28th Feb 2006 07:04
MFI Furniture Group PLC28 February 2006 28 February 2006 MFI Furniture Group Plc PRELIMINARY RESULTS FOR THE 52 WEEKS TO 24 DECEMBER 2005 KEY POINTS 2005 results and business developments • Total sales up 2.5% to £1,552.2m: - Howden UK up 10.5% to £617.8m; - UK Retail down 4.5% to £787.8m. • Howden UK pre exceptionals operating profit £103.6m (2004: £102.8m). • UK Retail pre exceptionals operating loss £85.1m (2004: £31.3m loss). • Loss before tax and exceptionals £0.6m (2004: £54.5m profit). • Loss before tax after exceptionals £110.8m (2004: £20.6m profit). • Net borrowings down £6.7m to £55.5m at 24 December 2005 - net cash of £112m as at 27 February 2006. • Successful exit from five peripheral businesses, including Hygena Cuisines in France, with cash proceeds of £92m from the Hygena Cuisines sale after the year-end. • New £150m medium term banking facility agreed in February 2006. • Settlement of VAT dispute resulting in £21.8m cash receipt in February 2006 from HM Revenue & Customs. • Agreement reached with pension trustees on scheme benefits and reduction in deficit. Current trading • In the first part of 2006, Howden UK continues to trade well. UK Retail is in line with plan, with sales down and gross margin up. Strategic update • First phase, stabilisation, completed: - new management structure; - strategy review; - financial stability; - exited peripheral businesses. • New strategic focus has been agreed and encompasses: - accelerating new Howdens depot openings, consistent with successful business model; - reorganising the Group into three distinct businesses; - refocusing Retail around kitchens and bedrooms; - a store by store property review; - improving customer service; - restructuring Supply business to make it flexible and efficient. • Consultations have commenced on proposals that could lead to significant job reductions. MFI Chief Executive, Matthew Ingle, said: "2005 was a very difficult year for MFI. Since my appointment in October, thenew management team has worked with speed and urgency to address the problemsfacing the Group. We have made good progress by exiting a number of peripheralbusinesses, restoring financial stability and developing our new strategy forthe future. We have a huge opportunity to rebuild this Group - there is a lot to do and itwill take time. We are building the foundations needed and I am confident we areon the right track. Phase 1, stabilisation, is complete and we are nowcommencing phase 2, fixing the business, which we are announcing today. Thiswill see us rebuilding and refocusing the business, to create a profitableformat for Retail and to grow Howdens." Enquiries: Investor Relations: Mark Robson MFI Furniture Group 020 7404 5959Gary Rawlinson Media enquiries: Susan Gilchrist Brunswick 020 7404 5959Fiona LaffanAnna Jones GROUP RESULTS As indicated in recent trading statements, the Group's results for 2005 reflectthe volatile and difficult trading conditions encountered by UK Retail,particularly during the second half of the year, and problems inherent in thebusiness. This resulted in a substantially increased operating loss for UKRetail. Total turnover rose by 2.5% to £1,552.2m (2004: £1,514.6m). Gross margin increased by 40 basis points to 50.0%, the lower margin of UKRetail being offset by the increased margin of Howden UK. Higher selling,distribution and administration costs meant a loss before tax, excludingexceptional items, of £0.6m (2004: £54.5m profit). Including exceptional items,there was a loss of £110.8m (2004: £20.6m profit). Net exceptional charges totalled £110.2m (2004: £33.9m), with a cash cost of£19.2m. Operating exceptional charges were £106.7m. These comprised: • £42.4m arising from the impairment of UK Retail assets; • £13.0m arising from the impairment of Sofa Workshop goodwill; • £38.7m relating to the write off of a receivable from HM Revenue & Customs; • £34.0m due to the write down of stock valuations; • £14.9m relating to the write off of capital expenditure on IT systems (£20m written off in 2004); • £5.4m incurred for remedial actions in respect of the supply chain; • a credit of £40.1m relating to the Group's UK pension scheme; • £1.6m other exceptional net credits. Non-operating exceptional charges totalled £3.5m. These comprised: • costs of £20.9m relating to the exit from peripheral businesses; • £17.4m relating to the profit on disposal of land and buildings, and fixtures and fittings. The tax charge of £7.8m represents tax payable in France (£1.5m), and prior yearmovements and deferred tax (£6.3m). Loss per share, excluding exceptional items, was 0.9p (2004: positive 5.5p).Including exceptionals, basic loss per share was 20.2p (2004: positive 1.3p). Earnings before interest, tax, depreciation and amortisation were £78.1m (2004:£122.1m). Cash outflow relating to operating exceptional items was £19.2m. Netcapital expenditure was an inflow of £9.5m (2004: outflow £74.6m). Expenditureon fixed assets totalled £47.9m (2004: £82.8m), while the sale of fixed assetsgenerated £57.4m (2004: £8.2m). In 2005, there was a cash inflow of £6.7m (2004:outflow £72.8m). Compared to a year earlier, net borrowings fell from £62.2m to£55.5m at 24 December 2005. DIVIDEND No final dividend for 2005 will be paid (2004:2.0p). The interim dividendalready paid is therefore the total dividend for the year, 2.0p per share (2004:4.0p). OPERATIONAL REVIEW Howden UK 2005 2004 £m £mTurnover 617.8 559.1Operating profit before exceptional items 103.6 102.8 Against the background of increasingly difficult trading conditions, Howden UKperformed well with turnover increasing by 10.5% to £617.8m, same depot turnoverrising by 6.8%. Although gross margin rose by 110 basis points, higher staff(£8.4m), pension (£6.0m) and logistics (£5.2m) costs resulted in operatingprofit before exceptional items being virtually unchanged at £103.6m. Increased staff costs reflected higher investment in staff in anticipation ofnew depot openings, which were slowed in the second half as a result of thefocus on cash conservation. Howden UK pension costs also increased, and,following the new agreement with the pension funds trustees, are expected toremain unchanged in 2006. 22 new depots were opened in 2005, bringing the total to 342. Also, 38 existingdepots were extended and 9 were relocated. UK Retail (including Sofa Workshop) 2005 2004 £m £mTurnover 787.8 825.1Operating loss before exceptional items (85.1) (31.3) Turnover fell by 4.5% to £787.8m, and was 5.1% lower on a same store basis.Deteriorating market conditions in the second half of the year, when sales fell12.4% compared with the same period in 2004, meant that the 3.2% growth seen inthe first half was more than cancelled out. Gross margin was 70 basis pointslower than in 2004, as a result of pursuing volume in the 2005 Winter Sale.However, actions taken by the new management team meant that gross margin beganto recover in the fourth quarter. Previously identified increases in rent and rates (£9m), pension costs (£11m),supply chain stabilisation (£4m) and other logistics costs (£8m), plus anadditional £6m advertising expenditure, were partly offset by cost savingsinitiatives (£23m). As with Howden UK, the new agreement with the pension fundstrustees is expected to result in similar pension costs in the current year. As a result of lower gross profit and increased costs, operating loss beforeexceptional items increased to £85.1m (2004: £31.3m loss). France Retail 2005 2004 £m £mTurnover 133.3 119.4Operating profit before exceptional items 4.2 2.0 Turnover rose by 11.6% to £133.3m and operating profit increased by £2.2m to£4.2m. The sale of this business was announced on 14 February 2006 and the proceeds of£92m were received the same day. Supply After a lull in new product introduction, 20 new kitchen and bedroom ranges wereintroduced during 2005, including two new bedroom formats. Stability in the supply chain contributed to a significant real reduction instock levels, which fell by £22m over the year. GROUP DEVELOPMENTS Strategic review In October, we announced that a wide-ranging and fundamental review of theGroup's performance and strategy was being undertaken under the leadership ofnew Chief Executive, Matthew Ingle. In phase 1, we appointed a new managementteam, exited peripheral businesses, refinanced the Group and developed ourstrategic plan. In phase 2, we are implementing our plans for fixing thebusiness. Phase 3 includes other areas where we are confident there is scope toimprove performance substantially, but where further work is required. • Group structure Following the exit from peripheral businesses, including the successful sale ofHygena Cuisines earlier this month, the Group is focused on its UK operations.The current centralised group structure for these is inappropriate andinefficient. It has led to a build up of central and other costs for which thebusiness lines were not directly responsible and operational inefficiencieswhich we intend to eliminate, particularly in the Group's manufacturingoperations. The Group's UK operations are being reorganised into three businesses, whichwill be separately run, managed and accounted for, providing clarity and directresponsibility for all revenues and associated costs of the Group. The threebusinesses will be: • Retail, comprising the stores and the assets (including regional home delivery centres) associated with final delivery of orders to customers; • Howdens, comprising the depot network; • Supply, including primary warehousing, which will supply products to Retail and Howdens on an arms length basis. Product will be sourced from manufacturing operations retained by the Group and, increasingly, from external suppliers. CEOs have been appointed for Retail, Howdens and Supply, and the Group is nowbeing run on this basis. Steps to effect the legal and commercial separation ofthe businesses are being implemented. These changes enable us to identify clearly where costs lie within the Group andwho has responsibility for them. This will enable us to identify allopportunities for both cost reduction and increased efficiency. The Group intends to report its 2006 Interim results under this new structure,together with comparative information. • Retail The profitability of Retail cannot be restored within the historical businessmodel. The aggregate gross margin is insufficient to absorb fully home deliveryand in-store costs, which are scaled for a much larger business. Retail alsosuffers from poor customer service levels, both in-store and with delivery. Amuch more focussed and flexible structure is required to improve performance,combined with rigorous application of accountability and control, bothfinancially and operationally. The results of the review to date are summarisedbelow. Product offer Retail currently sells across the whole range of home furniture, from fittedkitchens and bedrooms, and furniture for these rooms, to lounge and dining roomfurniture, bathrooms and home office. The profitability and competitiveness ofthe product offer varies considerably and some products are not profitable afterallocation of store and delivery costs. Retail will now concentrate on kitchens and bedrooms, and associated products,where it has competitive advantage and can achieve higher margins. This does notnecessarily mean higher priced product. Kitchens and bedrooms currentlyrepresent in excess of 80 per cent of Retail's sales and gross margin, but asignificantly lower proportion of selling space. Sales of non-core products will be progressively reduced as the store portfoliois reshaped. Where appropriate, Retail will consider granting concessions forsuch products. As a result, Retail's sales are expected to fall in 2006, withthe impact on gross profit partially offset by a rise in gross margin. We willconcentrate on selling higher margin products, increasing the penetration ofinstallation sales, and improving supply arrangements. The concentration on higher margin product will involve a rationalisation ofranges, and testing and roll-out of new products is now more systematic. Thiswill lead to a smaller range of higher quality product supported by a morefocussed marketing campaign. By the end 2006, we plan to reduce the number ofbedroom ranges from 53 to 31 and kitchen ranges from 63 to 38. Sofa Workshop As part of our strategy of concentrating on our core kitchens and bedroomsproducts, we have commenced a sales process for Sofa Workshop. We have alsobegun a consultation process with employees which may lead to 95 job losses. In-store service Our overall service model will improve. Currently, 60 per cent of customers arenot pro-actively approached by our sales staff. As products become increasinglysophisticated, more of our staff will need greater in-depth product knowledgeand an ability to plan both kitchens and bedrooms. Accordingly, we aresignificantly upgrading our training programme which was curtained in 2005following closure of the training department. In addition, our staff schedulingwill be improved to provide better customer service at busy times. Also, oursales staff will be in control of the sale from planning to delivery andinstallation. Logistics and home delivery In 2005, the costs of primary distribution and initial home delivery tocustomers were around £100m or approximately 13 per cent of UK Retail's sales.In addition, delivery was characterised by poor execution, with around 60 percent of kitchen orders, at the worst point last year, requiring more than onedelivery to complete. This led to further costs estimated at £36m in 2005. The fixed costs of distribution and home delivery are too high, the operationbeing scaled for a much larger business. Also, home delivery is uneconomic forsome low value items. As a result, three of MFI's eight regional home deliverycentres (RHDC) may be closed. This could result in around 180 potential joblosses. Retail now has responsibility for the RHDCs and final delivery to customers, andthere has been some improvement in the rate of successful deliveries. Inaddition, customers will in due course have the option to collect theirpurchases instead of having them delivered. It will be necessary to achieve a further significant reduction in totaldelivery costs, including those attributable to poor execution, for a turnaroundof Retail to be successful. Retail is therefore trialling a new service centremodel in Nottingham. It involves a local delivery centre (LDC) serving a clusterof local stores, a model that worked successfully in France. Staff, planners andfitters can co-ordinate their activities and deal with customer's issuespersonally and on a local basis. Customers can collect their orders from the LDCor, for a charge, the order will be delivered to their home. Staff areincentivised on the profitability of the sale, adjusted for any costs of poorexecution. Store portfolio Store sizes currently range from 3,000 to 40,000 square feet, operate in avariety of retail locations and incur rent costs ranging from £8 to £40 persquare foot. Total property costs were £101m in 2005. Retail has concluded that the most appropriate size of stores to maximiseprofitability is between 8,000 and 15,000 square feet. It has also decided whatthe most appropriate retail location is. A store by store assessment is beingundertaken to determine how the current portfolio can be re-shaped, costeffectively, to meet this profile. 11 stores have already been identified whichdo not meet this portfolio criteria and can be exited cost effectively. If thesestores are closed, this may result in around 95 potential job losses. We expect to complete the store by store assessment later this year and willprovide an update with our 2006 Interim results. Overall, the combined actions identified in Retail may result in a total of 370job losses and closure costs of £13m. Annualised cost savings are estimated at£7m. • Howden UK Howdens is a successful business that still has good growth opportunities, bothfrom existing and new depots. It has historically been a very cash generativebusiness and is expected to remain so. In existing depots, it is expected growth will continue as they mature.Consideration will be given to introducing new product ranges and new marketingmaterial that supports the customer. Where appropriate, existing depots will beexpanded or re-located. The expansion of Howdens was deliberately slowed as the Group's situationworsened in 2005. Now, Howdens will again be able to move forward byre-investing more of the cash it generates in new depots. We plan to add newdepots at the rate of about 30 per year. • Supply Approximately half the products sold by the Group are manufactured in-house andthe remainder sourced from third parties. For example, we currently source 15%of our total product from Italy. In a number of categories, relative to in-house manufacture, higher qualityproducts can be sourced at lower cost (and risk) from third parties. For theGroup's manufacturing facilities to be price competitive with third partysuppliers for these products, significant capital investment would be required.However, this would still leave the Group gross margin exposed to rises in unitcosts if volumes fell below planned levels. As a result, we propose to reduce manufacturing capacity in the UK byapproximately 40%, with associated costs of £21m. This may lead to around 1,100job reductions (approx 9% of MFI's total employees). Annualised cost savings areestimated at £12m. In addition, the Group does not have to incur around £40-50m of capitalinvestment to modernise the factories and working capital tied up in in-housemanufacturing will be released. These actions will mean that third party sourcing will increase to approximately75 per cent by the end of 2007 from its current 50%, with associated benefits oflower costs of goods sold and reduced capital expenditure. • Financial implications The phase 2 measures announced today are expected to deliver total profit andloss account benefits of around £11m in 2006 and annualised benefits of £23mfrom 2007 onwards, together with significant working capital and capitalexpenditure savings. In respect of these measures, the Group is expected toincur cash costs of £34m in 2006 and associated asset write offs of £36m. Thisyear, fees of around £12m will be incurred in respect of the reorganisation ofthe Group, the development of the new strategy and the new banking arrangements.MFI will provide an update on the next phase of the review, concerning homedelivery logistics and the reshaping of the store portfolio, with its 2006Interim results announcement. Banking arrangements We announced, on 17 February 2006, a new 39-month secured £150m facility thatreplaces the previous facility. The Company has received clearance from thePensions Regulator in respect of the new financing arrangements. The Company andthe Trustees of the MFI Group Pension Plan and the Schreiber Fund have agreedthat, for so long as the new facilities remain in place, security will also begranted to the Trustees by the MFI Group. This security will be released uponthe new lenders being repaid in full. Management changes Matthew Ingle was appointed Chief Executive in October 2005 and CEOs have beenappointed for each of the three new businesses: Stephen Round heads Retail, RobFenwick manages Supply and Matthew Ingle continues to head Howdens. An interimGroup Chief Operating Officer, Pippa Wicks of AlixPartners, has been appointed. Pensions • FRS17 valuation The pre-tax deficit at 24 December 2005 was £296m (£295m at 25 December 2004). During 2005, liabilities fell by £45m as a result of certain members of the UKpension plans accepting a cash payment in exchange for any claim they may havefor additional pension benefits arising from the non-equalisation of retirementages for men and women (the equalisation liability is now £5m at 2004 values).This, together with favourable investment returns, largely offset increases inscheme liabilities which arose from a further fall in bond yields during 2005,and a smaller increase from changes made to life expectancy assumptions. • Actuarial valuation and new pension arrangements The triennial actuarial valuations (as at 6 April 2005) calculated a pre-taxfunding deficit of £182m, after the reduction in liabilities described above.Agreement has been reached with the Trustees concerning arrangements forclearing this deficit. The trustees also recognised the need for change tofuture service benefits. From September 2006, the intention is that the current schemes benefits, whichare based on final salary at retirement, will be replaced by a contracted-inhybrid arrangement under which a core defined benefit pension based on careeraverage earnings will be offered with an optional top-up defined contributionaccount. The effect of these changes would be to reduce the gross actuarialfunding deficits (as at 6 April 2005) by £32m to £150m. A similar reductionwould occur on a FRS17 basis. Under arrangements agreed with the Pensions Regulator, it is intended that theremaining actuarial deficit will be cleared over a 10-year period. As part ofthese arrangements and in connection with the terms of the new secured lendingfacility (see above), the Trustees have been granted security for the durationof the new banking facility via a first fixed charge over the issued sharecapital of Howden Joinery Limited and second ranking security over other assetscharged to secure the new facility. We estimate the total annualised charges to the profit and loss account arisingfrom the new pension arrangements will be around £35m (including £3.8m inrespect of the loss of national insurance rebates as a result of the changes tothe scheme and estimated take-up of the top-up defined contribution option).This is similar to the charge in 2005. TRADING UPDATE Howden UK has continued to trade well in the first part of the current year(from Boxing day 2005 to 22 February 2006). Total sales are up 9% on the sameperiod last year and more than 6% up on a same depot basis. Gross marginimprovement has continued and is up more than 100 basis points on last year.There are no plans to repeat the June 2005 promotion this year as this putpressure on margins over the course of last year. In what has been a tough market for 'larger ticket' items, Retail has traded inline with our plan. Consistent with our deliberate strategy of exitingunprofitable products, orders in the first part of the year are 17% lower thanthe same period in 2005, 14% lower on a same store basis. However, gross marginhas risen by 500 basis points. As a result, the like for like contribution togross profits is only 5% lower than last year. The Group currently has net cash of £112m, including the Hygena Cuisinesdisposal proceeds. The next trading update will be given at our AGM on 19 May 2006. CONSOLIDATED PROFIT AND LOSS ACCOUNT 52weeks to 24 December 2005 Before exceptional items Exceptional Continuing Discontinued Total items operations operations* operations (note 3) Total (note 13) £m £m £m £m £mTurnoverGroup and shareof joint venture 2 1,422.7 133.3 1,556.0 - 1,556.0Less: share ofjoint venture (3.8) - (3.8) - (3.8) ------ -------- ------- ------- -------Group turnover 1,418.9 133.3 1,552.2 - 1,552.2Cost of sales (706.4) (69.6) (776.0) (34.4) (810.4) ------ -------- ------- ------- -------Gross profit 712.5 63.7 776.2 (34.4) 741.8Selling anddistributioncosts (629.6) (53.2) (682.8) (58.0) (740.8)Administrativeexpenses (75.1) (6.3) (81.4) (14.3) (95.7) ------ -------- ------- ------- -------Operatingprofit/(loss) 2 7.8 4.2 12.0 (106.7) (94.7)Share ofoperating lossof joint venture (1.5) - (1.5) - (1.5) ------ -------- ------- ------- -------Total operatingprofit - Groupand share ofjoint venture 6.3 4.2 10.5 (106.7) (96.2)Exceptional item- netprofit/(loss) ondisposal offixed assets 3 - - - 17.4 17.4Exceptional item- provision forclosure ofoperations 3 - - - (20.9) (20.9) ------ -------- ------- ------- -------Profit/(loss) onordinaryactivitiesbefore interest 6.3 4.2 10.5 (110.2) (99.7)Interestreceivable andsimilar income 3.9 0.1 4.0 - 4.0Interest payableand similarcharges (6.3) - (6.3) - (6.3)Other financecharges - FRS17pension (8.8) - (8.8) - (8.8) ------ -------- ------- ------- -------(Loss)/profit onordinaryactivitiesbefore taxation (4.9) 4.3 (0.6) (110.2) (110.8)Tax on(loss)/profit onordinaryactivities 4 (2.7) (2.2) (4.9) (2.9) (7.8) ------ -------- ------- ------- -------(Loss)/profitfor thefinancial period (7.6) 2.1 (5.5) (113.1) (118.6)Dividends paid 5 (11.8) - (11.8) - (11.8) ------ -------- ------- ------- -------Amounttransferred(from) / toreserves 7 (19.4) 2.1 (17.3) (113.1) (130.4) ====== ======== ======= ======= ======= Earnings per shareBasic(loss)/earningsper 10p ordinaryshare 6 (20.2)p =======Diluted(loss)/earningsper 10p ordinaryshare 6 (20.2)p =======Earnings per share(before exceptionalitems)Basic(loss)/earningsper 10p ordinaryshare 6 (0.9)p ======Diluted(loss)/earningsper 10p ordinaryshare 6 (0.9)p ====== 52 weeks to 25 December 2004 (restated **) Before exceptional items Exceptional Continuing Discontinued Total items operations operations operations Total (note 13) £m £m £m £m £mTurnoverGroup and share of jointventure 2 1,399.1 119.4 1,518.5 - 1,518.5Less: share of jointventure (3.9) - (3.9) - (3.9) ------- ------- ------- ----- -------Group turnover 1,395.2 119.4 1,514.6 - 1,514.6Cost of sales (700.9) (61.8) (762.7) (3.1) (765.8) ------- ------- ------- ----- -------Gross profit 694.3 57.6 751.9 (3.1) 748.8Selling and distributioncosts (573.0) (50.6) (623.6) (32.8) (656.4)Administrative expenses (59.0) (5.0) (64.0) 4.0 (60.0) ------- ------- ------- ----- -------Operating profit/(loss) 2 62.3 2.0 64.3 (31.9) 32.4Share of operating loss ofjoint venture (2.1) - (2.1) - (2.1) ------- ------- ------- ----- -------Total operating profit -Group and share of jointventure 60.2 2.0 62.2 (31.9) 30.3Exceptional item - netprofit/(loss) on disposalof fixed assets 3 - - - (2.0) (2.0)Exceptional item -provision for closure ofoperations 3 - - - - - ------- ------- ------- ----- -------Profit/(loss) on ordinaryactivities before interest 60.2 2.0 62.2 (33.9) 28.3Interest receivable andsimilar income 1.8 0.2 2.0 - 2.0Interest payable andsimilar charges (4.1) (0.2) (4.3) - (4.3)Other finance charges -FRS17 pension (5.4) - (5.4) - (5.4) ------- ------- ------- ----- -------(Loss)/profit on ordinaryactivities before taxation 52.5 2.0 54.5 (33.9) 20.6Tax on (loss)/profit onordinary activities 4 (22.8) - (22.8) 9.6 (13.2) ------- ------- ------- ----- -------(Loss)/profit for thefinancial period 29.7 2.0 31.7 (24.3) 7.4Dividends paid 5 (23.2) - (23.2) - (23.2) ------- ------- ------- ----- -------Amount transferred (from)/ to reserves 7 6.5 2.0 8.5 (24.3) (15.8) ======= ======= ======= ===== ======= Earnings per shareBasic (loss)/earnings per10p ordinary share 6 1.3p =======Diluted (loss)/earningsper 10p ordinary share 6 1.2p =======Earnings per share (beforeexceptional items)Basic (loss)/earnings per10p ordinary share 6 5.5p =======Diluted (loss)/earningsper 10p ordinary share 6 5.3p ======= * Relates to Hygena Cuisines (see note 13). Included within selling anddistribution costs (operating exceptional items) are £0.3m of costs relating tothe discontinued operations (2004: £0.4m). Included within profit and loss ondisposals is a loss on disposal of assets related to discontinued operations of£0.2m (2004: £0.2m). ** Restated for FRS17 (see note 12) CONSOLIDATED BALANCE SHEET 24 December 25 December Notes 2005 2004 (restated*) FIXED ASSETS £m £m Intangible assets - 13.7Tangible assets 262.3 381.6Investments 8.8 8.1 --------- ---------Total fixed assets 271.1 403.4 --------- --------- CURRENT ASSETS Stocks 173.5 238.4Debtors 134.5 217.9Investments 5.5 9.4Cash at bank and in hand 89.0 28.4 --------- --------- 402.5 494.1 --------- --------- CREDITORS FALLING DUE WITHIN ONE YEAR 8 (246.0) (359.3) Net current assets 156.5 134.8 Total assets less current liabilities 427.6 538.2 CREDITORS FALLING DUE AFTERMORE THAN ONE YEAR 9 (150.0) (100.0) PROVISIONS FOR LIABILITIES AND CHARGES 10 (9.6) (13.5) --------- --------- Net assets excluding net pension liability 268.0 424.7NET PENSION LIABILITY (207.2) (206.2) --------- ---------Net assets 60.8 218.5 ========= ========= CAPITAL AND RESERVES Called up share capital 7 62.7 62.3Share premium account 7 81.3 77.2Revaluation reserve 7 13.3 21.8ESOP reserve 7 (55.0) (55.1)Other reserves 7 28.1 28.1Profit and loss account 7 (69.6) 84.2 --------- --------- Equity shareholders' funds 60.8 218.5 ========= ========= These financial statements were approved by the board on 28 February 2006 andwere signed on its behalf by Mark Robson, Director. * Restated for FRS17 - see note 12 CONSOLIDATED CASH FLOW STATEMENT 52 weeks to 52 weeks to 24 December 25 December Notes 2005 2004 £m £m Net cash inflow from operating activities 11 24.0 66.7 Returns on investments and servicing of finance 11 (2.3) (1.4) Taxation (3.4) (33.7) Capital expenditure and financial investment(net) 11 8.3 (75.7) Equity dividends paid (23.4) (23.2) -------- ------- Cash inflow / (outflow) before use of liquidresources and financing 3.2 (67.3) Management of liquid resources 3.9 2.4 Financing 11 53.7 44.6 -------- ------- Increase/(decrease) in cash in the period 60.8 (20.3) ======== ======= RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase/(decrease) in cash in the period 60.8 (20.3) Cash movement on: - debt and lease financing (50.0) (50.0) - cash flow from increase in liquid resources (3.9) (2.4) ------- ------- Change in net funds/(debt) resulting from cash flows 6.9 (72.7) Effect of foreign exchange rate changes 11 (0.2) (0.1) ------- ------- Movement in net funds/(debt) in the period 6.7 (72.8) Net (debt)/funds at the beginning of the period 11 (62.2) 10.6 ------- ------- Net debt at the end of the period 11 (55.5) (62.2) ======= ======= 1. BASIS OF PREPARATION The financial information set out does not constitute statutory financialstatements for the periods ended 52 weeks to 24 December 2005 and 52 weeks to 25December 2004, but is derived from those accounts. Statutory accounts for the 52weeks to 25 December 2004 have been delivered to the Registrar of Companies andthose for the 52 weeks to 24 December 2005 will be sent to shareholders andfiled with the Registrar of Companies on 19 April 2006. The auditors havereported on the accounts, their reports were unqualified and did not containstatements under Section 237(2) or (3) of the Companies Act 1985. The accounting policies are consistent with those applied to the auditedfinancial statements for the 52 weeks to 25 December 2004, with the exception ofthe adoption of FRS17 'Retirement Benefits' in full in 2005. The Group isrequired to adopt FRS17 retrospectively and so we have restated the comparativefigures. The effect of the restatement is shown in note 12. 2. SEGMENTAL ANALYSIS The analysis of turnover by destination is not materially different to theanalysis of turnover by origin. 52 weeks to 52 weeks to 24 December 25 December 2005 2004TURNOVER £m £m Howden Joinery 617.8 559.1UK Retail 787.8 825.1France Retail 133.3 119.4Howden Millwork 9.3 7.3Other operations 4.0 3.7 -------- -------- 1,552.2 1,514.6Joint venture operations 3.8 3.9 -------- --------Total 1,556.0 1,518.5 ======== ======== 24 December 25 December 2005 2004 Total Total (restated)NET ASSETS £m £m Howden Joinery 101.6 141.8UK Retail 191.1 305.9France Retail 29.6 40.2Howden Millwork (4.2) 8.8Other operations 4.6 1.7Joint venture operations 0.8 0.1 -------- --------- 323.5 498.5Unallocated net assets/(liabilities):Pension deficit (207.2) (206.2)Dividend accrual - (11.6)Cash and current asset investments 94.5 37.8Loans (150.0) (100.0) -------- ---------Total net assets 60.8 218.5 ======== ========= 2 . SEGMENTAL ANALYSIS (continued) 52 weeks to 24 December 2005 52 weeks to 25 December 2004 (restated)PROFIT BEFORE Before Except- Total Before Except- TotalTAXATION except- ional except- ional ional items ional items items items £m £m £m £m £m £mHowden Joinery 103.6 0.7 104.3 102.8 2.5 105.3UK Retail (85.1) (94.9) (180.0) (31.3) (14.0) (45.3)France Retail 4.2 (0.3) 3.9 2.0 (0.4) 1.6Howden Millwork (6.9) - (6.9) (8.6) - (8.6)Otheroperations (3.8) - (3.8) (0.6) - (0.6)Operatingexceptionalitem resupplychain computersystem - (14.9) (14.9) - (20.0) (20.0) Operatingexceptionalitem repensions - 40.1 40.1 - - -Operatingexceptionalitem re stock - (34.0) (34.0) - - -Operatingexceptionalitem rerestructuring - (3.4) (3.4) - - - ------- -------- ------- -------- -------- --------Totaloperatingprofit 12.0 (106.7) (94.7) 64.3 (31.9) 32.4Joint ventureoperations (1.5) - (1.5) (2.1) - (2.1) ------- -------- ------- -------- -------- --------Totaloperatingprofit (Groupand JVs) 10.5 (106.7) (96.2) 62.2 (31.9) 30.3Profit/(loss)on disposalof fixed assets - 17.4 17.4 - (2.0) (2.0)Provision forclosure ofoperations(note 5f) - (20.9) (20.9) - - -Net interestpayable (2.3) - (2.3) (2.3) - (2.3)FRS17 pensionfinancecharges (8.8) - (8.8) (5.4) - (5.4) ------- -------- ------- -------- -------- --------(Loss)/profitbeforetaxation (0.6) (110.2) (110.8) 54.5 (33.9) 20.6 ======= ======== ======= ======== ======== ======== 3. EXCEPTIONAL ITEMS Exceptional costs charged to profit in the year are analysed as follows: Cost of Selling & Administrative Total sales distribution expenses £m £m £m £mSupply Chain(note 3a) 0.4 5.0 - 5.4Restructuring(note 3a) - - 3.4 3.4Credit onshare basedpayments &associatednationalinsurance(note 3a) - - (2.0) (2.0)Pensions NRD(note 3b) - - (40.1) (40.1)StructuralGuarantee(note 3c) - 38.7 - 38.7Profit onnovation (note3c) - (3.0) - (3.0)Impairment(note 3d) 34.0 17.3 53.0 104.3 ------- ------- -------- ------Total chargedto operatingprofit 34.4 58.0 14.3 106.7 ======= ======= ======== Non operatingexceptionals:Profit ondisposal (note3e) (17.4)Cost ofclosures (note3f) 20.9 ------Totalexceptionalcosts beforetax 110.2Tax charge onexceptionalitems 2.9 ------Totalexceptionalcosts aftertax 113.1 ====== a) Exceptional items - supply chain, restructuring costs and share schemes Exceptional items of £5.4m before tax (2004: £31.9m), are included in operatingloss in respect of the supply chain. In addition £3.4m has been spent onrestructuring in the year. There has also been a £2.0m net credit in respect ofshare scheme amortisation and associated national insurance where performanceconditions are no longer expected to be met (2004: £7.5m). The charges are madeup as follows: £m £mAdditional delivery and associated remedial costs 1.2Additional staff and consultancy costs 3.9Redundancy costs 0.3 -------- 5.4Restructuring costs 3.4Credit re share-based payment amortisation and associatednational insurance (2.0) -------Operating exceptional costs before tax 6.8Tax credit on operating exceptional items (1.2) -------Operating exceptional costs after tax 5.6 ======= b) Exceptional items - pensions On 6 May 2004, the Group announced additional pension liabilities arising from afailure to equalise the pension age for men and women at age 65. Under FRS17valuation methods, these additional liabilities were estimated at £50m. In May2005 the Group wrote to certain members of the UK pension plans offering them animmediate cash payment in exchange for giving up any claim a member may have topossible additional pension benefits arising from the equalisation issue. Theclosing date for the offers was 8 July 2005. By value 87.4 % of the eligible members accepted the cash offer. This hasresulted in a total cash payment of £16.0m in respect of all members who haveaccepted the cash offer in 2005. The cash has been paid and the expense for allmembers who accepted the offer has been recognised in these accounts. The effectof these settlements is to reduce the additional liability (originally estimatedat £50m on an FRS17 basis) by £45.0m. This reduction in liability has also beenreflected in these accounts. 3. EXCEPTIONAL ITEMS (continued) b) Exceptional items - pensions (continued) On 14 March 2005 the group announced that it had received a cash settlement of£12.0m from one of the third parties on whose advice the Group and the pensionplan trustees had relied.The cash payments and the reduction in deficit for alloffers accepted, together with the cash settlement received from a third partyand the associated legal fees, have been treated as exceptional items, includedin operating loss. The effect of these items is: £m £m Reduction in pension deficit following acceptance of cash 45.0offerCost of cash offer (16.0)Cash settlement received from third party 12.0Professional fees incurred (0.9) ---------Net operating exceptional credit before tax 40.1Tax charge on operating exceptional items (8.4) -------Net operating exceptional credit after tax 31.7 ======= c) Exceptional items - structural guarantee Between August 2001 and May 2004 the Group introduced an optionalinsurance-backed structural guarantee on certain items of furniture sold in itsUK retail stores. Value Added Tax (VAT) was paid on the furniture element of thetransaction and Insurance Premium Tax (IPT) was paid on the sale of thesewarranties. An assessment totalling £60.5m was raised on the VAT on the sale of thewarranties and the relevant tax was paid to HM Revenue & Customs at the time.This payment was carried on the balance sheet as a debtor without any provisionas at the time we believed that we had a strong legal case to recover this moneyin full. To date, the following amounts have been recorded: Cumulative 2005 2004 2003 2002 2001 £m £m £m £m £m £mReduction in VAT 60.5 - 10.5 20.7 22.0 7.3IPT paid (15.3) - (2.3) (5.3) (5.6) (2.1)Externalinsurance premium/expenses (7.7) - (1.2) (2.5) (2.8) (1.2)Reinsurancepremium to Groupcompany (12.5) - (2.1) (4.2) (4.5) (1.7)Underwritingprofit recognised byGroup company 8.4 5.5 1.9 1.0 - - -------- ------ ------- ------ ------- ------Profit taken toprofit and lossaccount 33.4 5.5 6.8 9.7 9.1 2.3 ======== ====== ======= ====== ======= ====== 80% of the insurance was reinsured by the external insurer through the Group'scaptive insurance company, Southon Insurance Company Limited. MFI has reached a settlement with HM Revenue & Customs in January 2006 over thisVAT dispute as the resource required, and associated litigation risk, was deemedto be a distraction to achieving a successful implementation of the new businessstrategy. Both parties have agreed to settle, with HM Revenue & Customsrefunding £21.8m to MFI. As a result, MFI has written off the balance of thereceivable of £38.7m in the accounts for the 52 weeks to 24 December 2005. Themoney was collected in February 2006. 3. EXCEPTIONAL ITEMS (continued) c) Exceptional items - structural guarantee (continued) The exceptional item of £38.7m in respect of the Structural Guarantee includedin operating loss is made up as follows: £m £m Structural guarantee debtor at 26 December 2005 60.5HM Revenue & Customs refund (21.8) ---------Net operating exceptional cost before tax 38.7Tax credit on operating exceptional items - -------Net operating exceptional cost after tax 38.7 ======= In addition part of the structural guarantee furniture insurance programundertaken by the Group's captive insurance company - Southon Insurance - hasbeen novated to an external insurance company; this transaction generated anunderwriting profit of £3.0m which is included in operating profit. The effectof this item is: £mProfit on novation 3.0Tax charge on operating exceptional item (0.9) ----------Operating exceptional credit after tax 2.1 ========== d) Exceptional provision for impairment As a result of the continued underperformance of the UK retail business inaccordance with FRS11 we have assessed the assets of UK Retail and as a resultimpaired the UK retail assets by £42.4m. In addition £14.9m has been providedagainst the SAP system (2004: £20.0m) and £13.0m has been provided against thegoodwill relating to the Sofa Workshop acquisition. Stock valuations have alsobeen reduced by £34.0m for obsolete and excess stock. £m £mUK retail impairment 42.4Write off of elements of the supply chain computer systemcapitalised in prior years 14.9Impairment of goodwill on Sofa Workshop acquisition 13.0Stock write-down 34.0 -------Operating exceptional costs before tax 104.3Tax credit on operating exceptional items - -------Operating exceptional costs after tax 104.3 ======= e) Profit on disposal of fixed assets The profit on disposal of fixed assets of £17.4m (52 weeks to 25 December 2004:loss of £2.0m), represents net gains on disposal of land and buildings andfixtures and fittings. The associated deferred tax credit is £1.3m (25 December2004: £nil). f) Exceptional provision for closure costs As announced in our press release of 11 May 2005, the Group agreed with ourjoint venture partners to end the venture, Hygena at Currys, by mutual agreementfollowing a comprehensive review of the business. A closure programme for theHygena concessions, which traded in 130 of Currys' 370 stores, is now complete. In our press release of 1 December 2005, the Group announced it is to close it'sUS pilot operation Howden Millworks. A closure programme for the 20 depots is inplace and we expect trading to cease by April 2006 and operations to cease byJune 2006. In addition, the Group announced the sale of its 50% interest in itsTaiwan joint venture to its Taiwanese partner and announced the closure of theUK joint venture with Ethan Allen. A closure programme for the 2 Ethan Allenstores is in place and we expect it to be finished by March 2006. The sale ofthe Group 50% interest in its Taiwan joint venture to its Taiwanese partner wascompleted in December 2005. 3. EXCEPTIONAL ITEMS (continued) (f) Exceptional provision for closure costs (continued) In accordance with FRS3, we have disclosed the costs of closure (includingprovision for future operating losses) of these businesses, and have treatedthem as post-operating exceptional items. The costs comprise the followingitems: £m £m Costs of closure - hygena @ Currys 6.5Costs of closure - Howden US 13.1Costs of closure - Ethan Allen 1.4 ------- 21.0Cost of closure - Taiwan 0.3Receipt from sale of 50% share of joint venture (0.4) -------Exceptional provision for closures before tax (0.1) --------- 20.9Tax credit on operating exceptional items (3.9) ---------Total exceptional provision for closures after tax 17.0 ========= 4. TAX ON (LOSS)/PROFIT ON ORDINARY ACTIVITIES 52 weeks to 52 weeks to 24 Dec 2005 25 Dec 2004 £m £mTaxation on profit for the period comprises: UK corporation tax at 30.0% (2004: 30.0%) - 14.6Overseas tax 1.5 -Current tax adjustment relating to prior periods (1.7) 3.9 ------ ------Total current tax (0.2) 18.5Deferred tax charge/(credit) 8.0 (5.3) ------ ------ 7.8 13.2 ====== ====== 5. EQUITY DIVIDENDS 52 weeks to 52 weeks to 24 Dec 2005 25 Dec 2004 £m £mInterim paid - 2.0 pence per share 11.8 11.6(2004 - 2.0 pence per share)Final proposed - nil - 11.6(2004 - 2.0 pence per share) ------ ------Total dividend - 2.0 pence per share 11.8 23.2(2004 - 4.0 pence per share) ====== ====== 6. EARNINGS PER SHARE 52 weeks to 24 December 2005 52 weeks to 25 December 2004 ------------------------------------- ----------------------------------- Earnings Weighted Earnings Earnings Weighted average per (restated) average number share number Earnings of of per share shares shares (restated) £m m p £m m pBasic (loss)/earnings per share:---------------------------------- Basic(loss)/earnings per share (118.6) 588.4 (20.2) 7.4 581.0 1.3Effect ofdilutive shareoptions - - - - 17.9 (0.1) ------ ------ ------ ------ ------ ------ Diluted(loss)/earningsper share (118.6) 588.4 (20.2) 7.4 598.9 1.2 ====== ====== ====== ====== ====== ====== Reconciliation of(loss)/earningsper share to exclude exceptionalitems:----------------------------------Basic (loss)/earnings per share (118.6) 588.4 (20.2) 7.4 581.0 1.3Exceptional items (net of tax) 113.1 - 19.3 24.3 - 4.2 ------ ------ ------ ------ ------ ------Basic (loss)/earnings per shareexcluding exceptional items (5.5) 588.4 (0.9) 31.7 581.0 5.5 ====== ====== ====== ====== ====== ======Diluted (loss)/earnings per share (118.6) 588.4 (20.2) 7.4 598.9 1.2Exceptional items (net of tax) 113.1 - 19.3 24.3 - 4.1 ------ ------ ------ ------ ------ ------Diluted (loss)/earnings per shareexcluding exceptional items (5.5) 588.4 (0.9) 31.7 598.9 5.3 ====== ====== ====== ====== ====== ====== Earnings per share (eps) excluding exceptional items has been calculated to showthe impact of these exceptional items, as they can have a significant effect onearnings and therefore warrant separate consideration. In accordance with FRS14, as the company is loss making in 2005, no adjustmenthas been made to diluted eps, therefore diluted eps equals basic eps. 7. RESERVES Share Share premium Revaluation ESOP Other Profit and capital account reserve reserve reserves loss account £m £m £m £m £m £m As at 25December 2004 62.3 77.2 21.8 (55.1) 28.1 286.5Restatementonadopting FRS17 (note 12) - - - - - (202.3) ----- -------- ------- ------- ------- -------As at 25December2004 restated 62.3 77.2 21.8 (55.1) 28.1 84.2Retainedloss for theperiod - - - - - (130.4)Movement onpensiondeficit - - - - - (29.9)Shares issued 0.4 4.1 - - - (1.8)Netmovementon ESOP reserve - - - 0.1 - -Realisedrevaluationprofit - - (8.5) - - 8.5Foreignexchange - - - - - (0.2) ----- -------- ------- ------- ------- ------- As at 24December 62.7 81.3 13.3 (55.0) 28.1 (69.6)2005 ===== ======== ======= ======= ======= ======= The cumulative amount of goodwill written off against Group profit and lossaccount reserves in respect of acquisitions prior to 24 April 1999 when FRS 10'Goodwill and intangible assets' was adopted amounts to £504.6m (25 December2004 - £504.6m). Other reserves represent a special reserve of £482.6m less goodwill arising onconsolidation of £454.5m. The special reserve is distributable. 8. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 24 Dec 2005 25 Dec 2004 £m £m Trade creditors 73.4 154.5Corporation tax 0.9 4.6Other taxation and social security 33.2 24.0Other creditors 19.7 20.0Accruals and deferred income 118.8 144.6Proposed dividends - 11.6 ------ ------ 246.0 359.3 ====== ====== 9. CREDITORS: AMOUNTS FALLING AFTER MORE THAN ONE YEAR 24 Dec 2005 25 Dec 2004 £m £mBank loans 150.0 100.0 ====== ====== On 17 February 2006 the Group refinanced it's medium term debt and replaced themwith a new 3.25 year secured facility. 10. PROVISIONS FOR LIABILITIES AND CHARGES Pension Property Deferred Total provision provision taxation £m £m £m £mGroupAt 25 December 2004 7.4 0.7 9.3 17.4Removed on adoption of FRS17 (7.4) - 3.5 (3.9) ------ ------ ------ ------At 25 December 2004 - restated - 0.7 12.8 13.5Created in the period - 0.5 - 0.5Utilised in the period - - (4.4) (4.4) ------ ------ ------ ------At 24 December 2005 - 1.2 8.4 9.6 ====== ====== ====== ====== The £8.0m charge for deferred tax included in note 4 is made up of the £4.4mcredit to the deferred tax provision above, offset by a £12.4m charge from thedeferred tax asset of the pension deficit. The £12.4m relates to the £45.0mexceptional credit, as well as the difference between the pension charge for theyear and the contributions paid. 11. CONSOLIDATED CASH FLOW STATEMENT a) Reconciliation of operating (loss)/profit to operating cash flows 24 Dec 2005 25 Dec 2004 £m £m (restated)Operating profit before exceptional items 12.0 64.3Depreciation and amortisation charge 66.1 57.8 ------ ------ 78.1 122.1Decrease / (increase) in stocks 21.3 (42.7)Decrease/ (increase) in debtors 43.7 (15.4)(Decrease)/ increase in creditors and provisions (94.7) 45.3Adjustment for pensions movements (5.2) - ------ ------Net cash inflow - pre-exceptional operating activities 43.2 109.3Net cash outflow - operating exceptionals (18.2) (28.1)Net cash outflow - operating exceptionals expensed inprior year (1.0) -Net cash outflow - VAT paid re Structural guarantee - (14.5) ------ ------Net cash inflow from operating activities 24.0 66.7 ====== ====== Net cash inflow from operating activities comprises:Continuing operating activities 10.9 60.7Discontinued operating activities 13.1 6.0 ------ ------ 24.0 66.7 ====== ====== b) Analysis of cash flows for headings netted in the cash flow statement 24 Dec 2005 25 Dec 2004 £m £m (restated)Returns on investments and servicing of financeInterest received 4.1 2.0Interest paid (6.4) (3.4) ------ ------Net outflow on investments and servicing of finance (2.3) (1.4) ====== ====== Capital expenditure and financial investmentPayments to acquire tangible fixed assets (47.9) (82.8)Receipts from sales of tangible fixed assets 57.4 8.2Investment in joint ventures (1.2) (1.1) ------ ------Net inflow/(outflow) for capital expenditure andfinancial investment 8.3 (75.7) ====== ====== FinancingShares issued 2.7 2.2Payment to acquire own shares 1.0 (7.6)Other increase in bank finance 50.0 50.0 ------ ------Net inflow from financing 53.7 44.6 ====== ====== c) Analysis of net funds Cash at Bank Net Current Total bank loans debt asset net investments (debt)/ funds £m £m £m £m £mAs at 27 December2003 48.8 (50.0) (1.2) 11.8 10.6Cash flow (20.3) (50.0) (70.3) (2.4) (72.7)Exchangedifference (0.1) - (0.1) - (0.1) ------ ----- ----- ------ -----As at 25 December2004 28.4 (100.0) (71.6) 9.4 (62.2)Cash flow 60.8 (50.0) 10.8 (3.9) 6.9Exchangedifference (0.2) - (0.2) - (0.2) ------ ----- ----- ------ -----As at 24 December2005 89.0 (150.0) (61.0) 5.5 (55.5) ====== ===== ===== ====== ===== 12. PENSIONS The Group has adopted FRS17 "Retirement Benefits" in full with effect from 26December 2004. On adopting FRS17, we are required to change the accountingtreatment of our defined benefit pension schemes. Under FRS17 we are required toinclude the assets and liabilities of these schemes on the Group balance sheet.Current service costs, curtailment and settlement gains and losses, and netfinancial returns are included in the profit and loss account in the period towhich they relate. Actuarial gains and losses are included in the statement oftotal recognised gains and losses. We are required to show the effect of adopting FRS17 retrospectively and so wehave restated our comparative figures as shown below: GROUP PROFIT AND Profit on ordinary Net interest Profit for theLOSS ACCOUNT activities before receivable/ financial period interest (payable) £m £m £m52 weeks to 25Dec 2004As previouslystated 27.3 (2.3) 10.5Effect ofadopting FRS17 1.0 (5.4) (3.1) --------- --------- ---------As restated 28.3 (7.7) 7.4 ========= ========= ========= GROUP Gross pension provision (included in Net pension P&L reserveBALANCE Provisions for liabilities & charges) liabilitiesSHEET £m £m £m25 Dec 2004Aspreviously (7.4) - 286.5statedEffect ofadopting 7.4 (206.2) (202.3)FRS17 ------------ ----------- ----------As restated - (206.2) 84.2 ============ =========== ========== The actuarial valuation of the schemes as at 6 April 2005 was updated to 24December 2005 by an independent qualified actuary on a basis consistent with therequirements of FRS 17 and is reported below. It showed that the market value ofthe schemes' assets was £412m and that the actuarial value of these assetsrepresented 58% of the benefits that had accrued to members. The weightedaverage major assumptions used for this update were: 24 Dec 2005 25 Dec 2004 27 Dec 2003 Rate of increase in salaries 3.9% 3.9% 3.0%Rate of increase in pensions inpayment (pre 6 April 1997) 3.0% 3.0% 3.0%Rate of increase in pensions inpayment (post 6 April 1997) 2.9% 2.9% 2.5%Discount rate 4.8% 5.4% 5.5%Inflation assumption 2.9% 2.9% 2.5% The base tables used for mortality in retirement are PMA92 and PFA92. Thesetables can be projected forward to allow for expected future improvements inmortality. For current pensioners in the scheme, the tables have been projectedforward to 2015. For future pensioners, the tables have been projected forwardto 2025. The following table shows the future life expectancies in years for males andfemales at the age of 65, in line with the mortality assumptions adopted. Age 65 Future pensioners - Males 21.6 - Females 24.4Current pensioners - Males 20.9 - Females 23.7 12. PENSIONS (continued) 24 Dec 25 Dec 2005 2004 £m £mAnalysis of the amount that has been chargedto operating profit under FRS 17Current service cost 24.2 15.0Past service credit (45.0) - ------ ------Total operating charge (20.8) 15.0 ====== ====== Analysis of the amount that has been chargedto net finance income under FRS 17Expected return on pensionscheme assets 23.7 20.7Interest on pension schemeliabilities (32.5) (26.1) ------ ------Net return (8.8) (5.4) ====== ====== Analysis of the actuarial loss that has been 24 Dec 25 Dec 27 Decrecognised in the statement of total 2005 2004 2003recognised gains and losses Actual return less expectedreturn on pension schemeassets 39.6 1.9 26.6Experience gains and lossesarising on the schemeliabilities 22.9 3.6 (19.1)Changes in assumptionsunderlying the presentvalue of the schemeliabilities (105.5) (105.6) (13.6) ------ ------ ------Actuarial loss that hasbeen recognised in theSTRGL (43.0) (100.1) (6.1) ====== ====== ====== 24 Dec 2005 25 Dec 2004 27 Dec 2003Analysis of the movement in the scheme £m £m £mdeficit during the yearDeficit as at start of year (294.6) (189.1) (179.5)Total operating charge (24.2) (15.0) (10.6)Contributions 29.6 15.0 14.2Net return (8.8) (5.4) (7.1)Past service credit in respect ofNRD issue 45.0 - -Actuarial loss recognised in theSTRGL (43.0) (100.1) (6.1) ------- ------- -------Deficit as at end of year (296.0) (294.6) (189.1) ======= ======= ======= 13. POST BALANCE SHEET EVENTS On 13 February 2006 the Group completed on the sale of Hygena Cuisines forproceeds of £92.4m. The impact on the profit is shown on the Consolidated Profitand Loss account. The impact on the cashflow is shown in note 11. On 17 February 2006 the Group refinanced it's medium term debt and replaced itwith a new 3.25 year secured facility. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Howden Joinery