MPH.L Regulatory News (MPH)

16 Nov 2005 07:02

Marchpole Holdings PLC16 November 2005 For Immediate Release 16 November 2005 MARCHPOLE HOLDINGS PLC HALF YEAR RESULTS "Marchpole Builds Platform for Growth" Marchpole Holdings plc, which designs, produces and sells high quality clothingand accessories for six world class brands (Yves Saint Laurent, Boateng,Jean-Charles de Castelbajac ("JCC") and Jean-Charles de Castelbajac / Rossignol,Emanuel Ungaro and Ungaro) announces its results for the six months ended 30September 2005. Interim results for the six months ended 30 September 2005 Highlights Christopher Phillips Chairman, commented "On the basis of our current order bookand sales projections, we expect the existing business to achieve profits beforetax for the full year in excess of last year." • Turnover £14.9m (2004: £15.7m) • Operating profit £1.2m (2004 IFRS restated: £2.7m) • In excess of £0.75m has been expensed during the half year on brand development. • Profit before tax £1.0m (2004 IFRS restated: £2.6m) • EPS 0.5p (2004 IFRS restated: 1.5p) • Interim dividend maintained at 0.25p (2004: 0.25p) to be paid to shareholders on the register at 31 December 2005, payable in January 2006. • Spring/Summer 2006 order book of £15.6m (2004: £13.5m) • 4.5m Bank financing for Moda acquisition approved Commenting Greg Tufnell, Chief Executive said: "We continue to invest in our new brands. The forthcoming acquisition of ModaAmerica is part of the development of the business to meet our objective ofbeing a worldwide brand management company." For further information please contact: Buchanan Communications 020 7466 5000Tim Thompson / Nicola Cronk Chairman's Statement Our strategy of building a business with a strong portfolio of worldwide luxurybrands continues. Marchpole's expertise is in developing and marketing brands and this half yearin particular has seen significant development expenditure. Despite difficulttrading conditions in some of our markets I am optimistic that the results forthe full year will show an improvement in profitability on last year. TheCompany intends to maintain its dividend policy. The acquisition of Moda America will expand our business into the Americanmarket and take us further towards fulfilling our strategy. Marchpole has alsoincreased the JCC brand exposure through our partners opening new stores inJapan and South Korea which will raise our presence in these markets. Results Turnover in the first half of the year was £14.9m (2004: £15.7m). Historically Marchpole has achieved 42 per cent of its annual sales in the firsthalf year. Last year, for a plethora of reasons, first half sales were 48 percent of the full year. We consider that the current year has seen a return tothe historic pattern. The group has produced a profit before tax of £1.0m (2004 IFRS restated: £2.6m). We are confident that our new brands together with the Moda acquisition willmore than compensate for any loss of YSL revenues from 2007/2008. To ensurethis we have invested in our supporting infrastructure. Flagship retail spacehas been opened in Paris and London for Emanuel Ungaro and in Paris for JCC. Anew warehouse and distribution facility has been opened in Italy. New showroomshave been opened in Paris and Milan for JCC and Emanuel Ungaro. Senioroperational management has been strengthened throughout the company includingthe appointment of Jean-Paul Donald Potard as our European CEO. These costs arereflected in the increase in overhead expenditure during the half year whichincludes £0.75m which has been spent on brand development. Outlook On the basis of our current order book, we expect the existing business togenerate profit before tax for the full year in excess of last year. The current order book for Spring Summer 2006 is £15.6m which represents growthin all areas with the highlights being the first season for Boateng in HarveyNichols, Emanuel Ungaro launching in London and Paris and JCC growing sales androyalty incomes across the world. Emanuel Ungaro is making progress on a worldwide basis with encouraging sales inJapan, Hong Kong, Russia, the Middle East and Italy. Our third flagship EmanuelUngaro shop in shop opens in January in New York where we have already had apositive response from both customers and press. Our wholly owned brand, JCC, continues to grow both its sales and royaltyincome. We are optimistic that there will be further growth in both of theseareas in the second half of the year. Royalty and design fee income continueto increase as we expand the successful collaborations with brands such asRossignol. In the second half of the year the company will continue to expandgeographically and increase its presence in the important accessories market. Dividend The final dividend for the year ended 31 March 2005 was approved at our AGM on 6September 2005. I am also pleased to announce that the Board has agreed to payan interim dividend of 0.25 pence per share (2004: 0.25 pence per share) toshareholders on the register on 31 December 2005 payable in January 2006. Board Changes Two new appointments were made to the Board during the half year. RonaldStirling and Harvey Shulman. Ronald brings a wealth of fashion industryexperience and Harvey his legal background and corporate expertise. The Finance Director, Justin Hampshire, resigned to pursue another opportunity.We are fortunate in having former Deloitte partner John Harrison as a boardmember who has stepped into the Finance Director position whilst an appropriatepermanent replacement is appointed. Prospects We remain confident that the continued performance of our existing brands andthe acquisition of Moda America will result in strong sales and profits growth. On behalf of the Board and shareholders I would like to thank the staff ofMarchpole, our suppliers and customers for their continued support. Christopher PhillipsChairman UNAUDITED CONSOLIDATED INCOME STATEMENTFOR THE SIX MONTHS ENDED 1 OCTOBER 2005 6 months to 6 months to Year ended 1 October 2005 2 October 2004 31 March 2005 Notes £'000 £'000 £'000 Revenue 3 14,874 15,668 32,460Cost of sales (7,794) (7,767) (16,289)Gross profit 7,080 7,901 16,171Distribution costs (1,681) (1,728) (3,999)Administrative expenses (4,224) (3,444) (7,039)Operating profit 1,175 2,729 5,133Net finance costs (165) (106) (253)Profit before tax 3 1,010 2,623 4,880Tax 4 (387) (691) (1,829)Profit for period 623 1,932 3,051 Earnings per share basic 5 0.5p 1.5p 2.3pEarnings per share diluted 5 0.5p 1.4p 2.2p UNAUDITED CONSOLIDATED BALANCE SHEETAT 1 OCTOBER 2005 As at As at As at 1 October 2005 2 October 2004 31 March 2005 £'000 £'000 £'000 Non-current assetsGoodwill 3,511 3,530 3,529Other intangible assets 357 133 386Property, plant and equipment 893 482 759 4,761 4,145 4,674Current assetsInventories 3,232 2,194 1,658Trade debtors and other receivables 10,148 8,707 9,386Cash and cash equivalents 421 183 254 13,801 11,084 11,298Current liabilitiesBank overdrafts (1,470) (854) (696)Trade and other payables (4,866) (5,364) (3,901)Interest-bearing loans and borrowings (3,248) (1,166) (2,431)Other financial liabilities - - (70)Liabilities for current tax (1,129) (988) (1,255) (10,713) (8,372) (8,353) Net current assets 3,088 2,712 2,945 Non-current liabilitiesInterest-bearing loans and borrowings (298) (333) (315) Net assets 7,551 6,524 7,304 Capital and reservesShare capital 1,335 1,325 1,335Share premium 2,704 2,666 2,704Foreign subsidiary currency reserve 1 (5) (30)Merger reserve - (1,818) -Hedge reserve - - (70)Retained earnings 3,511 4,356 3,365Total shareholders' funds 7,551 6,524 7,304 UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE PERIOD ENDED 1 OCTOBER 2005 Share Share Foreign Hedging Merger Retained Total capital premium subsidiary reserve reserve earnings currency reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 April 2004 1,325 2,666 (48) (79) (1,818) 2,751 4,797Changes in equity to 2 October 2004Cash flow hedgesTransferred to profit and loss for the period - - - 79 - - 79Exchange differences on translating foreign operations - - 43 - - - 43Net income recognised directly in equity - - 43 79 - - 122Profit for the period - - - - - 1,932 1,932Total recognised income and expense for the period - - 43 79 - 1,932 2,054Dividends - - - - - ( 331) (331)Share options -Equity-settled transactions - - - - - 4 4 At 2 October 2004 1,325 2,666 (5) - (1,818) 4,356 6,524 Changes in equity to 31 March 2005Cash flow hedgesGains/(losses) taken to equity - - - (70) - - (70)Exchange differences on translating - - (25) - - - (25)foreign operationsNet income recognised directly in equity - - (25) (70) - - (95)Profit for the period - - - - - 1,119 1,119Total recognised income and expense for - - (25) (70) - 1,119 1,024the periodDividends - - - - - (331) (331)Transfer - - - - 1,818 ( 1,818) -Share optionsEquity-settled transactions - - - - - 39 39Share options exercised 10 38 - - - - 48 At 31 March 2005 1,335 2,704 (30) (70) - 3,365 7,304 Changes in equity to 1 October 2005Cash flow hedgesTransferred to profit and loss for the period - - - 70 - - 70Exchange differences on translating foreign operations - - 31 - - - 31Net income recognised directly in equity - - 31 70 - - 101Profit for the period - - - - - 623 623Total recognised income and expense for the period - - 31 70 - 623 724Dividends - - - - - ( 601) ( 601)Share optionsEquity-settled transactions - - - - - 124 124 At 1 October 2005 1,335 2,704 1 - - 3,511 7,551 UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE 6 MONTHS ENDED 1 OCTOBER 2005 6 months to 6 months Year to 1 October to 31 March 2005 2 October 2005 2004 Notes £'000 £'000 £'000 Cash generated from / (absorbed by) operations 6 987 (1,402) 1,543 Interest received - 3 3Interest and facility fees paid (159) (127) (250)Interest element of hire purchase and finance lease rental (10) (8) (3)Taxes paid (513) (786) (1,660)Dividends (601) (331) (662)Net cash used in operating activities (296) (2,651) (1,029) Investing activitiesPurchase of intangible fixed assets - - (283)Purchase of tangible fixed assets (261) (109) (538)Net cash used in investing activities (261) (109) (821) Financing activitiesIssue of share capital - - 48Loan repayments (34) - (710)Capital element of HP and finance lease rentals (16) (13) (32)Net cash from financing activities (50) (13) (694)Net decrease in cash and cash equivalents (607) (2,773) (2,544)Opening cash and cash equivalents (442) 2,102 2,102Closing cash and cash equivalents (1,049) (671) (442) Notes to the Interim Statement At 1 October 2005 1. Basis of preparation The group's next annual consolidated financial statements, for the year ending31 March 2006, will be prepared in accordance with International FinancialReporting Standards adopted for use in the EU ("IFRSs"). These condensedconsolidated interim financial statements have been prepared on the basis of therecognition and measurement requirements of IFRSs expected to be effective (oravailable for early adoption) in those annual consolidated financial statements.These requirements are still subject to change and to additional interpretation. The financial information presented in this interim statement does notconstitute full financial information within the meaning of Section 240 of theCompanies Act 1985. The comparative figures for the year ended 31 March 2005differ from the statutory financial statements for the period. Those financialstatements, which were prepared under UK GAAP, received an unqualified auditreport (and did not include a statement under s237(2) or (3) of the CompaniesAct 1985). Those financial statements have been delivered to the Registrar ofCompanies. Adjustments have been made to those figures so that they comply withthe recognition and measurement requirements of IFRSs. Neither the amendedfigures nor those for the interim periods ended 1 October 2005 or 2 October 2004have been audited or reviewed by the auditors. 2. Revised accounting policies These condensed interim financial statements have been prepared on the basis ofaccounting policies consistent with those adopted in the group's statutoryfinancial statements to 31 March 2005, with the exception of: a. changes arising from the transition to IFRS based accounts; and b.an expanded policy on the matching of design costs with the relevant sales. (a) IFRS Adoption The changes to the accounting policies are set out below. Where the group has taken advantage of the exemptions given by IFRS 1: "First-time adoption of International Financial Reporting Standards" this is also noted below. IFRS 2 'Share-based payments' - charges have been made to the income statementin respect of employee and third party share options based on their fair valueat grant date. The charge is recognised over the related performance period. Themajority of the charge relates to the Employee Share Option Scheme. As permittedby IFRS 1, IFRS 2 has not been applied to options granted prior to 7 November2002 which had vested prior to 1 January 2005. IFRS 3 'Business Combinations' - IFRS 3 requires impairment reviews to beperformed on an annual basis on the goodwill held by the Group. Any impairmentwill be recognised in the consolidated income statement. An impairment reviewhas been performed and no impairment was evident and as a result no impairmantloss has been charged. Amortisation charged in previous periods has been writtenback. IAS 10 'Events after the balance sheet date' - under IAS 10 dividends in respectof a year are only recognised when they are declared and approved. Dividendscharged in earlier periods have been reallocated to the periods in which theywere declared. IAS 21 'The effect of changes in foreign currency rates' - Under IAS 21 thegoodwill arising on the purchase of a foreign subsidiary is regarded as an assetof the subsidiary concerned, denominated in foreign currency and retranslated atthe balance sheet date. Exchange differences arising on this retranslation, andthat of other assets of foreign subsidiaries are accumulated in a separatereserve within equity. IAS 38 'Intangible assets' - the patents and trademarks held by the Group asintangible assets meet the recognition criteria under IAS 38 and have thereforecontinued to be held as intangible assets. IAS 32 & 39 'Financial instrument measurement and reporting' - In accordancewith the Group's policy to enter into financial instruments only for hedgingpurposes, there has been no impact on the consolidated income statement from theapplication of hedge accounting. IAS 39 requires the recognition of losses andgains on financial instruments held at the balance sheet date, but allows suchamounts on instruments identified as hedges to be reflected in a separatereserve in equity so that there is no impact on results. The effect of the changes to the group's accounting policies as a result of IFRSadoption were as follows: a Reconciliation of profit before tax under UK GAAP to IFRS 6 months to Year to 2 October 31 March 2004 2005 £'000 £'000 Profit before tax as previously reported under UK GAAP 2,539 4,747 IFRS Adjustments: Share based payments (4) (43) Amortisation write-back 88 176 Profit before tax in accordance with IFRSs 2,623 4,880 Taxation (691) (1,829) Profit for the period in accordance with IFRS 1,932 3,051 b Reconciliation of equity under UK GAAP to IFRS 1 April 2004 2 October 31 March 2004 2005 £'000 £'000 £'000 Total equity as previously reported under UK GAAP 4,608 6,078 6,573 IFRS Adjustments: Dividend recognition 331 331 601 Amortisation write-back 27 115 203 Goodwill retranslation (90) - (3) Foreign currency hedges (79) - (70) 4,797 6,524 7,304 (b) Design costs Costs incurred in designing and producing sample collections for each season forall brands have been deferred to match the sales of that season. Previously thispolicy had only been implemented for wholly owned brands. 3 Turnover and profit on ordinary activities before taxation Turnover and profit on ordinary activities before taxation are wholly attributable to the Group's principal activity. Turnover analysis by geographical origin of sales: 6 months to 6 months to Year to 1 October 2005 2 October 2004 31 March 2005 £'000 £'000 £'000 United Kingdom 12,188 13,012 27,035 Europe 2,686 2,656 5,425 14,874 15,668 32,460 Turnover analysis by geographical destination: 6 months to 6 months to Year to 1 October 2005 2 October 2004 31 March 2005 £'000 £'000 £'000 United Kingdom and Republic of Ireland 12,389 13,039 27,186 Europe 1,059 1,569 2,720 Far East 1,392 1,041 2,509 Other 34 19 45 14,874 15,668 32,460 Geographical analysis of profit on ordinary activities before taxation: 6 months to 6 months to Year to 1 October 2005 2 October 2004 31 March 2005 £'000 £'000 £'000 United Kingdom 1,614 2,431 5,362 Europe (623) 79 (571) Hong Kong 19 113 89 1,010 2,623 4,880 Geographical analysis of net assets: As at As at As at 1 October 2005 2 October 2004 31 March 2005 £'000 £'000 £'000 United Kingdom 9,755 7,616 8,842 Europe (2,436) (1,385) (1,750) Hong Kong 232 293 212 7,551 6,524 7,304 4 Taxation A provision for corporation tax has been made using the effective rate of 38% on profit before taxation. 5 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: 6 months to 6 months to 2 Year to 31 1 October 2005 October 2004 March 2005 £'000 £'000 £'000 Net profit attributable to equity holders of the 623 1,932 3,051 parent Weighted average number of ordinary shares in issue 133,076,235 132,454,569 132,545,402 Effect of dilutive potential ordinary 3,826,128 3,809,913 3,930,404 shares 136,902,363 136,264,482 136,475,806 Earnings per share (pence) Basic 0.5 1.5 2.3 Diluted 0.5 1.4 2.2 6 Reconciliation of operating profit to cash generated from/(absorbed by) operations 6 months to 6 months to Year to 1 October 2 October 31 March 2005 2004 2005 £'000 £'000 £'000 Cash generated from operations Operating profit 1,175 2,729 5,133 Depreciation 150 85 202 Share option expense 124 4 43 Amortisation 17 - 17 Foreign exchange movement 39 (60) (70) (Increase)/decrease in stocks (1,574) (208) 328 Increase in debtors (762) (3,967) (4,646) Invoice financing and short term loans 851 390 2,366 Increase/(decrease) in creditors 967 (375) (1,830) Net cash generated from/(absorbed by) 987 (1,402) 1,543 operations This information is provided by RNS The company news service from the London Stock Exchange