31 Mar 2009 07:00
31st March, 2009
LAURA ASHLEY HOLDINGS plc
("the Company")
Laura Ashley today announces results for the 53 weeks to 31 January 2009 showing resilient performance and top-line growth in a challenging economic environment.
Financial Highlights
Total Group sales up 9.6% to £260.5m. (2008: £237.6m)
UK retail sales up 10.6% to £207.0m, like-for-like sales down 6.2%
UK retail Fashion sales increased by 24%, like-for-like sales up 3.6%
Gross margin declined by 2 percentage points as a result of promotional activity and the weakness of Sterling
Profit before tax, excluding gains from exceptional items, of £9.6m (2008: £15.8m). (Non-recurring profit of £0.6m (2008: profit £4.0m))
Healthy Balance Sheet with £7.9m net cash as at the year end
Final dividend proposed of 0.75 pence per share making the total dividend of 1.25 pence per share for the year (2008: 2.0 pence per share)
Operational Summary
Ongoing store realignment programme: position at 31 January 2009: 228 stores (870,000 sq. ft) (2008: 208 stores (751,000 sq. ft)
Ongoing focus on overseas franchise growth as part of long-term international strategy (currently 223 franchised stores in 25 countries worldwide)
Capital expenditure: £9.0m invested in the business (2008: £10.9m)
Online sales up 65.4%
Continued operational focus on maximising efficiency of selling space, supplier contracts and sourcing
Commenting on the results, Tan Sri Dr. K P Khoo, Chairman, said:
"In a period of extraordinary economic difficulties I am pleased that Laura Ashley has remained resilient. The strength of our brand, distinctiveness of our products and loyalty of customers are critical factors which will continue to enhance our efforts to grow both in the UK and internationally.
Continuing targeted promotional activity during the first seven weeks of this year has seen an increase in total retail sales and like-for-like improvement and through this period margins have remained flat.
We are committed to our three key strategic areas of focus: improved product offering, store realignment, increased productivity through operational efficiencies, and these have added value through the year. The improvements to our store portfolio through our realignment programme will continue in 2009, albeit at a slower rate."
Enquiries:
| Laura Ashley Holdings plc | 020 7404 5959 (31 March) |
| Lillian Tan, CEO Rebecca Navarednam, CFO | 020 7880 5100 (thereafter) |
| Brunswick | 020 7404 5959 |
| Tom Buchanan / James Olley |
Overview
For the 53 weeks to 31 January 2009, profit before tax was £10.2m (2008: £19.8m) Excluding gains from exceptional items, profit was £9.6m compared to £15.8m the previous year.
Total group sales increased by £22.9m (9.6%) to £260.5m compared to the previous year of £237.6m. The improved total sales position was primarily due to the increase in UK store and Internet sales. For the year ended 31 January 2009, total UK store sales were up 10.6% to £207.0m (LFL -6.2%) whilst Internet sales grew by 65.4% to £17.0 m. Total UK store sales growth has primarily been driven by our store realignment programme which has seen an increase in total selling space of 119,000 square feet (15.9%), thereby bringing our total selling space to 870,000 square feet.
The promotional activity we undertook in the second half of the financial year (as a response to the increasingly tough trading environment) coupled with the weakness of Sterling, has contributed to the overall gross margin declining by 2 percentage points against last year. With the addition of new stores, operating expenses (excluding the impact of non-recurring items) have increased by 11.4% to £108.4m (2008: £97.3m).
We have focused for some years on maximising efficiencies across our business and this process has continued with particular emphasis on maximising the potential from our store portfolio. Our store realignment programme continued during the period as we sought to ensure our stores are best located and better serve our product and customers. The improvements to our store portfolio through our realignment programme will continue in 2009, albeit at a slower rate. Toward the end of the year we developed and are now introducing our new 'Space-Flex' programme, a focused strategy for utilising selling space in a flexible and efficient way.
Consistent with our ongoing cost control exercises we have in particular, amongst others, reviewed supplier contracts and sourcing arrangements throughout the year.
Taking into consideration the current economic climate, the Board has recommended a final dividend of 0.75 pence per share. When taken with the interim dividend of 0.5 pence per share (paid on 7 November 2008), the total dividend for the year will be 1.25 pence per share (25% of nominal value) (2008: 2.0 pence per share).
Product
The UK business is split into four main categories. The relative split of UK sales is as follows: Home Accessories 29%, Furniture 26%, Decorating 23% and Fashion 22%. The improvement of Fashion in such a challenging and volatile market is reflected in the increase of Fashion's proportion of the UK business in comparison to last year.
Home Accessories
The Home Accessories product category includes lighting, gift, bed linen, rugs, throws and cushions, and epitomises Laura Ashley's focus on distinctive, inspirational and quality product offerings.
During the year ended 31 January 2009, sales of Home Accessories increased by 7.7% (LFL -6.0%). An extended Christmas offer drove the Home Accessories category as did the continued development of our mirrored products and casual dining offer. The introduction of new colour palettes largely contributed towards the success of bed linen; the encouraging growth seen in the new Indulgence bath range and the successful extension of Children's products. In the current economic environment, this product category responds to our customers wishing to refresh their homes on an affordable budget. We continue to innovate by developing distinctive products which appeal to our customer base.
Furniture
The Furniture product category includes upholstered furniture, beds and cabinet furniture.
The current economic downturn, falling house prices and rising unemployment have all adversely impacted Furniture sales to a much greater extent than the other Home product categories as consumers continue to restrain or delay spending on such big ticket items. In the second half, aggressive promotional activity persisted within the industry in response to the challenging environment.
In such an environment it was not unexpected that total Furniture sales dropped by 3.5% (LFL -19%) for the year ended 31 January 2009. Upholstery sales were flat year on year despite the adverse impact of leather upholstery, which dropped by 33% whilst Cabinet sales dropped by 8%. However, Internet sales on Furniture continued to be strong with a growth of 33% year on year.
As a continuation of our commitment to our customers on our distinctive product offering, we continue to drive innovation in our Upholstery products with the introduction of new colours, textures and sofa shapes. The extension of some of our best selling Cabinet ranges and new inspirational mirrors have been welcomed by our customers.
Decorating
This category includes curtains, fabric, paint, decorative accessories and wall coverings.
During the year ended 31 January 2009, Decorating sales were up 6.5% (LFL -7.0%) reflecting our belief that the growing trend (as seen in Home Accessories) for customers in the current economic climate is to seek affordable ways to re-decorate their homes. Innovation of our product range continues to be a key driver of sales.
Building on our continued strength and success in wallpaper, we have invested in a new wallpaper printing machine. This machine will enable us to increase production capacity and extend the range and designs we can offer which will provide us the potential to increase sales.
Fashion
For the year ended 31 January 2009, UK retail Fashion sales increased by 24% (LFL +3.6%) in a very difficult consumer environment. The increase is a result of the added space from our new stores and the success of the product range. The general consumer downturn has necessitated additional markdown activity; however, we have contained this to targeted promotional strategies that are planned on a seasonal basis.
The highlights for the year were cardigans which saw a second successive year of growth; jumpers which were particularly successful in spring and dresses which were driven by prints and skirts on proven shape/fabric combinations which worked well in autumn. In the current economic climate, occasion-wear products suffered. Our best ranges for the year were smart-casual, bold with a tight colour palette and mainly using proven shapes. Our collections also combine 'wear now' styles with seasonal 'must haves'.
UK Operations
Retail Stores
At 31 January 2009, the property portfolio in the UK comprised 228 stores. We have four main store types: 126 mixed product stores (selling all product categories), 71 Home stores (selling Home products only), 28 Home concession stores and 3 Clearance Outlets.
We are committed to our store realignment programme in 2009 and, as previously, it will continue to be subject to our stringent property selection criteria. The improvements to the store portfolio will be taken at a more considered pace in 2009 and, additionally, through our new 'Space-Flex' programme. This new programme builds on our strategy of maximising the potential of selling space in our stores and we believe the benefits of the renewed focus on utilisation and efficiency of selling space will be seen in the current year.
During the year ended 31 January 2009, we opened 29 new stores totalling 143,000 square feet and closed 9 stores totalling 24,000 square feet. As a result, total selling space increased by 15.9% to 870,000 square feet.
During the year, we introduced our first branded Laura Ashley Outlet Stores. These three Clearance Outlets have proven to be successful in clearing prior season stocks to achieve cleaner stock positions.
Direct Business
Our E-Commerce and Mail Order channels remain a vital part of our multi-channel retail strategy, now representing 12% of total UK retail sales. Total E-commerce and Mail Order sales were up 17% on last year. Within this figure and reflecting the trend we have seen over the last 5 years, E-Commerce sales were up 65.4%, more than compensating for an ongoing market decline in Mail Order purchasing.
International Operations
Franchising
Our international franchising operations continue to be an important part of the Laura Ashley business and, as at 31 January 2009, there were 223 (2008: 204) franchised stores in 25 (2008: 27) countries worldwide. We believe in the long-term benefits of the international franchise network and as evidence of that, have negotiated with our Japanese partner to commit to growing the Laura Ashley presence in Asia over the next 5 years. It is intended that 80 stores will eventually be opened in China, with the first four stores having opened as at 31 January 2009, as scheduled. Additionally, we have signed a new franchise agreement with a Middle Eastern partner to open 20 stores over the next 5 years.
We will continue to expand our franchise business into more territories with suitable partners over the next 2 years including territories such as India, Russia, Indonesia, South Africa, Eastern Europe and South America.
In the year ended 31 January 2009, Franchise revenues have remained flat at £20.3m as our partners, particularly in Europe, have also been affected by the global economic downturn.
Licensing
In the year ended 31 January 2009, Licensing income decreased by 2.9% to £3.3m due mainly to the termination of a licensee contract following a review of all UK licensee businesses.
Dividend
The Board has recommended a final dividend of 0.75 pence per share. When taken with the interim dividend of 0.5 pence per share paid on 7 November 2008, this takes the total dividend for the year to 1.25 pence per share (2008: 2.0 pence per share). This dividend will be proposed at the AGM on 3 June 2009 and subject to shareholder approval, will be paid on 20 August 2009 to all shareholders on the register at the close of business on 8 May 2009.
The Board will continue to review dividend payments on the basis of annual profitability, taking into account the impact of the current economic downturn on the business.
Current trading
For the 7 weeks to 21 March 2009, total retail sales increased by 4%. For the same period, like-for-like retail sales improved by 5.3% due to continuing targeted promotional activity. However, margins have remained flat.
The year 2008 witnessed a period of extraordinary economic turbulence and we expect the effects of that to impact the general consumer outlook over the coming year. However, Laura Ashley remains confident that, with our strong brand and compelling product offering combined with our focus on maximising efficiencies, we will be well placed to respond to the challenges ahead.
Store portfolio realignment in the UK will be at a more considered pace in 2009, but we will continue to develop our business internationally through the strong partnerships we have built up, particularly in Asia.
| Group Income Statement | |||||
| for the financial year ended 31 January 2009 | |||||
| 2009 | 2008 | ||||
|
| Note |
| £m |
| £m |
| Revenue | 260.5 | 237.6 | |||
| Cost of sales |
|
| (142.2) |
| (125.8) |
| Gross profit | 118.3 | 111.8 | |||
| Operating expenses |
|
| (107.8) |
| (93.3) |
| Profit from operations | 10.5 | 18.5 | |||
| Share of operating (loss)/profit of associate | (0.5) | 0.3 | |||
| Dividend received | 0.1 | - | |||
| Finance income | 0.2 | 1.0 | |||
| Finance costs |
|
| (0.1) |
| - |
| Profit before taxation | 10.2 | 19.8 | |||
| Taxation |
|
| (3.1) |
| (5.8) |
| Profit for the financial year |
|
| 7.1 |
| 14.0 |
| Earnings per share - basic and diluted | 2 | 0.97p | 1.90p |
| Group Balance Sheet | |||||
| As at 31 January 2009 | |||||
| 2009 | 2008 | ||||
|
|
|
| £m |
| £m |
| Non-current assets | |||||
| Property, plant and equipment | 39.4 | 35.4 | |||
| Deferred tax asset | 1.8 | 1.8 | |||
| Investment in associate | 4.7 | 3.6 | |||
| Investment in subsidiaries | - | - | |||
| Investment in quoted shares | 1.5 | 2.1 | |||
| 47.4 | 42.9 | ||||
| Current assets | |||||
| Inventories | 53.1 | 39.5 | |||
| Trade and other receivables | 20.3 | 26.7 | |||
| Cash and cash equivalents | 7.9 | 29.2 | |||
| 81.3 | 95.4 | ||||
| Total assets |
|
| 128.7 |
| 138.3 |
| Current liabilities | |||||
| Current tax liabilities | 0.5 | (1.2) | |||
| Trade and other payables | 69.0 | 69.3 | |||
| 69.5 | 68.1 | ||||
| Non-current liabilities | |||||
| Retirement benefit liabilities | 6.5 | 6.5 | |||
| Deferred tax liabilities | 0.4 | 1.4 | |||
| Provisions and other liabilities | 0.3 | 0.4 | |||
| 7.2 | 8.3 | ||||
| Total liabilities |
|
| 76.7 |
| 76.4 |
|
|
|
|
|
|
|
| Net assets |
|
| 52.0 |
| 61.9 |
| Equity | |||||
| Share capital | 37.3 | 37.3 | |||
| Share premium | 86.4 | 86.4 | |||
| Own shares | (0.8) | (0.8) | |||
| Retained earnings | (70.9) | (61.0) | |||
| Total equity |
|
| 52.0 |
| 61.9 |
| Statements of Changes in Shareholders' Equity | |||||
| As at 31 January 2009 | |||||
| GROUP | |||||
| Share | Share | Own | Retained | Total | |
| Capital | Premium | Shares | Earnings | Equity | |
|
| £m | £m | £m | £m | £m |
| Balance as at 27 January 2007 | 37.3 | 86.4 | (0.8) | (61.2) | 61.7 |
| Profit for the financial year ended 26 January 2008 | - | - | - | 14.0 | 14.0 |
| Dividends paid | - | - | - | (11.1) | (11.1) |
| Exchange differences on translation of investments | - | - | - | 0.1 | 0.1 |
| Purchase of own shares | - | - | - | (2.2) | (2.2) |
| Unrealised investment loss | - | - | - | (0.6) | (0.6) |
| Balance as at 26 January 2008 | 37.3 | 86.4 | (0.8) | (61.0) | 61.9 |
| Profit for the financial year ended 31 January 2009 | - | - | - | 7.1 | 7.1 |
| Dividends paid | - | - | - | (14.6) | (14.6) |
| Exchange differences on translation of investments | - | - | - | 1.7 | 1.7 |
| Purchase of own shares | - | - | - | (1.4) | (1.4) |
| Unrealised investment loss | - | - | - | (2.7) | (2.7) |
| Balance as at 31 January 2009 | 37.3 | 86.4 | (0.8) | (70.9) | 52.0 |
| Cash Flow Statements | ||||
| As at 31 January 2009 | ||||
| 2009 | 2008 | |||
|
| Notes | £m |
| £m |
| Operating activities |
| |||
| Cash generated from operations | 3 | 7.7 | 27.2 | |
| Corporation tax paid | (2.4) | (6.2) | ||
| Dividends paid | (14.6) | (11.1) | ||
| Dividends received | 0.1 | - | ||
| Finance income | 0.2 | 1.0 | ||
| Finance cost | (0.1) | - | ||
| (9.1) | 10.9 | |||
| Investing activities | ||||
| Purchase of property, plant and equipment | (9.0) | (10.9) | ||
| Sale of property, plant and equipment | 0.2 | 1.9 | ||
| Purchase of investment | (2.1) | (2.1) | ||
| Net cash received from associate | 0.1 | 0.1 | ||
| (10.8) | (11.0) | |||
| Financing activities | ||||
| Repurchase of own shares | (1.4) | (2.2) | ||
| Payment of finance lease obligations | - | (0.2) | ||
|
|
| (1.4) |
| (2.4) |
| Net (decrease)/increase in cash and cash equivalents | 4 | (21.3) |
| (2.5) |
| Reconciliation of Net Cash Flow to Movement in Net Funds | ||||
| For the financial year ended 31 January 2009 | ||||
| 2009 | 2008 | |||
|
| Note | £m |
| £m |
| Net (decrease)/increase in cash and cash equivalents | (21.3) | (2.5) | ||
| Cash inflow from changes in loans and leases |
| - |
| 0.2 |
| Change in net funds resulting from cash flows | (21.3) | (2.3) | ||
| Net funds at the beginning of the financial year | 29.2 | 31.5 | ||
| Net funds at the end of the financial year | 4 | 7.9 |
| 29.2 |
NOTES
Basis of preparation
Consolidated financial statements and accounting policies
The preliminary announcement for the year ended 31 January 2009 has been prepared in accordance with International Accounting Standards and International Financial Reporting Standards (collectively "IFRSs") as adopted by the European Union (EU) at 31 January 2009. Details of the accounting policies applied are those set out in Laura Ashley Holdings Plc's Annual Report 2009. The annual financial information presented in this preliminary announcement for the year ended 31 January 2009 is based on, and is consistent with, that in the Group's audited financial statements for the year ended 31 January 2009, and those financial statements will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditor's report on those financial statements is unqualified and does not contain any statement under Section 237(2) or (3) of the Companies Act 1985.
These consolidated financial statements have been prepared using the historical cost convention, modified for certain items carried at fair value, as stated in the accounting policies.
Statutory accounts
Information in this preliminary announcement does not constitute statutory accounts of Laura Ashley Holdings Plc and its subsidiaries ("the Group") within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 26 January 2008 have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985.
The Group's Annual Report for the year ended 31 January 2009 will be made available in due course and will be available for viewing and download from the Group's website at www.lauraashley.com. The Annual Report will be circulated in printed form to shareholders in early May 2009.
| 2. Earnings per Share | ||||
| Earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares during the year (excluding treasury shares). | ||||
|
|
|
| 2009 | 2008 |
| Basic and diluted earnings attributable to ordinary shareholders (£m) | 7.1 | 14.0 | ||
| Weighted average number of ordinary shares ('000) - basic and diluted | 729,408 | 736,224 | ||
| Earnings per share |
|
| 0.97p | 1.90p |
| 3. Reconciliation of profit/(loss) from operations to net cash inflow/(outflow) from operating activities | ||||
| 2009 | 2008 | |||
|
|
|
| £m | £m |
| Profit/(loss) from operations | 10.5 | 18.5 | ||
| Depreciation charge | 5.5 | 4.3 | ||
| Profit on sale of property, plant and equipment | (0.2) | (1.7) | ||
| Exchange movement on property, plant and equipment | (0.5) | - | ||
| Increase in inventories | (13.6) | (1.8) | ||
| Decrease/(increase) in receivables | 6.4 | (5.9) | ||
| (Decrease)/increase in payables | (0.3) | 19.3 | ||
| Movement in provisions | (0.1) | (5.5) | ||
| Net cash inflow/(outflow) from operating activities |
|
| 7.7 | 27.2 |
| 4. Analysis of net funds | ||||
| Group | ||||
| At 26 Jan | Cash flow | At 31 Jan | ||
| 2008 | 2009 | |||
|
|
| £m | £m | £m |
| Cash and cash equivalents |
| 29.2 | (21.3) | 7.9 |