Chairman's Statement

I am pleased to report to shareholders on another year of substantial progress at Group level, pre-tax profits rose to £16,457,000 from £13,461,000 last year, an increase of 22%. Over five years Group profits have now grown by the impressive annual rate of 32%. Basic earnings per share during the year have increased by 19% to 10.76p. Return on capital employed stands at 27%.

In response to the continued growth in profitability and confirming our commitment to a progressive dividend policy the Board is proposing a final ordinary dividend of 2.75p which will bring the total for the year to 3.50p, a 40% increase on last year. The dividend will be paid on 12 July 2004, subject to shareholders’ approval at the AGM, to those shareholders registered at the close of business on 11 June 2004.

The Perfume Shop has delivered another exemplary performance, increasing sales by 22% and on a like for like basis by 10%; the latter unquestionably the gold standard in terms of underlying growth. This excellently managed business and its team is set to continue a programme of carefully measured expansion in the UK, while at the same time it remains poised to take the right opportunities of further growth both at home and overseas.

The sought after recovery in Department Store sales proved elusive in the face of significant additional competitive capacity and deflationary price pressures. At de Gruchy, retrenchment in the Jersey finance industry, fresh competition and disruption from the refurbishment programme impeded recovery; nonetheless in spite of a 5% fall in sales the Division still contributed 28% of the Group’s profit before tax and provides a return of 8% on the capital employed. Management is focused upon delivering a real shareholder return from this part of our business.

Merchant Retail remains in robust order with high levels of profit generation, low and decreasing debt and strong cash flow. The business is well served by a fully committed team ably led by its Executive management. The year ahead will as ever bring its challenges but I look forward to reporting upon further progress in 12 months time.

BRIAN O'CALLAGHAN
Chairman

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