5th Apr 2006 12:30
Signet Group PLC05 April 2006 Signet Group plc (LSE: SIG, NYSE: SIG) Embargoed until 12.30 p.m. (BST) Preliminary results for year ended 28 January 2006 5 April 2006 Signet Now Largest Speciality Jeweller In US Dividend up 10% • Group total sales: £1,752.3m up 8.5% • Group like for like sales up 2.4% • Group profit before tax: £200.4m down 1.7% • Earnings per share: 7.5p down 3.8% • Total annual dividend per share: 3.3p up 10.0% These results have been prepared in accordance with International FinancialReporting Standards ("IFRS"), see note 13 for further details. Divisional Highlights • US:- Division now largest US speciality jewellery retailer with 8.2% market share - Kay strengthened its No.1 speciality brand position with sales up 9.9% to $1,290m - Jared joined top-five brands in sector with sales of $534m - Rough diamond sourcing initiative commenced - $1 billion new store investment programme over next five years • UK:- Diamonds now 29% of product mix, versus 22% in 2000/01 - 228 stores trading in modernised format Terry Burman, Group Chief Executive, commented: "The US business againsignificantly outperformed its main competition and gained further market share.The business has now become the largest US speciality jewellery retailer bysales. Over the next five years it is planned to invest some $1 billion in newUS store space. In the longer term there is the potential to double the numberof stores. Despite very challenging trading conditions, which resulted in a fall inprofitability, the UK business still achieved a healthy 10.5% operating margin,a 26.6% return on capital employed and strong cash flow. While the UK businesshas undergone significant changes in recent years there are still manyopportunities for further improvement. In the year to date, US like for like sales have increased at a similar rate tothat achieved in the year to 28 January 2006. The gross margin eased reflectingthe expansion of Jared, product mix changes and higher commodity costs. In theUK, the like for like sales decline during the nine week period reduced to lowsingle digits. Valentine's Day promotions and a stronger performance by theinsurance replacement business resulted in some reduction in gross margin." Enquiries: Terry Burman, Group Chief Executive +44 (0) 20 7317 9700 Walker Boyd, Group Finance Director +44 (0) 20 7317 9700 Susan Gilchrist, Brunswick +44 (0) 20 7404 5959 Pamela Small, Brunswick +44 (0) 20 7404 5959 Signet operated 1,814 speciality retail jewellery stores at 28 January 2006;these included 1,221 stores in the US, where the Group trades as "Kay Jewelers","Jared The Galleria Of Jewelry", and under a number of regional names. At thatdate Signet operated 593 stores in the UK, where the Group trades as "H.Samuel","Ernest Jones", and "Leslie Davis". Chairman's Statement Group results In the 52 weeks to 28 January 2006 total sales rose by 8.5% to £1,752.3 million(2004/05: £1,615.5 million). Like for like sales advanced by 2.4%, a strong USperformance more than compensating for a significant fall in the UK. Profitbefore tax was £200.4 million (2004/05: £203.9 million). The tax rate was 34.7%(2004/05: 33.9%). Earnings per share were 7.5p (2004/05: 7.8p). See note 10 forthe impact of exchange rate movements. The US division again significantly outperformed its main competition and hasnow become the largest US speciality jewellery retailer by sales. Total dollarsales increased by 12.1%, with like for like sales up 7.1%. Like for like salesin the first half rose by 7.9% followed by a solid performance in the secondhalf when they rose by 6.4%. The UK experienced the sharpest deterioration in retail trading conditions for14 years. Consequently the division's annual like for like sales fell by 8.2%, aperformance believed to be at least in line with that of the UK jewellerysector. The Group had a net cash outflow of £4.8 million (2004/05: £10.0 million) afterinvesting £136.7 million in fixed and working capital during the year (2004/05:£152.1 million). The Balance Sheet remains strong and gearing (net debt toshareholders' funds) at 28 January 2006 was 11.2% (29 January 2005: 10.8%). Thestore refurbishment programme in the UK continued at a similar level to that in2004/05. In the US, new store space grew by 9% (2004/05: 8%) and will increasefurther over the next five years given a planned investment programme of $1billion. Dividend The Board is pleased to recommend a 10.0% increase in the final dividend to2.8875p per share (2004/05: 2.625p), the total for the year being 3.3p per share(2004/05: 3.0p). Dividend cover is 2.3 times (2004/05: 2.6 times). Distributionpolicy is regularly reviewed taking into account earnings, cash flow, gearingand the needs of the business. See note 8 regarding dividends to US holders ofordinary shares and ADSs. Board changes Following the announcement made at this time last year, I now confirm that Iwill retire from the Board at the end of the 2006 AGM. I have held the positionof Chairman since 1992. At that time the Group was in a perilous state but muchhas changed since then and today Signet has a market capitalisation approaching£2 billion. I will stand down knowing that the business is in good hands and Iwould like to express my appreciation to Board colleagues, executives and stafffor the invaluable contribution they have made to Signet's success. The Board has appointed Malcolm Williamson as Chairman with effect from theconclusion of the AGM on 9 June 2006. Mr Williamson is a senior internationalbusinessman with significant chairmanship experience and has been anon-executive director of the Group since November 2005. I would like to takethis opportunity to wish him well in his new role. Current trading In the year to date, US like for like sales have increased at a similar rate tothat achieved in the year to 28 January 2006. The gross margin eased reflectingthe expansion of Jared, product mix changes and higher commodity costs. In theUK, the like for like sales decline during the nine week period reduced to lowsingle digits. Valentine's Day promotions and a stronger performance by theinsurance replacement business resulted in some reduction in gross margin. Chief Executive's Review Group Group operating profit was £208.2 million (2004/05: £212.5 million). Theoperating margin was 11.9% (2004/05: 13.2%) and the return on capital employed("ROCE") 22.4% (2004/05: 26.3%). The declines being primarily due to difficulttrading conditions in the UK. The Group's medium term objectives are to maintain leading performance standardson both sides of the Atlantic, to increase new store space in the US, and tomaintain a strong balance sheet whilst funding expansion of space in the US anddividend payments. US division During the year the division became the largest speciality retail jeweller inthe US with an 8.2% market share. Kay substantially strengthened its position asthe leading speciality jewellery brand and Jared is now also among the top-fivebrands in the sector. Operating profit rose by 17.3% to £167.1 million (2004/05:£142.4 million). At constant exchange rates the increase was 13.6% and the fiveyear annual compound growth rate was 11.9%. The division significantly outperformed the US retail sector with total dollarsales up by 12.1% and like for like sales rising by 7.1%. Jared's like for likesales performance was particularly strong. Kay's like for like sales increasedbroadly in line with the division as a whole, while those of the regionalbrands were slightly ahead of last year. Over the last five years the USdivision's total dollar sales have grown at an annual compound rate of 9.7% andlike for like sales by 4.7%. During the same period, the division's share of thespeciality jewellery market has risen from 5.8% to 8.2%. Consolidation in thespeciality jewellery sector continues, providing significant opportunity to gainfurther market share. New store space growth increased to 9% during 2005/06 (2004/05: 8%), comparedwith 6% in 2001/02. Compound growth in new store space over the last five yearshas been 7% per annum. The majority of the space increase was attributable tothe expansion of Jared. The business also continued to invest in supportservices including increased capacity in the distribution centre, staffrecruitment and training, and an expanded real estate department. Over the next five years it is planned to invest $1 billion in fixed and workingcapital to grow new store space. This will increase the number of stores inoperation by over 40%. Over the longer term the US division has the potential todouble store space within the three existing formats of Kay, Jared and theregional brands. The division's current strategy is to gain further profitable market sharethrough like for like sales growth by focusing on proven competitive advantagesand by increasing new store space by 8% - 10% per annum (a measured increasefrom the previous target of 7% - 9%). Where appropriate, acceleration of thisgrowth through acquisitions will be considered. Increases in total sales willprovide further leverage of the cost base and supply chain efficiencies. The USdivision is increasingly becoming the speciality jewellery retailer of choicefor customers, employees, suppliers and real estate developers. UK division Against the background of a difficult retail environment, UK operating profitfell to £49.1 million (2004/05: £76.9 million including a restructuring chargeof £1.7 million). The retail sector experienced the sharpest deterioration intrading conditions since 1991. Whilst like for like sales fell by 8.2% thedivision still achieved a healthy operating margin of 10.5%, ROCE of 26.6% andstrong cash flow. The division's strategy is to increase store productivity andoperating margin by lifting the average transaction value, predominantly throughhigher diamond sales. Notwithstanding the difficult environment, the average transaction valueincreased by 5% and diamonds now account for 29% (2004/05: 28%) of thedivision's sales. During the last five years the average transaction values haveincreased by 34% in H.Samuel and by 37% in Ernest Jones. Diamond participationhas risen from 17% to 21% and from 33% to 38% respectively. The business has continued to focus on improving customer service, withconcentration on staff training and motivation. The diamond selection wasfurther improved, with the Leo and Forever Diamond ranges once moreoutperforming the division. Stores remodelled during the year achieved asuperior sales performance sufficient to satisfy the Group's investmentcriteria. Further trials of television advertising for both brands took place.In implementing these initiatives the division continued to draw on the USbusiness' best practice and experience. While the UK business has undergonesignificant changes in recent years there are still many opportunities forfurther improvement. US performance review (73% of Group sales) Details of the US division's performance are set out below: 2005/06 2004/05 Change Change at constant Like for like reported exchange rates(1) change £m £m % % %Sales 1,282.7 1,107.8 +15.8 +12.1 +7.1Operatingprofit 167.1 142.4 +17.3 +13.6Operatingmargin 13.0% 12.9%ROCE 22.4% 22.2% (1) See note 10 for reconciliation of impact of exchange rates. The operating margin was a little above that of last year, leverage of like forlike sales growth offsetting the impact of additional immature space of 50 basispoints as well as the adverse movement in gross margin of 50 basis points. Thechange in gross margin primarily reflected the growth of Jared and the increasein average transaction values as customers increasingly purchased larger andmore expensive diamonds. Both of these factors were drivers of the like for likesales growth and are expected to continue in 2006/07. A range of supply chaininitiatives and selective pricing changes largely counter-balanced commoditycost increases. The increase in the price of diamonds has moderated although thecost of fine gold continues to rise. Further pricing and supply chaininitiatives are planned to mitigate the impact of commodity cost increases. Thebad debt charge was 3.0% of total sales (2004/05: 2.9%). The proportion of salesthrough the in-house credit card was 51.1% (2004/05: 50.6%). In the jewellery sector, superior customer service and product knowledge arecritical competitive advantages and during 2005/06 a system to measure customersatisfaction was introduced to help identify areas for improvement on astore-by-store basis. The proportion of qualified diamontologists, includingthose in training, increased to over 70% of full time sales staff. Recruitmentpractices were further improved and the programme to enhance jewellery repairprocedures continued. A virtual diamond vault, offering consumers access via anin-store computer to a supplier's inventory of loose diamonds, was rolled out toall Jared stores and selected mall stores. Average unit selling prices in both mall stores and Jared increased by some 8%reflecting further positive response by the consumer to new, higher value,merchandising initiatives, as well as selective changes in retail prices due toincreased commodity costs. The upper end of the diamond selection was furtherenhanced and the Leo Diamond range was again expanded. In Jared the luxury watchranges continued to be extended. During the year an initiative to develop thecapability to source rough diamonds was commenced with the objective of securingadditional reliable and consistent supplies of diamonds. The annual gross marketing spend amounted to 6.7% of sales (2004/05: 6.6%) anddollar marketing expenditure increased by 12.7% reflecting the growth in sales.Kay's consistent use of its highly effective "Every kiss begins with Kay"advertising campaign enabled it to gain further consumer awareness therebybenefiting its sales performance. It is intended to launch a new Kay websitewith an e-commerce capability during the second half of 2006. Regional brandscontinued to use radio advertising although television advertising was tested inone market over Christmas 2005. The test will be expanded to a further twomarkets in 2006/07. Local television advertising supported all Jared stores forthe first time during the holiday period and it is now expected that Jared willhave sufficient scale to move to national television advertising in the fourthquarter of 2007/08. A project to increase the capacity of the distribution centre commenced in 2005/06 and is on schedule to be completed in 2006/07. As part of this project a newcentral repair facility was opened thereby increasing productivity. In 2005/06 Kay increased sales by 9.9% to $1,290.1 million (2004/05: $1,174.4million) and at the year end there were 781 Kay stores. It is planned toincrease Kay's representation in malls by 23-28 net new stores in 2006/07. Inselected malls a superstore format, drawing on the experience of Jared and therecently launched metropolitan store concept, will be tested during 2006/07. Thetrial of Kay in open-air retail centres has proved successful and the rate ofopenings will be increased to 20-25 in 2006/07 (2005/06: 11). Three stores inmetropolitan locations started trading in 2005/06 and two more sites areexpected to be added in 2006/07. An opportunity to open Kay stores in outletcentres has also been identified and it is intended to test about five stores inthis format in 2006/07. In total 50-60 additional Kay stores are planned for2006/07 (2005/06: 39) and in the longer term there is the potential for over1,450 stores. 330 mall stores traded under strong regional brand names at 28 January 2006 withsales of $484.5 million (2005/06: $471.1 million). The regionally branded storesprovide the potential to develop a second mall brand of sufficient size tojustify the cost of national television advertising. This would require about550 stores which could be achieved in the medium term by a mixture of storeopenings and acquisitions. It is planned that 10-15 net new stores will beopened in 2006/07 (2005/06: nine) and there is potential for some 700 regionalstores under a single national brand. Jared sales were $534.2 million (2004/05: $415.0 million) and the portfolio of110 stores is equivalent in space terms to about 450 mall stores. The Jaredconcept is the primary vehicle for US space growth and in 2005/06 the number ofstore openings increased to 18 (2004/05: 14). One store in New Orleans wasclosed due to hurricane and flood damage. The chain is immature with only 40% ofstores having traded for five full years. Nonetheless Jared's average storecontribution rate is nearing that of the division as a whole. The 43 matureJareds achieved, on average, sales of some $5.6 million in their fifth year oftrading, above their target level. During 2006/07 it is intended to increase thenumber of Jared openings to 18-23 and opportunities for over 250 stores havebeen identified. The table below sets out the store numbers, net new openings and the potentialnumber of stores by chain: 29 January Net openings 28 January Planned net Potential 2005 2005/06 2006 openings 2006/07Storenumbers _____________________________________________________________________Kay Mall 721 25 746 23-28 850+ Off-mall 20 11 31 20-25 c.500 Metropolitan nil 3 3 2 c.50 Outlet 1 nil 1 5 50-100 _____________________________________________________________________ 742 39 781 50-60 1,450+Regionals 321 9 330 10-15 c.700Jared 93 17 110 18-23 250+ _____________________________________________________________________ Total 1,156 65 1,221 80-90 2,400+ _____________________________________________________________________ In 2005/06 fixed capital investment was $88.1 million (2004/05: $77.6 million)and this is planned to rise to over $100 million in 2006/07. Some $45 million ofthe fixed capital investment related to new store space in 2005/06, with anincrease to about $55 million expected in 2006/07. The investment in workingcapital, that is inventory and receivables, associated with space growthamounted to some $96 million in 2005/06 and is expected to increase to over $115million in 2006/07. Recent investment in the store portfolio, both fixed and working capital, is setout below: 2005/06 2004/05 2003/04 _________________________________________New stores Mall stores 49 44 47 Off-mall stores(1) 14 10 10 Jared stores 18 14 12 Fixed capital investment $45m $27m $25m Working capital investment $96m $76m $60m _________________________________________ Total investment $141m $103m $85m Store refurbishments and relocations 57 76 61Other store fixed capital investment $28m $29m $20m _________________________________________Total store investment $169m $132m $105m _________________________________________ (1) Includes three metropolitan stores UK performance review (27% of Group sales) Details of the UK division's performance are set out below: 2005/06 2004/05 Change Like for like change £m £m % % Sales: H.Samuel 256.2 281.1 -8.8 -8.7 Ernest Jones 208.5 221.1 -5.7 -7.5 Other 4.9 5.5 -10.9 __________________________ Total 469.6 507.7 -7.5 -8.2 __________________________Operating profit 49.1 76.9(1) -36.2Operating margin 10.5% 15.1%(1)ROCE 26.6% 44.5%(1) (1) After charging a restructuring expense of £1.7 million. The UK division's operating margin was 10.5% (2004/05: 15.1%) reflecting thepoor trading conditions and the resulting negative operational leverage. Pricingdiscipline was maintained and the gross margin increased by 60 basis points in2005/06 but is expected to show a slight decline in 2006/07. Diamond jewellery assortments were further enhanced during the year andparticipation continued to rise. The Leo Diamond range was further expanded inErnest Jones and the Forever Diamond selection was increased in H.Samuel. Whitemetal jewellery again proved popular. The average selling price in H.Samuel was£38 (2004/05: £37) and in Ernest Jones £148 (2004/05: £141). Both customer service and product knowledge remain priorities. A carefullystructured weekly training programme continues to be followed, with an emphasison measurable outcomes. The sales commission scheme, which drew on the Group'sUS experience, was successfully tested in 2004/05 and rolled out during 2005/06. The television advertising trial continued at a similar level of coverage to2004/05. Marketing expenditure represented 3.2% of sales in 2005/06 (2004/05:3.0%). In August 2005 an e-commerce capability was launched on the H.Samuelwebsite as a complement to store-based customer service. It is anticipated thatthe Ernest Jones website will commence e-commerce in 2006/07. During the year 78 stores were refurbished or relocated. At the year end 228stores, mostly H.Samuel, traded in the modernised format, accounting for over40% of the UK division's sales. Five Ernest Jones and three H.Samuel stores wereopened. 17 H.Samuel and two Ernest Jones stores were closed. At the year endthere were 593 stores (386 H.Samuel and 207 Ernest Jones). A lower level ofstore refit is planned for 2006/07 in line with the cycle, with store capitalexpenditure expected to be some £12 million (2005/06: £22 million). Recent investment in the store portfolio is set out below: 2005/06 2004/05 2003/04 _____________________________________Store refurbishments and relocations 78 81 32New H.Samuel stores 3 2 -New Ernest Jones stores 5 7 5Store fixed capital investment £22m £23m £13m Group financial review Operating margin and ROCE Operating margin (operating profit to sales ratio) was 11.9% (2004/05: 13.2%)and ROCE was 22.4% (2004/05: 26.3%). Capital employed is based on the average ofthe monthly balance sheets and at 28 January 2006 included US in-house creditcard debtors amounting to £382.4 million (29 January 2005: £319.0 million). Group and financing costs Group central costs amounted to £8.0 million (2004/05: £6.8 million), theincrease includes costs associated with new corporate governance practices and anet property provision of £0.7 million (2004/05: £0.4 million). Net financingcosts amounted to £7.8 million (2004/05: £8.6 million), the reduction beingprimarily due to higher interest income received in the first half. Taxation The charge of £69.6 million (2004/05: £69.1 million) represents an effective taxrate of 34.7% (2004/05: 33.9%). It is anticipated that the effective tax ratewill be approximately 36% in 2006/07. Profit for the financial period Profit for the 52 weeks ended 28 January 2006 was £130.8 million (2004/05:£134.8 million). The next reporting period is the 53 weeks ending 3 February2007. Liquidity and capital resources Cash generated from operations amounted to £188.1 million (2004/05: £172.6million) after funding a working capital increase of £66.3 million (2004/05:£81.6 million), principally as a result of the growth of the US division. It isanticipated that in 2006/07 there will be a further increase in the level ofworking capital investment due to planned US store openings. Interest of £11.4million (2004/05: £11.6 million) and tax of £64.5 million (2004/05: £56.5million) were paid. Net cash from operating activities was £112.2 million (2004/05: £104.5 million). Group capital expenditure was £75.9 million (2004/05: £70.5 million). The levelof capital expenditure was some 1.6 times (2004/05: 1.7 times) the depreciationand amortisation charge of £46.2 million (2004/05: £41.7 million). Capitalexpenditure in 2006/07 is expected to be £75 million to £85 million, most ofwhich will be store related. There were disposal proceeds of £7.5 million (2004/05: £0.2 million). Equity dividends of £52.7 million (2004/05: £43.8 million)were paid in the year. Net cash outflow was £4.8 million (2004/05: £10.0million). In 2006/07 the cash outflow is expected to be between £10 million and£30 million reflecting the planned increase in space growth in the US. Net debt Net debt at 28 January 2006 was £98.6 million (29 January 2005: £83.5 million,£93.8 million after exchange translation differences). Group gearing at the yearend was 11.2% (29 January 2005: 10.8%). On 30 March 2006 the Group entered into a US private placement note term seriespurchase agreement for $380 million of fixed rate notes as set out below: Amount Interest rate Maturity $100 million 5.95% 2013 $150 million 6.11% 2016 $130 million 6.26% 2018 Funding and completion is expected on 23 May 2006. The proceeds of the issuewill be used to replace a maturing $251 million privately placed receivablessecuritisation and for general corporate purposes. Pensions The Group has one UK defined benefit plan (the "Group Scheme") which was closedto new members in 2004. All other pension arrangements are defined contributionplans. The IAS 19 present value of obligations of the Group Scheme increasedlast year by £33.4 million primarily as a result of increasing the longevityassumption by approximately four years to over 85 for future pensioners. Themarket value of the Group Scheme's assets increased by £19.8 million. As aresult the pension deficit on the balance sheet increased by £13.6 million to£15.5 million before a related deferred tax asset of £4.6 million (29 January2005: £0.6 million). The triennial actuarial valuation will be carried outduring 2006/07, however the IAS 19 assumptions already reflect the revisedlongevity projections that are likely to be used. The cash contribution to the fund in 2005/06 was £4.3 million (2004/05: £3.7million). The Group expects to contribute a minimum of £3.5 million in 2006/07subject to review following the completion of the actuarial valuation, whenadditional contributions are expected to be agreed. Summary of Fourth Quarter Results (Unaudited) 13 weeks ended 13 weeks ended Like for like 28 January 2006 29 January 2005 change £m £m %Sales UK 195.8 213.0 -8.6 US 523.1 424.5 +6.4 --------- ---------- 718.9 637.5 +1.8 --------- ----------Operating profit UK - Trading 54.0 67.2 - Group central costs (3.3) (1.9) --------- ---------- 50.7 65.3 US 96.5 82.6 --------- ----------Total operating profit 147.2 147.9Net financing costs (1.9) (1.0) --------- ----------Profit before tax 145.3 146.9 Taxation (50.6) (48.0) --------- ----------Profit for the period 94.7 98.9 --------- ----------EPS - basic 5.5p 5.7p - diluted 5.4p 5.7p The Board of Directors approved this statement of preliminary results on 5 April2006. There will be an analysts' presentation and conference call today at 2.00 p.m.BST (9.00 a.m. US Eastern Time and 6.00 a.m. US Pacific Time) and a simultaneousaudio and video webcast at www.signetgroupplc.com. To help ensure the conferencecall begins in a timely manner, all participants should dial in 5 to 10 minutesprior to the scheduled start time. The call details are: UK dial-in: +44 (0) 20 7365 1834 US dial-in: +1 718 354 1171 UK 48hr. replay: +44 (0) 20 7784 1024 Pass code: 8440161# US 48hr. replay: +1 718 354 1112 Pass code: 8440161# First quarter sales figures are expected to be announced on 4 May 2006. High resolution photographs are available to the media at www.newscast.co.uk +44 (0) 20 7608 1000. This release includes statements which are forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995. Thesestatements, based upon management's beliefs as well as on assumptions made byand data currently available to management, appear in a number of placesthroughout this release and include statements regarding, among other things,our results of operation, financial condition, liquidity, prospects, growth,strategies and the industry in which the Group operates. Our use of the words"expects," "intends," "anticipates," "estimates," "may," "forecast,""objective," "plan" or "target," and other similar expressions are intended toidentify forward-looking statements. These forward-looking statements are notguarantees of future performance and are subject to a number of risks anduncertainties, including but not limited to general economic conditions, themerchandising, pricing and inventory policies followed by the Group, thereputation of the Group, the level of competition in the jewellery sector, theprice and availability of diamonds, gold and other precious metals, seasonalityof the Group's business and financial market risk. For a discussion of these and other risks and uncertainties which could causeactual results to differ materially, see the "Risk and Other Factors" section ofthe Company's 2004/05 Annual Report on Form 20-F filed with the U.S. Securitiesand Exchange Commission on May 3, 2005 and other filings made by the Companywith the Commission. Actual results may differ materially from those anticipatedin such forward-looking statements even if experience or future changes make itclear that any projected results expressed or implied therein may not berealised. The Company undertakes no obligation to update or revise anyforward-looking statements to reflect subsequent events or circumstances. SIGNET GROUP plc Consolidated income statement for the 52 weeks ended 28 January 2006 52 weeks 52 weeks Notes ended ended 28 January 29 January 2005 2006________________________________________________________________________________ £m £m________________________________________________________________________________ Sales 1,752.3 1,615.5 2,10 Cost of sales (1,516.3) (1,371.8)________________________________________________________________________________Gross profit 236.0 243.7Administrative expenses (74.1) (69.8)Other operating income 46.3 38.6 3________________________________________________________________________________Operating profit 208.2 212.5 2,10Finance income 9.3 8.4 4Finance expense (17.1) (17.0) 4________________________________________________________________________________Profit before tax 200.4 203.9 10Taxation - UK (12.9) (20.5) 5 - US (56.7) (48.6) 5________________________________________________________________________________Profit for the financial period 130.8 134.8________________________________________________________________________________ Earnings per share - basic 7.5p 7.8p 7 - diluted 7.5p 7.8p 7________________________________________________________________________________ All of the above relate to continuing activities. Consolidated balance sheet at 28 January 2006 28 January 29 January 2005 Note 2006________________________________________________________________________________ £m £m________________________________________________________________________________ AssetsNon-current assetsIntangible assets 22.9 17.4Property, plant and equipment 253.8 225.7Other receivables 14.3 11.6Deferred tax assets 17.4 15.9________________________________________________________________________________ 308.4 270.6________________________________________________________________________________Current assetsInventories 679.7 577.9Trade and other receivables 430.4 359.4Cash and cash equivalents 52.5 102.4________________________________________________________________________________ 1,162.6 1,039.7________________________________________________________________________________ Total assets 1,471.0 1,310.3________________________________________________________________________________ LiabilitiesCurrent liabilitiesShort-term borrowings (151.1) (53.1)Trade and other payables (217.1) (163.3)Deferred income (50.4) (53.5)Current tax (50.2) (43.8)________________________________________________________________________________ (468.8) (313.7)________________________________________________________________________________Non-current liabilitiesBank loans - (132.8)Trade and other payables (36.0) (28.2)Deferred income (65.6) (56.2)Provisions (6.2) (5.8)Retirement benefit obligation (15.5) (1.9)________________________________________________________________________________ (123.3) (224.9)________________________________________________________________________________ Total liabilities (592.1) (538.6)________________________________________________________________________________ Net assets 878.9 771.7________________________________________________________________________________ EquityCapital and reserves attributable toequity shareholdersCalled up share capital 8.7 8.7Share premium 71.7 68.0Other reserves 138.2 138.6Retained earnings 660.3 556.4________________________________________________________________________________Total equity 878.9 771.7 9________________________________________________________________________________ Consolidated statement of recognised income and expense for the 52 weeks ended 28 January 2006 52 weeks 52 weeks ended ended 28 January 29 January 2005 2006________________________________________________________________________________ £m £m________________________________________________________________________________ Profit for the financial period 130.8 134.8Translation differences 33.1 (18.9)Gains on cash flow hedges 1.4 -Actuarial loss on retirement benefit scheme (11.4) (3.9)________________________________________________________________________________Total recognised income & expense for theperiod 153.9 112.0________________________________________________________________________________ Consolidated cash flow statement for the 52 weeks ended 28 January 2006 52 weeks 52 weeks ended ended 28 January 29 January 2005 2006________________________________________________________________________________ £m £m________________________________________________________________________________Cash flows from operating activities: Profit before tax 200.4 203.9Depreciation and amortisation charges 46.2 41.7Financing costs 7.8 8.6Increase in inventories (72.8) (52.3)Increase in trade and other receivables (51.4) (44.5)Increase in payables and deferred income 53.0 10.7Other non-cash movements 4.9 4.5________________________________________________________________________________Cash generated from operations 188.1 172.6Interest paid (11.4) (11.6)Taxation paid (64.5) (56.5)________________________________________________________________________________Net cash from operating activities 112.2 104.5________________________________________________________________________________ Investing activities:Interest received 2.4 1.8Proceeds from sale of property, plant andequipment 7.5 0.2Purchase of property, plant and equipment (70.4) (70.5)Purchase of intangible assets (5.5) -________________________________________________________________________________Cash flows from investing activities (66.0) (68.5)________________________________________________________________________________ Financing activities:Proceeds from issue of share capital 3.7 7.3Purchase of own shares (2.0) (9.5)Repayment of borrowings (46.6) (14.5)Dividends paid (52.7) (43.8)________________________________________________________________________________Cash flows from financing activities (97.6) (60.5)________________________________________________________________________________ Reconciliation of movement in cash and cash equivalents:Net decrease in cash and cash equivalents (51.4) (24.5)Opening cash and cash equivalents 102.4 128.0Translation difference 1.5 (1.1)________________________________________________________________________________Closing cash and cash equivalents 52.5 102.4________________________________________________________________________________ Reconciliation of cash flows to movement in net debt:(1)Change in net debt resulting from cash flows (4.8) (10.0)Translation difference (10.3) 6.4________________________________________________________________________________Movement in net debt in the period (15.1) (3.6)Opening net debt (83.5) (79.9)________________________________________________________________________________Closing net debt (98.6) (83.5)________________________________________________________________________________ (1) Net debt represents cash and cash equivalents, short-term borrowings andbank loans. Notes to the financial results for the 52 weeks ended 28 January 2006 1. Basis of preparation This financial information has been prepared in accordance with InternationalFinancial Reporting Standards (collectively "IFRS") as adopted by the EuropeanUnion ("EU"). Any difference between these standards and those issued andadopted by the International Accounting Standards Board are not material to theGroup for the accounting periods presented in this announcement. IFRS is subjectto review and possible amendment or interpretive guidance and therefore subjectto change. 2. Segment information 2006 2005________________________________________________________________________________ £m £m________________________________________________________________________________ Sales by origin and destinationUK, Channel Islands & Republic of Ireland 469.6 507.7US 1,282.7 1,107.8________________________________________________________________________________ 1,752.3 1,615.5________________________________________________________________________________ Operating profit/(loss)UK, Channel Islands & Republic of Ireland- Trading(1) 49.1 76.9- Group central costs (8.0) (6.8)________________________________________________________________________________ 41.1 70.1US 167.1 142.4________________________________________________________________________________ 208.2 212.5________________________________________________________________________________ (1) Group central costs for 2006 include a net charge of £0.7 million relatingto property provisions (2005: £0.4 million). The Group's results derive from one business segment - the retailing ofjewellery, watches and gifts. 3. Other operating income Other operating income comprises interest receivable from the US in-house creditprogramme £45.5 million (2005: £38.6 million) and foreign exchange gains £0.8million (2005: £nil). 4. Financing costs 2006 2005________________________________________________________________________________ £m £m________________________________________________________________________________Interest receivable 2.4 1.8Defined benefit pension scheme - expected return on scheme assets 6.9 6.6 - interest on pension liabilities (5.7) (5.4)Interest payable and similar charges (11.4) (11.6)________________________________________________________________________________ (7.8) (8.6)________________________________________________________________________________ 5. Taxation 2006 2005________________________________________________________________________________ £m £m________________________________________________________________________________Current taxation - UK tax 11.5 20.1 - US tax 60.0 27.1Deferred taxation - UK 1.4 0.4 - US (3.3) 21.5________________________________________________________________________________ 69.6 69.1________________________________________________________________________________ Notes to the financial results for the 52 weeks ended 28 January 2006 6. Translation differences The exchange rates used for the translation of US dollar transactions andbalances in these accounts are as follows: 2006 2005________________________________________________________________________________ Income statement (average rate) 1.80 1.86Balance sheet (closing rate) 1.77 1.89________________________________________________________________________________ 7. Earnings per share 2006 2005________________________________________________________________________________ £m £m________________________________________________________________________________ Earnings attributable to shareholders 130.8 134.8________________________________________________________________________________ Basic weighted average number of shares in issue 1,736.6 1,731.6(million)Dilutive effect of share options (million) 3.3 3.6________________________________________________________________________________Diluted weighted average number of shares (million) 1,739.9 1,735.2________________________________________________________________________________Earnings per share - basic 7.5p 7.8p - diluted 7.5p 7.8p________________________________________________________________________________ The number of shares in issue at 28 January 2006 was 1,738,843,382 (29 January2005: 1,735,615,152 shares). 8. Dividends During 2005/06, a dividend of 2.625p per share was paid on 8 July 2005 inrespect of the final dividend declared for the year ended 29 January 2005. Also,an interim dividend for the year ended 28 January 2006 was paid on 4 November2005. Subject to shareholder approval, a proposed dividend of 2.8875p per share willbe paid on 7 July 2006 to those shareholders on the register of members at closeof business on 2 June 2006. This financial information does not reflect thisproposed dividend, which will be treated as an appropriation of retainedearnings in the year ending 3 February 2007. 28 January 29 January 2005 2006________________________________________________________________________________ £m £m________________________________________________________________________________ Final dividend paid of 2.625p per share (2005:2.160p) 45.5 37.3Interim dividend paid of 0.4125p per share(2005: 0.3750p) 7.2 6.5________________________________________________________________________________ 52.7 43.8________________________________________________________________________________ Under US tax legislation the rate of US federal income tax on dividends receivedby individual US shareholders from qualified foreign corporations is reduced to15%. Dividends paid by the Group to individual US holders of shares or ADSsshould qualify for this preferential tax treatment. The change in legislationonly applies to individuals subject to US federal income taxes and therefore thetax position of UK shareholders is unaffected. Individual US holders are urgedto consult their tax advisers regarding the application of this US legislationto their particular circumstances. Notes to the financial results for the 52 weeks ended 28 January 2006 9. Changes in shareholders' equity Other reserves Retained earnings _____________________________________ _____________________________ Share capital Share premium Revaluation Special Reserve for own Hedging Translation Retained Total reserve reserves shares reserve reserve earnings________________________________________________________________________________________________________________________ £m £m £m £m £m £m £m £m £m________________________________________________________________________________________________________________________ Balance at 31January 2004 8.6 60.7 3.1 142.2 - - (99.1) 584.7 700.2Recognisedincome andexpense:- Profit forthe financialperiod - - - - - - - 134.8 134.8- Translationdifferences - - - - - - (18.9) - (18.9)Actuarial lossrecognised - - - - - - - (3.9) (3.9)Equity-settledtransactions -net - - - - - - - 5.1 5.1Dividends - - - - - - - (43.8) (43.8)Transfer onpropertydisposals - - 1.2 - - - - - 1.2Share optionsexercised 0.1 4.8 - - 1.6 - - - 6.5 Purchase ofown shares byESOT - - - - (9.5) - - - (9.5)Shares issuedto QUEST/ESOTs - 2.5 - - - - - (2.5) -________________________________________________________________________________________________________________________Balance at 29January 2005 8.7 68.0 4.3 142.2 (7.9) - (118.0) 674.4 771.7Recognisedincome andexpense:- Profit forthe financialperiod - - - - - - - 130.8 130.8- Gains oncash flowhedges - - - - - 1.4 - - 1.4- Translationdifferences - - - - - - 33.1 - 33.1Actuarial lossrecognised - - - - - - - (11.4) (11.4)Equity-settledtransactions -net - - - - - - - 4.1 4.1Dividends - - - - - - - (52.7) (52.7)Share optionsexercised - 2.3 - - 1.6 - - - 3.9Purchase ofown shares byESOT - - - - (2.0) - - - (2.0)Shares issuedto ESOTs - 1.4 - - - - - (1.4) -________________________________________________________________________________________________________________________Balance at 28January 2006 8.7 71.7 4.3 142.2 (8.3) 1.4 (84.9) 743.8 878.9________________________________________________________________________________________________________________________ Notes to the financial results for the 52 weeks ended 28 January 2006 10. Impact of constant exchange rates The Group has historically used constant exchange rates to compareperiod-to-period changes in certain financial data. This is referred to as 'atconstant exchange rates' throughout this release. The Group considers this auseful measure for analysing and explaining changes and trends in the Group'sresults. The impact of the re-calculation of sales, operating profit, earningsper share, profit before tax and net debt at constant exchange rates, includinga reconciliation to the Group's GAAP results, is analysed below. 52 weeks ended 28 52 weeks ended 52 weeks ended Growth at Impact of 2004/05 Growth atJanuary 2006 actual exchange exchange rate constant movement exchange 28 January 29 January rates at constant rates exchange rates 2006 2005 (non-GAAP) (non-GAAP)______________________________________________________________________________________________________________ £m £m % £m £m %______________________________________________________________________________________________________________ Sales by origin anddestinationUK, ChannelIslands &Republic ofIreland 469.6 507.7 (7.5) - 507.7 (7.5)US 1,282.7 1,107.8 15.8 36.9 1,144.7 12.1______________________________________________________________________________________________________________ 1,752.3 1,615.5 8.5 36.9 1,652.4 6.0______________________________________________________________________________________________________________ Operating profit/(loss)UK, Channel Islands& Republic ofIreland- Trading 49.1 76.9 (36.2) - 76.9 (36.2)- Groupcentral costs (8.0) (6.8) n/a - (6.8) n/a______________________________________________________________________________________________________________ 41.1 70.1 (41.4) - 70.1 (41.4)US 167.1 142.4 17.3 4.7 147.1 13.6______________________________________________________________________________________________________________ 208.2 212.5 (2.0) 4.7 217.2 (4.1)______________________________________________________________________________________________________________ Profit beforetax 200.4 203.9 (1.7) 4.4 208.3 (3.8)______________________________________________________________________________________________________________ Earnings pershare 7.5p 7.8p (3.8) 0.2p 8.0p (6.3)______________________________________________________________________________________________________________ At 28 January 2006 28 January 29 January Impact of At constant 2006 2005 exchange exchange rates rate movement (non-GAAP)________________________________________________________________________________ £m £m £m £m________________________________________________________________________________ Net debt (98.6) (83.5) (7.8) (91.3)________________________________________________________________________________ 11. Accounts The financial information set out above does not constitute the Company'sstatutory accounts for the 52 weeks ended 28 January 2006 or the 52 weeks ended29 January 2005, but is derived from those accounts. Statutory accounts for the52 weeks ended 29 January 2005 have been delivered to the Registrar ofCompanies, whereas those for the 52 weeks ended 28 January 2006 will bedelivered following the Company's annual general meeting. The auditors havereported under Section 235 of the Companies Act 1985 on those accounts for eachof those periods; their reports were unqualified and did not contain a statementunder Section 237 (2) or (3) of that Act. Notes to the financial results for the 52 weeks ended 28 January 2006 12. Reconciliation of IFRS to US GAAP Effect on profit for the financial period of differences between IFRS and USGAAP 52 weeks 52 weeks ended ended 28 January 29 January 2006 2005 £m £m_________________________________________________________________________________Profit for the financial period in accordance withIFRS 130.8 134.8_________________________________________________________________________________ Pensions (1.8) (0.9)Sale and leaseback transactions 0.8 1.0Returns provisions (6.0) -Stock compensation 4.4 -Asset retirement obligations (1.0) -_________________________________________________________________________________US GAAP adjustments before taxation (3.6) 0.1Taxation 5.0 2.6_________________________________________________________________________________US GAAP adjustments after taxation 1.4 2.7_________________________________________________________________________________ Retained profit attributable to shareholders inaccordance with US GAAP 132.2 137.5_________________________________________________________________________________ Earnings per ADS in accordance with US GAAP - basic 76.1p 79.4p - diluted 76.0p 79.1pWeighted average number of ADSs outstanding (million) - basic 173.7 173.2 - diluted 174.0 173.8_________________________________________________________________________________ Effect on shareholders' funds of differences between IFRS and US GAAP ________________________________________________________________________________ 28 January 29 January 2006 2005________________________________________________________________________________ £m £m________________________________________________________________________________Shareholders' funds in accordance with IFRS 878.9 771.7________________________________________________________________________________Goodwill in respect of acquisitions (gross) 501.0 476.8Adjustment to goodwill (59.7) (56.1)Accumulated goodwill amortisation (153.0) (146.0)Sale and leaseback transactions (7.1) (7.9)Pensions 14.4 28.2Depreciation of properties (2.5) (2.5)Revaluation of properties (4.3) (4.3)Returns provisions - 6.0Other - 0.5________________________________________________________________________________ US GAAP adjustments before taxation 288.8 294.7Taxation (2.2) (10.4)________________________________________________________________________________US GAAP adjustments after taxation 286.6 284.3________________________________________________________________________________Shareholders' funds in accordance with US GAAP 1,165.5 1,056.0________________________________________________________________________________Shareholders' funds in accordance with US GAAP atbeginning of period 1,056.0 988.5Net income in accordance with US GAAP 132.2 137.5Issue/(purchase) of shares, net 1.9 (3.1)(Decrease)/increase in additional paid-in capital (0.3) 2.5Dividends paid (52.7) (44.3)Other comprehensive (expense)/income (1) (18.1) 1.4Translation differences 46.5 (26.5)________________________________________________________________________________Shareholders' funds in accordance with US GAAP atend of period 1,165.5 1,056.0________________________________________________________________________________ (1) Other comprehensive (expense)/income relates principally to the Group'sdefined benefit pension scheme. Notes to the financial results for the 52 weeks ended 28 January 2006 13. Adoption of IFRS (i) Revised accounting policies adopted For financial years commencing on or after 1 January 2005 the Group is requiredto report in accordance with IFRS as adopted by the EU. The Group therefore nowprepares its results under IFRS. Any difference between these standards andthose issued and adopted by the International Accounting Standards Board are notmaterial to the Group. This announcement contains audited comparativeinformation for the 52 weeks ended 29 January 2005 that have been restated underIFRS. IFRS is subject to review and possible amendment or interpretive guidanceand therefore subject to change. Revised accounting policies adopted as a resultof the application of IFRS are given below. All other accounting policiesapplied are consistent with those disclosed in the Annual Report & Accounts forthe 52 weeks ended 28 January 2006. These changes have no impact on the Group's historical or future cash flows orthe timing of cash received and paid. The rules for the first time adoption of IFRS are set out in IFRS 1 'First-timeAdoption of International Reporting Standards'. In general, a company isrequired to determine its IFRS accounting policies and apply theseretrospectively to determine its opening balance sheet under IFRS. A number ofexceptions from retrospective application are allowed to assist companies asthey move to reporting under IFRS. For details of where the Group has takenadvantage of the exemptions see the notes below. IFRS 2 Share-based payments In accordance with IFRS 2, the Group has recognised a charge to income inrespect of the fair value of outstanding employee share options. The fair valueis calculated using the Black-Scholes and binomial valuation models and ischarged to income from the grant date over the relevant option vesting period.The optional transitional arrangements, which allow companies to apply IFRS 2fully retrospectively to all options granted but not fully vested at therelevant reporting date, have been used. The operating profit impact in 2004/05was a charge of £3.9 million. IFRS 3 Business combinations IFRS 3 requires goodwill to be stated at cost with impairment reviews carriedout annually, or more frequently when there are indications that the carryingvalue may not be recoverable. Under the transitional arrangements the Group hasapplied IFRS 3 from the transition date. As a result, all prior businesscombination accounting and goodwill was frozen, subject to exchange ratemovements, at the transition date of 31 January 2004 and the value of goodwillwas frozen, subject to exchange rate movements, at £16.8 million, withamortisation previously reported under UK GAAP for 2004/05 of £1.0 million notcharged under the IFRS presentation. IAS 10 Events after the balance sheet date Under IAS 10 dividends are not provided for until formally approved. As a resultnet assets at 29 January 2005 were increased by the amount of the final proposeddividend of £45.5 million. IAS 12 Income taxes The application of IAS 12 results in the separate disclosure of deferred taxassets and liabilities on the Group's balance sheet. Opening balance sheetadjustments have been made to reclassify these assets and liabilities. IAS 17 Leases IAS 17 requires that where operating leases include clauses in respect ofpredetermined rent increases, those rents are charged to the income statement ona straight line basis over the lease term, including any construction period orother rental holiday. Such lease clauses are commonly found in the US and resultin an acceleration of lease charges for accounting purposes from the later tothe earlier years of the lease term. In addition, Standard InterpretationsCommittee ("SIC") 15 requires inducements to enter into a lease to be recognisedover the lease term rather than over the period to the next rent review. For 2004/05, this resulted in an additional charge to the income statement of£3.5 million and a decrease in net assets of £17.9 million before deferred tax. Where quantifiable, the discounted cost of decommissioning the assets installedin leasehold premises is included in the cost of the asset and appropriatedecommissioning provisions are recognised. There was no impact on profit beforetax for 2004/05 although net assets are reduced by £1.0 million before deferredtax. IAS 18 Revenue recognition IAS 18 requires that revenue is only recognised when all significant risks ofownership have been transferred to the buyer. Provisions for returned goods are recognised in net assets with movements inthese provisions recognised in the income statement. There are a number of otherpresentation changes that do not have an impact on the profit or net assets ofthe Group. Interest receivable from the US in-house credit programme isclassified as other operating income. Notes to the financial results for the 52 weeks ended 28 January 2006 13. Adoption of IFRS (continued) IAS 32 and 39 Financial instruments The Group has taken the exemption not to restate comparatives for IAS 32'Financial Instruments: Disclosure and Presentation' and IAS 39 'FinancialInstruments: Recognition and Measurement'. As a result, the comparativeinformation in the 2005/06 accounts is presented on the previously existing UKGAAP basis. The Group applies the hedge accounting provisions of IAS 39 as theyrelate to forward currency and commodity contracts to the extent practically andeconomically appropriate in order to minimise future volatility arising from itsimplementation. IAS 38 Intangible assets Computer software that is not an integral part of the related hardware isclassified as an intangible asset and is stated at cost less accumulateddepreciation. Depreciation is charged on a straight line basis over periods fromthree to five years. (ii) Reconciliation of IFRS to UK GAAP Cumulative effect on total equity of differences between IFRS and UK GAAP 29 January 31 January 2005 2004________________________________________________________________________________ £m £m________________________________________________________________________________Total equity previously reported under UK GAAP 739.1 674.9 IFRS adjustments:Goodwill amortisation 1.0 -Leases (18.9) (15.8)Revenue recognition (6.0) (6.0)Deferred taxation 11.0 9.8Dividend recognition 45.5 37.3________________________________________________________________________________Total equity as reported in accordance with IFRS 771.7 700.2________________________________________________________________________________ Effect on sales and profit before tax of differences between IFRS and UK GAAP 52 weeks ended 29 January 2005________________________________________________________________________________ £m________________________________________________________________________________ Profit before tax previously reported under UK GAAP 210.3 IFRS adjustments:Share-based payments (3.9)Goodwill amortisation 1.0Leases (3.5)________________________________________________________________________________Profit before tax in accordance with IFRS 203.9Taxation:Taxation in accordance with IFRS (69.1)________________________________________________________________________________Profit for the financial period in accordance with IFRS 134.8________________________________________________________________________________ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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