JLH.L Regulatory News (JLH)

JOHN LEWIS OF HUNGERFORD PLC

("John Lewis of Hungerford" or the "Company")

Interim results

CHAIRMAN'S STATEMENT

This interim statement covers the six month period to 28 February 2015.

Financial performance

The results we are reporting today reflect the challenges created by the staffing changes previously reported. Whilst the first half year is traditionally our weaker trading period it is particularly disappointing to have to report an operating loss of £174k for the half year, following two consecutive years in which we made a profit in our first half (2014: £66,000, 2013: £35,000).

The loss reflects that a number of investments have been made in our business to support the delivery of our strategic plan which anticipated continued turnover growth. However, turnover for the period was static at £3.5 million (2014: £3.6 million), due entirely to a decline in like for like sales from our existing estate.

In particular the unplanned departure of three of our highest performing sales people from our top showroom had a significant impact. This included two of our most experienced designers both of whom elected to pursue alternative careers away from kitchen design. Addressing this became a focus of management during the period and as a consequence we have had to divert senior resource into the showroom to rebuild the client base and secure a pipeline of activity into the second half year. However, this movement of senior staff has had a knock on effect elsewhere in the company, which is borne out by the result for the period.

Segmental information

The results shown above were derived from our total estate which includes sales from the new showrooms that were opened last year. Combined sales from our two new showrooms of £520,000 achieved business objectives and made a significant contribution to sales. Our bedroom business continues to grow with sales of £143,000 during the period (2014: £105,000) and is gaining a strong reputation with a high number of successful installations completed. It is our intention to create further bedroom display areas over time, as space allows.

As part of our focus on improving sales our other priority has been to review the general productivity and skill levels across the entire sales team. As a result, further salespeople left the business as part of a managed programme. Although, coupled with the unplanned changes referred to above, this has created temporary challenges the Board believes that revitalising sales performance within our mature estate to be a critical component of driving an improved financial performance.

I am pleased to report we are making some progress in addressing these staffing changes, with a number of high calibre people recently recruited. As with all new recruits, it will take some time for them to complete their training.

Our artisan installation service continues to trade in line with kitchen volume, so consequently sales were static for the period. As well as making a valuable financial contribution we continue to believe controlling the installation process plays a critical role in enhancing customer's experience of the brand.

Investment in the Future

The first half of the year has seen further investment in our existing showroom estate as we focus on rolling out the new contemporary Pure and Urban ranges following successful testing in Fulham and Chiswick. This has led to comprehensive refits at both our Harrogate and Oxford showrooms, improving the competiveness of the offering and generating fresh interest at both locations.

We continue to focus our efforts on meeting the customer demand for our new contemporary products and have three further refits planned for this financial year.

In the factory we have replaced our increasingly unreliable and expensive to maintain spray line of 13 years with new machinery and this investment combined with the purchase of new finishing and sanding technology will stand us in good order to meet future production demands in a competitive way.

Cash flow

Cash at bank and in hand at the end of the period was £863,000 (2014: £720,000) inclusive of customer deposits and advance payments. Our bank loans at the end of the period were £816,000 repayable within 10 years.

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 £4.3 million in line with the comparable period last year. Our statutory revenue recognition policy remains that we only recognise sales at the point orders are dispatched.

An update on trading will be made in June, following completion of the third quarter, ending 31st May 2015. Although the second half year is traditionally our stronger trading period we now consider it unlikely that the losses in the first half will be recovered in full and so expect to report a loss for the full year.

New showrooms

Successful new showrooms are dependent on location, product selection and great people.

Whilst we remain vigilant for opportunities in suitable localities our immediate priority is to recruit and train talented salespeople across our existing store portfolio. Once these people are in place and our existing business is secure, your Board believe it may be appropriate to continue with the cautious expansion of our showroom portfolio.

Outlook

The Company maintains its focus on long standing heritage and brand loyalty. The recent change in PR Company has led to improved coverage in key titles and we have seen an improvement in enquiries and interest in the business. The customer journey continues to be at the heart of everything we do for all areas of the Company.

We are fortunate to have a management team with a proven ability to react quickly to both opportunities and threats presented by volatile economic conditions. The business continues to look forward with confidence that once internal staffing issues are resolved we will be able to return to profitable sales growth.

Malcolm Hepworth

Chairman