Final Results

 

TIDMTHT 
 
RNS Number : 7062Y 
Thorntons PLC 
09 September 2009 
 

 
 
 
 
For Immediate Release 
 
 
Thorntons PLC 
 
 
Announcement of Preliminary Results 
 
 
Thorntons Plc ("Thorntons" or "the Company") today announced its preliminary 
results for the 52 weeks ended 27 June 2009. 
 
 
Key points 
 
 
  *  Revenues increased 3.2% to GBP214.8 million (2008: GBP208.1 million) 
 
  *  Profit before tax* decreased by 4.5% to GBP8.1million (2008: GBP8.5 million) 
 
  *  The operating loss that historically occurs in the second half of the year was 
  reduced by 80.1% to GBP0.6 million (2008: GBP2.8 million) 
 
  *  Basic earnings per share have decreased 40.7% from 9.1p to 5.4p impacted by a 
  higher tax charge 
 
  *  Net debt was reduced by GBP1.6 million over the year 
 
  *  Since the year end the Company agreed new bank facilities committed for three 
  years 
 
  *  The Board recommends a final dividend of 4.85p (2008: 4.85p) 
 
* Profit before tax includes exceptional items which give rise to a GBP1.8 
million net credit, as described in note 2. 
 
 
Mike Davies, Thorntons' Chief Executive, said: 
 
 
"I am pleased to report good overall sales growth for the year in a difficult 
economic environment. Following the implementation of a number of initiatives 
earlier in the financial year, performance in the second half improved 
substantially. 
 
 
"During the year, we implemented a number of prudent cost control measures and 
focused on management of the balance sheet. We cleared stocks during the 
difficult pre-Christmas trading period and managed to reduce debt for the year 
as a whole. In addition we continued to innovate and invest in the future across 
both our product range and in our Retail and Manufacturing infrastructure. We 
launched the new "Choc Block" range in Retail and the new chocolate box range in 
the Commercial channel, refreshed the Christmas and Spring season ranges and 
introduced various new ice cream flavours. We also made substantial investments 
in our new EPOS system and in manufacturing. 
 
 
"Discussions are progressing well with both Clinton Cards and other potential 
franchisees to replace lost sales following the closure of 94 Birthdays 
franchises. Currently, 37 stores have already reopened, with a further 38 stores 
expected to start trading before Christmas. 
 
 
"Since the year end, the Company has agreed new committed bank facilities for 
three years. This, together with the changes we have made this year, puts us in 
a good position to emerge from the recession a more profitable business. As a 
result Thorntons is well placed to continue its long term growth strategy and we 
remain optimistic about the future. 
 
 
Ends 
 
 
For further information please contact: 
 
Cardew GroupT: 020 7930 0777 
Nadja Vetter / Emma Consett / Daniela Cormano 
 
 
 
Chairman's statement 
 
 
Three years ago we started to implement a new strategy, putting the customer at 
the forefront of our thinking and strengthening the foundations of the business 
in line with our long-term goals. Since then we have grown sales by almost GBP40 
million, from GBP176 million to GBP215 million, introduced many successful new 
products, increased our multichannel offer and invested significant sums in new 
point of sale systems and factory automation. 
 
 
However, Thorntons has not been immune to the global economic downturn. The 
pressures, which were most evident during the first half of the financial year, 
resulted in us taking the prudent but difficult decision to reduce the first 
half dividend in line with the reduction in earnings. I am pleased to report 
however that, following the implementation of a number of management initiatives 
earlier in the year, performance in the second half improved significantly and 
we delivered net sales growth of 6.1% and reduced the loss before taxation and 
exceptionals by GBP2.5 million. We also reduced net debt over the year by GBP1.6 
million. In August 2009, the Company agreed new committed bank facilities for 
three years and as a result the Company is well placed to continue its long term 
growth strategy and I remain optimistic about the future. 
 
 
Our strategy remains just as relevant now as it was before the recession and we 
remain focussed on driving the business forward and delivering sustainable 
growth in earnings per share supported by a strong balance sheet. 
 
 
We will achieve this by : 
· continuing to develop innovative new products 
· improving our UK retail performance across all three channels (Own Stores, 
Franchise and Thorntons Direct) 
· further expanding Commercial sales 
· improving productivity in Operations (purchasing, manufacturing and logistics) 
· selective development of export sales 
 
In July we took a further step towards "decoupling" the business by creating two 
business units namely "Sales & Operations" and "Retail". Barry Bloomer, MD, 
Sales & Operations, will run Commercial sales in addition to his existing role 
in charge of Purchasing, Manufacturing and Distribution. The Retail Business 
Unit will continue to be headed by the Director of Retail, Lysanne McCallion, 
adding responsibility for Thorntons Direct to that for Store Operations, 
Trading, Property and Franchise. While there is still a clear interdependence 
between the two business units, the split will allow us greater clarity in 
communicating our strategy and an ability to benchmark our performance against 
other successful retailers and manufacturers. Marketing, Finance and HR remain 
as single functions supporting both businesses. 
 
 
The progress we have made, most notably in the second half, would not have been 
possible without the hard work, dedication and commitment of all our staff and I 
would like to express my deep gratitude for all their efforts. 
 
 
Earlier this year, John Wall, our Finance Director, informed us of his decision 
to step down from the Board by January 2010. On behalf of the Board I would like 
to thank John for his invaluable service to Thorntons over the past five years 
and for his commitment to ensuring an orderly transition prior to his departure. 
While we will be sorry to lose John, I am delighted that Mark Robson has agreed 
to join Thorntons as his successor. Mark has extensive experience in the retail 
and consumer goods sectors, most recently with Somerfield Ltd, now part of the 
Co-operative Group. I would also like to thank Martin Davey, who retired from 
the Board as Non-Executive Director in December, for his valuable contribution 
to the Company and welcome Diana Houghton as a new Non-Executive Director to the 
Board. Diana brings with her a wealth of experience in branded product 
manufacturing and strategy consulting and has taken on the role of Chair of the 
Audit Committee. 
 
 
I am pleased to report that the Board has recommended a final dividend of 4.85p 
per share unchanged from last year which, subject to Shareholder approval, will 
be paid on 27 November 2009. 
 
 
John von Spreckelsen 
Chairman 
8 September 2009 
 Chief Executive's report 
 
 
Over the past year, we acted decisively to manage the business during the 
recession and I am pleased with the overall result. Sales increased by 3.2%, 
profit before taxation fell 4.5% to GBP8.1 million (including exceptional items) 
and we reduced our debt by GBP1.6 million by the year end. From a retail 
perspective, the peak of the crisis, in the eight to ten weeks before Christmas, 
could not have hit us at a worse time, as historically 40% of Thorntons' annual 
sales and most of its profits are generated during the Christmas quarter. This 
reinforces the importance of our long term goal to reduce our financial 
dependency on Christmas. 
 
 
The decision to focus on the balance sheet, by discounting to clear stocks and 
collect cash before Christmas, and by implementing further cost management 
initatives to protect the business going forward, paid off in the second half of 
the year, supported by a 6.1% sales growth. The second half operating loss 
(excluding exceptionals) reduced from GBP2.8 million last year to GBP0.6 million 
and our debt was reduced by GBP1.6 million over the year to GBP26.7 million. All 
this was achieved despite losing Woolworths as a major customer before Christmas 
and incurring a bad debt of GBP0.5 million when our largest franchisee, 
Birthdays Ltd, was placed into administration in May. 
 
 
Notwithstanding the impact of the recession we continued to focus on the 
implementation of our strategy as follows:- 
 
 
Product Innovation 
2009 has seen a series of product success stories for Thorntons, most notably 
amongst our leading sharing brand 'Thorntons Moments' and our stylish, luxury 
bar range 'Chocolate Blocks'. Family favourite 'Moments' hit GBP10 million sales 
in its first full year of trading and 'Chocolate Blocks' doubled the sales of 
the old range. However, the success of 'Chocolate Blocks' isn't just evident in 
its sales figures; new additions to the range in 2009 have picked up an 
impressive five industry awards from the prestigious Academy of Chocolate and 
the Great Taste Awards. These award winning bars have been created by Thorntons' 
Master Chocolatier, Keith Hurdman, using the finest single origin chocolate, and 
flavours that have surprised and delighted our customers, such as tonka bean, 
salted macadamia and salted pistachio. Other firm favourites such as hazelnut 
and raisin, strawberry and raspberry have recently been added to the range, and 
we continue to look to introduce more new exciting flavours for our customers. 
 
 
The Spring 2009 seasonal products included new designs for Valentine's Day, 
Mother's Day and Easter, which were on trend with their bright, folk design and 
included new creations with personalisation at the heart, delivering improved 
sales and fantastic customer feedback. 
 
 
With the aim of driving sales during the traditionally quieter summer months, we 
have invested in our ice cream offering. Firstly we have extended the range of 
both our sticks and scoops, and secondly we have increased awareness of the ice 
cream brand. New ice cream sticks launched this year include White Delight and 
Mint Choc Truffle. A Tropical Twist exotic fruit sorbet swirled with natural 
frozen yoghurt was added to the scoop range. 
 
 
We also invested in an ice cream marquee, featuring a nostalgic seaside theme. 
The marquee has been on tour to several music festivals and countrywide events 
and has been a resounding success both in terms of sales and brand awareness. 
 
 
Looking ahead, this Autumn is an exciting time for Thorntons. Not only will our 
new Christmas range, which includes some exciting product innovations and 
eye-catching packaging, be launched in our stores, but we also have two new 
product collections launching in store and online. 
 
 
The 'Continental City Boxes', which include the milk chocolate 'Paris 
Collection' and dark chocolate 'Milan Collection', are a little taste of 
contemporary Europe and are inspired by the flavours from the cities themselves. 
They are the latest addition to the famous 'Continental' range. 
 
 
'Metropolitan' is another exciting proposition from Thorntons. This stylish gift 
box is beautifully designed and is made with the finest Dominican Republic and 
Ecuador single origin chocolate, paired with unusual flavours such as cloudberry 
and quince, which will delight our discerning foodie fans. 
 
 
With many other stimulating innovations in the pipeline for 2010, it is an 
exciting time for Thorntons. 
 
UK Retail 
Overall UK Retail sales, including Own Store, Franchise and Thorntons Direct, 
declined by 0.5% to GBP157.9 million from GBP158.6 million in 2008. 
 
 
Own Store performance declined by 0.4% during the year with the vast majority of 
the shortfall occurring in the Christmas quarter. During the course of the year 
we opened five new stores, resited one and closed six. Therefore, the retail 
estate ended the year with 379 stores, unchanged from last year. 
 
 
With the benefit of hindsight the recessionary environment during the Autumn and 
Christmas 2008 selling season was not the ideal time to trial our new concept 
stores. More work is being done to further improve the concept before we proceed 
to roll it out. 
 
 
The uncertainties in the property market are ongoing and we continue to pursue 
opportunities to reduce our costs at the time of lease renewals and rent 
reviews, as well as by renegotiating service charges. With 379 stores owned by 
more than 150 different landlords and the opportunity to review terms arising 
only once every five years for each store, this is a laborious process but one 
that should bear fruit in the long term. 
 
 
Like for like sales declined by 2.0% for the year as a whole, again, mostly due 
to the poor trading in the Christmas quarter. 
 
 
Franchise store sales grew by 2.2% during the year and I would like to thank all 
our Franchisees for their hard work and commitment to Thorntons during this 
particularly difficult year. Unfortunately sales were adversely affected at the 
end of the year by the collapse of the Birthday stores that were placed into 
administration in May and accounted for 94 of our 254 Franchise stores. Clinton 
Cards Plc have since bought back a number of Birthday stores from the 
administrators including 37 that have a Thorntons franchise. These have now 
resumed business as usual. Negotiations are progressing swiftly to appoint new 
Franchisees in the remaining locations and we would expect to have reopened most 
of them in time for Christmas. 
 
 
Thorntons Direct delivered mixed results. Overall sales to consumers from the 
website and the call centre increased by 13.9% during the year but sales to 
corporate end users declined by 30.7%, resulting in an overall decline in sales 
of 5.2%. Historically, our growth in corporate sales was driven by our success 
in the financial services and automotive sectors, both of which were 
unfortunately hit hard by the economic downturn and all discretionary 
expenditure on gifts ceased. We have since redirected our sales efforts into 
other sectors and are beginning to see some recovery in corporate sales, 
particularly in the leisure and hospitality sectors. 
 
Commercial Sales 
Commercial sales continued to outperform the rest of the business and grew by 
14.9% to GBP56.8m and now account for 26.5% of total company sales. We achieved 
good growth in all major multiples and now have more than 25% of the inlaid box 
chocolate market in the UK (A.C.Nielsen, June 2009 excluding sales in Thorntons 
Retail). 
 
In November, Woolworths, one of our largest commercial customers, went out of 
business. As this had been anticipated well in advance, the resulting bad debt 
was minimal. I would like to express my particular thanks to the Commercial team 
for their quick response to the opportunities available to them at the time and 
for the growth achieved through the channel as a whole. 
 
 
Operations 
The Purchasing team have once again done an excellent job of mitigating the 
volatility of the cocoa bean market with prices reaching a 24-year high in 
February 2009. Fortunately, dairy prices remained low for most of the year, 
helping us avoid the need for any significant price increases. 
 
 
An ongoing area of focus is the productivity of our manufacturing facility and a 
significant step was taken this year with the investment of more than GBP1.1 
million in a second robotic packaging line. This is now fully operational and 
should improve productivity and gross margins in the coming year. 
 
 
We took another step to reduce costs as well as to mitigate our impact on the 
environment by outsourcing distribution of our products to the South East of 
England, particularly within the M25, to a third party. 
 
 
Overall, supply service levels to all our customers, including our own stores, 
improved further from 95% to 96%. 
 
 
Export Sales 
Export sales have been on the radar for some time and we believe now is the 
right moment to dedicate resources to exploring this opportunity. This is a long 
term objective and we will carefully evaluate the options and learn from past 
experience before embarking on a controlled expansion of export sales. 
 
 
Outlook 
As I write this report there are very early signs that the worst of the 
recession might be over and this, together with all the work we have put into 
product innovation, reducing costs and improving productivity give me 
confidence. We make excellent products and by continuing to live up to our 
values of imagination, togetherness and excellence, I strongly believe that the 
prospects for Thorntons are good. 
 
 
Mike Davies 
Chief Executive 
8 September 2009 
 
Finance Director's report 
 
 
Profits and Tax 
Operating profit in the second half improved significantly, 
which helped to limit the fall in the full year pre-exceptional operating profit 
of GBP7.9 million (2008: GBP9.7 million) to just 23.1%, compared to the decline 
of 35.2% seen at the interim stage. Thorntons historically generates an 
operating loss in the second half of the year but during 2009 this loss was 
reduced to GBP0.6 million (excluding exceptional items), down from GBP2.8m the 
previous year. This was helped by a relatively modest 6.1% growth in sales over 
the period. 
 
 
Percentage margins declined slightly in the second half but less so than in the 
first half of the year which was adversely affected by the downturn in consumer 
spending in the months before Christmas. Decisive steps were taken at that time 
to contain operating expenses with the result that second half expenses 
(excluding exceptional items) were 0.5% below last year's level. 
 
 
Profit before taxation ("PBT") decreased by 4.5% to GBP8.1 million (2008: GBP8.5 
million) and PBT pre-exceptionals decreased 25.8% to GBP6.3 million. The 
exceptional items which give rise to the GBP1.8 million 
net credit in the full year income statement consist of a one-off curtailment 
gain relating to the Group's defined benefit pension scheme of GBP2.3 million 
(which is described in more detail below) and an unusually large write-off of a 
GBP0.5 million bad debt arising from the insolvency of Birthdays, our largest 
Franchise partner. 
 
 
The GBP4.5 million tax charge for the year represents 55.4% of PBT compared with 
last year's tax charge of 28.4%. The main reason for the increase in the tax 
charge is that the Finance Act 2008 included legislation which had the effect of 
phasing out, over four years, the benefit of industrial buildings allowances 
("IBAs") which are deductible for tax purposes. This change generated a one-off 
deferred tax charge in 2009 of approximately GBP2.0 million or 25.1% of PBT. A 
provision of GBP2.9 million was made in the interim accounts for the deferred 
tax consequences of the abolition of IBAs. Since then, however, we have taken 
steps to reclassify certain industrial building assets as plant and machinery 
for which capital allowances are available, thus reducing the interim deferred 
tax charge by 
GBP0.9 million. Once the IBA tax allowances are fully phased out the Group's 
annual tax cash cost will increase by some GBP150,000. 
 
 
Prior year tax credits amounted to 0.7% of PBT, which left an underlying current 
year tax charge of 31.0%. This, as in previous years, is higher than the 
effective statutory rate of 28.0%, mainly because of a historic element of 
capital investment for which no tax allowances are available. 
 
 
Shareholder Returns and Dividends 
Basic earnings per share have decreased by 
40.7% from 9.1p to 5.4p. If the exceptional items are excluded, the underlying 
decrease in earnings per share is 28.6%. 
 
 
Dividends paid in the year amounted to 6.05p per share. As a result of the 
uncertain economic outlook, the Board felt it prudent to pay a reduced interim 
dividend of 1.2p (2008: 1.95p) during the financial year. It is the intention of 
the Board to recommend at the Annual General Meeting that a final dividend of 
4.85p be paid to shareholders in November 2009, thus making a total dividend in 
respect of the year's earnings of 6.05p (2008:6.80p). 
 
 
Cash and Debt 
 Cash generated from operations before taxation improved from 
GBP14.0 million in 2008 to GBP19.0 million this year. Operating cash flow before 
working capital movements was virtually unchanged from 2008 but management 
action to control inventory levels and receivables collection and to improve 
payment terms from suppliers reduced working capital outflows to GBP2.8 million, 
down from GBP7.9 million the previous year. 
 
 
Cash investment in fixed assets totalled GBP10.0 million (2008: GBP7.5 million), 
of which GBP3.0 million was funded through finance leasing. The net balance 
sheet addition to fixed assets of GBP10.2 million was slightly more than the 
cash figure and included GBP3.0 million of expenditure on new EPOS systems 
described below, GBP1.1m on a second robotic packing line, which will help to 
reduce product costs, and GBP1.7 million on new stores and store improvements. 
The balance was invested in new product tooling and other supply chain and IT 
improvements. 
 
Shortly after the end of the financial year the Group negotiated new committed 
banking facilities with HSBC, Lloyds TSB Bank and Santander/Alliance & Leicester 
totalling GBP52.5 million for a three year period. The costs of these facilities 
are higher than those of existing facilities but are in line with market rates 
and provide certainty of funding for the medium term. Covenants are set at 
levels which are broadly similar to those in the previous agreements. 
 
 
Business Performance 
The Board continues to apply the following key 
performance indicators in order to measure progress towards achieving 
shareholder value: 
 
 
  *  Net sales growth - the year on year increase in sales revenue excluding any 
  impact from acquisitions or disposals. 
  *  Like for like sales growth - the change in the sales of those of our own shops 
  which are open for trading for corresponding periods comparing the current year 
  with the previous year. 
  *  Gross return on sales - gross margin as a percentage of net sales revenue. 
  *  Profit before tax - current year profit before tax compared with the previous 
  year. 
  *  Operating cash flow - cash generated from operations before working capital 
  movements, taxation, asset investment and financing activities. 
 
 
 
Performance against these was as follows: 
 
 
+---------------+----------+----------+----------+ 
|               |     2009 |     2008 |     2007 | 
+---------------+----------+----------+----------+ 
| Net           |     3.2% |    11.9% |     5.3% | 
| sales         |          |          |          | 
| growth        |          |          |          | 
+---------------+----------+----------+----------+ 
| Like-for-like |   (2.0)% |     2.9% |     0.8% | 
| sales growth  |          |          |          | 
+---------------+----------+----------+----------+ 
| Gross         |    48.9% |    50.5% |    53.7% | 
| return        |          |          |          | 
| on            |          |          |          | 
| sales         |          |          |          | 
+---------------+----------+----------+----------+ 
| Profit        |  GBP8.1m |  GBP8.5m |  GBP7.1m | 
| before        |          |          |          | 
| tax           |          |          |          | 
+---------------+----------+----------+----------+ 
| Operating     | GBP21.8m | GBP21.9m | GBP19.8m | 
| cash flow     |          |          |          | 
+---------------+----------+----------+----------+ 
 
 
A review of each of the above is included under the appropriate heading 
elsewhere in this report. 
 
 
Sales 
The Group's sales are made through a number of channels whose 
performance is summarised below: 
 
 
+------------+--------+--------+------------+ 
|            |   2009 |   2008 |          % | 
|            |   GBPm |   GBPm |  increase/ | 
|            |        |        | (decrease) | 
+------------+--------+--------+------------+ 
| Own        |  134.5 |  135.1 |     (0.4)% | 
| Stores     |        |        |            | 
+------------+--------+--------+------------+ 
| Franchise  |   15.3 |   14.9 |       2.2% | 
+------------+--------+--------+------------+ 
| Commercial |   56.8 |   49.5 |      14.9% | 
+------------+--------+--------+------------+ 
| Thorntons  |    8.2 |    8.6 |     (5.2)% | 
| Direct     |        |        |            | 
+------------+--------+--------+------------+ 
| Total      |  214.8 |  208.1 |       3.2% | 
+------------+--------+--------+------------+ 
 
 
A detailed review of the sales performance by channel is included in the Chief 
Executive's report. 
 
 
Margins 
 There was a decrease in gross margin of GBP0.1 million which was 
caused by a decline in percentage margins from 50.5% in 2008 to 48.9% this year, 
more than offsetting the GBP6.7 million growth in sales over the same period. 
The main factor in the decline in margin was the need, in a recessionary trading 
environment, to attract customers to our own stores by offering higher levels of 
promotional discounts than in the previous year and to ensure that stock was 
cleared before Christmas. The change in the proportion of sales through the 
various channels, which is largely mitigated by the lower costs of serving the 
faster growing channels, also had an adverse effect on gross profit. We 
succeeded in increasing our prices during the year in order to offset increases 
in raw material and manufacturing costs. 
 
 
Costs 
Operating expense growth, excluding exceptional items, was 2.6%, a 
figure lower than the rate of sales growth, and this combination lead to a drop 
in operating expenses as a percentage of sales from 46.1% in 2008 to 45.8% this 
year. This was the result of a number of cost management initiatives that were 
put in place when it became apparent in the early part of the year that there 
would be a downturn in consumer spending caused by the banking crisis. These 
initiatives included freezing external recruitment, inviting staff to take 
unpaid leave, reducing discretionary spend wherever possible and tightly 
managing shop costs. 
 
 
Profits on asset (mainly property) disposals declined from GBP143,000 last year 
to GBP16,000 in the current year. 
 
 
 Other Operating Income 
There was a 23.8% improvement in other operating income during the year from 
GBP1.1 million to GBP1.4 million, which was mainly the result of increased sales 
into major multiples by existing licensees of Thorntons branded products, mainly 
cakes and ice cream. 
 
 
Pensions 
The IAS19 pension scheme deficit increased from GBP16.0 million in 2008 to 
GBP21.3 million at the end of 2009. During the year the Group implemented a 
"career average" change to the terms of the defined benefit pension scheme which 
reduced liabilities for future pensions by GBP2.3 million and generated a 
corresponding income statement curtailment gain. However, a number of other 
factors contributed to the net increase in the deficit of GBP5.3 million. The 
general decline in the value of equity markets accounted for a GBP4.5 million 
reduction in the market value of the scheme's assets. The liabilities of the 
scheme, excluding the effect of the one-off curtailment gain, have increased by 
GBP4.4 million which includes the effect of improving life expectancy. 
 
 
The Company continues to inject funds into the scheme in order to reduce the 
scheme deficit over time and made deficit reduction payments totalling GBP1.7 
million during the year. 
 
 
Information Systems 
The major achievement of the year was the successful 
replacement of all our outdated store tills, credit card terminals and central 
supporting software with state of the art equipment and software which has 
provided us with a competitive advantage in many aspects of our retail 
operations. The improvements include a significant reduction in transaction 
times, helping to shorten customer queues at peak periods. The roll-out of this 
project was achieved in a challengingly short time period and enabled us to go 
live before Christmas 2008. 
 
 
By the end of the financial year we had upgraded all our credit card systems 
both for our retail business and for Thorntons Direct such that they are fully 
compliant with the credit card industry's PCI-DSS standard which sets the 
security standards for handling credit card transactions. 
 
 
We also successfully upgraded our Oracle systems which are the core of our 
financial, manufacturing and purchasing systems. This was achieved with minimum 
disruption to the business. 
 
 
John Wall 
Finance Director 
8 September 2009 
  Consolidated income statement 
52 weeks ended 27 June 2009 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
|              |         52 weeks ended 27 June          |         52 weeks ended 28 June          | 
|              |                  2009                   |                  2008                   | 
+--------------+-----------------------------------------+-----------------------------------------+ 
|              |       Before | Exceptionals |     Total |       Before | Exceptionals |     Total | 
|              |              |     (note 2) |           | exceptionals |              |           | 
|              | exceptionals |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
|              |      GBP'000 |      GBP'000 |   GBP'000 |      GBP'000 |      GBP'000 |   GBP'000 | 
|              |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Revenue      |      214,805 |            - |   214,805 |      208,122 |            - |   208,122 | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Cost         |    (109,836) |            - | (109,836) |    (103,017) |            - | (103,017) | 
| of           |              |              |           |              |              |           | 
| sales        |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Gross        |      104,969 |            - |   104,969 |      105,105 |            - |   105,105 | 
| profit       |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Operating    |     (98,439) |        1,800 |  (96,639) |     (95,918) |            - |  (95,918) | 
| expenses     |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Other        |        1,410 |            - |     1,410 |        1,139 |            - |     1,139 | 
| operating    |              |              |           |              |              |           | 
| income       |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Operating    |        7,940 |        1,800 |     9,740 |       10,326 |            - |    10,326 | 
| profit       |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Finance      |           38 |            - |        38 |           45 |            - |        45 | 
| income       |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Finance      |      (1,690) |            - |   (1,690) |      (1,901) |            - |   (1,901) | 
| costs        |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Profit       |        6,288 |        1,800 |     8,088 |        8,470 |            - |     8,470 | 
| before       |              |              |           |              |              |           | 
| taxation     |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Taxation     |      (1,946) |      (2,537) |   (4,483) |      (2,402) |            - |   (2,402) | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Profit       |        4,342 |        (737) |     3,605 |        6,068 |            - |     6,068 | 
| attributable |              |              |           |              |              |           | 
| to equity    |              |              |           |              |              |           | 
| shareholders |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
|              |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Earnings     |              |              |           |              |              |           | 
| per          |              |              |           |              |              |           | 
| share        |              |              |           |              |              |           | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Basic        |         6.5p |       (1.1)p |      5.4p |         9.1p |            - |      9.1p | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
| Diluted      |         6.5p |       (1.1)p |      5.4p |         9.0p |            - |      9.0p | 
+--------------+--------------+--------------+-----------+--------------+--------------+-----------+ 
 
 
All activities in both the current and previous year relate to continuing 
operations. 
 
 
Dividend per share 
 
 
+-----------------------------------------------+-------+------------+------------+ 
|                                               | Note  |       2009 |       2008 | 
+-----------------------------------------------+-------+------------+------------+ 
| Proposed final dividend                       |       |      4.85p |      4.85p | 
+-----------------------------------------------+-------+------------+------------+ 
| Impact on shareholders' funds (GBP'000)       |  3    |      3,247 |      3,237 | 
+-----------------------------------------------+-------+------------+------------+ 
| Total dividend in respect of the year         |       |      6.05p |      6.80p | 
+-----------------------------------------------+-------+------------+------------+ 
| Impact on shareholders' funds (GBP'000)       |  3    |      4,050 |      4,562 | 
+-----------------------------------------------+-------+------------+------------+ 
| Paid in the year                              |       |      6.05p |      6.80p | 
+-----------------------------------------------+-------+------------+------------+ 
| Impact on shareholders' funds (GBP'000)       |  3    |      4,040 |      4,550 | 
+-----------------------------------------------+-------+------------+------------+ 
 
 
  Consolidated statement of recognised income and expense 
52 weeks ended 27 June 2009 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |   52 weeks |   52 weeks | 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |      ended |      ended | 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |    27 June |    28 June | 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |       2009 |       2008 | 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |    GBP'000 |    GBP'000 | 
+-----------------------------------------------+-------+------------+------------+ 
| Actuarial loss recognised in the defined      |       |    (8,629) |    (2,148) | 
| benefit pension scheme                        |       |            |            | 
+-----------------------------------------------+-------+------------+------------+ 
| Movement of deferred tax on actuarial loss    |       |      2,416 |        601 | 
+-----------------------------------------------+-------+------------+------------+ 
| Net expense recognised directly in equity     |       |    (6,213) |    (1,547) | 
+-----------------------------------------------+-------+------------+------------+ 
| Profit attributable to equity shareholders    |       |      3,605 |      6,068 | 
+-----------------------------------------------+-------+------------+------------+ 
| Total recognised (expense)/income             |       |    (2,608) |      4,521 | 
| attributable to equity shareholders for the   |       |            |            | 
| financial period                              |       |            |            | 
+-----------------------------------------------+-------+------------+------------+ 
 
 
  Consolidated balance sheet at 27 June 2009 
 
+---------------------------------------------------------------+----------+----------------+----------------+ 
|                                                               |          |           2008 |           2007 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
|                                                               | Note     |        GBP000 |        GBP000 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Assets                                                        |          |                |                | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Non-current assets                                            |          |                |                | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Intangible assets                                             |          |          4,850 |          4,786 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Property, plant and equipment                                 |          |         62,759 |         64,084 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
|                                                               |          |         67,609 |         68,870 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Current assets                                                |          |                |                | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Inventories                                                   |          |         25,370 |         24,307 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Trade and other receivables                                   |          |         14,056 |         15,155 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Cash and cash equivalents                                     |          |            588 |          1,088 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
|                                                               |          |         40,014 |         40,550 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Liabilities                                                   |          |                |                | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Current liabilities                                           |          |                |                | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Trade and other payables                                      |          |       (22,628) |       (22,014) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Borrowings                                                    |          |       (22,625) |       (24,057) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Current tax liabilities                                       |          |        (1,043) |          (984) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Provisions for liabilities                                    |          |          (254) |          (122) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
|                                                               |          |       (46,550) |       (47,177) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Net current liabilities                                       |          |        (6,536) |        (6,627) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Non-current liabilities                                       |          |                |                | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Borrowings                                                    |          |        (4,637) |        (5,295) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Deferred tax liabilities                                      |          |        (2,917) |        (2,750) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Retirement benefit obligations                                |          |       (21,313) |       (15,965) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Other non-current liabilities                                 |          |        (2,816) |        (2,612) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Provisions for liabilities                                    |          |          (652) |          (586) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
|                                                               |          |       (32,335) |       (27,208) | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Net assets                                                    |          |         28,738 |         35,035 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Shareholders equity                                          |          |                |                | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Ordinary shares                                               |        4 |          6,835 |          6,835 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Share premium                                                 |        4 |         13,752 |         13,750 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Retained earnings                                             |        4 |          8,151 |         14,450 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
| Total equity attributable to parents equity holders          |          |         28,738 |         35,035 | 
+---------------------------------------------------------------+----------+----------------+----------------+ 
 
 
Consolidated cash flow statement 
52 weeks ended 27 June 2009 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |   52 weeks |   52 weeks | 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |      ended |      ended | 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |    27 June |    28 June | 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |       2009 |       2008 | 
+-----------------------------------------------+-------+------------+------------+ 
|                                               |       |    GBP'000 |    GBP'000 | 
+-----------------------------------------------+-------+------------+------------+ 
| Cash flows from operating activities          |       |     17,138 |     11,481 | 
+-----------------------------------------------+-------+------------+------------+ 
| Cash flows from investing activities          |       |            |            | 
+-----------------------------------------------+-------+------------+------------+ 
| Proceeds from sale of property, plant and     |       |         51 |        262 | 
| equipment                                     |       |            |            | 
+-----------------------------------------------+-------+------------+------------+ 
| Purchase of property, plant and equipment     |       |    (7,112) |    (5,680) | 
+-----------------------------------------------+-------+------------+------------+ 
| Net cash used in investing activities         |       |    (7,061) |    (5,418) | 
+-----------------------------------------------+-------+------------+------------+ 
| Cash flows from financing activities          |       |            |            | 
+-----------------------------------------------+-------+------------+------------+ 
| Net proceeds from issue of ordinary shares    |       |          2 |        223 | 
+-----------------------------------------------+-------+------------+------------+ 
| Interest paid                                 |       |    (1,469) |    (1,831) | 
+-----------------------------------------------+-------+------------+------------+ 
| Interest received                             |       |         27 |         37 | 
+-----------------------------------------------+-------+------------+------------+ 
| Capital element of finance lease rental       |       |    (3,297) |    (3,712) | 
| payments                                      |       |            |            | 
+-----------------------------------------------+-------+------------+------------+ 
| Borrowings (advanced)/repaid                  |       |    (1,800) |      2,000 | 
+-----------------------------------------------+-------+------------+------------+ 
| Dividends paid                                |  3    |    (4,040) |    (4,550) | 
+-----------------------------------------------+-------+------------+------------+ 
| Net cash used in financing activities         |       |   (10,577) |    (7,833) | 
+-----------------------------------------------+-------+------------+------------+ 
| Net decrease in cash and cash equivalents and |       |      (500) |    (1,770) | 
| bank overdrafts                               |       |            |            | 
+-----------------------------------------------+-------+------------+------------+ 
| Cash and cash equivalents at beginning of     |       |      1,088 |      2,858 | 
| period                                        |       |            |            | 
+-----------------------------------------------+-------+------------+------------+ 
| Cash and cash equivalents at end of period    |       |        588 |      1,088 | 
+-----------------------------------------------+-------+------------+------------+ 
 Notes to the preliminary announcement 
 
 
1     Basis of preparation 
 
 
This preliminary announcement does not constitute statutory accounts within the 
meaning of section 434 of the Companies Act 2006. The financial information for 
the years ended 27 June 2009 and 28 June 2008 has been extracted from the 
consolidated financial statements on which the auditors have given unqualified 
opinions and which do not contain statements under Sections 498(2) or 498(3) of 
the Companies Act 2006. This announcement has been agreed with the Company's 
auditors for release. 
 
 
The financial information included in this preliminary announcement does not 
include all the disclosures required by International Financial Reporting 
Standard ("IFRS") or the Companies Act 2006 and accordingly it does not itself 
comply with IFRS or the Companies Act 2006. 
 
 
The Group's financial statements for the year ended 28 June 2008 have been 
delivered to the Registrar of Companies and 27 June 2009 will be delivered to 
the Registrar of Companies following the Company's Annual General Meeting. 
 
 
The Group prepares its annual consolidated financial statements in accordance 
with International Financial Reporting Standards ("IFRS") and International 
Financial Reporting Interpretations Committee ("IFRIC") interpretations as 
adopted by the European Union ("EU") and with those parts of the Companies Act 
2006 applicable to companies reporting under IFRS. There are no material 
differences between the accounting policies adopted for use in the preparation 
of the consolidated financial statements for the year ended 27 June 2009, the 
financial information included in this preliminary announcement and the 
accounting policies disclosed in the 2008 Annual Report and Financial 
Statements, copies of which are available on Thorntons PLC website, 
www.thorntons.co.uk 
 
These consolidated financial statements have been prepared under the historical 
cost convention with the exception of derivative financial instruments and share 
based payments which are recognised at fair value. 
 
 
This preliminary announcement will be published on the Company's website, in 
addition to the paper version. The maintenance and integrity of the website is 
the responsibility of the directors. The work carried out by the auditors does 
not involve consideration of these matters. Legislation in the United Kingdom 
governing the preparation and dissemination of financial statements may differ 
from legislation in other jurisdictions. 
 
 
 
 
2     Exceptional items 
 
 
Exceptional items comprise: 
 
+--------------------------------------------------------------------------------------+---------------+ 
|                                                                                      |          2009 | 
|                                                                                      |       GBP000 | 
+--------------------------------------------------------------------------------------+---------------+ 
| Pension curtailment gain                                                             |         2,300 | 
+--------------------------------------------------------------------------------------+---------------+ 
| Franchisee bad debt                                                                  |         (500) | 
+--------------------------------------------------------------------------------------+---------------+ 
|                                                                                      |         1,800 | 
+--------------------------------------------------------------------------------------+---------------+ 
|                                                                                      |               | 
+--------------------------------------------------------------------------------------+---------------+ 
| Tax charge attributable to exceptional items                                         |           504 | 
+--------------------------------------------------------------------------------------+---------------+ 
| Net tax impact of withdrawal of industrial buildings allowances                      |         2,033 | 
+--------------------------------------------------------------------------------------+---------------+ 
|                                                                                      |         2,537 | 
+--------------------------------------------------------------------------------------+---------------+ 
 
Pension curtailment gain 
During the year the Group implemented a change to the 
defined benefit pension scheme from a final salary to a Career Average Revalued 
Earnings ("CARE") basis. Under the CARE Scheme, pension benefits are built up 
each year linked to the members' pensionable salaries in that year. This 
reduction in pension benefits has resulted in a curtailment gain, which in line 
with IAS 19, has been valued at GBP2,300,000. 
 
 
Franchisee bad debt 
This charge relates to the creation of a provision against an unusually large 
bad debt following the insolvency of a major franchisee. 
 
 
Tax charge attributable to exceptional items 
This is the tax charge arising in relation to the exceptional profit and loss 
items calculated at the standard rate of 28%. 
 
 
2     Exceptional items (continued) 
 
 
Net tax impact of withdrawal of industrial buildings allowances 
This relates to a one off charge of GBP3,053,000 arising from the withdrawal of 
industrial buildings allowances. This is offset by a GBP1,020,000 tax credit 
arising from a revision of capital allowance claims made in respect of plant and 
machinery. 
 
 
3    Ordinary dividends 
 
 
+------------------------------------------------------------------------+----------------+----------------+ 
|                                                                        |           2009 |           2008 | 
+------------------------------------------------------------------------+----------------+----------------+ 
|                                                                        |        GBP000 |        GBP000 | 
+------------------------------------------------------------------------+----------------+----------------+ 
| Final dividend paid for the 52 weeks ended 28 June 2008 of 4.85p       |                |                | 
+------------------------------------------------------------------------+----------------+----------------+ 
| (53 weeks ended 30 June 2007: 4.85p)                                   |          3,237 |          3,235 | 
+------------------------------------------------------------------------+----------------+----------------+ 
| Interim dividend paid in respect of the 52 weeks ended 27 June 2009    |                |                | 
+------------------------------------------------------------------------+----------------+----------------+ 
| of 1.20p (52 weeks ended 28 June 2008: 1.95p)                          |            803 |          1,315 | 
+------------------------------------------------------------------------+----------------+----------------+ 
| Amounts recognised as distributions to equity holders                  |          4,040 |          4,550 | 
+------------------------------------------------------------------------+----------------+----------------+ 
 
 
 
 
In addition, the Directors are proposing a final dividend in respect of the year 
ended 27 June 2009 of 4.85p per share which will absorb an estimated 
GBP3,200,000 of shareholders funds. It will be paid on 27 November 2009 to 
shareholders who are on the register of members on 30 October 2009. 
 
The trusts operating the Long-Term Incentive Plan Scheme ("LTIP 2007") have 
fully waived dividends on the 504,610 shares (2008: 504,610) held at 27 June 
2009 and all but 0.01p per share on the 905,070 (2008: 905,070) shares held in 
respect of the 2001 Executive Share Option Scheme. 
 
 
4     Statement of changes in shareholders' equity 
+----------------------------------+----------+----------+-----------+----------+ 
|                                  |   Share  |   Share  |  Retained |    Total | 
|                                  |  capital |  premium |  earnings |  GBP'000 | 
|                                  |  GBP'000 |  GBP'000 |   GBP'000 |          | 
+----------------------------------+----------+----------+-----------+----------+ 
| At 30 June 2007                  |    6,811 |   13,551 |    14,524 |   34,886 | 
+----------------------------------+----------+----------+-----------+----------+ 
| Total recognised income and      |        - |        - |     4,521 |    4,521 | 
| expense                          |          |          |           |          | 
+----------------------------------+----------+----------+-----------+----------+ 
| New share capital issued         |       24 |      199 |         - |      223 | 
+----------------------------------+----------+----------+-----------+----------+ 
| Share-based payment charge       |        - |        - |       447 |      447 | 
+----------------------------------+----------+----------+-----------+----------+ 
| Effect of tax on share option    |        - |        - |     (510) |    (510) | 
| movement                         |          |          |           |          | 
+----------------------------------+----------+----------+-----------+----------+ 
| Movement in investment in own    |        - |        - |        18 |       18 | 
| shares                           |          |          |           |          | 
+----------------------------------+----------+----------+-----------+----------+ 
| Dividends                        |        - |        - |   (4,550) |  (4,550) | 
+----------------------------------+----------+----------+-----------+----------+ 
| At 28 June 2008                  |    6,835 |   13,750 |    14,450 |   35,035 | 
+----------------------------------+----------+----------+-----------+----------+ 
| Total recognised income and      |        - |        - |   (2,608) |  (2,608) | 
| expense                          |          |          |           |          | 
+----------------------------------+----------+----------+-----------+----------+ 
| New share capital issued         |        - |        2 |         - |        2 | 
+----------------------------------+----------+----------+-----------+----------+ 
| Share-based payment charge       |        - |        - |       520 |      520 | 
+----------------------------------+----------+----------+-----------+----------+ 
| Effect of tax on share option    |        - |        - |     (171) |    (171) | 
| movement                         |          |          |           |          | 
+----------------------------------+----------+----------+-----------+----------+ 
| Dividends                        |        - |        - |   (4,040) |  (4,040) | 
+----------------------------------+----------+----------+-----------+----------+ 
| At 27 June 2009                  |    6,835 |   13,752 |     8,151 |   28,738 | 
+----------------------------------+----------+----------+-----------+----------+ 
 
 
 
 
 
5     Reconciliation of movement in net debt 
 
 
 
 
+------------------------------------------------------------------------+--------------+--------------+ 
|                                                                        |         2009 |         2008 | 
+------------------------------------------------------------------------+--------------+--------------+ 
|                                                                        |      GBP000 |      GBP000 | 
+------------------------------------------------------------------------+--------------+--------------+ 
| Decrease in cash and cash equivalents                                  |        (500) |      (1,770) | 
+------------------------------------------------------------------------+--------------+--------------+ 
| Cash flows from decrease in debt                                       |        5,097 |        1,712 | 
+------------------------------------------------------------------------+--------------+--------------+ 
| Change in net debt resulting from cash flow                            |        4,597 |         (58) | 
+------------------------------------------------------------------------+--------------+--------------+ 
| Inception of new finance leases                                        |      (3,007) |      (1,795) | 
+------------------------------------------------------------------------+--------------+--------------+ 
| Movement in net debt in the period                                     |        1,590 |      (1,853) | 
+------------------------------------------------------------------------+--------------+--------------+ 
| Net debt at beginning of period                                        |     (28,264) |     (26,411) | 
+------------------------------------------------------------------------+--------------+--------------+ 
| Net debt at end of period                                              |     (26,674) |     (28,264) | 
+------------------------------------------------------------------------+--------------+--------------+ 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
 FR BDGDCLSGGGCI