7th Sep 2009 07:00
7 September 2009
Theo Fennell PLC
("Theo Fennell" or "the Company")
Final Results for the year ended 31 March 2009
HIGHLIGHTS:
Corporate
Appointment of Barbara Snoad as Chief Executive in May 2009
Return of Theo Fennell as Creative Director in June 2009
Appointment of new Chairman - Rupert Hambro and Deputy Chairman - Alasdair Hadden-Paton June 2009
Operational
New strategy in place focusing on core design-led jewellery range with new collection - "Phi" launching at the end of September. Other pieces in production now for Christmas 2009
Board focused on developing wholesale offer outside the UK; in the Middle East, Russia and the Far East
Collaboration agreement negotiated between Theo's new design business - Original Design Partnership (ODP) and Theo Fennell PLC. This will provide design services for new products as well as nurture new talent
Financial
Turnover of £21.8m (2008: £28.06m)
Pre-exceptional loss of £2m (2008: profit of £ 1.9m)
Decision by new board to write down £1.3m relating to write-off of license and development costs, provision against obsolete stock and closure of certain store concessions
Outlook
Board confident of turnaround
Strong sales of core Theo Fennell product in certain department stores
Re-engaging with loyal Theo Fennell customer base
Overseas demand still strong
Rupert Hambro, Chairman commented:
"In 2008 Theo Fennell PLC was impacted by both the economic climate and a number of unwise management decisions, resulting in a significant loss for the year. The new, recently appointed board and management team have decided to make all the necessary write downs for this financial year which will leave the Company unencumbered as it progresses its turnaround strategy to restore the Company to its previous levels of success."
7 September 2009
Enquiries:
|
Theo Fennell |
Barbara Snoad - CEO |
020 7591 5000 |
|
Pelham Public Relations |
James Henderson / Kate Catchpole |
020 7337 1512 |
|
Seymour Pierce Limited |
Mark Percy / Catherine Leftley |
020 7107 8000 |
CHAIRMAN'S STATEMENT
I write this report about your company's trading results for the year to 31 March 2009. These results are not easy to comment on given there is now a new management team and Board of Directors in place. I only joined the Company after the end of this financial year and became Chairman in June 2009. At the same time Alasdair Hadden-Paton became Deputy Chairman and Theo Fennell rejoined the board of the company he founded after almost 18 month's absence. His return has been very well received by our staff and customers.
A number of developments took place last year under the previous Chairman and Board including the appointment of a new CEO and the departure of Theo Fennell. Operationally, new watch and jewellery concessions were opened at Brown Thomas in Dublin (which were subsequently closed in April 2009) and House of Fraser in London's new Westfield Centre (which was also subsequently closed in January 2009). New fragrance contracts were entered into and management focused on Brand extensions rather than the Group's core jewellery business. Since that time those fragrance and brand extension contracts have been terminated. Consequently, these results include some significant write-offs for the business due to the various aborted initiatives of the previous 12 months.
As has been announced, Barbara Snoad returned as Chief Executive in May 2009 to take responsibility for the day-to-day running of the business. She is now implementing a new strategy compatible with the design-led ethos and core jewellery business which had been very successful in the past.
Results
I regret that, due to a combination of unwise management decisions and adverse trading conditions during the financial year under review, it has proved necessary to take exceptional charges of £1,312,058 which has culminated in the Company suffering a total operating loss of £3,308,260. Sales at our Fulham Road shop were most disappointing during the year, and all aspects of the business, with the exception of the Harrods luxury watch counters, which at their insistence were handed back during the year returning cash to the business for stock of £1,581,661, were below last year and below budget. The Chopard concession at Harrods was also reclaimed during the year.
Design, Product and Strategy
Theo Fennell coming back into the business that he founded has already made an impact. He has returned as Creative Director with responsibility for all creative aspects of the Company and I have no doubt this will also have an impact on sales. He has already put into production new pieces for Christmas 2009 and instigated production of designs submitted, but not used, last year, which I feel will be the beginning of the turnaround for the Company.
It is your Board's intention to recreate and revive the profitable UK business and to develop a wholesale offer around the Theo Fennell brand which will be available in a number of countries starting with Russia and in the Far East. We are already well represented in the Middle East through our partners Al Tayer. It would not be your Board's intention to open 'stand alone' stores anywhere for the moment, but rather to franchise with retail partners in countries where there is a demand for our style of luxury products and to take trade partners, where necessary, for non-core product. Your Board is considering every way this process might be accelerated.
The Original Design Partnership
During Theo Fennell's absence from the Board, he started a new design business called the Original Design Partnership ("ODP"). The ODP has a contractual arrangement with the Company to provide design services for new products. It also provides the same service for other companies. Theo's intention is to build a group of talented designers across varied disciplines to provide services wherever the demand might arise. With Theo Fennell's return to the Company it is your Board's intention to acquire a minority interest in ODP with the remaining shareholdings split amongst those who work in ODP, including Theo Fennell. A collaboration agreement has been negotiated between the two companies.
Outlook
The current trading has not shown an improvement but we are convinced we have seen the worst of it despite economic forecasts. With Theo Fennell on board we shall re-engage with loyal clients who, during his absence, have had little to do with the business. New designs, new concepts, a reinvigorated energy and enthusiasm with a renewed management team will, in our view, bring rewards for our shareholders. The Company has not yet turned the corner, although we continue to see strong sales in certain of our stores, the coming months will be a vital part of the re-engaging of all of us with our customers. We are so grateful for shareholders' patience during these very difficult times and we are equally grateful for the loyalty of the wonderful staff who have been re-energised by Theo's return, in the knowledge that they have an exciting and more secure future.
Rupert Hambro
Chairman
7 September 2009
Profit and Loss AccountFor the year ended 31 March 2009
|
2009 £ |
2008 £ |
|||||
|
Turnover Continuing operations Discontinued operations |
11,885,938 9,936,410 |
16,831,423 11,233,655 |
||||
|
Total turnover |
21,822,348 |
28,065,078 |
||||
|
Cost of sales Exceptional cost of sales |
(21,507,904 (1,063,358 |
) ) |
(23,986,310 - |
) |
||
|
Total cost of sales |
(22,571,262 |
) |
(23,986,310 |
) |
||
|
Gross (loss) / profit |
(748,914 |
) |
4,078,768 |
|||
|
Administrative expenses Exceptional administrative expenses |
(2,310,646 (248,700 |
) ) |
(2,201,045 (500,600 |
) ) |
||
|
Total administrative expenses |
(2,559,346 |
) |
(2,701,645 |
) |
||
|
Operating (loss) / profit Continuing operations Discontinued operations |
(2,463,057 (845,203 |
) ) |
667,087 710,036 |
|||
|
Total operating (loss) / profit |
(3,308,260 |
) |
1,377,123 |
|||
|
Net interest (payable) / receivable |
(32,868 |
) |
25,350 |
|||
|
(Loss) / profit on ordinary activities before taxation |
(3,341,128 |
) |
1,402,473 |
|||
|
Tax on (loss) / profit on ordinary activities |
391,394 |
(432,853) |
||||
|
Retained (loss) / profit for the year |
(2,949,734 |
) |
969,620 |
|||
|
Basic (loss) / earnings per share |
(15.70 |
)p |
5.21 |
p |
||
|
Diluted (loss) / earnings per share |
(15.70 |
)p |
4.74 |
p |
||
|
Basic (loss) / earnings per share from continuing operations |
(11.20 |
)p |
1.40 |
p |
||
|
Diluted (loss) / earnings per share from continuing operations |
(11.20 |
)p |
1.32 |
p |
There were no recognised gains or losses other than the loss for the financial year.
Balance Sheetas at 31 March 2009
|
2009 |
2008 |
|||||||
|
£ |
£ |
£ |
£ |
|||||
|
Fixed assets Tangible assets |
594,829 |
737,907 |
||||||
|
Current assets Stocks Debtors Cash at bank and in hand |
8,506,093 1,295,645 1,418,330 |
10,053,293 2,408,794 958,008 |
||||||
|
11,220,068 |
13,420,095 |
|||||||
|
Creditors: amounts falling due within one year |
(2,951,860 |
) |
(4,046,526 |
) |
||||
|
Net current assets |
8,268,208 |
9,373,569 |
||||||
|
Total assets less current liabilities |
8,863,037 |
10,111,476 |
||||||
|
Creditors: amounts falling due after more than one year |
||||||||
|
Convertible loan note |
(300,000 |
) |
- |
|||||
|
Other |
(1,563,917 |
) |
(187,622 |
) |
||||
|
(1,863,917 |
) |
(187,622 |
) |
|||||
|
Net assets |
6,999,120 |
9,923,854 |
||||||
|
Capital and reserves Called up share capital Share premium account Profit and loss account Share options reserve |
940,533 4,572,857 1,451,806 33,924 |
935,533 4,552,857 4,380,463 55,001 |
||||||
|
Equity shareholders' funds |
6,999,120 |
9,923,854 |
Cash Flow StatementFor the year ended 31 March 2009
|
2009 |
2008 |
|||||||
|
£ |
£ |
£ |
£ |
|||||
|
Net cash (outflow) / inflow from operating activities |
(608,259 |
) |
1,969,428 |
|||||
|
Returns on investments and servicing of finance Interest paid on bank loans, overdrafts and other loans Interest element of finance lease payments Interest received |
(68,820 (1,572 37,524 |
) ) |
(77,022 (6,138 108,510 |
) ) |
||||
|
(32,868 |
) |
25,350 |
||||||
|
Taxation Corporation tax received |
- |
140,139 |
||||||
|
Capital expenditure Purchase of tangible fixed assets Receipt from sale of fixed assets |
(355,072 50,000 |
) |
(482,281 - |
) |
||||
|
(305,072 |
) |
(482,281 |
) |
|||||
|
Net cash (outflow) / inflow before financing |
(946,199 |
) |
1,652,636 |
|||||
|
Financing Share issuance Capital element of finance lease payments Bank loan |
25,000 (6,302 1,387,823 |
) |
50,750 (19,848 203,154 |
) |
||||
|
Increase in cash |
460,322 |
1,886,692 |
1. Basis of preparation
The financial statements have been prepared under the historical cost convention and in accordance with applicable United Kingdom accounting standards. The principal accounting policies which are set out below have remained unchanged from the previous year. These policies have been applied consistently in dealing with items in relation to the Company's financial statements and have been reviewed in accordance with Financial Reporting Standard 18 "Accounting Policies".
Going concern
The current economic conditions continue to create uncertainty over the level of demand for the Company's products and the Board have therefore undertaken extensive detailed forecasting of the Company's activities, including sensitivity analysis, through to September 2010.
Cash flow projections are based on conservative assumptions and continued overdraft facilities. A new agreement is currently being negotiated with Clydesdale Bank plc regarding overdraft facilities which are due for renewal on 30 September 2009. Should these negotiations be successful, the Board do not envisage a shortfall in working capital during the coming twelve months. The Board are encouraged that after initial discussions with the bank no matters have been brought to their attention to suggest that renewal may not be agreed on satisfactory terms.
Accordingly, based on the Company's plans for 2009/10 and after making enquiries, the Directors have a reasonable expectation that the Company has adequate resources available from funds generated from trading and from banking facilities to continue operations for at least 12 months from the date of signing of these financial statements.
The directors are therefore satisfied that the Company has adequate resources to continue in business for the foreseeable future. Accordingly, the financial statements of the Company have been prepared on a going concern basis.
2. Analysis of continuing and discontinued operations
|
Continuing operations |
Discontinued operations |
Total |
||||
|
2009 |
2009 |
2009 |
||||
|
£ |
£ |
£ |
||||
|
Turnover |
11,885,938 |
9,936,410 |
21,822,348 |
|||
|
Cost of sales |
(11,716,300 |
) |
(9,791,604 |
) |
(21,507,904 |
) |
|
Exceptional cost of sales |
(553,350 |
) |
(510,008 |
) |
(1,063,358 |
) |
|
Total cost of sales |
(12,269,650 |
) |
(10,301,612 |
) |
(22,571,262 |
) |
|
Gross loss |
(383,712 |
) |
(365,202 |
) |
(748,914 |
) |
|
Administrative expenses Exceptional administrative expenses |
(1,830,645 (248,700 |
) |
(480,001 - |
) |
(2,310,646 (248,700 |
) |
|
Total administrative expenses |
(2,079,345 |
) |
(480,001 |
) |
(2,559,346 |
) |
|
Total operating loss |
(2,463,057 |
) |
(845,203 |
) |
(3,308,260 |
) |
2. Analysis of continuing and discontinued operations (continued)
|
Continuing operations |
Discontinued operations |
Total |
||||
|
2008 |
2008 |
2008 |
||||
|
£ |
£ |
£ |
||||
|
Turnover |
16,831,423 |
11,233,655 |
28,065,078 |
|||
|
Cost of sales |
(13,879,519 |
) |
(10,106,791 |
) |
(23,986,310 |
) |
|
Gross profit |
2,951,904 |
1,126,864 |
4,078,768 |
|||
|
Administrative expenses Exceptional administrative expenses |
(1,784,217 (500,600 |
) |
(416,828 - |
) |
(2,201,045 (500,600 |
) |
|
Total administrative expenses |
(2,284,817 |
) |
(416,828 |
) |
(2,701,645 |
) |
|
Total operating profit |
667,087 |
710,036 |
1,377,123 |
During the year the following department store concessions were terminated, Harrods Luxury Watches, Harrods Chopard Boutique, Brown Thomas Ireland, and House of Fraser Westfield.
3. Exceptional items
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Exceptional cost of sales continuing operations |
||||
|
Write off of Fragrance license costs, development costs of new Fragrance and provision against obsolete stock |
283,088 |
- |
||
|
Write down of stock |
172,630 |
- |
||
|
Write off of branded Watch development costs |
45,754 |
- |
||
|
Write off of aborted design projects and rebranding exercise |
51,878 |
- |
||
|
553,350 |
- |
|||
|
Exceptional cost of sales discontinued operations |
||||
|
Costs of luxury watch Harrods closure |
329,663 |
- |
||
|
Costs of withdrawal from Brown Thomas Ireland |
180,345 |
- |
||
|
510,008 |
- |
|||
|
Total exceptional cost of sales |
1,063,358 |
- |
Exceptional administrative expenses
The exceptional administrative charge in the year to 31 March 2009 relates to the costs of the departure of the previous Chief Executive and Retail Director.
The exceptional administrative charge in the year to 31 March 2008 relates to the costs of the departure of the previous Managing Director and the appointment of the Chief Executive.
4. Tax on (loss) / profit on ordinary activities
The taxation charge is based on the (loss) / profit for the year and represents:
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Current tax: |
||||
|
UK Corporation tax at 28% (2008: 30%) |
- |
461,717 |
||
|
Adjustment in respect of prior years |
(461,717 |
) |
(9 |
) |
|
(461,717 |
) |
461,708 |
||
|
Deferred tax: |
||||
|
Origination and reversal of timing differences (see note 10) |
70,323 |
(28,855 |
) |
|
|
(391,394 |
) |
432,853 |
5. Earnings per share
(Loss)/profit per share is calculated by dividing the (loss)/profit attributable to ordinary shareholders by the weighted average number of ordinary shares during the year. Share options are generally dilutive if the exercise price was below the average market price for the year end 31 March 2009 of 12.5p.
|
Continuing operations |
Discontinued operations |
Total |
||||
|
2009 |
2009 |
2009 |
||||
|
£ |
£ |
£ |
||||
|
Loss for the financial year |
(2,104,531 |
) |
(845,203 |
) |
(2,949,734) |
|
|
Weighted average number of ordinary shares |
18,793,994 |
18,793,994 |
18,793,994 |
|||
|
Loss per share - basic |
(11.20) |
p |
(4.50) |
p |
(15.70) |
p |
|
Loss per share - diluted |
(11.20) |
p |
(4.50) |
p |
(15.70) |
p |
|
Continuing operations |
Discontinued operations |
Total |
||||
|
2008 |
2008 |
2008 |
||||
|
£ |
£ |
£ |
||||
|
Profit for the financial year |
259,584 |
710,036 |
969,620 |
|||
|
Effect of convertible loan note |
14,700 |
- |
14,700 |
|||
|
Adjusted profit for dilutive earnings per share |
274,284 |
710,036 |
984,320 |
|||
|
Weighted average number of ordinary shares |
18,607,508 |
18,607,508 |
18,607,508 |
|||
|
Effect of dilutive share options |
1,143,119 |
1,143,119 |
1,143,119 |
|||
|
Effect of convertible loan note |
1,027,777 |
1,027,777 |
1,027,777 |
|||
|
Adjusted weighted average number of ordinary shares |
20,778,404 |
20,778,404 |
20,778,404 |
|||
|
Earnings per share - basic |
1.40 |
p |
3.82 |
p |
5.21 |
p |
|
Earnings per share - diluted |
1.32 |
p |
3.42 |
p |
4.74 |
p |
5. Earnings per share (continued)
(Loss)/earnings per share excluding post tax exceptional items are calculated as follows;
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
(Loss)/profit for the financial year |
(2,949,734 |
) |
969,620 |
|
|
Exceptional cost of sales (refer note 1) |
765,615 |
- |
||
|
Board Reorganisation (refer note 1) |
179,067 |
350,420 |
||
|
Adjusted (loss)/profit excluding exceptional items for basic earnings per share |
(2,005,052 |
) |
1,320,040 |
|
|
Effect of convertible loan note |
- |
14,700 |
||
|
Adjusted (loss)/profit excluding exceptional items for dilutive earnings per share |
(2,005,052 |
) |
1,334,740 |
|
|
Weighted average number of ordinary shares |
18,793,994 |
18,607,508 |
||
|
Effect of dilutive share options |
- |
1,143,119 |
||
|
Effect of convertible loan note |
- |
1,027,777 |
||
|
Adjusted weighted average number of ordinary shares |
18,793,994 |
20,778,404 |
||
|
(Loss)/earnings per share excluding exceptional items - basic |
(10.67 |
)p |
7.09 |
p |
|
(Loss)/earnings per share excluding exceptional items - diluted |
(10.67 |
)p |
6.42 |
p |
6. Stocks
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Raw materials |
664,147 |
633,497 |
||
|
Work in progress |
38,206 |
45,012 |
||
|
Finished goods |
7,803,740 |
9,374,784 |
||
|
8,506,093 |
10,053,293 |
The Company held £1,598,829 of stock on consignment as at 31 March 2009 (2008: £4,091,688) which is not recorded on the balance sheet. The principal terms of the consignment agreements, which can generally be terminated by either side, are such that the Company can return any or all of the stock to the relevant suppliers without financial and commercial penalties and the supplier can vary stock prices.
7. Debtors
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Trade debtors |
1,011,055 |
1,710,713 |
||
|
Other debtors |
5,194 |
381,758 |
||
|
Deferred tax |
- |
70,323 |
||
|
Prepayments and accrued income |
279,396 |
246,000 |
||
|
1,295,645 |
2,408,794 |
8. Creditors: amounts falling due within one year
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Bank loans and overdrafts |
120,886 |
112,176 |
||
|
Trade creditors |
1,229,633 |
1,450,200 |
||
|
Corporation tax |
- |
461,717 |
||
|
Social security and other taxes |
736,310 |
470,645 |
||
|
Other creditors |
94,670 |
312,372 |
||
|
Accruals and deferred income |
767,543 |
933,114 |
||
|
Amounts due under finance lease agreements |
2,818 |
6,302 |
||
|
Convertible loan note |
- |
300,000 |
||
|
2,951,860 |
4,046,526 |
The bank loans and overdrafts are secured by a debenture over the assets and undertakings of the Company.
9. Creditors: amounts falling due after more than one year
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Convertible loan note |
300,000 |
- |
||
|
Bank loans |
1,563,917 |
184,804 |
||
|
Amounts due under finance lease agreements |
- |
2,818 |
||
|
1,863,917 |
187,622 |
The convertible loan note was issued on 3 September 2003. Interest is payable quarterly at 7 % per annum. The loan note may be converted to ordinary shares at a conversion price of 30p per ordinary share. During the year the loan note term was extended by three years and is now repayable on 30 June 2011 to the extent which it has not been converted. The loan note is secured over the assets of the Company ranking behind that currently held by Clydesdale Bank PLC ("the Bank") whether current or in the future.
10. Share capital
|
2009 |
2008 |
|||
|
£ |
£ |
|||
|
Authorised |
||||
|
30,000,000 Ordinary Shares of 5p |
1,500,000 |
1,500,000 |
||
|
Allotted, called up and fully paid |
||||
|
18,810,661 Ordinary Shares of 5p |
940,533 |
935,533 |
During the year 100,000 shares were issued as a result of the exercise of share options. The nominal value of these shares was £5,000 and the consideration was £25,000.
11. Reserves
|
Share premium account |
Profit and loss account |
|
Share options reserve |
||||
|
£ |
£ |
£ |
|||||
|
At 1 April 2008 |
4,552,857 |
4,380,463 |
55,001 |
||||
|
Loss for the year |
- |
(2,949,734 |
) |
- |
|||
|
Premium on shares issued during the year |
20,000 |
- |
- |
||||
|
Transferred to profit and loss account |
- |
21,077 |
(21,077 |
) |
|||
|
At 31 March 2009 |
4,572,857 |
1,451,806 |
33,924 |
12. Dividend
The Company does not propose to pay a dividend for the year ended 31 March 2009.
13. Publication of Non-Statutory Accounts
The financial information set out in this preliminary announcement does not constitute the company's statutory accounts for the years ended 31 March 2009 or 2008 as defined in section 240 of the Companies Act 1985.The summarised balance sheet at 31 March 2009 and the summarised profit and loss account, summarised cash flow statement and associated notes for the year then ended have been extracted from the Company's 2009 audited statutory financial statements. The auditor's report on the statutory financial statements for the year ended 31 March 2009 was unqualified and did not contain any statement under Section 237(2) or (3) of the Companies Act 1985. This announcement includes extracts from the audited statutory accounts for the year to 31 March 2009 upon which the auditors' opinion is modified on the basis of an emphasis of matter opinion in relation to going concern. The comparative figures relating to the year to 31 March 2008 are taken from the audited statutory accounts for that year.
The Annual Report and Accounts for the year ended 31 March 2009 is being posted to shareholders and is available on the Company's website www.theofennell.com
Related Shares:
TFL.L