ALY.L Regulatory News (ALY)

21 Sep 2006 07:00

Ashley (Laura) Hldgs PLC21 September 2006 21st September 2006 LAURA ASHLEY HOLDINGS plc ("the Company") Results for the 26 weeks to 29 July 2006 Summary • Profit before tax of £3.0m (2005: -£0.2m)(1) • Total Group sales (including royalties) up 5.8% to £106.5m (2005: £100.7m) • UK retail sales(2) up 10.3% to £81.6m (2005: £73.9m) • UK retail like-for-like sales(2) up 13.2% with better margin performance • Continued cost management and increased productivity across the business • Successful realignment of the UK retail store portfolio continues Commenting on the results Lillian Tan, Chief Executive Officer, said: "This strong improvement from last year is the result of management's continuedfocus on product enhancement, margin improvement, increased efficiency and asuccessful store realignment strategy. Despite challenging retail conditions inthe UK, we believe that our recovery will continue, underpinned by solidoperational efficiency throughout the business." Enquiries: Tom Buchanan Brunswick 020 7404 5959James Olley Overview The financial performance of the Group has shown continued improvement in thefirst 6 months of this financial year. For the 26 weeks to 29 July 2006, we arepleased to report a profit before tax of £3.0 million, compared to a loss of£0.2 million for the same period in the previous year. There are no one-offproperty gains included within the reported £3.0 million profit. For the sameperiod last year, one-off property gains totalled £0.2 million. Total Group sales (including royalties) for the 6 months to 29 July 2006 rose£5.8 million (5.8%) to £106.5 million with an increase in UK retail sales(3) of£7.6 million (10.3%) to £81.6 million (2005: £73.9 million). UK like-for-likesales increased by 13.2%, albeit against weak prior year comparatives, driven bya continued strong performance in the Home product categories and a positiveFashion sales performance. In this environment of growing sales, we haveincreased margins as a result of improvements in underlying gross productperformance, savings in distribution costs and reduced stock losses. Operating expenses have increased during the period, in line with higher sales.We are continuing to focus on driving greater efficiencies across the business.The supply chain remains a particular area of focus and we remain committed toseeking ongoing improvements. Product The UK business is split into four main categories. The relative split of UKsales is as follows: Furniture 29%, Home Accessories 28%, Decorating 24% and Fashion 19%. Across theHome categories (Furniture, Home Accessories, Decorating), margin improvementhas been based on reduced promotional activity, better buying and improvedproduct ranges with an increasing percentage of our product now being sourcedfrom Asia and Eastern Europe. The teams in Home have focussed on increasing thequality of the products and ensuring that they are keeping pace with designtrends, while working to improve the supply chain, getting products to storesfaster and more efficiently. For Fashion, in addition to our existing supply arrangements in the Far East, wehave increased our sourcing from Eastern Europe, Turkey and India. This isresulting in improved lead times and lower cost prices. Furniture The furniture product category includes upholstered furniture, beds and cabinetfurniture. During the 6 months ended 29 July 2006, Furniture sales were up 3.5%(LFL 1.5%). The focus in the Furniture category has been to improve the margin rate and seekgreater efficiencies in the supply chain, whilst maintaining a strong productrange that remains highly attractive to our customers. The market trendcontinues to be for distinctive printed fabrics on upholstered furniture (suchas the Stowe print). Ours is a balanced offer that combines traditional rangessuch as the Garrett and the more modern striped fabric on upholstered furnituresuch as the Chenille. Home Accessories The Home Accessories product category includes lighting, gift, bed linen, rugs,throws and cushions. During the 6 months to 29 July 2006, sales of HomeAccessories rose 13.7% (LFL 10.1%). There has been a strong performance in this category from gift (for example,storage and mirrored jewellery boxes) and lighting products. Recognising thesuccess of our expanded accessories ranges, such as top of bed, we continue toinnovate and develop new and distinctive product offerings in this category. Decorating This category includes curtains, fabric, paint, accessories and wall coverings.During the 6 months to 29 July 2006, Decorating sales were up 12.7% (LFL 10.7%). Within this category, wallpaper has continued to perform well reflecting thecontinued trend for statement wallpapers in home decorating. Ready-made curtainshave again performed well and have seen strong margin rate improvement. Our moredecorative accessory products have also recorded a strong performance. Fashion Last year, we repositioned Fashion as a niche clothing brand. Our strategy wasto reduce the number of ranges and the selling space during a period ofconsolidation as we sought to improve the product offering. During the 6 months to 29 July 2006, UK retail Fashion sales increased by 35%albeit against a weak prior year comparative (LFL 45.5%). This increase has notbeen at the expense of margin rate, which has been maintained over the period. Particular successes in the first half were from our own heritage prints as wellas current trend prints in dresses, skirt and tops. An especially popular printthis season was Tropical Hibiscus. UK Operations Retail Stores As of 29 July 2006, the property portfolio in the UK comprised 178 stores. Totalselling space has increased by 3% to 547,000 square feet. We have three mainstore types: 86 mixed product stores, 55 Home stores and 37 Home concessionstores. We have continued to build on our strategy of identifying more costeffective locations and have opened 6 new stores, in the first half, totalling33,000 square feet of selling space. As part of the process of realigning ourstores, 8 stores were closed (14,000 square feet) during the first half. Mail Order and E-Commerce Sales through our Mail Order and E-Commerce channels now represent 12% of totalUK retail sales. This represents a slight decrease compared to last year (2005:13%) due to the significant increase in UK retail sales. However, Mail Order andE-Commerce remain at the core of our multi-channel retail strategy. In total,Mail Order and E-Commerce sales remained flat. Within this, Internet sales wereup 29.0% and now account for 31% of total direct sales. Mail Order sales weredown 10.0% reflecting the general market trend towards E-Commerce at the expenseof more traditional direct sales channels. In March 2006, we launched a new website and, for Autumn/Winter 2006, themajority of the Fashion collection will be available online. There are currently383,000 registered users (2005: 328,000). International Operations Franchising For the 6 months ended 29 July 2006, Franchise revenue decreased by 18% to £9.8mmainly due to reduced sales in the Far East and the closure of our Middle Eastfranchise operation. We are actively seeking a replacement for our Middle Eastfranchise, although we currently do not expect this to be in place before 2007. As explained earlier this year, the reduced Fashion offer adversely impactedFranchise sales for the year ended 28 January 2006. This effect has continuedinto the first half of the current year. However, we expect the improvementsthat have benefited UK Fashion sales in the first half, to have a positiveimpact on our international operations going forward. Franchising will always be an important part of the Laura Ashley brand. We arecurrently reviewing the strength and quality of our existing franchise partnersand the franchise agreements under which they operate before we further expandthis part of our business. There are currently 194 franchised stores in 28countries. Licensing Licensing income is up 17% to £2.1m, driven mainly by improvements in USlicensing revenue. Manufacturing Following the consolidation of manufacturing onto one site in Wales, furtherrestructuring has resulted in the outsourcing of fabric printing overseas. OurTexplan manufacturing operation continues to manufacture wallpaper, paint,made-to-measure curtains and blinds and investment has brought new developmentsin digital printing. Third party business at Texplan remains small, but isincreasing. Dividend In July 2006, we paid our first dividend since 1997. There will be no interimdividend this year. The Board will take a decision regarding a final dividend atthe appropriate time, based on the performance of the business during the yearas a whole. Current Trading On 19 July 2006, we said in a statement that like-for-like UK retail sales wereup 14.3% in the first 24 weeks to 15 July 2006. In the 31 weeks to 2 September2006, like-for-like UK retail sales were up 13.1%. Despite challenging UK retailconditions, all our product offerings remain resilient and we have confidence inthe outlook for the Company. -------------------------- (1) Excluding the benefit of one-off property gains, profit before tax of £3.0m (2005: -£0.4m) (2) Excluding Mail Order and Internet sales (3) Excluding Mail Order and Internet sales Group Income Statement For the 26 weeks ended 29 July 2006 26 weeks to 26 weeks to 52 weeks to 29 July 2006 30 July 2005 28 January 2006 (unaudited) (unaudited) (audited) £m £m £m------------------------ ----------- ---------- ----------Revenue 106.5 100.7 211.1Cost of sales (59.8) (59.3) (120.5)------------------------ ----------- ---------- ----------Gross profit 46.7 41.4 90.6Operating expenses (44.4) (41.6) (85.2)------------------------ ----------- ---------- ----------Profit/(loss) from operations 2.3 (0.2) 5.4Share of operating profit ofassociate 0.4 0.1 0.3Net finance income/(cost) 0.3 (0.1) 0.4------------------------ ----------- ---------- ----------Profit/(loss) before taxation 3.0 (0.2) 6.1Taxation (1.1) 0.1 (1.9)------------------------ ----------- ---------- ----------Profit/(loss) for the period 1.9 (0.1) 4.2------------------------ ----------- ---------- ----------Earnings/(loss) per share -basic and diluted 0.26p (0.01)p 0.56p------------------------ ----------- ---------- ---------- The Group's results shown above are derived entirely from continuing operations. There were no recognised gains or losses other than those included in the GroupIncome Statement. Group Balance SheetAs at 29 July 2006 At 29 July 2006 At 30 July 2005 At 28 January 2006 (unaudited) (unaudited) (audited) £m £m £m---------------- ----------- ----------- ----------- Non-current assets ----------- ----------- -----------Property, plant andequipment 28.2 29.8 29.1Deferred tax asset 3.9 4.0 3.9Investment inassociate 3.4 3.4 3.4Investment in quotedshares 0.7 - - ----------- ----------- ----------- 36.2 37.2 36.4Current assets ----------- ----------- -----------Inventories 40.6 35.2 35.0Trade and otherreceivables 21.4 19.5 22.7Cash and cashequivalents 18.5 18.3 22.1 ----------- ----------- ----------- 80.5 73.0 79.8---------------- ----------- ----------- -----------Total assets 116.7 110.2 116.2---------------- ----------- ----------- ----------- Current liabilities ----------- ----------- -----------Current taxliabilities 2.2 1.2 1.9Bank borrowings - 0.7 -Obligations underfinance leases 0.4 0.3 0.3Trade and otherpayables 44.5 34.8 41.3 ----------- ----------- ----------- 47.1 37.0 43.5Non-current liabilities ----------- ----------- -----------Bank borrowings - 4.3 -Obligations underfinance leases - 0.4 0.2Retirement benefitliabilities 13.3 13.2 13.3Provisions and otherliabilities 0.3 0.3 0.2 ----------- ----------- ----------- 13.6 18.2 13.7---------------- ----------- ----------- -----------Total liabilities 60.7 55.2 57.2---------------- ----------- ----------- --------------------------- ----------- ----------- -----------Net assets 56.0 55.0 59.0---------------- ----------- ----------- ----------- EquityShare capital 37.3 37.3 37.3Share premium 86.4 86.4 86.4Own shares (1.8) (0.8) (0.8)Retained earnings (65.9) (67.9) (63.9)---------------- ----------- ----------- -----------Total equity 56.0 55.0 59.0---------------- ----------- ----------- ----------- Group Statement of Changes in Shareholders' EquityFor the 26 weeks ended 29 July 2006 Share Share Own Retained Total Capital Premium Shares Earnings Equity £m £m £m £m £m------------------------- ------ ------- ------ ------ ------ Balance as at 29 January 2005 37.3 86.4 (0.8) (68.0) 54.9 Loss for the 6 months ended30 July 2005 - - - (0.1) (0.1)Actuarial gain on definedbenefit pension scheme - - - 0.2 0.2------------------------- ------ ------- ------ ------ ------Balance as at 30 July 2005 37.3 86.4 (0.8) (67.9) 55.0 Profit for the 6 months ended28 January 2006 - - - 4.3 4.3Actuarial loss on definedbenefit pension scheme - - - (0.2) (0.2)Exchange differences ontranslation of investments - - - (0.1) (0.1)------------------------- ------ ------- ------ ------ ------Balance as at 28 January 2006 37.3 86.4 (0.8) (63.9) 59.0 Profit for the 6 months ended29 July 2006 - - - 1.9 1.9Exchange differences ontranslation of investments - - - (0.2) (0.2)Dividends paid - - - (3.7) (3.7)Purchase of own shares - - (1.0) - (1.0)------------------------- ------ ------- ------ ------ ------Balance as at 29 July 2006 37.3 86.4 (1.8) (65.9) 56.0------------------------- ------ ------- ------ ------ ------ Group Cash Flow StatementFor the 26 weeks ended 29 July 2006 26 weeks to 26 weeks to 52 weeks to 29 July 2006 30 July 2005 28 January 2006 (unaudited) (unaudited) (audited) £m £m £m--------------------------- -------- -------- ---------- Operating activities -------- -------- ----------Cash generated from operations 4.1 4.3 16.0Corporation tax paid (0.7) (0.7) (1.8)Net finance income 0.3 0.2 0.3 -------- -------- ---------- 3.7 3.8 14.5 Investing activities -------- -------- ----------Purchase of property, plantand equipment (2.0) (1.1) (3.3)Sale of property, plant andequipment - 0.1 0.5Purchase of investment (1.6) - -Net cash received fromassociate 0.1 0.1 0.1 -------- -------- ---------- (3.5) (0.9) (2.7)Financing activities -------- -------- ----------Loan repaid - (0.5) (5.5)Dividends paid (3.7) - -Payment of finance leaseobligations (0.1) (0.2) (0.3) -------- -------- ---------- (3.8) (0.7) (5.8)--------------------------- -------- -------- ----------Net (decrease)/increase incash and cash equivalents (3.6) 2.2 6.0--------------------------- -------- -------- ---------- Reconciliation of Net Cash Flow to Movement in Net FundsFor the 26 weeks ended 29 July 2006 26 weeks to 26 weeks to 52 weeks to 29 July 2006 30 July 2005 28 January 2006 (unaudited) (unaudited) (audited) £m £m £m--------------------------- -------- -------- ----------Net (decrease)/increase incash and cash equivalents (3.6) 2.2 6.0Cash inflow from changes inloans and leases 0.1 0.6 5.8--------------------------- -------- -------- ----------Change in net cash during theperiod (3.5) 2.8 11.8Net funds at the beginning ofthe period 21.6 9.8 9.8--------------------------- -------- -------- ----------Net funds at the end of theperiod 18.1 12.6 21.6--------------------------- -------- -------- ---------- Notes 1. Basis of preparation The interim financial statements have been prepared under the historical costconvention, in accordance with International Financial Reporting Standards(IFRS) and International Financial Reporting Interpretations Committee (IFRIC)and with those parts of the Companies Act 1985 applicable to companies reportingunder IFRS. These accounts do not constitute the Group's statutory financialstatements within the meaning of Section 240 of the Companies Act 1985. The accounting policies applied in the report are consistent with those appliedin the annual report for the year ended 28 January 2006 and are also availableon the Company's website at www.lauraashley.com. The interim financial statements of the Group include the results of LauraAshley Holdings plc and its subsidiaries and associated company. 2. Dividends During the financial period ended 29 July 2006, the Company paid a finaldividend for the year ended 28 January 2006 of 0.5p per ordinary share giving atotal dividend of £3.7 million. 3. Segmental analysis 26 weeks to 26 weeks to 52 weeks to 29 July 2006 30 July 2005 28 January 2006 Total Total Total (unaudited) (unaudited) (audited) £m £m £m------------------- --------- --------- ----------RevenueRetail 93.6 86.1 183.4Non-retail 12.9 14.6 27.7------------------- --------- --------- ---------- 106.5 100.7 211.1------------------- --------- --------- ---------- Profit/(loss) before taxation Branch contributionRetail 9.0 6.1 18.0Non-retail 4.4 3.5 8.3--------------------- --------- --------- ---------- 13.4 9.6 26.3Indirect overhead costs (11.1) (9.8) (20.9)--------------------- --------- --------- ----------Operating profit/(loss) 2.3 (0.2) 5.4Share of operating profit of associate 0.4 0.1 0.3Net finance income/(cost) 0.3 (0.1) 0.4--------------------- --------- --------- ----------Profit/(loss) before taxation 3.0 (0.2) 6.1--------------------- --------- --------- ---------- 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. 4. Principal exchange rates 26 weeks to 26 weeks to 52 weeks to 29 July 2006 30 July 2005 28 January 2006 Average Period end Average Period end Average Period end-------- ------- -------- ------ --------- ------ ---------US Dollar 1.80 1.87 1.85 1.75 1.81 1.78Euro 1.45 1.46 1.46 1.45 1.46 1.46Japanese Yen 208 214 199 197 201 207-------- ------- -------- ------ --------- ------ --------- 5. Taxation Taxation has been calculated by applying the forecast full year effective rateof tax in the individual fiscal territories to the results for this period. 6. Earnings/(loss) per share 26 weeks to 26 weeks to 52 weeks to 29 July 2006 30 July 2005 28 January 2006 (unaudited) (unaudited) (audited)---------------------------- -------- -------- ----------Basic and diluted earnings/(loss) attributableto ordinary shareholders (£m) 1.9 (0.1) 4.2 Weighted average number of ordinary shares - basic anddiluted ('000) 742,570 743,547 743,547Earnings/(loss) per share 0.26p (0.01)p 0.56p---------------------------- -------- -------- ---------- Basic and diluted earnings/(loss) per share is calculated by dividing theearnings/(loss) attributable to ordinary shareholders by the weighted averagenumber of ordinary shares during the period. 7. Reconciliation of operating profit/(loss) to net cash inflow from operatingactivities. 26 weeks to 26 weeks to 52 weeks to 29 July 2006 30 July 2005 28 January 2006 (unaudited) (unaudited) (audited) £m £m £m----------------------- ----------- --------- -----------Operating profit/(loss) 2.3 (0.2) 5.4Depreciation charge 2.8 3.2 6.1Profit on sale ofproperty,plant and equipment - (0.2) (0.3)Change in inventories (5.6) (0.2) (0.1)Change in receivables 1.3 3.6 0.4Change in payables 3.2 (2.0) 4.5Change in provisions and otherliabilities 0.1 0.1 ------------------------ ----------- --------- -----------Net cash inflow from operatingactivities 4.1 4.3 16.0----------------------- ----------- --------- ----------- This information is provided by RNS The company news service from the London Stock Exchange