Final Results

Brown (N.) Group PLC 10 May 2005 10 May 2005 N Brown Group plc PRELIMINARY RESULTS ANNOUNCEMENT YEAR ENDED 26 FEBRUARY 2005 N Brown Group plc, the Manchester based direct home shopping company, today announces its preliminary results for the 52 weeks to 26 February 2005. Highlights: •Significant improvement in performance of the core Home Shopping business with operating profit up 13.6% to £59.2m •Group turnover £460.3m (2004: £470.5m) •Group profit before tax and exceptionals £44.1m (2004: £49.1m) •Exceptional provisions of £25.5m in respect of restructuring of House of Stirling and Financial Services businesses •Net cash inflow before financing of £19.3m and reduced gearing of 52% (2004: 60%) •Total dividend per share for the year maintained at 5.84p •Group current trading shows underlying sales growth of 2% Alan White, Chief Executive, said: 'We are pleased with the successful home shopping performance this year. N Brown is working to build on this positive performance and also deliver a program of significant change to restructure and re-focus our business model. We are concentrating on the areas where we see the strongest future growth opportunities, from our more profitable home shopping brands and channels to market. 'Over the course of this year, we have put in place many profit improvement initiatives across the Group, and we are delighted to see early signs of the benefit of these programmes.' Lord Alliance CBE, Chairman, added: 'The Group has made significant progress in the profit recovery of the core home shopping business during a year in which the management team has worked hard to exploit additional channels to market for our specialist larger size product ranges. 'Our performance in the new financial year has started positively as customers are reacting well to improvements in product ranges and new catalogue offerings.' -Ends- For further information please contact: N Brown Group plc On the day: 0207 554 1400 Alan White, Chief Executive Thereafter: 0161 236 2000 Dean Moore, Finance Director Website : www.nbrown.co.uk Gavin Anderson & Company Charlotte Stone / Fergus Wylie Tel: 020 7554 1400 CHAIRMAN'S STATEMENT Group The Group results for the year ended 26th February 2005 show significant progress has been made in the profit recovery of the core home shopping business, reflecting the major focus on margins and new growth areas over the past two years. In the continuing tough trading conditions, which have affected the whole retailing industry, this division, which accounts for over 90% of total revenues, increased operating profits by 13.6% on turnover up 0.9%. A program to rationalise and restructure our other businesses will be completed by the autumn. Impairment costs of £25.5m have been provided to effect these changes with positive benefits for group profitability going forward. Overall group turnover is down by 2.2% at £460.3m but operating profit before operating exceptional items is up from £54.2m to £54.4m. Pre-tax profit is £18.6m (2004, £31.0m) after accounting for higher interest charges, joint venture losses and impairment provisions. The borrowings have reduced to £126.2m during the year with a net cash inflow before financing of £19.3m generated by a significant reduction in both the working capital and capital expenditure requirements. This results in gearing of 52% (2004, 60%) on net assets of £243.3m and interest cover before operating exceptional items of 6.5 times. The Board is recommending maintaining the dividend at 5.84p, covered 1.9 times before operating exceptional items. Home Shopping Core home shopping results, excluding House of Stirling and Teleview which are covered separately below, show a significant operating profit improvement, up 13.6% at £59.2m (2004 £52.2m) on turnover up 0.9% to £416.5m. This reflects the concerted management action which has resulted in a 1.3% gross margin rate improvement and a cost reduction programme which has reduced selling and administration costs by over £4m. Our home shopping strategy is to focus on specific customer and product niches, with particular specialism in larger sizes and/or the over forty-five customer. Whilst turnover growth has been modest we have shown considerable success in certain key product categories. Overall sales of ladieswear were level with last year despite strong deflation in the market place, and within this sales of corsetry and lingerie were up by 9%. Footwear was our strongest performing range with sales up 13%. The total turnover for home and leisure products was, as expected, slightly down at £116m. The tighter credit controls, introduced to improve profitability, had the predicted impact on slowing sales of the higher value furniture and electrical lines. This was offset by the launch of a new Christmas Gifts catalogue which resulted in a greater contribution from toys, gifts and decorations. Sales grew in all three of our customer age groups. Within the younger titles (30-45 age group) Fashion World remains the dominant catalogue but the fastest growing brand is still Simply Be, where sales grew by 18%. The main mid-life group of catalogues targeted at the 45-65 age group rose by 1% to £293m including sales from the House of Bath database we acquired in November 2004. Once this business is fully integrated we will use it as a platform to increase sales from the ABC1 socio-demographic groups, where the market is growing strongly. Sales to the older customers (65 plus) rose by 2% to £22m with good performances from Heather Valley and Special Collection. Our emphasis on customer recruitment has been to improve the quality rather than the quantity of our database. We discontinued the Value Catalogue and Home Essentials on grounds of low profitability, which contributed to a 3% decline in customer numbers. The higher quality customer base, together with improved targeting and catalogue content, resulted in the average sales per customer rising by 4%. Our channels to market continue to evolve. Internet penetration has increased to 11% of total sales, reflecting growth of over 60% to £44m. We plan to increase this further by both promoting this channel to our existing customers and building new on-line brands. For example, Viva La Diva.com has been launched and is aimed at a new audience, offering a range of high street and designer footwear brands in addition to our own range of wide fitting footwear. In late autumn we launched the Express Shopping Channel on the main digital television channels in partnership with Northern and Shell. Our share of losses was £1.9m as planned, including set up costs. The gross margin has improved by 1.3% to 56.6% through a combination of reduced bad debts, following the tightening of credit limits, and a deliberate move to reduce the level of discounting. As we outlined at the interim results, we have embarked on a focussed cost reduction campaign, including using on-line auction techniques to improve purchase prices and, where necessary, restructuring business processes. This has yielded savings of £4m in the current year. House of Stirling The recovery plan implemented for House of Stirling, our door-to-door selling operation, has delivered the expected reduction in losses in the second half. The underlying results for the year show sales of £24m, down 27.5%, and pre-exceptional operating losses of £6.3m (2004, £2.0m). We have undertaken a fundamental review of the business and are taking radical action to stem the losses, resulting in an impairment charge of £22.5m. This is shown separately as an operational exceptional item. Teleview The disposal process for our television rental operation has been protracted. We are in negotiations with interested parties and hope to conclude a deal shortly. The operating result was break-even compared with a £1.2m pre-exceptional operating profit last year. Financial Services We have been making personal loans to our customers since 2001. After a thorough review of the prospects for this business we have decided to offer these products only as an intermediary, for which we receive guaranteed commission. The existing loan portfolio of £19m will be collected out by our own debt collection team but we anticipate a shortfall of £3m, including costs, which has been taken as an operating exceptional item. The pre-exceptional operating profit in the division was £1.2m (2004, £2.4m). Fulfilment Services An operating profit before operating exceptional items of £0.3m has been achieved against £0.8m last year. The interactive services activity was closed down in July 2004 and the focus is now clearly on more profitable fulfilment contracts, helping retailers to establish their on-line and catalogue channels. We are working on a solid pipeline of opportunities, and fulfilment contracts have now been signed with Woolworths and more recently JJB Sports. The rapid growth of multi-channel retailing continues to provide exciting opportunities for Zendor. Board Jim Martin, currently non-executive Deputy Chairman and distinguished former Chief Executive, has indicated his intention to retire from the board at our Annual General Meeting in July. Jim has served 31 years with the company, during which it has grown from a market capitalisation of only £4m, much of it due to his outstanding retailing skills, as well as sheer hard work. We thank Jim for his enormous contribution to the company over many years and wish him well. Prospects & Outlook Despite the reported weakening of general customer demand in recent months, we have seen some encouraging signs in current trading. Sales in our core home shopping business for the 10 weeks since the year end are running 5% ahead of last year, 3% of which is contributed by House of Bath customers. However in the light of recent announcements in the sector we remain cautious in our outlook for both sales and gross margin. The restructuring program for our non-core activities will be completed by the autumn, resulting in a significant improvement in the rate of return on capital employed. Overall we are delighted that the many profit improvement initiatives we have put in place in the core business are starting to deliver positive results. Sales in many of our key product categories are advancing and we have improved both the gross margin and the cost base, with a further limited net benefit to come in the current year. The fact that this has been achieved in a very competitive retail market, confirms our confidence in the program we are now pursuing. Whilst there is more progress to be made, the hard work of management and staff is starting to be rewarded. Lord David Alliance, CBE 10 May 2005 CHIEF EXECUTIVE'S REVIEW Introduction We are pleased to report that in the year ended 26th February 2005 we have made good progress in implementing our specialist multi-channel home shopping strategy, whilst at the same time rationalising our other activities. We will continue to pursue these two routes which we believe will enable us to succeed in a highly competitive and deflationary retail environment. Home Shopping Turnover from our core home shopping activities was up by 0.9% at £416.5m. Operating profit increased by 13.6% to £59.2m, giving an operating margin of 14.2%. The key reasons for the improvement in operating profits are a reduction in bad debts, a direct result of the introduction of a more tightly controlled credit policy since 2003, and also reduced selling and administration costs resulting from a group-wide campaign to improve business processes and reduce costs. Channels to Market Customers have never had so many ways to spend their money. We have responded to this competitive environment by expanding our channels to market and by targeted promotional activity. The core route to our customer remains the mailing of catalogues. The frequency of mailings has been increasing, with our best customers receiving a major catalogue or brochure almost every month. This frequent contact helps to keep the offer fresh, the customers loyal and increases our share of their overall spending. These additional mailings also allow the introduction of new, and seasonal products, and we can offer selective price reductions and promotional offers to stimulate demand. Varying catalogue formats has proved successful in achieving enhanced response rates. The sales from leaflets accompanying customers' statements have been declining and we have been deliberately switching our marketing investment into the direct mailing of mid-season catalogues (such as New Now, Summer Value and Classic Detail), where the sales rose by 5% to £91m. In addition to direct mail we continue to expand telemarketing activity at our call centres. In the last year £37m of revenue (up 3%) was generated through up selling techniques used on inbound orders and from outbound calls to selected customers promoting our special offers. Our on-line activity continues to grow rapidly. Initially the internet was merely an alternative ordering mechanism to the telephone and post. This is no longer the case. We are now well into the development phase where our websites carry a much wider range of offers and products than any of our catalogues. These offers may be targeted at specific events, such as Mothers Day, or include additional products, such as flowers and vitamins. This channel to market therefore remains a key area for future development and growth. The major internet launch last year was Viva La Diva.com which is targeted at women who love shoes. In addition to our own range of wide fitting footwear a number of high street brands (such as Schuh, Carvela and Hobbs) and fashion shoe designers (including Emma Hope and Lulu Guinness) are helping us to provide the most comprehensive on-line footwear selection in the UK. The availability of delivery to customers direct from the supplier is vital to these on-line ventures if they are to deliver an acceptable return. The ability to launch new concepts for a low level of investment, and the reduced cost of communication with customers, makes the internet an increasing focus of our development activities. Retail shops are a small part of our multi-channel mix at present. We have had for some time a chain of nineteen stores in the North East of England to sell off end of range stock. House of Bath has a shop at its headquarters in Bath which attracts customers who want to buy the goods on sale in the catalogues in person rather than by home delivery. We are testing this concept further with a trial store in Harrogate for our Shoe Tailor brand, offering a selection from our footwear range and a personalised measuring service, augmented with a much wider range available for home delivery. Customer Groups We operate a portfolio of catalogues targeted at defined customer groups. The common link is the product range which is targeted at either the larger customer and/or those aged over forty-five. The customers are classified into three age groups. The younger customers aged 30-45 are predominantly serviced by the Fashion World and Simply Be catalogues. Total sales were £102m, up 1% on last year. The midlife customer group, incorporating principally the J D Williams, Ambrose Wilson, Oxendales, Premier Man and Fifty Plus brands, increased sales by 1% to £293m, accounting for 70% of the home shopping total. The new addition to this group was House of Bath, a business we acquired out of administration in November 2004 for a total cost of £1.5m. This acquisition has given us access to a database of over one million customers in the more affluent ABC1 socio-demographic groups, currently the fastest growing sector of the home shopping market. The key task is to integrate House of Bath's operations into N Brown's facilities, which will be completed later this summer. This will facilitate mailings to and from other parts of the customer database, allow parcels to be distributed through our courier network and enable the provision of a suitable credit offer. The launch in January 2005 of a 200 page catalogue to our best performing customers in our 65+ aged group has helped to reverse the recent downward trend in sales from this customer group. There were good performances from both Heather Valley and Special Collection in particular. Sales in total rose by 2% to £22m. Product Ranges Our product ranges are tailored to the needs of our chosen groups. In order to deliver authority in our larger sizes and fittings proposition we have over 50,000 different product options each season. The best performances have come from our most specialist product areas. Ladieswear sales of £224m represents 54% of our total sales, the same as the previous year. Basic casual clothing was impacted by deflation in prices, driven by the discount sector, but we saw strong demand for occasionwear, outerwear and styles for the more mature lady. Corsetry and lingerie, where we offer a comprehensive range of fittings and styles, saw a 9% sales increase. Menswear sales of £31m were level with the previous year with the sales concentrated at the lower price points. This pattern has been reflected in our 2005 menswear ranges where we have a higher proportion of value for money lines. Footwear is a core range where we sell in excess of one million pairs of wide-fitting shoes each year. Additional sales from a range of footwear in younger styles for the Fashion World and Simply Be customers, together with an expanded range for the midlife customer, helped aggregate footwear sales to rise by 13% to £46m. Home and leisure sales were 1% lower at £116m. However the launch of the new Christmas Gifts catalogues in the autumn gave new impetus to sales of toys, gifts and decorations. Similarly, the bulk of sales from the House of Bath catalogues are largely for home and leisure lines, generally in the 'hard to find' category. The plan for our product ranges in the 2005 catalogues is to increase further our market share in our core product areas. We will be reducing the number of stock lines but the product options will increase as we selectively introduce more smaller sizes and variable garment lengths. Other Activities House of Stirling, our weekly collected credit operation incurred losses of £4.2m in the first half, and we instigated a recovery plan which has been implemented throughout the second half. This has resulted in a significant improvement in the rate of cash collection, although sales have remained subdued due to the more conservative underwriting criteria. The results for the year show turnover of £24.0m, down 27.5%, and pre-exceptional operating losses of £6.3m against £2.0m last year. A fundamental review of the business has concluded that we need to rationalise the business, which is unique in being product-based rather than loan-based, if we are to eliminate losses in the future. We have taken an impairment charge of £22.5m to facilitate this restructuring. Zendor, which provides home shopping solutions for multi-channel retailers, has seen a number of changes during the year. Eunite, the interactive services division, was closed as planned in July 2004 and the focus concentrated on securing fulfilment contracts from the top 200 UK retailers, many of whom are planning to expand their catalogue and on-line activities. Zendor was successful last year in winning contracts with Daisy and Tom, Woolworths and, most recently, JJB Sports and there is a good pipeline of prospects. Sales were £7.4m, down 16.9% with a pre-exceptional operating profit of £0.3m (2004, £0.8m). Financial income is a core part of N Brown's activities. The major activity is the provision of flexible credit accounts for our home shopping customers, and this has continued successfully throughout the period. In addition we offer warranty and insurance products and personal loans to our customers. Turnover for the year from these activities was down 22.9% at £6.7m, as we tightened the underwriting criteria, producing an operating profit of £1.2m (2004, £2.4m). The insurance products are provided by financial services companies with N Brown Group acting as a broker, but the personal loans have been transacted as a principal. These loans have not delivered an acceptable return on capital employed and we have decided to collect out the existing portfolio. We have recognised a £3m impairment on the £19m loan portfolio as a consequence of this exit. Going forward we will instead offer personal loans to our customers from third party providers for which we will receive a guaranteed commission. Balance Sheet and Cashflow The group's borrowings have been reduced to £126.2m as a result of a net cash inflow before financing of £19.3m against an outflow of £30.5m last year. The main changes relate to a lower level of working capital requirements and capital expenditure of only £9.4m. Net assets at the year-end are £243.3m (2004, £244.3m) with gearing reduced to 52%. The underlying financial strength of the business has significantly improved during the last year. Outlook Future growth for the business will come from expanding our customer base, developing the channels to our customers and refining the product range. Once we have integrated House of Bath onto our logistics platform we see opportunities for expanding sales to the more affluent customer. We will also be concentrating on reactivating lapsed customers and on-line search engines will be an increasing source of new customer recruitment. Our internet websites will be further developed. Vivaladiva.com will be supported with a public relations campaign and Petfoodnstuff.com has recently been launched to satisfy the millions of pet-loving consumers. We see further opportunities for specialist websites. There is additional scope to improve the efficiency of the business and we intend to build on the great response we had from the whole management team last year in rising to the challenge to reduce costs and change our business processes. Summary The clear focus on niche customers and products is starting to produce positive results, and is helping us to succeed in a highly competitive and deflationary retail environment. The business is developing a number of marketing channels to customers and improving the targeting of products and catalogues to customers. Current trading is 5% up on last year in the core home shopping business, and 2% up on a like-for-like basis excluding House of Bath for the 10 weeks since the year end. We are pleased with the progress we have made in the last year and remain confident that our strategy will provide a solid platform for the future. Alan White 10 May 2005 GROUP PROFIT AND LOSS ACCOUNT for the 52 weeks ended 26 February 2005 Continuing Continuing activities Goodwill activities before goodwill Amortisation before Operating Unaudited amortisation & operating Audited operating exceptional Total & operating exceptional Total exceptional items 52 weeks to exceptional items 52 weeks to items (note 4) 26-Feb-05 items (note 4) 28-Feb-04 Note £m £m £m £m £m £m -------------------------------------------------------------------------------------------- Turnover 1 460.3 - 460.3 470.5 - 470.5 ============================================================================================ ------------------------------------------------------------------------------------------------------------------------ Operating profit before goodwill amortisation 2 54.4 (25.5) 28.9 54.2 (7.8) 46.4 Goodwill amortisation - - - - (10.3) (10.3) ------------------------------------------------------------------------------------------------------------------------ Operating profit 3 54.4 (25.5) 28.9 54.2 (18.1) 36.1 Share of joint venture (1.9) - (1.9) - - - operating loss Profit/(loss) on sale of (0.3) - (0.3) 1.0 - 1.0 tangible fixed assets -------------------------------------------------------------------------------------------- Profit on ordinary 52.2 (25.5) 26.7 55.2 (18.1) 37.1 activities before finance charges Net interest payable (8.1) - (8.1) (6.1) - (6.1) and similar charges -------------------------------------------------------------------------------------------- Profit on ordinary 44.1 (25.5) 18.6 49.1 (18.1) 31.0 activities before taxation Taxation on profit on (11.0) 7.7 (3.3) (13.8) 1.2 (12.6) ordinary activities -------------------------------------------------------------------------------------------- Profit on ordinary 33.1 (17.8) 15.3 35.3 (16.9) 18.4 activities after taxation Equity minority - - - - (0.5) (0.5) interests ------------------------------------------------------------------------------------------- Profit for the financial 33.1 (17.8) 15.3 35.3 (17.4) 17.9 year Dividends 6 (17.2) - (17.2) (17.1) - (17.1) ------------------------------------------------------------------------------------------- Retained profit/(loss) 15.9 (17.8) (1.9) 18.2 (17.4) 0.8 for the year =========================================================================================== Underlying earnings 7 11.25p 12.02p per share Goodwill amortisation (6.07)p (5.91)p & operating exceptional -------- -------- items Basic earnings per 5.18p 6.11p share -------- -------- Diluted earnings 7 5.17p 6.08p per share -------- -------- Dividends per share 6 5.84p 5.84p -------- -------- GROUP BALANCE SHEET as at 26 February 2005 Unaudited Audited 2005 2004 £m £m (restated note 8) ------------------------------- Fixed assets Intangible assets 1.5 - Tangible assets 78.8 83.0 Investments 0.1 - ------------------------------- 80.4 83.0 =============================== Current assets Stocks 44.8 46.4 Debtors 332.6 354.1 Cash at bank and in hand 44.5 26.8 421.9 427.3 =============================== Creditors Amounts falling due within one year (84.2) (90.4) ------------------------------- Net current assets 337.7 336.9 ------------------------------- Total assets less current liabilities 418.1 419.9 Creditors Amounts falling due after more than one year (170.0) (170.6) Provisions for liabilities and charges (4.8) (5.0) ------------------------------- Net assets 243.3 244.3 =============================== Capital and reserves Called-up share capital 29.5 29.5 Share premium account 9.2 9.1 Own shares (1.5) (2.3) Profit and loss account 206.1 208.0 ------------------------------- Equity shareholders' funds 243.3 244.3 Equity minority interests - - ------------------------------- Capital employed 243.3 244.3 =============================== Gearing 52% 60% GROUP CASH FLOW STATEMENT for the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2005 2004 2004 Note £m £m £m £m --------------------------------------------- Net cash inflow from operating activities 5 66.5 29.4 Returns on investments and servicing of finance Interest paid (8.3) (6.3) Interest element of finance lease payments (0.1) (0.1) ------- ------- Net cash outflow from returns on investments and servicing of finance (8.4) (6.4) Taxation Corporation tax paid (14.5) (12.8) Capital expenditure and financial investment Purchase of tangible fixed assets (9.4) (25.4) Loans advanced to Joint Venture (2.0) - Sale of fixed asset investment - 0.8 Sale of tangible fixed assets 4.9 0.6 Decrease in own shares held in trust 0.8 0.7 ------- ------- Net cash outflow from capital expenditure and financial investment (5.7) (23.3) Acquisitions and disposals Purchase of subsidiary undertakings - (0.3) Purchase of trade and assets (1.5) - ------- ------- Net cash outflow from acquisitions and disposals (1.5) (0.3) Equity dividends paid (17.1) (17.1) -------- ------- Cash inflow/(outflow) before financing 19.3 (30.5) Financing Issue of ordinary share capital 0.1 0.4 New loans - 34.0 Loan repayments - (0.5) Capital element of finance leases (0.6) (0.5) ------- ------- Net cash (outflow)/inflow from financing (0.5) 33.4 -------- ------- Increase in cash in the year 18.8 2.9 -------- ------- GROUP CASH FLOW STATEMENT, contd. for the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2004 £m £m -------- ------- Reconciliation of net cash flow to movement in net debt Increase in cash in the year 18.8 2.9 Cash inflow from increase in loans - (34.0) Repayment of loans - 0.5 Repayment of capital element of finance leases 0.6 0.5 -------- ------- Movement in net debt in the year 19.4 (30.1) Net debt at 28 February 2004 (145.6) (115.5) -------- -------- Net debt at 26 February 2005 (126.2) (145.6) ======== ======= STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2004 £m £m ---------------------------------- Profit for the financial year 15.3 17.9 Exchange adjustments offset in reserves 0.2 (0.1) ---------------------------------- Total recognised gains relating to the year 15.5 17.8 ================================== RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS for the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2004 £m £m (restated note 8) Profit for the financial year 15.3 17.9 Dividends (17.2) (17.1) ------------------------------- (1.9) 0.8 Other recognised gains and losses (net) relating to the year 0.2 (0.1) Share option charge 0.6 0.2 Issue of ordinary share capital 0.1 0.4 ------------------------------- Net (reduction in)/additions to shareholders' funds (1.0) 1.3 Equity shareholders' funds at 28 February 2004 244.3 243.0 (originally £246.6m before deducting prior period adjustment of £2.3m) ------------------------------- Equity shareholders' funds at 26 February 2005 243.3 244.3 =============================== NOTES TO THE ACCOUNTS for the 52 weeks ended 26 February 2005 Unaudited Audited 2005 2004 1. Analysis of turnover £m £m Home shopping 416.5 412.6 Door to door selling 24.0 33.1 TV Rental 5.7 7.2 Financial services 6.7 8.7 Fulfilment 7.4 8.9 --------------------------------- 460.3 470.5 ================================= Unaudited Audited 2. Analysis of operating profit before goodwill 2005 2004 amortisation and operating exceptional items £m £m Home shopping 59.2 51.8 Door to door selling (6.3) (2.0) TV Rental - 1.2 Financial services 1.2 2.4 Fulfilment 0.3 0.8 --------------------------------- 54.4 54.2 ================================= Unaudited Audited 2005 2004 3. Analysis of operating profit £m £m Home shopping 59.2 52.2 Door to door selling (28.8) (2.0) TV Rental - (8.4) Financial services (1.8) 2.4 Fulfilment 0.3 (8.1) --------------------------------- 28.9 36.1 ================================= Unaudited Audited 4. Analysis of goodwill amortisation and 2005 2004 operating exceptional items £m £m Amortisation of goodwill - 0.6 Impairment of carrying value of tangible fixed assets - 7.8 Impairment of carrying value of financial services 3.0 - Impairment of carrying value of door to door selling operation 22.5 - Write-off of carrying value of goodwill - 9.7 --------------------------------- 25.5 18.1 ================================= Unaudited Audited 5. Reconciliation of operating profit to 2005 2004 operating cash flows £m £m Operating profit 28.9 36.1 Decrease/(increase) in stocks 1.6 (4.7) Decrease/(increase) in debtors 17.6 (23.2) Increase/(decrease) in creditors 7.5 (9.6) Depreciation 10.9 12.6 Amortisation of goodwill and other intangible fixed assets - 0.7 Impairment of goodwill and tangible fixed assets - 17.5 --------------------------------- Net cash inflow from operating activities 66.5 29.4 --------------------------------- 6. An interim dividend of 1.74p per ordinary share was paid on 7 January 2005 to shareholders on the register at the close of business on 10 December 2004. A final dividend of 4.10p per ordinary share is proposed to be paid on 27 July 2005 to shareholders on the register at the close of business on 1 July 2005. 7. The calculation of earnings per share is based on the profit for the financial year of £15.3m (2004, £18.4m) and the weighted average number of shares in issue during the year of 294.0m (2004, 293.0m). To assist comparison, an underlying earnings per share has also been calculated to exclude the impact of goodwill amortisation and operating exceptional items and is based on a profit for the financial year of £33.1m (2004, £35.3m). For diluted earnings per share, the weighted average number of shares of 294.7m (2004, 294.1m) has been calculated after adjusting for the potential dilution of outstanding share options. 8. The financial information set out above does not constitute the group's statutory financial statements for the 52 weeks ended 26 February 2005 or the 52 weeks ended 28 February 2004. The financial information for the 52 weeks ended 28 February 2004 is derived from the statutory financial statements for that year which have been delivered to the Registrar of Companies. The auditors have reported on the financial statements for the 52 weeks ended 28 February 2004; their report was unqualified and did not contain any statement under Section 237 (2) or (3) of the Companies Act 1985. The accounts for the 52 weeks to 28 February 2004 have been restated following the implementation of UITF Abstract 38 - Accounting for ESOP Trusts. The effect of this change is that shares held within Employee Share Option Schemes are no longer classified in the balance sheet as a fixed asset investment but as a deduction from shareholders' funds. This change has no impact on the profit and loss account. All other accounting policies adopted are consistent with those set out in the Annual Report and Accounts for the 52 weeks ended 28 February 2004. The auditors have not reported on financial statements for the 52 weeks ended 26 February 2005, nor have any such financial statements been delivered to the Registrar of Companies. This report was approved by the Board of Directors on 10 May 2005. It is expected that the full Annual Report and Accounts for the 52 weeks ended 26 February 2005 will be posted to shareholders on 3 June 2005. This information is provided by RNS The company news service from the London Stock Exchange

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