Interim Results - 28 Weeks to 6 November 1999

MFI Furniture Group PLC 15 December 1999 MFI FURNITURE GROUP PLC Interim Results for the 28 weeks ended 6 November 1999 MFI Furniture Group Plc, the UK's largest manufacturer and retailer of kitchen and bedroom furniture, announces its interim results for the 28 weeks ended 6 November 1999. Financial Highlights * Underlying growth (excluding discontinued product lines) of 4%. * Total sales down 3% to £431.7 m (H1 1998: £442.5 m) - Improving sales trend in second quarter * Operating profit up 35% to £18.0 m (H1 1998 : £13.3m) * Profit before tax and exceptional items up 48% to £12.1 m (H1 1998: £8.2 m). * Free cash flow of £53.1 m (H1 1998: £23 m); gearing down to 19% (H1 1998: 50%) * Underlying earnings per ordinary share up 81% to 1.43p (H1 1998: 0.79p) * Interim dividend of 0.7p per share declared (H1 1998: 0.7p) Business Highlights * Realisation of £108 million to come from sale and partial leaseback of 10 retail properties * Disposal of Hygena Packaging for £37 million * Continued growth from Howden Joinery * Successful launch of MFI's largest ever new range of kitchens Commenting on the results John Hancock, Chief Executive said: 'The last six months have been a period of intense activity for MFI. We have concentrated on stabilising the business - both financially and operationally - and laying the foundations for sustainable growth in the future. Much remains to be done, but I believe that we have made an encouraging start. 'The Winter Sale represents a very important trading period for us, and we will issue a Preliminary Results statement and a full update on current trading in March.' Contacts: MFI Furniture Group PLC John Hancock, Chief Executive 0181 913 5319 Michael Williamson, Finance Director 0181 913 5343 Brunswick Group Limited Susan Gilchrist / William Cullum / Charlotte Elston 0171 404 5959 FINANCIAL HIGHLIGHTS ------------------------------------------------------------------- 28 weeks to 28 weeks to 52 weeks to 6 November 7 November 24 April 1999 1998 1999 (as restated) Unaudited Unaudited Audited CONSOLIDATED RESULTS £m £m £m Turnover 431.7 442.5 810.4 Operating profit - before 18.0 13.3 26.4 exceptional items Operating profit/(loss) - 18.0 (14.3) (8.4) after exceptional items Profit/(loss) before 12.1 (26.6) (24.8) taxation EARNINGS PER SHARE (Undiluted) Earnings/(loss) per 10p 1.43 p (4.12) p (4.17) p ordinary share Earnings per 10p ordinary 1.43 p 0.79 p 2.08 p share before exceptional items DIVIDEND Dividend per Ordinary 0.70 p 0.70 p 0.70 p Share of 10p each GROSS MARGIN -before 54.3% 52.8% 54.1% exceptional items OPERATING MARGIN -before 4.2% 3.0% 3.3% exceptional items GEARING 19% 50% 37% NET BORROWINGS AT PERIOD £60.2 m £98.3 m £113.3 m END RETAIL TRADING AREA '000 SQ. FT. (at end of period) UK 4,742 5,224 4,678 France and Spain 742 750 712 RETAIL SALES PER SQ. FT. (£) UK 68.4 63.9 119.0 France and Spain 50.2 47.9 101.0 NUMBER OF EMPLOYEES - (at end of period) UK - Retail 4,598 5,278 4,592 - Trade 703 483 575 France and Spain 674 649 634 Manufacturing 2,785 2,617 2,662 Other operations 56 60 59 Total 8,816 9,087 8,522 -------------------------------------- NUMBER OF EMPLOYEES - 8,522 9,371 9177 (average) CHAIRMAN'S STATEMENT ------------------------------------------------------------------- Financial results Turnover for the Group fell from £442.5 million to £431.7 million. Included in the prior half year's turnover was £29 million of discontinued product which, when excluded, gives an underlying 4% growth on a continuing products basis. This confirms the improving sales trend indicated at the preliminary results stage in July and at the AGM in September. Group operating profit was £18.0 million. This represents a 35% increase over last year, and demonstrates both the benefits from the major restructuring of the UK retail business over the past 12 months and the continued growth of Howden Joinery. Pre-tax profit at £12.1 million also shows a strong improvement against pre-exceptional profits of £8.2 million last year. Free cash flow generated was £53 million, and was used to reduce the debt of the Group. With net borrowings of £60 million, gearing has been reduced to 19% at the half year end. The Group has plans in place to reduce debt further, to provide greater financial stability and flexibility as a platform for improved operating performance. As a result of the improved operating and cash flow performance and the recently announced sale of some of our assets, the Board is declaring an interim dividend of 0.7p, payable on 4 February 2000. Review of operations UK retail sales for the first quarter were relatively depressed. The second quarter showed a substantial improvement, thanks in part to the launch of MFI's largest-ever new range of kitchen products, which has been rolled out progressively since August and has been excellently received by the market. A major advertising and promotional campaign, beginning in August, also helped re- communicate MFI's core 'value' promise to the customer. Despite the sharp reduction last year in the numbers of products carried in the stores, footfall and sales have been relatively unaffected, showing that the MFI retail brand retains its core appeal to the customer. These are encouraging trends as we approach the peak post-Christmas season. The Manufacturing division maintained its position as the industry's leading low-cost producer. The introduction twelve months ago of the new system of home delivery from distribution centres is expected to cut distribution costs substantially over the next three years. Most of the initial problems in the customer service area have been resolved, but there are still issues which continue to be vigorously addressed, and we are working to provide a 'right first time' service to all customers. Howden Joinery continued to grow strongly, with sales up by 57% and profits up by 79%. Our overseas operations in France and Spain increased sales in local currency by 14% and 19% respectively. Major developments We have devoted much of the past six months to strengthening the management team and to a programme of financial and operational stabilisation for the Group, as well as to laying the foundations for sustainable growth in the future. Among the key developments are: - A strengthened management structure Appointments have included: Mark Horgan (previously with Mars) as Group Marketing Director; Gordon MacDonald (formerly of Safeway) as Group Human Resources Director; and Michael Williamson (ex-Rhone Poulenc Rorer and SmithKline Beecham) as Group Finance Director. A management executive board representing all key divisions and disciplines has been created in order to improve communications and decision making across the Group. - Improved financial stability In the interests of strengthening the balance sheet to provide a firmer foundation for future growth, we have announced that, subject to shareholder approval, we will undertake the sale and partial leaseback of ten freehold retail stores for a total of £108 million. We plan a similar exercise with six freehold distribution centres for proceeds of approximately £25 million. Today we are announcing the sale of our subsidiary, Hygena Packaging, to La Rochette SA of France for a consideration of approximately £37 million. Hygena Packaging was regarded as a non- core activity and this, together with the property disposal proceeds, is being applied primarily to reduce the borrowings of the Group. The remaining £200 million property portfolio will continue to be managed actively, with a view to maintaining financial flexibility and to realising maximum value for the business and its shareholders. Change of year end/dividend policy The Board has decided to change the Group's accounting reference date to 31 December. The rationale for the change, which has been reviewed by management and has received overwhelming support, is as follows: * it will improve the accuracy and control of the forecasting and business planning processes; * it will place the major trading period in the first quarter, allowing management time to respond to trading accordingly; and * it will enable the forecasting and communication of results to shareholders and analysts to become more accurate and predictable. With the change in year-end date, dividends will now be paid in October (interim) and June (final). It is anticipated that future interim and final dividends will be of approximately equal value. D S Hunt 15 December 1999 Chairman KPMG ------------------------------------------------------------------- Independent review report by KPMG Audit Plc to MFI Furniture Group Plc Introduction We have been instructed by the Company to review the financial information set out on pages 5 to 12 and we have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The Listing Rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where they are to be changed in the next annual accounts in which case any changes, and the reasons for them, are to be disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4: Review of Interim financial information issued by Auditing Practices Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the 28 weeks ended 6 November 1999. KPMG Audit Plc Chartered Accountants London 15 December 1999 CONSOLIDATED PROFIT AND LOSS ACCOUNT ------------------------------------------------------------------- 28 weeks to 6 November 1999 ----------------------------- Dis Continuing continued Total Operations OperationsUnaudited Note Unaudited Unaudited £m £m £m Turnover 2 417.6 14.1 431.7 Change in stocks (1.1) - (1.1) Other operating income 12.2 - 12.2 --------------------------------- 428.7 14.1 442.8 --------------------------------- Raw materials and 191.1 4.9 196.0 consumables Staff costs 91.9 3.0 94.9 Depreciation of 17.1 1.0 18.1 tangible fixed assets Other operating charges 112.6 3.2 115.8 --------------------------------- 412.7 12.1 424.8 --------------------------------- Operating profit/(loss) 2 16.0 2.0 18.0 Profit/(loss) on 0.7 0.1 0.8 disposal of fixed assets --------------------------------- Profit/(loss) on 16.7 2.1 1 ordinary activities 8 before interest . 8 =================== Interest receivable and 0.8 similar income Interest payable and (7.5) similar charges ------------ Profit/(loss) before 2 12.1 taxation Tax 4 (3.6) ------------ Profit/(loss) for the 8.5 financial period Dividends 5 (4.2) ------------ Amount transferred to 6 4.3 reserves ============ Earnings per share Earnings per 10p 7 1.43p ordinary share Diluted earnings per 7 1.43p 10p ordinary share 28 weeks to 7 November 1998 (as restated) ------------------------------------------ Con tinuin Total g Dis Opera Opera Con tions tions tinued Pre Excep Pre Opera Excep tional excep tions tionals Items Total tional Un Un Un Un s audited audited audited audite Un £m £m £m d audite £m d £m Turnover 428.3 14.2 442.5 - 442.5 Change in stocks 2.0 - 2.0 (4.2) (2.2) Other operating 11.1 - 11.1 - 11.1 income ------------------------------------------- 441.4 14.2 455.6 (4.2) 451.4 ------------------------------------------- Raw materials and 205.2 5.6 210.8 1.0 211.8 consumables Staff costs 96.1 2.7 98.8 6.7 105.5 Depreciation of 20.5 0.9 21.4 - 21.4 tangible fixed assets Other operating 108.0 3.3 111.3 15.7 127.0 charges ------------------------------------------- 429.8 12.5 442.3 23.4 465.7 ------------------------------------------- Operating 11.6 1.7 13.3 (27.6) (14.3) profit/(loss) Profit/(loss) on (0.8) - (0.8) (6.5) (7.3) disposal of fixed assets ------------------------------------------ Profit/(loss) on 10.8 1.7 12.5 (34.1) (21.6) ordinary activities before interest ================= Interest receivable 1.0 - 1.0 and similar income Interest payable and (5.3) (0.7) (6.0) similar charges ------------------------- Profit/(loss) before 8.2 (34.8) (26.6) taxation Tax (3.5) 5.6 2.1 ------------------------- Profit/(loss) for 4.7 (29.2) (24.5) the financial period Dividends (4.2) - (4.2) ------------------------- Amount transferred 0.5 (29.2) (28.7) to reserves ========================= Earnings per share Earnings per 10p 0.79p (4.91)p (4.12)p ordinary share Diluted earnings per 0.79p (4.91)p (4.12)p 10p ordinary share 52 weeks to 24 April 1999 ------------------------------------------- Con tinuin Total g Dis Opera Opera Con tions tions tinued Pre Excep Pre Opera excep tional excep tions tionals Items Total tional Audited Audited Audited Audite s £m £m £m d Audite £m d £m 784.6 25.8 810.4 - 810.4 Turnover (8.3) - (8.3) (4.2) (12.5) Change in stocks 20.5 - 20.5 - 20.5 Other operating income ------------------------------------------- 796.8 25.8 822.6 (4.2) 818.4 ------------------------------------------- 354.1 9.3 363.4 1.0 364.4 Raw materials and 176.4 5.1 181.5 6.7 188.2 consumables Staff costs 35.9 1.7 37.6 7.2 44.8 Depreciation of 207.3 6.4 213.7 15.7 229.4 tangible fixed assets Other operating charges ------------------------------------------- 773.7 22.5 796.2 30.6 826.8 ------------------------------------------- 23.1 3.3 26.4 (34.8) (8.4) Operating profit/(loss) (1.3) - (1.3) (6.5) (7.8) Profit/(loss) on disposal of fixed assets ------------------------------------------- 21.8 3.3 25.1 (41.3) (16.2) ================ Profit/(loss) on ordinary activities before interest 2.2 - 2.2 Interest receivable (10.1) (0.7) (10.8) and similar income Interest payable and similar charges ------------------------- 17.2 (42.0) (24.8) Profit/(loss) before (4.8) 4.8 - taxation Tax ------------------------- 12.4 (37.2) (24.8) Profit/(loss) for (4.2) - (4.2) the financial period Dividends ------------------------- 8.2 (37.2) (29.0) ========================= 2.08p (6.25)p (4.17)p 2.08p (6.25)p (4.17)p CONSOLIDATED BALANCE SHEET ------------------------------------------------------------------- As at As at As at 6 November 7 November 24 April 1999 1998 1999 (as restated) Notes Unaudited Unaudited Audited FIXED ASSETS £m £m £m Tangible assets 424.7 359.7 456.2 Investments 8.0 8.0 8.0 ----------------------------------- 432.7 367.7 464.2 ---------------------------------- CURRENT ASSETS Stocks 88.3 90.7 85.9 Debtors 44.5 45.1 70.1 Investments 10 0.6 0.6 0.6 Cash at bank and in 10 53.0 30.4 52.9 hand ---------------------------------- 186.4 166.8 209.5 ----------------------------------- CREDITORS FALLING DUE WITHIN ONE YEAR Borrowings 10 105.5 115.5 155.5 Other amounts 172.4 179.7 178.2 ---------------------------------- 277.9 295.2 333.7 ---------------------------------- Net current (91.5) (128.4) (124.2) liabilities TOTAL ASSETS LESS 341.2 239.3 340.0 CURRENT LIABILITIES CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR Borrowings 10 8.3 13.8 11.3 Other amounts 2.6 0.7 0.8 ----------------------------------- 10.9 14.5 12.1 ----------------------------------- PROVISIONS FOR 17.0 26.6 18.7 LIABILITIES AND CHARGES ----------------------------------- Net assets 313.3 198.2 309.2 =================================== CAPITAL AND RESERVES Called up share 59.5 59.5 59.5 capital Share premium account 6 43.9 43.9 43.9 Other reserves 6 16.5 14.1 15.3 Revaluation Reserve 6 110.0 - 111.8 Profit and loss 6 83.4 80.7 78.7 account ----------------------------------- Equity shareholders' 313.3 198.2 309.2 funds ================================== CONSOLIDATED CASH FLOW STATEMENT ------------------------------------------------------------------- As at As at As at 6 November 7 November 24 April 1999 1998 1999 Notes Unaudited Unaudited Audited £m £m £m Cash inflow from 8 46.7 38.1 59.3 operating activities Returns on 9 (6.6) (5.3) (9.0) investments and servicing of finance Taxation - 0.5 (17.7) Capital expenditure 9 13.2 (40.1) (49.5) Equity dividends paid - (18.4) (22.6) ----------------------------------- 53.3 (25.2) (39.5) Management of liquid 9 - - - resources Financing 9 (53.0) 17.4 54.7 ----------------------------------- Increase/(decrease) 0.3 (7.8) 15.2 in cash in the period =================================== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase/(decrease) 0.3 (7.8) 15.2 in cash in the period Cash movement on : - debt and lease 9 53.0 (17.4) (54.7) financing ----------------------------------- Change in net debt 53.3 (25.2) (39.5) resulting from cash flows Effect of foreign 10 (0.2) 0.6 0.1 exchange rate changes ----------------------------------- Movement in net debt 53.1 (24.6) (39.4) in the period Net debt at the 10 (114.0) (74.6) (74.6) beginning of the period ----------------------------------- Net debt at the end 10 (60.9) (99.2) (114.0) of the period =================================== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES ------------------------------------------------------------------ 28 weeks to 28 weeks to 52 weeks to 6 November 7 November 24 April 1999 1998 1999 (as restated) Unaudited Unaudited Audited £m £m £m Profit/(loss) for the 8.5 (24.5) (24.8) financial period Unrealised surplus on 111.8 revaluation of properties -------------------------------------- 8.5 (24.5) 87.0 Translation differences on foreign currency (0.2) 0.6 0.1 denominated net investments -------------------------------------- Total recognised gains 8.3 (23.9) 87.1 and losses for the period =========== Prior period adjustment (13.8) (13.8) (Note 11) ------------------------- Total gains and losses (37.7) 73.3 recognised since the last annual report. ========================= RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS ------------------------------------------------------------------ 28 weeks to 28 weeks to 52 weeks to 6 November 7 November 24 April 1999 1998 1999 (as restated) Unaudited Unaudited Audited £m £m £m Profit/(loss) for the 8.5 (24.5) (24.8) financial period Dividends (4.2) (4.2) (4.2) -------------------------------------- Retained profit/(loss) 4.3 (28.7) (29.0) for the financial period Unrealised surplus on - - 111.8 revaluation of properties Other recognised losses (0.2) 0.6 0.1 --------------------------------------- Net addition/(reduction) 4.1 (28.1) 82.9 to equity shareholders' funds Equity shareholders' 309.2 226.3 226.3 funds at beginning of the period * --------------------------------------- Equity shareholders' 313.3 198.2 309.2 funds at end of the period ====================================== * Equity shareholders' funds have been restated for both comparative periods with the shareholders' funds being reduced by £13.8m at April 1998 which affects the opening reserves of both 6 November 1998 and 24 April 1999 respectively. NOTES TO THE FINANCIAL STATEMENTS ------------------------------------------------------------------- 1 BASIS OF PREPARATION The financial information for the 28 weeks ended 6 November 1999 and 7 November 1998 are unaudited and have been prepared using accounting policies which are consistent with those applied to the audited financial statements for the 52 weeks ended 24 April 1999. These statements do not constitute statutory financial statements within the meaning of Section 240 of the Companies Act 1985. The comparative figures for the 52 weeks ended 24 April 1999 are an abridged statement of the Group's full financial statements for that period which have been delivered to the Registrar of Companies and on which the auditors made an unqualified report. 2 SEGMENTAL ANALYSIS 28 weeks to 7 November 1998 52 weeks to 24 (as restated) April 1999 --------------------------------------------- 28 weeks Before Before Excep to 6 Excep Excep Excep tion November tional tional tional al 1999 items items Total items items Total TURNOVER £m £m £m UK - 323.9 354.7 636.1 Retail - Trade 55.4 35.2 70.5 France 36.6 35.4 73.2 and Spain Other 1.7 3.0 4.8 opera tions ----- ---- ---- Continu 417.6 428.3 784.6 ing Opera tions Disconti 14.1 14.2 25.8 nued Opera tions ----- ---- ---- 431.7 442.5 810.4 PROFIT/ £m £m £m £m £m £m £m (LOSS) BEFORE TAXATION UK - 10.5 8.3 (27.6) (19.3) 7.9 (34.8) (26.9) Retail - Trade 5.0 2.8 - 2.8 7.7 - 7.7 France 0.5 - - - 6.6 - 6.6 and Spain Other - 0.5 - 0.5 0.9 - 0.9 opera tions ------------------------------------------------------- Continu 16.0 11.6 (27.6) (16.0) 23.1 (34.8) (11.7) ing Opera tions Discon 2.0 1.7 - 1.7 3.3 - 3.3 tinued Opera tions ------------------------------------------------------- 18.0 13.3 (27.6) (14.3) 26.4 (34.8) (8.4) Profit/( 0.8 (0.8) (6.5) (7.3) (1.3) (6.5) (7.8) Loss) on disposal of fixed assets Net (6.7) (4.3) (0.7) (5.0) (7.9) (0.7) (8.6) interest payable ------------------------------------------------------- Profit/( 12.1 8.2 (34.8) (26.6) 17.2 (42.0) (24.8) loss) before taxation ------------------------------------------------------- NET £m £m £m ASSETS /(LIABIL ITIES) UK - 327.4 232.9 347.6 Retail - Trade 28.9 19.9 33.0 France 9.0 24.9 25.4 and Spain Other 12.3 18.8 16.5 opera tions -------- ----- ----- 377.6 296.5 422.5 Un (64.3) (98.3) (113.3) Allocate d net liabil ities -------- ----- ----- 313.3 198.2 309.2 -------- ----- ----- Manufacturing operating profit has been apportioned across the separate divisions in proportion to its sales to those divisions. Unallocated net liabilities comprise balances in respect of dividends and net borrowings. The analysis of turnover by destination is not materially different to the analysis of turnover by origin. NOTES TO THE FINANCIAL STATEMENTS ------------------------------------------------------------------- 3 EXCEPTIONAL ITEMS The exceptional items charged in the Group profit and loss account for the prior periods arise from the restructuring of the UK Retail business. 4 TAXATION The taxation charge is calculated at 29.8% per cent on profit (28 weeks to 7 November 1998 - 39.8% ; 52 weeks to 24 April 1999 - 27.9%), being the estimated effective rate of taxation for the 36 weeks ending 1 January 2000. 5 DIVIDEND The interim dividend will be paid on 4 February 2000 to shareholders on the register of members at the close of business on 6 January 2000. The shares will be quoted ex-dividend on 29 December 1999. 6 RESERVES Share Profit and premium Other Revaluation loss account reserves Reserve account £m £m £m £m As at 24 April 1999 43.9 15.3 111.8 78.7 Retained profit for - - - 4.3 the period Realised on disposal - - (1.8) 1.8 Amortisation of - 1.2 - (1.2) goodwill Currency translation - - - (0.2) adjustments ------------------------------------------- As at 6 November 43.9 16.5 110.0 83.4 1999 =========================================== 7 EARNINGS PER SHARE 28 weeks to 7 28 weeks to 6 November 1998 52 weeks to 24 November 1999 (as restated) April 1999 ----------------------------------------------------------- Weigh ted aver Weight Weigh age ed ted num aver aver ber Earn age Earn age Earn of ings number ings numbe ings Earn shar per Earn of per Earn r of per ings es share ings shares share ings share share s £m m p £m m P £m m p Basic earning s per share (eps) Earning 8.5 594.9 1.43 (24.5) 594.9 (4.12) (24.8) 594.9 (4.17) s per ordinar y shares Effect - 0.4 - - - - - - - of dilutiv e share options ------------------------------------------------------------ Diluted 8.5 595.3 1.43 (24.5) 594.9 (4.12) (24.8 594.9) (4.17) earning s per share ------------------------------------------------------------ eps before excep tional items Basic 8.5 594.9 1.43 (24.5) 594.9 (4.12) (24.8) 594.9 (4.17) earn ings per share Excep - - - 29.2 - 4.91 37.2 - 6.25 tional items net of tax ------------------------------------------------------------- Basic 8.5 594.9 1.43 4.7 594.9 0.79 12.4 594.9 2.08 eps pre excep tional items Dilut 8.5 594.9 1.43 (24.5) 594.9 (4.12) (24.8) 594.9 (4.17) ed earn ings per share Excep - 0.4 - 29.2 - 4.91 37.2 - 6.25 tional items net of tax ------------------------------------------------------------- Dilut 8.5 595.3 1.43 4.7 594.9 0.79 12.4 594.9 2.08 ed eps pre excep tional items ------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS ------------------------------------------------------------------- 8 CASH FLOW STATEMENT Reconciliation of operating profit/(loss) to operating cash flows:- 28 weeks to 28 weeks to 52 weeks to 6 November 7 November 24 April 1999 1998 1999 £m £m £m Operating profit/(loss) 18.0 (14.3) (8.4) Depreciation charge 18.1 21.4 44.8 (Increase)/decrease in (2.2) 3.7 15.4 stocks Decrease/(Increase) in 25.8 (8.3) (30.0) debtors (Decrease)/increase in (13.0) 35.6 37.5 creditors and provisions ---------- --------- ---------- Net cash inflow from 46.7 38.1 59.3 operating activities ========= ========= ========== 9 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT 28 weeks to 28 weeks to 52 weeks to 6 November 7 November 24 April 1999 1998 1999 £m £m £m Returns on investments and servicing of finance Interest received 0.8 1.0 2.2 Interest paid (7.4) (6.3) (11.2) ---------- ---------- ---------- Outflow on investments and (6.6) (5.3) (9.0) servicing of finance ========== ========== ========== Capital expenditure and financial investment Payments to acquire fixed - (7.2) (7.2) assets investments Payments to acquire tangible (11.9) (34.6) (48.4) fixed assets Receipts from sales of 25.1 1.7 6.1 tangible fixed assets ---------- ---------- ---------- Inflow/(outflow) for capital 13.2 (40.1) (49.5) expenditure and financial investment ========== ========== ========== Cash inflow from liquid - - - resources ========== ========== ========== Financing (Decrease)/increase in bank (53.0) 17.3 54.8 finance Capital element of finance - 0.1 (0.1) lease rental payments ---------- ---------- ---------- Outflow /(inflow) for (53.0) 17.4 54.7 financing Issue of ordinary share - - - capital ---------- ---------- ---------- Financing (53.0) 17.4 54.7 ========== ========== ========== NOTES TO THE FINANCIAL STATEMENTS ------------------------------------------------------------------- 10 ANALYSIS OF NET DEBT Cash at Curren Revol Short Fi bank t ving term Net nance Total asset and Invest credit loans Bor leases Net in ments fa Row debt hand cility ings £m £m £m £m £m £m £m As at 25 37.6 0.6 (90.0) (22.0) (73.8) (0.8) (74.6) April 1998 Cash flow (7.8) - (20.0) 2.7 (25.1) (0.1) (25.2) Exchange 0.6 - - - 0.6 - 0.6 movement ---------------------------------------------------- - As at 7 30.4 0.6 (110.0) (19.3) (98.3) (0.9) (99.2) November 1998 Cash flow 23.0 - (40.0) 2.5 (14.5) 0.1 (14.4) Exchange (0.5) - - - (0.5) 0.1 (0.4) movement ---------------------------------------------------- - As at 24 52.9 0.6 (150.0) (16.8) (113.3) (0.7) (114.0) April 1999 Cash flow 0.3 - 50.0 3.0 53.3 - 53.3 Exchange (0.2) - - - (0.2) - (0.2) movement ---------------------------------------------------- - As at 6 53.0 0.6 (100.0) (13.8) (60.2) (0.7) (60.9) November 1999 ==================================================== 11 PRIOR PERIOD ADJUSTMENT During the period ended 24 April 1999 the sales recognition policy of MFI Furniture Centres Limited was changed from recognising sales on an order basis to a despatch basis. This change in accounting policy has necessitated adjustments to stock, debtors and creditors. Prior to the adoption of this accounting policy MFI Furniture Centres Limited recognised sales, in full, together with the retail element of the profit at the time that the customer placed the order and paid the deposit, subject to provisions. Now sales are recognised when goods are despatched. As a result of this change in accounting policy, prior period figures have been restated. The effects of this change in accounting policy on revenue recognition are shown below :- 28 weeks to 52 weeks to 7 November 24 April 1998 1999 £m Decrease in operating profit (0.6) - Taxation - (5.3)* -------------------------- Loss for the financial period (0.6) (5.3) -------------------------- Stocks 8.0 6.1 Debtors due within one year (35.4) (34.4) Creditors falling due within one 13.0 9.1 year -------------------------- (14.4) (19.2) Provisions for liabilities and - - charges -------------------------- Reduction in net assets (14.4) (19.2) -------------------------- * Release of deferred tax asset.

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