JLH.L Regulatory News (JLH)

22 May 2009 16:07



JOHN LEWIS OF HUNGERFORD PLC

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

Interim results - period ending 28 February 2009

CHAIRMAN'S STATEMENT

Review of Operations

Weaker sales revenues in the second quarter of the current financial year reflected a highly challenging trading environment. Revenue in the Winter Sale being particularly affected. However, sales for the third quarter are 10% up on the same period last year and the order book is already strong for quarter 4. As a result, although overall sales revenues in the period were significantly below our budgeted figures and fell below management's expectations, an improvement is expected in the second half of the year.

The gross margin has improved by 1.2% points compared with the same time period last year, but the reduced volume has increased the overall loss for the first half by £345k.

Steps have been taken within the business to reduce the cost base as far as possible and the effect of this will flow through over the next 12 months. 

The two new showrooms, Cambridge (opened 26th April 2008) and Oxford (opened 7th June 2008) are both trading in line with expectations and to budget.

During the period under review management has continued to implement many operational changes. The expected benefits of these have yet to be reflected in the financial results.

The management team have continued their commitment to developing the Company's operating methodology to find efficiencies where possible and to gain maximum benefit from the new systems that have been introduced. In addition there have been further introductions of new products and product enhancements which have yet to be rolled out across all showrooms. February also saw the launch of our on-line shop, designed to improve the accessibility and increase sales of our furniture products throughout the UK.

All of these changes reflect management's commitment to invest for the longer-term future of the Company.

Summary of Financial Results

Turnover for the period was £1,593,000 against £2,132,000 for the comparable period last year - a decrease of 25%. The majority of this deficit occurred in the Winter Sale period.

Unit sales of kitchens and the average revenue have declined in the period. The enhancements made to the product line last year have bolstered the sales figures considerably and continue to provide a wider offering for customers who are appreciative of this enhancement.

The timing of sales at the moment is very much led by customer requirements, rather than any advertised sales periods. This has created a notable change to order book activity.

The Normalised Loss before taxation, share based payments and exceptional items was £509,000 (2008 - £117,000 loss). As in the prior year, due to uncertainties as to the outcome of the current year, no tax credit has been booked in these interim statements against current period losses. Normalised losses exclude the effect of accounting standard FRS20 in relation to unvested share options. The charge for the period, including related expenses, amounted to £84,000 (2008: £57,000). Your Board considers that the arbitrary nature of the FRS20 methodology means that this resulting charge has little meaningful relevance to the reported financial results.

Capital expenditures in the period were £18,000 (2008 - £86,138).

While remaining in a cash positive position, net cash outflows from operating activities were £584,000 (2008 - £130,000 inflow).

As at 28 February 2009 the Company had cash balances of £333,000 (2008 - £814,000) and available overdraft facilities amounting to £250,000 which have not been utilised. 

Outlook for the Future

Continuing weakness in the UK housing market and a deteriorating general economic outlook has resulted in a highly challenging trading environment.

However the Company's established brand name and enhanced product offering of quality and style at reasonable prices, means the Company is now well positioned against many of its competitors.

Increasing appropriately targeted customer access to the Company's product range is essential to future revenue growth. The two new showroom units referred to above are an illustration of what can be achieved with the new product range in the right locations.

The Board remains very positive about improvements being implemented within the business even though this is being masked by the challenging economic picture. 

Your Board is very cautious as to the outcome for the full year but remains confident that the foundations now being laid for the future, will deliver significant improvements in financial performance once overall market conditions improve. 

Malcolm Hepworth

Chairman

22 May 2009