23rd Mar 2007 07:00
Intimas Group PLC23 March 2007 Intimas Group plc Preliminary results for the year to 31 December 2006 Intimas Group plc ("Intimas" or "the Group") is a designer and supplier ofladies' intimate apparel, with a portfolio of brands comprising Lepel, Ted BakerIntimates, Discover Mademoiselle, Urban Nights, Charnos Lingerie and "By Caprice" HIGHLIGHTS • Significant expansion of branded operations, with the addition of Charnos Lingerie • Total turnover maintained at £21.3m (2005: £21.7m) • Profit before taxation of £3.05m (2005: £0.9m) • Operating profit before taxation of £0.9m (2005: loss of £0.9m), after non-recurring items • Pension Scheme FRS 17 deficit reduced to £1.4m (2005: £6.7m), before related taxation • Scheme Specific Funding agreed with Pension Scheme Trustees • Proposed share buy-back Michael Hobbs, Chairman, comments: "The UK retail environment continues to present significant challenges to itssuppliers, but our developing multi-brand, multi-channel distribution model willhelp us to create a more balanced operating model to counteract the continuingchallenges of this environment. "We anticipate that with the ongoing effect of the loss of business fromContessa, the significant reduction in our private label swimwear business andthe squeezing in suppliers' terms from a number of national accounts, we willsee some one-off hits to our underlying operating profitability in the firsthalf. We are anticipating a slight drop in first half performance because ofthis but with a stronger end to the year, giving an overall improvement in theGroup's underlying performance." 23 March 2007 ENQUIRIES: Intimas Group plc Tel: 0115 983 6000Michael Hobbs, ChairmanCarol Duncumb, Chief ExecutiveLaurence Ford, Finance Director College Hill Tel: 020 7457 2020Gareth David Chairman's Statement This has been a year of significant progress at Intimas, as we have worked hardto sort out the business and to establish a clear strategic focus. I am pleasedwith the Group's achievements and I am confident the business has built a strongfoundation on which to grow further. Our results reflect the progress we have made. Despite a reduction in privatelabel sales, our overall turnover was little changed at £21.3m (2005: £21.7m),due to continuing growth in branded sales. We have improved our gross margin to27.8% (2005: 20.7%) and have achieved an operating profit from continuingactivities after non-recurring items, of £0.9m (2005: loss of £0.9m). Operational highlights of the past year include the acquisition of CharnosLingerie, a re-launch of the Lepel brand, a move into retailing through theopening of two retail clearance outlets, a strengthening of the seniormanagement team and the establishment of an export agreement that will take theLepel brand into Scandinavia. Resolving the issue of our ongoing pension deficit has also been a majorpriority over the past year. The Board has been careful to balance the interestsof all stakeholders in the business (pension members, employees andshareholders) when trying to find a suitable resolution and, as detailed in theFinance Director's Report, we believe that we have now achieved a solution tothis issue that will satisfy all parties. At the beginning of 2006 we entered into an active and productive dialogue withthe Pension Trustees to find the most objective and balanced solution for allparties. By rebuilding this relationship and by sharing the company's planswith the Trustees, we have been able to establish a very effective dialogue. Inthe process, we have achieved some major improvements in the performance of thescheme and found ways of significantly reducing the company's ongoingliabilities. We have now agreed with the Pension Trustees a sensible funding programme underthe scheme specific funding exercise. This funding proposal is good news for allstakeholders and the remaining liability is no longer greatly disproportionateto the size and performance of the business. It also clear from the outcome thatthe decision we made at the start of 2006 not to pursue a share buy-back and asa consequence inject £7.5m into the Pension Scheme was the right thing to do. In view of the significant progress achieved over the past year and prospectsfor continuing progress in 2007, the Board is proposing to put a specialresolution to the next AGM that will allow the company to purchase up to 5% ofits issued share capital. We are mindful that we need to further invest in thedevelopment of the business and therefore would propose to implement a share buyback, up to a maximum cost to the company of £600,000, should conditions allow. New Distribution Channels The two retail clearance units we opened in October have performed well, and areallowing us to manage more effectively our clearance of end of season stocklines. Building on our initial success at Braintree and Long Eaton, we are nowplanning to open further units. A further development of the retail proposition into concessions and a limitednumber of major UK city centres is currently being evaluated. The aim is todevelop complementary channels of distribution, to maximise sales and exposurefor all our brands whilst maintaining a primary focus on the support of ournational and local wholesale customers. In addition to the development of our retail proposition, we also plan to focusduring the current year on the development of international distribution for allour brands. We have decided to test this strategy throughout 2007 by anagreement with Keller Fashion in Sweden to distribute Group brands intoScandinavia. We are currently looking to recruit an experienced manager to further developour international distribution activities over the next two years. Theinternational franchising of the retail format presents an additionaldistribution channel and is being evaluated over the coming year. The UK retail environment continues to present significant challenges to itssuppliers, but our developing multi-brand, multi-channel distribution model willhelp us to create a more balanced operating model to counteract the continuingchallenges of this environment. Challenges Along with our successes, we had a number of setbacks in the year. The sale ofthe Contessa lingerie retail chain to La Senza in 2006, for example, has had asignificant effect to the branded side of our business. Lost sales over the pastyear amounted to around £70,000 and the anticipated impact in 2007 is areduction in sales of £750,000. With the change of ownership of a number of key national accounts (Debenhams andHouse of Fraser) and a weakening in the general retail sector, we also saw aworsening in supplier payment terms, both in terms of settlement discounts andcredit days. Where possible, we try to mitigate against these imposed terms butthe Group will see some negative impact on our gross margins this financialyear. Private Label After a number of years of difficult trading and rationalisation in the privatelabel business, we are now putting plans together to focus on growth. Ourstated aim has been to only do private label business "when it is complementaryand profitable" to the branded operation. With the appointment of AileenWebster, the strategy is now moving on to focus much more on profitably growingthe business by using the experience she gained in the high volume arena whenshe worked at Sara Lee Courtaulds. We will make some targeted investment to support the opportunity, but the mainaim is to sweat the assets we have. There is a dedicated Head Office and teamfor this operation at Leek in Staffordshire, where we will now integrate all thenightwear, lingerie and swimwear teams. Aileen is currently assessing the fullopportunity and we will update you later in the year. Prospects Last year we talked about maximising shareholder value and I hope allshareholders have been pleased by the significant increase we have seen in ourshare price over the past 12 months. Our aim this year is to continue to growshareholder value, by particularly focusing on the growth of profit fromcontinuing business operations. Sensible investments have been made that shouldshow encouraging growth in the full year but, in particular, in the second half. We anticipate that with the ongoing effect of the loss of business fromContessa, the significant reduction in our private label swimwear business andthe squeezing in suppliers' terms from a number of national accounts, we willsee some one-off hits to our underlying operating profitability in the firsthalf. We are anticipating a slight drop in first half performance because ofthis but with a stronger end to the year, giving an overall improvement in theGroup's underlying performance I have enjoyed my first year as Chairman, and am pleased with the progress wehave made. Now that most of the pension and asset realisation activity is at anend, I am sure we will see a much clearer focus and acceleration of growth inthe trading activities of the business. MICHAEL HOBBS Chairman 23 March 2007 CHIEF EXECUTIVE'S REVIEW The past year has been characterised by an enhanced stability, after severalchallenging years in which many retailers changed ownership and sought to altersources of supply on a direct basis. Total Group sales from continuingoperations were broadly in line with the previous year, but the split betweenour two trading divisions continued to shift away from private label into a morebalanced position reflecting the growth of our brands. Brand sales now accountfor 55% of sales compared with 33% last year and as little as 17% when I joinedthe company. During the year we took a number of major strategic decisions to further our aimof building the Group into one of the UK's strongest portfolio of intimateapparel brands. In March we bought Charnos Lingerie out of administration.Charnos, a traditional English heritage brand, represented a complementaryaddition to our high fashion Ted Baker, Discover Mademoiselle collections andthe medium-priced, broader appeal, of our Lepel brand. Later in the year, we took the decision to better manage and control ourclearance activity away from chain store discounters and open the first ofseveral factory outlets under the Intimas fascia. These have proved not only tobe a more profitable use of clearance merchandise, but have also given usvaluable information on the buying habits of our consumers. In the current financial year, I expect the development of our private labeldivision to run parallel to the growth of our brand division. We believe thereis still a demand for a well run, complementary and profitable private labeldivision. Customers still wish to benefit from the innovation and fashion designgenerated by our business, however we will choose our customers carefully andwork with those who respect the rules of supplier partnership. Brands I am pleased to report that our total brand turnover for 2006 increased by 61%.Highlights by brand are as follows: Lepel - maintained its reputation for being one of the industry's leadingco-ordinate lingerie brands. Turnover in the year grew by 14%. Its marketposition was further consolidated with the UK's largest department storeswhilst, at the same time, we made major inroads into more profitable specialistindependent and smaller store group retailers. During last year we focused on improving operational excellence and have madeinvestment into IT and supply systems as well as increasing Head Office manpowerin both sourcing, supply chain management and warehousing. The result is avastly improved delivery performance to our customers, with many congratulatingus for setting high industry standards. Recently, Lepel was awarded the highlyprestigious AIS (Associated Independent Stores) supplier of the year award,beating all industry competitors. We are now turning our attention to improving the overall branding of Lepel witha high profile re-launch of our corporate identity, backed up by majorinvestment into fixturing, point of sale, quality imagery and expanded fashionranges. This has, in the first few weeks of launch, received much attention fromour customers who are responding to the brand's progress. We expect to advanceour position during the rest of this year in both the co-ordinated and thevolume classic bra market. Charnos Lingerie - we remain encouraged by the acquisition of this classicEnglish heritage brand. Whilst the management team wrestled with postadministration issues during the Summer, and with the Autumn order book delayed,progress was made, re-establishing customer confidence. This Summer will see the re-launch of the highly successful 'Superfit'collection, designed to meet the needs of the more discerning everyday-wearconsumer. Early indications from our important independent retail customers arethat this collection will establish itself as an important continuity productwithin the industry. We intend to price position Charnos at the mid to higherend of the market, in direct competition with the leading French and Italianhouses. With the recent departure of Brand Director Shaeren McKenzie, and subsequentlythe loss of several other key individuals, we face some challenges early in theyear in re-establishing the senior team. As a result, I have promoted DornRushin to the role of Brand Director. Dorn has worked with me at Intimas for thelast four years and has a proven track record of team building and managingprofitable businesses, having previously been Commercial Director of PrivateLabel. Ted Baker - continues to establish itself in all credible fashion lingerieretailers. Reports on sell-through pre-Christmas were encouraging; with manycustomers suggesting a stronger order book in the coming sell-in for the Autumn/Winter 2007 season. This Spring, although it is still very early, we are alreadyseeing an exciting sell-through of Ted Baker swimwear ranges, with somecustomers placing repeat orders for the high season. Our ambition is to sit alongside the best of the fashion houses and we arecertainly benefiting from the general success of the Ted Baker brand, togetherwith continuing to learn a great deal from the management of one of UK's mostsuccessful branded businesses. Discover Mademoiselle - launched three seasons ago alongside Lepel. Initially,we positioned it to be overtly sexy, and whilst it was well received, we nowrecognise the need for the brand to be repositioned as a competitively pricedfashion sister to the more everyday-wear positioning of Lepel. We have been veryencouraged by the order book for the Spring/Summer season and pre-Christmassell-through was strong. We will nurture the growth of this business and havestrong ambition for it to develop into a credible brand in its own right. Private Label - sales were down £5.0 million (35%) on last year. This is thecontinued result of the Group's strategy to exit unprofitable private labelsales, whilst enforcing our policy of supplying under a partnership that adheresto lead times and margin requirements. I am pleased to announce the appointmentof an experienced and highly capable director for this division, Aileen Webster,formerly with Sara Lee Courtaulds. Aileen will bring her ability and contacts tostrengthen this division both in nightwear and lingerie. We have been encouraged by the 'halo' effect that our brands have had on privatelabel whilst, at the same time, a number of retailers have recognised the needto use 'specialists' on engineered products such as lingerie after sufferingquality issues on a direct basis. Despite this, the general trend is for thisdivision to continue to be under intense margin pressure and we will not seekgrowth at any price. Our supply agreement to the celebrity model Caprice continues to support herDebenhams sales. Caprice herself continues to open new channels of distributionand we are encouraged by the response she is having to the new Autumn 2007collections, however, overall development is slower than initially anticipated. Retail - we now feel confident that we have developed a strong brandedproposition that could be translated to the high street, particularly in majorcity centres. We anticipate opening our first high street store to test thisconcept in the second half of 2007. This will give us the opportunity to furtherimprove our consumer awareness as well as launching new concepts to the market.Our retail division is increasingly in a position to launch a concession-styleoperation and we are in early discussion with a number of department storeretailers to emulate our retail format under the Intimas name. Outlook We remain determined to maximise the potential of our branded portfolio, and therecent appointment of a Group Brand Director, Jane Denereaz, who was formerlywith the Eveden Group of brands, reinforces our commitment to becoming brandleaders in the intimate apparel sector in the UK. Over the coming year the business will continue to develop through severaldiverse but focussed activities, lessening our overall exposure to any one modeof operation. We will continue to seek a balance between wholesale and retail,brand and private label and, finally, UK and export. Carol Duncumb Chief Executive 23 March 2007 Financial Review Profit and loss account The financial statements continue to reflect the strategic refocusing of theGroup towards its Branded operations, not only through growth in its existingBrands but also through the addition of Charnos Lingerie to the portfolio. Thestronger margins generated from this strategy have enabled operating profits toimprove despite a 2% fall in turnover. The Group's operating profit has also been supported by action taken in the yearto de-risk and reduce its potential Pension Scheme liabilities by making fundsavailable to enable former employees to transfer their benefits out of thePension Scheme. The high acceptance rate received from these scheme members hasresulted in settlement gains that have contributed to the Group's operatingprofit of £852,000 (2005: loss of £909,000). Profits from the sale of the Group's Borrowash property and interest generatedfrom cash balances further contributed to a profit after tax of £2.8m (2005:profit £0.6 million). Key performance indicators The Group sees the key performance indicators as the development of Brand sales,increased gross margin and the control of working capital. 2006 2005SalesWholesale - Branded £11.73m £7.27m - Private Label £9.42m £14.45mRetail £0.11m -Gross Margin % 27.8% 20.7%Working Capital * £8.2m £5.0m * Working Capital excludes deferred tax debtors and amounts due to Pension Scheme members but includes working capital on acquisitions Continuing operations Despite an increase of 61% in Brand sales, a continued decline in Private Labelsales of 35% has caused turnover to reduce to £21.3m (2005: £21.7m). However, growth in higher margin Branded sales, both through the acquisition ofCharnos Lingerie and increases in the existing branded business has enabledgross margins to increase to 27.8% (2005: 20.7%). This enhanced mix of Brandedsales has more than countered the further decline in private label sales, whichcontinue to be affected by price pressures and higher supply costs. Continuing activities reported an operating profit of £866,000 (2005: loss£1,006,000). Excluding net gains of £953,000 relating to pension schemetransfers and funding, and £97,000 of reorganisation costs that primarily relateto changes made to Branded sales and management structures, the Group generatedan operating profit of £10,000 on continuing activities (2005: loss £249,000). Discontinued operations Discontinued operations produced an operating loss of £14,000 (2005: profit£97,000). Additional net income of £81,000 has been received from a distributionby the Group's associated company, Guy Birkin Limited, which is in the processof being wound up. The process of asset realisation from the Group's discontinued Lace activitieswas completed during the year with the sale of the Borrowash property to DavidWilson Homes Limited. The elimination of various planning issues and covenantsassociated with the property enabled gross proceeds of £3.87m to be received(£3.73m after costs) and a profit of £1.74m to be generated. Pensions During the year the Group undertook an exercise to address its ongoing liabilityto its principal pension scheme, the Sherwood Group plc Retirement BenefitsScheme ("the Scheme"). As part of this exercise letters were sent to various categories of deferredmembers of the Scheme (members who no longer work for a Company within theGroup) to offer them the opportunity to transfer out of the Scheme into schemesof their own choice. As the Scheme is in deficit, the Scheme Trustees, at theGroup's request, provided details of the available reduced transfer values torelevant deferred members and the Group offered to supplement these with a cashtop-up to a maximum value of their full transfer value. The Group's aim was toprovide the relevant Scheme membership with an opportunity to transfer out ofthe Scheme with a fair transfer value, whilst reducing the current FRS 17Pension deficit on the Group Balance Sheet, the Group's ongoing liabilities tothe Scheme and the overall costs of administration. In total over 70% of the deferred members contacted indicated that they wishedto accept the offer and transfer out of the Scheme. As a consequence £3.75m ofsettlement gains have reduced the Group's FRS 17 liabilities and, after costsassociated with this exercise and the overall funding of the Scheme, the Group'sprofitability in the year has been increased by £953,000. The reduction in the pension deficit on an FRS 17 basis has been furtherenhanced by additional company contributions and improved returns on theScheme's investments during the year, resulting in a pension deficit at the endof the year of £1.4m (2005: £6.7m) before the related deferred taxation. The Board has also been in discussion with the Scheme's Trustees over thelong-term funding requirements required under the Scheme Specific Funding regimeintroduced by the Pensions Act 2004. A process initiated by the triennialactuarial valuation of the Scheme at 1 January 2006. The preliminary results of this triennial actuarial valuation showed a fundingdeficit of £12.0m on a basis that is more prudent than the FRS 17 basis.However, this deficit has significantly reduced to £5.2m as a consequence ofmembers transferring out of the Scheme (which took place after the valuationdate); and further refinement of the valuations financial assumptions as aresult of the Trustees' consequent review of the Scheme's investment strategy.The Board has agreed with the Scheme Trustees to fund this deficit over an 8year 5 month period from 1 January 2006, and have also agreed an investmentpolicy that is liability driven with the expectation that returns from assetswill out perform liabilities. Documentation to this effect is in the process ofbeing submitted to the Pension Regulator. Taking into consideration the actuarial gains and Company contributions in 2006the funding deficit is estimated to have reduced to approximately £2.9m at 1January 2007. As part of the funding agreement current contribution levels willreduce to £552,000 per annum from 1 April 2007. The funding level will continueto be monitored and will be re-addressed as part of the next triennial valuationwhich is due at 1 January 2009. Taxation The deferred tax charge reflects the release of the deferred tax assetassociated with the reduced pension scheme deficit. However, this has beenlargely offset by an increase in the deferred tax asset related to the Group'staxable trading losses. These have increased primarily as a result of allowablecontributions made to both the Pension Scheme and members who are transferringout of the Scheme. The gain on the sale of the Borrowash property will beabsorbed by available capital losses. Consolidated balance sheet Net assets have increased to £17.9m (17.0 pence per share) from £14.6m (13.9pence per share) due to the profit in the year and the reduction in the pensiondeficit. The 31 December 2006 cash balance is valued at 8.0 pence per share. Fixed assets In March 2006 the Group purchased Charnos Lingerie. The fair values associatedwith the net assets acquired have resulted in £231,000 being attributed to theCharnos brand name. During the year the Group invested £294,000 in the design and development of thenew retail clearance store concept. In addition £60,000 was spent on extendingthe pick & pack storage facilities to cater for the central warehousing ofCharnos Lingerie and the increasing Branded operations. The Group also continuedto invest in its IT systems and point of sale fixturing, with £162,000 spent inthe year on new Branded fixturing to support in-store sales. Cash flow Net cash balances reduced by £1.06m in the year to 31 December 2006 to £8.43m,with an operational cash outflow of £3.91m, and a net inflow from investment,acquisitions and disposals of £2.85m. The main elements of the operational cash outflow are pension contributions inexcess of operating charges of £0.9m, and an increase in working capital of£2.8m, (including the Charnos Lingerie acquisition, working capital hasincreased by £3.2m). Charnos Lingerie has contributed £0.7m to this workingcapital increase, whilst in the Group's other operations debtors have risen by£1.1m and creditors have fallen by £1.0m. Extended payment terms applied by our major customers during 2006 have increasedyear end trade debtors by approximately £0.7m, the remainder of the debtorsincrease is due to higher Branded sales activity and the phasing of sales in thelast quarter of the year. Improved operational controls have not only contributed to lower product costsbut also enabled stock to be made available to customers early in the season. Asa consequence, supplier payments normally held over into the New Year have beenmade, in accordance with payment terms, prior to the year-end with a resultingreduction in year on year creditor levels. Net cash flow was supported by the sale of the Borrowash property, whichgenerated net proceeds of £3.7million. The investment of cash balances ondeposit generated interest received of £0.4m, whilst the Group invested £1.3m inthe acquisition of Charnos Lingerie and other fixed assets. As part of the exercise of transferring deferred members out of the Group'spension scheme £2.4m of payments will be made to members during 2007. Principal risks and uncertainties The Board considers the following to be the principal risks: Reduced sales and margins - the Group sells third party manufactured ladiesapparel under its own Brand labels and through customer's own labels. Risk isassociated with too high a proportion of sales to any one customer, as the Grouphas limited ability to prevent customers re-sourcing their retail requirementsthrough alternative suppliers or alternative products. This risk has beenmitigated by continued investment into product design and development, growth ofBrand sales and the expansion of our channels of distribution. Product sourcing - the Group sources all its products from overseas, andmaintains purchasing arrangements with a number of suppliers throughout the FarEast thereby avoiding disproportionate exposure to any one supplier or countryof origin. Foreign currency exchange risk - most of the Group's products are purchased fromoverseas suppliers in US dollars. The Group enters into foreign exchange forwardcontracts in order to match its seasonal forward purchasing requirements. TheGroup's policy is to cover a fixed proportion of it currency requirement inadvance of each season and the balance during the season. The amount of currencycovered at 31 December 2006 was US$12.0 million (2005: US$ 12.0 million). Impact of transition to International Financial Reporting Standards (IFRS) onconsolidated group financial statements. The first results to be reported under IFRS will be the interim results inrespect of the year ending 31 December 2007. The Group is mindful of the impactof the new financial standards on its results and a project team is identifyingthe differences between UK GAAP and IFRS. Prior to publication of the 2007interim report a restatement of the balance sheet as at 31 December 2006 and 31December 2005 and the profit and loss account for the year ended 31 December2006 under IFRS will be made available to shareholders via the Group's websitewww.intimas.co.uk. Annual General Meeting The meeting will be held at the company's registered office, Fields Farm Road,Long Eaton, Nottingham, NG10 3FZ on 17th May 2007 at 10.30 am. LAURENCE FORD Finance Director 23 March 2007 Group profit and loss account Continuing Discontinued Continuing Discontinued operations operations Total operations operations Total 2006 2006 2006 2005 2005 2005 £'000 £'000 £'000 £'000 £'000 £'000Turnover 21,261 - 21,261 21,720 - 21,720 Turnover includes:Continuing operations 18,541 - 18,541 21,720 - 21,720Acquisitions 2,720 - 2,720 - - -Discontinued operations - - - - - - Cost of sales (15,348) - (15,348) (17,231) (17,231)Gross profit 5,913 - 5,913 4,489 - 4,489 Distribution costs (4,643) - (4,643) (3,884) - (3,884)Administrative expenses (404) (14) (418) (1,611) 97 (1,514) Administrative expenses include:Pension settlements and funding costs 953 - 953 (248) - (248)Reorganisation costs (97) - (97) (509) - (509)Impairment reversal - - - - 343 343Other (1,260) (14) (1,274) (854) (246) (1,100) Operating profit / (loss) 866 (14) 852 (1,006) 97 (909) Operating profit / (loss) includes:Continuing operations 644 - 644 (1,006) - (1,006)Acquisitions 222 - 222 - - -Discontinued operations - (14) (14) - 97 97Distribution from closure of associate - 81 81 - - -Profit on sale of asset held for resale - 1,736 1,736 - - -Profit on sale of fixed assets - - - - 1,635 1,635 Profit / (loss) on ordinary activities before interest 866 1,803 2,669 (1,006) 1,732 726 Other interest receivable and similar income 1,409 - 1,409 1,254 - 1,254Interest payable and similar charges (1,026) - (1,026) (1,069) - (1,069) Profit / (loss) on ordinary activities 1,249 1,803 3,052 (821) 1,732 911before taxation Tax on profit / (loss) on ordinaryactivities (246) - (246) 188 (490) (302)Profit / (loss) on ordinary activities for 1,003 1,803 2,806 (633) 1,242 609the year Amount transferred to / (from) reserves 1,003 1,803 2,806 (633) 1,242 609 Earnings per share - Basic and diluted - 1.0p 1.7p 2.7p (0.6p) 1.2p 0.6ppence Group balance sheet 2006 2005 £'000 £'000Fixed assetsIntangible assets 1,039 885Tangible assets 2,407 1,942 3,446 2,827Current assetsAsset held for resale - 1,996Stock 5,005 4,268Debtors 7,727 4,656Cash at bank and in hand 8,433 9,495 21,165 20,415 Creditors: amounts falling due within one year (5,703) (3,910)Net current assets 15,462 16,505 Total assets less current liabilities 18,908 19,332Net pension scheme deficit (986) (4,714)Net assets 17,922 14,618 Capital and reservesCalled up share capital 5,270 5,270Share premium account 89 89Capital redemption reserve 415 415Profit and loss account 12,148 8,844Shareholders' funds 17,922 14,618 Statement of total recognised gains and losses 2006 2005 £'000 £'000Profit for the year 2,806 609Currency translation differences on overseas net investments 21 (28)Actuarial gain on pension scheme 682 859Movement on deferred tax asset relating to pension scheme (205) (258)Total gains and losses recognised in the year 3,304 1,182 Reconciliation of movements in shareholders' funds 2006 2005 £'000 £'000Opening shareholders' funds 14,618 14,026Profit for the year 2,806 609Other recognised gains and losses 498 573Purchase of own shares - (590) Net increase in shareholders' funds 3,304 592Closing shareholders' funds at 31 December 17,922 14,618 Group cash flow statement 2006 2006 2005 2005 £'000 £'000 £'000 £'000Net cash outflow from operating activities (3,912) (1,619) Returns on investments and servicing of financeInterest received 383 406Distribution from closure of associate 81 - Net cash inflow from returns on investments and servicing 464 406of finance Capital expenditure and financial investmentAcquisition (647) -Purchase of tangible fixed assets (699) (373)Sale of tangible fixed assets - 1,936Sale of asset held for resale 3,732 - Net cash inflow from capital expenditure and financial 2,386 1,563investment Cash (outflow) / inflow before financing (1,062) 350 FinancingPurchase of own shares - (590)Net cash outflow from financing - (590)Decrease in cash resulting from cash flows (1,062) (240) Reconciliation of net cash flow to movement in net funds 2006 2005 £'000 £'000Decrease in cash resulting from cash flows (1,062) (240)Net funds at 1 January 9,495 9,735Net funds at 31 December 8,433 9,495 Reconciliation of operating profit/(loss) to net cash outflow from operatingactivities 2006 2005 £'000 £'000Operating profit / (loss) 852 (909)Depreciation and amortisation 330 322Impairment reversal - (343)Loss on disposal of fixed assets 1 9(Increase)/decrease in stock (267) 444(Increase)/decrease in debtors (1,924) 155Decrease in creditors (613) (587)Pension contributions in excess of operating charge (894) (710)Amounts payable relating to pension scheme transferring members 2,353 -Pension settlements (3,750) -Net cash outflow from operating activities (3,912) (1,619) Pension scheme deficit 2006 2005 £'000 £'000Deficit at the end of the period (1,408) (6,734)Related deferred tax asset 422 2,020Net pension scheme deficit (986) (4,714) Movement in pension scheme deficit during the year 2006 2005 £'000 £'000Deficit at beginning of year (6,734) (8,082)Movement in the year: Current service costs (37) (76) Contributions 931 786 Settlements 3,750 - Net charge to other finance income and expenditure - (221) Actuarial gain in statement of total recognised gains and losses 682 859Deficit at end of the year (1,408) (6,734) Acquisition The acquisition relates to the purchase of Charnos Lingerie on 17 March 2006.The fair values of the net assets acquired are as follows: Book value Adjustments Fair value £'000 £'000 £'000Tangible fixed assets 20 - 20Intangible fixed assets - brand name - 231 231Stock 530 (60) 470Current liabilities (74) - (74)Total 476 171 647 Cost of acquisition 585Costs associated with acquisition 62Total cost of acquisition 647 NOTES 1. The financial information set out above for the years ended31 December 2006 and 2005 does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985. Statutory accounts for 31December 2005 have been delivered to the Registrar of Companies and those for 31December 2006 will be delivered following the company's annual general meeting.The Company's auditors have reported on the full accounts for both years andhave accompanied each year with an unqualified report. 2. The calculation of earnings per share and diluted earningsper share is based on a profit for the year of £2,806,000 (2005: profit£609,000) and the weighted average number of shares in issue during the year of105,394,178 (2005: 107,527,238). 3. Copies of the 2006 Annual Report and Accounts will be sentto all shareholders. Copies will be available from the Company Secretary atIntimas Group plc, Fields Farm Road, Long Eaton, Nottingham NG10 3FZ andavailable on the website www.intimas.co.uk. 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