19th May 2005 07:01
Mothercare PLC19 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 todeliver another year of good profit growth. We are now two years into ourthree-year turnaround of Mothercare and the programme is very much on track. We are confident that the underlying strength of our brand, combined with ourspecialist 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 significantfurther growth opportunities will provide an increasingly important balance toour UK operations." Enquiries to: Mothercare plcBen Gordon, Chief Executive 01923 206001Steven Glew, Finance Director 01923 206140 Brunswick Group LimitedSusan 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 ofrebuilding 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 storesales up by 1.3% and gross margins up by 0.5 percentage points. Over two yearsUK like-for-like store sales have increased by 7.2% with gross marginsincreasing 6.7 percentage points. Completing the key projects in the programme remains our focus in the currentfinancial 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 toMarch 2005, we opened three new UK stores and 30 stores internationally. We planto open up to 10 additional UK stores and another 40 international stores in thenew financial year. With almost as many stores outside the UK (220) as withinthe UK (231) we have become a multinational business with a strong internationalbrand. TURNAROUND Our plan to rebuild the business is focused on five key projects: storeproposition, product and sourcing, supply chain, infrastructure and customerservice. The following is an update on these projects. Store proposition The high street refit programme is now largely complete. The majority of thehigh street portfolio has been transformed from what was a poorly presented andloss making part of the business, into a modern store grouping which nowgenerates a substantial contribution. This project focused on significantlyimproving the store environment and addressing the merchandise mix and has beenfurther supported by the work carried out on customer service. We have completed the refit of 100 of our 161 high street stores, equating to66% of high street space and 71% of high street sales. The cost of this refitprogramme was £12 million, an average of £25 per sq. ft. The refitted storescontinue to perform well, achieving sales growth of 5% above the average ofnon-refitted high street stores, generating a cash return on investment on anannualised basis in excess of 20%. The 35 stores in their second year sincerefit have maintained the much improved sales levels they achieved in theirfirst year. Of the remaining 61 stores, some 30 do not financially justify a major refit andwill undergo minor updates. The balance either will be relocated to new storesof a better size or location as appropriate opportunities arise or will beclosed. Our 70 out of town stores continue to perform well. This store portfolio hadbeen refurbished more recently than the high street stores. Nevertheless, wehave been trialling refurbishment options on a small group of these stores. Theresults of the trials have shown that changes to the physical appearance of theout of town stores is less significant to customers than merchandising mix,product adjacencies and store layout. We intend therefore to undertake onlymoderate updates to those stores that require them and focus primarily onimproving 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, designand value of our ranges have significantly repositioned our product offer. The"good, better, best" pricing architecture also introduced two years ago is a keyelement of this success. The success of this approach is shown by the increase in market share inchildren's clothing we have achieved over the last two years. In addition, it isdemonstrated by the fact that our customers are purchasing more added valueitems, 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 ourmarkets. Our new gift offer, which focuses on our core market of birth to agetwo, has been successfully launched and extremely well received by customers.The range is available through our internet service and in a variety ofselections in 40 trial stores. We are monitoring this trial and will use theresults to extend the offer at product and store levels. We have also launched our 'first bedroom' range through our internet service andin our largest stores. Initial responses from customers have again beenpositive. 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 pointswhilst reducing like-for-like selling prices reflects the progress we have madewith our sourcing initiatives. We are now sourcing product from betterfactories, fewer suppliers and fewer countries. Some 35% of our clothing issourced directly and our target is to raise this to 50%, gradually increasingthe 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 toimprove product availability and the efficiency of the distribution operation weinherited two years ago. Availability is now around 85% up from 65% two yearsago, and distribution costs, as a percentage to sales, have reduced to 6.4% from8.5% two years ago. However, our existing logistics network is inefficient and amajor constraint on our ability to fulfil our business potential. It impacts thevolume of product we can distribute effectively and limits the availabilitylevels we could achieve. We announced in November 2004 our new distribution strategy and the plan to movethe bulk of our operation to a new National Distribution Centre (NDC), whichwill be the hub of our distribution network. The new strategy is planned toprovide the benefits of lowering distribution costs towards our target of 5% tosales within 3 years of full operation, together with the sales increaseexpected 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 parkas our existing Daventry warehouse, part of which we are retaining. Thiscombined distribution solution enables a lower risk transfer programme and givesus flexibility for the future as we continue to grow. We are pleased that this programme is progressing very well. The construction ofthe new NDC facility has been completed on schedule and on budget. The firstphase of the move will involve the closure of our Coventry warehouse in June2005 with operations transferred to the NDC. The current Coventry warehousehandles our "pick to zero" distribution operation, which is approximately 20% ofthe value of our product and 50% of our cubic volume, together with our returnsbusiness. The returns business has already been successfully transferred and thepick 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 remainingboxed product from the Daventry warehouse to the NDC with completion scheduledfor the summer of 2006. As previously announced, we anticipate the move to the new NDC to incur £7million of capital expenditure, principally relating to the fit out of the newfacility, and £6.5 million of operating exceptional costs, largely comprisingone-off additional revenue costs related to the move. Infrastructure Lack of investment in the infrastructure of the business over many years hasbeen a significant factor in the historic under-performance of Mothercare. Thecentral merchandise planning and management systems have been a particularweakness. To address this, we successfully implemented a modern merchandiseplanning tool in 2004. The system, which is performing well, will be furtherenhanced this year with extensions to the planning and replenishment functions. A key element in the improvement of our infrastructure has also been thereplacement of our ageing EPOS system. The new EPOS system, in addition togiving us Chip and Pin capability, allows us to provide a higher level ofcustomer service including reduced transaction times. The system has now beensuccessfully implemented in 75 stores and we are on track to roll it out to allstores by March 2006. The cost of these enhancements to our infrastructure has been £6 million in theyear and is expected to be some £15 million in total over the three years of theturnaround programme.Customer service As the pre-eminent speciality retailer in our market, a high level of customerservice is critical to our success. To this end, we have taken the decision to upgrade significantly the quality ofservice and expertise provided by our store staff. This has included theintroduction of structured training programmes in product knowledge andcommercial selling. For the first time, a formalised training programme has beenestablished to develop experts in specific product categories in each store, alllinked to staff rewards with clear performance measurements. This programme will take time to realise its full potential. However, earlysigns of success are beginning to show and our research is finding thatcustomers are noticing a significant improvement in service levels. The resultsof our own "mystery shopper" campaign support these findings, also showingstrong improvements over the past year. LONG-TERM GROWTH The completion of the turnaround projects remain the immediate priority, as thiswill provide the basis for sustained long-term performance and a solid platformfor growth at Mothercare. The long-term growth of our business will come fromcontinuing to improve the performance of our existing operations together withexpansion of our International business, new UK store development and extendingour Direct operations. International Our International business represents a substantial growth opportunity forMothercare. Our brand has strong awareness internationally and a sustainedquality 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 salesvalue of our franchisees was £120 million for the year. Overall franchisee salesgrew by 17%, based on 10% like-for-like growth together with the addition of 30new stores. Our sales to franchisees, which include the cost of product togetherwith franchise/royalty fees, increased by 17.3% in the year. Through extensive analysis of our international markets we see potential foranother 100 international stores over the next three years, 40 of these willopen in the next year. With our existing franchisees we plan to open new storesthis year in territories where we are already represented. These include theMiddle East, where we currently have 74 stores, Russia, Greece and Spain. Withour existing franchisees who have the ability to expand into nearby markets wealso plan to open new stores in new countries this year. We have already openedin three new countries this year - Indonesia, Azerbaijan and Pakistan. We arealso progressing opportunities to develop new countries with new franchisees. To support this level of growth we established a new distribution centre inSingapore last year. This new centre, which complements our existing facility inDubai, means we can now distribute product originating in the Far East morequickly and at reduced cost. We also continue to use our UK distribution systemto service the international business and the new NDC will form a critical partof this mix. New UK store development In 2003 we carried out a review of our store portfolio in the UK, and concludedthat there is significant scope for store growth. The review identified at least40 additional high street and 20 out of town locations where Mothercare couldtrade successfully. We estimate that a programme of opening 5-10 new stores perannum is achievable, allowing us to ensure that we obtain the right stores inthe right locations, thereby achieving our target rates of return. Approximately75% of the UK population are within easy reach of a Mothercare store and ourplans 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 andSheffield and a high street store in Wandsworth. All are performing well and areon track to achieve their target levels of return. For the current year we have eight confirmed openings at this stage. Of thesefour 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 eachyear. Mothercare Direct Mothercare is a multi-channel business and Direct is a key part of thisstrategy. Direct comprises home shopping (internet at home and telephonecatalogue ordering) together with internet in stores (web-enabled stores).Overall our Direct channel continues to grow with sales up 15%. Transactions areup 12% and repeat customer numbers are growing. We have increased the number of web-enabled stores to 138 in the year and willroll out to all stores by March 2006. This channel provides a real growthopportunity for Mothercare, allowing customer orders to be placed on-line instores meaning we capture orders for products that are either not ranged at aparticular store or out of stock. This growth in internet ordering in-store has had some cannibalisation effect onour reported home shopping sales, which are down 5% in the year. Through improved on-line functionality, enhanced customer marketing, extensionof our ranges and web-enabling all our stores Direct is well positioned todeliver further strong growth. OUTLOOK We are confident that the underlying strength of our brand, combined with ourspecialist 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 significantfurther growth opportunities will provide an increasingly important balance toour UK operations. We will provide a trading statement for the first quarter on July 15, the dateof our AGM. FINANCIAL REVIEW RESULTS SUMMARY Total group sales have increased by 2.3% to £457.2 million (2004: £446.9million) with like-for-like UK store sales up by 1.3%. Operating profit beforeexceptional items improved by 13.3% to £17.9 million from £15.8 million lastyear. 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 15.8Exceptional operating items (6.5) 0.8 -------- --------Operating profit 11.4 16.6Non-operating exceptional items 2.4 6.6Interest 1.7 0.7Taxation (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 9.7Mothercare 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 salesincreased by 0.7% to £384.1 million. Like-for-like sales (defined as salesgrowth on the previous year for stores that have been trading continuously fromthe same selling space for at least 13 financial periods) increased by 1.3%. Thesales loss due to net store closures was 0.6%. Three stores were opened duringthe year and five were closed. Mothercare Direct sales reduced by 4.8% to £17.0 million largely due tocannibalisation from significantly increased sales in the web-enabled stores. Operating profit before exceptional operating items increased by 9.3% to £10.6million from £9.7 million last year. Mothercare International Mothercare International, our overseas franchise business, performed well withsales 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 totalto 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 improvementwere an increase in sales and gross margin together with a reduction indistribution costs. Taking into account exceptional operating items, groupoperating 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 flowthrough the business which lead to improved availability to customers andallowed for greater full price trading. The improvements in our product rangeand the early benefits of our sourcing initiatives also played a major role inthe 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 ourcontinued focus on reducing cost base offset increases in key cost areas such asstore payroll and energy. Operating exceptional items The operating exceptional charge of £6.5 million relates to the costs associatedwith the re-organisation of the distribution network as a result of the move tothe new NDC. Non - operating exceptional items The exceptional credit of £2.4 million relates to the profit on disposal net ofcosts 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 aresult of the higher average cash balances resulting from the positive cash flowof the business. Due to the tax losses we have brought forward of some £36 million no tax willactually be paid for the year. The tax charge of £4.4 million, representing aneffective tax rate of 29%, reflects utilisation of these losses in respect ofwhich 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 inthe year was £2.4 million (2004: £2.7 million). The valuation of the schemesunder 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 deferredtaxation at 30% amounting to £6.6 million (2004: £6.7 million). On a FRS17 basisthe 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 andlevels of benefits of the group's pension schemes. The changes in benefitstructure will reduce costs in the long term, however the deficit remainssignificant and the group concluded that a special voluntary contribution intothe scheme of £10 million to strengthen its funding position was necessary andappropriate. This contribution was made in March 2005. If this contribution had not been made, our pension deficit under FRS 17 wouldhave increased by £10 million mainly due to the impact of allowing for increasedmortality rates. We expect to review the ongoing level of contributions to the scheme when theactuarial valuation as at 31 March 2005 is completed. The investment riskprofile of the pension funds has also been reviewed and the level of investmentin fixed income and property has been increased to help reduce the likelihood ofsignificant deficits arising in the future. Balance sheet and cash flow The group had a net cash inflow of £6.7 million before the special pensioncontribution of £10 million, giving a net cash outflow of £3.3 million in theyear, 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), ofwhich the cost of our high street store refurbishment programme was £7.5 millionand 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 taxcharge of 9.3 pence per share (2004: 24.4 pence after a tax charge of nil penceper share). The directors are pleased to recommend a final dividend for the year of 5.3pence (2004: 4.0 pence). The total dividend for the year is 8.0p compared with4.0p last year, an increase of 100%. The final dividend will be payable on 29 July 2005 to shareholders registered on17 June 2005. The latest date for election to join the dividend re-investmentplan is 8 July 2005. IFRS We are well advanced with preparation for the adoption of InternationalFinancial Reporting Standards (IFRS). The group will adopt IFRS for its 2005/06financial reporting. We intend to issue 2004/05 financial information, restatedfor IFRS, with our AGM statement in July 2005. Preliminary announcement of audited results Group profit and loss accountFor 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 - 446.9Cost 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 47.0Administrativeexpenses (31.3) - (31.3) (30.4) - (30.4)---------------------- ----- ------- -------- ------ ------- ------- ------Profit fromretailoperations 17.9 (6.5) 11.4 15.8 0.8 16.6Exceptional items:Profit on saleof subsidiaryundertaking 1 - 2.4 2.4 - 2.0 2.0Profit ondisposal ofstores 1 - - - - 4.6 4.6Interest (net) 2 1.7 - 1.7 0.7 - 0.7---------------------- ----- ------- -------- ------ ------- ------- ------Profit onordinaryactivitiesbeforetaxation 19.6 (4.1) 15.5 16.5 7.4 23.9Taxation 3 (6.3) 1.9 (4.4) - 7.3 7.3---------------------- ----- ------- -------- ------ ------- ------- ------Profit onordinaryactivitiesafter taxation 13.3 (2.2) 11.1 16.5 14.7 31.2 ------- -------- ------- -------Dividends paidand proposed 4 (5.5) (2.7) ------ ------Retainedprofit for thefinancial yeartransferred toreserves 5.6 28.5 ------ ---------------------------- ----- ------- -------- ------ ------- ------- ------Earnings pershare 5 16.2p 46.5pEarnings pershare diluted 5 15.9p 45.7p---------------------- ----- ------- -------- ------ ------- ------- ------ Group balance sheet As at 26 March 2005 (27 March 2004) 2005 2004 Note £ million £ million------------------------- ----- ------ ------ --- ------ ------Fixed assetsTangible assets 87.0 81.3------------------------- ----- ------ ------ --- ------ ------Current assetsStocks 46.8 45.0Debtors 40.8 34.0Cash at bank and in hand andtime 37.0 40.3deposits ----- ------ ------ --- ------ ------------------------------- 124.6 119.3Creditors - amounts falling duewithin 6 (59.5) (60.1)one year ----- ------ ------ --- ------ -------------------------------Net current assets 65.1 59.2------------------------- ----- ------ ------ --- ------ ------Total assets less current 152.1 140.5liabilitiesCreditors - amounts falling dueafter 6 (0.5) (1.2)one yearProvisions for liabilities and 7 (8.1) (3.6)charges ----- ------ ------ --- ------ -------------------------------Net assets 143.5 135.7------------------------- ----- ------ ------ --- ------ ------Capital and reservesattributable to equityinterestsCalled up share capital 35.8 35.5Share premium account 1.3 0.6ESOP reserve (3.2) (4.2)Profit and loss account 109.6 103.8------------------------- ----- ------ ------ --- ------ ------Shareholders' funds 8 143.5 135.7------------------------- ----- ------ ------ --- ------ ------ Group cash flow statementFor 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 activitiesProfit from retailoperations beforeexceptional items 17.9 15.8Depreciation 12.0 13.0Reversal of pastimpairment losses - (1.1)Loss on disposal oftangible fixedassets 0.7 0.9Cost of employee share schemes 1.2 0.9(Increase)/decrease in stocks (1.8) 3.0(Increase)/decrease in debtors (3.3) 0.1Prepaid specialcontribution to pension scheme (10.0) -(Decrease)/increase in creditors (2.2) 4.9Net cash outflow in respect ofexceptional items (2.0) (0.4)------------------------- ----- --- ------ ------ --- ------ ------Net cash inflow fromoperating activities 12.5 37.1------------------------- ----- --- ------ ------ --- ------ ------ Net cash inflow fromoperating activities 12.5 37.1Returns on investments andservicing of financeInterest received 1.8 0.9Interest paid (0.1) (0.2)------------------------- ----- --- ------ ------ --- ------ ------ 1.7 0.7Capital expenditurePurchase 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) 30.7Acquisitions and disposalsSales of subsidiaryundertakings 3.4 1.3Equity dividends paid (4.6) -Management of liquidresources 30.0 (30.0)FinancingIssue of ordinary sharecapital 1.0 0.8Acquisition ofown shares - (0.2)------------------------- ----- --- ------ ------ --- ------ ------ 1.0 0.6------------------------- ----- --- ------ ------ --- ------ ------Increase in cash in theyear 26.7 2.6------------------------- ----- --- ------ ------ --- ------ ------ Reconciliation of net cashflow to movement in netfundsIncrease in cash in theyear 26.7 2.6Cash flow from management of liquid resources (30.0) 30.0------------------------- ----- --- ------ ------ --- ------ ------Movement in net funds inthe year (3.3) 32.6Net 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 37.0Overdrafts - - - - ------------------------ ----- --- ------ ------ ------ ------ ------Net cash 7.7 2.6 10.3 26.7 37.0----------------------- ----- --- ------ ------ ------ ------ ------Cash flow from managementof liquid resourcesTime 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 retailoperations to provide for the direct revenue costs associated with there-organisation of the distribution network as a result of the move to theNational Distribution Centre. Exceptional income of £2.4 million has been credited to profit before taxationrelating to the sale of a subsidiary undertaking. The group has capital taxlosses significantly in excess of likely future requirements and one of thegroup's subsidiary undertakings with capital tax losses attached has been soldto 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 anexceptional credit of £0.8 million relating to VAT, principally arising from thesuccessful outcome of an outstanding VAT claim. In the 52 weeks ended 27 March 2004, non-operating exceptional items credited toprofit before taxation amounted to £6.6 million and comprised the followingthree items. The release of a prior year provision of £2.6 million no longerrequired following the early surrender of the lease of a vacant property. Leasepremiums of £2.5 million received and receivable on the sales of the leases offour stores offset by a charge of £0.5 million to provide for the loss ondisposal of another two stores. The profit on disposal of one of the group'ssubsidiary 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 millionwas recognised in the balance sheet in respect of carried forward tax lossesfollowing the group's return to profitability. In addition, a brought forwardprovision for corporation tax of £0.9 million was released as an exceptionalitem since the provision was no longer required. 2 Interest (net) 2005 2004 £ million £ million------------------------- ----- --- ------ ------ --- ------ ------Interest payable and similarcharges:Bank loans and overdrafts (repayablewithin five years, not by instalments) (0.1) (0.2)Interest receivable and 1.8 0.9similar income ------------------------- ----- --- ------ ------ --- ------ ------ 1.7 0.7------------------------- ----- --- ------ ------ --- ------ ------ 3 Taxation The charge/(credit) for tax on profit on ordinary activities comprises: 2005 2004 £ million £ million------------------------- ----- --- ------ ------ --- ------ ------Current TaxUK corporation tax at 30% - -(2004 - 30%)Exceptional release of prior year taxprovision (note 1) - (0.9)------------------------- ----- --- ------ ------ --- ------ ------ - (0.9)------------------------- ----- --- ------ ------ --- ------ ------Deferred TaxReversal of deferred tax asset inrespect of tax losses utilised againstprofits for the year 4.7 -Adjustment in respect of (0.3) -prior yearsExceptional credit fordeferred 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 26March 2005 (2004 - £36 million). 4 Dividends paid and proposed 2005 2004 £ million £ million-------------------------------------- --- ------ ------Interim paid of 2.7 pence per ordinaryshare (2004 - nil pence) 1.9 -Final proposed of 5.3 pence perordinary 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 67.3min issueDilution - option schemes 1.2m 1.1m------------------------- ----- --- ------ ---- --- -------- -------Diluted weighted average number of shares in issue 69.2m 68.4m ------------------------- ----- --- ------ ---- --- -------- ------- Profit after tax £11.1m £31.2mExceptional items (net of tax) £2.2m (£14.7m)------------------------- ----- --- ------ ---- --- -------- -------Profit after tax before £13.3m £16.5mexceptional items ------------------------- ----- --- ------ ---- --- -------- -------Basic earnings per share 16.2p 46.5pEarnings per share before 19.5p 24.4pexceptional itemsDiluted 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 yearTrade creditors 29.8 25.6Proposed dividend 3.6 2.7Payroll and other taxes, including social security 1.2 1.2Accruals and deferred income 24.2 28.8Landlords' contributions 0.7 1.0Other 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 2.6Distribution 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 3.6Charged in year - 6.5 0.3 6.8Utilised 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 ofthe distribution network, of which the main components relate to leaseprovisions on vacant property and start up costs. It is expected thatsubstantially 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 31.2Dividends (5.5) (2.7)New share capital subscribed 1.0 0.8Acquisition of own shares - (0.2)Cost of employee share schemes charged to profit andloss 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 ExchangeRelated Shares:
Mothercare