18 Mar 2019 07:00
18 March 2019
John Lewis of Hungerford plc
(the "Company")
Half-year Report
John Lewis of Hungerford Plc (AIM: JLH), the specialist manufacturer and retailer of kitchens, bedrooms and freestanding furniture, is pleased to announce its interim results for the six months ended 31 December 2018.
Overview
We are pleased to report that trading and sales for the half year period ending 31 December 2018 was in line with management expectations. This is due to the continued improvement in both the levels of customer enquiries and the conversion improvements following the investment in our sales training, marketing literature and showroom estate. This improvement has continued over the last 3 months with the launch of our new website in December 2018. We are now seen as a Destination Brand once again by our customer audience.
As previously announced, we changed our year end to 30 June last year and in line with that we have also changed the prior year comparisons for the Interims reported, to provide comparative figures for the half-year to 31 December 2017.
This comparable period for the half-year ending 31 December 2017 included the stronger than usual trading period in July and August 2017, being the first two months of the previous year comparison. Trading in those two months was exceptionally strong, followed by a strong Autumn 2017. As previously reported, the weakening of the sector in early Spring 2018 resulting from the inclement weather led to delayed building works until early Autumn 2018.
Against a continued weak retail environment, it is pleasing to see that the combination of our dispatched orders, forward order book against which a full deposit has been taken, together with our future orders against which a first stage deposit has been taken, are broadly in line with the previous year. We believe this is due primarily to the strength of our focused marketing activities and the ability of our team to deliver exceptionally high standards of service throughout the customer journey.
Financial Review
As the comparable period is December 2017, the Board have taken the decision to provide unaudited management information to allow shareholders to compare more easily, the performance over the two periods.
Turnover for the first half year was £3.7m (Dec 2017: £4.7m - with the benefit of the year-end for FY17 included). The first quarter of FY2019 showed an adverse comparison, followed by a 3% (on a like-for-like basis "LFL") improvement in the second quarter. This improvement has continued into the third quarter showing strong LFL performance and a broadly comparable forward order book. Dispatched sales and the forward order book at the end of the half year stood at £5.0m (Dec 2017: £5.8m - with the benefit of the year-end for FY2017 included). Future orders against which a first stage deposit had been taken were ahead of the prior year at £1.8m (Dec 2017: £1.0m).
The adverse sales variance for the period has led to an increased operating loss of £318k, primarily due to reduction in volume.
A summary of the financial results show:
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| Six months ended 31 December 2018 (Unaudited) £'000 | Six months ended 31 December 2017 (Unaudited) £'000 | Movement £'000 |
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Turnover | 3,666 | 4,748 | (1,082) |
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Cost of Sales | (1,973) | (2,363) | 390 |
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Gross Margin | 1,693 | 2,385 | (692) |
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Gross Margin | 46.2% | 50.2% | (4.0)% |
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Overheads/Other | (2,011) | (2,128) | 117 |
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(Loss)/Profit from Operations | (318) | 257 | (575) |
Inflationary pressures reported in the results for the 10 months ended 30 June 2018 continue and the Board have taken the decision to apply price increases to new business across both Kitchens and Bedrooms from 1 July 2019. Fixed overheads, which are primarily our skilled workforce, are an integral part of our business capability and as such, we expect to see a recovery of the overhead over the full year result. Additional margin pressures have arisen from a continued shift in our product mix towards higher value appliances and worktops, attracting lower margins, together with a higher component of Bedrooms in the half year, now representing 8% of revenue. Our City showrooms have accounted for 50% of the revenue on Kitchens which also attract a lower installation charge. The Board are committed to taking action where appropriate to ensure the Company controls costs and margins over the remainder of the year.
Operational Review
The first half year has seen the installation of our new paint spray facilities, which represents a significant investment in our production facility. We are keen to ensure that our production is as efficient, as it is effective, and that we have the capacity to absorb our planned growth over the next 2-3 years. Our multi-skilled workforce are becoming increasingly more flexible which we hope will allow us to adapt to our customer demands while benefiting from continued economies of scale.
Our ongoing focus on our priorities within marketing continue to pay dividends, with high levels of recommendations resulting from our improved capability to deliver an outstanding customer experience. With the new website live in December, we have enjoyed a strong uplift in enquiries with a higher degree of relevance and interest across all our product categories. Our Social channels also continue to increase in the quality and quantity of engagement. The marketing module for our CRM system has now been installed and is beginning to show results in our lead nurturing capabilities to allow our customers to enjoy a more personalised journey. Successful installations have led to many inspirational photo shoots, which continue to provide us with opportunities to showcase our product and our talented design team, through innovative, unique and truly bespoke designs.
The Board have worked hard to ensure that the three key investments above are scheduled to deliver an ROI within a fixed period and we plan to monitor this closely.
Our Bedrooms category continues to develop and has allowed us the opportunity to diversify in cabinetry across the home. Our costing project is now almost complete and we look forward to how this may inform the management team going forward on the progression of this product category.
Cash Flow
Cash at bank and in hand at the end of the period was £479k (2017: £710k) this includes customer deposits and advance payments. Our bank loans at the end of the period were £535k repayable over 10 years. Our overdraft facility of £250k remained unused at the end of the period.
Current Trading
We believe the best measure of current trading to be the aggregate of our dispatched sales and the forward order book, being committed orders for which deposits have been taken. At the end of the period the aggregate of these stood at £5.0m (Dec 2017: £5.8m). As previously highlighted our statutory revenue recognition policy is to recognise sales only at the point orders are dispatched.
Post period end, the momentum has continued, and shows after 10 weeks into the second half, our year-to-date aggregate of dispatched sales and the forward order book are now at £6.1m (Dec 2017: £6.7m). Future orders against which a first stage deposit has been taken continue to grow ahead of the previous year at £1.9m (Mar 2018: £1.5m).
The above gives us confidence that our full year trading will be in line with the prior year.
Our business remains sensitive to the prevailing market conditions within the retail and home improvement sectors and as such, the Board continues to monitor the situation closely. At this time, we remain confident that we expect to recover much, if not all, of the first half loss for the year ended 30 June 2019.
Kiran Noonan Gary O'Brien
Chief Executive Officer Non-Executive Chairman
15 March 2019 15 March 2019
Enquiries:
John Lewis of Hungerford plc Gary O'Brien - Chairman | 01235 774300 |
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Cenkos Securities plc Katy Birkin Azhic Basirov | 0207 397 8900 |
Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.
INCOME STATEMENT |
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For the six months ended 31 December 2018 |
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| 6 months ended 31 December 2018 (Unaudited) £'000 | 6 months ended 31 December 2017 (Unaudited) £'000 | 10 months ended 30 June 2018 (Audited) £'000
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Revenue | 3,666 | 4,748 | 6,715 |
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Cost of sales | (1,973) | (2,363) | (3,465) |
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Gross profit | 1,693 | 2,385 | 3,250 |
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Selling and distribution costs | (253) | (277) | (443) |
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Administration expenses: |
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Other | (1,758) | (1,851) | (3,156) |
Total | (1,758) | (1,851) | (3,156) |
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(Loss)/Profit from operations | (318) | 257 | (349) |
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Finance expenses | (17) | (19) | (25) |
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(Loss)/Profit before tax | (335) | 238 | (374) |
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Taxation | - | 14 | 181 |
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(Loss)/Profit after taxation | (335) | 252 | (193) |
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(Loss)/Profit per share |
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Basic | (0.18)p | 0.13p | (0.10)p |
Fully diluted | (0.18)p | 0.13p | (0.10)p |
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STATEMENT OF COMPREHENSIVE INCOME |
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For the six months ended 31 December 2018
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| 6 months ended 31 December 2018 (Unaudited) £'000 | 6 months ended 31 December 2017 (Unaudited) £'000 | 10 months ended 30 June 2018 (Audited) £'000
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(Loss)/Profit for the period | (335) | 252 | (193) |
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Total Comprehensive Income | (335) | 252 | (193) |
BALANCE SHEET AS AT 31 December 2018 |
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| 6 months ended 31 December 2018 (Unaudited) £'000 | 6 months ended 31 December 2017 (Unaudited) £'000 | 10 months ended 30 June 2018 (Audited) £'000 |
Non-Current Assets |
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Intangible assets | 179 | 53 | 56 |
Tangible assets | 2,368 | 2,342 | 2,357 |
Deferred Tax Asset | 69 |
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Trade and other receivables | 43 | 43 | 43 |
| 2,659 | 2,438 | 2,525 |
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Current assets |
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Inventories | 194 | 241 | 169 |
Trade and other receivables | 661 | 382 | 530 |
Cash and cash equivalents | 479 | 710 | 686 |
| 1,334 | 1,333 | 1,385 |
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Current liabilities | (2,406) | (1,746) | (1,942) |
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Net current liabilities | (1,072) | (413) | (557) |
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Total assets less current |
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liabilities | 1,587 | 2,025 | 1,968 |
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Non-current liabilities | (462) | (568) | (508) |
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Provisions for liabilities |
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and charges | (101) | (101) | (101) |
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Net Assets | 1,024 | 1,356 | 1,359 |
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Equity |
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Share capital | 187 | 187 | 187 |
Other reserves | 1 | 1 | 1 |
Share premium account | 1,188 | 1,188 | 1,188 |
Retained Earnings | (352) | (20) | (17) |
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Total Equity | 1,024 | 1,356 | 1,359 |
STATEMENT OF CHANGES IN EQUITY |
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For the six months ended 31 December 2018 |
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| Share | Share | Other | Retained |
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| Capital | Premium | Reserves | Earnings | Total |
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| £'000 | £'000 | £'000 | £'000 | £'000 |
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At 31 August 2017 (Audited) | 187 | 1,188 | 1 | 176 | 1,552 |
Loss for the period (4 months) | - | - | - | (196) | (196) |
At 31 December 2017 | 187 | 1,188 | 1 | (20) | 1,356 |
Loss for the period | - | - | - | 3 | 3 |
At 30 June 2018 (Audited) | 187 | 1,188 | 1 | (17) | 1,359 |
Loss for the period | - | - | - | (335) | (335) |
At 30 December 2018 (Unaudited) | 187 | 1,188 | 1 | (352) | 1,024 |
STATEMENT OF CASH FLOWS |
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For the six months ended 31 December 2018 |
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| 6 months ended 31 December 2018 (Unaudited) £'000 | 6 months ended 31 December 2017 (Unaudited) £'000 | 10 months ended 30 June 2018 (Audited) £'000 |
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(Loss)/Profit from operations | (318) | 257 | (349) |
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Depreciation, impairment and amortisation | 123 | 129 | 223 |
(Increase) / Decrease in inventories | (25) | 27 | 8 |
(Increase) / Decrease in receivables | (131) | 88 | (31) |
Increase / (Decrease) in payables | 469 | (499) | (352) |
(Profit) / Loss on disposal of property plant and equipment | - | 15 | 31 |
Increase / (Decrease) in provisions | - | - | - |
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Net cash from operating activities | 118 | 17 | (470) |
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Cash flows from financing activities | (68) | (69) | (115) |
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Cash flows from investing activities | (257) | (81) | (232) |
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Net decrease in cash and cash equivalents | (207) | (133) | (817) |
Net cash and cash equivalents at the start of the period | 686 | 843 | 1,503 |
Net cash and cash equivalents at the end of the period | 479 | 710 | 686 |
NOTES:
1. These interim financial statements have been prepared on the basis of accounting policies adopted by the Company and set out in the annual report and accounts for the period ended 30 June 2018. The Company does not anticipate any change in these accounting policies for the year ended 30 June 2019. As permitted, this interim report has been prepared in accordance with the AIM Rules and not in accordance with IAS 34 "Interim financial reporting". The principal risks and uncertainties facing the Company are disclosed in the Company's financial statements for the period ended 30 June 2018, available from www.john-lewis.co.uk and remain unchanged.
2. Basic and fully diluted loss per ordinary share is calculated as follows:
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| 6 months | 6 months | 10 Months | |
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| ended | ended | ended | |
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| 31 December | 31 December | 30 June | |
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| 2018 | 2017 | 2018 | |
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Profit / (loss) attributable to ordinary shareholders (£'000) | (335) | 252 | (193) |
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Weighted average number of shares in issue |
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| 186,745,519 | 186,745,519 | 186,745,519 | |
Shares used to calculate diluted earnings per share | 186,745,519 | 186,745,519 | 186,745,519 |
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Basic earnings per ordinary share (pence) |
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| (0.18)p | 0.13p | (0.10)p | |
Diluted earnings per ordinary share (pence) |
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| (0.18)p | 0.13p | (0.10)p | |
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At 31 December 2018 the basic and diluted loss per share is the same, as the vesting of share option awards would reduce the loss per share and is, therefore, anti-dilutive.
3. Copies of the 2018 interim accounts will be available to shareholders on the Company's website www.john-lewis.co.uk shortly.
4. Following the change of the Company's year end from 31 August to 30 June, the Company reported final results for the 10 months ended 30 June 2018 on 6 November 2018. The unaudited comparative figures for the six months ended 31 December 2017 are therefore reproduced for comparative purposes only and have not been previously reported.