1st Aug 2013 13:21
1st August 2013
Theo Fennell PLC
("Theo Fennell" or "the Company")
Final results for the year ended 31 March 2013
Theo Fennell plc, the luxury jewellery brand, announces results for the year ended 31 March 2013.
HIGHLIGHTS
Financial & Operational
·; Turnover of £10.71m (2012: £12.38m)
·; Loss for the year has been substantially reduced by £824,000 to £878,616 (2012: Loss £1,702,621)
·; Sales in the first half of the financial year were in line with Board expectations with turnover down by 8% at £4.94m (2012 H1: £5.36m), however second half sales were down 18% at £5.77m (2012 H2: £7.02m)
·; Cost base further restructured to bring costs in line with trading performance
·; Completed a full upgrade of the IT network and hardware
·; Wholesale sales were up 16% with new concession openings in Kuwait and in Baku, Azerbaijan
Product & Design
·; Launch of new pieces and collections including the Tryst, Wild Rose, Tropical & Safari Animal 'Arts collections, and new Spangle pieces
·; Alias, the silver jewellery range, launched the Meadow collection during the year which has performed well, and new 'Arts launched late in the year
·; New men's range with launch of gold and enamelled cufflinks which are selling well
·; Ongoing investment in unique one-off pieces to meet current demand from clients for truly bespoke products
Outlook & Strategy
·; Focused on international growth with plans to open with a wholesale partner in Qatar in September
·; On-going positive discussions with partners in South East Asia and China
·; Introducing Limited Edition ranges in the coming year including Magical Dawn and Woodland Animal 'Arts
·; Further new collections include the Bud & Vita ranges
·; Expanding gold and enamelled bespoke cufflinks targeted at male market
·; Large amount of diamond stock supported by consignment partners
·; Targeting wholesale and online as primary channels to grow sales further
·; Focused on growing the brands 'Bespoke' and 'One-off' offering and highlighting the craftsmanship element of these products
Recommended offer by Mirfield 1964 Plc
The Independent Directors are pleased to announce a recommended offer by Mirfield 1964 Plc (incorporated for the purpose of making the recommended offer on behalf of EME Capital LLP and its co-investors). The details regarding Mirfield's strategic plans for the business are outlined in today's announcement of the proposed offer. We believe that this recommended offer will be in the best interests of shareholders, employees and customers.
Rupert Hambro, Chairman of Theo Fennell, commented:
"Although it has been another challenging year for the Company, we have made some solid progress having expanded our product ranges, upgraded our IT systems and strengthened our overseas network. We have continued to reduce costs and restructured our wholesale division. We are confident that these changes will enhance the Company's performance.
Sales for the first three months of last year were encouraging but there is no doubt we suffered alongside many other retailers during the Olympics and Christmas was again disappointing. Whilst we remain cautious in the short term given the on-going economic challenges which are affecting consumer spending and constraints we face from lack of capital, we believe firmly in the long term potential of the brand.
As you know we have been in takeover talks with a number of parties since we announced on 5 September 2012 that we were in very preliminary talks with EME Capital LLP which has been a significant investment of time and resource.
Following these discussions, we are pleased to announce today a recommended offer from Mirfield 1964 Plc (incorporated for the purpose of making the recommended offer on behalf of EME Capital LLP and its co-investors), as set out in our offer document dated today.
Theo Fennell, Interim MD & Founder of Theo Fennell commented:
"Our focus in the coming year is to return the Company to profit. We continue to launch exciting new collections and expand our range of pieces. Our online sales have performed strongly and we will continue to build this side of the business. We are also focused on developing the brand internationally with our overseas concessions and partners.
The shift in customer mind set back to the values of craftsmanship, originality and individuality plays very much to our strengths and we are very focused on marketing these points of difference."
Enquiries:
Theo Fennell PLC | Theo Fennell | 020 7591 5000 |
Pelham Bell Pottinger Cantor Fitzgerald Europe | Lucy Miles Mark Percy/ Catherine Leftley | 020 7861 3885 020 7894 7000 |
CHAIRMAN'S STATEMENT
Chairman's Statement
The Company's results for this year were disappointing. After an encouraging first three months of the year, during which sales were up by 3%, trading during the remainder of the year was more difficult with sales 18% below the prior year, mainly due to the Olympics, a poor Christmas and the generally depressed UK consumer market.
In view of the challenges faced over the past year and in response to the on-going uncertainties regarding the economic environment, the Company has continued the restructuring of its cost base.
In the coming year we will focus the business on growing sales through our directly operated retail stores in London, which benefit from a broad range of International clients. The price point for a number of potential clients has risen dramatically over the last year or two and we have therefore taken steps to partner with diamond dealers who will provide us with the stones we need, on consignment.
Although international wholesale was up on the previous year it suffered from political problems in certain countries. The Bahrain outlet was closed down due to political unrest. There were also a number of issues releasing stock from customs in the former Soviet states. With planned new openings in Qatar, and possibly Nigeria, we expect to see a marked improvement in our wholesale revenues in the coming year.
Our long term strategy remains the same; to build on the unique strengths of the business and its design-led ethos. We intend to grow the core jewellery business while developing our product offering, particularly at the high end, and growing our international distribution and client base.
FinancialFor the year ended 31 March 2013 the Company achieved sales of £10.7m, well below the prior year, and made a loss on ordinary activities before taxation and exceptional items of £0.71m (2012: loss of £1.21m).
The restructuring and refocus of the business has taken longer than we had hoped to produce an improvement in the performance of the business. Current sales in the first three months of the financial year to 31 March 2014 are £1.98m versus £2.53m in the same period last year.
Design, Product and Operations
In the year we have continued to invest in unique one-off pieces which we believe clearly differentiates our product from our competitors in the jewellery market. These pieces are at the forefront of British design and craftsmanship and utilise the very best skills from our workshop. Most recent examples of this are the expanded range of the Opening Rings. These have not only been showcased in our Fulham Road store, but also by key wholesale partners and were exhibited at Masterpiece in London in July 2013.
In the current year we will launch Magical Dawn, the third in our series of Limited Edition keys, crosses and Phi's following the success of our Enchanted Pool and Secret Garden Limited Editions. Our 'Arts collection will be expanded with the introduction of a series of Woodland Animal 'Arts including the Fox, Badger, Owl and Mouse. We have recognised the limited offer in the fine jewellery market for men's cufflinks and extended our range of unique and individual gold and enamelled cufflinks.
The Alias range continues to be refined and we will launch new collections later in the year.
Website
The website has continued to perform well and online sales for this financial year were 172% higher than the prior year, turnover amounted to £255.3k (2012: £93.8k). We are also encouraged by the performance in the first quarter of the current year with sales 5.8% above the prior year. We will continue to refine and develop the website and support it with a tailored marketing campaign. We expect this to be a growing part of our business and an important communication channel to our clients.
Retail Stores
We continue to focus our directly operated retail stores on the London market which benefits from an affluent international client base.
We are disappointed to report that the new boutique in the Burlington Arcade, Mayfair, had a slower than expected start. However, since the beginning of the current financial year, it is beginning to show good signs of improvement.
International and Wholesale
Apart from the political problems, the wholesale channel did not perform as well as anticipated. We have taken action to address the poor performance and restructured our wholesale division.
I am pleased to report a solid start in the first quarter of the current financial year. We have seen a good performance from our partners in Dubai and Eastern Europe. We have also secured a new wholesale opening in Qatar with Amiri Gems which will be opening in September 2013.
We continue to explore opportunities in key international markets including the Middle East, Far East and USA. We expect to secure at least one new significant wholesale opening in the current year but remain focused on appointing the right partners to represent the Theo Fennell brand, particularly in the Chinese market.
The Board
On 24 September 2012 we announced that Frank McKay joined the Board as a non-executive director.
On 7 December 2012, we announced that Gavin Saunders, Finance Director of Theo Fennell Plc, had left the Company and was replaced by Alasdair Hadden-Paton.
Banking
I am pleased to report that we have renewed our banking facilities with the Clydesdale Bank until July 2014. However, whilst having renewed the facility and being generally supportive, Clydesdale Bank has informed the Board that it wishes to have its facilities to the Company replaced within two years.
Outlook
As shareholders will be aware, the Company has experienced challenging trading conditions over the last few years with the tough economic environment affecting consumer spending. As previously announced, the Company experienced weak Christmas trading. The Board has responded by significantly reducing costs and restructuring the wholesale division. The Company has also been proactive in launching new jewellery ranges and expanding online sales. These actions have resulted in a significant reduction in the losses of the business.
Recommended offer by Mirfield 1964 Plc
The Independent Directors are pleased to announce a recommended offer by Mirfield 1964 Plc (incorporated for the purpose of making the recommended offer on behalf of EME Capital LLP and its co-investors).
Rupert Hambro
Chairman
31 July 2013
Summarised Profit and Loss AccountFor the year ended 31 March 2013
Note | 2013£ | 2012£ | ||||
Turnover | 10,706,341 | 12,383,774 | ||||
Cost of sales | (4,841,534 | ) | (5,727,887 | ) | ||
Gross profit | 5,864,807 | 6,655,887 | ||||
Selling and distribution expenses Administrative expenses Exceptional administrative expenses | 2 | (5,213,059 (1,232,486 (167,000 | ) ) ) | (5,896,236 (1,870,049 (488,442 | ) ) ) | |
Total administrative expenses | (6,612,545 | ) | (8,254,727 | ) | ||
Total operating loss | (747,738 | ) | (1,598,840 | ) | ||
Net interest payable | (130,878 | ) | (103,781 | ) | ||
Loss on ordinary activities before taxation | (878,616 | ) | (1,702,621 | ) | ||
Tax on loss on ordinary activities | 3 | _ | _ | |||
Retained loss for the year | (878,616 | ) | (1,702,621 | ) | ||
Basic & diluted loss per share | 4 | (3.79 | )p | (7.39 | )p | |
Summarised Balance Sheetas at 31 March 2013Company Number 01955534
Note | 2013 | 2012 | |||||||
£ | £ | £ | £ | ||||||
Fixed assetsTangible assets Investments
|
5 |
|
499,198 50,000 549,198 |
|
522,542 182,000 704,542 | ||||
Current assetsStocksDebtors |
6 7 |
6,649,711 1,499,834 |
|
|
7,658,812 1,529,321 |
|
| ||
8,149,545 | 9,188,133 | ||||||||
Creditors: amounts falling due within one year |
8 |
(3,620,734 |
) |
(3,958,036 |
) | ||||
Net current assets | 4,528,811 | 5,230,097 | |||||||
Total assets less current liabilities |
5,078,009 |
5,934,639 | |||||||
Net assets | 5,078,009 | 5,934,639 | |||||||
Capital and reservesCalled up share capital Share premium accountProfit and loss account Share options reserve |
9 10 10 10 |
1,157,901 5,741,166 (2,026,575 205,517 |
) |
1,157,901 5,741,166 (1,147,959 183,531 |
) | ||||
Equity shareholders' funds | 5,078,009 | 5,934,639 |
Summarised Cash Flow StatementFor the year ended 31 March 2013
2013 | 2012 | ||||||||
Note | £ | £ | £ | £ | |||||
Net cash inflow from operating activities |
201,184 |
|
32,853 |
| |||||
Returns on investments and servicing of finance Interest paid on bank loans, overdrafts and other loans Interest received |
(130,916 38 |
) |
(103,844 63 |
) | |||||
(130,878 | ) | (103,781 | ) | ||||||
Capital expenditure Purchase of tangible fixed assets
|
(296,874
|
) |
(165,027
|
) | |||||
(296,874 | ) | (165,027 | ) | ||||||
Net cash outflow before financing
|
(226,568 |
) |
(235,955 |
) | |||||
Financing Share issuance, net of costs Bank loan |
- (1,168,502 |
) |
68,000 (160,810 |
) | |||||
Decrease in cash | (1,395,070 | ) | (328,765 | ) |
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 detailed forecasting of the Company's activities, including sensitivity analysis, through to 31 March 2015.
The Company meets its day-to-day working capital requirements through an overdraft facility of £2.5m from Clydesdale Bank plc that has been renewed until 31 July 2014. The Directors have prepared cash flow projections based on conservative assumptions which show that the Company should be able to operate within the level of the facility for the next 12 months. Additionally if the recommended offer by Mirfield 1964 Plc completes as envisaged, further funds in excess of £2.0m will be available for working capital purposes.
If the Mirfield 1964 Plc offer were not to complete and trade was to deteoriate significantly the Directors have concluded that the combination of these circumstances represents a material uncertainty that may cast significant doubt on the Company's ability to continue as a going concern. Nevertheless after making enquiries, and considering the uncertainties described above, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For these reasons, they continue to adopt the going concern basis in preparing the annual report and accounts.
2. Exceptional administrative expenses | 2013 | 2012 | ||
£ | £ | |||
Departure of previous Chief Executive Officer | - | 315,000 | ||
Costs of defending the employment tribunal case by a senior employee and the associated compensation |
- |
123,105 | ||
Cost of withdrawal from Harvey Nichols Manchester and associated restructuring costs |
- |
50,337 | ||
Impairment on ODP investment | 132,000 | |||
Costs of professional advice in relation to the discussions with EME Capital LLP |
35,000 |
- | ||
Total exceptional administrative expenses | 167,000 | 488,442 |
3. Tax on loss on ordinary activities
2013 | 2012 | |||
£ | £ | |||
Current tax: | ||||
UK Corporation tax at 24% (2012: 26%) | - | - | ||
Adjustment in respect of prior years | - | - | ||
- | - | |||
Deferred tax: | ||||
Origination and reversal of timing differences | - | - | ||
- | - |
4. Loss per share
Loss per share is calculated by dividing the loss 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 2013 of 10.75p.
2013 | 2012 | |||
£ | £ | |||
Loss for the financial year | (878,616 | ) | (1,702,621 | ) |
Weighted average number of ordinary shares | 23,158,029 | 23,034,696 | ||
Effect of dilutive share options | - | - | ||
Adjusted weighted average number of ordinary shares | 23,158,029 | 23,034,696 | ||
Loss per share - basic & diluted | (3.79 | )p | (7.39 | )p |
5. Fixed assets investments
2013 | 2012 | |||
£ | £ | |||
At 1 April 2012 | 182,000 | 182,000 | ||
Additions | - | - | ||
Impairment on investment | (132,000 | ) | - | |
At 31 March 2013 | 50,000 | 182,000 |
For the year ended 31 March 2013 the Original Design Partnership made a loss before tax of £96,770 (2012: profit before tax of £14,773) and the total capital and reserves was £27,653 (2012: £119,002).
This is treated as a fixed asset investment as the Company does not exert significant influence over The Original Design Partnership. The Company is not involved in the strategic, operational and financial decision making of The Original Design Partnership and we do not have independent Board representation.
6. Stocks | 2013 | 2012 | ||
£ | £ | |||
Raw materials | 637,046 | 775,699 | ||
Work in progress | 58,156 | 53,144 | ||
Finished goods | 5,954,509 | 6,829,969 | ||
6,649,711 | 7,658,812 |
The Company held £3,274,144 of stock on consignment as at 31 March 2013 (2012: £2,422,286) 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 | 2013 | 2012 | ||
£ | £ | |||
Trade debtors | 991,609 | 1,212,181 | ||
Other debtors | 134,086 | 11,309 | ||
Prepayments and accrued income | 374,139 | 305,831 | ||
1,499,834 | 1,529,321 |
8. Creditors: amounts falling due within one year | 2013 | 2012 | ||
£ | £ | |||
Bank loans | 131,646 | 1,300,148 | ||
Bank overdrafts | 2,087,341 | 692,271 | ||
Trade creditors | 690,243 | 642,776 | ||
Social security and other taxes | 282,003 | 354,429 | ||
Other creditors | 91,782 | 214,847 | ||
Accruals and deferred income | 337,719 | 753,565 | ||
3,620,734 | 3,958,036 |
The bank loans are secured by a debenture over the assets and undertakings of the Company.
9. Share capital | 2013 | 2012 | ||
£ | £ | |||
Allotted, called up and fully paid | ||||
23,158,029 (2012: 23,158,029) Ordinary Shares of 5p | 1,157,901 | 1,137,901 |
10. Reserves | Share premium account | Profit and loss account | Share options reserve | ||||
£ | £ | £ | |||||
At 1 April 2012 | 5,741,166 | (1,147,959 | ) | 183,531 | |||
Loss for the year Premium on shares issued during the year, net of Costs | - - | (878,616 - | ) | - - | |||
Recognition of equity settled share based payments in the year | - | - | 21,986 | ||||
At 31 March 2013 | 5,741,166 | (2,026,575 | ) | 205,517 |
11. Publication of Non-Statutory Accounts
The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts as defined in Section 435 of the Companies Act 2006 in respect of 2013 accounts and 2012 accounts.
The summarised balance sheet at 31 March 2013 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 2013 audited statutory financial statements which continued to include a modification within the auditors' opinion with an emphasis of matter opinion in relation to going concern. The comparative figures relating to the year to 31 March 2012 are taken from the audited statutory accounts for that year.
The Annual Report and Accounts for the year ended 31 March 2013 will be being posted to shareholders and will be made available on the Company's website www.theofennell.com.
Related Shares:
TFL.L