BAE.L Regulatory News (BAE)

Beale PLC, the specialist department store operator, announces Interim Results for the 26 weeks ended 4 May 2013.

•

Operating Profit (pre-exceptional costs) of £145,000, an improvement of £749,000

·;

Exceptional costs of £479,000 relate to refinancing with Burdale Financial Limited and the move from premium to standard listing on the Stock Exchange

•

The exit from TV & Audio and more targeted promotions leaves total and like for like gross sales, which include concession sales and VAT, 7% lower than last year

•

Total gross profit declined 10.5% with a shift in the sales mix offset by less promotional markdown to leave gross margin largely flat

•

Cost restructuring, process improvements and generally much better cost control lowered administrative expenses (excluding exceptional items)13.8%

•

Cash inflow from operating activities before interest and tax of £2.3m, versus a £1.2m outflow last year

Post

·;

£1m received for the amendment to the lease for Tonbridge store

Post Balance Sheet

•

Maidstone ceased trading on the termination of its lease at the end of June

•

The closure of the Cinderford store at the end of July has been announced

•

Keith Edelman to resign from the Board once a suitable replacement has been found and appointed

Notes

26 weeks to

4 May

2013

£000

26 weeks to

28 April

2012

£000

Audited

53 weeks to

3 November 2012

£000

Gross sales*

2

65,919

70,846

135,549

Revenue - continuing operations

2

35,588

39,717

74,609

Cost of sales

(17,215)

(19,179)

(36,833)

Gross profit

18,373

20,538

37,776

Administrative expenses

Exceptional administrative expenses

3

(18,228)

(479)

(21,142)

-

(40,712)

(2,082)

Total administrative expenses

(18,707)

(21,142)

(42,794)

Operating profit/(loss) before exceptional items

145

(604)

(2,936)

Operating loss - continuing operations

(334)

(604)

(5,018)

Finance expense

(413)

(358)

(733)

Finance income

1

1

1

Loss on ordinary activities before tax

(746)

(961)

(5,750)

Taxation credit/(charge) on loss

5

-

24

(59)

Loss for the period from continuing operations attributable to equity members of the parent

(746)

(937)

(5,809)

Basic loss per share

6

(3.63)p

(4.56)p

(28.3)p

Diluted loss per share

6

(3.63)p

(4.56)p

(28.3)p

*

Gross sales reflect revenue inclusive of concession sales and VAT, all from continuing operations.

Notes

4 May

 2013

£000

28 April

 2012

£000

Audited

3 November

 2012

£000

Non-current assets

Goodwill

7

892

892

892

Property, plant and equipment

24,775

27,024

25,204

Financial assets

-

16

16

Derivative asset

8

1,496

1,405

1,416

27,163

29,337

27,528

Current assets

Inventories

14,475

15,759

15,816

Trade and other receivables

3,061

5,961

5,295

Cash and cash equivalents

606

847

454

Restricted cash

9

1,000

-

-

19,142

22,567

21,565

Total assets

46,305

51,904

49,093

Current liabilities

Trade and other payables

(12,547)

(13,494)

(14,449)

Provisions

(170)

-

(271)

Tax liabilities

(35)

(35)

(35)

Preference shares

-

-

(307)

Borrowings, bank loan & overdrafts

(250)

(6,500)

(255)

(13,002)

(20,029)

(15,317)

Net current assets

6,140

2,538

6,248

Non-current liabilities

Preference shares

10

(6,445)

(6,368)

(6,213)

Borrowings

(8,591)

(1,750)

(9,025)

Retirement benefit obligations

12

(1,171)

(203)

(1,171)

Lease incentives

(4,260)

(3,409)

(3,790)

Deferred tax liabilities

(3,072)

(3,158)

(3,066)

Obligations under finance leases

(977)

(979)

(978)

Total liabilities

(24,516)

(37,518)

(15,867)

(35,896)

(24,243)

(39,560)

Net assets

8,787

16,008

9,533

Equity

Share capital

1,026

1,026

1,026

Share premium account

440

440

440

Revaluation reserve

9,026

9,042

9,082

Capital redemption reserve

361

54

54

ESOP reserve

(14)

(22)

(15)

Retained earnings

(2,052)

5,468

(1,054)

Total equity

8,787

16,008

9,533

26 weeks to

4 May

2013

£000

26 weeks to

28 April

2012

£000

Audited

53 weeks to

3 November 2012

£000

Actuarial gain on pension scheme

-

-

(2,236)

Revaluation

-

-

-

Tax on revaluation reserve

-

87

183

Tax on items taken directly to equity

-

-

37

Net income recognised directly in equity

-

87

(2,016)

Loss for the period

(746)

(937)

(5,809)

Total comprehensive loss for the period

(746)

(850)

(7,825)

26 weeks to

4 May

2013

£000

26 weeks to

28 April

2012

£000

53 weeks to

3 November 2012

£000

Opening equity

9,533

16,858

16,858

Total comprehensive loss for the period

(746)

(850)

(7,325)

Total movements in equity for the period

(746)

(850)

(7,325)

Closing equity

8,787

16,008

9,533

Share

 Capital

£000

Share

 premium account

£000

Revaluation

reserve

£000

Capital redemption reserve

£000

ESOP

reserve

£000

Retained

earnings

£000

At 30 October 2011

1,026

440

9,010

54

(22)

6,350

Loss for the period

-

-

-

-

-

(937)

Deferred tax on revaluation reserve

-

-

87

-

-

-

Transfer from revaluation reserve

-

-

(55)

-

-

55

28 April 2012

1,026

440

9,042

54

(22)

5,468

Loss for the period

-

-

-

-

-

(4,872)

ARCS loan

-

-

-

-

-

500

Tax on Comprehensive income

-

-

-

-

-

37

Deferred tax charge on revaluation reserve

-

-

96

-

-

-

EPOS reserve loss for the period

-

-

-

-

7

(7)

Transfer from revaluation reserve

-

-

(56)

-

-

56

Net actuarial loss

-

-

-

-

-

(2,236)

3 November 2012

1,026

440

9,082

54

(15)

(1,054)

Loss for the period

-

-

-

-

-

(746)

Deferred tax on revaluation reserve

-

-

-

-

-

-

EPOS reserve loss for the period

-

-

-

-

1

(1)

Redemption of preference shares

-

-

-

307

-

(307)

Transfer from revaluation reserve

-

-

(56)

-

-

56

4 May 2013

1,026

440

9,026

361

(14)

(2,052)

Note

26 weeks to

4 May

2013

£000

26 weeks to

28 April

2012

£000

Audited

53 weeks to

3 November 2012

£000

Cash inflow/(outflow) from operating activities before interest and tax

11

2,340

(1,152)

(2,493)

Interest paid

(177)

(149)

(360)

Interest received

1

1

1

Net cash generated from/(used in) operating activities

2,164

(1,300)

(2,852)

Cash flows from investing activities

Purchase of property, plant and equipment

(302)

(1,241)

(1,611)

Proceeds from maturing of investment

37

-

-

Net cash used in investing activities

(265)

(1,241)

(1,611)

Cash flows from financing activities

Preference shares redeemed

(307)

-

-

(Decrease)/increase in bank loans

(309)

2,900

4,800

Repayment of loan

(125)

(250)

(625)

Net repayments from obligation under finance lease

(1)

-

(1)

Net cash (used in)/generated from financing activities

(742)

2,650

4,174

Net Increase/(decrease) in cash and cash equivalents in the period

1,157

109

(289)

Cash and cash equivalents at beginning of period

449

738

738

Cash and cash equivalents at end of period (including restricted cash)

1,606

847

449

26 weeks to

4 May

2013

£000

26 weeks to

28 April

2012

£000

52 weeks to

3 November

2012

£000

Cash at bank

Restricted cash

Bank overdrafts

606

1,000

-

847

-

-

454

-

(5)

Cash and cash equivalents (including overdrafts)

1,606

847

449

Borrowings:

Debt due within one year - Bank loan

- Loan

-

(250)

(6,000)

(500)

(307)

(250)

(250)

(6,500)

(557)

Debt due after one year

Preference shares

(6,445)

(6,368)

(6,213)

Loan

(1,000)

(1,750)

(1,125)

Bank loan

(7,591)

-

(7,900)

(15,036)

(8,118)

(15,238)

Total borrowings

(15,286)

(14,618)

(15,795)

Net debt

(13,680)

(13,771)

(15,346)

1.

Accounting Policies

Basis of preparation

The Interim Financial Statements for the 26 weeks ended 4 May 2013 have been prepared on the basis of the accounting policies set out in the Group's financial statements for the 53 weeks ended 3 November 2012.

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 £112,000 which was repayable on demand.

On 1 February 2013 the Group entered into a new loan facility with Burdale Financial Limited. The terms of that loan facility are for up to a maximum of £12m Senior Secured Credit Facilities. The facilities are secured by a debenture over most of the present and future assets and undertakings. The new bank facilities include one financial covenant which requires the Company shall procure that 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 Company and the lender based on financial projections. At the moment the trading cash flow covenants are only stated to the end of October 2013. The bank facility states that, for covenant levels beyond October 2013, the Lender, acting reasonably, will determine new trading cash flow covenant levels for the following financial year based on the Annual Revised Forecasts and consistent with the methodology applied by the Lender in determining the financial covenant levels set out in the agreement. In addition there is condition that for a period of 14 days between 1 December and 31 January each year drawings do not exceed £2.5m.

The Group is subject to a number of risks and uncertainties which arise as a result of the current economic environment. In determining that the Group is a going concern, these risks, the most significant of which are the impact on consumer behaviour and in turn the impact on the level of the Group's sales, have been considered by the Directors.

The Directors have prepared forecast information for the 2012/13 year and a three year corporate plan. Based on these forecasts, forward covenant tests to October 2013 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 2013. 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 interim 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. Thus the going concern basis is adopted in preparing these interim statements.

2.

Revenue

All the Group's revenue is derived from retail sales made in the UK. Revenue excludes VAT and the non-commission element of sales made by concession outlets.

26 weeks to

4 May

2013

£000

26 weeks to

28 April

2012

£000

52 weeks to

3 November

2012

£000

Gross sales

65,919

70,846

135,549

VAT

(10,869)

(11,615)

(22,207)

Gross sales (excluding VAT)

Agency sales less commission

55,050

(19,462)

59,231

(19,514)

113,342

(38,733)

Revenue

35,588

39,717

74,609

Seasonality of sales

The Group sales are more heavily weighted towards the first half of the financial year on a like for like basis, with 53.82% (2011: 54.44%) of gross annual sales of the previous year being made in the first half on a like for like basis (this excludes the 19 stores acquired from ARCS on 22 May 2011). 

3.

Exceptional administrative expenses

The Group had an exceptional item of £479,000 (28 April 2012 £Nil, 3 November 2012 £2,082,000). The £479,000 exceptional item consisted of costs associated with refinancing the Group and the move from premium to standard listing on the stock exchange. The £2,082,000 arising in the period to 3 November 2012 relates to fixed asset impairment, store card closure costs and redundancy cost.

4.

Segment information

The Board have reviewed the requirements of IFRS 8. The individual department stores have similar economic characteristics, products and services, class of customer, method of service provision and regulatory environment. Consequently the directors consider the individual stores can be aggregated into one segment.

5.

Tax

A tax charge has arisen of nil (2012: £24,000 credit). The total tax charge for the 53 weeks ended 3 November 2012 was calculated at 10.26%.

Tax for the six month period is charged at nil (26 weeks ended 28 April 2012 credit at 2.5%; 53 weeks ended 3 November 2012 charged at 10.26%).

6.

 Loss per share

26 weeks to

4 May

2013

26 weeks to

28 April

2012

52 weeks to

3 November

2012

Weighted average number of shares in issue for the purpose of basic earnings per share

20,524,797

20,524,797

20,524,797

Dilution - share reward schemes

228,312

949,874

781,562

20,753,109

21,474,671

21,306,359

£000

£000

£000

Loss for basic and diluted earnings per share

(746)

(937)

(5,809)

Pence

Pence

Pence

Basic loss per share

(3.63)

(4.56)

(28.3)

Basic loss per share before exceptional item

(1.30)

(4.56)

(18.16)

Diluted loss per share

(3.63)

(4.56)

(28.3)

7.

Goodwill

As at 4 May 2013 the directors assessed the business for indicators of impairment and none were found.

8.

 Derivative asset

4 May

2013

£000

28 April

2012

£000

3 November

2012

£000

Embedded Derivative

1,496

1,405

1,416

The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, as with the 8.2m preference shares (28 April 2012 8.5m, 3 November 2012 8.5m) (see note 10 for the reduction in preference shares), a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

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 8,500,000 preference shares was valued at inception on 22 May 2011 to be £1,078,000. As at 4 May 2013 the derivative was valued at £1,496,000 (28 April 2012: £1,405,000; 3 November 2012: £1,416,000). It has been assumed the Group can borrow at 5% (28 April 2012 4%, 3 November 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.

9.

 Restricted cash

As at 4 May 2013 the Group has £1 million (28 April 2012: Nil 3 November 2012: Nil) deposited with HSBC as security over cash deposits.

10

 Preference Shares

4 May

2013

£000

28 April

2012

£000

3 November

2012

£000

Preference Shares

6,445

6,368

6,213

At the EGM on 17 May 2011 the shareholders approved the issue of 8,500,000 new redeemable preference shares of £1 each in capital of the Company to ARCS. On 7 December 2012, 306,612 preference shares were redeemed, equivalent to the value of stock held by the Skipton store as at 22 May 2011. The Skipton store ceased trading on 3 November 2012.

The preference shares have been recorded at their estimated initial fair value of £5.97m on 22 May 2011. The initial value was established by an independent third party valuer, based on assumptions provided by management including an estimate of the Group's credit spread and based on the interest and cashflows arising in relation to the preference shares and the fact that no dividend will accrue on the preference shares until five years from their date of issue. The preference shares carrying value is stated above on an amortised cost basis. The effective rate of interest arising on the shares is 7.11%. Furthermore the preference shares can be repaid at any time without penalty. The terms of the preference shares are such that an embedded derivative is recognised, details of which are included in note 8.

In addition, the preference shares must be immediately redeemed on a change of control of the Company or on a sale of all, or substantially all, of the assets of the enlarged Group. Furthermore, should the Group cease trading and fully close down and cease to operate any of the stores acquired from ARCS on 22 May 2011, then an amount of preference shares equivalent to the value of the stock relating to that store as at 22 May 2011 will be redeemed.

Please see note 14 in relation to the change in ownership of the preference shares.

11.

Reconciliation of operating loss to cash generated from/(used in) operating activities

26 weeks to

4 May

2013

£000

26 weeks to

28 April

2012

£000

53 weeks to

3 November

2012

£000

Operating loss

(334)

(604)

(5,018)

Adjustments for:

Cash disbursements of pension obligations (net of charge included within the income statement)

-

-

(1,268)

Fixed asset impairment

33

-

-

Depreciation

698

803

1,583

Profit on disposal of investment

(21)

-

-

Fair value movement of derivative

(80)

(172)

(183)

Decrease in inventories

1,341

703

646

Decrease/(Increase) in trade and other receivables

2,234

(285)

381

Decrease in trade and other payables

(1,531)

(1,597)

(44)

Cash inflow/(outflow) from operations

2,340

(1,152)

(3,903)

12.

Retirement benefit obligations

The defined benefit obligations at 4 May 2013 have not been changed from the figures recorded at 3 November 2012. In the directors' opinion, movements in significant assumptions, asset values and contributions paid when considered together would not have significantly altered the pension deficit.

13.

Post balance sheet event

In June 2013, the Maidstone store ceased trading. In July 2013 the Cinderford store will cease trading. The stores closure will not have a significant effect on the business profitability. The closure of Cinderford will mean the Group will have to redeem preference shares to the value of approximately £208,000, as this was the value of stock at Cinderford on acquisition as at 22 May 2011 (see note 10). On 10 June 2013 the Group announced that Keith Edelman intended to resign from the Board once a suitable replacement had been found and appointed.

14.

Related Party Transactions

On 24 February 2012 Panther Securities PLC who own 29.72% of Beale PLC purchased 3 freeholds from ARCS for £2,250,000, of which £300,000 is deferred until February 2015. In April 2013 Panther Securities PLC entered into contracts to purchase 3 further freeholds from ARCS where J.E. Beale PLC is the tenant. Two of the freehold purchases are deferred for 14 months. On the assumption that the deferred purchases complete J.E. Beale PLC will be a tenant in 11 freeholds owned by Panther Securities PLC. On 30 April 2013 Portnard Limited which is owned by A S Perloff and family trusts, together with Maland Pension Fund and a member of the Perloff family completed on the purchase of the 7,000,000 preference shares (there is a deferred agreement to purchase the balance of the preference shares within 3 years) from ARCS and the ARCS loan. From 30 April 2013 to 22 May 2014 Portnard Limited has beneficial ownership of the preference shares.

15.

Basis of financial information

The condensed set of financial statements included in this interim financial report, approved by the Board of directors on 3 July 2013, does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. This condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union. This Interim Report and Accounts will be sent to shareholders. Further copies may be obtained from the Company Secretary, Beale PLC, The Granville Chambers, 21 Richmond Hill, Bournemouth BH2 6BJ or directly from the Company website www.beales.co.uk.

The information included in this Interim Financial Statement for the 53 weeks ended 3 November 2012 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The statutory accounts for the 53 weeks ended 3 November 2012, which were prepared under International Financial Reporting Standards, have been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement made under Section 498(2) or (3) of the Companies Act 2006.

The financial year ending 2 November 2013 is a 52 week year.