ALY.L Regulatory News (ALY)

12 Apr 2006 07:01

Ashley (Laura) Hldgs PLC12 April 2006 LAURA ASHLEY HOLDINGS plc ("the Company") Results for the 52 weeks to 28 January 2006 Summary • Profit before tax up 38.6% to £6.1m (2005: £4.4m) * • Excluding the benefit of one-off property gains, profit before tax up 70.6% to £5.8m (2005:£3.4m) * • As anticipated, total Group sales down 11.6% to £211.1m primarily due to the realignment of the fashion offering • Strong balance sheet with a cash surplus • Margin rates maintained • Cost management and increased productivity across the business • New format UK stores trading successfully as the reconfiguration of the store portfolio continues • First and final dividend proposed of 10% of nominal value (0.5 pence per share) * Comparative figures for 2005 have been restated in accordance with IFRS. Theonly significant change to the figures was caused by the implementation of IAS19. Commenting on the results, Lillian Tan, Chief Executive Officer, said: "Laura Ashley's improved profitability in 2005 is the result of management'sfocus on increasing efficiency, the store realignment programme and the ongoingcost controls in all areas of the business, whilst maintaining margins in adifficult retail environment. Our new format, Home stores, are performing well and we are continuing to changeour store portfolio in that direction. Although the retail market remainschallenging, we believe our enhanced product offering, increased productivityand new format store opening programme will enable us to increase top line salesin 2006." Enquiries:Laura Ashley Holdings plc 020 7404 5959 (12 April)David Cook, Chief Financial Officer 020 7880 5100 (thereafter) Brunswick 020 7404 5959Tom BuchananJames Olley Overview The financial results of the Group have shown continued improvement over thelast year, (and in fact over the last 3 years), driven by efficiencyimprovements and cost savings. For the 52 weeks to 28 January 2006, we arepleased to report a profit before tax of £6.1 million, up 38.6% compared to aprofit in the previous year of £4.4 million. Included within the reported £6.1million profit is £0.3 million of one-off property gains (2005: £1.0 million).Excluding one-off property gains, profit before tax is 70.6% higher at £5.8m. As anticipated, total Group sales for the year ended 28 January 2006 were down£27.8 million (11.6%) to £211.1 million. The majority of this reduction wasaccounted for by lower UK sales, primarily due to the planned reduction of UKFashion sales. As a result, for the year ended 28 January 2006, total UK storesales were down 12.8% to £158.3 million (LFL -6.6%). Direct and indirect costs have been reduced by 11.5% (£11.1 million) as a resultof changes in the UK store portfolio, volume changes and other UK overheadsavings. Due to increasing cost pressures, we will continue to focus on drivinggreater efficiencies in all areas of the business, particularly on all aspectsof the supply chain. Product The UK business is split into four main categories. The relative split of UKsales is as follows: Furniture 31%, Home Accessories 29%, Decorating 23% andFashion 17%. Furniture The Furniture product category includes upholstered furniture, beds and cabinetfurniture. During the year ended 28 January 2006, Furniture sales were up 0.2% (LFL flat). A weaker consumer environment affected sales in the first half of the year.However, we saw a strong recovery through the key final quarter trading period.During the year, successes were seen in upholstery from new fabric ranges. Weexpect to see further improvement from the expansion of the range of fabric andleather products. In cabinet furniture, our award winning mirrored furnitureranges continued to perform well. We were also pleased with the introduction ofnew painted products for the bedroom. Home Accessories The Home Accessories product category includes lighting, gift, bed linen, rugs,throws and cushions. During the year ended 28 January 2006, sales of Home Accessories were down 1.4% (LFL -1.0%). Sales in this category have been mixed. However, continued growth has beenachieved in glass and mirrored lighting. We have expanded the casual diningrange with positive results from both china and accessory products. Decorating This category includes curtains, fabric, paint, accessories and wall coverings.During the year ended 28 January 2006, Decorating sales were down 4.4% (LFL-3.0%), reflecting the difficult market. Sales continued to be strong on fashionable products, such as statement printwallpaper, silk fabrics, ready-made curtains and the more decorative curtainaccessory products. Significant margin improvements were achieved through there-sourcing of ready-made curtains overseas. Fashion As previously announced, our strategy in Fashion was to reduce the number ofranges and the selling space during a period of consolidation, whilst improvingthe product offering. As a result, Fashion represented approximately 17% oftotal retail sales in the year, down from 22% last year. Selling space wasreduced by 10% and like for like sales were down 25%. In the second half, toimprove the profitability of the Fashion category in this reduced space, westrengthened our central product team significantly and increased the stockdensities by approximately 30%. These actions are already showing someencouraging trends in the last quarter and in current trading. UK Operations Retail Stores At 28 January 2006, the property portfolio in the UK comprised 180 stores. Wehave three main store types: 78 mixed product stores (selling all productcategories), 58 Home stores (selling the full range of Home products) and 44Home concession stores. During the year, significant changes were made to the UK store portfolio todrive efficiencies by identifying more cost effective locations. This hasresulted in the opening of 10 new Home stores and the addition of 40,000 sq. ft.of selling space. We intend to open substantially more than this in theforthcoming year subject to our normal property selection criteria. As part ofthe process of realigning our property portfolio, 14 stores (42,000 sq. ft.)were closed during the year. Mail Order and E-Commerce Sales through our Mail Order and E-Commerce channels now represent 13% of ourtotal UK retail business (2005: 11%) and are a vital part of our multi-channelretail strategy. Total Mail Order and E-commerce sales were flat on last year.Within this figure, Mail Order sales were down 10.2% and E-Commerce sales wereup 45.8%. This reflects the general market trend towards E-Commerce at theexpense of more traditional direct sales channels. The impact of our decision toreduce the Fashion category and focus on Home Furnishings has resulted in anincrease in total direct Home Furnishings sales of 6.0%. At the end of March 2006, we re-launched our web site: www.lauraashley.com andcontinue to invest in the development of this important distribution channel. Wenow have 328,000 registered E-Commerce customers (2005: 240,000). The continuedinvestment in our multi-channel approach affords us ever greater opportunitiesto communicate with our customers. International Operations Franchising In the year ended 28 January 2006, Franchise revenues decreased by 14.7% to£22.1 million. Fashion accounted for the loss in sales, in line with our reducedoffer, whilst Franchise Home sales were flat. The Autumn/Winter ranges were wellreceived and we expect sales in this category to recover this year. Fashion nowrepresents approximately 60% of total franchise sales (2005: 67%). As a resultof the relatively low margin on the sales that were lost and other cost savings,the overall impact on net profit was negligible. There are currently 210franchised stores in 28 countries worldwide. Licensing In the year ended 28 January 2006, Licensing income decreased by 7.1% to £3.9million. We have seen a slight decrease in revenues from North America, whilstLicensing revenues from Asia and Europe have remained largely flat. During theyear, we have signed various new licence agreements, including garden furniture,stationery and ladies handbags. Dividend Over the last three years, we have seen steadily increasing profits and astrengthening balance sheet. The business is generating cash and more funds willbe reinvested into the operation. The Board is of the opinion that the companyis now in a position to pay a dividend, the first since 1997, and believes thatthis represents a major milestone in the recovery of the business. Therefore,the Board recommends the payment of a first and final dividend of 10% of nominalvalue (0.5 pence per share). This dividend will be paid, subject to shareholderapproval, on 14 July 2006 to all shareholders on the register at the close ofbusiness on 30 June 2006. The Board will continue to review dividend payments onthe basis of annual profitability. Current trading Like-for-like trading in the 10 weeks to 8 April 2006 shows UK retail sales up11.2% on last year, predominantly due to the improved performance of the newlyrealigned Fashion offering. Our Home Furnishings category remains resilient,despite difficult UK retail conditions. Our focus for 2006 will be top linesales growth, margin improvement and cost management. Group Income StatementFor the financial year ended 28 January 2006 2006 2005 Notes £m £m---------------------------------------- ------- --------- ----------Revenue 1 211.1 238.9Cost of sales (120.5) (137.9)---------------------------------------- ------- --------- ----------Gross profit 90.6 101.0Operating expenses 2 (85.2) (96.3)---------------------------------------- ------- --------- ----------Profit from operations 5.4 4.7Share of operating profit of associate 0.3 0.4Net finance income/(cost) 0.4 (0.7)---------------------------------------- ------- --------- ----------Profit before taxation 6.1 4.4Taxation 3 (1.9) (1.3)---------------------------------------- ------- --------- ----------Profit for the financial year 4.2 3.1---------------------------------------- ------- --------- ----------Earnings per share - basic and diluted 4 0.56p 0.42p The Group's results shown above are derived entirely from continuing operations. The comparative Income Statement has been restated to account for the impact ofInternational Financial Reporting Standards ("IFRS"). Balance SheetsAs at 28 January 2006 Group Company ------------------ --------------------- 2006 2005 2006 2005 £m £m £m £m------------------------------- ------ ------ ------ ------Non-current assets ------ ------ ------ ------Property, plant and equipment 29.1 31.9 3.2 3.5Deferred tax asset 3.9 3.9 - -Investment in associate 3.4 3.5 0.8 0.8Investment in subsidiaries - - 99.2 98.5 ------ ------ ------ ------ 36.4 39.3 103.2 102.8Current assets ------ ------ ------ ------Inventories 35.0 34.9 - -Trade and other receivables 22.7 23.1 20.0 9.6Cash and cash equivalents 22.1 16.1 8.6 8.4 ------ ------ ------ ------ 79.8 74.1 28.6 18.0 ------ ------ ------ ------Total assets 116.2 113.4 131.8 120.8 ------ ------ ------ ------ Current liabilities ------ ------ ------ ------Current tax liabilities 1.9 2.0 - -Bank borrowings - 0.9 - -Obligations under finance leases 0.3 0.3 0.3 0.3Trade and other payables 41.3 36.7 2.5 2.6 ------ ------ ------ ------ 43.5 39.9 2.8 2.9Non-current liabilities ------ ------ ------ ------Bank borrowings - 4.6 - -Obligations under finance leases 0.2 0.5 0.2 0.5Retirement benefit liabilities 13.3 13.3 - -Provisions and other liabilities 0.2 0.2 0.5 0.3 ------ ------ ------ ------ 13.7 18.6 0.7 0.8 ------ ------ ------ ------Total liabilities 57.2 58.5 3.5 3.7 ------ ------ ------ ------Net assets 59.0 54.9 128.3 117.1 ------ ------ ------ ------EquityShare capital 37.3 37.3 37.3 37.3Share premium 86.4 86.4 86.4 86.4Own shares (0.8) (0.8) (0.8) (0.8)Retained earnings (63.9) (68.0) 5.4 (5.8) ------ ------ ------ ------Total Equity 59.0 54.9 128.3 117.1 ------ ------ ------ ------ The comparative Balance Sheet for the Group has been restated to account for theimpact of IFRS. Statement of Changes in Shareholders' EquityFor the financial year ended 28 January 2006 Share Share Own Retained Total Capital Premium Shares Earnings Equity £m £m £m £m £m------------------------------ ------- ------- ------ ------- -------Balance as at 1 February 2004 37.3 86.4 (0.8) (62.0) 60.9Adoption of IAS 19 - - - (9.0) (9.0)------------------------------ ------- ------- ------ ------- -------Restated 37.3 86.4 (0.8) (71.0) 51.9Profit for the financial yearended 29 January 2005 - - - 3.5 3.5Adoption of IAS 19 (0.4) (0.4)Exchange differences ontranslation of investments - - - (0.1) (0.1)------------------------------ ------- ------- ------ ------- -------Balance as at 29 January 2005 37.3 86.4 (0.8) (68.0) 54.9Profit for the financial yearended 28 January 2006 - - - 4.2 4.2Exchange differences ontranslation of investments - - - (0.1) (0.1)------------------------------ ------- ------- ------ ------- -------Balance as at 28 January 2006 37.3 86.4 (0.8) (63.9) 59.0------------------------------ ------- ------- ------ ------- ------- Group Cash Flow StatementFor the financial year ended 28 January 2006 2006 2005 Notes £m £m------------------------------------------------ ------ ------ ------Operating activities ------ ------Cash generated from operations 6 16.0 7.2Corporation tax paid (1.8) (0.8)Net finance income/(cost) 0.3 (0.3) ------ ------ 14.5 6.1Investing activities ------ ------Purchase of property, plant and equipment (3.3) (3.8)Sale of property, plant and equipment 0.5 1.6Net cash received from associate 0.1 0.1 ------ ------ (2.7) (2.1)Financing activities ------ ------Loan repaid (5.5) (1.8)Payment of finance lease obligations (0.3) (1.2) ------ ------ (5.8) (3.0)------------------------------------------------ ------ ------ ------Net increase in cash and cash equivalents 6.0 1.0------------------------------------------------ ------ ------ ------ Reconciliation of Net Cash Flow to Movement in Net Funds For the financial year ended 28 January 2006 2006 2005 £m £m------------------------------------------------ ------ ------ ------Net increase in cash and cash equivalents 6.0 1.0Cash inflow from changes in loans and leases 5.8 3.0------------------------------------------------ ------ ------ ------Change in net funds resulting from cash flows 11.8 4.0New finance leases - (1.0)------------------------------------------------ ------ ------ ------Change in net funds during the financial year 11.8 3.0Net funds at the beginning of the financial year 9.8 6.8------------------------------------------------ ------ ------ ------Net funds at the end of the financial year 7 21.6 9.8------------------------------------------------ ------ ------ ------ 1 Segmental analysis Revenue Net assets Revenue Net assets 2006 2006 2005 2005 £m £m £m £m--------------------------- -------- -------- ------- --------Retail 183.4 42.9 206.5 47.4Non-retail 27.7 16.0 32.4 7.5--------------------------- -------- -------- ------- -------- 211.1 58.9 238.9 54.9--------------------------- -------- -------- ------- --------Profit before taxationBranch contributionRetail 18.0 18.5Non-retail 8.3 9.0--------------------------- -------- -------- ------- -------- 26.3 27.5Indirect overhead costs (20.9) (22.8)--------------------------- -------- -------- ------- --------Profit from operations 5.4 4.7 Share of profit of associate 0.3 0.4Net finance income/(cost) 0.4 (0.7)--------------------------- -------- -------- ------- --------Profit before taxation 6.1 4.4--------------------------- -------- -------- ------- -------- Retail revenue reflects sales through Laura Ashley's managed stores, Mail Orderand E-Commerce. Non-retail revenue includes Licensing, Franchising and Manufacturing. Branch contribution is stated after deducting direct operating expenses, buying,marketing and administrative costs. 2006 2005 £m £m------------------------------------------ -------- --------Revenue by destination UK & Ireland 183.4 207.2Continental Europe 6.8 8.0Other 20.9 23.7------------------------------------------ -------- -------- 211.1 238.9------------------------------------------ -------- -------- 2 Operating expenses 2006 2005 £m £m------------------------------------------ -------- --------Distribution costs (69.1) (76.1)Administrative expenses (16.1) (20.2)------------------------------------------ -------- --------Operating expenses (85.2) (96.3)------------------------------------------ -------- -------- 3 Taxation 2006 2005 £m £m------------------------------------------ -------- --------UK corporation taxCurrent year 1.5 2.2Prior years - (1.1)------------------------------------------ -------- -------- 1.5 1.1Relief for overseas tax - (0.1)------------------------------------------ -------- -------- 1.5 1.0Overseas tax 0.3 0.1Tax charge in associate 0.1 0.2------------------------------------------ -------- --------Taxation on profit on ordinary activities 1.9 1.3------------------------------------------ -------- -------- 4 Earnings per share 2006 2005Basic and diluted earnings attributable to ordinaryshareholders (£m) 4.2 3.1 -------- --------Weighted average number of ordinary shares ('000) - basic and diluted 743,547 743,547 -------- --------Earnings per share 0.56p 0.42p -------- -------- 5 Principal exchange rates 2006 2005 Average Period end Average Period end----------------- ---------- --------- --------- ---------US Dollar 1.81 1.78 1.83 1.88Euro 1.46 1.46 1.47 1.45Japanese Yen 201 207 198 195----------------- ---------- --------- --------- --------- 6 Reconciliation of profit from operations to net cash inflow from operatingactivities 2006 2005 £m £m------------------------------------------ -------- --------Profit from operations 5.4 4.7Depreciation charge 6.1 6.3Profit on sale of property, plant and equipment (0.3) (1.0)(Increase)/decrease in inventories (0.1) 6.9Decrease/(increase) in receivables 0.4 (2.2)Increase/(decrease) in payables 4.5 (6.6)Movement on provisions - (0.8)Net cash outflow in respect of restructuring - (0.1)------------------------------------------ -------- --------Net cash inflow from operating activities 16.0 7.2------------------------------------------ -------- -------- 7 Analysis of net funds At 30 Jan Cash flow At 28 Jan 2005 2006 £m £m £m------------------------------------ --------- --------- ---------Cash and cash equivalents 16.1 6.0 22.1Bank borrowings:Debt due within one year (0.9) 0.9 -Debt due after more than one year (4.6) 4.6 ------------------------------------- --------- --------- --------- 10.6 11.5 22.1Obligations under finance leases (0.8) 0.3 (0.5)------------------------------------ --------- --------- ---------Net funds 9.8 11.8 21.6------------------------------------ --------- --------- --------- This information is provided by RNS The company news service from the London Stock Exchange