29th Jun 2009 07:00
29 June 2009
Beale PLC, the specialist department store operator, announces Interim Results for the 26 weeks ended 2 May 2009.
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* |
Revenue remained broadly stable at £26.7m (2008: £26.8m) despite the extremely difficult high street trading conditions
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* |
Like for like gross sales excluding VAT declined by 2.4%
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* |
The trend for gross sales excluding VAT improved during the period having been down 3.3% in the first 11 weeks of the period, but just 1.6% in the last 15 weeks of the period
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* |
Good sales growth from many own bought areas, such as housewares, linens and menswear; new own fashion label - Crimson being developed
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* |
Concession sales declined 6% as a number of concession brands fell into administration; new replacement concessions introduced such as Mamas and Papas, Joules, Chilli Peppers and Craghoppers
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* |
Profit before tax reduced to £543,000 (2008: £573,000)
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* |
Earnings per share of 2.65p (2008: 2.79p)
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* |
Beales to be first independent department store chain to launch GIVe, the new brand from George Davies in October |
Mike Killingley, Chairman, commented: "The economic environment in the UK provides extremely challenging trading conditions for retailers. We expect these conditions to continue in the second half.
"The key to improving the fortunes of your Group remains to increase sales while improving margins. We are continuing to pursue an aggressive promotional strategy, growing our buying-in margins and focusing on cost control. When the economic environment improves, we are confident that the action being taken will enable us to restore the Group to full year profitability."
For further information:
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Beale PLC |
Tavistock Communications |
Astaire Securities |
|
Tony Brown, Chief Executive |
Lulu Bridges |
Andrew Raca |
|
Ken Owst, Finance Director |
Polly Hutchinson |
Tel: 020 7448 4437 |
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Tel: 01202 552022 |
Tel: 020 7920 3150 |
Interim Management Report - 26 weeks ended 2 May 2009
Financial results
The Group earned a profit after tax for the period from continuing operations of £543,000 in the 26 week period ended 2 May 2009, compared with £573,000 in the equivalent period last year.
Any fall in year on year sales is disappointing, but we derive some comfort that, with the economy still in recession and high street trading conditions continuing to be extremely difficult, the decline in revenue was only 0.5%. Revenue comprises own bought sales and the commission received on concession sales.
Gross sales, which include the full value of concession sales and VAT, were distorted by the reduction in the VAT rate from 17.5% to 15% in December 2008. Sales fell by 4.0% but, after adjusting for the VAT reduction, the effective like for like sales reduction was 2.4%. Within this figure is an improving trend: a fall of 3.3% in the 11 weeks to 17 January and a 1.6% fall in the more recent 15 weeks.
The weaker performance of our concessions compared with own bought reflects the fall into administration of a number of high sales value concessions, including Elvi, Principles, Viyella, Adams, and Royal Worcester. Many of our own bought areas have shown good sales growth, notably housewares, linens and menswear. The management team has continued to focus on improving our buying-in margins, enabling us to support our promotional strategy without significantly affecting our gross margins.
We continue to focus on our cost base, and despite a further increase in the national minimum wage last autumn our operating costs were below those for the comparable period of last year.
Pre tax profit for the 26 weeks was £543,000 (2008: £881,000).
New brands
During the last 6 months we have worked hard to replace those brands which have gone into administration; new names include Mamas and Papas, Joules, Chilli Pepper and Craghoppers. To support our fashion margins and become less vulnerable to further concession failures we have also developed our own fashion label - Crimson - which we intend to develop through 2009 and 2010 to become our entry price point.
We are particularly delighted that, on 1 October, Beales will be the first independent department store chain to launch the new GIVe brand by George Davies. We have been working with George Davies since last November and have been pivotal in helping develop the operational model he will use to launch his new venture. GIVe will take space in all 11 of our stores.
Dividends
As last year, no dividend is proposed, and we do not consider it prudent to resume dividend payments until full year profitability has been restored.
Cash and balance sheet
As reported in our annual report in January, we renegotiated our bank facilities to secure a new £9 million term loan facility repayable in February 2011. We continue to operate within this facility and within our banking covenants.
We have also continued to drive down inventory levels, which were 13% lower at 2 May 2009 than at the equivalent date last year.
During the period the Board was pleased to sign the November 2007 pension triennial valuation. A new Schedule of contributions has been agreed with the trustees of The Beales Pension Scheme. The final salary scheme was closed to future accrual from 30 April 2009, having been closed to new entrants from 1997. Final salary section scheme members were invited to join the Money Purchase section of the scheme on 1 May 2009.
Related party transactions
No related party transactions took place during the period which had a material impact on the financial position or performance of the Group.
Outlook, including risks and uncertainties
The economic environment in the UK provides extremely challenging trading conditions for retailers. We expect these conditions to continue in the second half. As we explained in our 2008 annual report, and as described in note 1 to these condensed interim financial statements, this constitutes the principal risk and uncertainty facing the Group. However, based on current trading and our detailed forecasts, the Group expects to continue to comply with its financial covenants for the foreseeable future.
The key to improving the fortunes of your Group remains to increase sales while improving margins. We are continuing to pursue an aggressive promotional strategy, growing our buying-in margins and focusing on cost control. When the economic environment improves, we are confident that the action being taken will enable us to restore the Group to full year profitability.
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Mike Killingley |
Tony Brown |
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Chairman |
Chief Executive |
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26 June 2009 |
26 June 2009 |
Responsibility Statement
We confirm that to the best of our knowledge:
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(a) |
the condensed set of financial statements, which has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Group, included in the consolidation as a whole as required by DTR 4.2.4R; |
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(b) |
the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting'; |
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(c) |
the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and |
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(d) |
the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein). |
By order of the Board,
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Mike Killingley |
Tony Brown |
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Chairman |
Chief Executive |
|
26 June 2009 |
26 June 2009 |
The Interim Management Report contains certain forward-looking statements about the future outlook for the Group. Although the Directors believe that these statements are based on reasonable assumptions, any such statements should be treated with caution as future outlook may be influenced by factors that could cause actual outcomes and results to be materially different.
Condensed Consolidated Income Statement
Period ended 2 May 2009 - Unaudited
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Notes |
26 weeks to 2 May 2009 £000 |
Restated † 26 weeks to 3 May 2008 £000 |
52 weeks to 1 November 2008 £000 |
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|
Gross sales* |
2 |
46,599 |
48,542 |
88,982 |
|
Revenue - continuing operations |
2 |
26,713 |
26,834 |
47,881 |
|
Cost of sales |
(12,407) |
(12,129) |
(21,615) |
|
|
Gross profit |
14,306 |
14,705 |
26,266 |
|
|
Administrative expenses |
(13,654) |
(13,695) |
(27,492) |
|
|
Operating profit/(loss) - continuing operations |
652 |
1,010 |
(1,226) |
|
|
Interest payable |
(110) |
(135) |
(314) |
|
|
Interest receivable |
1 |
6 |
18 |
|
|
Profit/(loss) on ordinary activities before tax |
543 |
881 |
(1,522) |
|
|
Tax |
4 |
- |
(308) |
131 |
|
Profit/(loss) for the period from continuing operations |
543 |
573 |
(1,391) |
|
|
Basic and diluted earnings/(loss) per share (pence) |
5 |
2.65p |
2.79p |
(6.78p) |
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* |
Gross sales reflect revenue inclusive of concession sales and VAT, all from continuing operations. |
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† |
See note 1 for restated gross sales and revenue. |
Condensed Consolidated Balance Sheet
As at 2 May 2009 - Unaudited
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Notes |
2 May 2009 £000 |
3 May 2008 £000 |
1 November 2008 £000 |
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Non-current assets |
|
|
|
|
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Goodwill |
6 |
892 |
892 |
892 |
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Property, plant and equipment |
24,564 |
28,090 |
25,219 |
|
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Financial assets |
16 |
16 |
16 |
|
|
25,472 |
28,998 |
26,127 |
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Current assets |
|
|
|
|
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Inventories |
7,017 |
8,089 |
8,449 |
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Trade and other receivables |
4,968 |
5,209 |
4,684 |
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Cash and cash equivalents |
1,293 |
221 |
76 |
|
|
13,278 |
13,519 |
13,209 |
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Total assets |
38,750 |
42,517 |
39,336 |
|
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Current liabilities |
|
|
|
|
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Trade and other payables |
(6,508) |
(7,256) |
(7,484) |
|
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Tax liabilities |
(35) |
(35) |
(35) |
|
|
Bank overdrafts and loans |
- |
(500) |
(2,904) |
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|
(6,543) |
(7,791) |
(10,423) |
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Net current assets |
6,735 |
5,728 |
2,786 |
|
|
Non-current liabilities |
|
|
|
|
|
Bank loan |
(7,750) |
(5,000) |
(5,000) |
|
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Retirement benefit obligations |
8 |
(1,369) |
(2,304) |
(1,369) |
|
Deferred tax liabilities |
(4,135) |
(5,194) |
(4,135) |
|
|
Obligations under finance leases |
(979) |
(977) |
(978) |
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Total liabilities |
(14,233) (20,776) |
(13,475) (21,266) |
(11,482) (21,905) |
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Net assets |
17,974 |
21,251 |
17,431 |
|
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Equity |
|
|
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Share capital |
1,026 |
1,026 |
1,026 |
|
|
Share premium account |
440 |
440 |
440 |
|
|
Revaluation reserve |
7,510 |
9,104 |
7,559 |
|
|
Capital redemption reserve |
242 |
242 |
242 |
|
|
ESOP reserve |
(23) |
(26) |
(27) |
|
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Retained earnings |
8,779 |
10,465 |
8,191 |
|
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Total equity |
17,974 |
21,251 |
17,431 |
Condensed Consolidated Statement of Recognised Income and Expense
Period ended 2 May 2009 - Unaudited
|
26 weeks to 2 May 2009 £000 |
26 weeks to 3 May 2008 £000 |
52 weeks to 1 November 2008 £000 |
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|
Actuarial loss on pension scheme |
- |
- |
(385) |
|
|
Tax on items taken directly to equity Revaluation |
- - |
- - |
34 (1,505) |
|
|
Net income recognised directly in equity |
- |
- |
(1,856) |
|
|
Profit/(loss) for the period |
543 |
573 |
(1,391) |
|
|
Total recognised income and expense for the period |
543 |
573 |
(3,247) |
Condensed Consolidated Statement of Changes in Equity
Period ended 2 May 2009 - Unaudited
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26 weeks to 2 May 2009 £000 |
26 weeks to 3 May 2008 £000 |
52 weeks to 1 November 2008 £000 |
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Opening equity |
17,431 |
20,678 |
20,678 |
|
|
Total recognised income and expense for the period |
543 |
573 |
(3,247) |
|
|
Total movements in equity for the period |
543 |
573 |
(3,247) |
|
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Closing equity |
17,974 |
21,251 |
17,431 |
Condensed Consolidated Cash Flow Statement
Period ended 2 May 2009 - Unaudited
|
Note |
26 weeks to 2 May 2009 £000 |
26 weeks to 3 May 2008 £000 |
52 weeks to 1 November 2008 £000 |
|
|
Cash flows from operating activities before interest and tax |
7 |
1,819 |
125 |
(1,931) |
|
Interest paid |
(130) |
(145) |
(305) |
|
|
Interest received |
1 |
6 |
18 |
|
|
Tax received |
- |
63 |
63 |
|
|
Net cash inflow/(outflow) from operating activities |
1,690 |
49 |
(2,155) |
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchase of property, plant and equipment |
(320) |
(213) |
(559) |
|
|
Net cash used in investing activities |
(320) |
(213) |
(559) |
|
|
Cash flows from financing activities |
|
|
|
|
|
Increase in loans |
250 |
750 |
2,750 |
|
|
Net proceeds from obligations under finance leases |
1 |
1 |
2 |
|
|
Net cash generated from financing activities |
251 |
751 |
2,752 |
|
|
Net increase in cash and cash equivalents in the period |
1,621 |
587 |
38 |
|
|
Cash and cash equivalents at beginning of period |
(328) |
(366) |
(366) |
|
|
Cash and cash equivalents at end of period (being cash and bank overdrafts) |
1,293 |
221 |
(328) |
Condensed Analysis of Consolidated Net Debt
Period ended 2 May 2009 - Unaudited
|
26 weeks to 2 May 2009 £000 |
26 weeks to 3 May 2008 £000 |
52 weeks to 1 November 2008 £000 |
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|
Cash at bank Bank overdrafts |
1,293 - |
221 - |
76 (404) |
|
|
Cash and cash equivalents (including overdrafts) |
1,293 |
221 |
(328) |
|
|
Borrowings: |
|
|
|
|
|
Due within one year |
- |
(500) |
(2,500) |
|
|
Due after one year |
(7,750) |
(5,000) |
(5,000) |
|
|
Total borrowings |
(7,750) |
(5,500) |
(7,500) |
|
|
Net debt |
(6,457) |
(5,279) |
(7,828) |
Notes to the Condensed Consolidated Financial Statements
Unaudited
|
1. |
Accounting Policies |
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Basis of preparation |
|
|
The Interim Financial Statements for the 26 weeks ended 2 May 2009 have been prepared on the basis of the accounting policies set out in the Group's financial statements for the 52 weeks ended 1 November 2008. |
|
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Going Concern |
|
|
Until 27 February 2009, the Group met its day to day working capital requirements from two bank loans of £4.5 million and £5 million, repayable in February 2009 and October 2011 respectively, and an overdraft facility of £500,000 repayable on demand. On 27 February 2009 the Group secured a new bank loan facility of £9 million, repayable in February 2011. This was secured by a charge over the principal freehold properties which were independently revalued to £12.9 million as at 1 November 2008. A new overdraft facility of £112,000, which continues to be repayable on demand, was secured on 29 May 2009 against a minor freehold property. The facilities include key financial covenants which require testing based at the half year-end and year-end. The directors have prepared forecasts for the 2008/9 and 2009/10 years, covering a period of more than 12 months from the date of their approval of these interim financial statements. Based on the forecast results and cash flow, the Group will be able to meet its bank covenants, and on this basis the directors consider that the Group will continue to operate within the available facilities. The directors are aware that Group's performance could fall short of these forecasts because of the current challenging economic conditions and due to limited headroom in the operating result covenant this may result in a need to renegotiate the bank covenants during the year. If conditions in the wider UK economy, as they relate to the retail sector, were to decline below those which have been assumed in the Group's current forecasts (and notwithstanding further management action) then there is a risk that the Group might generate lower than anticipated revenues, or cash, or require write-downs in the value of the Group's assets. This risk represents a material uncertainty, which may require the Group to revisit its covenants with its lenders and, if necessary, re-set its covenant package. In this instance, a failure to agree a revision, or to obtain other funding, may cast significant doubt on the entity's ability to continue as a going concern such that the Group could be unable to realise its assets and discharge its liabilities in the normal course of business. Nevertheless, based upon the Group's current trading, forecasts and the actions described within the Group Chairman and Chief Executive's statement, the directors believe that the Group will continue to comply with its loan covenants and accordingly have concluded that it is appropriate to prepare the condensed consolidated interim financial statements on a going concern basis. |
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Revenue - change in policy |
|
|
Under IAS8 Accounting policies, changes in accounting estimates and errors staff discounts should be accounted for on a net basis within revenue. The 2008 figures have been restated to comply with this change in accounting policy. In the 2008 interim accounts, staff discounts were not offset against revenue but included in administrative expenses. The effect of this restatement is set out below. |
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Figures prior to restatement 26 weeks to 3 May 2008 £000 |
£000 |
Restated 26 weeks to 3 May 2008 £000 |
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Gross sales |
48,750 |
(208) |
48,542 |
|
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Revenue - continuing operations |
27,011 |
(177) |
26,834 |
|
|
Cost of sales |
(12,129) |
- |
(12,129) |
|
|
Gross profit |
14,882 |
(177) |
14,705 |
|
|
Administrative expenses |
(13,872) |
177 |
(13,695) |
|
|
Operating loss - continuing operations |
1,010 |
- |
1,010 |
|
2. |
Revenue |
|
All the Group's revenue is derived from retail sales made in the UK. Revenue excludes VAT and the non-commission element of sales made by concession outlets. |
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26 weeks to 2 May 2009 £000 |
26 weeks to 3 May 2008 £000 |
52 weeks to 1 November 2008 £000 |
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|
Gross sales |
46,599 |
48,542 |
88,982 |
|
|
VAT |
(6,239) |
(7,174) |
(13,091) |
|
|
Gross sales (excluding VAT) Agency sales less commission |
40,360 (13,647) |
41,368 (14,534) |
75,891 (28,010) |
|
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Revenue |
26,713 |
26,834 |
47,881 |
|
Seasonality of sales The Group sales are more heavily weighted towards the first half of the calendar year, with 54.5% of gross annual sales of the previous year being made in the first half. |
|
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3. |
Segment information |
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The directors regard the business as one segment. |
|
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4. |
Corporation tax charge |
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No tax arises on the result for the period due to the availability of brought forward losses for which no deferred tax asset has previously been recognised. Interim period taxation is accrued based on an estimated effective tax rate of nil (6 months ended 3 May 2008: 35%). The total tax credit for the 52 weeks ended 1 November 2008 was calculated at 9%. |
|
|
5. |
Earnings per share From continuing operations The calculation of the basic and diluted earnings per share is based on the following data: |
|
26 weeks to 2 May 2009 £000 |
26 weeks to 3 May 2008 £000 |
52 weeks to 1 November 2008 £000 |
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Earnings |
|
|
|
|
|
Earnings/(loss) for the purposes of basic and diluted earnings per share |
543 |
573 |
(1,391) |
|
|
Number of shares |
|
|
|
|
|
Weighted average number of ordinary shares for the purpose of basic earnings per share and for the purposes of diluted earnings per share |
20,524,797 |
20,524,797 |
20,524,797 |
|
The denominators used are the same as the above for both basic and diluted earnings per share. No dividend was paid (2007: nil per share). |
||
|
6. |
Goodwill As at 2 May 2009 the directors carried out an impairment review. The Board concluded the goodwill had not suffered any impairment. |
|
|
7. |
Reconciliation of operating profit/(loss) to cash generated from/(used in) operating activities |
|
|
26 weeks to 2 May 2009 £000 |
26 weeks to 3 May 2008 £000 |
52 weeks to 1 November 2008 £000 |
||
|
Operating profit/(loss) |
652 |
1,010 |
(1,226) |
|
|
Adjustments for: |
|
|
|
|
|
Cash disbursements of pension obligations (net of charge included within the income statement) |
- |
- |
(1,320) |
|
|
Depreciation |
975 |
1,109 |
2,235 |
|
|
Decrease in inventories |
1,432 |
2,149 |
1,789 |
|
|
(Increase)/decrease in trade and other receivables |
(284) |
753 |
1,278 |
|
|
Decrease in trade and other payables |
(956) |
(4,896) |
(4,687) |
|
|
Cash generated from/(used in) operations |
1,819 |
125 |
(1,931) |
|
8. |
Retirement benefit obligations |
|
The defined benefit obligation at 2 May 2009 has not been restated from the obligation at 1 November 2008 as, in the directors' opinion, there have not been any significant fluctuations. |
|
|
9. |
Basis of financial information |
|
The condensed set of financial statements included in this interim financial report, approved by the Board of directors on 26 June 2009, does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 and have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union. This Interim Report and Accounts will be sent to shareholders. Further copies may be obtained from the Company Secretary, Beale PLC, The Granville Chambers, 21 Richmond Hill, Bournemouth BH2 6BJ. |
|
|
The information included in this Interim Financial Statement for the 52 weeks ended 1 November 2008 does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The statutory accounts for the 52 weeks ended 1 November 2008, which were prepared under International Financial Reporting Standards, have been delivered to the Registrar of Companies. The Auditors' report on these accounts was unqualified, including an emphasis of matter paragraph in relation to a material uncertainty, and does not contain a statement made under Section 237(2) and Section 237(3) of the Companies Act 1985. |
|
|
The financial year ending 31 October 2009 is a 52 week year. |
Independent Review Report to Beale PLC
We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the 26 weeks ended 2 May 2009 which comprises the condensed consolidated income statement, the condensed consolidated balance sheet, the condensed consolidated statement of recognised income and expense, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 9. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdoms' Financial Services Authority.
As disclosed in note 9, the annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the 26 weeks ended 2 May 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
Emphasis of Matter - Going Concern
Without qualifying our conclusion, we draw attention to note 1 to the condensed consolidated interim financial statements which indicates the risk of conditions in the wider UK economy and their impact on the retailing sector, declining beyond that assumed in the Group's forecasts. These conditions indicate, along with all other matters as set forth in note 1, the existence of material uncertainty which may cast significant doubt upon the Group's ability to continue as a going concern. The condensed consolidated interim financial statements do not include any adjustments that would result if the Group were unable to continue as a going concern, which would include write-downs of the carrying value of assets, and providing for any further liabilities that might arise.
Deloitte LLP
Chartered Accountants and Registered Auditors
Southampton, United Kingdom
26 June 2009
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