended the year with a net cash balance of Â£38.5 million (2008/09: Â£24.8 million). As a result of the strong underlying performance of the group and the positive cash generation, we are pleased to propose a final dividend of 11.3 pence per share giving a total dividend for the year of 16.8 pence per share, an increase of 15.9%. TWO WORLD CLASS BRANDS Over the last five years we have grown Mothercare from a predominantly UK retailer into a global multi-channel company through our two world class brands, Mothercare and the Early Learning Centre. This transformation has been achieved through excellent product innovation and design together with a focus on specialism. We will continue to build the Mothercare group as the world's leading parenting retailer. An excellent example of creative innovation in the year is the Mothercare 'SPIN' pushchair. Working with experts to address new child development research, Mothercare's in-house design team developed this unique pushchair which allows babies to benefit from both facing their parents and also looking out to the world. The SPIN launched with great success around the world, becoming an immediate bestseller in its first year. Mothercare is now the leading pushchair retailer in a number of markets around the world, including the UK. Design and innovation at the Early Learning Centre continues, and one of our recent developments was the launch of our interactive Retro Robot which proved to be a bestseller over the Christmas period. MOTHERCARE STRATEGY We have four key growth channels through which we develop our two brands: 1. UK retailing 2. Direct 3. Wholesale 4. International franchise 1. UK retailing In November we announced that phase 1 of our property strategy, which we started in May 2008, was complete and that the Â£5.0 million of benefits highlighted at that time had been achieved with Â£5.0 million less capital expenditure than anticipated. At the same time we announced phase 2 of our property strategy. Whilst phase 1 was all about the rightsizing of Mothercare stores, reducing space and increasing sales per square foot, phase 2 will deliver a significant shift in footprint from in-town to the more profitable out-of-town parenting centre format - driving profit per square foot but leaving the overall retail space in the UK broadly the same. Even after closing 63 stores in phase 1 of our property strategy, we are still left with a very favourable lease expiry profile where almost 50% of the group's leases are due to expire by March 2012. This, together with the weak property market, has given us an excellent opportunity to embark on a new phase of our property strategy, closing more lower profit in-town stores, opening more out-of-town parenting centres in key catchments with strong property deals and renegotiating rents downwards at lease expiry. Phase 2 can be split into three distinct elements, each with separate targets: i) New out-of-town parenting centres Our out-of-town parenting centres are true destination stores with the full range of Mothercare and Early Learning Centre product together with key concessions. Our target is to increase the number of parenting centres in the UK to 120. In November we announced that we would open 10 new parenting centres per annum and in 2009/10 we met this target. The new stores are performing well and we have attracted Â£10.2 million of lease incentive payments from landlords in the year. Our plans to open 10 further out-of-town parenting centres in 2010/11 are on track. ii) Rationalise high street chain We announced in November our plans to close or renegotiate the leases on 90 lower profit in-town stores, dealing with 30 stores each year over three years. In 2009/10 we exceeded our target with 29 store closures and 14 lease renegotiations. iii) In-town opportunities We also identified a number of key towns where we targeted eight of our new landmark format stores. One of these was opened during 2009/10 and another after year end taking the total to six. We now expect our property strategy to deliver Â£16.1 million of annual benefits each year by the end of 2012 from phase 1 and phase 2 combined (an increase to our previous estimate of Â£15.0 million). 2. Direct Direct has continued its rapid growth with total sales of Â£126.8 million in the year, an increase of 18.2%. The development of e-commerce in the UK over the last ten years has transformed the face of UK retail and Mothercare has been in the vanguard of that transformation. Mothercare UK's Direct business is now over 20% of our UK business split between orders placed online at home and online in store. The growth of Direct reflects the transformation of retailing with stores increasingly acting more as showrooms. This is particularly true for our extensive range of nursery furniture, pushchairs and car seats. We continue to expand our product ranges online and our full Clothing range is now available on the Mothercare website in addition to our full range of Home & Travel and Toys. We are now rolling out our Widest Choice programme for the Early Learning Centre with a much larger range of lines now available online only. Also, in September we acquired the remaining 50% of Gurgle.com, our social networking website for parents and parents-to-be, which continues to grow rapidly. 3. Wholesale Wholesale is currently small, but represents a significant growth opportunity for us both in the UK and globally. In the UK, wholesale sales were Â£4.8 million, up 78%, and this will be boosted in 2010/11 by the autumn launch of our clothing partnership with Boots announced in February. We will supply childrenswear to Boots UK on a wholesale basis, replacing their existing childrenswear offer in circa 400 UK stores from September 2010. 4. International franchise Our fourth distribution channel is International franchising which is how we operate our overseas stores. International franchising remains the single largest growth opportunity for the group offering huge potential in developed and emerging markets, driven by the strength of our two brands, our unique network of strong franchise partners and our state of the art logistics network. Our International franchise model has allowed rapid growth with no capital investment for Mothercare. We earn profits from our royalties, as a fixed percentage of International retail sales. Total International sales, which include International retail sales and International wholesale sales, increased by 21.4% to Â£490.9m. International underlying profit from operations increased byÂ over 40% to Â£23.2 million on top of growth of over 50% last year. Over the last two years growth in our International business has been rapid with store numbers up 47.4% to 728 stores in 51 countries, and average retail selling space up 47.9% to 1.5 million square feet. Total International sales have increased byÂ more than 70% over the last two years and underlying profit from operations increased byÂ nearly 120% over the same period. The International segment as reported also includes our small overseas wholesale business. In our key growth markets of India and China, our strategy is to form joint ventures with our franchise partners so that Mothercare can share in more of the upside in markets where we expect to generate substantial growth. In October we announced our newest joint venture with Delhi Land & Finance in India. This new joint venture, along with our existing partner in the region, Shopper's Stop, gives us an excellent opportunity to accelerate our expansion in India. At the year end we had 32 successful stores in India and we expect to have 70 stores open by the end of the current financial year, well on the way to our medium term target of 200 stores. Mothercare owns 30% of the franchise companies in India and China. We charge a royalty on retail sales as with the franchise model, but we also earn a 30% share of the net joint venture profits. We contribute 30% of the capital expenditure in these markets and with the rapid growth that we predict, we are expecting to invest in the region of Â£5 million of total capital expenditure in India and China over the next three years. In Europe we have 327 stores with strong growth in Eastern European countries with higher birth rates, including Poland, Russia and Ukraine. Across the Middle East and Africa we have 225 stores and we are now opening larger format parenting centre stores with two stores opened in Dubai in the year exceeding 10,000 square feet. During the year we launched the Early Learning Centre in South Africa. Asia Pacific is currently our smallest region with 176 stores, but it has the greatest long-term growth potential, including both India and China. During the year we also launched Mothercare in Australia. We are growing the International business around the world by continuing to open new stores in existing countries, entering new countries and also opening larger format stores that can accommodate our entire product ranges. We plan to open at least 100 additional overseas stores per year for the foreseeable future. SUMMARY AND OUTLOOK Mothercare has had another strong year with our worldwide network sales exceeding Â£1 billion for the first time. International had a record year and we ended the year with a total of 1,115 stores worldwide in 52 countries. UK performance was robust with positive like-for-like sales growth for the fourth consecutive year, and our property restructure is on track. As a result of the excellent performance of the group, we have again recommended a significant increase in the dividend. The year finished with a more challenging consumer environment in the UK and strong growth in International. We expect this pattern to continue into 2010/11 and we are planning cautiously. However, overall we are well placed going forward, with our rapidly growing International platform, strong cash flow and debt free balance sheet. FINANCIAL REVIEW RESULTS SUMMARY Group underlying profit before tax increased by Â£0.3 million to Â£37.2 million (2008/09: Â£36.9 million as restated - see below). Underlying profit excludes exceptional items and other non-underlying items which are analysed below. After these non-underlying items, the group recorded a pre-tax profit of Â£32.5 million (2008/09: Â£42.0 million as restated). Underlying profit from operations before the IFRS 2 share based payments charge increased by Â£7.4 million, or 16.6%, to Â£52.0 million. Income Statement +-------------------------------------------------------------+-------+--------+ | | | 2008/09| |Â£ million |2009/10| | | | |restated| +-------------------------------------------------------------+-------+--------+ |Revenue | 766.4| 723.6| +-------------------------------------------------------------+-------+--------+ |Profit from operations before share based payments | 52.0| 44.6| +-------------------------------------------------------------+-------+--------+ |Share based payments | (14.4)| (7.6)| +-------------------------------------------------------------+-------+--------+ |Financing | (0.4)| (0.1)| +-------------------------------------------------------------+-------+--------+ |Underlying profit before tax | 37.2| 36.9| +-------------------------------------------------------------+-------+--------+ |Exceptional items and unwind of discount on exceptional| (1.3)| (4.6)| |provisions | | | +-------------------------------------------------------------+-------+--------+ |Non-cash foreign currency adjustments | (1.3)| 11.8| +-------------------------------------------------------------+-------+--------+ |Amortisation of intangible assets | (2.1)| (2.1)| +-------------------------------------------------------------+-------+--------+ |Profit before tax | 32.5| 42.0| +-------------------------------------------------------------+-------+--------+ |Underlying EPS - basic | 31.5p| 32.0p| +-------------------------------------------------------------+-------+--------+ |EPS - basic | 28.0p| 36.2p| +-------------------------------------------------------------+-------+--------+ Profit from operations before share based payments includes all of the group's trading activities, but excludes the volatile share based payment costs charged to the income statement in accordance with IFRS 2 (see below). Prior year restatement Historically, in line with many similar companies, the group has charged the costs of preparing catalogues in line with the sales benefits. Amendments to IAS 38 require associated costs for such catalogues to be recognised up front as the group has access to and receives the catalogues. This has resulted in restatement due to timing differences of additional costs of Â£0.2 million for the full year 2008/09 together with associated restatements of the tax charge. Non-underlying Items Underlying profit before tax excludes the following non-underlying items: * Non-cash adjustments principally relating to marking to market of commercial foreign currency hedges at the period end. As hedges are taken out to match future stock purchase commitments, these are theoretical adjustments which we are required to make under IAS 39 and IAS 21. These standards require us to revalue stock and our commercial foreign currency hedges to spot. This volatile adjustment does not affect the cash flows or ongoing profitability of the group and reverses at the start of the next accounting period. * Amortisation of intangible assets (excluding software). * Exceptional integration costs of Â£2.0 million being final integration costs of the Early Learning Centre (see note 3). * Net profits on disposal or termination of property interests of Â£1.0 million (see note 3). * Unwind of discount on exceptional property provisions Â£0.3 million (see note 3). Exceptional items in 2008/09 included Â£2.1 million of losses on disposal or termination of property interests, Â£1.5 million of integration costs and Â£1.0 million of unwind of discount on exceptional provisions. Results by Segment The primary segments of Mothercare plc, are the UK business and the International business. +---------------------+---------+---------+ | Â£ million - Revenue | 2009/10 | 2008/09 | +---------------------+---------+---------+ | UK | 590.3 | 578.8 | +---------------------+---------+---------+ | International | 176.1 | 144.8 | +---------------------+---------+---------+ | Total | 766.4 | 723.6 | +---------------------+---------+---------+ +----------------------------------------------------+---------+----------+ | | | 2008/09 | | Â£ million - Underlying Profit | 2009/10 | | | | | restated | +----------------------------------------------------+---------+----------+ | UK | 36.1 | 34.7 | +----------------------------------------------------+---------+----------+ | International | 23.2 | 16.5 | +----------------------------------------------------+---------+----------+ | Corporate | (7.3) | (6.6) | +----------------------------------------------------+---------+----------+ | Profit from operations before share based payments | 52.0 | 44.6 | +----------------------------------------------------+---------+----------+ | Share based payments | (14.4) | (7.6) | +----------------------------------------------------+---------+----------+ | Financing | (0.4) | (0.1) | +----------------------------------------------------+---------+----------+ | Underlying profit before tax | 37.2 | 36.9 | +----------------------------------------------------+---------+----------+ In the year, like-for-like UK retail sales growth has largely been offset by the impact of currency movements on net margin. However, profit has benefited from the property strategy, with lower occupancy costs, lower central costs as well as tight cost control and growth in the wholesale channel. International has benefited from the 21.4% growth in total International sales driving growth in royalty income and shipments, and central costs growing at a slower rate. Corporate expenses represent board and company secretarial costs and other head office costs including audit, professional fees, insurance and head office property. This year they include a Â£0.5 million one-off cost of restructuring and reorganising certain operations. Share based payments Underlying profit before tax also includes a share based payments charge of Â£14.4 million (2008/09: Â£7.6 million) in relation to the Company's long-term incentive schemes. There are three main types of long-term share based incentive scheme being the Executive Incentive Plan, the Performance Share Plan and the Save As You Earn schemes. Full details can be found in the Annual Report. The Executive Incentive Plan is based on Mothercare's Total Shareholder Return (TSR) over three years compared with the TSR of the FTSE General Retailers' Index. The scheme only vests if Mothercare's TSR outperforms the General Retailers'. The Performance Share Plan is based on cumulative underlying profit before tax growth over a three-year period and the Save As You Earn schemes give individuals the opportunity to subscribe to options at a discounted price over three years. These schemes therefore target both enterprise value creation and profit growth and we believe that they directly reflect the interests of our shareholders. Over the three years to 27 March 2010: * Mothercare's market capitalisation increased 107% from Â£274.1 million((1)) to Â£566.4 million((1)); * Mothercare's TSR outperformed the FTSE General Retailers' TSR by 120%(()((1))()) (Mothercare +88.0%; General Retailers -33.0%); and * Underlying profit before tax increased 64.6% to Â£37.2 million. As a result of this strong performance the share based payments charge calculated under IFRS 2 has increased. The charges as calculated under IFRS 2 are theoretical calculations based on a number of market based factors and estimates about the future including estimates of Mothercare's future share price and TSR in relation to the General Retailers'. As a result it is difficult to estimate or predict reliably future charges. However, we estimate with the information currently available, the share based payments charge in 2010/11 will reduce from Â£14.4 million to approximately Â£9 million. Like-for-like sales, total International sales and network sales 'Like-for-like sales' are defined as sales for stores that have been trading continuously from the same selling space for at least a year and include Direct in Home and Direct in Store. Sales from Early Learning Centre inserts in Mothercare stores are included where they are trading in existing Mothercare space. 'International franchisee retail sales' are the estimated retail sales of franchisees and joint ventures. 'Total International sales' are International franchisee retail sales plus International wholesale sales. Total 'network sales', which include the retail sales made by our franchise partners overseas to customers (rather than Mothercare sales to franchisees as published) and wholesale sales were Â£1.1 billion, up 10.0% as follows: +---------------------------+---------+---------+ | Â£ million - Network Sales | 2009/10 | 2008/09 | +---------------------------+---------+---------+ | UK retail (inc. Direct) | 585.5 | 576.1 | +---------------------------+---------+---------+ | UK wholesale | 4.8 | 2.7 | +---------------------------+---------+---------+ | Total UK | 590.3 | 578.8 | +---------------------------+---------+---------+ | Total International | 490.9 | 404.2 | +---------------------------+---------+---------+ | Group network sales | 1,081.2 | 983.0 | +---------------------------+---------+---------+ Financing and Taxation Financing represents interest receivable on bank deposits and costs relating to bank facility fees and the unwinding of discounts on provisions. The underlying tax charge is comprised of current and deferred tax and is calculated at 28.5 per cent (2008/09: 27.6 per cent). An underlying tax charge of Â£10.6 million (2008/09: Â£10.2 million as restated) has been included for the period; the total tax charge was Â£8.9 million (2008/09: Â£11.8 million as restated). Pensions We continue to operate defined benefit pension schemes for our staff, although the schemes are now closed to new members. Details of the income statement net charge, total cash funding and net assets and liabilities are as follows: +--------------------------------------------+-------+-+-------+--+-------+ |Â£ million |2010/11|*|2009/10| |2008/09| +--------------------------------------------+-------+-+-------+--+-------+ |Income statement | | | | | | +--------------------------------------------+-------+-+-------+--+-------+ |Service cost | (3.1)| | (2.1)| | (2.5)| +--------------------------------------------+-------+-+-------+--+-------+ |Return on assets / interest on liabilities | (0.6)| | (1.2)| | 1.6| +--------------------------------------------+-------+-+-------+--+-------+ |Net charge | (3.7)| | (3.3)| | (0.9)| +--------------------------------------------+-------+-+-------+--+-------+ |Cash funding | | | | | | +--------------------------------------------+-------+-+-------+--+-------+ |Regular contributions | (2.7)| | (2.7)| | (2.1)| +--------------------------------------------+-------+-+-------+--+-------+ |Deficit contributions | (2.3)| | (2.3)|**| (2.6)| +--------------------------------------------+-------+-+-------+--+-------+ |Total cash funding | (5.0)| | (5.0)| | (4.7)| +--------------------------------------------+-------+-+-------+--+-------+ |Balance sheet | | | | | | +--------------------------------------------+-------+-+-------+--+-------+ |Fair value of schemes' assets | | | 197.0| | 150.2| +--------------------------------------------+-------+-+-------+--+-------+ |Present value of defined benefit obligations| | |(252.1)| |(175.6)| +--------------------------------------------+-------+-+-------+--+-------+ |Net liability | N/A| | (55.1)| | (25.4)| +--------------------------------------------+-------+-+-------+--+-------+ * Estimate ** Excludes one-off contribution of Â£3.0 million paid in 2009/10. The Â£2.3 million deficit contribution was paid at the beginning of 2010/11 In consultation with the independent actuaries to the schemes, the key market rate assumptions used in the valuation are as follows: +---------------+---------+---------+-------------+-------------+ | | | | | Sensitivity | | | 2009/10 | 2008/09 | Sensitivity | | | | | | | Â£ million | +---------------+---------+---------+-------------+-------------+ | Discount rate | 5.6% | 6.5% | 0.1% | (5.6) | +---------------+---------+---------+-------------+-------------+ | | | | 0.5% | (30.2) | +---------------+---------+---------+-------------+-------------+ | Inflation | 3.7% | 3.2% | 0.1% | 5.3 | +---------------+---------+---------+-------------+-------------+ The pension fund deficit has increased because under IAS the liability is calculated based on corporate bond rates, which have reduced compared with last year. The sensitivity of the IAS 19 valuation to a 0.1% and 0.5% reduction in the discount rate and a 0.1% reduction in inflation are set out in the table above. Balance Sheet and Cash Flow The balance sheet includes identifiable intangible assets arising on the acquisition of The Early Learning Centre of Â£24.7 million and goodwill of Â£68.6 million. The group continues to generate operating cash, with cash generated from operations of Â£57.8 million after Â£3.0 million of one-off pension payments. We have managed the business very tightly this year and as a result we have generated a working capital inflow of Â£3.4 million. In future years however, we would expect an underlying working capital outflow of approximately Â£10 million per annum as a result of the rapid growth of International and Direct and the increase in our own direct sourcing operations, where we have achieved better margins but take ownership of stock earlier in the supply chain. After investing Â£24.2 million of capital expenditure (Â£14.0 million net of lease incentives received) and paying Â£13.2 million of dividends and Â£7.7 million of tax, the net cash position at the year end is positive, at Â£38.5 million (2008/09: Â£24.8 million). Going Concern The group's objective with respect to managing capital is to maintain a balance sheet structure that is both efficient in terms of providing long-term returns to shareholders and safeguards the group's ability to continue as a going concern. As appropriate, the group can choose to adjust its capital structure by varying the amount of dividends paid to shareholders, returns of capital to shareholders, issuing new shares or the level of capital expenditure. At the year end, the group had facilities of Â£65 million, being Â£55 million committed secured bank facilities and a Â£10 million uncommitted unsecured bank overdraft. As of 26 April 2010, the group refinanced, with committed secured bank facilities of Â£40 million at an interest rate of 1.7% above LIBOR, which expire on 31 October 2013. It also has an uncommitted unsecured bank overdraft of Â£10 million. The group's previous and current committed borrowing facilities contain certain financial covenants which have been met throughout the period. The covenants are tested half-yearly and are based around gearing, fixed charge cover and guarantor cover. The committed bank facility was drawn down by a maximum of Â£20 million during the period to fund seasonal working capital and at the year end the group had a cash balance of Â£38.5 million in addition to the Â£65 million of available facilities at the time (which has now been reduced to Â£50 million as noted above). The current economic conditions create uncertainty around the level of demand for the group's products. However, the group has long-term contracts with its franchisees around the world and long standing relationships with many of its suppliers. As a consequence, the directors believe that the group is well placed to manage its business risks successfully despite the uncertain economic outlook. The group's latest forecasts and projections have been sensitivity-tested for reasonable possible adverse variations in trading performance and show that the group will operate within the terms of its borrowing facilities and covenants for the foreseeable future. After making appropriate enquiries, the directors have a reasonable expectation that the Company and the group have adequate resources to continue in operational existence for the foreseeable future. The financial statements are therefore prepared on the going concern basis. Capital Expenditure Total capital expenditure in the year was Â£24.2 million (2008/09: Â£22.8 million), of which Â£5.5 million was for software intangibles and Â£14.6 million was invested in UK stores. Landlord contributions of Â£10.2 million (2008/09: Â£6.6 million) were received, partially offsetting the outflow. Net capital expenditure after landlord contributions was Â£14.0 million (2008/09: Â£16.2 million). Net capital expenditure for 2010/11, after landlord contributions, is expected to be Â£20 million. Earnings per Share and Dividend Basic underlying earnings per share were 31.5 pence compared to 32.0 pence last year (as restated). The directors recommend a 14.1% increase in the final dividend to 11.3 pence (2008/09: 9.9 pence) giving a total dividend for the year of 16.8 pence (2008/09: 14.5 pence), an increase of 15.9%. The final dividend will be payable on 6 August 2010 to shareholders registered on 4 June 2010. The latest date for election to join the dividend reinvestment plan is 16 July 2010. Treasury policy and financial risk management The board approves treasury policies and senior management directly controls day-to-day operations within these policies. The major financial risk to which the group is exposed relates to movements in foreign exchange rates and interest rates. Where appropriate, cost effective and practicable, the group uses financial instruments and derivatives to manage the risks. No speculative use of derivatives, currency or other instruments is permitted. Foreign currency risk All international sales to franchisees are invoiced in pounds sterling or US dollars. International published sales represent approximately 23 per cent of group sales. Total International sales represent approximately 45 per cent of group network sales. The group therefore has some currency exposure on these sales, but it is used to offset or hedge in part the group's US dollar and Euro denominated product purchases. The group policy is that all material exposures are hedged by using forward currency contracts. Interest rate risk At 27 March 2010, the group has positive cash balances. Given the cash generative nature of the group, interest rate hedging was not considered necessary. The board will keep this under review as the group develops. Shareholders' funds Shareholders' funds amount to Â£188.4 million, a decrease of Â£9.1 million in the year driven largely by the increase in the retirement benefits liability. This represents Â£2.14 per share compared to Â£2.25 per share at the previous year end (as restated). Accounting Policies and Standards This year the group has adopted International Financial Reporting Standard 8 'Operating Segments', International Accounting Standard 1 'Presentation of Financial Statements' (revised 2007) and Amendments to International Accounting Standard 38 'Intangible Assets'. Prior period results have been restated accordingly (see notes 1 and 11). Consolidated income statement For the 52 weeks ended 27 March 2010 +--------------------+----+---------------------------------------+---------------------------------------+ | | | | 52 weeks ended| | | | 52 weeks ended| | | |Note| | 28 March 2009| | | | 27 March 2010| | | | | | restated(3)| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ | | |Underlying(1)|Non-underlying(2)| Total|Underlying(1)|Non-underlying(2)| Total| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ | | | Â£ million| Â£ million| Â£| Â£ million| Â£ million| Â£| | | | | |million| | |million| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Revenue | 2 | 766.4| -| 766.4| 723.6| -| 723.6| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Cost of sales | 3 | (676.0)| (3.4)|(679.4)| (645.0)| 8.2|(636.8)| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Gross profit | | 90.4| (3.4)| 87.0| 78.6| 8.2| 86.8| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Administrative | | | | | | | | |expenses before | | (37.9)| (0.8)| (38.7)| (33.6)| -| (33.6)| |share based payments| | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Share based payments| | (14.4)| (1.2)| (15.6)| (7.6)| -| (7.6)| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Administrative | | (52.3)| (2.0)| (54.3)| (41.2)| -| (41.2)| |expenses | | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Profit from retail | | | | | | | | |operations before | | 52.5| (4.2)| 48.3| 45.0| 8.2| 53.2| |share based payments| | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Profit from retail | | 38.1| (5.4)| 32.7| 37.4| 8.2| 45.6| |operations | | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Profit/(loss) on | | | | | | | | |disposal/termination| | -| 1.0| 1.0| -| (2.1)| (2.1)| |of property | | | | | | | | |interests | 3 | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Share of results of | | (0.5)| -| (0.5)| (0.4)| -| (0.4)| |joint ventures | | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Profit from | | | | | | | | |operations before | | 52.0| (3.2)| 48.8| 44.6| 6.1| 50.7| |share based payments| 2 | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Profit from | | 37.6| (4.4)| 33.2| 37.0| 6.1| 43.1| |operations | | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Investment income | 4 | -| -| -| 0.4| -| 0.4| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Finance costs |3, 5| (0.4)| (0.3)| (0.7)| (0.5)| (1.0)| (1.5)| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Profit before | | 37.2| (4.7)| 32.5| 36.9| 5.1| 42.0| |taxation | | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Taxation | 6 | (10.6)| 1.7| (8.9)| (10.2)| (1.6)| (11.8)| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Profit for the | | | | | | | | |period attributable | | 26.6| (3.0)| 23.6| 26.7| 3.5| 30.2| |to | | | | | | | | | | | | | | | | | |equity holders of | | | | | | | | |the parent | | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Earnings per share | | | | | | | | +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Basic | 8 | 31.5p| | 28.0p| 32.0p| | 36.2p| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ |Diluted | 8 | 30.7p| | 27.3p| 31.0p| | 35.0p| +--------------------+----+-------------+-----------------+-------+-------------+-----------------+-------+ (1 )Before items described in note 2 below. (2 )Includes exceptional items (profit/loss on disposal/termination of property interests and integration costs), amortisation of intangible assets (excluding software) and the impact of non-cash foreign currency adjustments under IAS 39 and IAS 21 as set out in note 3 to the financial statements. (3 )Restated for Amendments to IAS 38 as described in note 11. All results relate to continuing operations. Consolidated statement of comprehensive income For the 52 weeks ended 27 March 2010 +-------------------------------------------+----+--------------+--------------+ | | | |52 weeks ended| | | |52 weeks ended| 28 March 2009| | |Note| 27 March 2010| | | | | | restated(1)| +-------------------------------------------+----+--------------+--------------+ | | | Â£ million| Â£ million| +-------------------------------------------+----+--------------+--------------+ |Other comprehensive income - actuarial loss| | | | |on defined benefit pension schemes | | (32.1)| (31.2)| +-------------------------------------------+----+--------------+--------------+ |Tax relating to components of other | | 9.0| 8.7| |comprehensive income | 6 | | | +-------------------------------------------+----+--------------+--------------+ |Net loss recognised in other comprehensive | | (23.1)| (22.5)| |income | | | | +-------------------------------------------+----+--------------+--------------+ |Profit for the period | | 23.6| 30.2| +-------------------------------------------+----+--------------+--------------+ |Total comprehensive income for the period | | | | |attributable to equity holders of the | | 0.5| 7.7| |parent | | | | +-------------------------------------------+----+--------------+--------------+ (1 )Restated for Amendments to IAS 38 as described in note 11. Consolidated balance sheet As at 27 March 2010 +---------------------+--------------+-------------+-------------+-------------+ | | | |28 March 2009|29 March 2008| | | Note |27 March 2010| | | | | | | restated(1)| restated(1)| +---------------------+--------------+-------------+-------------+-------------+ | | | Â£ million| Â£ million| Â£ million| +---------------------+--------------+-------------+-------------+-------------+ |Non-current assets | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Goodwill | |68.6 |68.6 |68.6 | +---------------------+--------------+-------------+-------------+-------------+ |Intangible assets | |36.3 |35.9 | 35.6| +---------------------+--------------+-------------+-------------+-------------+ |Property, plant and | |93.9 |92.4 |95.8 | |equipment | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Investments in joint | |1.7 |0.7 |0.8 | |ventures | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Retirement benefit | |- |- |2.0 | |obligations | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Deferred tax asset | |7.9 |0.8 |- | +---------------------+--------------+-------------+-------------+-------------+ | | |208.4 |198.4 |202.8 | +---------------------+--------------+-------------+-------------+-------------+ |Current assets | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Inventories | |91.3 |94.1 |70.8 | +---------------------+--------------+-------------+-------------+-------------+ |Trade and other | |57.7 |54.4 |51.1 | |receivables | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Current tax assets | |- |- |1.0 | +---------------------+--------------+-------------+-------------+-------------+ |Cash and cash | |38.5 |24.8 |22.7 | |equivalents | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Currency derivative | |14.1 |7.3 |0.7 | |assets | | | | | +---------------------+--------------+-------------+-------------+-------------+ | | |201.6 |180.6 |146.3 | +---------------------+--------------+-------------+-------------+-------------+ |Total assets | |410.0 |379.0 |349.1 | +---------------------+--------------+-------------+-------------+-------------+ +---------------------+--------------+-------------+-------------+-------------+ |Current liabilities | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Trade and other | |(120.6) |(108.7) |(95.6) | |payables | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Current tax | |(1.4) |(2.1) |- | |liabilities | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Obligations under | |- |- |(0.4) | |finance leases | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Short term provisions| |(9.0) |(11.9) |(24.0) | +---------------------+--------------+-------------+-------------+-------------+ | | |(131.0) |(122.7) |(120.0) | +---------------------+--------------+-------------+-------------+-------------+ |Non-current | | | | | |liabilities | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Trade and other | |(26.2) |(19.6) |(15.5) | |payables | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Obligations under | |- |(0.1) |(0.1) | |finance leases | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Retirement benefit | |(55.1) |(25.4) |- | |obligations | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Deferred tax | |- |- |(4.4) | |liability | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Long term provisions | |(9.3) |(13.7) |(12.1) | +---------------------+--------------+-------------+-------------+-------------+ | | |(90.6) |(58.8) |(32.1) | +---------------------+--------------+-------------+-------------+-------------+ |Total liabilities | |(221.6) |(181.5) |(152.1) | +---------------------+--------------+-------------+-------------+-------------+ +---------------------+--------------+-------------+-------------+-------------+ |Net assets | |188.4 |197.5 |197.0 | +---------------------+--------------+-------------+-------------+-------------+ +---------------------+----------+---+-------------+-------------+-------------+ |Equity attributable to equity | | | | | |holders of the parent | | | | | +---------------------+----------+---+-------------+-------------+-------------+ |Called up share | |44.1 |43.8 |43.6 | |capital | | | | | +---------------------+--------------+-------------+-------------+-------------+ |Share premium account| |4.9 |4.3 |3.4 | +---------------------+--------------+-------------+-------------+-------------+ |Other reserve | |50.8 |50.8 |50.8 | +---------------------+--------------+-------------+-------------+-------------+ |Own shares | |(8.9) |(10.6) |(9.8) | +---------------------+--------------+-------------+-------------+-------------+ |Translation reserves | |1.3 |1.2 |- | +---------------------+--------------+-------------+-------------+-------------+ |Retained earnings | |96.2 |108.0 |109.0 | +---------------------+--------------+-------------+-------------+-------------+ |Total equity | 9 |188.4 |197.5 |197.0 | +---------------------+--------------+-------------+-------------+-------------+ (1 )Restated for Amendments to IAS 38 as described in note 11. Consolidated statement of changes in equity For the 52 weeks ended 27 March 2010 +--------------+---------------------------------------------------------------+ | | Equity attributable to equity holders of the parent | +--------------+-------+-------+----------+-------+-----------+--------+-------+ | | Share| Share| Other| Own|Translation|Retained| Total| | |capital|premium|reserve(1)| shares| reserve|earnings| equity| | | |account| | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ | | Â£| Â£| Â£ million| Â£| Â£ million| Â£| Â£| | |million|million| |million| | million|million| +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Balance at 29 | | | | | | | | |March 2009 as | | | | | | | | |previously | 43.8| 4.3| 50.8| (10.6)| 1.2| 109.1| 198.6| |reported | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Change in | | | | | | | | |accounting | -| -| -| -| -| (1.1)| (1.1)| |policy (note | | | | | | | | |11) | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Balance at 29 | | | | | | | | |March 2009 (as| 43.8| 4.3| 50.8| (10.6)| 1.2| 108.0| 197.5| |restated)(2) | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Total | | | | | | | | |comprehensive | | | | | | | | |income for the| -| -| -| -| -| 0.5| 0.5| |period | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Issue of | 0.3| 0.6| -| -| | -| 0.9| |equity shares | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Credit to | | | | | | | | |equity for | | | | | | | | |equity-settled| -| -| -| -| -| 2.6| 2.6| |share based | | | | | | | | |payments | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Shares | | | | | | | | |transferred to| | | | | | | | |employees on | -| -| -| 1.7| -| (1.7)| -| |vesting | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Exchange | | | | | | | | |differences | | | | | | | | |arising on | | | | | | | | |translation of| -| -| -| -| 0.1| -| 0.1| |overseas | | | | | | | | |operations | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Dividends paid| -| -| -| -| -| (13.2)| (13.2)| +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Balance at 27 | 44.1| 4.9| 50.8| (8.9)| 1.3| 96.2| 188.4| |March 2010 | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ For the 52 weeks ended 28 March 2009 +--------------+---------------------------------------------------------------+ | | Equity attributable to equity holders of the parent | +--------------+-------+-------+----------+-------+-----------+--------+-------+ | | Share| Share| Other| Own|Translation|Retained| Total| | |capital|premium|reserve(1)| shares| reserve|earnings| equity| | | |account| | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ | | Â£| Â£| Â£ million| Â£| Â£ million| Â£| Â£| | |million|million| |million| | million|million| +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Balance at 30 | | | | | | | | |March 2008 as | | | | | | | | |previously | 43.6| 3.4| 50.8| (9.8)| -| 110.0| 198.0| |reported | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Change in | | | | | | | | |accounting | -| -| -| -| -| (1.0)| (1.0)| |policy (note | | | | | | | | |11) | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Balance at 30 | | | | | | | | |March 2008 (as| 43.6| 3.4| 50.8| (9.8)| -| 109.0| 197.0| |restated)(2) | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Total | | | | | | | | |comprehensive | | | | | | | | |income for the| -| -| -| -| -| 7.7| 7.7| |period | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Issue of | 0.2| 0.9| -| -| -| -| 1.1| |equity shares | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Credit to | | | | | | | | |equity for | | | | | | | | |equity-settled| -| -| -| -| -| 2.5| 2.5| |share based | | | | | | | | |payments | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Purchase of | -| -| -| (1.1)| -| -| (1.1)| |own shares | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Shares | | | | | | | | |transferred to| | | | | | | | |employees on | -| -| -| 0.3| -| (0.3)| -| |vesting | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Exchange | | | | | | | | |differences | | | | | | | | |arising on | | | | | | | | |translation of| -| -| -| -| 1.2| -| 1.2| |overseas | | | | | | | | |operations | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Dividends paid| -| -| -| -| -| (10.9)| (10.9)| +--------------+-------+-------+----------+-------+-----------+--------+-------+ |Balance at 28 | 43.8| 4.3| 50.8| (10.6)| 1.2| 108.0| 197.5| |March 2009 | | | | | | | | +--------------+-------+-------+----------+-------+-----------+--------+-------+ (1 )The other reserve relates to shares issued as consideration for the acquisition of the Early Learning Centre on 19 June 2007. (2 )Restated for Amendments to IAS 38 as described in note 11. Consolidated cash flow statement For the 52 weeks ended 27 March 2010 +-------------------------------------------+----+--------------+--------------+ | | |52 weeks ended|52 weeks ended| | |Note| | | | | | 27 March 2010| 28 March 2009| +-------------------------------------------+----+--------------+--------------+ | | | Â£ million| Â£ million| +-------------------------------------------+----+--------------+--------------+ |Net cash flow from operating activities | 10 | 50.1| 34.9| +-------------------------------------------+----+--------------+--------------+ |Cash flows from investing activities | | | | +-------------------------------------------+----+--------------+--------------+ |Interest received | | -| 0.4| +-------------------------------------------+----+--------------+--------------+ |Purchase of property, plant and equipment | | (18.7)| (17.5)| +-------------------------------------------+----+--------------+--------------+ |Purchase of intangibles - software | | (5.5)| (5.3)| +-------------------------------------------+----+--------------+--------------+ |Proceeds from sale of property, plant and | | 2.4| -| |equipment | | | | +-------------------------------------------+----+--------------+--------------+ |Investments in joint ventures and | | (1.9)| (0.3)| |acquisition of subsidiary | | | | +-------------------------------------------+----+--------------+--------------+ |Net cash used in investing activities | | (23.7)| (22.7)| +-------------------------------------------+----+--------------+--------------+ |Cash flows from financing activities | | | | +-------------------------------------------+----+--------------+--------------+ |Interest paid | | (0.5)| (0.4)| +-------------------------------------------+----+--------------+--------------+ |Repayment of obligations under finance | | (0.1)| (0.4)| |leases | | | | +-------------------------------------------+----+--------------+--------------+ |Equity dividends paid | | (13.2)| (10.9)| +-------------------------------------------+----+--------------+--------------+ |Issue of ordinary share capital | | 0.9| 1.1| +-------------------------------------------+----+--------------+--------------+ |Purchase of own shares | | -| (1.1)| +-------------------------------------------+----+--------------+--------------+ |Net cash used in financing activities | | (12.9)| (11.7)| +-------------------------------------------+----+--------------+--------------+ |Net increase in cash and cash equivalents | | 13.5| 0.5| +-------------------------------------------+----+--------------+--------------+ |Cash and cash equivalents at beginning of | | 24.8| 22.7| |period | | | | +-------------------------------------------+----+--------------+--------------+ |Effect of foreign exchange rate changes | | 0.2| 1.6| +-------------------------------------------+----+--------------+--------------+ |Cash and cash equivalents at end of period | | 38.5| 24.8| +-------------------------------------------+----+--------------+--------------+ Notes a. General information a. The accounting policies followed are the same as those published by the group within the 2009 annual report and accounts except that in the current year the group has adopted International Financial Reporting Standard 8 'Operating Segments', International Accounting Standard 1 'Presentation of Financial Statements' (revised 2007) and Amendments to IAS 38 'Intangible Assets'. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the group that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. In contrast, the predecessor Standard (IAS 14 'Segment Reporting') required the group to identify two sets of segments (business and geographical), using a risks and rewards approach, with the group's system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. As a result, the segmental information which is included in note 2 below is presented in accordance with IFRS 8. The comparatives have been restated accordingly. IAS 1 (revised) requires the presentation of a statement of changes in equity as a primary statement, separate from the income statement and statement of comprehensive income. As a result, a consolidated statement of changes in equity has been included in the primary statements. Amendments to IAS 38 require that when an entity has a right to access or has taken delivery of mail order catalogues or advertisement, any associated expenditure must be recognised as an expense. Historically, and in line with a number of similar companies, the group had prepaid the costs of preparing catalogues until the catalogue had been distributed and the benefits of sales associated with the costs of the catalogue were earned. This change in accounting policy has been applied retrospectively, the effect of which is disclosed in note 11. b. Whilst the financial information included in this preliminary announcement has been prepared in accordance with IFRS as endorsed by the European Union, this announcement does not itself contain sufficient information to comply with all the disclosure requirements of IFRS. c. The Company believes that underlying profit before tax and underlying earnings provides additional useful information for shareholders. The term underlying earnings is not a defined term under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. It is not intended to be a substitute for IFRS measures of profit. As the Company has chosen to present an alternative earnings per share measure, a reconciliation of this alternative measure to the statutory measure required by IFRS is given in note 8. d. The financial information set out in this announcement does not constitute the Company's statutory accounts for the 52 week period ended 27 March 2010 or the 52 week period ended 28 March 2009, but it is derived from those accounts. Statutory accounts for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498 (2) or (3) Companies Act 2006 or equivalent preceding legislation. 1. Segmental information The group has adopted IFRS 8 'Operating Segments' with effect from 29 March 2009. IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the group that are regularly reported to the group's board in order to allocate resources to the segments and assess their performance. The group's reporting segments under IFRS 8 are UK and International. UK comprises the group's UK store and wholesale operations, catalogue and web sales. The International business comprises the group's franchise and wholesale revenues outside the UK. The unallocated corporate expenses represent board and company secretarial costs and other head office costs including audit, professional fees, insurance and head office property. +--------------+---------+-----------------------------------------------------+ | | | 52 weeks ended 27 March 2010| +--------------+---------+---------+-------------+----------------+------------+ | | | | | Unallocated| | | | | | | | | | | | UK|International| Corporate|Consolidated| | | | | | Expenses| | +--------------+---------+---------+-------------+----------------+------------+ | | |Â£ million| Â£ million| Â£ million| Â£ million| +--------------+---------+---------+-------------+----------------+------------+ |Revenue | | | | | | +--------------+---------+---------+-------------+----------------+------------+ |External sales| |590.3 |176.1 | -| 766.4| +--------------+---------+---------+-------------+----------------+------------+ |Result | | | | | | +--------------+---------+---------+-------------+----------------+------------+ |Segment result |36.1 |23.2 | (7.3)| 52.0| |(underlying) | | | | | +------------------------+---------+-------------+----------------+------------+ |Share based payments | | | | (14.4)| +------------------------+---------+-------------+----------------+------------+ |Non-cash foreign| | | | (1.3)| |currency adjustments | | | | | +------------------------+---------+-------------+----------------+------------+ |Amortisation of| | | | (2.1)| |intangible assets | | | | | +------------------------+---------+-------------+----------------+------------+ |Exceptional items | | | | (1.0)| +------------------------+---------+-------------+----------------+------------+ |Profit from operations | | | | 33.2| +------------------------+---------+-------------+----------------+------------+ |Finance costs | | | (0.7)| +----------------------------------+-------------+----------------+------------+ |Profit before taxation | | | 32.5| +----------------------------------+-------------+----------------+------------+ |Taxation | | | (8.9)| +----------------------------------+-------------+----------------+------------+ |Profit for the period | | | 23.6| +----------------------------------+-------------+----------------+------------+ Notes continued +--------------+---------+-----------------------------------------------------+ | | | 52 weeks ended 28 March 2009 restated(1)| +--------------+---------+---------+-------------+----------------+------------+ | | | | | Unallocated| | | | | | | | | | | | UK|International| Corporate|Consolidated| | | | | | Expenses| | +--------------+---------+---------+-------------+----------------+------------+ | | |Â£ million| Â£ million| Â£ million| Â£ million| +--------------+---------+---------+-------------+----------------+------------+ |Revenue | | | | | | +--------------+---------+---------+-------------+----------------+------------+ |External sales| |578.8 |144.8 | -| 723.6| +--------------+---------+---------+-------------+----------------+------------+ |Result | | | | | | +--------------+---------+---------+-------------+----------------+------------+ |Segment result |34.7 |16.5 | (6.6)| 44.6| |(underlying) | | | | | +------------------------+---------+-------------+----------------+------------+ |Share based payments | | | | (7.6)| +------------------------+---------+-------------+----------------+------------+ |Non-cash foreign| | | | 11.8| |currency adjustments | | | | | +------------------------+---------+-------------+----------------+------------+ |Amortisation of| | | | (2.1)| |intangible assets | | | | | +------------------------+---------+-------------+----------------+------------+ |Exceptional items | | | | (3.6)| +------------------------+---------+-------------+----------------+------------+ |Profit from operations | | | | 43.1| +------------------------+---------+-------------+----------------+------------+ |Investment income | | | 0.4| +----------------------------------+-------------+----------------+------------+ |Finance costs | | | (1.5)| +----------------------------------+-------------+----------------+------------+ |Profit before taxation | | | 42.0| +----------------------------------+-------------+----------------+------------+ |Taxation | | | (11.8)| +----------------------------------+-------------+----------------+------------+ |Profit for the period | | | 30.2| +----------------------------------+-------------+----------------+------------+ (1 )Restated for Amendments to IAS 38 as described in note 11. 3. Exceptional and other non-underlying items Due to their significance or one-off nature, certain items have been classified as exceptional or non-underlying as follows: ++-----------------------------------------------+--------------+--------------+ || |52 weeks ended|52 weeks ended| || | | | || | 27 March 2010| 28 March 2009| ++-----------------------------------------------+--------------+--------------+ || | Â£ million| Â£ million| ++-----------------------------------------------+--------------+--------------+ |Exceptional items: | | | +------------------------------------------------+--------------+--------------+ |Profit/(loss) on disposal/termination of | 1.0| (2.1)| |property interests | | | +------------------------------------------------+--------------+--------------+ |Integration of ELC included in cost of sales(1) | -| (1.5)| +------------------------------------------------+--------------+--------------+ |Integration of ELC included in admin expenses | (0.8)| -| +------------------------------------------------+--------------+--------------+ |Share based payments charge included in admin| (1.2)| -| |expenses | | | +------------------------------------------------+--------------+--------------+ |Other non-underlying items: | | | +------------------------------------------------+--------------+--------------+ |Non-cash foreign currency adjustments under IAS| (1.3)| 11.8| |39 and IAS 21(1) | | | +------------------------------------------------+--------------+--------------+ |Amortisation of intangibles(1) | (2.1)| (2.1)| +------------------------------------------------+--------------+--------------+ |Unwinding of discount on exceptional property | (0.3)| (1.0)| |provisions included in finance costs | | | +------------------------------------------------+--------------+--------------+ |Exceptional and other non-underlying items | (4.7)| 5.1| +------------------------------------------------+--------------+--------------+ (1 )Included in non-underlying cost of sales is a charge of Â£3.4 million (2009: credit of Â£8.2 million). Profit/(loss) on disposal/termination of property interests During the 52 weeks ended 27 March 2010 ('current year') a net credit of Â£1.0 million has been recognised in profit from operations relating to profit on disposal/termination of property interests and provisions against subleases and vacant property. During the 52 weeks ended 28 March 2009 ('prior year') a net charge of Â£2.1 million was recognised in profit from operations relating to provisions against subleases and vacant property. Integration of the Early Learning Centre In the current year, costs of Â£0.8 million have been charged to administrative expenses relating to restructuring costs. In the prior year, costs of Â£1.5 million were charged to cost of sales relating to the restructure of Early Learning Centre's supply chain and the opening of Early Learning Centre inserts in Mothercare stores. Share based payments charge included in admin expenses In the current year, a one-off share based payments charge relating to the 2007 Executive Incentive Plan of Â£1.2 million (2009: Â£nil million) was recognised in administrative expenses relating to synergies achieved from the integration of the Early Learning Centre. 4. Investment income +---------------------------+----------------+----------------+ | | 52 weeks ended | 52 weeks ended | | | | | | | 27 March 2010 | 28 March 2009 | +---------------------------+----------------+----------------+ | | Â£ million | Â£ million | +---------------------------+----------------+----------------+ | Interest on bank deposits | - | 0.4 | +---------------------------+----------------+----------------+ | Investment income | - | 0.4 | +---------------------------+----------------+----------------+ 5. Finance costs +------------------------------------------------+--------------+--------------+ | |52 weeks ended|52 weeks ended| | | | | | | 27 March 2010| 28 March 2009| +------------------------------------------------+--------------+--------------+ | | Â£ million| Â£ million| +------------------------------------------------+--------------+--------------+ |Interest and bank fees on bank loans and | 0.4| 0.4| |overdrafts | | | +------------------------------------------------+--------------+--------------+ |Unwinding of discounts on provisions(1) | 0.3| 1.1| +------------------------------------------------+--------------+--------------+ |Finance costs | 0.7| 1.5| +------------------------------------------------+--------------+--------------+ (1 )Includes a non-underlying charge of Â£0.3 million (2009: Â£1.0 million) of unwinding of discount on exceptional provisions. See note 3. Notes continued 6. Taxation The charge for taxation on profit for the period comprises: +--------------------------------------------+--------------+--------------+ | | |52 weeks ended| | |52 weeks ended| | | | | 28 March 2009| | | 27 March 2010| | | | | restated(1)| +--------------------------------------------+--------------+--------------+ | | Â£ million| Â£ million| +--------------------------------------------+--------------+--------------+ |Current tax: | | | +--------------------------------------------+--------------+--------------+ |Current year | 8.5| 8.3| +--------------------------------------------+--------------+--------------+ |Adjustment in respect of prior periods | (1.5)| -| +--------------------------------------------+--------------+--------------+ | | 7.0| 8.3| +--------------------------------------------+--------------+--------------+ +--------------------------------------------+--------------+--------------+ |Deferred tax: | | | +--------------------------------------------+--------------+--------------+ |Current year | 0.4| 4.5| +--------------------------------------------+--------------+--------------+ |Adjustment in respect of prior periods | 1.5| (1.0)| +--------------------------------------------+--------------+--------------+ | | 1.9| 3.5| +--------------------------------------------+--------------+--------------+ |Charge for taxation on profit for the period| 8.9| 11.8| +--------------------------------------------+--------------+--------------+ (1 )Restated for Amendments to IAS 38 as described in note 11. UK corporation tax is calculated at 28 per cent (2009: 28 per cent) of the estimated assessable profit for the period. The charge for the period can be reconciled to the profit for the period before taxation per the consolidated income statement as follows: +------------------------------------------------+--------------+--------------+ | | |52 weeks ended| | |52 weeks ended| | | | | 28 March 2009| | | 27 March 2010| | | | | restated(1)| +------------------------------------------------+--------------+--------------+ | | Â£ million| Â£ million| +------------------------------------------------+--------------+--------------+ |Profit for the period before taxation | 32.5| 42.0| +------------------------------------------------+--------------+--------------+ |Profit for the period before taxation multiplied| | | |by the standard rate of corporation tax in the | 9.1| 11.7| |UK of 28% (2009: 28%) | | | +------------------------------------------------+--------------+--------------+ |Effects of: | | | +------------------------------------------------+--------------+--------------+ |Expenses not deductible for tax purposes | 0.7| 1.0| +------------------------------------------------+--------------+--------------+ |Impact of overseas tax rates | (0.4)| 0.1| +------------------------------------------------+--------------+--------------+ |Utilisation of tax losses not previously | (0.5)| -| |recognised against capital gains | | | +------------------------------------------------+--------------+--------------+ |Adjustment in respect of prior periods | -| (1.0)| +------------------------------------------------+--------------+--------------+ |Charge for taxation on profit for the period | 8.9| 11.8| +------------------------------------------------+--------------+--------------+ (1 )Restated for Amendments to IAS 38 as described in note 11. In addition to the amount charged to the income statement, deferred tax relating to retirement benefit obligations amounting to Â£9.0 million (2009: Â£8.7 million) has been credited directly to equity. 7. Dividends +--------------------------+-------------------------+-------------------------+ | | 52 weeks ended| 52 weeks ended| | | | | | | 27 March 2010| 28 March 2009| +--------------------------+---------------+---------+---------------+---------+ | |pence per share| |pence per share| | | | |Â£ million| |Â£ million| +--------------------------+---------------+---------+---------------+---------+ |Amounts recognised as | | | | | |distributions to equity | | | | | |holders in the period | | | | | +--------------------------+---------------+---------+---------------+---------+ |Final dividend for the | 9.9p| 8.5| 8.3p| 6.9| |prior year | | | | | +--------------------------+---------------+---------+---------------+---------+ |Interim dividend for the | 5.5p| 4.7| 4.6p| 4.0| |current year | | | | | +--------------------------+---------------+---------+---------------+---------+ | | | 13.2| | 10.9| +--------------------------+---------------+---------+---------------+---------+ The proposed final dividend of 11.3 pence per share for the 52 weeks ended 27 March 2010 was approved by the Board after 27 March 2010, on 20 May 2010, and so, in line with the requirements of IAS 10 'Events After the Balance Sheet Date', the related cost of Â£9.8 million has not been included as a liability as at 27 March 2010. This dividend will be paid on 6 August 2010 to shareholders on the register on 4 June 2010. Notes continued 8. Earnings per share +------------------------------------------------+--------------+--------------+ | |52 weeks ended|52 weeks ended| | | | | | | 27 March 2010| 28 March 2009| +------------------------------------------------+--------------+--------------+ | | million| million| +------------------------------------------------+--------------+--------------+ |Weighted average number of shares in issue | 84.4| 83.5| +------------------------------------------------+--------------+--------------+ |Dilution - option schemes | 2.1| 2.7| +------------------------------------------------+--------------+--------------+ |Diluted weighted average number of shares in | 86.5| 86.2| |issue | | | +------------------------------------------------+--------------+--------------+ +------------------------------------------------+--------------+--------------+ | | | Â£ million| | | Â£ million| | | | | restated(1)| +------------------------------------------------+--------------+--------------+ |Earnings for basic and diluted earnings per | 23.6| 30.2| |share | | | +------------------------------------------------+--------------+--------------+ |Non-cash foreign currency adjustments | 1.3| (11.8)| +------------------------------------------------+--------------+--------------+ |Amortisation of intangibles arising on | 2.1| 2.1| |acquisition of ELC | | | +------------------------------------------------+--------------+--------------+ |Unwinding of discount on exceptional property | 0.3| 1.0| |provisions | | | +------------------------------------------------+--------------+--------------+ |Exceptional items (note 3) | 1.0| 3.6| +------------------------------------------------+--------------+--------------+ |Tax effect of above items | (1.7)| 1.6| +------------------------------------------------+--------------+--------------+ |Underlying earnings | 26.6| 26.7| +------------------------------------------------+--------------+--------------+ +------------------------------------------------+--------------+--------------+ | | | pence| | | pence| | | | | restated(1)| +------------------------------------------------+--------------+--------------+ |Basic earnings per share | 28.0| 36.2| +------------------------------------------------+--------------+--------------+ |Basic underlying earnings per share | 31.5| 32.0| +------------------------------------------------+--------------+--------------+ |Diluted earnings per share | 27.3| 35.0| +------------------------------------------------+--------------+--------------+ |Diluted underlying earnings per share | 30.7| 31.0| +------------------------------------------------+--------------+--------------+ (1 )Restated for Amendments to IAS 38 as described in note 11. The impact of the restatement for Amendments to IAS 38 (as described in note 11) was to decrease basic earnings per share by 0.1p and diluted earnings per share by 0.2p for the 52 weeks ended 28 March 2009. 9. Reconciliation of equity +------------------------------------------------+--------------+--------------+ | | |52 weeks ended| | |52 weeks ended| | | | | 28 March 2009| | | 27 March 2010| | | | | restated(1)| +------------------------------------------------+--------------+--------------+ | | Â£ million| Â£ million| +------------------------------------------------+--------------+--------------+ |Total recognised income and expense | 0.5| 7.7| +------------------------------------------------+--------------+--------------+ |Dividends to equity holders of the parent | (13.2)| (10.9)| |company | | | +------------------------------------------------+--------------+--------------+ |Issue of ordinary share capital | 0.9| 1.1| +------------------------------------------------+--------------+--------------+ |Exchange differences on translation of overseas | 0.1| 1.2| |operations | | | +------------------------------------------------+--------------+--------------+ |Purchase of own shares | -| (1.1)| +------------------------------------------------+--------------+--------------+ |Cost of employee share schemes | 2.6| 2.5| +------------------------------------------------+--------------+--------------+ |Net (decrease)/increase in equity | (9.1)| 0.5| +------------------------------------------------+--------------+--------------+ |Equity at beginning of year | 197.5| 197.0| +------------------------------------------------+--------------+--------------+ |Equity at end of year | 188.4| 197.5| +------------------------------------------------+--------------+--------------+ (1 )Restated for Amendments to IAS 38 as described in note 11. 10. Reconciliation of cash flow from operating activities +------------------------------------------------+--------------+--------------+ | | |52 weeks ended| | |52 weeks ended| | | | | 28 March 2009| | | 27 March 2010| | | | | restated(1)| +------------------------------------------------+--------------+--------------+ | | Â£ million| Â£ million| +------------------------------------------------+--------------+--------------+ |Profit from retail operations | 32.7| 45.6| +------------------------------------------------+--------------+--------------+ |Adjustments for: | | | +------------------------------------------------+--------------+--------------+ |Depreciation of property, plant and equipment | 15.1| 17.3| +------------------------------------------------+--------------+--------------+ |Amortisation of intangible assets - software | 3.3| 2.6| +------------------------------------------------+--------------+--------------+ |Amortisation of intangible assets - other | 2.1| 2.1| +------------------------------------------------+--------------+--------------+ |Underlying losses on disposal of property, plant| 1.0| 2.4| |and equipment | | | +------------------------------------------------+--------------+--------------+ |Losses on disposal of intangible assets - | 0.1| -| |software | | | +------------------------------------------------+--------------+--------------+ |Loss/(gain) on non-underlying non-cash foreign | 1.3| (11.8)| |currency adjustments | | | +------------------------------------------------+--------------+--------------+ |Equity-settled share based payments | 2.6| 2.5| +------------------------------------------------+--------------+--------------+ |Movement in property provisions | (5.0)| (3.1)| +------------------------------------------------+--------------+--------------+ |Movement in integration provisions | (3.3)| (10.3)| +------------------------------------------------+--------------+--------------+ |Movement in other provisions | 0.1| (0.3)| +------------------------------------------------+--------------+--------------+ |Amortisation of lease incentives | (3.4)| (2.2)| +------------------------------------------------+--------------+--------------+ |Lease incentives received | 10.2| 6.6| +------------------------------------------------+--------------+--------------+ |Payments to retirement benefit schemes | (6.1)| (5.0)| +------------------------------------------------+--------------+--------------+ |Charge to profit from operations in respect of | | | |service costs of retirement benefit schemes | 3.7| 1.2| +------------------------------------------------+--------------+--------------+ |Operating cash flow before movement in working | 54.4| 47.6| |capital | | | +------------------------------------------------+--------------+--------------+ |Increase in inventories | (7.2)| (14.9)| +------------------------------------------------+--------------+--------------+ |Increase in receivables | (2.9)| (2.4)| +------------------------------------------------+--------------+--------------+ |Increase in payables | 13.5| 9.8| +------------------------------------------------+--------------+--------------+ |Cash generated from operations | 57.8| 40.1| +------------------------------------------------+--------------+--------------+ |Income taxes paid | (7.7)| (5.2)| +------------------------------------------------+--------------+--------------+ |Net cash flow from operating activities | 50.1| 34.9| +------------------------------------------------+--------------+--------------+ (1 )Restated for Amendments to IAS 38 as described in note 11. Notes continued 11. Prior period restatement Amendments to IAS 38 require that when an entity has a right to access or has taken delivery of mail order catalogues or advertisement, any associated expenditure must be recognised as an expense. Historically, and in line with a number of similar companies, the group has prepaid the costs of preparing catalogues until the catalogue has been distributed and the benefits of sales associated with the costs of the catalogue are being earned. As a result of this change in policy the amounts disclosed in the accounts have been changed, and the comparatives restated, as follows: +------------------------------------------------+++-------------+-------------+ |Balance sheet adjustments: |||28 March 2009|29 March 2008| +------------------------------------------------+++-------------+-------------+ | ||| Â£ million| Â£ million| +------------------------------------------------+++-------------+-------------+ |Trade and other receivables (as previously ||| 55.7| 52.5| |reported) ||| | | +------------------------------------------------+++-------------+-------------+ |Prior year adjustment ||| (1.4)| -| +------------------------------------------------+++-------------+-------------+ |Current year adjustment ||| 0.1| (1.4)| +------------------------------------------------+++-------------+-------------+ |Trade and other receivables (restated) ||| 54.4| 51.1| +------------------------------------------------+++-------------+-------------+ +------------------------------------------------+++-------------+-------------+ |Trade and other payables (as previously |||(108.4) | (95.6)| |reported) ||| | | +------------------------------------------------+++-------------+-------------+ |Prior year adjustment ||| -| -| +------------------------------------------------+++-------------+-------------+ |Current year adjustment ||| (0.3)| -| +------------------------------------------------+++-------------+-------------+ |Trade and other payables (restated) ||| (108.7)| (95.6)| +------------------------------------------------+++-------------+-------------+ +--------------------------------------------------+++-------+-----+ | Current tax liabilities (as previously reported) ||| (2.6) | 0.6 | +--------------------------------------------------+++-------+-----+ | Prior year adjustment ||| 0.4 | - | +--------------------------------------------------+++-------+-----+ | Current year adjustment ||| 0.1 | 0.4 | +--------------------------------------------------+++-------+-----+ | Current tax liabilities (restated) ||| (2.1) | 1.0 | +--------------------------------------------------+++-------+-----+ +--------------------------------------------++++----------------+ | |||| 52 weeks ended | | Income statement adjustments: |||| | | |||| 28 March 2009 | +--------------------------------------------++++----------------+ | |||| Â£ million | +--------------------------------------------++++----------------+ | Profit before tax (as previously reported) |||| 42.2 | +--------------------------------------------++++----------------+ | Current year adjustment |||| (0.2) | +--------------------------------------------++++----------------+ | Profit before tax (restated) |||| 42.0 | +--------------------------------------------++++----------------+ +-----------------------------------++++--------+ | Taxation (as previously reported) |||| (11.9) | +-----------------------------------++++--------+ | Current year adjustment |||| 0.1 | +-----------------------------------++++--------+ | Taxation (restated) |||| (11.8) | +-----------------------------------++++--------+ As a result of this change in policy, there was a Â£0.1 million increase in profit after tax for the 52 weeks ended 27 March 2010. Directors' Responsibility Statement We confirm to the best of our knowledge: 1. The financial statements, prepared in accordance with the applicable setoff accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings including the consolidation taken as a whole; and 2. the Business Review along with other documents which are incorporated into the directors' report, together include a fair review of the development and performance of the business and the position of the Company and the undertakings including the consolidation taken as a whole together with a description of the principal risks and uncertainties they face. By order of the Board Ben Gordon Neil Harrington Group Chief Executive Group Finance Director Dated 9 June 2010 1 Three-month average to 27 March in line with the scheme rules [HUG#1422778]

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