ALY.L Regulatory News (ALY)

LAURA ASHLEY HOLDINGS PLC

Interim Report 2019

Contents

2 Summary

3 Chairman's Statement

8 Responsibility Statement

11 Condensed Group Statement of Comprehensive Income

12 Condensed Group Statement of Financial Position

13 Condensed Group Statement of Changes in Shareholders' Equity

14 Condensed Group Cash Flow Statement

15 Reconciliation of Net Cash Flow to Movement in Net Funds

16 Notes

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.

20 February 2019

LAURA ASHLEY HOLDINGS plc

(the "Group")

Laura Ashley Holdings plc announces its interim results for the 26 weeks to 31 December 2018.

Summary

· Total Group sales of £122.9m (26 weeks to 31 December 2017: £134.7m)

· Total like-for-like retail sales down 4.2%

· Profit before tax and exceptional items £0.0m (H1 2017: £4.3m)

· Loss before tax including exceptional items £1.5m

· Fashion like-for-like sales up 11.8%

· All Group long-term debt cleared

· New digital platform launched​

· Hospitality expansion continues, with four tea rooms opened and new openings in the pipeline for 2019

· New franchise stores opened in Thailand and India

· The Board is not recommending payment of an interim dividend (December 2017: 0.0 pence)

Chairman's statement

"Trading conditions have been difficult during the first six months of the year to 31 December 2018. 

Given the continued market turbulence and having reviewed the revised management forecast for the second half year, the Board now holds the view that the performance for the entire year will fall short of market expectations.

Despite these challenges, our fashion performance was strong, achieving like-for-like growth of 11.8%. We have recently launched a new digital platform which is expected to improve online sales in the years ahead. This improved platform incorporates enhanced functionality, superior customer interface and advanced technological capability.

In line with our transformation towards a more lifestyle brand, the Group remains committed to further develop the hospitality segment of its business. With four tea rooms and a licensed hotel already in operation, we have laid the foundation for the further expansion. A number of opportunities are being evaluated, and we expect to see further openings this year.

Following the termination of the Master Licence Agreement for the territory of Japan with Aeon in September, a new Master Licence Agreement was concluded with Itochu Corporation. This will ensure the continuing presence and growth of Laura Ashley in Japan.

The Group is also exploring new partnership opportunities on the international front which will provide the thrust for our future growth. In the first half of this financial year, new stores were opened in India and Thailand by our franchise partners. In China, our online business continues to show growth. The Asian market will be a key focal point for the Group's international expansion, while we also explore opportunities in other regions.

In our drive for international growth, we are committed to preserve the inspirational and distinctive identity of the much-loved Laura Ashley brand.

Having eliminated all of our long-term debts, we are now better placed to deal with the current headwinds and to move the business forward.

Chairman

Enquiries:

Overview

For the 26 weeks to 31 December 2018, total Group sales were £122.9m (H1 2017: £134.7m), a fall of 8.7%. The decline in total revenue was primarily due to the closure of 4 stores during the period, a like-for-like retail sales drop of 4.2% and the termination of the master license agreement with our previous Japanese partner.

Margins during the period were affected by the weak Sterling against the US Dollar, as well as an increase in domestic costs. Achieved margin rate fell by 0.3% against the same period last year. Operating expenses for the period were slightly lower at £46.5m (H1 2017: £47.1m) as a result of store optimisation.

The loss of £1.5m for the first half year (H1 2017: Profit before tax: £4.3m) was attributed to lower Home Furnishings sales, revenue disruption caused by the change in our Japanese Franchise partner and the write-off of investment in an Associate Company. The impact of the Investment in Associate write-off was £1.3m, and was reported under the Exceptional Items of £1.5m.

Cash Flow and Balance Sheet

As at 31 December 2018, the Group had a cash reserve of £0.1m with no debt compared to £29.2m debt recorded a year earlier. The proceeds from the disposal of the Group's Singapore property were used to retire all its long-term debts. In February 2019, the Group disposed of the Manor Hotel in Elstree for a cash consideration of £6.0m. This corporate exercise has placed the Group in a stronger financial position.

The decrease in inventory to £50.1m (December 2017: £54.2m) was in line with the needs of the business.

Dividend

The Board is not recommending to pay an interim dividend (December 2017: 0.0 pence per share).

UK Retail and E-Commerce

As at 31 December 2018, the Group operated 156 stores in the UK (June 2018: 160), comprising 106 Mixed Product stores, 47 Home stores, 1 Concession store, 1 Gifts & Accessories store, and 1 Clearance outlet. During the reporting period, 4 stores were closed and none were opened. Two store openings are planned for the second half of the year.

Total UK retail sales for the period were £117.2m (H1 2017: £122.9m). On a like-for-like basis, UK retail sales fell by 4.2%. Total e-Commerce sales fell 9.7% to £24.3m (H1 2017: £26.9m). During the reporting period, the website was relaunched on a new platform with improved features to enhance customer shopping experience.

We continue to trade in ten European countries from our UK website.

Product

The Group's business is organised under four main product categories of Home Accessories, Furniture, Decorating and Fashion. For the 26 weeks ended 31 December 2018, the contributions of sales by each category were: Home Accessories 36%, Furniture 28%, Decorating 19% 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 26 weeks to 31 December 2018 increased by 0.3% with like-for-like performance up by 1.5%. Continued like-for-like growth in this competitive category gives us confidence that our seasonal gift offerings and core home accessories products are meeting customer expectations in both design and price. Our bed linen ranges, in particular, have performed well.

Furniture

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

Furniture sales for the 26 weeks to 31 December 2018 decreased by 15.0% with like-for-like sales down 14.4%. New product ranges have been added for Spring 2019 and we remain confident in both the quality and breadth that this category offers to our customer base. We expect its performance to improve during 2019.

Decorating

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

Decorating sales for the 26 weeks to 31 December 2018 fell by 14.2% with like-for-like sales down by 13.5%. As a result, our design teams are in the process of reviewing the mix of our decorating product offerings based on customer feedback and research.

Fashion

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

Fashion sales for the 26 weeks to 31 December 2017 increased 7.2% over the same period last year with like-for-like sales up by 11.8%. Building on the growth of last year, we are delighted that our fashion performance has maintained its momentum and continues to strengthen. Early reactions to Spring 2019 products are positive and this growth is expected to continue.

Hospitality

Laura Ashley, the Manor hotel, was sold in early 2019. The Group, however, is committed to developing the hospitality concept and this will be achieved through the licensing model rather than direct ownership. We now operate four licensed tea rooms and one licenced hotel., This recent venture has opened a pipeline of opportunities for the Group.

International Operations

New franchise stores were opened in Thailand and India during the reporting period with further openings planned for 2019.

Our Chinese digital platform business continues to grow and we are excited at the long-term growth opportunities the Chinese market offers.

The Japanese master licence agreement with Aeon Holdings was terminated on 17 September 2018 and on 18 September 2018, we signed a master licence agreement with Itochu Corporation. With this change of business partners, we are hopeful that the Laura Ashley brand, already much admired in Japan, will make further inroads in this country, building on a heritage of our 30 years of presence there.

In December 2018 our Australian master licensee went into administration. The Group did not have an equity interest in this licensee. We are pursuing a plan to maintain our presence in Australia.

We will continue to develop our international presence and explore new partnership opportunities. In the reporting period, our international operations contributed 6.7% of total Group revenue. As at 31 December 2018 there were 90 franchised stores (246 as at 31 December 2017) in 26 territories worldwide. The goal of the Group is to increase its international reach.

Current Trading and Outlook

Trading conditions have been difficult during the first six months of the year. Although, like-for-like sales were in line with management expectations, we expect trading conditions to remain challenging. Acknowledgements

I wish to convey my thanks to our staff, management and my fellow Board members for their hard work, contribution and commitment.

I also take this opportunity to thank our customers, franchise partners, license partners, shareholders and suppliers for their continued support and loyalty to the Group.

Andrew Khoo,

Chairman

Principal Risks and Uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and beyond, and could cause actual results to differ materially from expected and historical results. The Board considers that the majority of significant risks and uncertainties remain as published in the Annual Report for the period ended 30 June 2018. These comprise of:

· Failure of the business to meet sales and margin targets

· Failure to maintain or increase market share

· Failure to optimise store portfolio

· Failure to develop innovative product ranges

· Failure to attract, develop and retain talent with the correct skill and capability for further development as part of the Group's succession policy

· Failure to deliver sales growth online by failing to meet customer expectations or through failure of the website.

· Disruption to key IT systems from a major incident, including a cyber-attack

· Failure to grow our international business successfully through Franchise and Licensing partnerships

· Failure to maintain cost efficient funding and react to changes in foreign currency exchange fluctuations. Unforeseen financing requirements or treasury exposures

· Failure of central computer servers that manage points of sale, contact centre or website

· The risk of theft of staff, customer or corporate data.

· Failure of the business to deal with the impact of adverse Brexit trading conditions

A detailed explanation of these risks can be found on pages 11 and 12 of the 2018 Annual Report which is available at www.lauraashley.com.

Responsibility Statement

We confirm that to the best of our knowledge:

· The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

· The interim management report includes a fair review of the information required by:

a) DTR 4.2.7 R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remainder of the financial year; and

b) DTR 4.2.8 R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group in the first six months of the current financial year; and any changes in the related party transactions described in the last Annual Report that could have a material effect on the financial position or performance of the Group in the first six months of the current financial year.

By order of the Board

Seán Anglim

Finance Director

Condensed Group Statement of Comprehensive Income

For the 26 week period ended 31 December 2018

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

Condensed Group Statement of Financial Position

As at 31 December 2018

Condensed Group Statement of Changes in Shareholders' Equity

Condensed Group Cash Flow Statement

Reconciliation of Net Cash Flow to Movement in Net Funds

For the 26 week period ended 31 December 2018

Notes

1 Basis of preparation

This condensed set of financial statements has been prepared in accordance with the requirements of IAS 34 'Interim Financial Reporting' as adopted by the European Union ('EU').

As required by the Disclosure and Transparency Rules of the UK's Financial Conduct Authority and other than described below, this condensed set of financial statements has been prepared by applying the accounting policies and presentation that were applied in the preparation of the Group's published financial statements for the financial period ended 30 June 2018, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU. 

No new or amended financial accounting standards have been adopted in these financial statements.

The statutory audited accounts for the period ended 30 June 2018 have been delivered to the Registrar of Companies in England and Wales. The Auditor's report on these accounts was unqualified and did not contain statements under Section 498 of the Companies Act 2006.

These six months condensed financial statements are unaudited, not reviewed in accordance with 'International Standard on Review Engagements (UK and Ireland) 2410' and do not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006.

2 Segmental analysis

2 Segmental analysis (continued)

The reported segments are consistent with the Group's internal reporting for performance measurement and resource allocation. 

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.

3 Taxation

Taxation has been calculated by applying the forecast full year effective rate of tax in the individual fiscal territories to the results for this period.

4 Earnings per share

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

5 Reconciliation of Profit from Operations to Net Cash Inflow from Operating Activities

6 Related party transactions

The related party transactions that have occurred in the 26 week period ended 31 December 2018 are not materially different in size or nature to those reported in the Group's Annual Report for the financial year ended 30 June 2018.

7 Group pension arrangements

The assets and liabilities of the defined benefit pension scheme are considered on an annual basis at the end of each financial year.