Mothercare swings back into profit

BEATING even the most optimistic expectations today, Mothercare reported a £23m first-half swing from loss to profit and hinted that it could soon reinstate dividends.

The dramatic recovery after years of problems had analysts rushing to upgrade their full-year profit forecasts for the second time in six weeks.

House broker Cazenove lifted its forecast from £11m to £13.5m. The shares were marked 20p higher to 317 1/2p.

The retailer posted pre-tax profits of £13.4m, compared with a loss of £10m last time. Stripping out exceptional items, profits were still a solid £8.5m.

Chief executive Ben Gordon, brought in from Disney stores a year ago, said the improvement was due to stronger sales growth of 6.4% like-for-like, and tackling the group's warehouse problems.

But he warned that Mothercare was still less than a year into his three-year turnaround programme. 'We're not out of the woods yet.'

The dividend would be reinstated when Mothercare achieved sustained profitability, he said. The cash position has already dramatically improved, from an overdraft of £14m a year ago to a cash pile of £28m today. Mothercare is pushing ahead with a new store format after trials produced a 21% sales surge.

Gordon warned that the overall refurbishment programme would cost £20m because of the neglected fabric of the estate. He has earmarked £15m for it.

In the first five weeks of the second half, underlying sales growth slowed slightly to 4.6% but was still encouraging, he said.