BAE.L Regulatory News (BAE)

BEALE PLC

("BEALES" OR THE "GROUP")

RESULTS FOR THE YEAR ENDED 2 NOVEMBER 2013

28th February 2014

Beale PLC, the specialist department store operator, announces Preliminary Results for the 52 weeks ended 2 November 2013.

l Gross sales (inclusive of concession sales and VAT) down 11.1% as a result of

o Two store closures during the year (Cinderford and Maidstone)

o Exit from TV/Audio product category

o Change of promotional stance

o 53 week period in prior financial year

l Like for like (excluding closures and week 53) gross sales declined 8.2%

l Gross margin improved from 50.6% to 52.1% as a result of

o Improved intake margin

o Better stock control

o Product mix shift

l Loss before interest, tax, depreciation, amortisation and exceptional items reduced 27.2% to less than £1.0m (2012: £1.4m)

l Operating Loss before exceptional items reduced to £2.4m (2012: £2.9m)

l Pre tax loss after exceptional items of £4.0m reduced 30.7% (2012: £5.8m)

l Net exceptional expense primarily relates to asset impairment, refinancing and transfer of listing costs £0.8m (2012: £2.1m)

· During the 14 days of Christmas starting 21 December 2013, like for like net sales (excluding VAT) increased 4.1%; for the first 16 weeks of the current financial year like for like net sales are 4.4% behind the previous year.

· The balance sheet retains £7.4m of net assets (2012: £9.5m)

· £1.0m received for the amendment to the lease for Tonbridge store

· Working collaboratively with all key stakeholders the business has met and continues to meet its lending covenants

Will Tuffy Chairman commented:

"The current financial year has been one of considerable change for Beales. The year has seen a change of principal lender, change of CEO, change of listing status, change of culture, change of senior personnel, change of trading stance, and the massive business interruption through concession administrations; the business is different. The business is stronger as a result with options to move forward with a greater degree of confidence."

Further Information

Beale PLC Shore Capital

Michael Hitchcock, Chief Executive Anita Ghanekar

Edward Mansfield

Tel: 01202 552022 Tel: 0207 408 4090

GROUP STRATEGIC REPORT

Beales ambition is to be the local high street department store of choice securing repeat business by offering the highest possible customer service and aligned to absolute fiscal responsibility; the foundation of all successful businesses.

What we do and where we do it?

About the Group

Founded in 1881, today Beales operate a Group of 30 distinctive department stores, predominantly in secondary and tertiary market towns, across the country, from Hexham in the north, Bournemouth in the south, Lowestoft in the east and Southport in the West.

Its revenue is derived through selling product it has bought for resale, both food and non-food, and taking a commission on product and services sold by concessions selling their own product and services, both food and non-food.

In its simplest form, the objective of Beales is to provide a quality mix of both branded and own branded product and services to the local community, giving exemplary traditional local customer service, selling at a higher price to that which it was bought and operating the business at the most cost effective level possible. Beales offers branded, functional and aspirational merchandise and services for men, women and the home, tailored to the individual requirements in each locality of our customers, the discerning ABC1 consumer, who is seeking quality, style and value for money.

The Group is proud of its individuality and unique heritage, which is drawn on to provide exceptional levels of personal customer service and in-store environments which are being enhanced and updated constantly to meet the customers' expectations.

The Group continues to develop its internet sales, with the introduction of many new ranges, some of which may not be available in all stores. Visit www.beales.co.uk to review our wide range of direct delivered merchandise.

Beales offers a loyalty card scheme, Love Rewards, which it launched in May 2012 and now has close to 350,000 members.

Beales can be summarised as a business which is 'asset rich', i.e. it owns £12.4m of property assets and £15.2m of stock, yet 'cash poor', i.e. it has £14.8m of net debt and has produced net trading cash outflows for a number of years. Since Michael Hitchcock joined the business, first as interim CFO in June 2012, before stepping up to CEO, the business has been in turnaround. Significant steps have been taken to exploit the ownership of material freehold assets and stock by refinancing the debt at materially lower financing costs, closing business units that utilised significant cash resources, reorganising internal structures to make processes more efficient and cost effective and closed operating units that were not commercial or economically viable.

At the same time, Beales has exited loss making categories, i.e. TV/Audio and mitigated the failures of certain concession brands by actively seeking more robustly funded concession partners following the collapse of certain concession partners. Beales will continue to reshape the mix of products and brands to ensure it meets the objective of being the local high street department store of choice.

Beales intends to exploit its position in the predominantly secondary and tertiary high street locations where it trades and actively work with the local community to bring the customers back onto the high street. Collaborating with local councils and local Business Improvement Districts will ensure that Beales plays its own part in the rejuvenation of the UK's High Streets. Occupying one of the biggest sites, if not the biggest site in these high streets, provides the opportunity for brands new, re-emerging or traditional, to enter, return or remain respectively, on the high street at minimal risk.

STRATEGY

The ongoing strategy for Beales turnaround is to continue with the following initiatives,

1. Exit operating units that are not commercial or economically viable

2. Exit concession brands that are not commercial or economically viable

3. Exit categories that are not commercial or economically viable

4. Introduce new products and categories to fulfil the objective of being the local high street department store of choice

5. Continue the extensive cultural change within the business to ensure the customer interests are always the top priority for every employee

6. Continue the reorganisation of internal structures to make processes more efficient and cost effective

7. Secure continued ongoing funding to ensure Beales remains a going concern, through collaborating with Beales existing lender and major stakeholders and using the material assets it owns

and to instigate the following initiatives,

1. Position Beales at the heart of the community it trades in, by turning over excess space for community use

2. Leverage the considerable talent and resource it has at the centre, to offer management services to other independent department stores around the UK

3. Utilise the material freehold and leasehold assets that Beales owns to facilitate the generation of cash to reinvest back into their stores

4. Build on the more recent investment in Beales online offer to replicate the in-store experience

5. Build on the click and collect service it currently provides

6. Offer training sessions in store to its customers to take advantage of the online offering

PROGRESS INDICATORS

Progress will be measured by the financial results of Beales, namely profit making and cash self-sufficiency. As the business turns itself around - execution to the highest standard of the objectives/initiatives listed above will continue to move the business from loss making to profit making, towards cash self-sufficiency and to one which affords growth both organically and through acquisition. Everyday standard retail KPIs such as sales per square foot, average transaction value, gross margin, cost percentages and many more, are constantly referred to as guidance to ensure the critical objectives set out above are achieved.

REVIEW

Business Context

The current financial year has been one of considerable change for Beales. The year has seen a change of principal lender, change of CEO, change of listing status, change of culture, change of senior personnel, change of trading stance, and the massive business interruption through concession administrations; the business is DIFFERENT. The business is stronger as a result with options to move forward with a greater degree of confidence.

Change in principal lender:

Following a difficult and soft trading pattern in the early Autumn/Winter 2012 season, the need to refinance became a key priority; Beales is an asset rich but cash poor business, Beales needed to find a lender that played to these attributes and not one that took advantage of them. The business successfully refinanced with Burdale Financial Limited ("Burdale") on considerably lower financing costs, significantly less arduous covenant suite and with a far greater degree of flexibility to meet the uncertainties that exist in UK retail.

Change of CEO:

Following the previous CEO's resignation, the Board asked Michael Hitchcock, then Interim CFO to become CEO; the accountabilities and responsibilities of the senior management team were then realigned to ensure the operational decision making was decisive, collaborative and fully aligned. This made the process of change transparent, effective and at pace.

Change of listing status:

In order to help implement a number of potential strategic initiatives more efficiently and cost effectively it became clear that the Group required a greater degree of regulatory flexibility than it had as a company listed on the premium segment of the main market which is subject to the "super-equivalent" provisions of the Listing Rules. Consequently, the Group is required to seek prior shareholder approval in connection with certain transactions including: acquisitions or disposals of assets, lease amendments and/or surrenders that involve the making of significant incentive payments where these exceed certain size criteria and/or involve a transaction with a related party. The requirement to seek shareholder consent with the associated advisory costs and timing implication, which would not be applicable to a company with a standard listing, could act as a barrier to the Group from carrying out a number of important projects that would allow the Group to generate additional funding in a timely and cost effective manner as and when required. As a standard listed company, administrative costs would be reduced generally and certain transactions could be completed in a shorter timescale and at a materially lower expense than under the premium listing regime.

Change of culture:

The business culture moved from one of 'command and control' to one of 'accountability, responsibility and empowerment' in a very short space of time. A closed and re-active culture was replaced with openness, honesty and a proactive culture. The cultural change in the Head Office and the stores is palpable with customers noticing the difference and starting to speak of Beales again in a much more positive light.

Change in senior personnel:

The message was very clear from the outset from the new CEO; the requirements were clearly laid down and individuals had a choice as to whether they bought into those ideals. It was clear that some people could not cope with the pace of change and some people did not have the capacity to meet the high standards the business had now set itself. Up to 50% of store directors were changed in the last nine months of the financial year; a number of the senior team were changed and some roles were altered and aligned to the new way of working.

Change in the trading stance:

The business previously operated a promotional stance known as 'mega'; these were headline promotions offering customers material discounts which, whilst driving sales, did little to drive gross profit. As part of the strategic review of trading the new Executive Directors were aligned and agreed to cease this practice as it had clearly led to the alienation of customers, the alienation of store staff and the loss of concession partners. Management also, early in the financial year, took the decision to come out of the TV/Audio market, which was a loss making product line for the Group. Both these decisions had the effect of lowering sales whilst lifting the gross margin and more importantly protecting the brand equity of Beales.

Business interruption:

Beales business is 45%-50% concession; during the financial year the Group had a number of concession partners which entered administration causing significant and material interruption and disruption to trade, sales and profit. Famous Footwear - shoes; Barretts - shoes; The floor company - rugs and carpets; Mostyns - soft furnishings; Montgomery - curtains and soft furnishings. In addition some key women's fashion concessions, representing a material proportion of sales, were over 10% down year on year.

Seizing opportunities:

The Group entered into a transaction regarding the Tonbridge store which had a lease up to June 2031. Under the terms of the agreement with Sainsbury the Group received £1 million in cash on 25 April 2013 and, subject to successful planning and certain other pre-conditions being satisfied, the Group will receive a further £3 million on the lease surrender.

Stronger business:

The business ended the financial year in a far stronger position than it entered. The concession 'mats' are full for the first time in a number of years, the stock is the cleanest it has ever been, the margin in the stock supports the budget gross margin growth (see below) for 2014, the business has a supportive lender who wants to work with the business, the business has closed two non-commercial stores during the year with an option to close eight others in the current financial year, the business has negotiated a £1.2m rent reduction in a key store over three years, and Beales is attracting some key and sought after brands back into its stores. The business has options going forward.

Further progress:

Since the year end, executive management has made further progress to secure the long term viability of Beales. Collaboration amongst all the key stakeholders in the business including, principal lender, shareholders, landlords, suppliers, and pension trustees have all played a cooperative and communicative part in some way to assist the management whilst the business turns itself around. Whilst the specific nature of this assistance is required to remain confidential, the assistance largely takes the form of enhancing cash availability and creating headroom to borrowing facilities in case of negative trading movements. These actions also go a long way to supporting the Board's belief that the Group should be able to operate within its borrowing facilities and the Board has therefore continued to adopt the going concern basis in preparing the annual report and accounts, as detailed in the Financial Review.

MARKET OVERVIEW

The retail sector has borne the brunt of the austerity measures that the country has had to take on in the last few years and this is shown through footfall and LFL sales movements for the sector as a whole. The independent department store sector is under increasing pressure with a number of smaller chains falling into administration as they have been unable to facilitate the access to higher levels of working capital funding.

With this in mind the customers have clearly been seeking out products which come with a promotion and/or a discount; the first rail customers go to in store is increasingly the 'sale' rail. The vagaries of the English weather have also served to make it very difficult, for fashion in particular, to form any sort of normal pattern; warm and wet when fashion dictates it should be cold and dry and cold and dry when fashion dictates it should be warm and wet. Online is becoming an ever more established and greater share of the retail market with huge sums of money being invested to offer an omni-channel route to market.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties have not changed from last year and the Board continues to apply mitigating actions. All retailers face a very challenging and competitive trading environment. Sound risk management is an essential discipline for running the business efficiently.

Is there uncertainty?

Beales, as with all retailers, is highly operationally cost geared, i.e. there are a majority of costs that need to be spent before any sales are made, which means relatively small movements in sales and gross margin can materially affect the profitability of the business, both positively and negatively. To that end and given the absolute levels of losses before interest, tax, depreciation and amortisation generated by Beales, and covenants set based on the trading cash flow of the business, there will always be uncertainty.

What are the risks?

The nature of risk is that no list can be totally comprehensive, though the directors believe the principal risks and uncertainties faced and the mitigating actions taken to manage these risks and uncertainties are as follows:

The single biggest risk is our customers continued slow emergence from the period of austerity that the UK has been through. Beales may have the best looking shops with the best product and the best customer service, but if the customers do not have the increasing free disposable cash, they will not be minded to spend. A slow economic upturn mixed with continuing flagging consumer confidence with the need for increased discounting and promotions adversely impacts on revenues and margins. In mitigation we:

• Continually review the markets and performances of the trading environment;

• Balance our exposure by managing product mix, supplier mix and profit margins;

• Regularly monitor strategic key performance indicators; and

• Seek to enhance our sourcing margins and improve commercial terms.

Weather plays an important factor in the short term trading of any retailer, particularly those which have a core fashion offer and are dependent upon a 'normal' spring/summer and autumn/winter weather sequence; the mitigation to this, to an extent, is to adopt a more trans-seasonal product buying strategy.

Concession product or business failure: the last financial year has shown the level of disruption to trading through concession failure and poor product or line failure. These events are synonymous with the prevailing economic state of the nation. The business mitigates the likelihood of these events through careful and considered choice of concession partners.

In uncertain economic conditions the level of resources may be inappropriate to deliver the expected business benefits. In mitigation we:

• Regularly review the group corporate plan against expectation;

• Monitor our cost controls against structured financial plans and act accordingly; and

• Invest in appropriate systems to cost effectively monitor performance and add value.

Cash resources; Beales, being asset rich and cash poor with a material external debt needs to generate cash through sales. In the event that sales do not meet targets, to ensure that the terms of the external debt are met, other mitigating measures will need to be adopted to generate cash. In mitigation we:

• Maintain a strong relationship with major stakeholders;

• Ensure consistent and disciplined monitoring of working capital; and

• Review the allocation of Group resource and capital investment.

The Group may lose expertise with resignation of key Directors and senior management who are key to delivering success. In mitigation we:

• Seek to motivate all colleagues to fulfill Group targets;

• Have an ethos of candid and honest communication;

• Relevant review of remuneration appropriate to all areas of the business; and

• Seek to develop our people to take on greater responsibility.

The Group has continued to work within its lending facilities. However, the Group is subject to a number of risks and uncertainties, the principal ones being set out above, which we continually review in determining that the Group continues to operate as a going concern. Please refer to the Going Concern statement in the Financial Review.

OTHER KEY CONSIDERATIONS

Employees

People are at the centre of every retail business and Beales places the highest attention on securing and retaining the best talent open to them. Beales recognises that to ensure repeat business you need the right character of people working in stores. Choice of character in the first instance is a critical recruitment factor going forward.

Beales is continuing its strategy of ensuring that its employees look forward to coming into work. Culturally the business has moved forward massively and this positive momentum will be continued.

There are basic and expected requirements from all our employees, all geared at giving the customers the best customer experience. In turn we strive to give back to our employees career opportunities, training and development, and financial incentives and rewards wherever and whenever possible.

The analysis of gender of our employees at year end is set out below:

Environment

Beales has an ageing estate which in turn makes energy efficiency challenging; however Beales takes every opportunity to limit the energy it uses, actively monitoring energy use each hour across each building to ensure responsible and efficient use. All locations undertake to recycle materials of every sort wherever possible and to dispose of waste in the proficient and prescribed manner.

Human rights

Beales does not have a specific human rights policy at present but it does have policies representative of human rights principles.

Beales does not have a specific sourcing policy at present but it makes every effort to ensure that where it buys direct, or where it buys through a third party, the rights of all workers are respected.

Beales is an equal opportunities employer and actively seeks to protect the rights of all individuals to be free from discrimination or harassment. It operates a very strict and diligent approach to human rights ensuring each individual has the right and appropriate opportunities afforded to each human being.

Social and community issues

Beales places significant emphasis on the local area it serves. All stores have a chosen local charity which they support in a number of ways and seek to allow local groups to use the store as fund raising venues or provide resources to support local events in the community.

Beales is a huge supporter of the work undertaken by both Mary Portas and Bill Grimsey and wholeheartedly support the initiative to put the high street at the heart of local communities. This forms one strand of the strategy outlined above and adds to the initiatives already being undertaken by Beales, the 'local high street department store' of choice.

OUTLOOK AND SUMMARY

The steps management is taking cannot guarantee success; however, they can give the business the best chance of success during this critical turnaround phase. Beales has a lot of talent within its employees and they now have the culture and the environment to express and deploy that talent to good effect. There is passion, character and desire to turn Beales trading performance around. As a CEO I cannot ask for more from my team. Align this to the steps outlined in the strategic report and with some help from those factors outside of our control, weather and continued UK and global recovery, Beales has every chance of emerging from the turnaround phase in a far stronger position, to then take on a growth phase.

Michael Hitchcock

Chief Executive

Chairman's Statement

Overview

It seems that it is becoming a regular starting point to begin the Chairman's Statement with words to the effect that 'the year has been another tough year for UK retailers' - I make no apologies for saying that 2012/13 was no exception as it has indeed been one of the most challenging years in the retail sector for some time. Although the government statistics tell us that the UK economy has returned to growth, the purchasing power of consumers remains very much under pressure from food shopping prices and energy bills, which have both risen at a much steeper rate than household wages. Belts have to be tightened as there is less disposable income than last year, consequently consumers continue to keep a tight rein on expenditure and consequently confidence is subdued.

Beales is a business in turnaround and I am pleased to report it has made positive progress in 2012/13 towards the Group's major objective of returning our business to profitability. I say this because we have concentrated and focused our efforts and resources, to the very best of our ability, on what we can control. We continue to offer great value, brands and quality products to our customers through the balanced mix of own bought products and concession brands that has benefited margin in the year. Our loyalty programme has attracted c. 350,000 members since its launch in May 2012. Our people, throughout the business, have embraced the discipline of fiscal responsibility, understood the value that giving great customer service has to differentiate us from competitors and benefit future business and there is a shared desire by all staff to play their part in the turnaround. We have continued to invest carefully, with focused investment in the infrastructure to facilitate our online business in the future and are pleased with the results achieved. Much work remains to be done and the road ahead will be long and bumpy, but the turnaround has started to gain momentum and Beales has ended the year in a stronger position.

Results

The Group loss before tax for the year (52 weeks ended 2 November 2013) was £4.0m after exceptional charges of £0.8m (further details of which are detailed in the Financial Review) and represents a 30.7% improvement on the previous year (53 weeks ended 3 November 2012 £5.8m loss after exceptional charges of £2.1m). This significant improvement was achieved as a result of the full year benefit of the cost saving initiatives started last year and despite the negative impact of several factors outside the control of the Group (i.e. one week less in the financial year, abnormal weather conditions which affected sales of seasonal fashion merchandise in Spring and Autumn and the failure/underperformance of a number of concession partners in product areas which are key to the overall department store offer).

Gross sales (including VAT and Concession Sales) for the 52 weeks ended 2 November 2013 were £120.5m (53 weeks ended 3 November 2012 £135.5m). Gross profit for the year was £33.4m (2012 £37.8m and was achieved at an improved margin of 52.1 % (2012: 50.6%). As I have mentioned above, we traded for one week less in 2013 and sales were negatively impacted by several uncontrollable factors. Sales were also affected by Board decisions to close three stores (Skipton, Maidstone and Cinderford); to change the operation of 22 restaurants/cafes within Beales stores from being run by Beales to being run by concessionaires; to exit from low margin TV and Audio categories and to change the trading stance in order to move away from 'mega' promotions which chased sales at the detriment of margin, devaluing the Beales brand proposition and confusing our core customers.

Excluding the preference shares, net debt of £8.4m at 2 November 2013 is £0.4m below the previous year (2012: £8.8m) due, essentially, to a combination of the move to Burdale from HSBC and a reduction of the ARCS/Panther indebtedness.

The financial results are discussed in greater detail in the Financial Review.

Trading Update

Beales saw a very slow start to the new financial year with like for like sales after 7 weeks down 9.7% versus the same period last year. Some of this decline will be attributable to the cessation of 'mega' promotions which in the prior year generated heightened sales at little or no margin and the exit from the TV/Audio sector; however it still reflects the fact that the customers were restricted in terms of lower disposal incomes in the run-in to Christmas and the increasing tendency to shop later and later in the pre-Christmas period.

The 14 days of Christmas saw like for like sales increase 4.1% as shoppers resorted to local high streets for late Christmas shopping. Post-Christmas, customers were chasing a bargain with 'sale rails' the first port of call for many customers entering the stores. The first three weeks of the new calendar year saw like for like sales increase 9.0%, which even allowing for the snow and ice in the prior year, reflects a good growth. The end of January and the start of February have been materially affected by the flooding and inclement weather that continue to affect the UK and like for like sales are behind 5.6% compared to the same period last year.

Overall, for the first 16 weeks of the current financial year compared to the same period last year, like for like sales are behind 4.4%.

Board Succession

Following Tony Brown's departure on 8 February 2013, the Board took the decisions to appoint Michael Hitchcock as Chief Executive and increase the scope and enhance the responsibilities of Tony Richard's role as Trading Director.

On 23 April 2013, Stuart Lyons was appointed as non-independent non-executive director (representing the interests of Panther Securities Plc and Andrew Perloff's other family interests, which together hold 29.72% of the Group's issued share capital), replacing Simon Peters. On 21 October 2013, following Stuart's decision to step down, we welcomed Simon back to the Board.

On 18 July 2013, Cath Norgate-Hart was appointed non-executive director bringing a wealth of retail product and buying experience to the board. We are delighted to have Cath on the Board and we look forward to her continued valuable contribution.

On 12 September 2013, Keith Edelman left the Board and I was appointed Chairman as his successor. Keith joined Beales as non-executive director in September 2008 and was appointed Chairman in November 2011. On behalf of the Board and all of the staff at Beales, I would like to thank him for his considerable contribution and wise counsel. Following my appointment as Chairman, Cath has taken up the chairmanship of the remuneration committee and will be the senior independent non-executive director.

Staff

On behalf of the Board and shareholders, I would like to give special thanks to all Beales staff throughout our company - in stores and head office - for all of their dedication, hard work and considerable efforts during the year. In particular, I would like to thank them for embracing the change of culture and recognise the importance of the massive contribution they make to our business.

It is also right to recognise our concessions partners, our suppliers and AIS, our buying group, for their contribution during the past year.

Banking Facilities and Going Concern

We are pleased with the financial support and partnership extended to us by Burdale with whom we began a three year loan facility in February 2013.

As you would expect, the Group continues to manage its cash very closely and has met all of its banking covenants during the 2013 year. I have already mentioned that Beales operates in a very challenging and competitive trading environment and there are a number of risks and uncertainties facing the Group that are likely to impact its future development, performance and position. The Board continually assesses the Group's performance and manages those risks and uncertainties by careful consideration of the appropriate resources required by the Group. The Board believes that the Group should be able to operate within its borrowing facilities and the Board has therefore continued to adopt the going concern basis in preparing the annual report & accounts, as detailed in the Financial Review.

Outlook

Despite government statistical evidence indicating the resumption of growth in the UK economy, retailers and retail commentators agree that it is unlikely that consumer confidence will return quickly in 2014 and that the consensus prediction is that the road to a consumer led recovery will be long. If, on the other hand, one is optimistic about increased economic growth in 2014, this may accelerate the spectre of intervention by the Bank of England to increase interest rates, which will it itself lead to a further squeeze on disposable income. Either way, I conclude it would be illogical to assume that 2014 will see a significant increase in consumer spending and therefore I believe we can expect another tough year. As I said earlier, we at Beales will continue to concentrate and focus all of our effort and resources on what we can control to the very best of our ability.

Finally, I would like to pay particular thanks to Michael Hitchcock for his exemplary leadership and, together with Tony Richards, for their significant contributions thus far as the Executive Directors charged with the responsibility to deliver the turnaround of this business.

Will Tuffy

Independent Non-Executive Chairman

Financial Review

Overview of the Year

The business has continued to reset the operational cost base and deliver greater productivity from a largely fixed cost base. Further initiatives have been taken to maximise the availability of cash resources and minimise the level of debt in the business.

The business has made progress over the year with the loss after taxation reducing from £5.8m to £3.9m. The balance sheet net asset value of £7.4m (2012: £9.5m) contains freehold assets of £12.4m (2012: £12.5m) and a stock balance of £15.2m (2012: £15.8m) which is the cleanest in terms of ageing and quality than it has been for a significant number of years.

On 1 February 2013 the business arranged a new loan facility with Burdale. Moving the Group loan facility to Burdale has allowed the Board to allocate greater focus on the running of the department store business, rather than continually facing the possibility of covenant breaches.

Results

Gross sales, which include VAT and concessional sales, decreased to £120.5m (2012: £135.5m). During the year, the Group ceased trading in three stores, Cinderford, Maidstone and Skipton. The business also took the decision to cease 'mega' promotions which had lifted sales but at little or no margin and also to exit the TV/Audio sector, which was economically unviable. Furthermore, the year ended 3 November 2012 contained 53 weeks. Excluding the 53 week and the three stores which closed, gross sales were 8.2% down on the previous year.

Revenue from continuing operations fell to £64.1m from £74.6m. In part this is a result of the Group concessioning 22 restaurants/cafes within the department stores to a third party. As a consequence concession sales now account for 48.79% (2012: 45.95%) of gross sales.

Gross margin rose from 50.63% to 52.11%. This is in part the result of coming out of the TV/Audio which provided low margin, concessioning 22 restaurants/cafes within the department stores to a third party, and the greater control of stock and its ageing compared to prior periods.

Total administration expenses fell from £42.8m to £36.6m. This was as a result of three factors: the restructuring carried out in 2011/2012 financial year; the closure of 3 department stores during the year; and the concessioning of catering outlets.

During the year there was a net exceptional charge of £0.8m (2012: £2.1m); this was a combination of refinancing costs, costs associated with moving from a Premium Listing to a Standard Listing and asset impairment offset against an exceptional credit received following signing of a conditional agreement which may give rise to the surrender of the Tonbridge Lease. The Board regard these costs as exceptional as they are not recurring.

The operating loss has reduced from £5.0m to £3.2m.

The net cost of financing the business rose from £0.7m to £0.8m, 53.36% of the current year's cost comes from the finance charge on the preference shares which are not paid in cash as it represents an accounting charge.

Taxation

Deferred tax is provided in the accounts at 20%. There is a deferred tax credit of £112,000 (2012: charge £59,000).

Earnings

The loss per share and diluted loss per share was 18.9p (2012: loss per share and diluted loss per share 28.3p).

Loss before interest, depreciation, amortisation tax improved to £1.8m (2012: £3.4m).

No dividends were paid in the year (2012: nil per share). The Board considers that a significant trading improvement will be necessary before dividends are paid.

Pensions

From 1 September 2013 the Group operated a Group Personal Pension Scheme with Scottish Widows and the People's Pension as part of Auto-enrolment.

The Group closed the Beales defined contribution pension scheme to further accrual on 31 August 2013. During April 2009 the Group closed its defined benefit pension scheme to future accrual, having been closed to new entrants since April 1997. The Beales pension scheme is operated by the main trading subsidiary, J E Beale plc, which also has the responsibility for the Denners pension scheme. That scheme was closed to new members and future accrual when Denners Limited was acquired by the Group in 1999. The net surplus for both schemes remains on balance sheet.

The Group's total final salary pension surplus under IAS 19 at the year-end was £0.8m (2012: Deficit £1.2m); details of this are shown in the financial statements. The total actuarial gain for the period was £1.5m (2012: £2.2m loss). The Beales scheme has an IAS 19 surplus of £0.1m (2012: £1.7m deficit). The Denners scheme has an IAS 19 surplus of £0.7m (2012: £0.5m surplus).

During the year the Group continued to meet the contribution schedules agreed with the trustees for both schemes, contributing £0.5m (2012: £1.2m). Agreement was reached with the trustees of the Beales scheme regarding the triennial valuation based upon the year end of October 2010 and a new schedule of contributions was then agreed. This was subsequently revised at the time of the renewed revolving credit facility in June 2012. This resulted in a rate of contribution of £0.5m per annum, a reduction from the £1.55m per annum previously agreed. The calculations for the Beales pension scheme triennial valuation for the year ended2 November 2013 are ongoing. The Denners scheme October 2011 triennial valuation has been finalised by the actuary and no employer contributions are required.

Group systems

The Group systems are being continually improved to allow expedient and more effective decision making; retail is a 24/7 sector which requires information on a real time basis to be able to react to customer demands, market trends and environmental changes. The improved efficiency will continue to drive further efficiency cost savings.

Treasury and banking

Treasury activities are governed by procedures and policies approved by the Board. The Group's policy is to take a conservative stance on treasury matters and no speculative positions are taken in financial instruments. The treasury function manages the Group's financial resources in the most appropriate and cost-effective manner.

In negotiating the acquisition of the stores from ARCS in May 2011, the Group negotiated a five year term loan facility of £2.5m and issued £8.5m of preference shares at their nominal value. The term loan was repayable at a rate of £0.5m per annum although this was subsequently revised at the time of the renewed revolving credit facility in June 2012. The 8.5m £1 preference shares issued on 22 May 2011 are interest free for a period of five years, then interest is payable at a rate of 8.0% for four years, thereafter interest is payable at 9.0% for the residual life. They are to be redeemed at a rate of £0.5m bi-annually from year five. The Group has the option to redeem the preference shares at any time without any penalty for settlement. The specific terms of the preference shares create an embedded derivative for the Group. The fair value of the preference shares and the valuation of the embedded derivative were included in calculating the negative goodwill arising from the acquisition in 2011. There are, and will continue to be, non-cash charges and/or credits in the financial statements relating to accrued interest on the preference shares and fair value gains and/or losses in relation to the contracts' embedded derivative. Details of the preference shares and embedded derivative are shown in the financial statements.

On 1 February 2013 the Group agreed a refinance agreement with Burdale, an asset backed lender. Burdale is a subsidiary of Wells Fargo Bank in the USA. The loan runs for 3 years from 1 February 2013. The terms of the facility are for up to a maximum £12.0m senior secured credit facilities. The actual value that the Group can borrow is determined by the Group stock and property value, the maximum the Group could borrow from Burdale in 2013 was £9.4 million. The bank facilities include a financial covenant which requires the Group to procure that the trading cash flow in respect of each review period as set out in the facility agreement shall not be less than the amounts agreed between the Group and the lender, calculated on the basis of the financial projection. In addition there is a condition that for a period of 14 days between1 December and 31 January each year drawings do not exceed £2.5m except that for the period 1 December 2013 to 31 January 2014, in which case the limit shall be £3.0 million.

The facilities are secured by a first debenture over the Group assets (excluding the Kendal freehold to the extent of the Beales Pension Trustee charge). The Group is dependent on bank support to remain as a going concern. Furthermore, given the size of the Group's borrowing its loss will be affected by variations in interest rates.

Going concern

From 4 November 2012 to 1 February 2013 the Group and Company met their day-to-day working capital requirements through the use of one principal HSBC bank loan facility of £8.5 million (which was repayable on31 October 2015) and an overdraft facility of £0.1m which was repayable on demand.

As noted in both the Strategic Report and the Chairman's Statement all retailers face a very challenging and competitive trading environment and there are a number of risks and uncertainties facing the Group which are likely to impact its future development, performance and position. We are continually assessing our performance and managing these risks and uncertainties in considering the appropriate resources required for the Group.  The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review. In addition, the financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk, interest rate risk, market risk and liquidity risk.

The Directors have prepared forecast information for the 2013/14 year and a three year corporate plan. Based on these forecasts, forward covenant tests to October 2014, after applying financial sensitivities based on reasonably possible alternative trading scenarios and mitigating actions, show that the covenant is not forecast to be breached in the period to October 2014. Since the year end, executive management has made further progress to create additional headroom to borrowing facilities in case of negative trading movements. Collaboration amongst all the key stakeholders in the business including- principal lender, shareholders, landlords, suppliers, and pension trustees have all played a cooperative and communicative part in some way to assist the executive management whilst the business turns itself around. Whilst the specific nature of this assistance is required to remain confidential, the assistance largely takes the form of enhancing cash availability and creating headroom to borrowing facilities in case of negative trading movements. The forecast and corporate plan are based on market data and past experience and the Directors have formed a judgement that at the time of approving these financial statements, based on those forecasts and projections, there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. On this basis the directors continue to adopt the going concern basis of accounting in preparing the financial statements.

Balance sheet and cash flow

The balance sheet retains a net asset value of £7.4m (2012: £9.5m). The loss for the period of £3.9m (2012: £5.8m) has been offset in part by the elimination of the IAS 19 pension deficit.

Inventories have been reduced by £562k in part as a result of the closure of Cinderford, Maidstone and Skipton. Trade debtors have reduced substantially during the year following the closure of the Group in house credit business on 17 November 2012.

Total borrowing (excluding the preference shares) is £9.6m (2012: 9.3m), including both current and non-current elements. Significant reasons for the increase in debt are the investment in plant and machinery, redemption of preference shares, provision of £1.0m on deposit with HSBC and the operating loss.

The largest cash inflows are the result of the decision to close the in house credit function and the receipt of £1.0 million in relation to the Tonbridge lease. In April 2013 Beale plc announced that its principal trading subsidiary, J E Beale PLC, had signed a conditional agreement with Sainsburys which may give rise to the possible future surrender of the lease of its Tonbridge store. On signing of the agreement, J E Beale PLC received £1.0 million and this is been credited to profit evenly over two years.

The transaction is conditional on certain pre-conditions being satisfied within a 6 year period. If these conditions are satisfied then J E Beale PLC will be obliged to surrender the lease of its Tonbridge store to Sainsburys. Upon completion J E Beale PLC would receive a surrender premium of up to £3.0 million.

The Group's long term liabilities fell as a result of elimination of the pension deficit under IAS 19.

Capital and Financial Risk Management

The Group manages its capital to ensure that it can continue as a going concern. The capital structure of the Group consists of borrowings, preference shares, cash, cash equivalents, share capital, share premium account, revaluation reserve, ESOP reserve and retained earnings.

The Group's Treasury function provides services to the business, co-ordinates access to domestic financial markets, monitors and manages the financial risks relating to the operations of the Group. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Corporate Treasury function reports to the Board regularly. No dividend accrues on the preference shares until five years from the date of issue. Thereafter a preferential dividend of 8% per annum will be payable on each of the preference shares for 4 years, increasing to 9% thereafter. The preference shares can be repaid at any time at no penalty.

An embedded derivative in relation to the prepayment option arising on the original 8.5 million preference shares was valued at inception to be £1.1 million. As at 2 November 2013 the derivative was valued at £1.4 million (2012: £1.4 million). It has been assumed the Group can borrow at 5% (2012: 5%) over LIBOR without security in determining the credit spread required to value this instrument. The valuations were supplied by an independent third party.

The Group's activities do not expose it to changes in foreign exchange rates as nearly all imports are purchased in sterling. However, the Group is exposed to interest rate risk because entities in the Group borrow funds from third parties, the interest rates on which are linked to LIBOR.

Consolidated Income Statement

For the 52 weeks ended 2 November 2013

* Gross sales include revenue from concession sales and VAT.

Consolidated Balance Sheet

As at 2 November 2013

Consolidated Statement of Comprehensive Loss

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

For the 52 weeks ended 2 November 2013