Mothercare offered its first dividend payout in two years today after a trading revival delivered annual profits of £23.9 million.

The babycare retailer will pay 4p to shareholders after restoring the business to financial health via a turnaround plan that resulted in annual like-for-like sales growth of 5.9%.

Mothercare has overhauled stores, improved product ranges and cut costs at its distribution arm after sliding into the red by £24.8 million last year.

Recent trading has also been positive, with like-for-like sales at its 165 high street stores and 68 out-of-town branches ahead by 5.8% in the seven weeks to May 14.

Chief executive Ben Gordon said plans to turn Mothercare into an efficient retailer with an internationally respected brand were "well on track" after annual turnover rose 3.5% to £446.9 million.

"We are increasingly confident of Mothercare's potential to achieve sustained profitability and growth," he said.

At the heart of its strategy is the refurbishment of stores to carry the new Superlite format, which devotes more space to maternity ranges and offers customers a better shopping environment.

More than 50 branches have already been refitted and the group will convert a further 40 stores by March so that half its high street space carries the new design.

Stores with the Superlite format continued to outperform the remainder of the chain, Mothercare said.

In addition, the group is preparing to launch an expansion programme with up to ten stores opening each year at a cost of £10 million.

"It will take time to establish a pipeline of suitable sites so we would not expect the programme to commence fully until 2005," Mr Gordon said.

One out-of-town location has already been identified with a store at Thurrock Lakeside, in Essex, scheduled to open in September.

Mothercare is also set to expand overseas with around 30 store openings expected each year in countries including Greece, Spain and Russia. It currently has 190 international franchise sites.

Total sales in the UK rose by 3.3% to £381.3 million and reflected the impact of eight store closures during the year. A further ten stores are earmarked to shut, mainly smaller branches where profitability is tight.

Focusing on clothing ranges at its high street branches helped Mothercare to advance sales, while demand for nursery furniture and travel ranges such as buggies and prams also grew.

Toy sales were lower as the group concentrated on educational ranges but these were more profitable than previous products.

Thursday May 20, 2004