Final Results

Mothercare PLC 24 May 2006 24 May 2006 Mothercare plc Preliminary Results for the 53 weeks ended 1 April 2006 Key Financials: • Group sales up 5.6% to £482.7m (2005: £457.2m) • Group profit before taxation up 56.1% to £24.2m (2005: £15.5m) • Group profit before exceptional items and taxation up 8.7% to £21.3m (2005: £19.6m) • Basic EPS up 53.6% to 25.5p (2005: 16.6p) • EPS before exceptional items up 7.0% to 21.3p (2005: 19.9p) • Final dividend up 16.0% to 6.15p (2005: 5.3p) • Total dividend up 12.5% to 9.0p (2005: 8.0p) • Special contribution to pension schemes of £5.3m • Net cash generated £4.2m before special pension contribution Financial Highlights: •UK sales up 3.4% to £414.6m (2005: £401.1m), including Direct in Home up 18.8% to £20.2m (2005: £17.0m) and Direct in Store up 34.0% to £20.9m (2005: £15.6m) •UK store like for like sales up 0.4% in the second half (down 0.3% for the full year)* •UK gross margin up 0.4 percentage points •International revenue from franchisees up 21.4% to £68.1m (2005: £56.1m) •International like for like franchisee sales up 7.0% for the full year* On a 52 week basis (52 weeks to 25 March 2006 compared with 52 weeks to 26 March 2005) group sales were up 3.7% to £474.2m (2005: £457.2m) and group profit before exceptional items and taxation was up 4.1% to £20.4m (2005: £19.6m). Further 52 week information is set out in the Financial Review. Operational Highlights: •46 overseas franchise stores added during the year making 266 stores in 37 countries •Continuing optimisation of the property portfolio. 10 UK stores opened and 10 UK stores closed during the year •MODA maternity and Gift ranges successfully rolled out to all UK stores •New distribution centre proceeding in line with plan •New EPOS technology rolled out to all UK stores, all stores now web enabled Commenting on the results, Ben Gordon, Chief Executive said: 'The group has performed strongly in the year. Our UK business has remained resilient in a difficult trading environment, with the Direct business growing rapidly, illustrating the benefit of our multi-channel strategy. Our International expansion continues apace, reinforcing the strength of Mothercare as a global brand. The group is well placed as we now focus our emphasis on growth, through our strategy of Specialism, Efficiency and Reach.' Enquiries to: Mothercare plc Ben Gordon, Chief Executive 01923 241000 Neil Harrington, Finance Director 01923 241000 Brunswick Group Limited Susan Gilchrist/ Catherine Hicks/ Anna Jones 020 7404 5959 * see financial review for definition of like for like sales CHIEF EXECUTIVE'S REVIEW 2005/06 RESULTS The year ended 1 April 2006 contained 53 weeks compared with 52 weeks last year and the financial statements and this review have been prepared on this basis. Certain key information calculated on a 52 week basis is set out in the Financial Review. Group sales for the year rose by 5.6% to £482.7m (2005: £457.2m). Profit before exceptional items and tax, increased by 8.7% to £21.3m (2005: £19.6m). These figures exclude exceptional profits of £2.9m (2005: exceptional losses of £4.1m), which in the current year arose from the disposal of property interests as part of the ongoing optimisation of our store portfolio. If exceptional items are included, pre-tax profits increased by 56.1% to £24.2m. Against the backdrop of a continuing difficult UK retail market we have grown sales in the UK by 3.4% to £414.6m. This includes Direct in Home sales up 18.8% to £20.2m and Direct in Store sales up 34.0% to £20.9m. UK store like for like sales which were down by 0.3% over the year as a whole, rose by an estimated 1.2% (after adjusting for Easter) in the final quarter. UK gross margin increased by 0.4 percentage points. In our International markets both total and like for like sales have continued to grow strongly, by 21.4% (to £68.1m) and 7.0% respectively. We have changed the way we apportion shared costs between the UK and International, and this is detailed in the Financial Review. STRATEGIC DEVELOPMENT 2005/6 was the third year of our three year turnaround programme designed to rebuild shareholder value at Mothercare and lay the foundations for longer term growth. Since the start of the programme, a pre-tax loss of £24.8m has been turned into a pre-tax profit of £24.2m. Total group sales have increased by 11.8%. Over the last three years we have generated £80 million of cash before capital expenditure. Cash in the balance sheet is now £35.9m. The total shareholder return on £100 invested at the start is now worth £325. We are now developing Mothercare's full potential, focussing more aggressively on growth through our Specialism, Efficiency and Reach strategies. These will build Mothercare into a world class speciality brand enabling us to grow our business through the multi-channel retailing opportunities of Stores, Direct and International. SPECIALISM We are working to establish Mothercare as the leading specialist brand worldwide. The combination of the best, most innovative products, with great stores and outstanding service will ensure that Mothercare remains truly differentiated from our competitors. Product Our focus on the quality, design and value of our ranges has continued to show benefits. Mothercare's innovative and design led range of own brand pushchairs continues to improve in both quality and value. Our own brand 'Urban Detour' range won the Mother & Baby award, 'Best Pushchair' for the third year in succession. We have also introduced new lines, including branded pushchairs such as Bugaboo, Phil & Ted, Jane, and Mutsy. In clothing, we have made significant progress in the development of our own brand MODA range of maternity wear and this is now featured in 54 stand alone areas in our larger stores. MODA has been successful in addressing the needs and aspirations of the more fashion conscious shopper for maternity wear within our stores and is also successful in our overseas markets. We believe MODA has considerable scope for further growth. During the year we continued to improve the quality, design and value of our baby and childrenswear ranges and have seen a further increase in market share in our children's clothing, building on the performance of the past two years. Last year we introduced a new gift offer which focussed on our core market of birth to age two. During the year, the range was extended to all stores and added to our internet gift service, and is showing strong growth. Stores With the substantial completion of the High Street re-fit programme our attention has now turned to the out of town stores. We have refitted two out of town stores with a new trial concept designed to enhance the shopping experience, increase sales densities, expand our successful home and travel ranges and maximise the benefit from concessions. Early indications are that the performance of the refitted stores has been encouraging and we plan to extend the trial to at least a further ten out of town stores in 2006. We continue to optimise our store portfolio to ensure we have the best size and location wherever we trade. We opened 10 stores and closed 10 stores in the year, four of which were direct re-sites to smaller sized units and/or more suitable locations in the same town. In each case the rightsizing of the portfolio increased sales per square foot and reduced the operating costs of those units. Further optimisation of the portfolio will take place during 2006. Service and People We continue to invest in further developing the expertise and specialisim of our staff. We were particularly pleased that the high standards of customer service in our stores have been recognised in various national retailing surveys during the year. This underpins the results of our independent mystery shopper programme. In the results for the quarter to 1 April 2006 we achieved a score consistent with the best in class customer service scores of other service orientated multiple retail chains in the UK. Mothercare was also placed 9th in the Sunday Times Top 20 Best Big Companies to work for, 2006 awards. The Company was presented with a special 'Well Being' award, recognising its efforts in supporting its employees. EFFICIENCY Mothercare is building a highly efficient operating platform, including a new cost effective supply chain and state of the art sourcing capability, that will enable Mothercare to operate as a world class speciality retailer. Sourcing Continued progress has been made with our sourcing initiatives, allowing us to grow our UK margin over the year by 0.4 percentage points (and by 8.3 percentage points over the last three years). We continue to consolidate our direct sourcing activities in India, China and Europe. Some 38% of our clothing and 12% of our home and travel ranges are now sourced directly. We are on track to achieve our aim to increase directly sourced clothing to 50%. The establishment of our Indian sourcing office will be completed in this financial year and we expect to see further benefits to gross margin and efficiency. Supply Chain In November 2004 we announced our new distribution strategy and the plan to move the bulk of our operation to a new National Distribution Centre. At that time we indicated that the completion of the transition would take place in the summer of 2006. This transition is both on plan and budget. We continue to make significant progress on product availability. Through the efficiency of our overall distribution operations, availability is now around 90% up from 85% last year and from 65% three years ago. The completion of the move to the National Distribution Centre will give us the opportunity to drive further efficiencies from our distribution operations and reduce the distribution cost as a percentage of sales. Infrastructure During the year we successfully completed the roll out of our new EPOS system to all UK stores. All stores now have new till systems that have reduced transaction times for our customers, and given us the opportunity to implement a number of other in-store efficiencies; releasing more store staff hours into customer facing activities. All tills are web enabled, providing a platform for our web in Store offer. To address the industry wide issue of rising occupancy energy and fuel costs we are focussing on controllable aspects of our overheads. For example, we are mitigating increases in occupancy costs by measures including store re-siting, resizing and closures, while inflation in fuel costs is being off-set by refining the frequency and timing of deliveries to stores. REACH With the foundations of specialism and efficiency firmly in place, we can really drive our third priority which is about expanding our reach to parents here in the UK and around the world. This is supported by a world class franchisee network and an integrated multi channel catalogue and internet operation. UK Stores We have a significant opportunity over the next five years to relocate and re-size a number of our stores where leases fall for renewal. We have also identified at least 40 additional high street and 20 out of town locations where Mothercare could trade successfully. This gives us the opportunity to build a profitable UK store portfolio for the future and achieve our target of 80% of the UK population within easy reach of a Mothercare store. Mothercare Direct Over the last few years, we have grown a very successful multi channel business through Direct. Mothercare Direct comprises Direct in Home (Web in Home and telephone catalogue ordering) and Direct in Store (web-enabled stores). Overall sales from our Direct channel grew by 26.1% to £41.1m during the year. With the completion of the EPOS rollout to all stores, enabling all tills to access the internet, we have been able to extend the Web in Store ordering service and this has grown very strongly during the year. Mothercare.com is the number one parenting site in the UK. We estimate that two thirds of pregnant mothers use our site and we have 14 million page views each month. Our investment in the Direct business, which includes the extension of the Web in Store facility, provides the Company with a powerful opportunity to exploit both the in store and in home based internet retailing opportunities. We believe that our Direct business has significant potential for future growth worldwide. International Our International business continues to provide a substantial growth opportunity. We now trade in 37 countries through 266 stores. Total retail sales made by our franchisees were £169.4m. Overall franchisee like for like sales grew by an estimated 7.0%. Our income from franchisees increased by 21.4% during the year to £68.1m. During the current financial year we expect to open at least 50 new stores, the majority of which will be in existing markets. Our first stores in India opened in April 2006. We now have two stores in Mumbai, one in Pune, one in Hyderabad and one in Bangalore. We expect to have 10 stores open and trading in India by the end of the financial year. There are considerable opportunities to expand in the Middle East, South Asia and the Far East as well as to add to our portfolio of countries within Europe. To support this growth we have invested further in the supply chain for our International business by opening distribution centres in India to complement those in Singapore and Dubai. Outlook We are confident however that the underlying strength of the Mothercare brand together with the actions we are taking to improve the specialism, efficiency and reach of our business will help us to continue to grow in the UK and we are also confident that the UK Direct business and the International business will continue to develop strongly during the year. We will provide a trading statement for the first quarter on 20 July 2006, the date of our AGM. FINANCIAL REVIEW RESULTS SUMMARY Total group sales have increased by 5.6% to £482.7 million (2005: £457.2 million). Profit before tax and exceptional items improved by 8.7% to £21.3 million from £19.6 million last year. After an exceptional profit of £2.9 million (2005: exceptional loss of £4.1m) which arose from the disposal of property interests, pre-tax profit was up by 56.1% to £24.2 million (2005: £15.5 million). The results can be summarised as follows: Income statement 53 weeks 52 weeks 1 April 2006 25 March 2005 £m £m Revenue 482.7 457.2 Profit from operations before exceptional items 17.9 16.7 Investment income and finance costs 3.4 2.9 Profit before exceptional items and taxation 21.3 19.6 Exceptional items 2.9 (4.1) Taxation (6.7) (4.2) Profit after taxation 17.5 11.3 Earnings per share 25.5p 16.6p Dividend per share 9.0p 8.0p 53rd Week in 2006 The year ended 1 April 2006 contained 53 weeks compared with 52 weeks last year and the financial statements and this review have therefore been prepared on this basis. For information, on a more comparable, 52 week basis; •Group sales up 3.7% to £474.2 million (2005: £457.2million) •UK sales up 1.5% to £407.3 million (2005: £401.1m) including Direct in Store sales up 31.4% to £20.5 million and Direct in Home sales up 15.9% to £19.7 million •International revenue up 19.3% to £66.9 million •Group profit before exceptional items and taxation up 4.1% to £20.4 million (2005: £19.6 million). •Group profit after tax up 49.6% to £16.9 million IFRS We have fully adopted International Financial Reporting Standards (IFRS) and prior period comparatives have been restated. The impact of IFRS on profit after tax for 2004/05 was an increase of £0.2 million. A full reconciliation was issued at our AGM on 15 July 2005 and can be found on our web site www.mothercare.com Two of the new standards adopted, IAS 19 (Employee Benefits) and IAS 39 (Financial Instruments: Recognition and Measurement) give rise to non cash adjustments to the income statement, some of which could be highly volatile, and not reflective of the underlying profit of the business. The Profit from Operations in the year would be £1.2m higher (2005: £1.5m higher) and Profit after Tax would be £0.5m lower (2005: £0.2m higher) if the effect of these volatile non cash elements of IFRS are excluded. Results by segment The primary segments of Mothercare Plc are the UK (which includes the Direct business) and International businesses. We have adjusted the way that we report the Profit from Operations before exceptional items of our business segments, and now allocate shared costs between the two segments on a more comprehensive basis: £m 2006 Revenue Profit Profit (old basis) (new basis) UK 414.6 8.9 19.3 International 68.1 9.0 5.3 Corporate - - (6.7) 482.7 17.9 17.9 £m 2005 UK 401.1 9.4 19.6 International 56.1 7.3 4.4 Corporate - - (7.3) 457.2 16.7 16.7 Costs previously allocated to the UK and now allocated to International amount to £3.7 million (2005: £2.9 million) being mostly buying, merchandising, certain distribution and management costs. Corporate expenses not allocated to UK or International represent head office costs, board and senior management costs, insurance, annual and interim reporting costs and audit and professional fees. Results by category and channel Sales in the year have increased in each of our key product categories and also across each channel to market. Sales from UK stores were up 2.7%, International stores up 21.4% and Direct in Home up 18.8%. Like for like sales are defined as sales growth on the previous year for stores that have been trading continuously from the same selling space for at least a year. UK like for like sales were down 0.3% in the year in a difficult retail market, but were up an encouraging 0.4% in the second half and an estimated 1.2% in the final quarter. International franchisee like for like sales were up 7.0% in the year. Our Direct business, which is wholly within the UK, is growing rapidly. It comprises Direct in Home (home shopping by catalogue or internet) and Direct in Store (orders placed in store with the product delivered directly to the customers home). In total, sales from the Direct business increased by 26.1% to £41.1 million. Profit from operations before exceptional items Profit from operations increased by 7.2% to £17.9 million in the year. The key drivers of profit were the increase in UK store sales and margin percentage together with the smaller, but more rapidly growing, International and Direct businesses, which together more than off-set rises in the cost base. The UK gross margin improved by 0.4 percentage points as a result of better buying, an increase in direct sourcing (particularly in clothing) and greater volumes. The overall gross margin was 0.1 percentage point lower however due to the rapid growth of the International business which, although profit enhancing, is dilutive at the gross margin level. In line with other retailers, Mothercare is experiencing an increase in store operating costs in the UK - particularly occupancy, staff and energy costs. As a percentage of UK sales, store costs were up by 1.2% in the year, however the total UK cost increase was reduced to 0.5% of sales through tighter management of controllable costs. We would expect the upward pressure on occupancy, staff and energy costs to continue in the current year. However we expect this to be mitigated by a further focus on controllable costs. In addition, we will continue to work on reducing operational gearing in the UK through optimising the store portfolio (rightsizing and relocating stores to reduce rent and increase sales densities), growing the gross margin through more direct sourcing and better buying, expanding the Direct business, improving store productivity and focussing closely on all other costs. Exceptional items The exceptional profit of £2.9 million in the current year relates to the net gain associated with the disposal of stores at Aberdeen, Swansea, Durham and Windsor. Investment income, finance costs and taxation Net investment income and finance costs increased to £3.4 million from £2.9 million last year largely as a result of the net investment income on retirement benefit schemes. The tax charge of £6.7 million, representing an effective tax rate of 31.5%, mainly reflects utilisation of tax losses. The group still has unused tax losses of £17.7 million (2005: £22.6 million) available for off-set against future profits. Pensions We continue to operate a defined benefit pension scheme for our staff. The total net cost of the pension schemes in the year was £2.8 million (2005: £2.7 million). The valuation of the schemes under IAS 19 at 1 April 2006 gave rise to a reduction in the pension deficit of £4.9 million to £17.5 million (2005: deficit of £22.4 million) or £12.3 million (2005: £15.7 million) after deferred taxation. IFRS requires that we value pension scheme liabilities using a high quality corporate bond yield, and this has proven to be an extremely volatile measure. For example, if all other assumptions were equal, we estimate that the change in bond yields between 18 January 2006 and 26 April 2006 would have led to a movement in the deficit of approximately £30 million before deferred taxation, had the schemes been valued on these dates. The overall downward trend in the deficit over time however reflects the actions we have taken, including £15.3m of special contributions to the scheme over the last two years, and we are comfortable with the current level of funding in the schemes. We will continue to keep the structure and level of benefits of the group's pension schemes under active review. Balance sheet and cash flow The group had a net cash inflow of £4.2 million before the special pension contribution of £5.3 million, leading to a cash balance at the end of the year of £35.9 million (2005: £37.0 million). The working capital outflow in the year was £10.7 million. £4.0 million of this is due to increased inventory levels resulting from the growth of International and Direct, together with the increase in direct sourcing (stock ownership is taken earlier in the supply chain). Receivables growth of £3.0 million arises mostly from the growth of International. The total overseas receivables balance at 1 April 2006 was £14.3 million. Bank guarantees and/or insurance is in place to mitigate risk. Capital expenditure Capital expenditure in the year was £16.7 million. £8.9 million was invested in UK stores, including upgrades to the existing high street stores plus 10 new stores. £3.1 million was invested in systems infrastructure, including new EPOS tills in all stores, and £2.9 million was invested in the distribution network. Earnings per share and dividend Basic earnings per share were 25.5 pence for the period (2005: 16.6 pence). Adjusted earnings per share before exceptional items and after taxation were 21.3 pence (2005: 19.9 pence). The directors are pleased to recommend a 16.0% increase in final dividend for the year to 6.15 pence (2005: 5.3 pence). The total dividend for the year is 9.0 pence compared with 8.0 pence last year, an increase of 12.5%. The final dividend will be payable on 27 July 2006 to shareholders registered on 16 June 2006. The latest date for election to join the dividend re-investment plan is 7 July 2006. Preliminary announcement of audited results Consolidated income statement For the 53 weeks ended 1 April 2006 53 weeks 52 weeks ended 1 April ended 26 2006 March 2005 Note £ million £ million Revenue 2 482.7 457.2 Cost of sales (431.8) (408.1) Reorganisation of distribution network (exceptional) 3 - (6.5) Gross profit 50.9 42.6 Administrative expenses (33.0) (32.4) Profit from retail operations 17.9 10.2 Profit on disposal of property interests (exceptional) 3 2.9 - Profit from operations 20.8 10.2 Profit on disposal of subsidiary undertaking 3 - 2.4 (exceptional) Profit before financing and taxation 20.8 12.6 Investment income 4 12.7 10.9 Finance costs 5 (9.3) (8.0) Profit before taxation 24.2 15.5 Analysed between: Exceptional items 3 2.9 (4.1) Profit before exceptional items and taxation 21.3 19.6 Taxation 6 (6.7) (4.2) Profit for the period attributable to equity holders 17.5 11.3 of the parent Earnings per share Basic 8 25.5p 16.6p Diluted 8 25.0p 16.3p All results relate to continuing operations. Consolidated statement of recognised income and expense For the 53 weeks ended 1 April 2006 53 weeks 52 weeks ended 1 April ended 26 2006 March 2005 £ million £ million Actuarial losses on defined benefit pension schemes (0.8) (9.3) IAS 39 transfers to income statement 0.1 - Tax on items taken directly to equity 0.7 3.1 Net expense recognised directly in equity - (6.2) Profit for the period 17.5 11.3 Total recognised income and expense for the period attributable to equity holders of the parent 9 17.5 5.1 Changes in accounting policy to adopt IAS 31 and IAS 39: Attritutable to equity holders of the parent (0.1) - Consolidated balance sheet As at 1 April 2006 26 March 1 April 2006 2005 Note £ million £ million Non-current assets Property, plant and equipment 83.7 84.3 Intangible assets - software 4.0 2.7 Deferred tax asset 6 8.5 13.6 96.2 100.6 Current assets Inventories 50.8 46.8 Trade and other receivables 32.0 28.8 Cash and cash equivalents 35.9 37.0 118.7 112.6 Total assets 214.9 213.2 Current liabilities Trade and other payables (51.3) (55.9) Current tax liabilities (0.9) - Short term provisions (3.7) (5.1) (55.9) (61.0) Non-current liabilities Trade and other payables (8.9) (7.8) Retirement benefit obligations (17.5) (22.4) Long term provisions (0.9) (3.0) (27.3) (33.2) Total liabilities (83.2) (94.2) Net assets 9 131.7 119.0 Equity attributable to equity holders of the parent Called up share capital 36.3 35.8 Share premium account 2.2 1.3 Own shares (6.5) (5.5) Retained earnings 99.7 87.4 Total equity 131.7 119.0 Consolidated cash flow statement For the 53 weeks ended 1 April 2006 53 weeks 52 weeks ended 1 April ended 26 2006 March 2005 Note £ million £ million Net cash flow from operating activities 10 13.3 12.5 Cash flows from investing activities Interest received 1.8 1.8 Interest paid (0.3) (0.1) Purchase of property, plant and equipment (16.7) (18.4) Proceeds from sale of property, plant and equipment 6.0 1.1 Proceeds from sale of subsidiary undertaking - 3.4 Net cash used in investing activities (9.2) (12.2) Cash flows from financing activities Equity dividends paid 7 (5.5) (4.6) Issue of ordinary share capital 1.4 1.0 Purchase of own shares (1.1) - Net cash used in financing activities (5.2) (3.6) Net decrease in cash and cash equivalents (1.1) (3.3) Cash and cash equivalents at beginning of period 37.0 40.3 Cash and cash equivalents at end of period 35.9 37.0 Cash and cash equivalents represent cash at bank and in hand. Notes 1. General information and accounting policies a. This is the first year that the group has presented its financial statements under International Financial Reporting Standards (IFRS). The last financial statements under UK GAAP were for the 52 weeks ended 26 March 2005 and the date of transition to IFRS was 28 March 2004. Further details of the restatement and reconciliations to the UK GAAP financial information for the 52 weeks ended 26 March 2005 can be obtained from the group's website, www.mothercare.com/investorinfo b. The accounting policies followed are the same as those published by the group within the 2005 IFRS restatement except for the adoption of IAS 39 'Financial Instruments - Recognition and Measurement'. The group utilised the exemption available within IFRS 1 'First time adoption of IFRS' that permits prospective application of IAS 39. Consequently, the relevant comparative information for the 52 weeks ended 26 March 2005 does not reflect the impact of this standard. c. 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. The financial information set out in this announcement does not constitute the Company's statutory accounts for the 53 week period ended 1 April 2006 or the 52 week period ended 26 March 2005, but it is derived from those accounts as restated for the adoption of IFRS. Statutory accounts for 2005 have been delivered to the Registrar of Companies and those for 2006 will be delivered following the Company's annual general meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under s237 (2) or (3) Companies Act 1985. 2. Segmental information For management purposes, the group is currently organised into two primary operating segments: Mothercare UK and International. Mothercare UK comprises the UK store operations, catalogue and web sales. The International business comprises the group's franchise operations outside of the UK. These two segments are distinguished by the different nature of their risks and returns. It is considered that there is no secondary segment as all business originates in the UK. Segmental information is presented below: 53 weeks ended 1 April 2006 Mothercare UK International Consolidated £ million £ million £ million Revenue External sales 414.6 68.1 482.7 Result Segment result before exceptional items 19.3 5.3 24.6 Unallocated corporate expenses (6.7) Profit from retail operations before exceptional items 17.9 Profit on disposal of property interests 2.9 Profit before financing and taxation 20.8 Investment income 12.7 Finance costs (9.3) Profit before taxation 24.2 Taxation (6.7) Profit for the period 17.5 52 weeks ended 26 March 2005 Mothercare UK International Consolidated £ million £ million £ million Revenue External sales 401.1 56.1 457.2 Result Segment result before exceptional items 19.6 4.4 24.0 Unallocated corporate expenses (7.3) Profit from retail operations before exceptional items 16.7 Reorganisation of distribution network (6.5) Profit on disposal of subsidiary undertaking 2.4 Profit before financing and taxation 12.6 Investment income 10.9 Finance costs (8.0) Profit before taxation 15.5 Taxation (4.2) Profit for the period 11.3 3. Exceptional items Certain items do not reflect the group's underlying trading performance and have been classified as exceptional due to their significance and one-off nature. These include profits on the disposal of property interests and subsidiary undertakings, and reorganisation costs. During the 53 weeks ended 1 April 2006, a credit of £2.9 million has been recognised in profit from operations relating to net proceeds on the disposal of freehold and leasehold property interests. There was no tax effect as a result of the profit on disposal of property interests, due to the availability of capital losses brought forward from earlier periods. 4. Investment income 53 weeks 52 weeks ended ended 26 1 April 2006 March 2005 £ million £ million Interest on bank deposits 1.8 1.8 Retirement benefit schemes - return on assets 10.9 9.1 Investment income 12.7 10.9 5. Finance costs 53 weeks 52 weeks ended ended 26 1 April 2006 March 2005 £ million £ million Interest on bank loans and overdrafts 0.3 0.1 Retirement benefit schemes - interest on liabilities 9.0 7.9 Finance costs 9.3 8.0 6. Taxation The charge for taxation on profit for the period comprises: 53 weeks 52 weeks ended ended 26 1 April 2006 March 2005 £ million £ million Current tax: Current year 0.5 - Adjustment in respect of prior periods 0.4 - 0.9 - Deferred tax: Current year 5.8 4.5 Adjustment in respect of prior periods - (0.3) 5.8 4.2 Charge for taxation on profit for the period 6.7 4.2 UK corporation tax is calculated at 30 per cent (2005: 30 per cent) of the estimated assessable profit for the period. A net deferred tax asset of £8.5 million (2005: £13.6 million) has been recognised of which £5.3 million (2005: £6.8 million) is in respect of trading losses carried forward. At the balance sheet date, the group has unused tax losses of £17.7 million (2005: £22.6 million) available for offset against future profits. 7. Dividends 53 weeks 52 weeks ended ended 26 1 April 2006 March 2005 £ million £ million Amounts recognised as distributions to equity holders in the period Final dividend for 2005 of 5.3 pence per share (2005: final dividend for 2004 of 4.0 pence per share) 3.6 2.7 Interim dividend for 2006 of 2.85 pence per share (2005: interim dividend for 2005 of 2.7 pence per share) 1.9 1.9 5.5 4.6 The proposed final dividend of 6.15 pence per share for the 53 weeks ended 1 April 2006 was approved by the board after 1 April 2006, and so, in line with the requirements of IAS 10 'Events After the Balance Sheet Date', the related cost of £4.3 million has not been included as a liability as at 1 April 2006. This dividend will be paid on 27 July 2006 to shareholders on the register on 16 June 2006. 8. Earnings per share 53 weeks 52 weeks ended ended 26 1 April 2006 March 2005 million million Weighted average number of shares in issue 68.5 68.0 Dilution - option schemes 1.5 1.2 Diluted weighted average number of shares in issue 70.0 69.2 £ million £ million Earnings for basic and diluted earnings per share 17.5 11.3 Exceptional items: Costs of reorganisation of distribution network - 6.5 Profit on disposal of property interests (2.9) - Profit on disposal of subsidiary undertaking - (2.4) Tax effect of exceptional items - (1.9) Earnings before exceptional items 14.6 13.5 pence pence Basic earnings per share 25.5 16.6 Basic earnings per share before exceptional items 21.3 19.9 Diluted earnings per share 25.0 16.3 Diluted earnings per share before exceptional items 20.9 19.5 9. Reconciliation of equity 1 April 2006 26 March 2005 £ million £ million Total recognised income and expense 17.5 5.1 IAS 39 transition balance sheet adjustment (0.1) - Dividends to equity holders of the parent company (5.5) (4.6) Issue of ordinary share capital 1.4 1.0 Purchase of own shares (1.1) - Cost of employee share schemes 0.5 0.8 Net increase in equity 12.7 2.3 Equity at beginning of year 119.0 116.7 Equity at end of year 131.7 119.0 10. Reconciliation of cash flow from operating activities 53 weeks 52 weeks ended 1 April ended 26 2006 March 2005 £ million £ million Profit from retail operations 17.9 10.2 Adjustments for: Depreciation of property, plant and equipment 12.1 11.8 Amortisation of intangible assets - software 0.7 0.2 Losses on disposal of property, plant and equipment 0.3 0.7 Gain on currency derivatives (0.2) - Cost of employee share schemes 0.5 0.8 Charge to profit from operations in respect of costs of reorganisation of distribution network - 6.5 Utilisation of provision for costs of reorganisation of distribution network (2.6) (0.9) Movement in property provisions (0.5) (1.1) Utilisation of other provisions (0.4) (0.3) Payments to retirement benefit schemes (8.5) (12.4) Charge to profit from operations in respect of service costs of retirement benefit schemes 4.7 3.9 Operating cash flow before movement in working capital 24.0 19.4 Increase in inventories (4.0) (1.8) Increase in receivables (3.0) (3.3) Decrease in payables (3.7) (1.8) Net cash flow from operating activities 13.3 12.5 This information is provided by RNS The company news service from the London Stock Exchange

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Mothercare (MTC)
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