MACKAYS Stores Group, the Scottish clothing retailer behind the M&Co brand, has returned to the black with the help of a credit of £4.75 million resulting from changes in pension arrangements.
The company's latest accounts, published yesterday, show that the company made a pre-tax profit of £2.03 million in the year to February 21. It had made a pre-tax loss of £2.34 million in the prior 12 months.
In their report on the accounts, the directors say the group's defined-benefit pension scheme was closed to future accrual during the year and this resulted in a credit of £4.7 million.
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Renfrewshire-based Mackays Stores Group, which employs about 900 of its 3,753-strong workforce in Scotland and has 62 of its 260 UK stores north of the Border, made an operating profit of £4.92 million in the year to February 21. It made an operating loss of £895,000 in the prior 12 months.
This signals that, excluding the pension credit, there was a modest underlying improvement in the firm's profitability at the operating level.
This improvement was achieved against the backdrop of a fall in turnover to £158 million in the year to February 21, from £169 million in the prior 12 months. The drop in sales was attributed to a decision not to renew leases on unprofitable stores.
The directors say that 19 "non-profitable" stores were closed during the last financial year.
They highlight the fact that Mackays Stores Group made earnings before interest, tax, depreciation and amortisation of £11.98 million in the year to February 21, up from £10.12 million in the prior 12 months, and declare that this resulted in significant cash generation.
Highlighting more profitable trading, they say: "Following a significant improvement in the group's performance in 2012-13, further progress was made in 2013-14. Sales fell by 6.3 per cent from the previous year with the leases on a number of unprofitable stores coming to expiry and not being renewed.
"Product margins were significantly higher than 2012-13 as a result of the group's strategy of buying less stock and achieving more profitable sales due to a reduction in markdowns."
Iain McGeoch, chairman and major shareholder of the family-owned company, noted the company's net debt had been reduced by £6.4 million over the year.
And he flagged a further improvement in performance this financial year.
He said: "Our improved performance has continued and our year-to-date operating profit is ahead of 2013-14, with a further reduction in net debt."
Mr McGeoch said the company's web trade continued to grow, becoming a more significant part of the business. He added that the firm now dispatches goods to more than 80 countries.
Mr McGeoch also noted that the retailer now operates 19 international-franchises stores in nine countries, with new branches opening in the United Arab Emirates, Greece and Bulgaria. He declared these openings kept the firm in line with its international expansion plan.