ACT.L Regulatory News (ACT)

19 Oct 2005 08:00

Actif Group PLC19 October 2005 19 October 2005 Actif Group plc Preliminary results for the year ended 30 July 2005 Summary • Turnover down 6.1% to £25.9m (2004: £27.6m) • Composite gross margins have decreased to 40.5% from 41.6% • Total operating costs decreased by 4.3% to £10.8m (2004: £11.3m) • Operating loss of £336,000 (2004: profit of £189,000) • Loss before tax of £460,000 (2004: profit of £85,000) • Basic earnings per share of -0.73p (2004: 0.10p) • Closing stock reduced by 24% to £2.9m (2004: £3.8m) • Net debt increased by 46.7% to £1.99m (2004: £1.36m) • New store opening programme continued Commenting on these results, David Brock, Chairman said: "Clearly it is very disappointing to report on a loss-making year. However, in atough market environment, we have taken quick and decisive action to implement abusiness reorganisation plan to ensure the Group is in a strong position to rideout this consumer downturn. Our core product offer, focusing on Elle's heritageas a stylish, casual brand, continues to have broad market appeal and awell-established distribution network. Our improving strength in design andsourcing will enable us to further differentiate our offer, which we believe iskey to the continued appeal of the Elle brand in a very competitive UK clothingmarket. We will seek further opportunities to reduce our cost base without compromisingthese core strengths, and in so doing will ensure we are positioned to takeadvantage of any improvement in market conditions through 2006". Enquiries: Actif Group plc (020 7436 0222) Hudson Sandler (020 7796 4133) Mark Evans, Chief Executive (m: 07977 018007) Wendy Baker Chairman's statement The results for the twelve month period to 30 July 2005 reflect a difficult yearfor the Group, during which we have experienced a worsening retail environmentcharacterised by weak demand and rising property costs. As we reported in our interim statement in April, we saw an encouraging firsthalf with positive like for like sales growth in our prime Elle retail storesand further growth in our wholesale Elle business. The second half was muchtougher, with weak demand driving retail sales down by 14% in this period andwholesale customers being cautious about placing orders for the autumn / winter2005 season. These trading results have masked some of the improvements the Company has madein the product offer under the leadership of our new Commercial Director,Catherine Scorey. In the current climate it will take some time for theseimprovements to show through in the trading performance and we are thereforetaking prudent actions to reduce the cost base and manage stock levels tightlyduring this period. Results In the twelve months to 30 July 2005, total Group turnover decreased by 6.1% to£25.9m (2004: £27.6m). Composite gross margins have decreased to 40.5% from41.6% and costs have decreased by 4.3% to £10.8m, representing 41.8% of sales(2004: 40.9% of sales). The net result was a loss before tax of £460,000 (2004:profit before tax of £85,000) and the basic loss per share was 0.73p (2004:earnings per share of 0.1p). The Group saw a net cash outflow from operatingactivities of £0.09m, and net debt rose to £1.99m (2004: £1.36m) following netcapital expenditure of £0.4m (2004: £0.6m). Elle Retail Total retail sales in the period decreased by 9.7% to £13.9 m (2004: £15.4 m),which is down by 6.5% like-for-like on an underlying basis. Retail gross marginsare slightly below the comparative period at 57.5% (2004: 58.0%), reflecting anincreased need for promotional activity to drive sales and the impact ofreducing terminal stocks from prior seasons. Two new Elle stores opened in the period under review, and one loss-making storewas closed. We also opened three new concessions within the House of Fraserdepartment store group and, following the collapse of the Allders DepartmentStore group, closed three Elle concessions. Elle Wholesale Wholesale revenues from our Elle collections in the period have increased by5.7% to £7.6 m (2004: £7.2m) with the sales mix by category being broadlysimilar to last year. Wholesale gross profit margins have decreased to 28.8%(2004: 30.9%) mainly as a result of clearing unsold stock from Spring / Summer2004. Our wholesale customers are clearly not immune to the tougher tradingenvironment and both large buying groups and smaller independent retailers areshowing a greater degree of caution in placing orders for future seasons. Costs Operating costs have decreased by 4.3% to £10.8m (2004: £11.3m), whichrepresents 41.8% of sales (2004: 40.9% of sales). Retail operating costsdecreased by 7.5% to £7.3m (2004: £7.9m), equating to 52.5% of retail sales(2004: 51.3%). This adverse movement on the ratio to sales is reflective of thedecrease in retail sales, compounded by the addition of new retail space, wherewe have yet to see mature revenues. Total central overhead increased by 5.9% to£3.6m (2004: £3.4m) or 13.9% of total sales (2004: 12.3%). As we outlined in our trading update in early September, the Board has developedplans to realign the Group's cost base to reflect the tougher tradingenvironment. These plans have largely been implemented, which will lead tosavings in the region of £600k in the new financial year and a further £150k ofsavings in the subsequent year. Cash flow There was a net cash outflow from operating activities of £0.09m (2004: inflowof £0.6m). Net capital expenditure decreased to £0.4m (2004: £0.6m) as a result of thescaling back of the prime store opening programme. Projects completed in theyear include the new stores in Croydon and Livingston; 3 new concessions; andthe refit of the York store, following the completion of a new lease. Total working capital increased by 1.8% to £3.74m (2004: £3.67m). This increasein working capital is a combination of the following: a 24.4% decrease in stocklevels to £2.9m (2004: £3.8m), reflecting tighter stock purchasing and actionstaken to clear historic terminal stocks; a 13.6% decrease in debtors to £3.8m(2004: £4.4m) and an 35.0% decrease in trade and other creditors to £3.0m (2004:£4.5m), mainly due to the decrease in stock levels and an increase in sourcingfrom Portugal to take advantage of shorter leadtimes and reduce the uncertaintyof supply from China in light of quota changes. As a result of the movements outlined above, net debt has increased by 46.7% to£1.99m (2004: £1.36m), resulting in a gearing ratio at the year end of 52%(2004: 32%). Our People On behalf of the Board I would like to thank the Actif Group team. This has beena very challenging year and the recent business reorganisation was a difficultand unsettling time for everyone. The team is demonstrating its resiliencetogether with clear enthusiasm for the Elle brand and real determination to makethe business a success. Board Changes Catherine Scorey, who joined the company as commercial director in December2004, was appointed to the Board on 1st August 2005. The Board is pleased by theprogress Catherine is making in revitalising the Elle ranges. Current trading and prospects Trading since the start of the new financial year has continued on a similartrend to that experienced in the second half of last year with no apparentimprovement in consumer demand and warm weather suppressing demand for Autumnranges. September saw the opening of our latest Elle store in the new Chapelfield centrein Norwich. We are committed to opening a further store at the McArthur GlenDesigner Outlet Centre in Ashford, Kent in October and are considering furtheropportunities. We are also committed to expanding the number of Elle concessionsduring the year. In this tough market we have taken quick and decisive action to implement abusiness reorganisation plan to ensure the Group is in a strong position to rideout the consumer downturn. We will seek further opportunities to reduce our costbase without compromising our core strengths and in so doing will ensure we arepositioned to take advantage of any improvement in market conditions through2006. David BrockChairman 19 October 2005 Group profit and loss accountFor the year ended 30 July 2005 Audited Audited Notes 2005 2004 £'000 £'000Turnover 2 25,941 27,643Cost of sales (15,441) (16,135) __________ _________Gross profit 10,500 11,508Other operating expenses (10,836) (11,319) __________ _________ Operating (loss) / profit (336) 189 Interest payable and similar charges (124) (104) __________ _________(Loss) / profit on ordinary activities before (460) 85taxationTaxation (22) (22) __________ _________(Loss) / profit for the financial year (482) 63 __________ _________ Earnings per share 3 Basic earnings per share (0.73p) 0.10p __________ _________Diluted earnings per share (0.73p) 0.09p __________ _________ All amounts relate to continuing activities. Group balance sheetAs at 30 July 2005 Audited Audited 2005 2004 £'000 £'000Fixed assetsIntangible assets 39 42Tangible assets 2,014 1,896 __________ _________ 2,053 1,938Current assetsStocks 2,902 3,840Debtors 3,780 4,374Cash at bank and in hand 6 6 __________ _________ 6,688 8,220Creditors: amounts falling due within one year (4,442) (5,270) __________ _________Net current assets 2,246 2,950 __________ _________Total assets less current liabilities 4,299 4,888Creditors: amounts falling due after more than one year (503) (610) __________ _________Net assets 3,796 4,278 __________ _________Capital and reservesCalled up share capital 666 666Share premium account 4,326 4,326Other reserves 89 89Profit and loss account (1,285) (803) _________ _________Shareholders' funds - all equity 3,796 4,278 __________ _________ Group cash flow statementFor the year ended 30 July 2005 Audited Audited Notes 2005 2004 £'000 £'000Net cash (outflow) / inflow from operating activities 4 (89) 554Returns on investments and servicing of finance (124) (104)Capital expenditure and financial investment (420) (646) __________ __________Net cash outflow before financing (633) (196)Financing (215) 645 __________ __________(Decrease) / increase in cash in the year 5 (848) 449 __________ __________ Notes: 1. Basis of preparation This summary financial information comprises that of Actif Group plc and itssubsidiaries for the year ended 30 July 2005. The preliminary announcement,which does not constitute statutory accounts within the meaning of Section 240of the Companies Act 1985, is an extract from the Group statutory accounts forthe year ended 30 July 2005, which will be delivered to the Registrar ofCompanies in due course. The auditors have issued an unqualified opinion on thefinancial statements for the year ended 30 July 2005, and the year ended 31 July2004 have been extracted from the statutory accounts for that period, which havebeen delivered to the Registrar of Companies. 2. Segment information The turnover and profit before taxation are attributable to the Group'sprincipal activity, being the design, contracted manufacture, wholesale andretail of high quality fashion clothing. a) Analysis of turnover by destination: Audited Audited 2005 2004 £'000 £'000United Kingdom 25,227 26,430Overseas - European community 687 1,075Overseas - Non European community 27 138 __________ __________ 25,941 27,643 __________ __________ b) Classes of business Year ended 30 July 2005 Retail Wholesale Third party Sourcing Group £ £ £ £ £'000 £'000 £'000 £'000Turnover 13,871 7,610 4,460 25,941Cost of sales (5,894) (5,417) (4,130) (15,441) __________ __________ __________ __________Gross profit 7,977 2,193 330 10,500 __________ __________ __________ __________Distribution costs - retail (7,440) (7,440)Common costs (3,396) __________Operating loss (336)Net interest payable (124) __________Loss before taxation (460) __________ Year ended 31 July 2004 Retail Wholesale Third party Group Sourcing £ £ £ £ £'000 £'000 £'000 £'000Turnover 15,368 7,202 5,073 27,643Cost of sales (6,460) (4,978) (4,697) (16,135) __________ __________ __________ __________Gross profit 8,908 2,224 376 11,508 __________ __________ __________ __________Distribution costs - retail (8,499) (8,499)Common costs (2,820) __________Operating profit 189Net interest payable (104) __________Profit before taxation 85 __________All other common costs have not been apportioned as this would be misleading. 3. Earnings per ordinary share The calculations of earnings per share is based on the earnings for thefinancial period attributable to equity shareholders and the weighted averagenumber of ordinary shares as follows: Weighted average number of shares: 2005 2004 Number NumberFor basic earnings per share 66,171,471 65,602,836 __________ __________For diluted earnings per share 67,624,651 69,304,719 __________ __________ There is no potential dilution in the year under review. Basic/diluted 2005 2004 £'000 £'000(Loss) / profit for the financial year (460) 85Less taxation (22) (22) __________ __________ (482) 63 __________ __________ 4. Reconciliation of operating profit to operating cash flows Audited Audited 2005 2004 £'000 £'000Operating (loss) / profit (336) 189Depreciation charges 475 697Amortisation of goodwill 3 3Profit on disposal of assets (172) (4)Decrease/(increase) in stock 938 (455)Decrease/(increase) in debtors 571 (587)(Decrease)/increase in creditors (1,568) 711 __________ __________Net cash (outflow) / inflow from operating activities (89) 554 __________ __________ 5. Reconciliation of net cash flow to net debt Audited Audited 2005 2004 £'000 £'000(Decrease) / increase in cash in the year (848) 449Cash outflow/(inflow) from decrease/(increase) in debt and lease financing 215 (745) __________ __________Change in net debt resulting from cash flows (633) (296)New finance leases - 56 __________ __________Movement in net debt in year (633) (240)Net debt at 1 August 2004 (1,356) (1,116) __________ __________Net debt at 30 July 2005 (1,989) (1,356) __________ __________ 6. Annual General Meeting The Annual General Meeting will be held at 29 Cloth Fair, London EC1A 7NN on 20December 2005 at 12 noon. 7. Report and Accounts The annual report and accounts for the year ended 30 July 2005 is being sent toshareholders and will be available, free of charge, from the registered officeof the Company at 20 Little Portland Street, London W1W 8AA. This information is provided by RNS The company news service from the London Stock Exchange