8th Mar 2005 07:01
French Connection Group PLC08 March 2005 8th March 2005 FRENCH CONNECTION GROUP PLC Preliminary Results for the year ended 31 January 2005 French Connection Group PLC today announces preliminary results which arein-line with market expectations • Turnover £265.7 million (2004: £267.9 million) -1% • Operating margin before goodwill 12.4% (2004: 14.4%) • £11.7 million increase in net funds to £52.2 million (2004: £40.5 million) +29% • Profit before tax and goodwill £33.0 (2004: £38.7 million) -15% million • Profit before tax £32.3 million (2004: £38.1 million) -15% • Adjusted* earnings per share 24.0p (2004: 28.4p) -15% • Basic earnings per share 23.1p (2004: 27.5p) -16% • Total dividend 5.00p (2004: 3.25p) +54% Stephen Marks, Chairman, commented on the results: "For the first time in nine years our growth record was interrupted by adisappointing trading performance in the second half of the financial year. Wehave learnt lessons from this and feel confident that we will use thisexperience to return to our growth track and build a stronger business for thefuture." "The key to our success has always been the strength of our product design andthe aesthetic of its presentation in-store. We are working hard to ensure thatwe can meet our customers' expectations in these areas." "Recent trading conditions on the UK high street have been very difficult,however even in the light of this our current trading is very disappointing. Ican see signs of improvement and beginnings of a recovery and, while it is stillearly days, we go forward feeling positive about the changes that are beingmade." Enquiries:Stephen Marks/Neil Williams/Roy Naismith French Connection +44(0)20 7399 7677Tom Buchanan/Lucie Anne Brailsford Brunswick +44(0)20 7404 5959 * Adjusted profits in this statement have been amended to remove amortisation ofgoodwill and adjusted earnings per share has been amended to remove amortisationof goodwill and losses on disposal of assets. Chairman's Statement Dear Shareholders, In the year ended 31 January 2005, Group turnover fell slightly to £265.7million (2004: £267.9 million). The operating margin (before amortisation ofgoodwill) also fell but remains strong at 12.4% (2004: 14.4%), reflecting awell-managed business with good margins and controlled costs. Profit beforetaxation and amortisation of goodwill was £33.0 million, 15% below last year(2004: £38.7 million), and adjusted earnings per share also fell by 15% to 24.0pence (2004: 28.4 pence). Basic earnings per share fell by 16% from 27.5 penceto 23.1 pence. Our confidence in the ability of the business to return to growthand the continued strong cash generation enables the Board to propose a totaldividend for the year of 5.00 pence per share, a 54% increase over last year. Wewill now target a dividend cover of between four and five times. For the first time in nine years our growth record was interrupted by adisappointing trading performance in the second half of the financial year. Wehave learnt lessons from this and are confident that we will use this experienceto return to our growth track and build a stronger business for the future. Thekey to our success has always been the strength of our product design and theaesthetic of its presentation in-store. We are working hard to ensure that wecan meet our customers' expectations in these areas. The performance of our UK/Europe retail business was not as strong as theprevious year reflecting a concentration on previously successful styles insteadof a greater focus on more fashion-led products. We have made changes to ourretail buying team by bringing in new people with fresh eyes. The new ranges for2005 have been reviewed, some fresh products have been added for Summer and weare confident that they will be popular with our customers. After a strong start to the year, the UK/Europe wholesale business was alsoaffected by disappointing sell-through of the Winter collection during thesecond half which resulted in a lower level of in-season repeat business. TheContinental European side of the business has continued to grow, driven by anincreased focus on this area over the last two years. In North America the wholesale business has continued to grow and business withthe department stores is developing well. However, the retail business hassuffered and we saw a fall in like-for-like sales during the second half of theyear. We are confident that we will continue to grow the wholesale business fromits relatively low level and that we will return the retail business to growth.We are continuing to open new stores this year and will push to return thebusiness in North America to profitability in the short term. The continued development of both of our mail-order businesses, fcuk and Toast,has been very pleasing. Toast has made great progress in both the mail-order andconcession businesses and we look forward to the reaction to the firststand-alone store which opened recently in Harrogate. Brand licensing has continued to show significant growth, driven by organicgrowth in the Boots' products, the expansion to worldwide distribution of thefcuk fragrance and the continued development of the shoe range, with some newlicensing initiatives in the pipeline. This is coupled with increased incomefrom our license partners in Asia, Australia and Mexico. Marking the start of asignificant development programme in China, we opened our first store in Beijingin January. As I have said above, we have put in place a number of initiatives to improvethe performance in the UK/Europe retail business. Although there is an air ofcaution among our wholesale customers because of their generally poor Winter2004 season, the reaction to our Winter 2005 ranges has been very positive. TheNorth America business has started the year well with the wholesale order bookswell ahead of last year and an improvement in the performance in the retailstores. Recent trading conditions on the UK high street have been very difficult,however even in the light of this our current trading is very disappointing at a17% decline on a like-for-like basis. I can see signs of improvement andbeginnings of a recovery, and while it is still early days, we go forwardfeeling positive about the changes that are being made. Finally I want to thank our hard-working staff, who have performed with greatdetermination during a challenging time. Stephen MarksChairman and Chief Executive7 March 2005 Operating Review United Kingdom and Europe Retail turnover in the year fell 5% to £110.6 million (2004: £116.7 million)with a 15% increase in total selling space and a fall in like-for-like sales of12%. The weak like-for-like sales reported during the first half of the yearweakened further in the second half, directly affected by our over-emphasis onproduct lines that had been successful in previous seasons at the expense of themore fashion-led products. A number of changes have already been made to improve our performance. Thebuying teams within our retail division have been strengthened, we haveimplemented an overhaul of the presentation of product within the stores and anadditional package of product will be introduced over the next few months tostrengthen the impact of the Summer ranges. In addition the level of advertisingspend in the UK has been increased to give a heavier weight to the nationwidebillboard and magazine campaigns in March and April. The expansion of the store portfolio has continued during the period with theopening of seven new French Connection stores and the acquisition of six storesfrom our franchisees. We also opened four Nicole Farhi concessions within majorHouse of Fraser stores. The overall profitability of the retail division has been affected by both thevolume shortfall and the consequential impact on gross margins as mark-downswere increased in order to clear excess merchandise. Closing stock is at anormal level and we have also worked successfully on controlling overheads. The home shopping businesses have grown considerably during the year with Toastperforming particularly strongly resulting in substantially increasedprofitability. The new Toast stand-alone store has recently opened in Harrogate.Our fcuk mail-order business has developed well, especially through on-linebusiness, and the number of active customers is growing steadily. Wholesale turnover grew to £101.3 million (2004: £100.1 million), held back bylower levels of in-season business during the second half of the year. We havemaintained our customer base and we continue to work with them to increasefull-price volumes. We have continued to grow volumes in Europe with an enhancedsales team developing relationships with major department stores and a newshowroom in Milan. The profitability of the wholesale business has continued to improve as a resultof the constant tight control of buying prices supported by the beneficialimpact on input prices of the continued weakening of the Dollar, a reduction inthe proportion of discounted sales through close management of stock levels andtight control of overheads. North AmericaThe progress that we have made over the last two years has continued for theyear as a whole although at a slower rate than we had anticipated due to a slowdown in growth in the retail division in the second half. Retail turnover increased by 11% to $61.0 million (2004: $55.0 million); a 3%increase in like-for-like sales and a 4% increase in average trading spacereflecting four new stores and one closure. The rate of sales growth slowedduring the second half of the year mirroring the UK retail business. Translatedinto Sterling, turnover is the same as last year at £33.2 million due to thecontinued weakening of the Dollar. Wholesale turnover increased by 12% to $23.5 million (2004: $21.0 million). Thishas been achieved through further development of business with the majordepartment stores. We have been able to increase the number of stores in whichthe product is stocked and the value of product in each of these stores. Thesell-throughs achieved have been good and this adds to the momentum for thegrowth of the business in the future. We have a good sales team in place who arebuilding the relationships we need to develop the business in the future.Increased turnover, improved margins and tightly controlled overheads resultedin an overall profit for the year. Translated into Sterling at the weaker Dollarrate, turnover has increased by 1% to £12.8 million (2004: £12.7 million). We are pleased with our performance in North America and we expect to be able tocontinue the improvements. Rest of the WorldThe sales growth in our Japan joint venture was strong for the majority of theyear but suffered in the fourth quarter with particularly difficult tradingconditions locally. Our Hong Kong joint venture has made significant progressover the last few months. In these new markets where our brand awareness is notyet established it takes more time for stores to achieve their full salespotential. We opened a new store in Beijing in early January and initial tradingis providing confidence for the three new stores to open over the next fewmonths in Shanghai. Our share of the trading losses for the year has increasedreflecting a full year of trading for Japan and start up losses in Hong Kong. The developments that we have made in the Asia, Australia and Mexico marketshave enabled us to generate considerable growth in the turnover of our Hong Kongbased wholesale business. Turnover has increased in local currency terms by 65%and operating profit by 54%. All of the countries have increased the number oflocations through which they trade and we are now represented in ten countries,divided between stand-alone stores and department store concessions. Brand licensingThe income from the licensing of our brands has increased considerably againduring the year. Total income was up 25% at £4.5 million (2004: £3.6 million).The grooming and toiletries business with Boots continued to grow well. Theladies range was re-launched during the year, a men's sports range was added tothe core men's offer and sales of Christmas packs grew further. The expansion ofthe fcuk fragrance to worldwide distribution together with a full year of salesin North America also made a significant contribution to the growth. Our shoelicensee continued to develop the business growing the number of accounts and expanding with existing stores. Royalty income from the licensed countries continued to grow. This was driven bythe developments in Asia together with strong organic growth and further storeexpansion in Australia, with five new stores during the year. Current trading and future prospectsOn a like-for-like basis, sales of the new season product in the first fiveweeks of the new financial year have declined by 17% however the performance ofthe latest additions to the ranges has provided some indication that we will seean improvement over the remainder of the season. The full effects of theadditions to the Summer ranges, the changes in our visual merchandising and theincreased advertising will feed through to the stores in the coming months andwe expect to be able to build from that foundation through the Summer and intothe Winter season. We will continue the expansion of the store portfolio andhave four new French Connection locations in UK/Europe in the pipeline to openduring the year. The wholesale order books for Summer 2005 in UK/Europe are broadly in line withthis time last year. The initial reaction to the new product in stores has beengood but repeat orders have been at a lower level than last year. The responseto the Winter 2005 collection has been good, however our customers remaincautious given their performance last season and the order books are slightlybehind this time last year. We expect this to improve as the sell-through of theSummer product improves. In North America like-for-like retail sales in the first five weeks are ahead by5%. We will shortly be opening new stores in Atlanta, Chicago, Las Vegas andMontreal. In North America the wholesale order books are well ahead of this timelast year and we expect to be able to generate continued growth. The speed of the improvement in our UK/Europe retail business, in what continuesto be a challenging retail environment, is important to the result for the year.However we are confident that the changes we have put in place will contributeconsiderably to the performance of the business over the coming months. Neil WilliamsOperations Director7 March 2005 Financial Review The financial results for the year ended 31 January 2005 reflect the significantchallenges that have confronted the Group during the period. Due to the poorperformance of the ranges in the second half of the year, total turnover showeda small decline but the costs associated with new retail space and the impact ongross margins of the need to clear terminal stocks have resulted in a 15%decline in earnings per share, adjusted to remove the amortisation of goodwilland losses on disposal of assets, to 24.0 pence. However, Group net operatingmargin remained above 12%, profits remain above the level seen two years ago andcash generation remains strong resulting in closing net funds of £52.2 million. Group trading resultsGroup turnover decreased by 1% all of which was due to the poor salesperformance in the UK retail division which saw an overall sales decline of 5%on a 15% increase in average space traded over the year. The lower salesresulted in the need to increase the levels of discount during the sale periodto deal with the excess stock and gross margins were consequently impacted.Along with the operating costs of the additional trading space the net effectwas a reduction in net operating result in that division from £11.1 millionprofit to a loss of £1.6 million. In North America we opened four new stores and closed one store resulting in a5% overall increase in traded space. Turnover in Dollar terms increased by 11%reflecting like-for-like growth of 3%. With a continued weakening of the Dollarthe Sterling reported turnover shows no change on last year. The retail businessin North America encountered similar challenges to the UK business in the secondhalf which required larger than planned markdowns to retail prices resulting ina reduction in the net operating margin. With lower levels of in-season orders in the second half of the year the UK/Europe wholesale business grew by 1% over the year with much of the growthcoming from Continental Europe. The net operating margin increased significantlyas a result of both operating leverage from increased volumes and improved inputmargins arising from the weakness of the Dollar. In North America, wholesale turnover grew by 12% in Dollar terms and 1% inSterling terms. There was no repeat of the discounting required last year and sothe operating margin improved significantly to report a profit of £0.9 million(2004: loss of £0.7 million) Sales volumes to our licensees through our Hong Kong office increased by 50% dueto strong growth by our Australia and Hong Kong licensees and the stores openedby our new licensees across the region. Net profit from the region was £1.8million (2004: £1.3 million). Margin and overheadsGroup gross margin fell by 20 basis points from 53.8% to 53.6%. Behind thismovement there were more significant movements as follows: • the Dollar weakened during the year by 11% having a consequentially beneficial impact on the cost of products bought in Hong Kong and improving gross margin by 80 basis points; • the poor trading encountered in the second half of the year resulted in higher mark downs in our retail stores reducing Group margin by 120 basis points; • a reduction in the proportion of turnover generated by the retail channel resulted in a 70 basis point reduction in the reported Group gross margin; and • lower levels of discounting in North America provided a benefit of 90 basis points. Overhead costs continue to be tightly controlled showing only a 5% increase to£114.1 million from £109.1 million last year. All of this increase is accountedfor by the increases in retail trading space while other minor volume-relatedcost increases in the UK have been offset by the effect of the weakening Dollaron overheads in North America. We continue to maintain our brand profile throughadvertising and marketing expenditure which amounted to £9.5 million during theyear (2004: £9.8 million). This is further supported by the marketingexpenditure made by our licensees around the world. Licensing income increased by 25% from £3.6 million to £4.5 million reflectingcontinued organic growth from our toiletries and shoe licensees and additionalincome from our country licensees. Taken together these elements resulted in an operating profit beforeamortisation of goodwill of £32.9 million (2004: £38.6 million) and a net marginof 12.4% (2004: 14.4%). Operating profit was £32.2 million (2004: £38.0million). Joint venturesDuring last year two 50:50 joint ventures were created with local operators inJapan and Hong Kong and the resulting businesses have been granted licences tooperate French Connection retail outlets. Together, these two businessesreported turnover of £8.3 million during the year, half of which is reported inthese financial statements as the Group's share of joint ventures' turnover. TheGroup's share of the net operating loss of these two businesses was £1.3million. Interest, tax charge and minority interestsReflecting the net funds position and increasing interest rates net interestincome of £1.4 million was generated in the year. The tax charge for the year was £10.0 million representing 30.3% of profitbefore tax and goodwill, similar to last year. The minority interest represents the share of results attributable to the 25%ownership held by local management in our Canada business and the Toastmail-order business, both of which are profitable and therefore give rise to theminority interest. Earnings and dividendsNet earnings for the year attributable to shareholders after interest, tax andminority interests decreased by 16% to £22.0 million from £26.2 million.Adjusted earnings per share decreased by 15% to 24.0 pence per share from 28.4pence per share last year. Basic earnings per share decreased 16% to 23.1 pence. Taking into account the increased level of net funds in the Group and strongcash generation the Board has decided to raise the dividend and will target thedividend cover of between four and five times. The Board has recommended a finaldividend of 3.8 pence per share (2004: 2.25 pence) giving a total dividend forthe year of 5 pence per share (2004: 3.25 pence), an increase of 54%. Subject toapproval at the Annual General Meeting, the final dividend will be paid on 5July 2005 to shareholders on the register on 18 March 2005 (ex-dividend date 16March 2005). Fixed assets investmentTotal capital expenditure in the year was £9.9 million, £8.2 million of whichwas spent on the retail portfolio including the eleven new stand-alone storesacross the world. The remaining expenditure included our new showrooms in Milan,new production offices in London and enhancements to our computer systems. Afurther £3.8 million was invested in the acquisition of six franchise stores andfurther funding of the two joint ventures in Japan and Hong Kong. Net funds and working capitalNet cash inflow from operating activities was £39.9 million (2004: £52.1million) and after payment of tax, dividends and fixed asset investments theclosing net funds increased by £11.7 million to £52.2 million (2004: £40.5million). Total working capital at the year end increased by £3.7 million. This included a£1.8 million, 4% increase in stock driven by the 12% increase in retail space atthe year end. An increase in trade debtors of £2.8 million arose largely due tothe later phasing of wholesale shipments over December and January 2005. Treasury risk managementThe principal treasury risks to the Group arise from exchange rate and interestrate fluctuations. The Board has approved policies for managing these risks,which are reviewed on a regular basis, including the use of financialinstruments, principally forward foreign exchange contracts. No transactions ofa speculative nature are undertaken. Options are not used. The most significant exposure to foreign exchange fluctuations relates topurchases made in foreign currencies, principally the Hong Kong Dollar. TheGroup's policy is to reduce substantially the risk associated with purchasesdenominated in foreign currencies by using forward fixed rate currency purchasecontracts, taking into account any foreign currency cash flows. Over half of ourHong Kong Dollar requirement for the new financial year is covered by forwardDollar purchase contracts at rates representing an improvement over the averagerate achieved in the year ended 31 January 2005. There has been no change sincethe year end to the major treasury risks faced by the Group or the Group'sapproach to the management of these risks. International Financial Reporting StandardsEuropean Union listed companies are required to report consolidated financialstatements in accordance with International Financial Reporting Standards("IFRS") for periods commencing on or after 1 January 2005. The Group is welladvanced in its preparation for the adoption of IFRS. Changes from the currentreporting standards are likely to result in differences in various accountingtreatments including goodwill, dividends, foreign currency hedging, leaseincentives, and share-based payments. The Group's results for the year ending 31 January 2006 will be published inMarch 2006 under IFRS. The interim results for the six months to 31 July 2005,published in September 2005, with therefore also be compiled under IFRS. TheBoard intends to publish a reconciliation of the results for the year ended 31January 2005 to an equivalent set of results reported under IFRS prior to thepublication of the interim results in September 2005. Roy NaismithGroup Finance Director7 March 2005 Group Profit and Loss AccountYear ended 31 January 2005 Note 2005 2004 £m £m---------------------------------------- ----- ------------ ------------Turnover 1 265.7 267.9 Cost of sales (123.2) (123.8)---------------------------------------- ----- ------------ ------------Gross profit 142.5 144.1 Operating expenses 2 (114.8) (109.7)Other operating income 3 4.5 3.6---------------------------------------- ----- ------------ ------------ ---------------------------------------- ----- ------------ ------------Operating profit before amortisation of goodwill 32.9 38.6 Amortisation of goodwill (0.7) (0.6)---------------------------------------- ----- ------------ ------------Operating profit 32.2 38.0 Share of operating loss of joint ventures (1.3) (0.6)Net interest receivable and similar items 4 1.4 0.7---------------------------------------- ----- ------------ ------------Profit on ordinary activities before taxation 1 32.3 38.1 Tax on profit on ordinary activities (10.0) (11.7)---------------------------------------- ----- ------------ ------------Profit on ordinary activities after taxation 22.3 26.4 Minority interests - equity (0.3) (0.2)---------------------------------------- ----- ------------ ------------Profit attributable to shareholders 22.0 26.2 Dividends - equity 5 (4.8) (3.1)---------------------------------------- ----- ------------ ------------Retained profit for the financial year 17.2 23.1---------------------------------------- ----- ------------ ------------Basic earnings per share 6 23.1p 27.5p---------------------------------------- ----- ------------ ------------Adjusted earnings per share 6 24.0p 28.4p---------------------------------------- ----- ------------ ------------Diluted earnings per share 6 22.9p 27.2p---------------------------------------- ----- ------------ ------------Equity dividends per share 5 5.00p 3.25p---------------------------------------- ----- ------------ ------------ The Group's results were entirely from continuing operations. Group Balance SheetAt 31 January 2005 Note 2005 2004 £m £m------------------------------------------------ ----- ----------- -----------Fixed assetsIntangible assets 11.5 11.0Tangible assets 31.3 31.8Investments 2.5 1.7------------------------------------------------ ----- ----------- ----------- 45.3 44.5------------------------------------------------ ----- ----------- -----------Current assetsStocks 43.4 41.6Debtors 36.0 31.9Cash at bank and in hand 9 55.1 47.4------------------------------------------------ ----- ----------- ----------- 134.5 120.9 Creditors: amounts falling due within one year (60.9) (63.2)------------------------------------------------ ----- ----------- -----------Net current assets 73.6 57.7------------------------------------------------ ----- ----------- -----------Total assets less current liabilities 118.9 102.2 Creditors: amounts falling due after more than one year (0.1) -Provisions for liabilities and charges - (0.5)------------------------------------------------ ----- ----------- -----------Net assets 1 118.8 101.7------------------------------------------------ ----- ----------- -----------Capital and reservesCalled-up share capital 1.0 1.0Share premium account 8.7 8.6Revaluation reserve 0.4 0.4Profit and loss account 108.5 91.8------------------------------------------------ ----- ----------- -----------Equity shareholders' funds 118.6 101.8Equity minority interests 0.2 (0.1)------------------------------------------------ ----- ----------- ----------- 118.8 101.7------------------------------------------------ ----- ----------- ----------- Group Statement of Total Recognised Gains and LossesYear ended 31 January 2005 2005 2004 £m £m-------------------------------------------------------- ----------- --------- Profit attributable to shareholders 22.0 26.2 Currency translation differences on foreign currency netinvestments (0.5) (0.6)-------------------------------------------------------- ----------- ---------Total gains and losses recognised since last Annual Report 21.5 25.6-------------------------------------------------------- ----------- --------- NOTE OF GROUP HISTORICAL COSTPROFITS AND LOSSESYear ended 31 January 2005 2005 2004 £m £m-------------------------------------------------------- ----------- ---------Reported profit on ordinary activities before taxation 32.3 38.1-------------------------------------------------------- ----------- ---------Historical cost profit on ordinary activities before taxation 32.3 38.1-------------------------------------------------------- ----------- ---------Historical cost profit retained for the year 17.2 23.1-------------------------------------------------------- ----------- --------- Group Cash Flow StatementYear ended 31 January 2005 2005 2004 Note £m £m £m £m------------------------------------- ------ ------- ------- ------- -------Net cash inflow from operatingactivities 7 39.9 52.1------------------------------------- ------ ------- ------- ------- -------Returns on investments and servicing offinance Interest received 1.4 0.8 Interest paid (0.1) (0.3)------------------------------------- ------ ------- ------- ------- -------Net cash inflow from returns on investments and servicing of finance 1.3 0.5------------------------------------- ------ ------- ------- ------- -------Taxation UK corporation tax paid (11.9) (11.9) Overseas tax (paid)/received (0.2) 0.1------------------------------------- ------ ------- ------- ------- -------Tax paid (12.1) (11.8) Capital expenditure and financialinvestment Purchase of tangible fixed (9.9) (10.6) assets Acquisitions and disposals Payments to acquire joint (3.8) (2.3) ventures and subsidiary undertakings Equity dividends paid (3.3) (2.7)------------------------------------- ------ ------- ------- ------- -------Net cash inflow before financing 12.1 25.2------------------------------------- ------ ------- ------- ------- -------Financing Share issues 0.1 - Repayment of debt (6.8) (7.6) Capital element of finance lease rental payments (0.3) (0.1)------------------------------------- ------ ------- ------- ------- -------Net cash outflow from financing (7.0) (7.7)------------------------------------- ------ ------- ------- ------- -------Increase in cash 8 5.1 17.5------------------------------------- ------ ------- ------- ------- ------- Notes to Accounts 1 Turnover, profit before taxation and net assets Group turnover 2005 2004 £m £m-------------------------------------------------- --------- ---------Group and share of joint ventures 269.8 269.7Less: share of joint ventures' turnover (4.1) (1.8)-------------------------------------------------- --------- ---------Group turnover 265.7 267.9-------------------------------------------------- --------- --------- Turnover Profit before taxation Net assetsBy divisional activity 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m---------------------- ------ ------ -------- ------- ------ -------RetailUK/Europe 110.6 116.7 (1.6) 11.1 19.4 23.2North America 33.2 33.2 (1.7) (0.7) 14.8 18.0---------------------- ------ ------ -------- ------- ------ -------Total Retail 143.8 149.9 (3.3) 10.4 34.2 41.2---------------------- ------ ------ -------- ------- ------ -------WholesaleUK/Europe 137.5 133.7 29.0 24.0 29.4 21.7North America 18.1 18.9 0.9 (0.7) 5.6 2.8Rest of World 7.8 5.2 1.8 1.3 (2.3) (2.3)---------------------- ------ ------ -------- ------- ------ -------Total Wholesale 163.4 157.8 31.7 24.6 32.7 22.2---------------------- ------ ------ -------- ------- ------ -------Interdivisional salesUK/Europe (36.2) (33.6)North America (5.3) (6.2)---------------------- ------ ------ -------- ------- ------ -------Total Interdivisional sales (41.5) (39.8)---------------------- ------ ------ -------- ------- ------ -------Wholesale, net ofInterdivisional salesUK/Europe 101.3 100.1North America 12.8 12.7Rest of World 7.8 5.2---------------------- ------ ------ -------- ------- ------ -------Total Wholesale, net of Interdivisional sales 121.9 118.0 31.7 24.6 32.7 22.2---------------------- ------ ------ -------- ------- ------ -------Licence income 4.5 3.6---------------------- ------ ------ -------- ------- ------ ------- 265.7 267.9 32.9 38.6 66.9 63.4 Share of jointventures' losses (1.3) (0.6)Net interest 1.4 0.7Interest bearing net assets 51.9 38.3Amortisation of goodwill (0.7) (0.6)---------------------- ------ ------ -------- ------- ------ ------- 265.7 267.9 32.3 38.1 118.8 101.7---------------------- ------ ------ -------- ------- ------ ------- 1 Turnover, profit before taxation and net assets continued Turnover Operating profit Net assets before goodwillBy geographic origin 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m------------------------- ------ ------ -------- ------ ------ ------UK/Europe 211.9 216.8 31.9 38.7 48.8 44.9North America 46.0 45.9 (0.8) (1.4) 20.4 20.8Rest of World 7.8 5.2 1.8 1.3 (2.3) (2.3)------------------------- ------ ------ -------- ------ ------ ------ 265.7 267.9 32.9 38.6 66.9 63.4------------------------- ------ ------ -------- ------ ------ ------ TurnoverBy geographic destination 2005 2004 £m £m------------------------- ------ ------UK/Europe 209.4 214.6North America 46.0 45.9Rest of World 10.3 7.4------------------------- ------ ------ 265.7 267.9------------------------- ------ ------ 2 Operating expenses 2005 2004 £m £m------------------------------------------------- ------- ------ Selling and distribution costs 101.5 97.1Administration costs 13.3 12.6------------------------------------------------- ------- ------ 114.8 109.7------------------------------------------------- ------- ------ 3 Other operating income 2005 2004 £m £m------------------------------------------------- ------- ------Licensing income 4.5 3.6------------------------------------------------- ------- ------ 4 Net interest receivable and similar items 2005 2004 £m £m------------------------------------------------- ------- ------Interest payable on bank loans and overdrafts (0.1) (0.3)Interest receivable 1.4 0.8Foreign currency gains 0.1 0.2------------------------------------------------- ------- ------ 1.4 0.7------------------------------------------------- ------- ------ 5 Dividends - equity 2005 Pence 2004 Pence £m per share £m per share----------------------- ------- --------- -------- ---------Interim paid 1.2 1.20p 1.0 1.00pFinal proposed 3.6 3.80p 2.1 2.25p----------------------- ------- --------- -------- ---------Total dividends 4.8 5.00p 3.1 3.25p----------------------- ------- --------- -------- --------- 6 Earnings per share Earnings per share of 23.1p (2004: 27.5p) is based on 95,417,431 shares (2004:95,293,211) being the weighted average number of ordinary shares in issuethroughout the year, and £22.0 million (2004: £26.2 million) being the profitattributable to shareholders. Diluted earnings per share of 22.9p (2004: 27.2p)is based on 96,210,974 shares (2004: 96,198,715) being the weighted averagenumber of ordinary shares adjusted to assume the exercise of dilutive options.The reconciliation to adjusted earnings per share which is based on 95,417,431shares (2004: 95,293,211) is as follows: 2005 Pence 2004 Pence £m per share £m per share---------------------------------- -------- --------- -------- -------- Profit attributable to shareholders 22.0 23.1p 26.2 27.5pLoss on disposal of fixed assets 0.2 0.2p 0.3 0.3pAmortisation of goodwill 0.7 0.7p 0.6 0.6p---------------------------------- -------- --------- -------- --------Adjusted earnings 22.9 24.0p 27.1 28.4p---------------------------------- -------- --------- -------- -------- In the opinion of the Directors, the adjusted earnings per share gives a bettermeasure of the Group's underlying performance than the basic earnings per share. 7 Reconciliation of operating profit to net cash inflow from operatingactivities 2005 2004 £m £m---------------------------------------------------- -------- -------- Operating profit 32.2 38.0Depreciation and amortisation 11.2 11.1Loss on sale of fixed assets 0.2 0.3(Increase)/decrease in stocks (1.8) 3.5Increase in debtors (3.5) 0.0Increase/(decrease) in creditors 1.6 (0.8)---------------------------------------------------- -------- --------Net cash inflow from operating activities 39.9 52.1---------------------------------------------------- -------- -------- 8 Reconciliation of increase in cash to movement in net funds 2005 2004 £m £m---------------------------------------------------- -------- --------Increase in cash 5.1 17.5Cash outflow from finance leases 0.3 0.1Repayment of loan 6.8 7.6---------------------------------------------------- -------- --------Change in net funds from cash flows 12.2 25.2Translation differences 0.1 1.1New finance leases (0.6) ----------------------------------------------------- -------- --------Movement in net funds 11.7 26.3Net funds at beginning of year 40.5 14.2---------------------------------------------------- -------- --------Net funds at end of year 52.2 40.5---------------------------------------------------- -------- -------- 9 Analysis of net funds 1 February Cash Non cash 31 January 2004 flow changes £m 2005 £m £m £m----------------------------- --------- ------- -------- ---------Cash at bank and in hand 47.4 7.7 - 55.1Overdrafts and short-termborrowings - (2.6) - (2.6)Finance lease obligations - 0.3 (0.6) (0.3)Bank loan due within one year (6.9) 6.8 0.1 ------------------------------ --------- ------- -------- ---------Net funds 40.5 12.2 (0.5) 52.2----------------------------- --------- ------- -------- --------- Cash comprises cash in hand and on overnight deposit. 10 Basis of preparation The financial information set out above does not constitute the Group'sstatutory accounts for the years ended 31 January 2005 or 2004 but is derivedfrom those accounts. Statutory accounts for 2004 have been delivered to theregistrar of Companies, and those for 2005 will be delivered following theGroup's Annual General Meeting. The auditors have reported on those accounts;their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. Five Year Record 2005 2004 2003 2002 2001 £m £m £m £m £m---------------------------------- ------- ------- ------- -------- -------Turnover 265.7 267.9 241.0 225.7 193.6---------------------------------- ------- ------- ------- -------- -------Profit on ordinary activities before taxation 32.3 38.1 29.5 22.6 19.1---------------------------------- ------- ------- ------- -------- -------Profit attributable to shareholders 22.0 26.2 20.4 15.0 10.2---------------------------------- ------- ------- ------- -------- -------Earnings per share---------------------------------- ------- ------- ------- -------- -------Basic 23.1p 27.5p 21.5p 15.8p 10.8p---------------------------------- ------- ------- ------- -------- -------Adjusted 24.0p 28.4p 22.5p 16.7p 11.0p---------------------------------- ------- ------- ------- -------- -------Diluted 22.9p 27.2p 21.4p 15.8p 10.8p---------------------------------- ------- ------- ------- -------- -------Dividends per share 5.00p 3.25p 2.40p 1.60p 1.30p---------------------------------- ------- ------- ------- -------- ------- Retail Locations 31 January 2004 31 January 2005 Forecast 31 January 2006Retail locations Number '000 sq ft Number '000 sq ft Number '000 sq ft------------------ ------ ---------- ------- ---------- ------- ----------OperatedUK/Europe stores 61 203 74 235 79 244OperatedUK/Europeconcessions 27 22 30 26 30 26Operated NorthAmerica stores 28 130 31 137 37 157Operated NorthAmericaconcessions 13 4 13 4 13 4------------------ ------ ---------- ------- ---------- ------- ----------Total 129 359 148 402 159 431------------------ ------ ---------- ------- ---------- ------- ----------FranchisedUK/Europestores 32 58 29 54 29 54FranchisedNorth Americastores 1 2 1 2 1 2FranchisedMiddle Eaststores 5 6 7 10 7 10Licensed Restof Worldstores 29 60 45 86 51 97Licensed Restof Worldconcessions 11 10 23 19 31 24------------------ ------ ---------- ------- ---------- ------- ----------Total 78 136 105 171 119 187------------------ ------ ---------- ------- ---------- ------- ---------- The forecast for 31 January 2006 is based upon known locations only. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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