Final Results
Mothercare PLC
19 May 2005
19 May 2005
Mothercare plc
Results for the 52 weeks ended 26 March 2005
Key Financials
• Group sales up 2.3% to £457.2 million (2004: £446.9 million)
• Profit before exceptional items and taxation up 18.8% to £19.6 million
(2004: £16.5 million)
• Like-for-like UK store sales up 1.3%*
• Gross margin up 0.5 percentage points
• Operating exceptional charge of £6.5 million (2004: credit of £0.8
million)
• Non-operating exceptional credit of £2.4 million (2004: credit of £6.6
million)
• Profit before tax £15.5 million (2004: £23.9 million)
• Adjusted earnings per share (before exceptional items) 19.5p - see note
5
• Basic earnings per share 16.2p (2004: 46.5p)
• Total dividend doubled to 8.0p (2004: 4.0p)
• Net cash generated, before special pension contribution of £10 million,
£6.7 million
• Cash balance of £37.0 million (2004: £40.3 million)
Operational Highlights
• Significant progress in rebuilding the business:
- New distribution centre on time and on budget
- High street store refit programme largely completed
- New product ranges launched
- EPOS system now in 75 stores
- Positive customer responses to improved service levels
• Growth plans gaining momentum
- 3 new stores opened in the UK, first openings since 2002
- International sales up 17.3% and operating profit up 19.7%
* See financial review for definition of like-for-like sales
Commenting on the results, Ben Gordon, Chief Executive said:
'Better stores, better products and better customer service have helped us to
deliver another year of good profit growth. We are now two years into our
three-year turnaround of Mothercare and the programme is very much on track.
We are confident that the underlying strength of our brand, combined with our
specialist expertise and the actions we are taking to transform the business,
will help us in a more difficult UK retail trading environment.
Our International business continues to develop strongly and with significant
further growth opportunities will provide an increasingly important balance to
our UK operations.'
Enquiries to:
Mothercare plc
Ben Gordon, Chief Executive 01923 206001
Steven Glew, Finance Director 01923 206140
Brunswick Group Limited
Susan Gilchrist/ Catherine Hicks/Anna Jones 020 7404 5959
CHIEF EXECUTIVE'S REVIEW
INTRODUCTION
In May 2003 we outlined a three-year turnaround programme with the objective of
rebuilding Mothercare and planning for longer-term growth.
We are now two years into this programme. Profit, before exceptionals and tax,
increased by 18.8% to £19.6 million in the year with like-for-like UK store
sales up by 1.3% and gross margins up by 0.5 percentage points. Over two years
UK like-for-like store sales have increased by 7.2% with gross margins
increasing 6.7 percentage points.
Completing the key projects in the programme remains our focus in the current
financial year to ensure the group is in a strong position for the future.
We have also turned our attention to driving our growth plans. In the year to
March 2005, we opened three new UK stores and 30 stores internationally. We plan
to open up to 10 additional UK stores and another 40 international stores in the
new financial year. With almost as many stores outside the UK (220) as within
the UK (231) we have become a multinational business with a strong international
brand.
TURNAROUND
Our plan to rebuild the business is focused on five key projects: store
proposition, product and sourcing, supply chain, infrastructure and customer
service. The following is an update on these projects.
Store proposition
The high street refit programme is now largely complete. The majority of the
high street portfolio has been transformed from what was a poorly presented and
loss making part of the business, into a modern store grouping which now
generates a substantial contribution. This project focused on significantly
improving the store environment and addressing the merchandise mix and has been
further supported by the work carried out on customer service.
We have completed the refit of 100 of our 161 high street stores, equating to
66% of high street space and 71% of high street sales. The cost of this refit
programme was £12 million, an average of £25 per sq. ft. The refitted stores
continue to perform well, achieving sales growth of 5% above the average of
non-refitted high street stores, generating a cash return on investment on an
annualised basis in excess of 20%. The 35 stores in their second year since
refit have maintained the much improved sales levels they achieved in their
first year.
Of the remaining 61 stores, some 30 do not financially justify a major refit and
will undergo minor updates. The balance either will be relocated to new stores
of a better size or location as appropriate opportunities arise or will be
closed.
Our 70 out of town stores continue to perform well. This store portfolio had
been refurbished more recently than the high street stores. Nevertheless, we
have been trialling refurbishment options on a small group of these stores. The
results of the trials have shown that changes to the physical appearance of the
out of town stores is less significant to customers than merchandising mix,
product adjacencies and store layout. We intend therefore to undertake only
moderate updates to those stores that require them and focus primarily on
improving the customer offer, and hence sales densities, out of town.
Product and sourcing
During the past two years the improvements we have made to the quality, design
and value of our ranges have significantly repositioned our product offer. The
'good, better, best' pricing architecture also introduced two years ago is a key
element of this success.
The success of this approach is shown by the increase in market share in
children's clothing we have achieved over the last two years. In addition, it is
demonstrated by the fact that our customers are purchasing more added value
items, which has raised our average selling price by some 3% in the period,
whilst like-for-like product prices have shown net deflation.
We are continuing to innovate and introduce new product ranges to extend our
markets. Our new gift offer, which focuses on our core market of birth to age
two, has been successfully launched and extremely well received by customers.
The range is available through our internet service and in a variety of
selections in 40 trial stores. We are monitoring this trial and will use the
results to extend the offer at product and store levels.
We have also launched our 'first bedroom' range through our internet service and
in our largest stores. Initial responses from customers have again been
positive. We have further product innovation planned for later this year,
including the refocusing and re-branding of our maternity range.
The fact that we have grown gross margins over the year by 0.5 percentage points
whilst reducing like-for-like selling prices reflects the progress we have made
with our sourcing initiatives. We are now sourcing product from better
factories, fewer suppliers and fewer countries. Some 35% of our clothing is
sourced directly and our target is to raise this to 50%, gradually increasing
the benefit to gross margin over a three to five year timescale.
Supply chain
We have made significant progress over the past two years with initiatives to
improve product availability and the efficiency of the distribution operation we
inherited two years ago. Availability is now around 85% up from 65% two years
ago, and distribution costs, as a percentage to sales, have reduced to 6.4% from
8.5% two years ago. However, our existing logistics network is inefficient and a
major constraint on our ability to fulfil our business potential. It impacts the
volume of product we can distribute effectively and limits the availability
levels we could achieve.
We announced in November 2004 our new distribution strategy and the plan to move
the bulk of our operation to a new National Distribution Centre (NDC), which
will be the hub of our distribution network. The new strategy is planned to
provide the benefits of lowering distribution costs towards our target of 5% to
sales within 3 years of full operation, together with the sales increase
expected to be generated from improving availability towards our target of 95%.
The new bespoke 300,000 square foot NDC is situated on the same logistics park
as our existing Daventry warehouse, part of which we are retaining. This
combined distribution solution enables a lower risk transfer programme and gives
us flexibility for the future as we continue to grow.
We are pleased that this programme is progressing very well. The construction of
the new NDC facility has been completed on schedule and on budget. The first
phase of the move will involve the closure of our Coventry warehouse in June
2005 with operations transferred to the NDC. The current Coventry warehouse
handles our 'pick to zero' distribution operation, which is approximately 20% of
the value of our product and 50% of our cubic volume, together with our returns
business. The returns business has already been successfully transferred and the
pick to zero operation is on schedule to transfer at the end of this month.
The subsequent phases of the move involve the gradual transfer of the remaining
boxed product from the Daventry warehouse to the NDC with completion scheduled
for the summer of 2006.
As previously announced, we anticipate the move to the new NDC to incur £7
million of capital expenditure, principally relating to the fit out of the new
facility, and £6.5 million of operating exceptional costs, largely comprising
one-off additional revenue costs related to the move.
Infrastructure
Lack of investment in the infrastructure of the business over many years has
been a significant factor in the historic under-performance of Mothercare. The
central merchandise planning and management systems have been a particular
weakness. To address this, we successfully implemented a modern merchandise
planning tool in 2004. The system, which is performing well, will be further
enhanced this year with extensions to the planning and replenishment functions.
A key element in the improvement of our infrastructure has also been the
replacement of our ageing EPOS system. The new EPOS system, in addition to
giving us Chip and Pin capability, allows us to provide a higher level of
customer service including reduced transaction times. The system has now been
successfully implemented in 75 stores and we are on track to roll it out to all
stores by March 2006.
The cost of these enhancements to our infrastructure has been £6 million in the
year and is expected to be some £15 million in total over the three years of the
turnaround programme.
Customer service
As the pre-eminent speciality retailer in our market, a high level of customer
service is critical to our success.
To this end, we have taken the decision to upgrade significantly the quality of
service and expertise provided by our store staff. This has included the
introduction of structured training programmes in product knowledge and
commercial selling. For the first time, a formalised training programme has been
established to develop experts in specific product categories in each store, all
linked to staff rewards with clear performance measurements.
This programme will take time to realise its full potential. However, early
signs of success are beginning to show and our research is finding that
customers are noticing a significant improvement in service levels. The results
of our own 'mystery shopper' campaign support these findings, also showing
strong improvements over the past year.
LONG-TERM GROWTH
The completion of the turnaround projects remain the immediate priority, as this
will provide the basis for sustained long-term performance and a solid platform
for growth at Mothercare. The long-term growth of our business will come from
continuing to improve the performance of our existing operations together with
expansion of our International business, new UK store development and extending
our Direct operations.
International
Our International business represents a substantial growth opportunity for
Mothercare. Our brand has strong awareness internationally and a sustained
quality perception.
We now trade in 30 countries through 220 stores with 20 franchisee partners,
with most of whom we have long-established relationships. The total retail sales
value of our franchisees was £120 million for the year. Overall franchisee sales
grew by 17%, based on 10% like-for-like growth together with the addition of 30
new stores. Our sales to franchisees, which include the cost of product together
with franchise/royalty fees, increased by 17.3% in the year.
Through extensive analysis of our international markets we see potential for
another 100 international stores over the next three years, 40 of these will
open in the next year. With our existing franchisees we plan to open new stores
this year in territories where we are already represented. These include the
Middle East, where we currently have 74 stores, Russia, Greece and Spain. With
our existing franchisees who have the ability to expand into nearby markets we
also plan to open new stores in new countries this year. We have already opened
in three new countries this year - Indonesia, Azerbaijan and Pakistan. We are
also progressing opportunities to develop new countries with new franchisees.
To support this level of growth we established a new distribution centre in
Singapore last year. This new centre, which complements our existing facility in
Dubai, means we can now distribute product originating in the Far East more
quickly and at reduced cost. We also continue to use our UK distribution system
to service the international business and the new NDC will form a critical part
of this mix.
New UK store development
In 2003 we carried out a review of our store portfolio in the UK, and concluded
that there is significant scope for store growth. The review identified at least
40 additional high street and 20 out of town locations where Mothercare could
trade successfully. We estimate that a programme of opening 5-10 new stores per
annum is achievable, allowing us to ensure that we obtain the right stores in
the right locations, thereby achieving our target rates of return. Approximately
75% of the UK population are within easy reach of a Mothercare store and our
plans will bring that figure closer to 80% over the next 3 years.
We opened three new stores in the year - two out of town stores at Thurrock and
Sheffield and a high street store in Wandsworth. All are performing well and are
on track to achieve their target levels of return.
For the current year we have eight confirmed openings at this stage. Of these
four are new out of town stores and four are replacement high street stores.
Once established, this programme will add some 2-3% to our trading space each
year.
Mothercare Direct
Mothercare is a multi-channel business and Direct is a key part of this
strategy. Direct comprises home shopping (internet at home and telephone
catalogue ordering) together with internet in stores (web-enabled stores).
Overall our Direct channel continues to grow with sales up 15%. Transactions are
up 12% and repeat customer numbers are growing.
We have increased the number of web-enabled stores to 138 in the year and will
roll out to all stores by March 2006. This channel provides a real growth
opportunity for Mothercare, allowing customer orders to be placed on-line in
stores meaning we capture orders for products that are either not ranged at a
particular store or out of stock.
This growth in internet ordering in-store has had some cannibalisation effect on
our reported home shopping sales, which are down 5% in the year.
Through improved on-line functionality, enhanced customer marketing, extension
of our ranges and web-enabling all our stores Direct is well positioned to
deliver further strong growth.
OUTLOOK
We are confident that the underlying strength of our brand, combined with our
specialist expertise and the actions we are taking to transform the business,
will help us in a more difficult UK retail trading environment.
Our International business continues to develop strongly and with significant
further growth opportunities will provide an increasingly important balance to
our UK operations.
We will provide a trading statement for the first quarter on July 15, the date
of our AGM.
FINANCIAL REVIEW
RESULTS SUMMARY
Total group sales have increased by 2.3% to £457.2 million (2004: £446.9
million) with like-for-like UK store sales up by 1.3%. Operating profit before
exceptional items improved by 13.3% to £17.9 million from £15.8 million last
year.
The results can be summarised as follows:
2005 2004
£m £m
Turnover (ex VAT) 457.2 446.9
-------- --------
Operating profit (before exceptional operating items) 17.9 15.8
Exceptional operating items (6.5) 0.8
-------- --------
Operating profit 11.4 16.6
Non-operating exceptional items 2.4 6.6
Interest 1.7 0.7
Taxation (4.4) 7.3
-------- --------
Profit after tax 11.1 31.2
-------- --------
Earnings per share 16.2p 46.5p
-------- --------
Group turnover and operating profit before exceptional operating items:
Turnover Operating profit
2005 2004 2005 2004
£m £m £m £m
Total UK 401.1 399.1 10.6 9.7
Mothercare International 56.1 47.8 7.3 6.1
-------- -------- -------- --------
Total 457.2 446.9 17.9 15.8
-------- -------- -------- --------
Divisional performance
UK
Total UK sales increased by 0.5% to £401.1 million. Total UK store sales
increased by 0.7% to £384.1 million. Like-for-like sales (defined as sales
growth on the previous year for stores that have been trading continuously from
the same selling space for at least 13 financial periods) increased by 1.3%. The
sales loss due to net store closures was 0.6%. Three stores were opened during
the year and five were closed.
Mothercare Direct sales reduced by 4.8% to £17.0 million largely due to
cannibalisation from significantly increased sales in the web-enabled stores.
Operating profit before exceptional operating items increased by 9.3% to £10.6
million from £9.7 million last year.
Mothercare International
Mothercare International, our overseas franchise business, performed well with
sales growing by 17.3% to £56.1 million and operating profit growing 19.7% to
£7.3 million. 30 new franchise stores were opened in the year taking the total
to 220 at the year end.
Operating profit
Group operating profit, before exceptional operating items increased by 13.3% to
£17.9 million, (2004: £15.8 million). The key factors driving this improvement
were an increase in sales and gross margin together with a reduction in
distribution costs. Taking into account exceptional operating items, group
operating profit decreased by 31.3% to £11.4 million (2004: £16.6 million).
Gross margin increased by 0.5 percentage points due to better product flow
through the business which lead to improved availability to customers and
allowed for greater full price trading. The improvements in our product range
and the early benefits of our sourcing initiatives also played a major role in
the increase.
Distribution costs reduced to 6.4% of sales from 6.5% last year.
The increase in other operating costs was restricted to below 3% as our
continued focus on reducing cost base offset increases in key cost areas such as
store payroll and energy.
Operating exceptional items
The operating exceptional charge of £6.5 million relates to the costs associated
with the re-organisation of the distribution network as a result of the move to
the new NDC.
Non - operating exceptional items
The exceptional credit of £2.4 million relates to the profit on disposal net of
costs of a subsidiary undertaking with capital losses attached.
Interest and taxation
Net interest income increased to £1.7 million from £0.7 million last year as a
result of the higher average cash balances resulting from the positive cash flow
of the business.
Due to the tax losses we have brought forward of some £36 million no tax will
actually be paid for the year. The tax charge of £4.4 million, representing an
effective tax rate of 29%, reflects utilisation of these losses in respect of
which a deferred tax asset was established at the end of last year.
Pensions
The total cost of the pension schemes charged to the profit and loss account in
the year was £2.4 million (2004: £2.7 million). The valuation of the schemes
under FRS17 at March 2005 gave rise to a net pension deficit of £15.5 million
(2004: deficit of £15.5 million) after the benefit of potential deferred
taxation at 30% amounting to £6.6 million (2004: £6.7 million). On a FRS17 basis
the net charge to profits would have been £2.8 million (2004: £3.8 million)
after the benefit of net finance income of £1.7 million (2004: £1.1 million).
Over the last two years we have performed a major review of the structure and
levels of benefits of the group's pension schemes. The changes in benefit
structure will reduce costs in the long term, however the deficit remains
significant and the group concluded that a special voluntary contribution into
the scheme of £10 million to strengthen its funding position was necessary and
appropriate. This contribution was made in March 2005.
If this contribution had not been made, our pension deficit under FRS 17 would
have increased by £10 million mainly due to the impact of allowing for increased
mortality rates.
We expect to review the ongoing level of contributions to the scheme when the
actuarial valuation as at 31 March 2005 is completed. The investment risk
profile of the pension funds has also been reviewed and the level of investment
in fixed income and property has been increased to help reduce the likelihood of
significant deficits arising in the future.
Balance sheet and cash flow
The group had a net cash inflow of £6.7 million before the special pension
contribution of £10 million, giving a net cash outflow of £3.3 million in the
year, leading to the cash balance at the end of the year of £37.0 million (2004:
£40.3 million).
Capital expenditure for the period was £18.4 million (2004: £8.5 million), of
which the cost of our high street store refurbishment programme was £7.5 million
and the cost of new stores was £2.6 million.
Earnings per share and dividend
Basic earnings per share are 16.2 pence for the period (2004: 46.5 pence).
Adjusted earnings per share before exceptional items are 19.5 pence after a tax
charge of 9.3 pence per share (2004: 24.4 pence after a tax charge of nil pence
per share).
The directors are pleased to recommend a final dividend for the year of 5.3
pence (2004: 4.0 pence). The total dividend for the year is 8.0p compared with
4.0p last year, an increase of 100%.
The final dividend will be payable on 29 July 2005 to shareholders registered on
17 June 2005. The latest date for election to join the dividend re-investment
plan is 8 July 2005.
IFRS
We are well advanced with preparation for the adoption of International
Financial Reporting Standards (IFRS). The group will adopt IFRS for its 2005/06
financial reporting. We intend to issue 2004/05 financial information, restated
for IFRS, with our AGM statement in July 2005.
Preliminary announcement of audited results
Group profit and loss account
For the 52 weeks ended 26 March 2005
52 weeks ended 52 weeks ended
26 March 2005 27 March 2004
---------------- ----------------
Before Exceptional Before Exceptional
exceptional items exceptional items
items (note 1) Total items (note 1) Total
Note £ million £ million £ million £ million £ million £ million
---------------------- ----- ------- -------- ------ ------- ------- ------
Turnover 457.2 - 457.2 446.9 - 446.9
Cost of sales (408.0) (6.5) (414.5) (400.7) 0.8 (399.9)
---------------------- ----- ------- -------- ------ ------- ------- ------
Gross profit 49.2 (6.5) 42.7 46.2 0.8 47.0
Administrative
expenses (31.3) - (31.3) (30.4) - (30.4)
---------------------- ----- ------- -------- ------ ------- ------- ------
Profit from
retail
operations 17.9 (6.5) 11.4 15.8 0.8 16.6
Exceptional items:
Profit on sale
of subsidiary
undertaking 1 - 2.4 2.4 - 2.0 2.0
Profit on
disposal of
stores 1 - - - - 4.6 4.6
Interest (net) 2 1.7 - 1.7 0.7 - 0.7
---------------------- ----- ------- -------- ------ ------- ------- ------
Profit on
ordinary
activities
before
taxation 19.6 (4.1) 15.5 16.5 7.4 23.9
Taxation 3 (6.3) 1.9 (4.4) - 7.3 7.3
---------------------- ----- ------- -------- ------ ------- ------- ------
Profit on
ordinary
activities
after taxation 13.3 (2.2) 11.1 16.5 14.7 31.2
------- -------- ------- -------
Dividends paid
and proposed 4 (5.5) (2.7)
------ ------
Retained
profit for the
financial year
transferred to
reserves 5.6 28.5
------ ------
---------------------- ----- ------- -------- ------ ------- ------- ------
Earnings per
share 5 16.2p 46.5p
Earnings per
share diluted 5 15.9p 45.7p
---------------------- ----- ------- -------- ------ ------- ------- ------
Group balance sheet
As at 26 March 2005 (27 March 2004)
2005 2004
Note £ million £ million
------------------------- ----- ------ ------ --- ------ ------
Fixed assets
Tangible assets 87.0 81.3
------------------------- ----- ------ ------ --- ------ ------
Current assets
Stocks 46.8 45.0
Debtors 40.8 34.0
Cash at bank and in hand and
time 37.0 40.3
deposits ----- ------ ------ --- ------ ------
-------------------------
124.6 119.3
Creditors - amounts falling due
within 6 (59.5) (60.1)
one year ----- ------ ------ --- ------ ------
-------------------------
Net current assets 65.1 59.2
------------------------- ----- ------ ------ --- ------ ------
Total assets less current 152.1 140.5
liabilities
Creditors - amounts falling due
after 6 (0.5) (1.2)
one year
Provisions for liabilities and 7 (8.1) (3.6)
charges ----- ------ ------ --- ------ ------
-------------------------
Net assets 143.5 135.7
------------------------- ----- ------ ------ --- ------ ------
Capital and reserves
attributable to equity
interests
Called up share capital 35.8 35.5
Share premium account 1.3 0.6
ESOP reserve (3.2) (4.2)
Profit and loss account 109.6 103.8
------------------------- ----- ------ ------ --- ------ ------
Shareholders' funds 8 143.5 135.7
------------------------- ----- ------ ------ --- ------ ------
Group cash flow statement
For the 52 weeks ended 26 March 2005 (52 weeks ended 27 March 2004)
2005 2005 2004 2004
£ million £ million £ million £ million
------------------------- ----- --- ------ ------ --- ------ ------
Reconciliation of net cash inflow from operating activities
Profit from retail
operations before
exceptional items 17.9 15.8
Depreciation 12.0 13.0
Reversal of past
impairment losses - (1.1)
Loss on disposal of
tangible fixed
assets 0.7 0.9
Cost of employee
share schemes 1.2 0.9
(Increase)/decrease
in stocks (1.8) 3.0
(Increase)/decrease
in debtors (3.3) 0.1
Prepaid special
contribution to
pension scheme (10.0) -
(Decrease)/increase
in creditors (2.2) 4.9
Net cash outflow
in respect of
exceptional items (2.0) (0.4)
------------------------- ----- --- ------ ------ --- ------ ------
Net cash inflow from
operating activities 12.5 37.1
------------------------- ----- --- ------ ------ --- ------ ------
Net cash inflow from
operating activities 12.5 37.1
Returns on investments and
servicing of finance
Interest received 1.8 0.9
Interest paid (0.1) (0.2)
------------------------- ----- --- ------ ------ --- ------ ------
1.7 0.7
Capital expenditure
Purchase of tangible
fixed assets (18.4) (8.5)
Sale of tangible
fixed assets 1.1 1.4
------------------------- ----- --- ------ ------ --- ------ ------
(17.3) (7.1)
------------------------- ----- --- ------ ------ --- ------ ------
Trading cash
(outflow)/inflow (3.1) 30.7
Acquisitions and disposals
Sales of subsidiary
undertakings 3.4 1.3
Equity dividends paid (4.6) -
Management of liquid
resources 30.0 (30.0)
Financing
Issue of ordinary share
capital 1.0 0.8
Acquisition of
own shares - (0.2)
------------------------- ----- --- ------ ------ --- ------ ------
1.0 0.6
------------------------- ----- --- ------ ------ --- ------ ------
Increase in cash in the
year 26.7 2.6
------------------------- ----- --- ------ ------ --- ------ ------
Reconciliation of net cash
flow to movement in net
funds
Increase in cash in the
year 26.7 2.6
Cash flow from management
of liquid resources (30.0) 30.0
------------------------- ----- --- ------ ------ --- ------ ------
Movement in net funds in
the year (3.3) 32.6
Net cash at the
beginning of the year 40.3 7.7
------------------------- ----- --- ------ ------ --- ------ ------
Net cash at the end of
the year 37.0 40.3
------------------------- ----- --- ------ ------ --- ------ ------
Analysis of net cash
2003 Cash flow 2004 Cash flow 2005
£ million £ million £ million £ million £ million
----------------------- ----- --- ------ ------ ------ ------ ------
Cash 7.7 2.6 10.3 26.7 37.0
Overdrafts - - - - -
----------------------- ----- --- ------ ------ ------ ------ ------
Net cash 7.7 2.6 10.3 26.7 37.0
----------------------- ----- --- ------ ------ ------ ------ ------
Cash flow from management
of liquid resources
Time deposits - 30.0 30.0 (30.0) -
----------------------- ----- --- ------ ------ ------ ------ ------
Net cash 7.7 32.6 40.3 (3.3) 37.0
----------------------- ----- --- ------ ------ ------ ------ ------
1 Exceptional items
Exceptional costs of £6.5 million have been charged to profit from retail
operations to provide for the direct revenue costs associated with the
re-organisation of the distribution network as a result of the move to the
National Distribution Centre.
Exceptional income of £2.4 million has been credited to profit before taxation
relating to the sale of a subsidiary undertaking. The group has capital tax
losses significantly in excess of likely future requirements and one of the
group's subsidiary undertakings with capital tax losses attached has been sold
to a third party for £2.4 million net of costs.
The tax effect of the above exceptional items is £1.9 million credit (2004 -
£nil).
In the 52 weeks ended 27 March 2004, profit from retail operations included an
exceptional credit of £0.8 million relating to VAT, principally arising from the
successful outcome of an outstanding VAT claim.
In the 52 weeks ended 27 March 2004, non-operating exceptional items credited to
profit before taxation amounted to £6.6 million and comprised the following
three items. The release of a prior year provision of £2.6 million no longer
required following the early surrender of the lease of a vacant property. Lease
premiums of £2.5 million received and receivable on the sales of the leases of
four stores offset by a charge of £0.5 million to provide for the loss on
disposal of another two stores. The profit on disposal of one of the group's
subsidiary undertakings with capital tax losses attached of £2.0 million.
In the 52 weeks ended 27 March 2004, an exceptional tax asset of £6.4 million
was recognised in the balance sheet in respect of carried forward tax losses
following the group's return to profitability. In addition, a brought forward
provision for corporation tax of £0.9 million was released as an exceptional
item since the provision was no longer required.
2 Interest (net)
2005 2004
£ million £ million
------------------------- ----- --- ------ ------ --- ------ ------
Interest payable and similar
charges:
Bank loans and overdrafts (repayable
within five years, not by instalments) (0.1) (0.2)
Interest receivable and 1.8 0.9
similar income
------------------------- ----- --- ------ ------ --- ------ ------
1.7 0.7
------------------------- ----- --- ------ ------ --- ------ ------
3 Taxation
The charge/(credit) for tax on profit on ordinary activities comprises:
2005 2004
£ million £ million
------------------------- ----- --- ------ ------ --- ------ ------
Current Tax
UK corporation tax at 30% - -
(2004 - 30%)
Exceptional release of prior year tax
provision (note 1) - (0.9)
------------------------- ----- --- ------ ------ --- ------ ------
- (0.9)
------------------------- ----- --- ------ ------ --- ------ ------
Deferred Tax
Reversal of deferred tax asset in
respect of tax losses utilised against
profits for the year 4.7 -
Adjustment in respect of (0.3) -
prior years
Exceptional credit for
deferred tax - (6.4)
(note 1)
------------------------- ----- --- ------ ------ --- ------ ------
4.4 (6.4)
------------------------- ----- --- ------ ------ --- ------ ------
4.4 (7.3)
------------------------- ----- --- ------ ------ --- ------ ------
The group had tax losses carried forward of approximately £23 million as at 26
March 2005 (2004 - £36 million).
4 Dividends paid and proposed
2005 2004
£ million £ million
-------------------------------------- --- ------ ------
Interim paid of 2.7 pence per ordinary
share (2004 - nil pence) 1.9 -
Final proposed of 5.3 pence per
ordinary share (2004 - 4.0 pence) 3.6 2.7
-------------------------------------- --- ------ ------
5.5 2.7
-------------------------------------- --- ------ ------
5 Earnings per share
2005 2004
------------------------- ----- --- ------ ---- --- -------- -------
Weighted average number of shares 68.0m 67.3m
in issue
Dilution - option schemes 1.2m 1.1m
------------------------- ----- --- ------ ---- --- -------- -------
Diluted weighted average number
of shares in issue 69.2m 68.4m
------------------------- ----- --- ------ ---- --- -------- -------
Profit after tax £11.1m £31.2m
Exceptional items (net of tax) £2.2m (£14.7m)
------------------------- ----- --- ------ ---- --- -------- -------
Profit after tax before £13.3m £16.5m
exceptional items
------------------------- ----- --- ------ ---- --- -------- -------
Basic earnings per share 16.2p 46.5p
Earnings per share before 19.5p 24.4p
exceptional items
Diluted earnings per share 15.9p 45.7p
------------------------- ----- --- ------ ---- --- -------- -------
6 Creditors - amounts falling due within one year and after one year
2005 2004
£ million £ million
------------------------- ------ ------
Amounts falling due within one year
Trade creditors 29.8 25.6
Proposed dividend 3.6 2.7
Payroll and other taxes, including social security 1.2 1.2
Accruals and deferred income 24.2 28.8
Landlords' contributions 0.7 1.0
Other creditors - 0.8
------------------------- ------ ------
59.5 60.1
------------------------- ------ ------
Amounts falling due after one year
------------------------- ------ ------
Landlords' contributions 0.5 1.2
------------------------- ------ ------
7 Provisions for liabilities and charges
2005 2004
£ million £ million
------------------------- ------ ------
Property provisions 1.5 2.6
Distribution provisions 5.6 -
Other provisions 1.0 1.0
------------------------- ------ ------
8.1 3.6
------------------------- ------ ------
The movement on provisions can be analysed as follows:
Property Distribution Other
provisions provisions provisions Total
£ million £ million £ million £ million
---------------------- ------- ------- ------ ------
Balance at 27 March 2004 2.6 - 1.0 3.6
Charged in year - 6.5 0.3 6.8
Utilised in year (1.1) (0.9) (0.3) (2.3)
---------------------- ------- ------- ------ ------
Balance at 26 March 2005 1.5 5.6 1.0 8.1
---------------------- ------- ------- ------ ------
Property provisions principally represent the costs of store disposals.
Distribution provisions principally represent the costs of the reorganisation of
the distribution network, of which the main components relate to lease
provisions on vacant property and start up costs. It is expected that
substantially all of the distribution provisions will be utilised by March 2007.
Other provisions principally represent provisions for uninsured losses.
8 Reconciliation of movement in shareholders' funds
2005 2004
£ million £ million
-------------------------------- ------ ------
Profit for the financial year 11.1 31.2
Dividends (5.5) (2.7)
New share capital subscribed 1.0 0.8
Acquisition of own shares - (0.2)
Cost of employee share schemes charged to profit and
loss account 1.2 0.9
-------------------------------- ------ ------
Net increase in shareholders' funds 7.8 30.0
-------------------------------- ------ ------
Shareholders' funds at beginning of the year 135.7 105.7
-------------------------------- ------ ------
Shareholders' funds at end of the year 143.5 135.7
-------------------------------- ------ ------
Notes:
a. The results for the year have been prepared using accounting policies
which are consistent with the previous year.
b. The financial information set out above does not constitute the Company's
statutory accounts for the 52 week periods ended 26 March 2005 or 27 March
2004, but it is derived from those accounts. Statutory accounts for 2004
have been delivered to the Registrar of Companies and those for 2005 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.
This information is provided by RNS
The company news service from the London Stock Exchange
Latest directors dealings
- 13 hours ago Cambridge Cognition Holdings
- 14 hours ago Shell
- 14 hours ago Centrica
- 15 hours ago Optima Health
- 15 hours ago Centrica