Last checked at 28 Aug 2008 07:00
FOR IMMEDIATE RELEASE
28 August 2008
LIBERTY PLC:
INTERIM RESULTS FOR SIX MONTHS TO 30 JUNE 2008
HIGHLIGHTS
Total revenue up to £21.7m from £20.5m in six months to 30 June 2007.
Independent Liberty of London showcase store in Sloane Street opened July 2008.
Liberty balance sheet supported by Great Marlborough Street Flagship Store valued at £31.5m.
Loss before tax increased to £4.2m in six months to June 2008 from £2.2m in the comparable period, reflecting increased brand expenditure of £2.0m and one-off restructuring costs of £0.9m.
"I am pleased to be reporting more progress at Liberty over the first half of the year both within the flagship store and across the business as a whole," Richard Balfour-Lynn, Chairman.
Contact:
| Liberty Plc Geoffroy de La Bourdonnaye, Chief Executive Paul Harris, Finance Director | Tel: 020 7734 1234 |
| Baron Phillips Associates Baron Phillips | Tel: 020 7920 3161 |
CHAIRMAN'S STATEMENT
For the six months ended 30 June 2008
I am pleased to be reporting more progress at Liberty over the first half of the year both within the flagship store and across the business as a whole. This advance reflects the hard work that has been undertaken over the past year to reorganise both the management team and the operating structures.
It is important to stress that we continue to develop the business on a number of fronts, all of which are aimed at making Liberty a global luxury brand. To this end, we continue to take full advantage of Liberty's worldwide brand identity, its history, designs and products.
Despite the current economic environment, I can report that revenue across all of Liberty's divisions has improved during the first half of the year compared to the same period a year ago. Total revenue for the period advanced by 6% to £21.7m against £20.5m for the first six months of 2007, with a particularly strong performance from our Fabrics division where we achieved a 15% rise in sales to £7.6m.
As shareholders will have noted, costs for the Liberty of London brand rose from just under £1.6m in the six months to June 2007 to almost £2.0m for the current period. The impact of this investment and certain one-off reorganisation costs of £0.9m this period, is that EBITDA for this six months was a loss of £2.7m compared to last year's loss of £1.3m. After interest and depreciation totalling £1.5m, this resulted in a pre-tax loss of £4.2m this time, compared to the pre-tax loss of £2.2m for the same period last year. We believe the expenditure invested during 2008 will improve performance in future years and the business has the benefit of the £31.5m Liberty flagship store which supports its financial strength.
Against a backdrop of difficult trading conditions in the retail sector, the Regent Street flagship store saw total sales increase to £16.7m. This reflects another successful half year for Men's Fashions, advancing by 13% on the back of a strong offer including an expanded footwear section, while our Beauty and Homes departments also performed strongly, producing 8% and 4% sales uplifts respectively during the first half.
The store is beginning to re-establish itself as a retail destination. We are undergoing a major transformation, both front-of-house and behind the scenes, that will continue to improve our product offer, service, visual identity and marketing.
Typical of this transformation is our highly focused lingerie department which stocks a number of brands that in London are exclusive to Liberty such as Kiki de Montparnasse. As a result, Liberty's lingerie department is now rated as one of the best in London. Additionally, we are offering a range of brands exclusive to Liberty in London such as Karl Lagerfeld and Christian Lacroix bridal, Le Labo perfumes and Jean Paul Gaultier ladieswear.
The store is also benefiting from its involvement with the Victoria & Albert Museum that led to collaboration over the staging of their exhibition "China Design Now". Since then the store has hosted a highly successful Arts & Crafts exhibition, which attracted large numbers of Liberty aficionados.
Part of the store's improvement is due to a reorganisation programme that has been implemented over the past nine months, the effects of which are now being seen. We have placed greater emphasis on buying and merchandising, particularly in Accessories and Ladies' Fashion. To that end we have appointed new buyers in Accessories and recruited Yasmin Sewell, an extremely talented and experienced buyer, as a long-term fashion advisor. She joins the team led by Olivia Richardson who was appointed Head of Fashion Buying in May. The impact of these changes, although coming through in the latter part of 2008, will be felt with more impact during the first half of 2009.
As I mentioned earlier, one of the great success stories of the period has been our Fabrics division especially in Japan where we now wholly own our wholesale business. Liberty designs have become increasingly popular in Japan and underlying Yen revenues in Japan rose by 19% during the period. We believe there are great opportunities to expand our wholesale fabrics sales base in a number of key markets, such as North America and the Far East and these are being examined.
Liberty prints are being used in a wide variety of design contexts across the world. Leading fashion designer Junya Watanabe is making extensive use of our fabrics in his clothing ranges while global brands like Nike and Gap have incorporated Liberty prints in certain of their best-selling product ranges.
We are collaborating with a range of artists, including the award winning English artist Grayson Perry, to produce new Liberty print designs. At the same time we are working with the Central St Martin's School of Art to enable textile students to develop and produce Liberty floral print collections for their end of year shows. The winner's designs will be presented in the store.
An important step in enhancing sales generally, as well as developing the brand globally, is the launch of our transactional website, enabling customers from around the world to buy our products on-line. We undertook a "soft" launch of the website last month and we already have a wide selection of the store products available. By the time I report to you again next Spring, the on-line store should have become well established and I will update shareholders with the progress we have made on this important advance to bring Liberty into our customers' homes.
Progress continues to be made with the Liberty of London luxury brand. Last month we launched our first stand-alone Liberty of London store in Sloane Street. This 1,800 sq ft two-storey store has been designed by Paris-based architects Pierre Beucler and Jean-Christophe Poggioli. It is a showcase for the growing range of Liberty of London clothes and accessories, for both men and women. The new store reflects a modern take on Liberty's historic prints and designs, featuring among other things, a three metre long scarf bar that brings together an impressive mixture of exclusive designs. The store has been well received by the fashion media and is becoming a Knightsbridge landmark as it establishes itself on this famous shopping street as another major internationally-recognised luxury brand.
Today I am delighted to report that Liberty of London merchandise is now sold in more than 100 of the world's leading stores. This reflects the growing success of our wholesale operations especially through our trade shows in Paris, Milan and London.
Over the past few months we have appointed a range of high calibre people to key positions within Liberty as part of our overall restructuring. In May, Paul Harris, who has a strong retail background, was appointed to the Board as Finance Director, having been with the Company for two years as Financial Controller.
Other senior management appointments include James Bradbury who joined as Retail Operations Director. He brings a wealth of experience gained at Harrods and Jenners as well as a unique background from The Tussauds Group where his expertise in guest service standards will be enormously helpful in refining the whole Liberty shopping experience.
Meanwhile Fabio Guidetti will be taking up his role as Sales and Distribution Director for Liberty of London in the Autumn of 2008. He joins us from Pringle where he was head of international sales and he has held senior sales positions with other major brands such as Donna Karan and Cerutti.
I believe we now have the management team and structures in place to deliver both the service and product that is expected of a brand that is aiming at a global luxury retail market. We expect to see more collaborative ventures with major world brands, as well as individual fashion designers, that will raise not only our profile but also generate revenue within the international retail market.
While it is difficult to gauge our performance going forward in the present retail market and general economic uncertainty, I sincerely believe the entire Liberty business is better placed than ever to deliver a performance that reflects its inherent potential as well as its extensive history. The current economic environment makes all business challenging but we have the people, the brand and the products to face that challenge.
Richard Balfour-Lynn
Chairman
Liberty Plc
28 August 2008
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
for the six months ended 30 June 2008
| Six months | Six months | Year | ||
| ended | ended | ended | ||
| 30 June | 30 June | 31 December | ||
| 2008 | 2007 | 2007 | ||
| Notes | £'000 | £'000 | £'000 | |
| Revenue | 2 | 21,717 | 20,531 | 45,845 |
| Cost of sales | (11,872) | (11,052) | (25,663) | |
| Gross profit | 9,845 | 9,479 | 20,182 | |
| Selling and distribution costs | (11,363) | (10,600) | (22,789) | |
| Administrative expenses | (2,453) | (1,304) | (4,426) | |
| Other operating income | 311 | 280 | 941 | |
| Results from operating activities | (3,660) | (2,145) | (6,092) | |
| Finance income | 37 | 33 | 1,002 | |
| Finance expenses | (557) | (133) | (1,286) | |
| Loss before taxation | (4,180) | (2,245) | (6,376) | |
| Taxation | (226) | (192) | (371) | |
| Loss for the period | 2 | (4,406) | (2,437) | (6,747) |
| Attributable to: | ||||
| Equity shareholders of the Company | (4,433) | (2,655) | (7,107) | |
| Minority interests | 27 | 218 | 360 | |
| Loss for the period | (4,406) | (2,437) | (6,747) | |
| Loss per share (basic and diluted) | 3 | (19.6p) | (11.7p) | (31.4p) |
All results relate to continuing operations. The notes on pages 10 to 15 form part of these financial statements.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE (UNAUDITED)
for the six months ended 30 June 2008
| Six months | Six months | Year | |
| ended | ended | ended | |
| 30 June | 30 June | 31 December | |
| 2008 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Foreign exchange translation differences for foreign operations | (308) | (58) | 82 |
| Revaluation of property, plant and equipment | (946) | 1,490 | (2,312) |
| Effective portion of changes in fair value of cash flow hedges | (37) | (46) | - |
| Defined benefit pension scheme actuarial (loss) / gain, net of tax | (1,611) | 1,255 | 754 |
| Income and expense recognised directly to equity | (2,902) | 2,641 | (1,476) |
| Loss for the period | (4,406) | (2,437) | (6,747) |
| Total recognised income and expense for the period | (7,308) | 204 | (8,223) |
| Attributable to: | |||
| Equity shareholders of the Company | (7,335) | (14) | (8,583) |
| Minority interests | 27 | 218 | 360 |
| Total recognised income and expense for the period | (7,308) | 204 | (8,223) |
CONSOLIDATED BALANCE SHEET (UNAUDITED)
at 30 June 2008
| 30 June | 30 June | 31 December | ||
| 2008 | 2007 | 2007 | ||
| Notes | £'000 | £'000 | £'000 | |
| Non-current assets | ||||
| Intangible assets and goodwill | 18,382 | 18,200 | 18,382 | |
| Property, plant and equipment | 4 | 33,400 | 38,811 | 34,400 |
| 51,782 | 57,011 | 52,782 | ||
| Current assets | ||||
| Inventories | 7,339 | 7,232 | 7,595 | |
| Trade and other receivables | 8,566 | 6,696 | 6,812 | |
| Cash and cash equivalents | 1,346 | 1,171 | 4,296 | |
| 17,251 | 15,099 | 18,703 | ||
| Total assets | 69,033 | 72,110 | 71,485 | |
| Current liabilities | ||||
| Bank overdraft | - | (8,441) | - | |
| Trade and other payables | (17,949) | (10,439) | (15,688) | |
| Tax payable | (222) | (184) | (249) | |
| Derivative financial instruments | (37) | (46) | - | |
| (18,208) | (19,110) | (15,937) | ||
| Non-current liabilities | ||||
| Loans and borrowings | (14,067) | - | (13,000) | |
| Employee benefits | (1,855) | (97) | (416) | |
| Provisions | (550) | (1,680) | (550) | |
| Trade and other payables | (46) | - | (46) | |
| (16,518) | (1,777) | (14,012) | ||
| Total liabilities | (34,726) | (20,887) | (29,949) | |
| Net assets | 34,307 | 51,223 | 41,536 | |
| Equity | ||||
| Share capital | 5 | 6,036 | 6,036 | 6,036 |
| Other reserves | 5 | 70,845 | 75,593 | 71,791 |
| Retained earnings | 5 | (43,317) | (32,081) | (36,869) |
| Total equity attributable to shareholders of the Company | 33,564 | 49,548 | 40,958 | |
| Minority interests | 5 | 743 | 1,675 | 578 |
| Total equity | 34,307 | 51,223 | 41,536 |
The notes on page 10 to 15 form part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
for the six months ended 30 June 2008
| Six months | Six months | Year | |
| ended | ended | ended | |
| 30 June | 30 June | 31 December | |
| 2008 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Loss for the period | (4,406) | (2,437) | (6,747) |
| Adjustments for non-cash items | |||
| Taxation | 226 | 192 | 371 |
| Finance expenses | 557 | 133 | 1,286 |
| Finance income | (37) | (33) | (1,002) |
| Depreciation of property, plant and equipment | 1,004 | 939 | 2,475 |
| Currency translation differences | (50) | (73) | 8 |
| Equity settled share based payments | (59) | 62 | 124 |
| Cash flows from operations before changes in working capital | (2,765) | (1,217) | (3,485) |
| Change in inventories | (256) | 258 | 106 |
| Change in trade and other receivables | 544 | 193 | 815 |
| Change in trade and other payables | (1,855) | (4,795) | (1,417) |
| Change in provisions and employee benefits | (1,439) | 1,496 | 1,177 |
| Cash generated from operations | (5,771) | (4,065) | (2,804) |
| Interest paid | (448) | (277) | (338) |
| Taxation paid | (242) | (143) | (486) |
| Net cash from operating activities | (6,461) | (4,485) | (3,628) |
| Cash flows from investing activities | |||
| Interest received | 37 | 174 | 46 |
| Acquisition of subsidiary net of cash acquired | - | - | (1,235) |
| Purchase of property, plant and equipment | (950) | (1,673) | (2,600) |
| Net cash from investing activities | (913) | (1,499) | (3,789) |
| Cash flows from financing activities | |||
| Proceeds from drawdown of bank borrowings | 1,067 | - | 13,000 |
| Proceeds from drawdown from related parties | 3,357 | - | - |
| Payments to minority interests | - | (95) | (96) |
| Net cash used from financing activities | 4,424 | (95) | 12,904 |
| Net (decrease) / increase in cash and cash equivalents | (2,950) | (6,079) | 5,487 |
| Opening cash and cash equivalents | 4,296 | (1,191) | (1,191) |
| Closing cash and cash equivalents | 1,346 | (7,270) | 4,296 |
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of preparation
The half-yearly financial report of Liberty Plc ("the Company") for the six months ended 30 June 2008 incorporates the results of the Company and its subsidiary undertakings ("the Group") for the period then ended. The results have been prepared on the basis of the accounting policies adopted in the financial statements of the Group at the previous year end of 31 December 2007, consistently applied in all material respects in the preparation of these financial results.
2. SEGMENT REPORTING
| Six months | Six months | Year | |
| ended | ended | ended | |
| 30 June | 30 June | 31 December | |
| 2008 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Revenue by business division | |||
| Retail including brand | 14,076 | 13,882 | 32,570 |
| Fabric | 7,641 | 6,649 | 13,275 |
| 21,717 | 20,531 | 45,845 | |
| Revenue by geographical origin | |||
| United Kingdom | 18,142 | 17,925 | 40,840 |
| Japan | 3,575 | 2,606 | 5,005 |
| 21,717 | 20,531 | 45,845 | |
| (Loss) / profit for the period by business division | |||
| Retail | (4,119) | (1,914) | (5,675) |
| Fabric | 1,579 | 1,477 | 2,993 |
| Liberty of London branded product | (1,120) | (1,708) | (3,410) |
| Operating loss | (3,660) | (2,145) | (6,092) |
| Net finance costs | (520) | (100) | (284) |
| Taxation | (226) | (192) | (371) |
| Loss for the period | (4,406) | (2,437) | (6,747) |
Concession revenue
Sales from concession departments are included on a commission only basis and are therefore excluded from revenue above. Gross revenue of concession departments was as follows:
| Six months | Six months | Year | |
| ended | ended | ended | |
| 30 June | 30 June | 31 December | |
| 2008 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Gross revenue of concession departments | 3,959 | 3,371 | 7,660 |
3. LOSS PER SHARE
The loss per share figures are calculated by dividing the loss attributable to equity shareholders of the Company for the period, by the weighted average number of ordinary shares in issue during the period, as follows:-
| Six months | Six months | Year | |
| ended | ended | ended | |
| 30 June | 30 June | 31 December | |
| 2008 | 2007 | 2007 | |
| £'000 | £'000 | £'000 | |
| Loss for the period attributable to equity shareholders of the Company | (4,433) | (2,655) | (7,107) |
| Number | Number | Number | |
| '000 | '000 | '000 | |
| Weighted average number of ordinary shares in issue during the period | 22,603 | 22,603 | 22,603 |
| Loss per share (basic and diluted) | (19.6p) | (11.7p) | (31.4p) |
4. PROPERTY, PLANT AND EQUIPMENT
| Freehold | Plant, machinery fixtures & | ||
| property | equipment | Total | |
| £'000 | £'000 | £'000 | |
| Cost or valuation | |||
| At 1 January 2008 | 29,474 | 13,945 | 43,419 |
| Additions | - | 950 | 950 |
| Revaluation | (1,125) | - | (1,125) |
| At 30 June 2008 | 28,349 | 14,895 | 43,244 |
| Depreciation | |||
| At 1 January 2008 | - | (9,019) | (9,019) |
| Charge for the period | (179) | (825) | (1,004) |
| Revaluation | 179 | - | 179 |
| At 30 June 2008 | - | (9,844) | (9,844) |
| Net book value at 30 June 2008 | 28,349 | 5,051 | 33,400 |
| Freehold | Plant, machinery fixtures & | ||
| property | equipment | Total | |
| Group | £'000 | £'000 | £'000 |
| Cost or valuation | |||
| At 1 January 2007 | 32,148 | 11,345 | 43,493 |
| Additions | - | 2,600 | 2,600 |
| Revaluation | (2,674) | - | (2,674) |
| At 31 December 2007 | 29,474 | 13,945 | 43,419 |
| Depreciation | |||
| At 1 January 2007 | - | (6,906) | (6,906) |
| Charge for the year | (362) | (2,113) | (2,475) |
| Revaluation | 362 | - | 362 |
| At 31 December 2007 | - | (9,019) | (9,019) |
| Net book value at 31 December 2007 | 29,474 | 4,926 | 34,400 |
Valuation
The Group's property, plant and equipment is all located in the United Kingdom. The Group's property was valued at 30 June 2008 by qualified professional valuers working for the company of DTZ, Chartered Surveyors, ("DTZ"), acting in the capacity of External Valuers. All such valuers are Chartered Surveyors, being members of the Royal Institution of Chartered Surveyors ("RICS").
DTZ act as valuers to the Liberty Group and undertake half year and year end valuations for accounting purposes. DTZ has been carrying out this valuation instruction for the Liberty Group for a continuous
period since 1999 and Paul Wolfenden has been the signatory of Valuation Reports provided to the Liberty Group for the same period since June 1999. In addition, DTZ provide ad-hoc valuation advice to the Liberty Group. DTZ is a wholly owned subsidiary of DTZ Holdings plc. In the financial year to 30th April 2008, the proportion of total fees payable by the Liberty Group to the total fee income of DTZ Holdings plc was less than 5%. It is not anticipated that this situation will vary in terms of the financial year of DTZ to 30th April 2009. DTZ have not received any introductory fees or acquisition fees in respect of the property owned by the Liberty Group within the 12 months prior to the date of valuation. However, DTZ have been appointed as valuers in respect of certain of the property and in the last 12 months they have provided valuation advice for bank lending purposes in relation to the property.
The valuation was carried out in accordance with the RICS Appraisal and Valuation Standards 6th Edition ("the Manual") and the property was valued on the basis of Existing Use Value. Existing Use Value is defined in the Manual as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the property required by the business and disregarding potential alternative uses and any other characteristics of the property that would cause its Market Value to differ from that needed to replace the remaining service potential.
The valuation includes the land and buildings; the trade fixtures, fittings, furniture, furnishings and equipment; and the market's perception of the trading potential excluding personal goodwill; together with an assumed ability to renew existing licences, consents, certificates and permits. The value excludes consumables and stock in trade. The valuation excludes any goodwill associated with the management by the Company or its subsidiaries.
The valuation of the Tudor property and fixtures totalled £31.5m, including fixtures and equipment with a net book value of £3.2m at 30 June 2008. The historic cost of the Group's property at 30 June 2008 includes capitalised interest of £0.2m (2007: £0.2m).
5. RECONCILIATION OF MOVEMENT ON CAPITAL AND RESERVES
| Share | Merger | Revaluation | Translation | Retained | Minority | Total | ||
| capital | reserve | reserve | reserve | earnings | Total | interest | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2008 | 6,036 | 61,503 | 10,288 | 43 | (36,912) | 40,958 | 578 | 41,536 |
| Reclassification | - | - | - | - | - | - | 138 | 138 |
| Foreign exchange translation differences for foreign operations | - | - | - | (308) | - | (308) | - | (308) |
| Revaluation of property, plant and equipment | - | - | (946) | - | - | (946) | - | (946) |
| Effective portion of changes in fair value of cash flow hedges | - | - | - | - | (37) | (37) | - | (37) |
| Defined benefit pension scheme actuarial gains, net of tax | - | - | - | - | (1,611) | (1,611) | - | (1,611) |
| Loss for the period | - | - | - | - | (4,433) | (4,433) | 27 | (4,406) |
| Share based payments | - | - | - | - | (59) | (59) | - | (59) |
| Balance at 30 June 2008 | 6,036 | 61,503(2) | 9,342(2) | (265)(1) | (43,052)(1) | 33,564 | 743 | 34,307 |
(1) Disclosed as 'Retained earnings' of £43,317,000 in consolidated balance sheet.
(2) Disclosed as 'Other reserves' totalling £70,845,000 in consolidated balance sheet.
| Share | Merger | Revaluation | Translation | Retained | Minority | Total | ||
| capital | reserve | reserve | reserve | earnings | Total | interest | equity | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Balance at 1 January 2007 | 6,036 | 61,503 | 12,600 | (38) | (30,601) | 49,500 | 1,641 | 51,141 |
| Foreign exchange translation differences for foreign operations | - | - | - | (58) | - | (58) | 34 | (24) |
| Revaluation of property, plant and equipment | - | - | 1,490 | - | - | 1,490 | - | 1,490 |
| Effective portion of changes in fair value of cash flow hedges | - | - | - | - | (46) | (46) | - | (46) |
| Defined benefit pension scheme actuarial gains, net of tax | - | - | - | - | 1,255 | 1,255 | - | 1,255 |
| Loss for the period | - | - | - | - | (2,655) | (2,655) | - | (2,655) |
| Share based payments | - | - | - | - | 62 | 62 | - | 62 |
| Balance at 30 June 2007 | 6,036 | 61,503(2) | 14,090(2) | (96)(1) | (31,985)(1) | 49,548 | 1,675 | 51,223 |
(1) Disclosed as 'Retained earnings' of £32,081,000 in consolidated balance sheet.
(2) Disclosed as 'Other reserves' totalling £75,593,000 in consolidated balance sheet.