31 Mar 2011 07:00
("the Company")
Laura Ashley announces results for the 52 weeks to 29 January 2011 showing record profits.
Summary
·; Total Group sales up 6.2% to £285.0m (2010: £268.4m)
·; Total UK retail sales up 5.3% to £256.6m, like-for-like sales up 5.6%
·; All product categories showing positive like-for-like sales growth:
o Furniture sales up 7.2%, like-for-like sales up 8.9%
o Home Accessories sales up 3.1%, like-for-like sales up 4.0%
o Decorating sales up 5.3%, like-for like-sales up 6.3%
o Fashion sales up 2.6%, like-for-like sales up 1.7%
·; Gross margin rate maintained
·; Profit before taxation, including exceptional gains, up 119% to £24.1m (2010: £11.0m)
·; Profit before taxation, excluding exceptional gains, up 91% to £19.3m (2010: £10.1m)
·; Exceptional gain of £4.8m (2010: £0.9m), primarily due to the sale of the Bardon warehouse
·; Total EPS of 2.65p (2010: 0.80p)
·; Adjusted EPS of 1.99p (2010: 0.67p)
·; Strong Balance Sheet with £38.5m cash at the year end (2010: £17.4m) and a clean inventory position
·; Final dividend proposed of 1.0 pence per share making the total dividend of 1.5 pence per share for the year (2010: Total dividend 1.0 pence per share)
Commenting on the results, Tan Sri Dr. K P Khoo, Chairman, said:
"I am delighted to announce such a strong set of results in what continues to be a challenging retail market. Like-for-like sales growth was recorded across all product categories, and all business channels improved profitability. We are also pleased that, in a fragile global economy, our franchise sales grew by 18%. We have seen again this year the importance of E-Commerce trading and are especially pleased with growth of 45% in this channel as we reach out to customers in a new and dynamic way.
Since the beginning of February, we have seen a decline in our performance which we attribute to a general weakening in the consumer economy. We believe that our strong product offer and brand, robust balance sheet and continued operational efficiencies give us a sound base to face the tough outlook ahead."
Enquiries:
| |
| Laura Ashley Holdings plc Lillian Tan CEO Seán Anglim CFO |
0207 8805100 |
Media Enquiries: Brunswick Tom Buchanan James Olley |
020 7404 5959 |
Corporate Broker Numis Securities Ltd James Serjeant Oliver Cardigan | 020 7260 1200
|
Overview
For the 52 weeks to 29 January 2011, profit before taxation was up 119% at £24.1 million (2010: £11.0 million). Excluding gains from exceptional items, profit was up 91% at £19.3 million (2010: £10.1 million).
Total Group sales increased by £16.6 million (6.2%) to £285.0 million compared to the previous year of £268.4 million. Improved sales were recorded across the Internet, Retail Stores and the Franchise business channels. For the year ended 29 January 2011, total Internet sales grew by 45% to £32.0 million whilst UK store sales were up 2.5% to £218.8 million (LFL +2.9%). Retail space was reduced by 53,000 square feet (6%), as the UK portfolio was reduced by 14 stores, from 231 to 217.
In spite of greater supplier costs due to the increases in commodity costs, gross margin rates were maintained at last year levels. Operating expenses remained broadly flat at £105.6 million (2010: £105.2 million).
Cash Flow and Balance Sheet
Cash generated from operations in the year was £29.1 million (2010: £20.3 million). The net increase in cash balances over the year was £21.1 million with the Group holding £38.5 million in cash as at the year end (2010: £17.4 million).
Exceptional Items
An exceptional gain of £4.8 million was recorded during the year. This related to the sale of the Bardon warehouse, the disposal of a number of leases and a provision in respect of legal costs incurred in defending a trademark litigation.
Dividend
The Board has recommended a final dividend of 1.0 pence per share. When taken with the interim dividend of 0.5 pence per share paid on 10 November 2010, this takes the total dividend for the year to 1.5 pence per share (2010: Total dividend of 1.0 pence per share). This dividend will be proposed at the AGM on 6 June 2011 and, subject to shareholders' approval, will be paid on 15 July 2011 to all shareholders on the register at the close of business on 17 June 2011.
The Board will continue to review dividend payments on the basis of annual profitability, the economic climate and the needs of the business.
UK Retail
As at 29 January 2011, the property portfolio in the UK comprised 217 stores (2010: 231). We have five main store types: 138 Mixed Product stores (selling all product categories), 55 Home stores (selling Home products only), 22 Home concession stores, 1 Gifts & Accessories store and 1 Clearance outlet. During the year, 2 Home stores were converted to Mixed Product stores.
As we focus on becoming a leader in Home Interior Design, three stores have now opened design studios, building on our existing design service. Further design studios will be added in the coming twelve months. We also plan to increase our dedicated headcount in this area, as Home Interior design becomes a more important and distinguishing part of our retail business.
During the year ended 29 January 2011, we opened 2 new stores and closed 16 stores. As a result, total selling space fell by 6.0% to 833,000 square feet. The store closures are part of the ongoing store portfolio realignment programme, which is focussed on optimising profitability. The realignment will also focus on the acquisition of smaller, new concept stores and optimising space in our existing portfolio to drive additional density.
Our E-Commerce channel remains a key part of our multi-channel retail strategy, representing 12.5% of total UK retail sales (11.2% of total Group sales). This has increased from 9% of total UK Retail sales last year (8.2% of total Group sales). Total E-Commerce and Mail Order sales were up 25% on last year. Within this figure and reflecting the trend we have seen over recent years, E-Commerce sales were up 45.0%, more than compensating for an ongoing market decline in Mail Order sales. The Laura Ashley application is now available to download free on both the iPhone and iPad.
Product
The UK business is split into four main categories. For the financial year ended 29 January 2011, the relative split of UK sales is as follows: Furniture 30%, Home Accessories 28%, Decorating 22% and Fashion 20%.
Furniture
The Furniture product category includes beds, upholstered furniture, mirrors and cabinet furniture.
Total Furniture sales increased 7.2% (LFL +8.9%) for the year ended 29 January 2011. We were encouraged by the strong performance of Furniture through the E-Commerce channel.
The success of the furniture offer continues to be a feature of the business. This is based on additional sales from range extensions, new fabrics and colour options for upholstery and the introduction of new mirror ranges.
Home Accessories
The Home Accessories product category includes lighting, gifts, bed linen, rugs, throws, cushions, and children's accessories.
During the year ended 29 January 2011, sales of Home Accessories increased by 3.1% (LFL +4.0%).
Distinctive patterns and on trend colour palettes have supported growth in our bedroom collections. Our accessory ranges provided an affordable means for customers to update their homes.
Decorating
This category includes curtains, blinds, fabric, paint, decorative accessories and wall coverings.
During the year ended 29 January 2011, Decorating sales were up 5.3% (LFL +6.3%).
Archive patterns have made a major contribution to the success of both fabrics and wallpaper. Our exclusive patterns and distinctive colour palettes have been extremely popular. We continue to respond to key trends as well as updating our core classic options. Made to measure curtains and blinds are a significant sales driver in this category.
Fashion
For the year ended 29 January 2011, UK retail fashion sales increased by 2.6% (LFL +1.7%) in what continued to be a highly competitive consumer environment.
Our strong performance in this category has been based on key dress and skirt shapes. Additionally, we have improved quality and fit across the entire range and this has had a notable effect on sales particularly in the trouser category. Our nightwear, swimwear and accessories categories have also continued to perform well.
We previously announced the launch of our Weekend range, which, together with our Essentials range, have become welcome additions to our fashion category. These new, small ranges broaden and enhance our overall fashion offer.
We recently launched a Girlswear range (Ages 2 - 8). This is being sold in 35 of our fashion stores and online. Initial reactions from both the Press and customers have been positive.
International Operations
Our international franchising operations continue to be an important part of the Laura Ashley business and, as at 29 January 2011, there were 240 (2010: 230) franchised stores in 29 (2010: 26) countries worldwide. They include 6 stores in South Korea and 6 stores in the Middle East. We are continuing to grow this part of the business and are focusing on new territories such as Eastern Europe and Asia.
Franchise revenues grew by 18% to £22.8 million.
Licensing income increased by 3.0% to £3.1m. Licenses were awarded during 2010 for new categories, which included promotional gifting, toiletries, limited edition shoes and Fairtrade clothing.
Current Trading and Outlook
There has been a decline in performance since the beginning of February, which we attribute to a general weakening in the consumer economy. For the 8 weeks to 26 March 2011, like-for-like UK retail sales have decreased by 4.2%. We believe that our strong product offer and brand, robust balance sheet and continued operational efficiencies give us a sound base to face the tough outlook ahead.
The store portfolio realignment programme will continue in the UK. We aim to achieve the optimum balance between a profitable store portfolio and online retail. We will continue to develop our online presence through an improved and enhanced website which will give our customers a clear and enjoyable shopping experience. Our franchise business will maintain its current expansion programme as we develop partnerships in new territories. New licensing opportunities in high quality products will also be explored to improve the profitability of the Group.
| Group Statement of Comprehensive Income |
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For the financial year ended 29 January 2011 |
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2011 | 2010 |
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Note | £m | £m |
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| Revenue | 285.0 | 268.4 |
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Cost of sales | (159.6) | (151.4) |
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Gross profit | 125.4 | 117.0 |
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Operating expenses | (100.8) | (104.3) |
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Profit from operations | 24.6 | 12.7 |
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Share of operating profit/(loss) of associate | 0.5 | (1.1) |
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Finance income | - | 0.1 |
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Finance costs | (1.0) | (0.7) |
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Profit before taxation | 24.1 | 11.0 |
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Taxation | (4.8) | (5.2) |
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Profit for the financial year * | 19.3 | 5.8 |
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Other comprehensive income: |
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Exchange differences on translation of investments | 0.2 | (0.2) |
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Unrealised investment gain | 0.3 | 0.5 |
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Other comprehensive income for the year net of taxation | 0.5 | 0.3 |
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Total comprehensive income for the year | 19.8 | 6.1 |
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* Earnings per share - basic and diluted - calculated based on profit for the financial year | 2 | 2.65p | 0.80p |
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Adjusted earnings per share (excluding exceptional items) | 2 | 1.99p | 0.67p |
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The Group's results shown above are derived entirely from continuing operations. | ||||||||
| Group Balance Sheet | ||||
As at 29 January 2011 | ||||
2010 | 2010 | |||
£m | £m | |||
Restated | ||||
Non-current assets | ||||
Property, plant and equipment | 23.7 | 36.1 | ||
Deferred tax asset | 2.0 | 1.9 | ||
Investment in associate | 4.1 | 3.2 | ||
Investment in quoted shares | 2.3 | 2.0 | ||
32.1 | 43.2 | |||
Current assets | ||||
Inventories | 48.7 | 48.0 | ||
Trade and other receivables | 21.7 | 21.2 | ||
Cash and cash equivalents | 38.5 | 17.4 | ||
108.9 | 86.6 | |||
Total assets | 141.0 | 129.8 | ||
| Current liabilities | ||||
Current tax liabilities | 1.6 | 4.6 | ||
Trade and other payables | 71.8 | 68.1 | ||
73.4 | 72.7 | |||
Non-current liabilities | ||||
Retirement benefit liabilities | 7.2 | 6.9 | ||
Deferred tax liabilities | 0.6 | 0.7 | ||
Provisions and other liabilities | 0.1 | 0.5 | ||
7.9 | 8.1 | |||
Total liabilities | 81.3 | 80.8 | ||
Net assets | 59.7 | 49.0 | ||
Equity | ||||
Share capital | 37.3 | 37.3 | ||
Share premium | 86.4 | 86.4 | ||
Own shares | (0.8) | (0.8) | ||
Retained earnings | (63.2) | (73.9) | ||
Total equity | 59.7 | 49.0 |
| Group Statement of Changes in Shareholders' Equity | ||||||||||
As at 29 January 2011 | ||||||||||
Share | Share | Own | Retained | Total | ||||||
Capital | Premium | Shares | Earnings | Equity | ||||||
£m | £m | £m | £m | £m | ||||||
Balance as at 31 January 2009 | 37.3 | 86.4 | (0.8) | (70.9) | 52.0 | |||||
Change of accounting policy - see note 6 | - | - | - | (1.8) | (1.8) | |||||
Balance as at 31 January 2009 as restated | 37.3 | 86.4 | (0.8) | (72.7) | 50.2 | |||||
Profit for the financial year | - | - | - | 5.8 | 5.8 | |||||
Dividends paid | - | - | - | (7.3) | (7.3) | |||||
Other comprehensive income | - | - | - | 0.3 | 0.3 | |||||
Balance as at 30 January 2010 | 37.3 | 86.4 | (0.8) | (73.9) | 49.0 | |||||
Profit for the financial year | - | - | - | 19.3 | 19.3 | |||||
Dividends paid | - | - | - | (9.1) | (9.1) | |||||
Other comprehensive income | - | - | - | 0.5 | 0.5 | |||||
Balance as at 29 January 2011 | 37.3 | 86.4 | (0.8) | (63.2) | 59.7 | |||||
Group Statement of Cash Flow | ||||
For the financial year ended 29 January 2011 | ||||
2011 | 2010 | |||
Notes | £m | £m | ||
Operating activities | ||||
Cash generated from operations | 3 | 29.1 | 20.3 | |
Corporation tax paid | (8.4) | (0.5) | ||
Dividends paid | (9.1) | (7.3) | ||
Finance income | - | 0.1 | ||
Finance cost | (1.0) | (0.7) | ||
10.6 | 11.9 | |||
Investing activities | ||||
Purchase of property, plant and equipment | (1.6) | (2.4) | ||
Sale of property, plant and equipment | 12.1 | - | ||
10.5 | (2.4) | |||
Net increase in cash and cash equivalents | 4 | 21.1 | 9.5 | |
Reconciliation of Net Cash Flow to Movement in Net Funds | ||||
For the financial year ended 29 January 2011 | ||||
2011 | 2010 | |||
Note | £m | £m | ||
Net increase in cash and cash equivalents / Change in net funds resulting from cash flows | 21.1 | 9.5 | ||
Net funds at the beginning of the financial year | 17.4 | 7.9 | ||
Net funds at the end of the financial year | 4 | 38.5 | 17.4 | |
1 Basis of Preparation
Consolidated financial statements and accounting policies
The preliminary announcement for the year ended 29 January 2011 has been prepared in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as adopted by the European Union.
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. Details of the accounting policies applied are those set out in Laura Ashley Holdings Plc's Annual Report 2011.
The annual financial information presented in this announcement for the year ended 29 January 2011 is based on, and is consistent with, that in the audited financial statements of Laura Ashley Holdings Plc and its subsidiaries ('the Group') for the year ended 29 January 2011, 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 498(2) or (3) of the Companies Act 2006.
IAS 8 (revised) 'Accounting Policies' was issued in December 2003. It was adopted by the Group from 1 January 2005. In accordance with the standard, the Group has disclosed for the current year and prior year the amount of adjustment to earnings per share as a result of an initial application of IAS 38' Intangible Assets'.
An amendment to IAS 38 'Intangible Assets' requires that all marketing cost and production costs of the Group are recognised in the Group statement of comprehensive income as incurred rather than during the season that the costs relate to. As a result of this change in accounting policy, the net assets after tax at the previous balance sheet date are reduced by £1.6 million retrospectively as shown in note 6. As the effect on earnings was not material, reported profits for the prior period have not been restated.
IFRS 8 'Operating Segments' was issued in November 2006. The Group has applied IFRS 8 from 1 February 2009. Following the review of internal management reporting for the Group's chief operating decision makers, it was decided that the split of the Group's assets and liabilities into segments is no longer required.
Statutory Accounts
Information in this preliminary announcement does not constitute statutory accounts of the Group within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 January 2010 have been filed with the Registrar of Companies. The auditor's report on these accounts was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.
The Group's Annual Report for the year ended 29 January 2011 will be made available in due course and can be viewed and downloaded from the Group's website at www.lauraashley.com. The Annual Report will be circulated in printed form to shareholders in early May 2011.
2 Earnings per Share | ||||
Earnings per share is calculated by dividing the profit for the financial year by the weighted average number of ordinary shares during the year (excluding treasury shares of 18,272,500). | ||||
2011 | 2010 | |||
Profit for the financial year (£m) | 19.3 | 5.8 | ||
Weighted average number of ordinary shares ('000) - basic and diluted | 727,763 | 727,763 | ||
Earnings per share | 2.65p | 0.80p | ||
Adjusted earnings per share (excluding exceptional items) | 1.99p | 0.67p | ||
3 Reconciliation of Profit from Operations to Net Cash Inflow from Operating Activities | ||||
2011 | 2010 | |||
£m | £m | |||
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Profit from operations | 24.6 | 12.7 | ||
Depreciation charge | 5.4 | 5.3 | ||
Profit on sale of property, plant and equipment | (4.0) | - | ||
Exchange movement on property, plant and equipment | 0.1 | 0.2 | ||
(Increase)/decrease in inventories | (0.7) | 4.3 | ||
Decrease in receivables | (0.5) | (2.1) | ||
Increase/(decrease) in payables | 3.7 | (0.9) | ||
Movement in provisions | 0.5 | 0.8 | ||
Net cash inflow from operating activities | 29.1 | 20.3 | ||
4 Analysis of Net Funds | ||||
At 30 Jan | Cash | At 29 Jan | ||
2010 | Flow | 2011 | ||
£m | £m | £m | ||
Cash and cash equivalents | 17.4 | 21.1 | 38.5 | |
| 5 Segmental Analysis | ||||||||||
Retail | ||||||||||
Retail | E-Commerce | Total | Total | |||||||
Stores | & Mail Order | Retail | Non-retail | Total | ||||||
2011 | £m | £m | £m | £m | £m | |||||
Revenue | 220.7 | 37.8 | 258.5 | 26.5 | 285.0 | |||||
Contribution | 22.0 | 9.8 | 31.8 | 11.8 | 43.6 | |||||
Share of profit of associate | - | 0.5 | 0.5 | |||||||
Indirect overhead costs | (19.0) | - | (19.0) | |||||||
Finance costs | (1.0) | - | (1.0) | |||||||
Profit before taxation | 11.8 | 12.3 | 24.1 | |||||||
Retail | ||||||||||
Retail | E-Commerce | Total | Total | |||||||
Stores | & Mail Order | Retail | Non-retail | Total | ||||||
2010 | £m | £m | £m | £m | £m | |||||
Revenue | 215.3 | 30.1 | 245.4 | 23.0 | 268.4 | |||||
Contribution | 17.8 | 5.8 | 23.6 | 7.5 | 31.1 | |||||
Share of loss of associate | - | (1.1) | (1.1) | |||||||
Indirect overhead costs | (18.4) | - | (18.4) | |||||||
Finance income | 0.1 | - | 0.1 | |||||||
Finance costs | (0.6) | (0.1) | (0.7) | |||||||
Profit before taxation | 4.7 | 6.3 | 11.0 | |||||||
The reported segments are consistent with the Group's internal reporting for performance measurement and resources allocation. The Group does not allocate indirect overhead costs between its retail and non-retail segments. As significant elements of the indirect overhead costs arise from the retail segment, it is decided that the entire indirect costs are allocated to this segment.
Retail revenue reflects sales through Laura Ashley's managed stores, Mail Order and E-Commerce. Non-retail revenue includes Licensing, Franchising and Manufacturing. Contribution is stated after deducting direct operating expenses, buying, marketing and administrative costs.
Non-current assets | Revenue | |||||||||
2011 | 2010 | 2011 | 2010 | |||||||
£m | £m | £m | £m | |||||||
Restated | ||||||||||
| Destination | ||||||||||
UK & Ireland | 27.7 | 39.6 | 258.5 | 244.1 | ||||||
Continental Europe | 0.3 | 0.4 | 6.1 | 6.4 | ||||||
Other | 4.1 | 3.2 | 20.4 | 17.9 | ||||||
32.1 | 43.2 | 285.0 | 268.4 | |||||||
6 Prior Year Adjustments
Change in accounting policy
An amendment to IAS 38 'Intangible Assets' requires that all marketing and production costs of the Group are recognised in the Group statement of comprehensive income as incurred rather than during the season the costs relate to, resulting in a reduction of net assets after tax at the previous balance sheet dates prior to 31 January 2009 by £1.6 million retrospectively.
Fixed asset adjustment in subsidiary company
Costs of short leases under land and buildings amounting to £0.2 million were written off against the prior year reserves of Laura Ashley S.A. in France. There was no tax impact for this adjustment.
The result of the above changes is shown as follows:-
£m | |
Inventories | (0.8) |
Trade and other receivables | (1.2) |
Prior year corporation tax | 0.4 |
Fixed asset adjustment in subsidiary company | (0.2) |
Retained earnings | (1.8) |
7 Contingent Liabilities
a) Under the terms of the sale agreements entered into during the year ended 31 January 2004 for the disposal of certain former European subsidiary companies, the Company has a potential liability of £0.3 million in relation to warranty and tax claims (2010: £0.3 million).
b) The Company and its related company, Laura Ashley, Inc. (Master US Licensee), are co-respondents in defending an action against them in respect of the alleged breach of the terms of a settlement agreement with a company in the United States. The case has been presented to an arbitration panel in Chicago, Illinois, United States and remains ongoing. It is not possible to calculate a reliable estimate of the outcome of this matter.