27th Sep 2007 07:01
Moss Bros Group PLC27 September 2007 MOSS BROS GROUP PLCHalf Yearly Financial Report for the six months to 28 July 2007 HEADLINES Financial • Pre-tax loss of £0.8m (Ly: pre tax profit of £0.8m, which includes £0.5m of one-off gains) in line with expectations • Retail like for like sales up 3.0% • Gross margin up 40 basis points • Fixed occupancy costs up 4.3% like for like • Average cash balance for the six months up £2m with cash balance on 28 July of £10.8m (Ly £10.6m) • Interim dividend proposed of 0.5p (Ly 0.5p) • Current trading: like for like retail sales in the first eight weeks of the second half are ahead 0.8% against the comparative period last year; gross margin growth has been maintained Business Overview • 2 new stores opened in the first half; 3 further stores to be opened in the second six months • 25 stores refurbished in the first half yielding good returns • Positive early reaction to the new Autumn/Winter 07 ranges across all fascia • Improved stock position, 2% lower than last year Simon Carter The Company has entered into a franchise agreement to retail Simon Carterclothes and accessories; the first franchise store has opened in Covent Gardenin September. Commenting on the results, Philip Mountford, Chief Executive, said: "The business is on track, as we move in to the important second half of theyear. Our new supply chain infrastructure is in place and we look forward tomaximising the benefits of these initiatives. The refurbishment program ismoving forward providing good returns and we continue to open new stores inareas that we have identified as a good fit for the fascias we operate. We areexcited about the Simon Carter franchise agreements, and look forward todeveloping this rapidly growing brand in stand-alone stores. Following a challenging first quarter and an improved second quarter, we willcontinue to plan for a demanding environment and run the business tightly. Withall this in mind, the outlook for the rest of the year remains in line withexpectations." For further information please contact:Moss Bros Group Plc: 0207 447 7200 Philip Mountford, Chief Executive Michael Hitchcock, Finance Director Tulchan Communications: 0207 353 4200 Celia Gordon Shute Half Yearly Financial Report for the six months to 28 July 2007 This interim management report has been prepared for the sole purpose ofproviding information to allow the shareholders to assess and form a view as tothe Company's strategies and their potential for success. Any other party shouldnot rely upon the interim management report for any purpose. As well as making reference to the first six months trading and businessoperations, the interim management report includes statements regarding thefuture. These statements are made in good faith based on the informationavailable up to the date of this report and should be treated with caution dueto the inherent uncertainties, including both economic and business riskfactors, which underlie such forward looking information. Operations Moss Bros Group Plc retails and hires formalwear and fashion product for men,predominantly in the UK. As well as retailing menswear through the Moss fascia,the Group also trades through the Savoy Taylors Guild and Cecil Gee fascia. TheGroup hires formal wear under the Moss Bros Hire brand through all thesefascias. In addition the Group operates 13 Hugo Boss retail franchises, oneCanali retail franchise and one Simon Carter retail franchise. Strategy In order to maximise the potential of our business we have made significantsteps in modernising our supply chain and sourcing capabilities, which haveestablished a better platform for future profitable growth. This year we arestarting to realise the benefits of these investments and have a business whichis better equipped to compete in an increasingly difficult environment. Our investments in both IT and supply chain will allow for improved stockcontrol which should lead to a reduction in unplanned markdown and subsequentimprovement in gross margins. Early results are encouraging, with our grossmargin currently up 40 basis points. Our new supply chain infrastructure givesus faster lead times on product which allows the business to trade each seasonmore tightly, to give our customers what they want faster. Our store refurbishment programme continues. During the first half 25 storeswere refurbished, taking the total number of refurbished stores in the portfolioto 32 and 2 new stores were opened. The return on investment from this programmeis attractive, with average sales uplifts at +6%, and meets our objective tobuild a solid platform for the future. This program of refurbishment and newstore openings will continue. With a considerable list of sites within the UK and Ireland identified as ideallocations for the Group's fascias, the business is continuing to work onacquisition opportunities that achieve our roll out plans. Results for the six months ended 28 July 2007A summary of the key financial results is set out in the table below. Key financials Revenue Underlying Operating Profit/(Loss)* (i) 2007 2006 2007 2006 £'000 £'000 £'000 £'000 ----------------------------------------------------Mainstream 39,237 39,065 4,918 5,862Fashion 23,699 24,207 577 (200) ------ ------- ------ -------Total 62,936 63,272 5,495 5,662 ------ ------- ------ ------- (i) Pre unallocated shops' selling and marketing costs and administrative expenses 2007 2006 £'000 £'000 -------------------------Operating profit pre unallocated costs & expenses 5,495 5,662Unallocated shops selling & marketing costs (3,943) (2,688)Unallocated administrative expenses (2,505) (2,799) ------- -------Underlying operating (loss)/profit * (953) 175 ------- ------- * Underlying operating (loss)/profit is profit before interest, tax and one-off items and is reconciled to the financial information as follows: 2007 2006 £'000 £'000 -----------------------Operating (loss)/profit per financial information (1,018) 619One-off items (primarily property related) 65 (444) -------- --------Underlying operating (loss)/profit (953) 175 -------- -------- Revenue Total revenue has decreased marginally for the six months to 28 July 2007compared to the comparative period in 2006. The Group has opened 2 stores andclosed 2 stores in the first six months, the latter being strategic decisionsthat fit with the overall strategy of the business. Whilst like for like retail sales in mainstream fascias are ahead 0.5%, after aslow first quarter during which we were affected by disruption from the storerefurbishment programme, the second quarter showed a marked improvement. Like for like retail sales are ahead 6.4% in the fashion fascias, with stronggains registered across our fashion portfolio in the half. The continuedintroduction of fashionable power brands is maintaining Cecil Gee's position as a destination of choice for fashion conscious males, whilst the growing demand for higher priced leading menswear brands continues to grow the Group's brandedfranchise fascia sales. Hire continues to see the effects of a contracting wedding market and theintroduction of cheap black tie retail offers from the supermarkets. The weddingmarket has been additionally hit by the atrocious wet weather this summer whichresulted in a number of hire cancellations. Moss Bros Hire is by far the leadingbrand in formal wear hire and strategic actions are in place to ensure the Grouptakes full advantage of this. Hire is a very important part of our business andwe have plans in place to invest in the business in the coming period. Gross margin and underlying operating profit Gross margin has improved 40 basis points as a result of smarter sourcing andtighter control of markdown. Terminal stock levels have improved, with levels attheir lowest for a number of years, which should lead to lower levels ofmarkdown particularly in the seasonal fashion orientated fascias. Total operating costs have increased 5.1% with total like for like operatingcosts up 3.4%. It is well documented that costs across the sector are rising, particularly inproperty. We will continue to mitigate these rises through management action asmuch as possible. The largely fixed operating costs are incurred evenly acrossthe year, whereas the sales are weighted more to the second half of the year. Underlying operating loss before the impact of one-offs is £1.0m, £1.1m lowerthan the comparative period in 2006, largely as a result of difficult tradingconditions in the first quarter of the financial year. Dividend The Board is recommending an interim dividend of 0.50p per share, in linewith last year. This will be paid on 22 November 2007 to shareholders on theregister at the close of business on 19 October 2007. Cash The underlying cash position continued to improve with the average cash balance£2m higher than the comparative period in 2006. The cash balance on 28 July 2007was £10.8m, £0.2m higher than at the same time in 2006. Management have takenaction to ensure a better-managed working capital balance which has been achieved through improved terms with suppliers and more efficient stock buying leading to lower stock levels. The Group did not have need to take on any debt during the first six months. Cash flow Net cash outflow for the six months ended 28 July 2007 was £5.8m, £1.2m betterthan the comparative period in 2006. Lower trading profit for the Group and thereceipt of property compensation last year, was offset by improved workingcapital management. Change in asset classification In keeping with other hire businesses and seeking to show hire inventory as anasset not for resale but for revenue generation, the Group has reclassified hiregarments from inventory into fixed assets. All comparatives have been similarlyreclassified. There is no impact on operating profit, total assets or net cashflow. Related party transactions The Group has no material related party transactions that might reasonably beexpected to influence decisions made by users of these financial statements. Risks and uncertainties The challenging macro economic environment remains the single biggest risk anduncertainty that could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results todiffer materially from expected and historical results. Management have soughtto mitigate this risk by ensuring that the right product is in the rightlocation at the right time to capture the highest level of sales possible. Competitor risk The market place for specialist menswear in both formal and smart casual wear isincreasingly competitive. This competition takes the form of price, productoffer and customer service. Management have taken a number of key businessdecisions in the last 18 months to ensure that Moss Bros Group Plc maintains theposition of the UK's leading specialist menswear retailer offering anunparalleled branded product offer with exemplary customer service. Commercial relationships Sales growth is dependent on the continued supply of fashionable product atregular intervals. The business invests considerable time in identifying andconducting continual due diligence into new and existing suppliers to ensurecontinuity of product supply and to ensure good commercial rates. Foreign exchange The Group's policy is to eliminate all currency exposures on purchases by buyingthe amount of currency required at the time the obligation is known and holdingit in a designated bank account until it is needed. The direct foreign currencyrisk that the Group is exposed to is negligible. Future outlook Trading in the first eight weeks of the second half has been mixed, largely as aresult of the effect of unseasonal weather on our Hire business. Like for likeretail sales were ahead 0.8% and total Group like for like sales are flat overthe same period. Total Group sales are down 3%, the result of planned storeclosures. The early response to the new autumn/winter 07 products across all fascias hasbeen very strong. Coupled with the operational changes across the business andno further fiscal tightening in the economy, the outlook for the rest of theyear remains in line with expectations. CONDENSED CONSOLIDATED INCOME STATEMENT for the 6 months to 28 July 2007 6 months to 6 months to Year to 28 July 07 29 July 06 27 January 07 £'000 £'000 £'000 (Restated) (Restated) --------------------------------------------Revenue 62,936 63,272 133,876Cost of sales (27,928) (28,374) (61,469) -----------------------------------------Gross profit 35,008 34,898 72,407 Administrative expenses (2,570) (2,199) (4,518)Shops' selling and marketing costs (33,456) (32,080) (63,135) -----------------------------------------Operating(Loss)/ profit beforefinancing income (1,018) 619 4,754Financial income 222 186 354 -----------------------------------------(Loss)/profit before taxation (796) 805 5,108Taxation 239 (241) (1,468) -----------------------------------------(Loss)/profit after taxation (557) 564 3,640 -----------------------------------------Basic (loss)/ earnings per share (0.59)p 0.61p 3.92pDiluted (loss)/ earnings per share (0.59)p 0.60p 3.87p CONDENSED CONSOLIDATED BALANCE SHEET as at 28 July 2007 As at As at As at 28 July 07 29 July 06 27 January 07 £'000 £'000 £'000 (Restated) (Restated) --------------------------------------------AssetsProperty, plant and equipment 31,267 26,341 28,405Lease prepayments 2,835 3,115 2,812 --------------------------------------------Total non-current assets 34,102 29,456 31,217 Inventories 19,092 19,401 19,965Trade and other receivables 5,486 6,233 7,491Corporation tax receivable 213 - 213Cash and cash equivalents 10,840 10,662 16,590 -------------------------------------------- Total current assets 35,631 36,296 44,259 --------------------------------------------Total assets 69,733 65,752 75,476 --------------------------------------------EquityIssued capital 4,724 4,678 4,678Share premium account 8,666 8,400 8,400Retained earnings 38,006 37,672 39,766 --------------------------------------------Total equity 51,396 50,750 52,844 --------------------------------------------LiabilitiesOther payables 1,283 1,400 1,337Deferred tax liabilities 3,454 2,626 3,454 --------------------------------------------Total non-current liabilities 4,737 4,026 4,791 --------------------------------------------Trade and other payables 13,600 10,976 17,841 --------------------------------------------Total current liabilities 13,600 10,976 17,841 --------------------------------------------Total liabilities 18,337 15,002 22,632 --------------------------------------------Total equity and liabilities 69,733 65,752 75,476 -------------------------------------------- CONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS for the 6 months to 28 July 2007 6 months to 6 months to Year to 28 July 07 29 July 06 27 January 07 £'000 £'000 £'000 (Restated) (Restated) --------------------------------------------CASHFLOWS FROM OPERATING ACTIVITIES (Loss)/profit beforetaxation (796) 805 5,108Adjustments for:Profit on sale of non-current assets - (443) (2,189)Interest received (222) (186) (354)Depreciation 3,445 3,436 6,160Equity settled share-basedpayment transactions - 87 (211)Decrease/(increase) intrade and other receivables 2,005 1,077 (181)Decrease/(increase) in inventories 873 (1,565) (2,129)(Decrease)/increase in trade and other payables (4,039) (4,624) 2,180Tax refunded/(paid) - 25 (587) -------------------------------------------Net cash from operating activities 1,266 (1,388) 7,797 ------------------------------------------- CASHFLOWS FROM INVESTING ACTIVITIES Proceeds from sale ofnon-current assets - 600 2,758Interest received 222 186 354Compensation foracquisition of non-current assets - 1,071 1,027Acquisition of non-current assets (6,331) (6,273) (11,128) -------------------------------------------Net cash from investing activities (6,109) (4,416) (6,989) ------------------------------------------- CASHFLOWS FROM FINANCING ACTIVITIES Proceeds from the issue of share capital 312 20 20Purchase of own shares - - (218)Dividends paid (1,219) (1,209) (1,675) --------------------------------------------Net cash from financing activities (907) (1,189) (1,873) -------------------------------------------- Net decrease in cash andcash equivalents (5,750) (6,993) (1,065)Cash and cash equivalentsat beginning of period 16,590 17,655 17,655 -------------------------------------------Cash and cash equivalentsat end of period 10,840 10,662 16,590 ------------------------------------------- CONDENSED STATEMENT OF RECOGNISED INCOME AND EXPENDITURE for the 6 months to 28 July 2007 6 months to 6 months to Year to 28 July 07 29 July 06 27 January 07 £'000 £'000 £'000 ---------------------------------------------- (Loss)/profit for the periodattributable to equityholders of the parent (557) 564 3,640 NOTES TO THE CONDENSED INTERIM RESULTS FOR THE SIX MONTHS TO 28 JULY 2007 1. Basis of preparation These condensed consolidated interim financial statements have been prepared inaccordance with the requirements of IAS 34 "Interim Financial Reporting" asadopted by the EU. The condensed consolidated interim financial statements donot include all of the information required for full financial statements. The comparative figures prior to the restatement for hire inventory as describedin note 2 below are those, which could be extracted from the Company's statutoryaccounts for the financial year ended 27 January 2007. Those accounts have beenreported on by the Company's auditors and delivered to the Registrar ofCompanies. That report of the auditors was unqualified and did not containstatements under section 237(2)or(3) of the Companies Act 1985. The interim information for the 26 weeks ended 28 July 2007 and 29 July 2006 hasnot been audited or reviewed by the auditors. 2. Significant accounting policies Accounting policies adopted have been applied consistently and are consistentwith those set out in the accounts for the year ended 27 January 2007. During the period to 28 July 2007 hire inventory (NBV £4.6m at 28 July 2007:£4.4m at 27 January 2007) was reclassified from Inventories to Fixed Assets.Prior period comparators have been adjusted to reflect this classification. 3. Property transactions Shops' selling and marketing costs include £nil of gains on disposal ofnon-current assets during the period (2006: £443,000). In the prior year, theGroup received an interim payment of £1,627,000 for the compulsory relocation ofthe Group's distribution centre. After matching a portion of the £1,627,000against directly attributable costs incurred in the relocation and recognisingin the income statement (so that the net impact on the profit for the period isnil)£1,027,000 is allocated to the property, plant and equipment additionalfor the new distribution centre. 4. Seasonality The Group's operations have historically experienced higher revenue during thesecond half of the financial year. This is primarily due to the Christmas periodand post Christmas sale. Accordingly, the results of operations for the interimperiod are not indicative of the results, which may be expected for the entirefinancial year. 5. Earnings per share Basic (loss)/ earnings per ordinary share are based on the weighted average of93,761,583 (July 2006: 92,992,399; January 2007: 92,895,454) ordinary shares inissue during the period and are calculated by reference to the loss attributableto shareholders of £(557,000) (profit in July 2006: £564,000; January 2007:£3,640,000). Diluted (loss)/ earnings per ordinary share are based upon theweighted average of 94,211,126 (July 2006: 94,577,467; January 2007: 93,939,019)ordinary shares, which takes into account share options outstanding and arecalculated by reference to the loss or profit attributable to shareholders asstated above. During the period to 28 July 2007, 919,115 ordinary shares were issued resultingfrom the exercise of options by an ex-employee (nominal value: £46,000). 6. Dividends The following dividends were paid in the period: 6 months to 6 months to Year to 28 July 07 29 July 06 29 January 07 £'000 £'000 £'000 --------------------------------------------Final dividend 1.30 pence per share(2006: 1.30 pence per share) 1,219 1,209 1,209Interim dividend 0.50 pence per share - - 466 -------------------------------------------- 1,219 1,209 1,675 -------------------------------------------- The Directors have declared a dividend of 0.50 pence per share, totalling£472,000, payable on 22 November 2007. 7. Interim Report This interim report is available on application from the Company Secretary, MossBros Group Plc, 8 St Johns Hill London SW11 1SA. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MOSB.L