24th Jan 2005 07:00
Beale PLC24 January 2005 Monday, 24 January 2005 Beale PLC Preliminary Results for the 52 weeks ended 30 October 2004 Key Points • Results reflect the effect of intense competition, price deflation and more cautious consumer spending in a very competitive high street • More positive sales trend during the second half year due to improved merchandise selection in line with our Corporate Plan • Turnover down 5.5% at £65.3 million (2003: £69.1 million) (As reported under FRS5) • Gross sales for the Group (which includes the non-commission element of sales by agencies and VAT) fell by only 4% to £109.6m from £114.2m (down 5.2% in H1 and, as business plan changes took effect, by only 2.7% in H2) • Improvement in gross profit margin from 51.24% to 52.41% • Group profit before tax £0.26 million (2003: £1.08 million) • Earnings per share 0.11p (2003: 2.66p) • Final dividend maintained at 2.2p. Total dividend for the year of 3.30p per share (2003: 4.15p) • Cash inflow from operating activities increased to £3.9m (2003: £3.1m) reflecting improved stock control • Net debt reduced by £1.7m to £7.5m (2003: £9.2m) • Gearing at year end reduced to 28.5% (2003: 33.9%) • The introduction of young womenswear, now in all stores except Winchester, has been particularly successful • Continued implementation of January 2004 Strategic Review focusing on a variety of areas including improved product ranging, shop keeping standards and the refurbishment of stores. Chairman, Mike Killingley, commented: "We continue to believe that the actionswe have taken over the past two years to improve our product range and ourstores is making a difference and will be particularly beneficial when thetrading environment improves." For further information please contact: Beale PLC Tavistock Communications Rowan DartingtonAllan Allkins, Chief Executive Lulu Bridges Barrie NewtonKen Owst, Finance Director Katy Pratt Tel: 0117 925 3377Tel: 020 7920 3150 Tel: 020 7920 3150(24 January only) [email protected]: 01202 522 022 Beale PLC Preliminary Results for the 52 weeks ended 30 October 2004 Results Group operating profit for the 52 weeks ended 30 October 2004 was £0.56 million(2003: £1.32 million) on turnover down 5.5% at £65.3 million (2003: £69.1million). There were no changes to the portfolio of stores in either year, sothe reduction in turnover is on a like for like basis. Group profit before taxwas £0.26 million (2003: £1.08 million). Following the adoption of FRS5 Application Note G: Revenue Recognition, turnovernow excludes the non-commission element of sales made by agencies. Accordingly,these accounts show a restatement of the 2002/03 turnover and as such, the grosssales values* provide a more realistic indication of customers' willingness torespond to the overall retail offer within the Group's stores. Gross sales* forthe Group fell by only 4.0% to £109.6m from £114.2m. This reflects the strongerperformance of concessional sales in the business during the year: gross sales*fell by 5.2% in the first half of the year and, as business plan changes tookeffect, by only 2.7% in the second half. After a high effective tax chargeearnings per share were 0.11p (2003: 2.66p). It is also encouraging to note that within this difficult trading climate theGroup's gross profit percentage margin has improved. However, due to the salesdecline the achieved gross profit of £34.2m was still 3.4% lower than previousyear. Considerable commitment to curtail expense growth has limitedadministrative expenses to £33.7m, a reduction of 1.2% on the previous year, andthe result is an operating profit for the year of £559,000 (2003 £1,324,000).The deduction of bank interest charges for the year of £295,000 (2003 £239,000)results in a profit before tax of £264,000 (2003 £1,085,000). These results are disappointing, albeit not unexpected in light of the effect ofintense competition, price deflation and more cautious consumer spending. It isencouraging that the like for like sales performance did improve somewhat in thesecond half of our financial year, and particularly in the final quarter, andthat margins were maintained, but the trading climate remains fragile. The Board proposes a final dividend of 2.20p per share, the same as last year.When added to the interim dividend of 1.10p per share (2003: 1.95p) this gives atotal dividend of 3.30p per share (2003: 4.15p). The cost of the year'sdividends, at £0.68 million, is not covered by retained profits, but reflectsour substantial reserves and our belief that, in the medium term, our tradingstrategy will restore profits to more acceptable levels. Trading Performance Set against a continuing background of price deflation and cost inflation,consumer confidence continued to be fragile in a very competitive high street.The first half year was disappointing after a very challenging Christmas 2003trading period. However, it is pleasing to report a more positive sales trendduring the second half year due to improved merchandise selection in line with our Corporate Plan. The introduction of youngwomenswear, now in all stores except Winchester, has been particularlysuccessful. In addition, the move towards, in some stores, a more contemporaryfashion mix has worked well and has helped to introduce new customers, withoutalienating the loyal, more traditional, customer base. Our exclusive b. womenswear range has performed to expectation and complementedsuccessfully our branded offer. Last year's fire in the menswear department ofthe Bournemouth store severely depleted our menswear stocks for a time, whichhad an inevitable effect on sales. Homewares did not perform well in the firsthalf year, but customers have responded positively to revised ranges and specialpurchase promotions, improving sales in the second half. The Castlepoint Shopping Centre on the edge of Bournemouth, which offers freeparking, continues to adversely affect trade in our Bournemouth and Poolestores. In contrast, the Bedford and Kendal stores returned positiveperformances and are reaping the benefits of both capital expenditure andimproved product ranges. Of the three Bentalls acquisitions made in 2002,Worthing is performing well and Tonbridge is making good progress. The Southportstore was partly refurbished in October 2004 and completed on time and onbudget. The store's performance, post refurbishment, has been encouraging andcustomers have responded well to the introduction of young and more contemporaryfashion and a cafe on the ground floor. Trading Strategy The priorities over the past two years, and revised in our January 2004Strategic Review, have been to refocus on a variety of areas including improvedproduct ranging, shop keeping standards and the refurbishment of stores. We areconcentrating on the implementation of many of the fundamental retaildisciplines including:- Store Business Plans The refurbishment of the Southport store completed the 2002 Business Plans,which are now fully implemented, although they are reviewed on a continuingbasis. In order to provide a varied and comprehensive store product assortment,we shall continue to work with more partners, particularly in womenswear,although in some stores this will inevitably have an effect on the achievedmargin. Delivering quality, value and innovative products Our customers' pursuit of value has been a key element in our strategy and ourbuying teams have concentrated on sourcing keen value lines that do notcompromise our reputation for quality and which complement our branded offer. Wecontinue to seek out aspirational and innovative products in addition to brandsthat are exclusive in the high streets in which we trade. Improved visual merchandising and customer service The group has made great strides in improving its visual merchandisingtechniques and general store ambience. Exceeding customer service expectationsis vital in a competitive high street and we continue to build on our reputationfor the highest of standards. Identification of cost savings We have made significant cost savings against directly controlled costs duringthe year at a time when indirect cost pressures have increased significantly.This has been achieved without inhibiting the progression of our strategicobjectives. Improved customer communications Following a detailed analysis of our customer base, we have developed a morefocused approach to our marketing strategy. The introduction of direct marketingwill ensure that we communicate the right product or promotion at the right timeto the right customer, thus ensuring better communication both to our accountbase and potential new customers. Reduction of stock investment through improved stock management Improvements in our stock management have been key objectives, which willcontinue throughout 2004/05. It is pleasing to report that our like for likestock levels are 12.4% below last year. This has been achieved withoutcompromising our product offer to the customer. Achievement of better margins At a time of difficult sales growth, improving margins is a top priority,although we acknowledge that it is a challenge when set against price deflationand heavy discounting in the high street. In that context, therefore, I amencouraged that we have improved our margin against last year. Developing our team When costs are under close scrutiny staff training is often an easy savingstarget. However, we have not taken this view and we continue to invest intraining our staff. We have concentrated on commercial awareness training toensure the majority of our staff understand our corporate objectives and how tobest achieve them. We have talented people throughout the business who have been working very hardto implement this comprehensive programme of change and we are beginning to seethe benefits of all the hard work that has been done so far and which willbecome increasingly apparent during the course of the current trading year. Arevised buying office structure with improved procedures will continue to have apositive impact on ranges of products and their selection. These are not easy times for retailers, and we could not achieve what we havewithout the dedication and commitment of all our staff. On behalf of the Boardand shareholders, we thank them all for their contribution. Board As reported in the interim statement in June, Tim Rathbone, our merchandisedirector, left the Group in August with our thanks for his contribution to thebusiness and our best wishes for the future. In October we reported that we had appointed Hilary Santell as buying andmerchandise director. She will join the Group on 14 February 2005 fromLittlewoods Limited and will join the Board on that date. Hilary has hadextensive retail buying experience over the past 15 years with Burton Group,House of Fraser and Next, and more recently with Marchpole Holdings Plc, thelicensee for Yves Saint Laurent, where she gained main Board experience. We believe that Hilary's leadership skills, together with her considerableexperience of womenswear and retail in general, make her particularly wellqualified to continue to develop the buying team and to improve our productrange. With her expertise and guidance we are confident that we shall continueto enhance our offer so that we can match our customers' expectations moreclosely. We look forward to welcoming her to the Board. Alison Richards' second three year term as a Non-executive Director expired on18 January 2005. We continue to value Alison's advice and guidance highly andaccordingly we have invited her, and she has agreed, to serve a further threeyear term on the Board. Shareholding As last year, we shall not seek the usual powers at the forthcoming AnnualGeneral Meeting to buy in and cancel shares, in light of the continuedopposition of Lawdene Limited, which owns approximately 24% of the Company, tosuch a policy. Taxation The Group's tax charge for the year was £241,000 (2003: £539,000). The taxcharge is based on the standard rate of corporation tax of 30.0% (2003: 30.0%).The actual tax charged to profit and loss, including deferred tax, is well abovethe standard rate and reflects the adverse impact of capital expenditure onwhich we do not receive tax relief, resulting in a small post tax profit for theyear of £23,000 (2003: £546,000). Treasury Treasury activities are governed by procedures and policies approved by theBoard. The Group's policy is to take a conservative stance on treasury mattersand no speculative positions are taken in financial instruments. The treasuryfunction manages the Group's financial resources in the most appropriate costand tax efficient manner, minimising the Group's exposure to risk arising frominterest rate and foreign exchange fluctuations. During the year, the Group hascontinued to operate within its existing borrowing facilities of two five-yearfixed term loans of £5m each, plus an overdraft facility of £2.5m. Careful cashmanagement has enabled the Group to reduce gearing during the year. Cash flow The net cash inflow from operating activities was £3.9m (2003: £3.1m). Thisincrease resulted primarily from a reduction in stock levels. Investment infixed assets in the year was £1.3m (2003: £3.2m). During the period borrowings were reduced by £1.7m (2003: increased by £1.8m)leaving net debt at the end of the year of £7.5m (2003: £9.2m). Gearing at theyear end was reduced to 28.5% (2003: 33.9%). Systems During the year there have been significant advances in many of the Group'scontrols systems. The introduction of Chip and PIN was completed successfully inall stores before the end of November 2004. This new technology was introducedto reduce credit and debit card fraud, as required by the national bankingnetwork. The capital cost of the project has been approximately £150,000. Pensions deficit The Group has not adopted fully FRS17 "Retirement Benefits". The final salaryscheme was closed to new entrants in April 1997 when a defined contributionscheme was introduced. Even though the defined benefit scheme's assets have increased by £2.3m duringthe year, the liabilities have increased at a greater rate. This increase inassets should have exceeded the expected annual increase in liabilities. Yet,due to the application of differing actuarial assumptions applied to moreprecise data, an additional liability increase of £3.4m resulted. The deficitidentified by FRS17 at the year end, before adjustment for deferred tax, is£7.3m (2003: £4.4m). Accounting policies During the year the Group has adopted FRS5 Application Note G: RevenueRecognition (see note 2) as described earlier and UITF Abstract 38 in relationto investments in own shares. No other new accounting policies have been adoptedin the year and so apart from the impact of these, the financial statements havebeen compiled on a consistent basis. Beale PLC will be required to adopt International Accounting Standards (IAS)when publishing its Group accounts for the year ending October 2006. We willreport further on the impact of this in our 2005 financial statements. Outlook As has already been widely reported, retailers in general experienced verydifficult trading conditions over the Christmas and New Year period and Bealeswas no exception. Gross sales* for the 11 week period ended 15 January 2005 were3.6% below those of the same period last year, on a like for like basis. Thedifficulties experienced during the Christmas trading period, coupled withexpectations that 2005 will be a tough year for retailers in general, reinforcethe view that it will be another very challenging year for the Group. We continue to believe that the actions we have taken over the past two years toimprove our product range and our stores are making a difference and will beparticularly beneficial when the trading environment improves. Improving theproduct offer is a continuing focus and we shall introduce new departments suchas Audio/TV, childrenswear and arts & crafts, into selected stores during thecurrent year. The difficulties facing us serve to reinforce our corporate objectives ofdriving sales growth, improving product selection and profit margins, morefocused direct marketing and continued concentration on stock managementcontrols and cost reduction. We hope to build on our improving sales trend,however, given the increasingly challenging trading environment, we do notanticipate dramatic improvements in the present climate. Mike KillingleyChairman * Gross sales reflect turnover inclusive of concession sales (and VAT). Grosssales are analysed further in note 2. Consolidated Profit and Loss Accountfor the 52 weeks ended 30 October 2004 restated see note 2 2004 2003 Notes 52 weeks 52 weeks ----- -------- -------- £000 £000 Turnover 2 65,299 69,106 Cost of sales (31,075) (33,694) -------- --------Gross profit 34,224 35,412Administrative expenses (33,665) (34,088) -------- --------Operating profit 559 1,324Net interest payable and similar charges (295) (239) -------- --------Profit on ordinary activities before taxation 264 1,085Tax on profit on ordinary activities (241) (539)Profit for the financial period 6 23 546Dividends (677) (851) -------- --------Retained loss for the period (654) (305) ======== ======== Earnings per share 7 0.11p 2.66pDiluted earnings per share 7 0.11p 2.66p Dividends per share 6 3.30p 4.15p There is no material difference between the results as disclosed above and theresults on an unmodified historical cost basis. All of the results are derivedfrom continuing operations. Statement of Total Recognised Gains and Losses 2004 2003 -------- -------- £000 £000 Profit for the financial period 23 546Unrealised surplus on revaluation of properties - 1,659 -------- --------Total recognised gains and losses relating to the period 23 2,205 ======== ======== Consolidated Balance Sheetas at 30 October 2004 restated* 2004 2003 ---- ---- £000 £000Fixed assetsIntangible assets 1,089 1,155Tangible assets 22,955 24,635Investments 28 30 -------- -------- 24,072 25,820 ------ ------Current assetsStocks 11,440 13,055 Debtors due after one year 3,762 2,945 due within one year 6,403 6,890 ----- ----- 10,165 9,835Cash at bank and in hand 113 133 -------- -------- 21,718 23,023Creditors - amounts falling duewithin one year (10,627) (11,154) -------- --------Net current assets 11,091 11,869 -------- --------Total assets less currentliabilities 35,163 37,689Creditors - amounts falling dueafter more than one year (7,000) (9,000)Provisions for liabilities andcharges (1,778) (1,620) -------- --------Net assets 26,385 27,069 ======== ========Capital and reservesCalled up share capital 1,026 1,026Share premium account 440 437Revaluation reserve 3,916 3,965Capital redemption reserve 242 242ESOP reserve (54) (21)Profit and loss account 20,815 21,420 -------- --------Equity shareholders' funds 26,385 27,069 ======== ======== * The balance sheet for 2003 has been restated as a result of UITF Abstract 38.Investments in own shares are shown now in reserves rather than as a fixed assetinvestment. Consolidated Cash Flow Statementfor the 52 weeks ended 30 October 2004 2004 2003 52 weeks 52 weeks -------- -------- £000 £000 £000 £000 Cash inflow from operatingactivities 3,941 3,079 Returns on investments and servicingof financeInterest received 15 5Interest paid (277) (233) ------ ------Net cash outflow forreturns on investmentsand servicing of finance (262) (228) TaxationUK corporation tax net (29) (242) Capital expenditure andfinancial investmentPurchase of investment (38) (22)Sale of investment 2 2Purchase of tangible fixed assets (1,286) (3,201)Sale of tangible fixed assets 13 14 ------ ------Net cash outflow for capitalexpenditure and financialinvestment (1,309) (3,207) Acquisitions Purchase of businesses - 21 Equity dividends paid (677) (1,251) ------ -------Cash inflow/(outflow) before financing 1,664 (1,828) Financing - long term bank loans (2,000) 8,500 - short term bank loan - (7,000) - issue of ordinary shares 3 17 ------ ------Net cash (outflow)/inflowfrom financing (1,997) 1,517 ------ ------Decrease in cash duringthe period (333) (311) ====== ====== Notes 1 Nature of financial information The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 October 2004 or 1 November 2003. The financial information for 2004 and 2003 is derived from the statutory accounts for those years. The statutory accounts for 2003, which were unqualified, have been delivered to the Registrar of Companies. The statutory accounts for 2004 will be delivered to the Registrar of Companies following the Company's annual general meeting. The Group auditors, Deloitte & Touche LLP, have reported on the 2004 accounts, their report was unqualified and did not contain a statement under 237(2) or (3) of the Companies Act 1985. 2 Turnover and gross profit Turnover and gross profit are derived from one business activity. Income is recognised on delivery of goods or related services, although provision is made for any returns in accordance with the Group's normal terms of trade. Group turnover and gross profit includes interest earned on customers' accounts. In accordance with requirements of the amendment to FRS5 (Application Note G: Revenue Recognition) issued on 13 November 2003, turnover now excludes the non-commission element of sales where Beales, as the seller, is acting as an agent rather than as a principal. The current and prior year turnover has been adjusted as set out below, with a corresponding adjustment to cost of sales such that there is no impact on reported gross profit. 52 weeks ended 52 weeks ended 30 October 2004 1 November 2003 --------------- --------------- £000 £000 Turnover Gross sales (inc VAT) 109,598 114,232 VAT adjustment (15,654) (16,338) -------- -------- Turnover prior to restatement 93,944 97,894 Agency sales less commission (28,645) (28,788) -------- -------- Group reported turnover 65,299 69,106 ======== ======== Application Note G has necessitated other changes for retailers. The Board hasconsidered the impact of these for Beales and concluded that they are notmaterial. 3 Reconciliation of operating profit to net cash flow from operating activities 2004 2003 52 weeks 52 weeks -------- -------- £000 £000 Operating profit 559 1,324 Revaluation of investment 5 (2) Depreciation 2,960 3,035 Amortisation of goodwill 66 66 Profit on sale of investment - (1) (Profit)/loss on disposal of fixed (7) 3 assets Decrease/(Increase) in stocks 1,615 (541) Increase in debtors (330) (205) Decrease in creditors (927) (600) --------- -------- Cash inflow from operating activities 3,941 3,079 ========= ======== 4 Reconciliations of movements in shareholders' funds 2004 2003 £000 £000 Profit for the financial period 23 546 Dividends (677) (851) -------- ------- Retained loss for the period (654) (305) Proceeds of share issue 3 17 Revaluation - 1,659 ESOP reserve (33) (21) -------- ------- Net (decrease)/increase in shareholders' funds (684) 1,350 Opening shareholders' funds 27,069 25,719 -------- ------- Closing shareholders' funds 26,385 27,069 ======== ======= 5 Analysis of net debt 30 October 1 November 2004 Cash flow 2003 ---- --------- ---- £000 £000 £000 Cash at bank and in hand 113 (20) 133 Overdraft (620) (313) (307) ---------- -------- -------- (507) (333) (174) Debt due after one year (7,000) 2,000 (9,000) ---------- -------- -------- (7,507) 1,667 (9,174) ========== ======== ======== 6 Dividends The final ordinary dividend of 2.20p per share will be paid on 6 April 2005 to ordinary shareholders on the register at the close of business on 25 February 2005. 2004 2003 ---- ---- £000 £000Ordinary sharesInterim - paid 1.10p 226 1.95p 400Final - proposed 2.20p 451 2.20p 451 -------- -------- -------- -------- 3.30p 677 4.15p 851 ======== ======== ======== ======== 7 Earnings per share The calculation of earnings per share is based on profit for the financial year of £23,000 (2003 £546,000) and on 20,521,029 (2003 20,514,540) ordinary shares, being the weighted average number in issue during the year. The weighted average number of shares used in the calculation of diluted earnings per share is 20,521,029 (2003 20,544,599) calculated as follows: 2004 2003 number number ------ ------ Basic weighted average number of shares 20,521,029 20,514,540 Dilutive potential ordinary shares: employee - 30,059 share options ---------- ---------- 20,521,029 20,544,599 ========== ========== 8 Report and accounts Copies of the Company's Annual Report and Accounts will be sent to shareholders in due course. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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