ALY.L Regulatory News (ALY)

22 August 2018

LAURA ASHLEY HOLDINGS plc

("the Group")

Laura Ashley Holdings plc announces its full final results for the 52 weeks to 30 June 2018.

Summary

· Profit before tax and exceptional items of £5.6m (2017: £8.4m).

· Statutory profit before tax of £0.1m (2017: £6.3m).

· Total like-for-like retail sales down 0.4%.

· Fashion like-for-like retail sales up 9.7%.

· Total Group sales of £257.2m (2017: £277.0m).

· Online revenue of £59.7m (2017: £57.3m), which now represents 25.0% of retail revenue.

· Online sales up 4.1% on a like-for-like basis.

· The Board is not recommending payment of a dividend.

· Conditional agreement to sell the Singapore property announced today.

Commenting on the results, Tan Sri Dr Khoo Kay Peng, Chairman, said:

"As set out at the time of the interim results, the trading environment for the 1st half of the year was challenging and the Board expected these difficult trading conditions to continue into the second half of the year. This proved to be the case and, given the softer trading environment for the year ended 30 June 2018, we are disappointed to report a fall in profits. Continued margin pressure and the impact of a changing retail landscape have contributed to the overall reduction in profit before tax.

We are, however, encouraged by the progress and continued growth being made by our online business and will be launching a new digital platform in the weeks to come. We are also pleased with the 9.7% like-for-like growth of our fashion business in what is an extremely competitive sector.

Having decided earlier this year to franchise the Hotel and Tea Room concept both domestically and internationally, we have made good progress and are optimistic about the possibilities for growth. This will give the Group Brand enhancement and profitability going forward.

Our licensing agreement with Aeon Holdings for the territories of Japan, Hong Kong and Taiwan will come to an end in September 2018. We are, however, delighted to announce that we have signed a Master License Agreement with Itochu Corporation for Japan which we expect will help develop the Brand presence and contribute significant profitability in the years to come.

We signed a new license partner in Thailand earlier this year and we are looking forward to the opening of our first two Thai stores during the new financial year. Our Chinese digital platforms have continued to grow and are making good progress in developing our presence in the territory.

As announced separately today, we have accepted an offer, conditional on shareholder approval, to sell the freehold property in Singapore. Although the proposed sale has led to an impairment charge for the Group, on completion of the disposal, Group net debt will be significantly reduced and cash flow will be strengthened.

Laura Ashley's Brand is built on beautifully designed, high quality products. Whilst the trading environment will continue to be challenging, we remain resolutely confident in the underlying strength of this much loved Brand, in its relevance for today's consumer and in our strategies to both maintain and develop the Brand and the Company."

Enquiries:

Overview

For the 52 weeks to 30 June 2018, total Group sales were £257.2m (2017: £277.0m). Like-for-like sales fell by 0.4% over the same period. e-Commerce sales were £59.7m (2017: £57.3m). Like-for-like e-Commerce sales grew by 4.1%.

Group profit before taxation, excluding exceptional items, was £5.6m (2017: £8.4m). An exceptional charge of £5.5m was recorded in the year of which £4.7m relates to an impairment on the value of the Singapore property following the Group entering into a conditional agreement to sell the property.

Statutory profit before tax was £0.1m (2017: £6.3m).

Operating expenses of £91.7m were recorded for the year (2017: £98.3m). The reduction is largely attributed to the net reduction of stores over the period.

Cash Flow and Balance Sheet

As at 30 June 2018, bank borrowings stood at £20.1m and the net cash overdraft balance was £11.4m. Inventory of £55.7m was in line with requirements. The bank borrowings reflect the balance of the loan due in respect of the property in Singapore which was acquired in 2015. Upon completion of the disposal, the bank borrowings of £20.1m in respect of the property in Singapore will be repaid.

Dividend

No interim dividend was paid during the year and the Board is not recommending payment of a final dividend. For period ended 30 June 2017, a dividend of 0.5p was paid.

UK Retail

As at 30 June 2018, the property portfolio in the UK comprised 160 stores (June 2017: 167). The portfolio is as follows: 111 Mixed Product stores, 46 Home stores, 1 concession store, 1 Gifts & Accessories store and 1 Clearance outlet. During the reporting period, eight stores were closed and one opened, reducing total selling space by 2.6% to 662,000 square feet.

Over the coming year, we will open two new stores and close five stores as we continue to optimise the store portfolio.

Total UK retail sales of £236.0m were recorded during the 52 week period to 30 June 2018 (2017: £252m). UK retail sales were affected by the eight closures and the uncertainty in the market.

Total e-Commerce sales of £59.7m were recorded during the 52 week period to 30 June 2018 (2017: £57.3m). On a like-for-like basis, sales grew by 4.1%.

Product

The UK business is split into four main categories. For the period ended 30 June 2018, the relative split of UK sales was as follows: Home Accessories 34%, Furniture 29%, Decorating 20% and Fashion 17%.

Home Accessories

The Home Accessories product category includes lighting, gifts, bed linen, rugs, throws, cushions and children's accessories.

Home Accessories sales for the year to 30 June 2018 fell by 3.6% over the same period last year with like-for-like performance up by 2.9%. This is our largest category both in overall percentage of sales and in product rages. Gifts and accessories form the largest components of this category and include a strong seasonal bias featuring Christmas, Easter and summer product ranges. Continued development and novelty have helped to develop consistent like for like growth of between 5% and 10% within this category over recent years. Whilst the ranges are designed to complement our decorating and furnishing themes, they also stand alone as individual and design led products.

Furniture

The Furniture product category includes upholstered and cabinet furniture, beds and mirrors.

Furniture sales for the year to 30 June 2018 decreased by 8.2% over the same period last year with like-for-like sales down by 4.1%. This is our most highly priced category. Given the softer consumer confidence at this juncture, some of our customers have deferred the more expensive purchase of a new settee or bed. We are adding a selection of more competitively priced products to this range but will maintain the overall quality and diversity of choice which we now offer.

Decorating

This category includes fabric, curtains, wallpaper, paint and decorative accessories.

Decorating sales for the period to 30 June 2018 fell by 13.9% with like-for-like sales down 7.5%. This category has been particularly slow and significant effort has been made to address its performance during the next financial year, particularly with the inclusion of one new range aimed at a broader customer base.

Fashion

This category includes adult fashion, selected girls wear, fashion accessories and perfumery.

Fashion sales for the period to 30 June 2018 increased by 7.2% over the same period last year with like-for-like sales up by 9.7%. This performance has been very good and was achieved on the back of a restructure implemented last year and, a much improved product range. We are confident that this improved performance will continue and we are encouraged by sales in the early weeks of the new financial year.

Hotels and Tea Rooms

The Laura Ashley hotel recorded sales of £2.1m (2017: £2.5m) over the period. We continue to partner under franchise with a hotel in the Lake District, (Laura Ashley, The Belsfield).

Building on the success of our franchised hotel and interest from within the sector, the Company has decided to expand Laura Ashley Hotels by franchising the concept both domestically and internationally.

In June 2017, we opened our first Tea Room. Located in the Regency Hotel, Solihull, it has been a great success and has subsequently been expanded to meet customer demand. Based on this performance, one further franchised tea room was opened in Burnham Beeches in July 2018 and an additional two are planned for October 2018 of which one will be franchised and the other will be managed by the Company. We will continue to expand this concept as a franchise model.

International Operations

Contributing 7.0% of total Group revenue, our international Franchise and Licensing channels are an important and strategic part of our business. As at 30 June 2018, there were 213 franchised stores (243 as at 30 June 2017) in 29 territories worldwide.

Franchise and Licensing revenue of £18.0m was recorded during the period to 30 June 2018. (2017: £20.6m).

As announced in February 2018, from 17 September 2018 the master license agreement with AEON will be terminated for the Japan, Hong Kong and Taiwan territories. We are delighted to announce that we have signed a new master license agreement with Itochu Corporation for Japan and expect that the business and its profitability can now recover and grow to new levels over the years to come.

We are also pleased that we have acquired a new licence partner for Thailand, SB Group, and the first two stores will open in the new financial year.

We will continue to work closely with our partners and are confident that the Franchise and Licensing businesses will grow and develop.

We have continued to build our online presence in China and are now trading on three Chinese online platforms; T Mall Global, JD.com and Little Red Book.

Sale of Singapore Property

As also announced this morning, the Board has entered into a conditional agreement to sell the property in Singapore. The property in Singapore was purchased in June 2015 with a view to having an Asian headquarters, based there, to help expand into the Asian market including China and India. While expansion into the Asian market continues to be a priority, the retail environment, both domestically and internationally, has changed and the Board believes that this is an appropriate time to dispose of the property in Singapore.

The Board, therefore, conducted a thorough marketing exercise for the Property and considers that the sale of the Singapore property at the attributed value of SGD$54.5m is in the best interests of the Company and Shareholders as a whole. Given its size, the sale of the property is conditional on shareholder approval and a circular setting out details of the transaction and a notice of general meeting is being posted to shareholders today.

The Board believes that the sale of the property will strengthen the Company's balance sheet and net debt position as the bank borrowings relating to this property will be repaid on completion of the transaction. It is expected that, subject to shareholder approval, the transaction will be completed in November 2018. Given that the value attributed to the disposal is less than the carrying value of the property, an exceptional impairment charge of £4.7m, including the costs of disposal, is being taken in the results for the year.

Current Trading and Outlook

Trading for the seven weeks to 18 August 2018 is performing in line with management expectations.

Laura Ashley's Brand is built on beautifully designed, high quality products. We remain resolutely confident in the underlying strength of this much loved Brand, in its relevance for today and in our strategies to both maintain and develop it.

Acknowledgements

The success of the Group is due, in no small part, to the hard work and commitment of the staff, management and my fellow Board members. For this, I wish to convey my thanks and appreciation.

For their continued support and loyalty to the Group, I would like to thank our customers, shareholders and suppliers.

The Group's results shown above are derived entirely from continuing operations. 

Group Statement of Changes in Shareholders' Equity

* This movement is included in the Group Statement of Financial Position within Short-term borrowings.

The preliminary announcement for the year ended 30 June 2018 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 as stated in the accounting policies. Details of the accounting policies applied are those set out in Laura Ashley Holdings Plc's Annual Report 2018.

The annual financial information presented in the announcement for the period ended 30 June 2018 is based on and is consistent with the financial statements of Laura Ashley Holdings Plc and its subsidiaries ("the Group") for the period ended 30 June 2018. The audit of the financial statements for the year ended 30 June 2018 is not yet complete however, an unqualified opinion is expected. These accounts will be finalised on the basis of the financial information presented by the directors in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's annual general meeting.

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 June 2017 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 30 June 2018 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 September 2018 to those shareholders who have elected to receive a copy in printed form.

2 Earnings per Share

Earnings per share is calculated by dividing the profit/(loss) for the financial year by the weighted average number of ordinary shares during the year (excluding treasury shares of 18,272,500).

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, e-Commerce and Hotel. Non-retail revenue includes Licensing, Franchising and Manufacturing. Contribution is stated after deducting direct operating expenses, buying, marketing and administrative costs.

Segmental Analysis (continued)

The taxation charge for the year comprises taxation for the Group and the associate entity on current and prior years' taxable profits.

The effective tax rates for both the current and previous years are higher than the statutory rates of UK Corporation tax primarily due to the incidence of non-deductible expenditure which includes the impairment of the Singapore property.