Half Yearly Report

RNS Number : 4628S

Ashley (Laura) Hldgs PLC

10 September 2010

 

10 September 2010   LAURA ASHLEY HOLDINGS plc

("the Company")

  Laura Ashley today announces results for the 26 weeks to 31 July 2010 showing a thriving performance in an uncertain consumer environment with like-for-like growth across all product categories.

 

Summary

·; Total Group sales up 5.7% to £135.1m (2009: £127.8m)

·; Total UK retail sales up 5.5% to £121.6m, like-for-like sales up 6.2%

·; Increase in profit before taxation including exceptional gains to £10.5m (2009: £1.1m)

·; Increase in profit before taxation excluding exceptional gains to £5.7m (2009: £0.1m)

·; Exceptional gain of £4.8m primarily due to the sale and leaseback of a freehold property (2009: £1.0m)

·; Gross margin improved by 1.4 percentage points due to stronger Sterling and lower levels of promotional activity

·; Interim dividend increased by 100% to 0.5 pence per share (2009: 0.25 pence per share)

·; Strong Balance Sheet with £31.2m net cash (2009: £10.0m) and a clean stock position

·; All product categories showing positive like-for-like sales growth:

o Furniture sales up 7.8%, like-for-like sales up 9.2%

o Home Accessories sales up 5.0%, like-for-like sales up 5.2%

o Decorating sales up 6.3%, like-for-like sales up 7.1%

o Fashion sales up 4.2%, like-for-like sales up 1.6%

·; E-Commerce sales grew by 63.0%

  

  

Commenting on the results, Tan Sri Dr. K P Khoo, Chairman, said:

I am delighted with the strong performance of the Company for the first half of this financial year. In a difficult economic climate, Laura Ashley has continued to demonstrate the strength of its brand and has recorded positive like-for-like sales growth across all product categories. Our E-Commerce and international channels have continued to grow and become increasingly important to our multi channel strategy.

 

We will focus on developing Laura Ashley's distinctive product offering as well as improving operational efficiency. The consumer environment continues to be uncertain and we remain cautious for the remainder of the year.

 

Enquiries:

 

Brunswick	020 7404 5959
Tom Buchanan James Olley
Laura Ashley Holdings plc	020 7880 5100
Seán Anglim CFO

 

 

Overview

 

For the 26 weeks to 31 July 2010, total Group sales increased by £7.3m (5.7%) to £135.1m compared to the previous period of £127.8m. Total UK retail sales increased by 5.5% to £121.6m (LFL 6.2%). The improved total sales position was primarily due to the increase in E-Commerce and UK store sales. E-Commerce sales grew by 63.0% to £15.4m (2009: £9.4m). Total UK store sales were up 1.6% to £103.1m (2009: £101.5m) whilst Retail space was reduced by 20,000 selling square feet (2.3%) as the store portfolio was reduced by six to 225 stores.

 

Profit before taxation, including gains from exceptional items, was £10.5m (2009: £1.1m). Profit before taxation excluding exceptional items was £5.7m (2009: £0.1m). The exceptional gain of £4.8m primarily relates to the sale and leaseback of our Bardon warehouse.

 

Gross margin improved by 1.4 percentage points against last year due to stronger Sterling and lower levels of promotional activity. The negative overall impact of foreign exchange movements reduced to £1.8m (2009: £5.5m). Operating expenses declined by 0.6% to £54.5m (2009: £54.8m).

 

The Board has approved an interim dividend of 0.5 pence per share (5% of nominal value), an increase of 100% per share. (2009: 0.25 pence per share).

 

 

UK Operations

 

As at 31 July 2010, the property portfolio in the UK comprised 225 stores (January 2010: 231). We have four main store types: 139 Mixed Product stores, 58 Home stores, 25 Home concession stores and 3 Clearance outlets.

 

During the six months ended 31 July 2010, we relocated 1 store and closed 6 stores. As a result, total selling space decreased by 2.3% to 853,000 square feet.

 

Store realignment will continue in 2010 and, as previously stated, it will remain subject to our rigorous property selection criteria. The realignment will focus on the acquisition of smaller, new concept stores and optimising space in our existing portfolio to drive additional density.

 

Our E-Commerce and Mail Order channels continue to show strong growth and now represent 15.2% of total UK retail sales (2009: 11.9%). E-Commerce, Mail Order and Retail Stores now work in a highly complementary way to drive sales. Total E-Commerce and Mail Order sales were up 35.0% on last year and this is recognised now as an established channel to customers. Within this figure, E-Commerce sales were up 63.0%, more than compensating for an ongoing market decline in Mail Order sales. Laura Ashley products are now available for delivery to Germany, Switzerland, Italy and Austria via our E-Commerce channel.

  Product

 

The UK business is split into four main categories. For the 26 weeks ended 31 July 2010, the relative split of UK sales is as follows: Furniture 30%, Home Accessories 26%, Decorating 23% and Fashion 21%.

 

Furniture

The Furniture product category includes upholstered and cabinet furniture, beds and mirrors.

 

Furniture sales for the 26 weeks to 31 July 2010 increased by 7.8% (LFL +9.2%) over the same period last year, with customers responding well to our distinctive and high quality product offering.

 

We have expanded our online Made to Order furniture offer, which has been very well received. The introduction of new colour palettes, innovative shapes and product additions to our popular ranges continue to drive this core category forward.

 

Home Accessories

The Home Accessories product category includes lighting, gifts, bed linen, rugs, throws, cushions and children's accessories.

 

Home Accessories sales for the 26 weeks to 31 July 2010 increased by 5.0% (LFL +5.2%) over the same period last year.

 

Building on the success we have experienced with our gift range and children's roomsets, we have expanded and developed these ranges and they have been key drivers within this product category. Fragrance has also proven to be very popular and we continue to update our signature lighting offer with new distinctive pieces. New bed linen and cushion designs have also contributed to the positive sales momentum.

 

Our innovative, inspirational quality products within this category continue to epitomise the Laura Ashley handwriting as well as offering product that co-ordinates with all the roomsets.

 

Decorating

This category includes fabric, curtains, wall coverings, paint and decorative accessories.

 

Decorating sales for the 26 weeks to 31 July 2010 increased by 6.3% (LFL +7.1%) over the same period last year.

 

The bold introduction of new decorating collections, from updated classics to striking new colours, continues to be very popular and distinguishes Laura Ashley from its competitors. In addition, recolourations of best sellers also drive this category. We have continued to invest in shorter lead times across this category and have made good progress during the reported period.

 

Fashion

Despite facing some tough comparatives, Fashion sales for the 26 weeks to 31 July 2010 increased by 4.2% (LFL +1.6%) over the same period last year.

 

We have been successful at using our E-Commerce platform to attract new customers. We continue to introduce up-dated classics and new items, including our tunic dresses and blouses which have been particularly successful. Bright and colourful stories have continued to perform well as have our floral, botanical and butterfly prints, focusing on Laura Ashley's love of feminine, pretty clothing.

 

During the first half, we began to introduce a new line, 'Laura Ashley Weekend', and initial reaction to it has been positive. This remains a small range, but we will continue to roll it out in Autumn Winter.

 

 

International Operations

 

Our international franchising operations continue to be an important part of the Laura Ashley business and, as at 31 July 2010, there were 233 (January 2010: 230) franchised stores in 26 countries worldwide. New franchise partners have been signed in South Korea and Jersey and stores are due to open in both territories this Autumn.

 

Franchise revenues grew by 3.0% to £10.4m during the 26 weeks to 31 July 2010.

 

Licensing income increased 24.0% to £1.8m. Licences were awarded during 2010 for new categories, which include toiletries and gifts.

 

 

Dividend

 

A final dividend, in respect of the financial year ended 30 January 2010, of 0.75 pence per ordinary share was paid on 4 August 2010. When taken with the interim dividend of 0.25 pence per share paid on 12 November 2009, the total dividend for the year ended 30 January 2010 was 1.0 pence per share.

 

On 9 September 2010, the Board approved the payment of an interim dividend of 0.5 pence per share, an increase of 100% (2009: 0.25 pence per share). The interim dividend will be paid on 10 November 2010 to all shareholders on the register at the close of business on 15 October 2010.

 

 

Balance Sheet

 

The cash balance at 31 July 2010 was £31.2m, of which £12.3m derived from the sale and leaseback of our Bardon warehouse.

 

 

Current Trading and Outlook

 

For the 31 weeks to 4 September 2010, total UK retail sales increased by 4.5%. For the same period, like-for-like UK retail sales was up by 4.9%.

 

We will continue our focus on developing Laura Ashley's distinctive product offering as well as improving operational efficiency. The consumer environment continues to be uncertain and we remain cautious for the remainder of the year.

 

 

Responsibility Statement

 

 

We confirm that to the best of our knowledge:

 

a) The condensed set of financial statements has been prepared in accordance with IAS 34;

 

b) 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

 

c) The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of material related party transactions and changes therein).

 

 

By order of the Board

 

 

SeánAnglim

Chief Financial Officer

 

 

Condensed Group Statement of Comprehensive Income
for the 26 weeks ended 31 July 2010
		26 weeks to		26 weeks to		52 weeks to
		31 July 2010		1 August 2009		30 January 2010
		(unaudited)		(unaudited)		(audited)
		£m		£m		£m
Revenue		135.1		127.8		268.4
Cost of sales		(75.1)		(72.8)		(150.6)
Gross profit		60.0		55.0		117.8
Operating expenses, including exceptional items		(49.7)		(53.8)		(105.1)
Profit from operations		10.3		1.2		12.7
Share of operating profit/(loss) of associate		0.3		-		(1.1)
Finance income		-		-		0.1
Finance costs		(0.1)		(0.1)		(0.7)
Profit before taxation		10.5		1.1		11.0
Taxation		(1.8)		(0.3)		(5.2)
Profit for the financial period *		8.7		0.8		5.8
Other comprehensive income:
Exchange differences on translation of investments		1.0		-		(0.2)
Unrealised investment gain		0.2		0.6		0.5
Other comprehensive income for the period net of tax		1.2		0.6		0.3
Total comprehensive income for the period		9.9		1.4		6.1
* Earnings per share - basic and diluted		1.20p		0.11p		0.80p
calculated based on profit for the financial period

 

 

The Group's results shown above are derived entirely from continuing operations. Cost of sales and operating expenses have been adjusted to reflect accuracy within their individual categories.

 

 

 

Condensed Group Balance Sheet
as at 31 July 2010
			At 31 July 2010				At 1 August 2009				At 30 January 2010
			(unaudited)				(unaudited)				(audited)
			£m				£m				£m
							Restated				Restated
Non-current assets
Property, plant and equipment			25.7				38.3				36.3
Deferred tax asset			1.9				1.8				1.9
Investment in associate			4.6				4.6				3.2
Investment in quoted shares			2.2				2.1				2.0
			34.4				46.8				43.4
Current assets
Inventories			51.7				47.0				48.2
Trade and other receivables			21.4				20.1				21.2
Cash and cash equivalents			31.2				10.0				17.4
			104.3				77.1				86.8
Total assets			138.7				123.9				130.2
Current liabilities
Current tax liabilities			3.0				-				4.5
Trade and other payables			68.1				64.4				68.1
			71.1				64.4				72.6
Non-current liabilities
Retirement benefit liabilities			6.9				6.5				6.9
Deferred tax liabilities			0.9				0.4				0.7
Provisions and other liabilities			0.4				0.5				0.5
			8.2				7.4				8.1
Total liabilities			79.3				71.8				80.7
Net assets			59.4				52.1				49.5
Equity
Share capital			37.3				37.3				37.3
Share premium			86.4				86.4				86.4
Own shares			(0.8)				(0.8)				(0.8)
Retained earnings			(63.5)				(70.8)				(73.4)
Total equity			59.4				52.1				49.5

 

 

Condensed Group Statement of Changes in Shareholders' Equity
for the 26 weeks ended 31 July 2010
	Share	Share	Own	Retained	Total
	Capital	Premium	Shares	Earnings	Equity
	£m	£m	£m	£m	£m
Balance as at 31 January 2009	37.3	86.4	(0.8)	(70.9)	52.0
Change of accounting policy	-	-	-	(1.3)	(1.3)
Balance as at 31 January 2009 as restated	37.3	86.4	(0.8)	(72.2)	50.7
Profit for the 6 months ended 1 August 2009	-	-	-	0.8	0.8
Other comprehensive income	-	-	-	0.6	0.6
Balance as at 1 August 2009	37.3	86.4	(0.8)	(70.8)	52.1
Profit for the 6 months ended 30 January 2010	-	-	-	5.0	5.0
Dividends paid	-	-	-	(7.3)	(7.3)
Other comprehensive loss	-	-	-	(0.3)	(0.3)
Balance as at 30 January 2010	37.3	86.4	(0.8)	(73.4)	49.5
Profit for the 6 months ended 31 July 2010	-	-	-	8.7	8.7
Other comprehensive income	-	-	-	1.2	1.2
Balance as at 31 July 2010	37.3	86.4	(0.8)	(63.5)	59.4

 

 

 

Condensed Group Cash Flow Statement
for the 26 weeks ended 31 July 2010
		26 weeks to		26 weeks to		52 weeks to
		31 July 2010		1 August 2009		30 January 2010
		(unaudited)		(unaudited)		(audited)
		£m		£m		£m
Operating activities
Cash generated from operations		5.3		4.2		20.3
Corporation tax paid		(3.2)		(0.3)		(0.5)
Dividends paid		-		-		(7.3)
Finance income		-		-		0.1
Finance cost		(0.1)		(0.1)		(0.7)
		2.0		3.8		11.9
Investing activities
Purchase of property, plant and equipment		(0.5)		(1.8)		(2.4)
Sale of property, plant and equipment		12.3		-		-
Net cash received from associate		-		0.1		-
		11.8		(1.7)		(2.4)
Net increase in cash and cash equivalents		13.8		2.1		9.5

 

 

 

Reconciliation of Net Cash Flow to Movement in Net Funds
for the 26 weeks ended 31 July 2010
		26 weeks to		26 weeks to		52 weeks to
		31 July 2010		1 August 2009		30 January 2010
		(unaudited)		(unaudited)		(audited)
		£m		£m		£m
Net increase in cash and cash equivalents / change in net funds resulting from cash flows		13.8		2.1		9.5
Net funds at the beginning of the period		17.4		7.9		7.9
Net funds at the end of the period		31.2		10.0		17.4

 

 

Notes

 

 

1. Basis of Preparation

 

This condensed set of financial statements has been prepared in accordance with the requirements of IAS 34 'Interim Financial Reporting' as adopted by the European Union ('EU').

 

As required by the Disclosure and Transparency Rules of the UK's Financial Services Authority and other than described below, the condensed set of financial statements has been prepared by applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the financial year ended 30 January 2010, which were prepared in accordance with International Financial Reporting Standards as adopted by the EU. The statutory audited accounts for the year ended 30 January 2010 have been delivered to the Registrar of Companies in England and Wales. The Auditor's report on these accounts was unqualified and did not contain statements under Section 498 of the Companies Act 2006.

 

These half-year condensed financial statements are unaudited, not reviewed, and do not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006.

 

Impact of Changes to Accounting Standards

 

Changes in Accounting Policy

An amendment to IAS 38 Intangible Assets requires that all marketing and production costs of the Group are recognised in the Group statement of comprehensive income as incurred rather than during the season that the costs relate to.

 

As a result of this change in accounting policy, the net assets at each comparative balance sheet date are reduced by £1.3 million retrospectively. As the effect on earnings was not material in each of the financial periods, reported profits for prior periods have not been restated.

 

IFRS 8 Operating Segments (Amendment)

Following the review of internal management reporting for the Group's chief operating decision makers, it was decided that the split of the Group's assets and liabilities into segments is no longer required.

 

 

 

2. Segmental Analysis

 

	26 weeks to	26 weeks to	52 weeks to
	31 July 2010	1 August 2009	30 January 2010
	Total	Total	Total
	(unaudited)	(unaudited)	(audited)
	£m	£m	£m
Revenue
Stores	104.1	102.3	215.3
E-Commerce & Mail Order	18.5	13.7	30.1
Total retail	122.6	116.0	245.4
Non-retail	12.5	11.8	23.0
Total Revenue	135.1	127.8	268.4
Retail
Contribution:
Stores	11.2	5.3	16.0
E-Commerce & Mail Order	4.7	2.1	7.6
Total contribution	15.9	7.4	23.6
Indirect overhead costs	(10.2)	(10.6)	(18.4)
Finance income	-	-	0.1
Finance costs	(0.1)	(0.1)	(0.6)
Profit/(loss) before taxation	5.6	(3.3)	4.7

 

Non-Retail
Contribution	4.6	4.4	7.5
Share of associate profit/(loss)	0.3	-	(1.1)
Finance costs	-	-	(0.1)
Profit before taxation	4.9	4.4	6.3

 

Total Retail & Non-Retail
Contribution	20.5	11.8	31.1
Indirect overhead costs	(10.2)	(10.6)	(18.4)
Share of associate profit/(loss)	0.3	-	(1.1)
Finance income	-	-	0.1
Finance costs	(0.1)	(0.1)	(0.7)
Profit before taxation	10.5	1.1	11.0

 

 

2. Segmental Analysis (continued)

 

	26 weeks to	26 weeks to	52 weeks to
	31 July 2010	1 August 2009	30 January 2010
	Total	Total	Total
	(unaudited)	(unaudited)	(audited)
	£m	£m	£m

 

Non-Current Assets
Destination
UK & Ireland	29.4	41.8	39.8
Continental Europe	0.4	0.4	0.4
Other	4.6	4.6	3.2
Total non-current asset	34.4	46.8	43.4
Revenue
Destination
UK & Ireland	122.4	115.9	244.1
Continental Europe	3.3	3.2	6.4
Other	9.4	8.7	17.9
Total revenue	135.1	127.8	268.4

 

 

The reported segments are consistent with the Group's internal reporting for performance measurement and resources allocation. The Group does not allocate indirect overhead costs between its retail and non-retail segments. As a significant element of the indirect overhead costs arise from the retail segment, it is decided that the entire indirect costs are allocated to this segment.

 

Retail revenue reflects sales through Laura Ashley's managed stores, Mail Order and E-Commerce. Non-retail revenue includes Licensing, Franchising and Manufacturing.

 

Contribution is stated after deducting direct operating expenses, buying, marketing and administrative costs.

 

 

3. Taxation

 

Taxation has been calculated by applying the forecast full year effective rate of tax in the individual fiscal territories to the results for this period. No tax charge arises on the exceptional income due to the availability of capital losses in the Group.

 

 

4. Earnings per Share

 

	26 weeks to	26 weeks to	52 weeks to
	31 July 2010	1 August 2009	30 January 2010
	(unaudited)	(unaudited)	(audited)
Profit for the financial period (£m)	8.7	0.8	5.8
Weighted average number of ordinary
shares - basic and diluted ('000)	727,763	729,408	727,763
Earnings per share	1.20p	0.11p	0.80p

 

Earnings per share are calculated by dividing the profit for the financial period by the weighted average number of ordinary shares during the year (excluding treasury shares). In the opinion of the directors, there are no dilutive instruments.

 

 

5. Reconciliation of Profit from Operations to Net Cash Inflow from Operating Activities

 

	26 weeks to	26 weeks to	52 weeks to
	31 July 2010	1 August 2009	30 January 2010
	(unaudited)	(unaudited)	(audited)
	£m	£m	£m
Profit from operations	10.3	1.2	12.7
Depreciation charge	2.7	2.6	5.3
(Profit)/loss on sale of property, plant and equipment	(4.0)	0.1	-
Exchange movement on property, plant and equipment	-	0.2	0.2
(Increase)/decrease in inventories	(3.5)	5.5	4.3
Increase in receivables	(0.2)	(1.0)	(2.1)
Decrease in payables	-	(4.6)	(0.9)
Change in provisions and other liabilities	-	0.2	0.8
Net cash inflow from operating activities	5.3	4.2	20.3

 

 

6. Related Party Transactions

 

The related party transactions that have occurred in the 26 weeks ended 31 July 2010 are not materially different in size or nature to those reported in the Company's Annual Report for the financial year ended 30 January 2010.

 

 

 

 

 

 

 

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