Final Results - Year Ended 1 April 2000
Storehouse PLC
25 May 2000
Preliminary results for the 53 weeks ended 1 April 2000
STOREHOUSE ANNOUNCES PRELIMINARY RESULTS
- Group operating profit £13.5m* (£104.3m*)
- Mothercare returns to profit in second half
- Storehouse to become Mothercare plc
- Mothercare management changes announced
- Sale of Bhs completed - £224m received
- Cash return to shareholders of approximately £100m proposed
(equivalent to 23 pence per share)
*before exceptional items.
Commenting today, Alan Smith, Storehouse Chairman, said:
'With the completion of the sale of Bhs, we can now focus on
delivering Mothercare's full potential. I am delighted that Chris
Martin has become Chief Executive of Mothercare. He led the strategic
review of this business last Summer and will now lead the acceleration
of the Mothercare recovery programme put in place last Autumn, which
is already showing encouraging signs.'
Enquiries to:
Alan Smith, Chairman, Storehouse plc 020 7339 2115
Chris Martin, Chief Executive, Mothercare 020 7339 2152
Susan Gilchrist/Victoria Sabin, Brunswick Group Limited 020 7404 5959
Group results
The performances of both Bhs and Mothercare in the financial year
1999/2000 continued to be affected by the adverse factors which have
been characteristic of the clothing and general retail merchandise
sectors over the last two years, including price deflation, increasing
costs and new competition.
However, the Mothercare recovery programme, as set out in November, is
beginning to have an effect, with the business returning to profit in
the second half of the year. In particular, the board has been
encouraged by the performance of the large format Mothercare World
stores.
Group operating profit before exceptional items was £13.5 million
compared to £104.3 million last year on sales of £1266.1 million
(£1328.6 million) which were down by 4.7 per cent. Following an
interest charge of £6.5 million, profit before tax and exceptional
items was £7.0 million (£98.6 million).
Earnings per share before exceptional items was 1.6p (16.8p). As with
the interim dividend, no final dividend is proposed (9.1p).
In view of the trading conditions, strict cash controls were
implemented. Net debt at the year end was £69.4 million (£91.2
million). Balance sheet gearing was 30.8 per cent (14.8 per cent).
Disposal of Bhs
On 7 April 2000 the board announced that Storehouse had reached
agreement to dispose of Bhs to Measuremarket Ltd, a company wholly
owned by Philip Green and his family. The disposal was approved by
Storehouse shareholders at an Extraordinary General Meeting on 16 May
2000. Following completion of the transaction on 22 May 2000, an
initial cash consideration of £224 million has been received including
£24 million arising from movements in working capital. The final
level of consideration will be subject to a completion statement.
It is the board's intention to return approximately £100 million
(equivalent to 23p per share) of the proceeds of the disposal of Bhs
to shareholders, repay all group debt, and to apply the remainder of
the proceeds, net of costs, to the development of Mothercare. The
effect of this will be to provide a secure financial base for the
Mothercare business.
The board will seek approval at the Annual General Meeting to change
the name of Storehouse plc to Mothercare plc.
Bhs results
Sales for the year ended 1 April 2000 were £822.4 million (£856.2
million). UK like-for-like sales in the first half year were 9.2 per
cent lower and 4.4 per cent lower in the second half year, resulting
in a reduction of 6.5 per cent for the year as a whole (excluding the
53rd week). UK gross margin (excluding the 53rd week) fell by 2.3
percentage points. Sales to Bhs overseas franchisees (excluding the
53rd week) were down 54.7 per cent compared to last year from £42.5
million to £19.3 million.
Profit from retail operations before exceptional items, interest and
tax was £13.1 million (£86.4 million).
Mothercare results
Profit from retail operations before exceptional items, interest and
tax amounted to £0.4 million (£17.9 million) with a return to profit
in the second half year of £3.7 million. Excluding the disposal
stores, the ongoing Mothercare business generated a profit of £5.7
million, with sales in the UK (excluding the 53rd week) up 1.5 per
cent (flat on a like-for-like basis) and gross margins down 2.0
percentage points. In the second half year UK sales grew 3.3 percent
(excluding the 53rd week) and gross margins declined 0.3 percentage
points on last year. Sales to overseas franchisees declined by 25.4
percent (excluding the 53rd week) with a second half decline of 5.3
percent.
Of the 82 disposal stores there were 20 remaining at the year end.
Since the year end, contracts have been exchanged on ten of these and
a further four are under offer.
Exceptional charge
An exceptional charge of £396.4 million has been taken which relates
to one-off costs in four categories: the loss on disposal of Bhs; the
initial implementation of the turnaround plan at Bhs as announced in
November; the restructuring at Mothercare required as part of the
recovery programme set out in November; and the break-up of the
Storehouse head office.
Management
As a result of the disposal of Bhs, Stephen Tague, managing director
of Bhs and executive director of Storehouse, will be leaving the group
at the end of May.
Chris Martin, currently group finance director at Storehouse, will
become CEO of Mothercare with immediate effect.
The Mothercare business has previously been operated as three separate
divisions: Mothercare UK, Mothercare Direct and Mothercare
International, each with their own management teams reporting directly
to the Storehouse board. In order to drive the Mothercare recovery
programme more effectively through the three delivery channels, both
in the UK and internationally, these divisions have been integrated in
a new Mothercare structure. These changes will ensure that products
and services across all divisions are developed to deliver the
Mothercare brand potential with greater consistency in UK and overseas
stores, as well as through the catalogue and Mothercare.com.
As a result of the elimination of the role of managing director at
Mothercare UK, Greg Tufnell has left the business.
Mothercare strategy
The Mothercare recovery programme set out within the group's interim
results in November 1999 aims to restore Mothercare's brand position
as the destination store for all the needs of parents and young
children, offering the widest range of clothing, hardware and toys for
the pre-school child. This is being delivered through three channels:
Mothercare UK stores; Mothercare International; and Mothercare Direct,
which includes the Direct mail order catalogue and Mothercare.com, the
new transactional web site to be launched in June 2000. The
combination of these delivery channels will provide the customer with
maximum access to Mothercare products and services.
Products
Good progress has consistently been achieved over the last three years
in the product areas of home, travel and toys. These ranges already
successfully combine Mothercare's own-brand products with other well-
known brands across a full range of price points.
Mothercare will provide the same comprehensive coverage for the pre-
school child in its clothing ranges, through a wider and deeper offer
of Mothercare branded products as well as selected well-known branded
childrenswear. This spring, a number of new clothing brands including
Oilily, Osh Kosh, Chicco and Petit Bateau have been introduced, on a
trial basis, to the new Mothercare World store in Kew, Surrey. These
brands are to be introduced into a further 15 Mothercare World stores
over the coming months.
UK Stores
The expansion of the successful Mothercare World chain (stores larger
than 10,000 sq ft) is central to the future growth of Mothercare.
Mothercare World will carry the full range of merchandise and,
increasingly, also offer advice and new support services to customers.
It is planned that 40 new Mothercare World stores will be opened over
the next three to four years, including new locations and re-sites.
This will bring the total number of Mothercare World stores in the
chain to 100.
The Mothercare high street store will provide a destination range of
clothing for babies and pre-school children, together with a range of
hardware and toys tailored to the local market. The sale and closure
of 82 of the under-performing high street Mothercare stores in the
portfolio is nearing completion. The management team will continue to
review the portfolio on a market by market basis as additional
Mothercare World stores are opened.
Mothercare Direct
Relaunched last summer, the Mothercare Direct mail order catalogue
achieved sales of £7 million, up on last year, and provides a solid
base from which to develop the second Direct channel, Mothercare.com.
Mothercare.com, a fully transactional web site, will be launched in
June of this year. The site will provide a range of Mothercare
products as well as an extensive information service, chat rooms and
bulletin boards. A strong focus has been placed on ensuring that
fulfilment and call centre systems are in place and fully tested prior
to the launch of the site.
Mothercare International
The progress being made with the Mothercare recovery programme
provides a sound foundation for the further development of the
Mothercare International business which currently operates in 36
countries.
Current trading
Sales in the first seven weeks in the UK ongoing business increased by
5.3%, a like-for-like increase of 3.4%, and margins were up year on
year, continuing the improving trend seen in the second half.
Preliminary announcement of results
For the 53 weeks ended 1 April 2000
(1999 - 52 weeks ended 27 March 1999)
Before Excep- Before
excep- tional excep- Excep-
tional items tional tional
items (Note Total items items Total
3)
2000 2000 2000 1999 1999 1999
Notes £m £m £m £m £m £m
Turnover 1 1,266.1 - 1,266.1 1,328.6 - 1,328.6
_______ _______ _______ _______ _______ _______
Profit from 2
retail
operations 13.5 (92.8) (79.3) 104.3 (6.2) 98.1
Exceptional 3
items - (303.6) (303.6) - (12.1) (12.1)
Interest 4 (6.5) - (6.5) (5.7) - (5.7)
_______ _______ _______ _______ _______ _______
Profit
before
taxation 7.0 (396.4) (389.4) 98.6 (18.3) 80.3
Taxation (0.3) - (0.3) (27.6) 1.1 (26.5)
_______ _______ _______ _______ _______ _______
Profit/
(Loss) for
the
financial
year 6.7 (396.4) (389.7) 71.0 (17.2) 53.8
_______ _______ _______ _______ _______ _______
Dividend 5
per share
- Final - 5.4p
- Full -
year 9.1p
Earnings 6
per share
- Normal 1.6p (92.8)p 16.8p 12.7p
- Diluted 1.6p (92.8)p 16.7p 12.6p
1. Turnover
Turnover by division (excluding sales taxes) comprises:
2000 1999
£m £m
Bhs - discontinued businesses 822.4 856.2
Mothercare - continuing businesses 443.7 472.4
________ ________
1,266.1 1,328.6
________ ________
2. Profit from Retail Operations
Profit from Retail Operations before exceptional items by
division comprises:
2000 1999
£m £m
Bhs - discontinued businesses 13.1 86.4
Mothercare - continuing businesses 0.4 17.9
________ ________
13.5 104.3
________ ________
The depreciation charge for the year amounted to £66.6 million
(1999 - £63.2 million). The depreciation charge attributable to
continuing operations in 2000 was £14.7 million.
3. Exceptional Items
The exceptional items can be summarised as follows:
Continuing Discontinued Total
£m £m £m
Cost of sales (40.3) (43.6) (83.9)
Administrative expenses (8.0) (0.9) (8.9)
________ ________ ________
Total charged to retail
loss (a) (48.3) (44.5) (92.8)
Profit/(loss) on disposal
of Stores (b) 7.2 (3.4) 3.8
Provision for costs of
separation (c) (6.8) - (6.8)
Provision for loss on
disposal of Bhs (d) - (300.6) (300.6)
________ ________ ________
Total exceptional items (47.9) (348.5) (396.4)
________ ________ ________
(a) Exceptional costs charged to the loss from retail operations
This consists of the loss on the write-down of stock resulting from
the restructuring plans announced in November 1999, the impairment
charge for fixed assets at Mothercare, the pre launch costs of
Mothercare.com incurred before 1 April 2000, the provision for
redundancies and other related operating costs arising from the Bhs
and Mothercare store closure programmes. In addition there are
other one off costs including the cost of the strategic review; the
compensation paid to two directors for loss of office in accordance
with their service contracts and the write-down of the shares held
by the Storehouse employee trusts in accordance with UITF 13 and
FRS 11. The total costs of these items has been charged to cost of
sales and administration expenses as set out above.
(b) Profit or loss on disposal of stores:
During the year the group has disposed of a number of stores
arising from the Mothercare store disposal programme. In addition
the group's interests in the freehold of four Bhs stores have been
sold. As a result the group has generated a net profit on disposal
of stores of £24.3 million and generated cash on the disposal of
tangible fixed assets of £49.0 million. Provision for the loss on
disposal of stores is £20.5 million including the cost of the six
Bhs stores provided at the half year.
(c) Costs of separation of Bhs and Mothercare:
Provision of £6.8 million has been made for the costs of separating
the Bhs and Mothercare businesses and relocating Storehouse into
the Mothercare head office.
(d) Provision for loss on disposal of Bhs:
On 27 March 2000, the group announced that it had signed heads of
terms with Measuremarket Limited for the disposal of Bhs. The
disposal was completed on 22 May 2000. Provision has been made for
the estimated loss on the date of disposal of £300.6 million which
included direct costs of £3.6 million.
There is no tax effect as a result of the exceptional items. The net
cash impact of the exceptional items in 1999/2000 was a cash inflow of
£43.7 million. Excluding the net proceeds on the disposal of Bhs the
estimated cash outflow in the continuing business in 2000/2001 as a
result of these exceptionals is £12.2 million.
4. Interest
2000 1999
£m £m
Interest receivable 2.4 3.4
Interest payable - banks loans and overdrafts (8.1) (7.4)
Obligations under property leases (0.6) (1.6)
Obligations under finance leases (0.2) (0.1)
_______ _______
(6.5) (5.7)
_______ _______
5. Dividend
No final dividend has been proposed (1999 - 5.4p per share).
6. Earnings Per Share
2000 1999
Average number of ordinary shares in issue 420.2m 423.5m
Diluted impact of options including
Option 2000 - 0.6m
Diluted impact of LTIP shares 0.8m 0.2m
________ ________
Average number of potential ordinary
shares in issue 421.0m 424.3m
________ ________
(Loss)/profit for the financial year £(389.7)m £53.8m
Profit for the financial year excluding
exceptional items £6.7m £71.0m
(Loss)/earnings per share (92.8)p 12.7p
Earnings per share excluding exceptional
items 1.6p 16.8p
Diluted (loss)/earnings per share (92.8)p 12.6p
Reconciliation of movement in shareholders' funds
2000 1999
£m £m
Profit for the financial year (389.7) 53.8
Dividends - (38.6)
New share capital subscribed - 1.6
_______ _______
Net (decrease)/increase in shareholders' funds (389.7) 16.8
Opening shareholders' funds 615.3 598.5
_______ _______
Closing shareholders' funds 225.6 615.3
_______ _______
Note: This preliminary announcement of results does not constitute
statutory accounts. The preliminary announcement has been
extracted from the statutory accounts of Storehouse plc for 2000,
on which the auditors have given an unqualified auditors' report
and which have not yet been filed with the Registrar of Companies.
Summarised Group Balance Sheet at 1 April 2000
(1999 - 27 March 1999)
2000 1999
£m £m
Fixed Assets
Tangible Assets* 319.6 658.7
Investments 1.5 6.5
_______ _______
321.1 665.2
Current Assets
Stocks 118.7 185.2
Debtors 65.2 98.4
Cash at bank and time deposits 51.3 48.8
_______ _______
235.2 332.4
Creditors: Amounts falling due within one year (257.4) (323.6)
_______ _______
Net Current (liabilities) Assets (22.2) 8.8
_______ _______
Total Assets less current liabilities 298.9 674.0
Creditors: Amounts falling due after one year (11.6) (27.3)
Provisions for liabilities and charges (61.7) (31.4)
_______ _______
Net assets 225.6* 615.3
_______ _______
Shareholders' Funds 225.6 615.3
_______ _______
Net debt (69.4) (91.2)
_______ _______
Net gearing 30.8% 14.8%
Net assets per share 53p 145p
* The balance sheet includes the impact of the loss on disposal
of Bhs of £300.6 million which has been reflected as a
provision against tangible fixed assets.
Analysis of the Proforma Continuing Group Balance Sheet at
1 April 2000 excluding net debt
Continuing
business
£m
Fixed assets
Tangible fixed assets 92.5
Investments 1.5
_______
94.0
_______
Current assets
Stocks 39.8
Debtors 31.7
_______
71.5
Creditors: amounts falling due within one year (59.8)
_______
Net current assets 11.7
_______
Total assets less current liabilities 105.7
Creditors: amounts falling due after one year (1.2)
Provisions for liabilities and charges (8.5)
_______
Net assets excluding net debt 96.0
_______
Summarised Cash Flow Statement
For the 53 weeks ended 1 April 2000
(1999 - 52 weeks ended 27 March 1999)
2000 1999
£m £m
Retail profit before exceptionals 13.5 104.3
Depreciation 66.6 63.2
Working Capital 20.4 0.4
Other (5.3) (1.0)
_______ _______
Cash flow from operations 95.2 166.9
Taxation (0.6) (31.2)
Capital Expenditure (92.5) (140.2)
Asset disposals 49.0 12.3
Dividends (22.8) (38.5)
Acquisition of shares - (4.7)
Other (6.5) (4.1)
_______ _______
Decrease/(increase) in net debt 21.8 (39.5)
_______ _______
Net Debt (69.4) (91.2)
_______ _______
Divisional half year performance - Profit from retail operations
before exceptionals
For the 53 weeks ended 1 April 2000
(1999 - 52 weeks ended 27 March 1999)
First Half Second Half Full Year
2000 1999 2000 1999 2000 1999
£m £m £m £m £m £m
Bhs
Turnover 370.7 400.4 451.7 455.8 822.4 856.2
Profit (8.3) 28.9 21.4 57.5 13.1 86.4
Mothercare
Turnover 230.4 247.9 213.3 224.5 443.7 472.4
Profit (3.3) 12.3 3.7 5.6 0.4 17.9
Total
Turnover 601.1 648.3 665.0 680.3 1,266.1 1,328.6
Profit from
retail
operations (11.6) 41.2 25.1 63.1 13.5 104.3