4th Sep 2006 07:01
Ideal Shopping Direct PLC04 September 2006 4 SEPTEMBER 2006 IDEAL SHOPPING DIRECT PLC 2006 INTERIM RESULTS AND RENEWAL OF FREEVIEW CONTRACT Ideal Shopping Direct Plc ("Ideal"), Britain's leading independent TV shoppingbusiness, today reports interim figures for 2006 and confirms the renewal of itscarriage agreement with National Grid Wireless ("NGW") for the Freeview digitalTV platform. HIGHLIGHTS 2006 2005 Growth • Like-for-like turnover £40.7m £37.0m 10.1% • Like-for-like profit before taxation £4.0m £3.7m 8.3% • Profit before taxation £2.5m £3.6m (30.0)% • Basic Earnings per share 6.0p 8.5p (29.7)% • Interim dividend 1.5p 1.0p 50.0% • Cash (net of borrowings) £12.9m £13.4m (3.7)% • Strong core business sales growth • Profit impacted by one off costs of £1.3m in the period and £0.2m due to the implementation of FRS 20 (2005: £0.1m) • Underperforming Jewellery Vault channel closed in July • Completion of first acquisition, Superstore TV Ltd, in May • Freeview contract successfully renegotiated and extended • Interim dividend increased by 50% FREEVIEW Ideal's contract with NGW for the Freeview digital TV platform, which ran until2014, provided for a price review effective October 2008. Ideal have now agreeda revised contract with NGW to secure Ideal's position on Freeview until 2018.The revised fee from January 2007 will increase with the RPI. In the short termthe impact of this change means that profits in 2007 may be below those for2006, but this renegotiation will result in very significant savings compared toexpectations from 2009 onwards. Jim Hodkinson, Chairman, commented: "The Freeview platform remains the biggest engine of Ideal's growth, and withthe number of Freeview households expected to exceed 12m by 2012, I am delightedthat we have been able to agree a revised contract that now extends to 2018. Our interim results show robust organic sales growth. We continue to be aninnovative and fast paced company with a track record of developing andlaunching new propositions. Whilst we were disappointed that Jewellery Vault didnot meet our expectations, necessitating its prompt closure, we remain committedto investing in the development of new profit streams, both organically and byacquisition, as evidenced by our first acquisition, Superstore TV Ltd." Enquiries: Ideal Shopping Direct plc: Jim Hodkinson, Chairman Tel: 08700 780704 Andrew Fryatt, CEO Reputation Inc: Tom Wyatt Tel: 020 7758 2800 IDEAL SHOPPING DIRECT PLC 2006 INTERIM RESULTS AND RENEWAL OF FREEVIEW CONTRACT PERFORMANCE Sales for the 26 weeks to July 2nd 2006 were £42.3 million, an increase of 14.3%compared to the first half of 2005. On a like-for-like basis, excludingJewellery Vault, Superstore TV and the two additional days in the 26 weekaccounting period, sales were up 10.1%. Our principal channel, Ideal World, achieved continuing strong growth inturnover, led by the Fashion and Homewares categories. Create and Craft, ourspecialist craft and hobby channel, together with the related website, sawfurther strong growth helped by the Create and Craft Club, which encouragesonline sales via a discount. Ideal Vitality, our niche Health, Beauty andFitness channel had a difficult six months under an increasing regulatoryburden, and turnover was down year on year. Excluding Jewellery Vault, core business gross margins were down 1.2% on thefirst half of last year, due to a combination of the sales mix and the growth ofsales both on the Freeview platform and online, which incur sales commissions.The online sales commission arrangement will terminate with the implementationour new core systems platform, which is under test. Over the last year Ideal has invested significantly in upgrading the capacityand capability of the business in the areas of logistics, buying, e-commerce,direct marketing, compliance and business development. This has been necessaryboth to service a rapidly growing business and to meet our strategic ambitionsfor continued growth. The annualisation of these investments has seen continuingcore operating costs (excluding FRS 20 costs, Superstore and iChild) increase by8.4% over 2005. Like for like operating profit is up by £0.2m to £3.7m, and on a similar basisprofit before tax is up 8.3% to £4.0m. The Jewellery Vault channel, which sold jewellery via a falling-price auctionmodel, launched in July 2005. In its first six months of trading it incurred anoperating loss of approximately £0.5m. The channel's performance did not improvein the first half of this year and in an increasingly crowded market it did notachieve the critical mass required to reach profitability. We therefore decidedto act promptly to stem continuing losses, closing the channel with effect fromJuly 16th. In the period under review it incurred losses of £0.8m and additionalclosure costs of £0.4m on sales of £1.2m. After the losses incurred on Jewellery Vault, £0.1m of other non recurring costsand £0.2m of costs resulting from the implementation of FRS 20, reported profitbefore tax was £2.5m (2005: £3.6m). The implementation of FRS 20 ("Share Based Payments") is discussed in the "Prioryear adjustment" note to the Consolidated profit and loss accounts below. Thestandard requires that the estimated fair value of share option grants beexpensed through the Profit and Loss account in the period from grant toexercise. Net cash balances were £12.9m after investing £1.6m in the acquisition ofSuperstore TV Ltd and a further £0.6m in working capital finance for thatbusiness. Excluding these cashflows, net cash inflow from operating activitiesfor the half was £0.6m and capital expenditure was £0.5m. With brought forwardtrading losses now exhausted, Ideal will start making Corporation Tax paymentsin the second half of 2006. The continuing progress of the business has encouraged the Board to recommend aninterim dividend of 1.5p per ordinary share (2005: 1.0p), to be paid on 20thOctober 2006 to shareholders on the register on 22nd September 2006. SUPERSTORE Ideal acquired Superstore, a consumer products sourcing and wholesalingbusiness, with effect from 31st May this year. In the five weeks postacquisition it contributed £0.1m of turnover and a small operating loss. Theprocess of securing the synergy opportunities from Superstore's sourcing andbuying capability in the Far East is underway with expected margin improvementsin 2007, in parallel with Superstore's development of its wholesale craftproposition to multiple retailers. FREEVIEW A renewed contract for the broadcast of Ideal World on Freeview will come intoeffect from January 1st 2007. The terms of the agreement are contractuallyconfidential, but Ideal can confirm that: • The previous pricing structure, under which Ideal paid both a commission on sales and a fixed annual fee, has been simplified to a fixed fee which rises with the RPI • The contract extends to 2018, contingent on the renewal of NGW's Ofcom licence for Freeview in 2014. The new fee will be higher than that paid in 2006, but significantly belowestimates of what could have been payable at the review in 2008. In the shortterm the impact of this change means that profits in 2007 may be below those for2006. However, this renegotiation has achieved certainty of availability to therapidly growing Freeview audience and will result in very significant savingscompared to expectations from 2009 onwards. The Ofcom reported DTT (Freeview)audience has grown from 3.5m households in the first quarter of 2004 to 7.1mhouseholds in the first quarter of 2006, and is expected to exceed 12mhouseholds by the time the analogue signal is switched off in 2012. DEVELOPMENT We believe that considerable growth opportunities exist to enhance the corebusiness proposition, for example by developing own label ranges and byimproving the overall service delivery to customers. Well publicised trials withNext brought high profile branded products to Ideal World, and further tests areto be undertaken with N Brown products. We are accelerating the development of our on-line business by investing in oure-commerce and business development capabilities. We are particularly pleased bythe continuing growth in subscriptions to the Create and Craft Club, which wassupported by the launch of a CD-based version of the on-line magazine in July.We are committed to developing and trialling new online revenue streams, inparticular where our broadcast capabilities can be utilised to add videocontent. We have also added a wholesale craft business with the acquisition of Superstoreat the beginning of June, and plan to develop wholesale propositions for bothmultiple and independent craft retailers to service this rapidly growing market. In addition to our organic development plans, we recognise that acquisition maybe the quickest way to enter new segments and are actively reviewingopportunities. OUTLOOK Despite the unusually hot weather and the distractions of the World Cup in July,Ideal's core business has continued to show healthy like-for-like growth of 7.5%in the first 8 weeks of the second half. We anticipate that Freeview and on-linesales will continue to be the key drivers of growth for the rest of the year,and we believe that we can continue to improve our service proposition withoutsignificant additions to costs. Superstore TV, acquired at the end of May, is in the early stages of itsintegration and development, and we do not therefore expect it to make acontribution to earnings this year. Ideal operates in a dynamic segment of the retail market and the Board remainconfident about its opportunities and prospects. Enquiries: Ideal Shopping Direct plc: Tel: 08700 780704Jim Hodkinson, ChairmanAndrew Fryatt, CEO Reputation Inc: Tel: 020 7758 2800Tom Wyatt IDEAL SHOPPING DIRECT PLC2006 INTERIM RESULTS AND RENEWAL OF FREEVIEW CONTRACT Consolidated Profit and Loss Accounts 26 weeks to 2nd Six months to 30 Year to 31 July 2006 June 2005 December 2005 £000 £000 £000 (Restated) (Restated) (Unaudited) (Unaudited) (Audited) Turnover 42,272 36,977 79,191Cost of Sales (25,008) (21,114) (45,822) Gross Profit 17,264 15,863 33,369Administration and Distribution costs (14,577) (12,471) (26,569) Profit before exceptional items 2,687 3,392 6,800 Exceptional item (Note 2) (430) 0 0 Operating profit 2,257 3,392 6,800Net Interest 253 193 389Profit on ordinary activities before tax 2,510 3,585 7,189Tax on profit on ordinary activities (752) (1,098) (2,250) Retained profit transferred to reserves 1,758 2,487 4,939 Basic earnings per share (Note 3) 6.0 8.5 16.8Diluted earnings per share (Note 3) 5.9 8.3 16.5 There were no recognised gains or losses other than the profits of the 26 weeks ended 2nd July 2006 Prior year adjustment During the period the company adopted FRS 20. Under the new standard shareoptions are expensed during the vesting period, and this has resulted in arestatement of comparative figures. In the current period, £154,008 has beenexpensed. The comparative figures for the period ended 30 June 2005 was £74,972;and for the period ended 31 December 2005, £214,577. Opening reserves in thecomparative year have been reduced by £28,988. IDEAL SHOPPING DIRECT PLC2006 INTERIM RESULTS AND RENEWAL OF FREEVIEW CONTRACT Consolidated Balance Sheets 2nd July 2006 30th June 2005 31st December 2005 £000 £000 £000 (Restated) (Restated) (Unaudited) (Unaudited) (Audited) Fixed assetsTangible assets 8,979 7,784 8,794Intangible assets 1,627 10,606 7,784 8,794 Current assetsStock 5,359 6,051 5,254Debtors: amounts falling due within one year 2,454 1,184 2,208Current asset investment - Treasury Deposit 10,000Cash 16,631 7,078 19,557 24,444 24,313 27,019 Creditors: amounts falling due within one year (15,668) (16,454) (17,295) Net current assets 8,776 7,859 9,724 Total assets less current liabilities 19,382 15,643 18,518 Creditors: amounts falling due after more than (2,844) (3,038) (3,294)one yearProvisions for liabilities and charges (734) (773) (757) Net Assets 15,804 11,832 14,467 Capital & ReservesCalled up share capital 888 883 887Share premium account 191 139 180Share option reserve 398 104 244Profit & loss account 14,327 10,706 13,156 Shareholders' funds (Note 4) 15,804 11,832 14,467 IDEAL SHOPPING DIRECT PLC2006 INTERIM RESULTS AND RENEWAL OF FREEVIEW CONTRACT Consolidated Cash Flow Statements 26 weeks to 2nd Six months to 30 Year to 31 July 2006 June 2005 December 2005 £000 £000 £000 (Unaudited) (Unaudited) (Audited) Net Cash flow from operating activities (Note 5) 40 3,495 6,913 Returns on Investments and Servicing of FinanceInterest received 308 245 506Interest paid (15) (22)Finance lease interest paid (40) (30) (117) Net cash inflow/(outflow) from returns on 253 193 389investments and servicing on finance Capital ExpenditurePurchase of tangible fixed assets (549) (372) (897)Sale of tangible fixed assets 5 Net cash outflow from capital expenditure (549) (372) (892) Acquisitions & DisposalsPurchase of subsidiary undertaking (597)Repayment of acquired company loans (1,050) Net cash outflow from acquisitions and disposals (1,647) 0 0 Financing Issue of shares 13 56 101Repayment of borrowings (167) (169) (339)Capital element of finance lease payments (282) (350) (546) Net Cash outflow from financing (436) (463) (784) Equity Dividend paid (588) (292) (586) Management of liquid resourcesPurchase of short term deposits (10,000) (Decrease)/Increase in Cash (2,927) (7,439) 5,040 IDEAL SHOPPING DIRECT PLC 2006 INTERIM RESULTS AND RENEWAL OF FREEVIEW CONTRACT Notes to the interim financial information Note 1 Basis of preparation The interim financial information has been prepared on the basis of theaccounting policies set out in the Company's 2005 statutory financialstatements, except for the changes resulting from the adoption of FRS20 ("sharebased payments"), as disclosed above in the "Prior Year Adjustment" note to theConsolidated Profit and Loss Accounts. The financial information set out in these statements in respect of the year to31 December 2005 does not constitute the Company's financial statements for thatyear. The statutory financial statements for the year ended 31 December 2005have been delivered to the Registrar of Companies and the auditors' reportthereon was unqualified and did not contain statements under section 240 of theCompanies Act 1985. The financial statements for the 26 weeks ended 2 July 2006and the six months ended 30 June 2005 are unaudited. Note 2 Exceptional item Separately disclosed within operating profit is the cost of closure of theJewellery Vault channel of £430,000. The decision to close this channel wasannounced in June, and broadcasting ceased on July 16th. Note 3 Earnings per ordinary share The calculation of earnings per share is based on the profits attributable toordinary shareholders divided by the weighted average number of shares in issueduring the period. The weighted average number of shares is increased byoutstanding share options in order to calculate diluted earnings per share. 26 weeks ended 30 June 2006 Earnings attributable to Weighted average Earnings per ordinary shareholders £ number of shares share (pence) Basic 1,758,000 29,423,846 6.0Dilutive effect of securities: options 543,830 (0.1)Diluted 1,758,000 29,967,675 5.9 Six months ended 30 June 2005 Earnings attributable to Weighted average Earnings per ordinary shareholders £ number of shares share (pence) Basic 2,487,000 29,276,043 8.5Dilutive effect of securities: options 667,103 (0.2)Diluted 2,487,000 29,943,146 8.3 Year ended 31 December 2005 Earnings attributable to Weighted average Earnings per ordinary shareholders £ number of shares share (pence) Basic 4,939,000 29,315,129 16.8Dilutive effect of securities: options 535,381 (0.3)Diluted 4,939,000 29,850,510 16.5 Note 4Reconciliation of movements in Shareholders' funds 26 weeks to 2nd Six months to 30 Year to 31 December July 2006 June 2005 2005 £000 £000 £000 Profit for the period 1,758 2,487 4,939Equity dividends paid (588) (292) (586) 1,170 2,195 4,353Issue of shares in the period 13 56 101 Net increase in shareholders' funds 1,183 2,251 4,454Shareholders' funds at start of period 14,467 9,506 9,506Current period FRS20 adjustment 154Prior year adjustment - FRS20 75 215Prior year adjustment - FRS21 292 Shareholders' funds at end of period 15,804 11,832 14,467 Note 5Net cash inflow from operating activities 26 weeks to 2nd Six months to 30 Year to 31 December July 2006 June 2005 2005 £000 £000 £000 Operating profit 2,257 3,392 6,800Depreciation 376 496 861(Increase)/decrease in stocks 109 (2,222) (1,425)(Increase)/decrease in debtors 475 (108) (1,132)Increase/(decrease) in creditors (3,331) 1,862 1,594Transfer to share option reserve 154 75 215 Net cash inflow from operating activities 40 3,495 6,913 Note 6Reconciliation of net cash flow to movement in net funds 26 weeks to 2nd Six months to 30 Year to 31 December July 2006 June 2005 2005 £000 £000 £000 (Decrease)/increase in cash in the period (2,927) (7,439) 5,040Cash outflow/(inflow) from financing 167 169 339Cash outflow from finance leases 282 350 546Cash outflow from Treasury Deposits 10,000 Change in net funds resulting from cash (2,478) 3,080 5,925flows Inception of finance leases (855)Movement in net funds in the period (2,478) 3,080 5,070Net funds at start of period 15,394 10,324 10,324 Net funds at end of period 12,916 13,404 15,394 Note 7Analysis of changes in net funds At 1 January 2006 Cash flow At 30 June 2006 £000 £000 £000 Cash in hand and at bank 19,557 (2,927) 16,630Debt (2,879) 167 (2,712)Finance leases (1,284) 282 (1,002) 15,394 (2,478) 12,916 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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