19 Dec 2011 07:00
JOHN LEWIS OF HUNGERFORD PLC
FINAL RESULTS - YEAR ENDED 31 AUGUST 2011
John Lewis of Hungerford plc ("John Lewis of Hungerford" or the "Company") the specialist kitchen manufacturer and retailer today announces its final results for the year ended 31 August 2011.
CHAIRMAN'S STATEMENT
In my last interim statement I reported on the positive momentum building within the business and I am pleased to report that this was maintained in the second half year. Our strategy of complementing organic growth with selective investment in new stores contributed to a strong sales performance and we have been able to reinvest the resultant profits back into the business as we face into an increasingly uncertain economic outlook.
A highlight during the period was the performance of our two new stores, Beaconsfield and Blackheath, both of which exceeded our expectations and ended the year ahead of budget. The performance of these stores validates the careful approach we adopt in appraising new opportunities and, in light of this, the Board decided to continue our growth strategy through opening a new store in Cirencester on 1 October 2011. This brings our number of stores to 13. The recent openings have enabled us to refine our 'roll out' model such that we are able to quickly capitalise on new opportunities and move from appraisal to store opening in a quick and cost effective manner. New store openings have an important role in delivering our strategic objective to increase utilisation of our manufacturing facility. However, whilst we continue to consider new opportunities no additional store openings are currently planned.
Other key developments in the period included the purchase of the freehold of our Hungerford store for £150,000, funded through a new facility from our bankers, Barclays. Although this will not have a significant impact on annual operating costs, the acquisition enabled us to secure continued tenancy, on favourable terms, at one of our flagship stores.
Financial performance
The profit before taxation, share based payments and interest was £219,000 compared to a profit of £8,000 in 2010. This was driven by a strong sales performance, which increased by 16% to £6,224,000 (2010-£5,355,000). This includes the contribution from new store openings, of which one opened at the end of the previous year and one during the year under review. Excluding the impact of these, the like-for-like sales growth in the year was 0.1%. The overall gross profit margin of the business was consistent at 53.6% compared to 53.0% in 2010.
The charge in respect of share based payments for the year amounted to £55,000 (2010-£154,000). Your Board continues to believe the arbitrary nature of this accounting methodology means that this resulting charge has little meaningful relevance to the reported financial results.
In consultation with our auditors we have changed our accounting policy this year relating to showroom display units and appliances. Such items are now capitalised as fixed assets, which has had the impact of reducing operating profits by the depreciation charge of £25,000 compared to the previous policy of treating them as stock. Last years results have been similarly restated, which has reduced previously reported operating profits by £23,000. The Board believe the new policy represents a prudent approach to accounting for the items.
Net cash inflow from operating activities was £355,000 (2010-£131,000 inflow) and at the balance sheet date, cash at bank stood at £809,000 (2010-£818,000).
Capital expenditure in the period was £501,000 (2010-£436,000) principally comprising the acquisition of the Hungerford freehold, installation of a new mezzanine floor in the Wantage factory, the development of the Beaconsfield store and general improvements to the store estate.
Current trading
The current year started strongly with year-on-year sales growth during the first quarter. However, the length of our sales cycle means this performance was driven by customer purchasing decisions taken a number of months ago. Consequently, it is not necessarily reflective of current sentiment and we are undoubtedly seeing signs of a further erosion in customer confidence, which translates into a weaker forward order book. It is too early to determine whether this is a temporary reduction but we are closely monitoring the situation and are ready to take decisive action should it become necessary.
Outlook
Your Board is pleased with the progress the company has made in recent years, which has been achieved against a difficult economic backdrop. However, the overall economic situation remains very fragile and, like many businesses, we are heavily dependent upon the prevailing level of consumer confidence. Current trading indicates this is continuing to erode and so we must remain vigilant to the threat that this presents.
We are cautious about the prospects for the current year and, in particular, the impact on our business should the UK economy re-enter recession. In light of this we are maintaining tight control over overhead expenditure while recognising the need to continue to invest in the business if we are to deliver long-term shareholder growth. The winter sale has always been a key trading period for our business but the outturn in the current year will be equally influenced by the extent to which delayed or deferred customer orders return later in the year. It is simply too soon to state with any certainty whether this is likely to be the case.
I would again like to pay testament to the support of our employees who have been instrumental in delivering the positive developments over the past few years. As the Company moves towards its 40th anniversary it is their commitment to making quality British made kitchens and furniture that remains at the heart of our business.
Malcolm R. Hepworth
Non Executive Chairman
16 December 2011
Enquiries: | |||
Malcolm Hepworth, Chairman | John Lewis of Hungerford plc | 01235 774300 | |
Nick Reeve, Martyn Fraser | Smith & Williamson Corporate Finance Limited | 0117 376 2213 | |
Profit and Loss Account for the year ended 31 August 2011
2011 £ | 2010 As restated £ | ||||
Turnover | 6,224,331 | 5,355,128 | |||
Cost of sales | (2,888,346) | (2,516,380) | |||
Gross profit | 3,335,985 | 2,838,748 | |||
Selling and distribution costs | (396,693) | (474,575) | |||
Administrative expenses | |||||
Share based payments | (54,527) | (154,336) | |||
Other | (2,720,109) | (2,355,903) | |||
Total | (2,774,636) | (2,510,239) | |||
Operating profit/(loss) before share based payments | 219,183 | 8,270 | |||
Operating profit/(loss) | 164,656 | (146,066) | |||
Interest receivable and similar income | 3,786 | 3,507 | |||
Interest payable and similar charges | (32,535) | (7,708) | |||
Profit/(loss) on ordinary activities before taxation | 135,907 | (150,267) | |||
Tax on profit/(loss) on ordinary activities | 15,358 | (16,047) | |||
Retained Profit/(loss) for the financial year | 151,265 | (166,314) | |||
Earnings per share | |||||
Basic | 0.08p | (0.09)p | |||
Fully diluted | 0.08p | (0.09)p | |||
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Balance Sheet as at 31 August 2011
2011 | 2010 As restated | ||||
£ | £ | ||||
Fixed assets | |||||
Intangible assets | 32,722 | 7,872 | |||
Tangible assets | 2,463,006 | 2,255,760 | |||
2,495,728 | 2,263,632 | ||||
Current assets | |||||
Stocks | 219,364 | 165,331 | |||
Debtors | 299,834 | 272,853 | |||
Cash at bank and in hand | 809,247 | 818,015 | |||
1,328,445 | 1,256,199 | ||||
Creditors: amounts falling due within one year | (1,241,682) | (1,252,937) | |||
Net current assets | 86,763 | 3,262 | |||
Total assets less current liabilities | 2,582,491 | 2,266,894 | |||
Creditors: amounts falling due after more than one year | (591,715) | (477,515) | |||
Provisions for liabilities and charges | (10,213) | (16,047) | |||
Net assets | 1,980,563 | 1,773,332 | |||
Capital and reserves | |||||
Called up share capital | 186,745 | 186,745 | |||
Share premium account | 1,188,021 | 1,188,021 | |||
Other reserves | 1,421 | 1,421 | |||
Profit and loss account | 604,376 | 397,145 | |||
Shareholders' funds - all equity interests | 1,980,563 | 1,773,332 | |||
Cash Flow Statement for the year ended 31 August 2011
2011 | 2010 As restated | ||||||||
£ | £ | £ | £ | ||||||
Net cash inflow from operating activities
| 355,154 | 131,354 | |||||||
Returns on investments and servicing of finance | |||||||||
Interest and similar income received | 3,786 | 3,507 | |||||||
Interest paid | (32,535) | (7,708) | |||||||
Net cash outflow from returns on investments and servicing of finance | (28,749) | (4,201) | |||||||
Corporation tax refunded | 9,524 | 48,034 | |||||||
Capital expenditure | |||||||||
Payments to acquire intangible fixed assets | (28,808) | - | |||||||
Receipts from disposals of tangible fixed assets | 27,788 | 60,486 | |||||||
Payments to acquire tangible fixed assets | (472,449) | (436,182) | |||||||
Net cash outflow from capital expenditure | (473,469) | (375,696) | |||||||
Equity dividends paid | - | - | |||||||
Net cash outflow before financing | (137,540) | (200,509) | |||||||
Financing | |||||||||
New bank loans advanced | 153,375 | 500,000 | |||||||
Repayment of bank loans | (24,603) | (265,931) | |||||||
Net cash inflow from financing | 128,772 | 234,069 | |||||||
(Decrease)/increase in cash | (8,768) | 33,560 | |||||||
Notes
1. Statutory Accounts
The financial information does not constitute statutory accounts as defined in section 435 of the Companies Act 2006, but has been extracted from the statutory accounts for the year ended 31 August 2011 on which an unqualified audit report has been issued and which will be delivered to the Registrar following their adoption at the Annual General Meeting.
The statutory accounts for the financial year ended 31 August 2010 have been delivered to the Registrar of Companies with an unqualified audit.
2. Basis of preparation
The Company's statutory accounts have been prepared under the historical cost convention and in accordance with applicable accounting standards. During the year the Company changed its accounting policy relating to internally manufactured showroom display units. The effect of this change in accounting policy is to reduce profit after tax by £25,641 (2010: £23,342) and to reduce net assets as at 31 August 2011 by £80,152.
3. Loss per share
Basic and diluted
The calculation of profit/(loss) per share is based on a profit of £151,265 (2010: £(166,214) as restated) and a weighted average number of ordinary shares in issue of 186,745,519 ordinary shares (2010: 186,745,519).
4. Dividends
The Directors do not recommend payment of a dividend.
5. Posting of Accounts
Copies of the statutory accounts for the financial year ended 31 August 2011 will be posted shortly to shareholders with the notice of the Annual General Meeting. An electronic copy will be available, at the same time, on the Company's web site www.john-lewis.co.uk.
6. Annual General Meeting
The next Annual General Meeting of the Company will take place at the Company's offices at Grove Technology Park, Downsview Road, Wantage, Oxon, OX12 9FA at 4.00 pm on Monday 23 January 2012.