28th Jun 2006 07:02
Marchpole Holdings PLC28 June 2006 MARCHPOLE HOLDINGS PLC ("the Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2006 Increasing sales and expanding global reach Marchpole Holdings plc, the rapidly growing international fashion brandmanagement group which designs, produces and sells high quality clothing andaccessories for seven world class brands (Yves Saint Laurent, Boateng,Jean-Charles de Castelbajac, Jean-Charles de Castelbajac/Rossignol, Jean-Charlesde Castelbajac/Okaidi, Emanuel Ungaro and Ungaro) announces its preliminaryresults for the year ended 31 March 2006. Financial and Operational Highlights • Turnover up to £38.4m (2005:£31.5m) • Operating profit £5.5m (2005: £5.1m) • Profit before tax £4.9m (2005: £4.9m) • EPS of 2.6 pence per share (2005: 2.3 pence) • Final dividend of 0.45 pence per share proposed payable in September 2006 (2005: 0.45 pence) • Strong forward order book - Autumn/Winter 2006 over £40m (2005:£14.9m) • Acquisition of Moda America LLC, immediately earnings enhancing • Appointment of Michael Morris as Executive Deputy Chairman, John Harrison as Finance Director and Donald Potard as CEO Europe for Jean Charles de Castelbajac and Emanuel Ungaro Commenting on the results, Michael Morris, Executive Deputy Chairman, said: "The last year has been one of significant progress for the Company and wecontinue to build for the future. A major achievement during the year was theacquisition of Moda America LLC, the US licensee for Emanuel Ungaro, whichexpands our global reach and importantly offsets the termination of the YvesSaint Laurent licence. Marchpole has evolved from being a single brand, single country business to adiversified multi-brand international business with strong growth potential. Wenow operate through wholly owned subsidiaries in the major fashion centres ofthe world - the UK, mainland Europe in France and Italy, Asia and the USA. - fora wide range of internationally recognised fashion brands. Additionally we arenegotiating an exclusive distribution agreement to supply both the JCC range andUngaro into nine Middle Eastern and Gulf states and anticipate that an agreementwill be signed imminently. The Company's profitability and our strong Autumn/Winter forward order book area reflection of the investments which have been made in developing the Company'sbrands and we shall continue to pursue other earnings enhancing acquisitions andlicensing opportunities." For further information please contact: Marchpole 020 7 908 7777Michael Morris, Executive Deputy ChairmanJohn Harrison, Finance Director Bell Pottinger 020 7 861 3232David Rydell/ Emma Kent Shore Capital 020 7 408 4090Alex Borrelli/Dru Danford An analysts' presentation will be held at Marchpole's offices at 10.00am onWednesday 28 June 2006. CHAIRMAN'S STATEMENT I am pleased to report the preliminary results of Marchpole Holdings plc for theyear ended 31 March 2006. The business continues to grow and to expand itsglobal reach. The future potential of the business lies within the expertise of managingbrands on a worldwide platform. This platform has been developed over the lastthree years and we anticipate further growth. The acquisition of Moda America LLC which was completed during March this yearprovides fresh opportunities for a number of our brands and helps to cement therelationship with the House of Ungaro. The Company's profitability and the current record order book provide a soundreflection of the strength of the Company. Results and Dividend Continued improvements in the business are reflected by the increase in turnoverto £38.4m (2004: £31.5m). Despite the acknowledged difficult trading conditionsin the retail industry generally, excess one off legal costs and continuedinvestment in brands, operating profit including the impact of Moda acquisitionhas increased to £5.5m (2004: £5.1m) Profit before taxation has been maintainedat £4.9m (2005: £4.9m). The basic EPS is 2.6 pence per share (2005: 2.3 penceper share). The board is recommending the payment of a maintained final dividend of 0.45pence per share, which when added to the interim dividend of 0.25 pence pershare gives a total dividend for the year of 0.7 pence per share (2005: 0.7pence). The final dividend is proposed to be paid on 14 September 2006 followingthe completion of the Company's Annual General Meeting. Moda America LLC Acquisition The acquisition of Moda America LLC was completed in March 2006 and wasimmediately earnings enhancing. The acquisition strengthens our relationshipwith Emanuel Ungaro and importantly is expected to offset the termination of theYves Saint Laurent license in December 2006. It is a significant development asit offers the Company a unique opportunity to exploit its proven managementskills to expand the business into the world's largest market, the UnitedStates, and is a catalyst for further growth opportunities in the US and the UK.In particular, Marchpole has used its expertise within the industry to reduceoverheads and increase margins and will leverage the well establishedrelationships that Moda America LLC has developed with distributors in the USAto enhance promotion of the Jean-Charles de Castelbajac ('JCC') brands whichhave a strong legacy in the USA. JCC has previously sold into prestigiousretailers such as Neiman Marcus, Barneys, Saks and many independent boutiques.The acquisition of Moda America will allow the Company to continue to developthese opportunities. Licences Emanuel Ungaro and Ungaro Homme The acquisition of the House of Ungaro by Mr Asim Abdullah late last year fromthe Ferragamo family has strengthened the relationship between the House andMarchpole. We are working closely together on developments in design, productrange and distribution. A new seven year Ungaro Homme licence has been signed to cover North, Centraland South America in addition to Marchpole's existing licence for the UK andIreland. We also have first options for licence agreements for other countriesaround the world. We hold the worldwide licence for Emanuel Ungaro. Through Moda America we have a strong forward order book for Autumn/Winter 2006and the collections for Spring/Summer 2007 have been well received by US and UKretailers and the fashion media. In the UK early sales orders are encouraging and we are confident that theUngaro brand will go a long way towards replacing Yves Saint Laurent during themedium term. Jean-Charles de Castelbajac S.A. ("JCC") Development of the JCC brand has continued throughout the year. During the period we appointed Jean-Paul Donald Potard Chief Executive Officerfor Jean-Charles de Castelbajac ('JCC') Europe and Emanuel Ungaro Europeoverseeing the menswear collections. The brand reach continues to expand and during the period we extended our designagreement and increased the licence income with our Japanese partner, Itochu,for a further six years to 2011. Itochu handles the manufacture, wholesale andretail of the Castelbajac collections for the lucrative Japanese market with anapproximate turnover of Euros75m. Additionally the Company has also signed an agreement with a leading Europeaneyewear retailer Codir SA, to launch Castelbajac eyewear. The contract is forthree years and launched in 2006. Income from existing JCC licence agreements has continued to increase and hasmore than doubled post acquisition. Since the year end we have secured a majorlicensing agreement for children's wear, signed with Okaidi in May 2006. Okaidihas 450 retail outlets worldwide and we expect significant licence income fromthis agreement. We are in continuing negotiation with other potential licensees as we continueto develop this segment of our strategy. We have also signed a shop-in-shop agreement with Galleries Lafayette for theJCC range to be sold in their flagship iconic Boulevard Haussman store in Parisfrom July 2006. Furthermore the Company is negotiating an exclusive distributionagreement to supply both the JCC range and Ungaro into nine Middle Eastern andGulf states and anticipates that an agreement will be signed imminently. Direct sales through the JCC retail outlet in Paris are encouraging as are thosefrom the outlet in Fidenza, Italy which was opened in November 2005. Our partners in other countries are opening dedicated JCC retail outlets. ThisSeptember will see the opening of a 150 square metre flagship store in Kobe,Japan to be followed by Tokyo. We continue to invest in the brand and are confident of future growth. Yves Saint Laurent Since the acquisition of Yves Saint Laurent by Gucci seven years ago the Housepolicy has been not to renew licencing agreements nor to grant new ones. Thismeans that the relationship between Marchpole and Yves Saint Laurent, which hasbeen in existence for more than 30 years, will terminate at the end of 2006. We are pleased to report that demand from Marchpole's customers has beenmaintained despite the knowledge that this will be the final year that we areable to supply product. Marchpole's strategy for the last few years has been based on the expectationthat the Yves Saint Laurent licence agreement would not be extended beyond 2006and the Company is confident that it is well placed to withstand thistermination. Boateng Despite the ongoing dispute with Bespoke Couture, the Company owned and run byOzwald Boateng, Marchpole has continued to develop and sell the Boatengcollection and our commitment to the brand remains unaltered. It is anticipated that the dispute will be settled by the Court of Appeal laterthis year and the Company remains confident of a satisfactory outcome. Management Structure During the year Michael Morris, founder of Marchpole with more than 30 years'experience within the fashion clothing industry, was appointed Executive DeputyChairman and assumed overall senior executive responsibilities John Harrison, director and full-time Acting Finance Director since October2005, was appointed executive Group Finance Director. In addition we also appointed a new European Chief Executive Officer, Jean-PaulDonald Potard. Mr Potard is Chief Executive Officer for Jean-Charles deCastelbajac ('JCC') Europe and Emanuel Ungaro Europe overseeing the menswearcollections. Donald joined Marchpole from Jean-Paul Gaultier where he was ChiefExecutive Officer from 1991 to 2005. Greg Tufnell CEO left the Company to pursue other interests at the end of thefinancial year. Outlook The business continues to progress and to invest for the future. The acquisitionof Moda America LLC is a significant milestone in the development of theCompany. We will continue to focus on acquisitions, entering into new licenceagreements and extending existing ones. I am confident that we have themanagement team and the expertise to take the Company forward and to take fulladvantage of global opportunities. We are currently in negotiations for both anew licensing agreement and for a modest acquisition which we hope to concludein the current financial year. On behalf of the board of directors I would like to thank the employees of theCompany for their contribution towards the results for the year and inanticipation of their continued efforts towards yet further progress. Togetherwe look forward to harnessing the core strengths of the Company and todelivering enhanced shareholder value over the coming years. Christopher PhillipsChairman 28 June 2006 Dividend Declaration The Company confirms the following final dividend information: Amount of final dividend: 0.45 pence per Ordinary ShareRecord date: 18 August 2006Date of AGM: 12 September 2006Expected payment date: 14 September 2006 CONSOLIDATED INCOME STATEMENTFOR THE YEAR ENDED 31 MARCH 2006 31-Mar-06 31-Mar-05 Note £'000 £'000 Total Total Continuing Operations Revenue 38,370 31,520 Cost of sales (22,472) (16,419) --------- ---------- Gross profit 15,898 15,101 Distribution costs (2,230) (3,059) Administration expenses (9,092) (6,909) Fair value of net assets acquired in excess fair value of purchase consideration 5 889 - --------- ---------- Operating profit 5,465 5,133 Finance costs (541) (253) --------- ---------- Profit before tax 4,924 4,880 Tax 2 (1,399) (1,829) --------- ---------- Profit attributable to the equity shareholders 3,525 3,051 ========= ========== Earnings per share 3 Basic 2.6 2.3 --------- ---------- Diluted 2.6 2.2 --------- ---------- GROUP BALANCE SHEETAS AT 31 MARCH 2006 31-Mar-06 31-Mar-05 £'000 £'000Non-current assetsGoodwill 3,925 3,441Intangible assets 2,317 386Property, plant and equipment 1,335 759 --------- ---------- 7,577 4,586 --------- ----------Current assetsInventories 3,868 1,658Trade and other receivables 21,017 9,386Cash and cash equivalents 745 254 --------- ---------- 25,630 11,298 Total assets 33,207 15,884 Current LiabilitesBank overdraft and loans (10,039) (3,096)Trade and other payables (9,727) (3,901)Liabilities for current tax (2,369) (1,255)Deferred tax liabilities (247) -Obligations under finance lease (16) (31) --------- ---------- (22,398) (8,283) Net current assets 3,232 3,015 --------- ---------- Total assets plus current liabilities 10,809 7,601 Non-current liabilitiesObiligations under finance leases (263) (315) --------- ----------Deferred Tax (302) - --------- ---------- Net assets 10,244 7,286 ========= ========== Capital and reservesShare capital 1,360 1,335Share premium 2,798 2,704Other Reserves 290 43Foreign exchange reserves (212) (133)Retained earnings 6,008 3,337 --------- ---------- Total shareholders' funds - equity interests 10,244 7,286 ========= ========== CONSOLIDATED CASH FLOW STATEMENTFOR THE YEAR ENDED 31 MARCH 2006 Note 31-Mar-06 31-Mar-05 £'000 £'000 Net cash from operating activities 6 (4,225) (2,736) Investing ActivitiesInterest received - 3Purchases of plant & equipment (507) (538)Purchase of intangible assets - (283)Acquisition of subsidiary (837) - --------- --------Net cash used in investing activities (1,344) (818) Financing Activities -Equity dividends paid (934) (662)Proceeds on issue of shares 119 48New loans - 5,637Increase in bank facilities 6,645 566Capital element of finance lease rentals (15) (710)Repayment of loans (52) (3,869) --------- --------Net cash used in financing activities 5,763 1010 Movement in cash for the year 194 (2544) Cash and cash equivalents (including overdrafts) atthe of the year (442) 2,102 --------- --------Cash and cash equivalents (including overdrafts) atthe start of the year (248) (442) ========= ======== CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 31 MARCH 2006 Foreign Share Share Other Exchange Retained Capital Premium Reserve Reserve Earnings TOTAL £'000 £'000 £'000 £'000 £'000 £'000 As at 1April 2004 1,325 2,666 - - 948 4,939 Sharesissued in theperiod 10 38 - - - 48Credit inrespect ofshareoption charge - - 43 - - 43Profit forthe year - - - - 3,051 3,051 Foreignexchangemovement - - - (133) - (133)Dividends - - - - (662) (662) ------- ------- -------- -------- ------- -------- As at 31March 2005 1,335 2,704 43 (133) 3,337 7,286Adoptionof IAS 32/39 - - - - 80 80 ------- ------- -------- -------- ------- --------As at 1April 2005 1,335 2,704 43 (133) 3,417 7,366 Sharesissued in theperiod 25 94 - - - 119Credit inrespect ofshareoption charge - - 247 - - 247Profit forthe year - - - - 3,525 3,525Foreignexchangemovement - - - (79) - (79)Dividends - - - - (934) (934) ------- ------- -------- -------- ------- --------As at 31March 2006 1,360 2,798 290 (212) 6,008 10,244 ======= ======= ======== ======== ======= ======== NOTES TO THE FINANCIAL INFORMATIONFOR THE YEAR ENDED 31 MARCH 2006 1 General information and accounting policies a. This is the first year that the group has presented its financial statementsunder International Financial Reporting Standards ("IFRS") - see note 7 and 8.The last financial statements under UK GAAP were for the year ended 31 March2005 and the date of transition to IFRS was 1 April 2004. b. The preliminary result have been prepared in accordance with the accountingpolicies adopted under 1FRS for the first time. These accounting policies areconsistent with those published in the UK GAAP financial statements for the yearended 31 March 2005 with exception of certain changes described in note 8. The group utilised the exemption available within IFRS 1 'First time adoption ofIFRS' that permits prospective application of IAS 32 (Financial Instruments;Disclosure and Presentation) and 39 (Financial Instruments; Recognisation andMeasurement.) Consequently, the relevant comparative information for the yearended 31 March 2005 does not reflect the impact of this standard. c. Whilst the financial information included in this preliminary announcementhas been prepared in accordance with IFRS as endorsed by the European Union,this announcement does not itself contain sufficient information to comply withall the disclosure requirements of IFRS. The company expects to publish a fullset of accounts that comply with IFRS in August 2006. d. The financial information set out in this announcement does not constitutethe Group's statutory accounts for the years ended 31 March 2006 or 31 March2005, but it is derived from those accounts as restated for the adoption ofIFRS. Statutory accounts for 2005 have been delivered to the Registrar ofCompanies. The financial information for the year ended 31 March 2006 isunaudited. The statutory accounts for the year ended 31 March 2006 will befinalised on the basis of the financial information presented by the Directorsin this preliminary announcement and will be delivered to the Registrar ofCompanies after the company's annual general meeting. The previous auditors havereported on the UK GAAP accounts for the year ended 31 March 2005; their reportwas unqualified and did not contain statements under s237 (2) or (3) CompaniesAct 1985. e. The Board of Directors approved the preliminary announcement on 27th June2006. 2 Taxation 31-Mar-06 31-Mar-05 £'000 £'000 UK corporation tax at 30% (2004 - 30%): Current tax charge on profit for the year 1,613 1,812 Prior period adjustment (331) (118) Foreign tax 149 135 Deferred tax credit (32) - ---------- ---------- 1,399 1,829 ========== ========== 3 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: 31-Mar-06 31-Mar-05 £'000 £'000 Net Profit attributable to equity shareholders 3,525 3,051 ========== ========== Weighted Average number of ordinary shares in issue 133,764,568 132,545,402 Effect of dilutive potential ordinary shares 1,948,963 3.930.404 ---------- ---------- 135,713,531 136,475,806 ========== ========== Earnings per Share Basic 2.6p 2.3p Diluted 2.6p 2.2p 4 Dividends 31-Mar-06 31-Mar-05 £'000 £'000 Interim dividend paid - 0.25p per ordinary share (2005: 0.25p per share) 332 331Final dividend for prior period - 0.45p per share (2005: 0.25p per share) 602 331 ---------- ---------- 934 662 ========== ========== The Company confirms the following final dividend information which subject toapproval by shareholders at the Annual General Meeting and has not beenrecognized as a liability in accordance with accounting standards (IAS10). Amount of final dividend: 0.45 pence per Ordinary ShareRecord date: 18 August 2006Date of AGM: 12 September 2006Expected payment date: 14 September 2006 5 Acquisition of subsidiary During the year the group purchased the entire equity interest of ModaAmerica LLC effective 31 December 2005. Provisional values have beenassigned to the assets and liabilities acquired and the purchaseconsideration based on information held to date, however, adjustments tothese values may occur as the fair values and purchase consideration arefinalised. Book Value Fair value Fair adjustments Value £'000 £'000 £'000 Net assets acquired Property, plant and equipment 621 (483) 138 Inventories 611 - 611 Trade and other receivables 2,579 (130) 2,449 Cash and cash equivalents (18) - (18) Trade and other payables (3,188) (57) (3,245) --------- --------- -------- 605 (670) (65) ========= ========= Intangible value ascribed to client relationships 2,000 less deferred tax accrual (600) Fair value of net assets acquired in excess of fair value of purchase consideration - recognised in the income statement (889) -------- Total consideration 446 ======== Satisfied by: Cash 182 Directly attributable costs 264 -------- 446 ======== Adjustments include amendments to reflect the fair value of the assets andliabilities acquired, specifically to write off fixed assets which couldnot be physically verified and to identify additional liabilities whichwere not recorded in the book value. The final consideration is subject to agreement with the vendor in respectof a set of completion accounts. Negotiations remain ongoing. Theconsideration included above represents the Directors' expectation of thefinal purchase price and includes an anticipated recovery of £408,000 inrelation to cash paid to date. Any movements in the final considerationwill be reflected in the group's accounts for the forthcoming year inaccordance with IFRS 3: Business Combinations. Turnover of Moda America LLC for the period from acquisition to 31 March2006 was £2,551,000 and the profit before tax was £336,000. 6 Net cash outflow from operating activities 31-Mar-06 31-Mar-05 £'000 £'000 Operating profit 5,465 5,133 Adjustments for: Gain on derivatives (17) - Depreciation 295 202 Amortisation of intangible assets 71 17 Share option provision 247 43 Excess of net assets acquired over consideration released to income statement (889) - Foreign exchange - (70) --------- ---------- Operating cash flows before movements in working capital 5,172 5,325 (Increase) / decrease in inventories (1,599) 328 (Increase) in debtors (8,786) (4,646) Increase / (decrease) in creditors 2,590 (1,830) --------- ---------- Cash generated by operations (2,623) (823) Income taxes paid (1,061) (1,660) Interest Paid (541) (253) --------- ---------- Net Cash from operating activities (4,225) (2,736) ========= ========== 7 Reconciliation between UK GAAP and IFRS The table below highlights the financial impact on the profit before tax and netassets of the key IFRS adjustments described in note 8. Year to 31 March 2005 £'000 Profit before tax reported under UK GAAP 4,747IFRS adjustments:Share based payments (IFRS 2) (43)Goodwill amortisation (IFRS 3) 176 ----------Profit before tax restated under IFRS 4,880Taxation (1,829) Profit for the year restated under IFRS 3,051 ========== 1 April 2004 31 March 2005 £'000 £'000 Net assets under UK GAAP 4,608 6,573IFRS adjustments: Dividend recognition (IAS 10) 331 601Goodwill amortisation (IFRS 3) - 176Goodwill retranslation (IAS 21) - (64) ---------- ----------Net assets reported under IFRS 4,939 7,286 ========== ========== 8. IFRS Adoption As noted above the group has adopted IFRS for the first time in the year ended31 March 2006 The changes to the group's existing UK GAAP accounting policies are set outbelow. Where the group has taken advantage of the exemptions given by IFRS 1:First Time Adoption of International Financial Reporting Standards this is alsonoted below. IFRS 2: Share Based Payments - charges have been made to the income statement inrespect of employee share options based on the fair value at grant date. Thecharge is recognised over the related performance period. As permitted by IFRS1,IFRS 2 has not been applied to options granted prior to 7 November 2002 whichhad not vested by 1 April 2004 or to options granted subsequent to 7 November2002 but which vested before 1 April 2004. IFRS 3: Business Combinations - IFRS 3 requires impairment reviews to beperformed on an annual basis on the goodwill held by the group. Any impairmentwill be recognised in the consolidated income statement. An impairment reviewhas been completed at each period end and no impairment was evident, and as aresult no impairment loss has been charged. The group has taken the exemption inIFRS 1 from restating business combinations prior to 1 April 2004. In accordancewith IFRS 3 goodwill amortisation from this date charged under GAAP has beenwritten back. IAS 10: Events after balance sheet date - Under IAS 10 dividends in respect of ayear are only recognised when they are declared and approved. Dividends chargedin earlier periods have been reallocated to the period in which they aredeclared. IAS 21: The effects of changes in foreign exchange rates - Under IAS 21 thegoodwill arising on the purchase of a foreign subsidiary is regarded as an assetof the subsidiary concerned, denominated in foreign currency and retranslated atthe balance sheet date. Exchange differences arising from this retranslation,and that of other assets of foreign subsidiaries are accumulated in a separatereserve within equity. The group have taken the option to set this reserve tozero at transition to IFRS. IAS 32 and 39: Financial Instruments Measurement and Reporting - The group hastaken the option not to apply the accounting under these standards to thecomparative figures. The balance sheet at 1 April 2005 has been adjusted toaccount for the standards. The group enters into foreign exchange forwardcontracts to economically hedge purchases and sales of goods in foreigncurrencies (principally USD). These derivatives are included on the balancesheet and movements in fair value are taken to the income statement. Inaddition, contracts for purchases of goods in foreign currencies that containembedded derivatives have been separated and the derivative recognised at fairvalue with movements being recognised in the income statement. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MPH.L