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

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