19th Nov 2007 07:01
Marchpole Holdings PLC19 November 2007 MARCHPOLE HOLDINGS PLC ("Marchpole", "the Company" or "the Group") INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 Transition into lucrative brand driven consumer markets Marchpole Holdings plc, the fast growing global luxury fashion brand management group which designs, produces and sells high quality clothing and accessories for ten world class brands (Emanuel Ungaro, Ungaro Homme, Jean Charles de Castelbajac ('JCC'), Jean Charles de Castelbajac/Rossignol, Jean Charles de Castelbajac/Okaidi, Jean Charles de Castelbajac/New Era, JCDC/Lee Cooper, Homebody and Homemummy and Boateng) announces its interim results for the six months ended 30 September 2007. Financial and Operational Highlights • Turnover £29.9m (2006: £38.6m) • Operating profit £1.2m (2006 restated: £5.0m) • Profit before taxation £0.5m (2006 restated: £4.0m) • EPS of 1.2 pence per share (2006: 10.2 pence per share) • Interim dividend 1.1 pence (2006: 1.5 pence) • Maintains the total dividend distribution at 3.75 pence per share for the year to 31 March 2008 • Significant expansion into lucrative Russian, Eastern European, Middle East and Far East markets • JCC signs two high-profile partnership agreements and three major distribution contracts: o Partnership with Lee Cooper Inc., the global denim brand o Licence agreement with the headwear company, New Era o Distribution agreement with the Dubai based Chalhoub Group, the leading Middle East luxury lifestyle promoter o Distribution agreement with The Crocus Group, the major Russian retail and real estate business, and opening of flagship store in Moscow o Distribution agreement with Coronet, part of the Itochu Group in Japan • New flagship JCC store in Tokyo • First long term licence and distribution agreements for Emanuel Ungaro and Ungaro Homme in South America • Four flagship Emanuel Ungaro stores in Eastern Europe to be opened in Spring 2008 • Strong forward order book showing 60% increase • Further strengthening of the Board Commenting on the results, Michael Morris, Executive Deputy Chairman, said: "Whilst these results are showing a slow down, the reduction in our level ofprofitability is a direct result of our growth and expansion way outside of ourtraditional geographies and modus operandi. This has been a period oftransition for the Company as we expand into the highly lucrative Russian,Eastern European, and Far East markets. The Company is no longer reliant on asingle brand, and is now a multi brand global business. Many of our labels arestill in relative infancy stages in these dominant, luxury brand driven marketsand we believe that our three to five year expansion programme into thesemarkets can deliver value way in excess of what could be achieved with ourformer business model. "We continue to strengthen the global reach of the JCC label with newdistribution agreements in the Middle East, Russia and the Far East. During theperiod we were also delighted to sign two high profile partnership agreementsfor JCC. The first agreement is with the world renowned headwear company NewEra. The subsequent agreement is a long term partnership with Lee Cooper tolaunch two new designer denim lines which will be the first and only premiumdenim collection offered by Lee Cooper. The brand continues to build upon itssuccess in the USA, a key fashion market, with increased distribution to 60multi-brand stores including the renowned Bloomingdale's. "Our licence agreements for Emanuel Ungaro and Ungaro Homme are delivering goodgrowth. We have secured licence and distribution contracts for both lines inSouth America and will be opening a flagship store in Colombia in Spring 2008.In addition to this store we will be opening three further flagship stores inAzerbaijan, Bucharest, and Uzbekistan, also in Spring 2008. "Our two most recent acquisitions, Greenmark and Homebody, are now fullyintegrated. "We remain confident that Marchpole is well positioned for continueddevelopment, to maximise earnings enhancing opportunities as they arise. Weintend to maintain our total dividend distribution for the next period andremain committed to delivering solid growth over the medium to longer term." For further information please contact: Marchpole Holdings plc 020 7908 7777 Michael Morris, Executive Deputy ChairmanRay Harris, Finance Director Bell Pottinger Corporate & Financial 020 7861 3232 David Rydell / Emma Kent / Amy Rajendran Shore Capital 020 7408 4090Alex Borrelli / Pascal Keane CHAIRMAN'S STATEMENT I am pleased to report the interim results of Marchpole Holdings plc for the sixmonths ended 30 September 2007. The level of profitability is a direct consequence of our investment andexpansion into new markets and the loss of the benefit of the YSL licence, whilst we are continuing to exploit opportunities in our core markets of UK, USA and Western Europe. We recognise the importance of the emerging economies tothe fashion retail business, and the significant returns that such markets can deliver. We are making good progress in expanding sales of our brands in the brand driven consumer markets of Russia, the Eastern European States, the MiddleEast, India and the Far East. These markets are experiencing a rapidly developing and increasingly sophisticated retail environment with a rising demand for luxury brands. The Russian, the Eastern European, the Chinese and theGulf Countries will make an increasing contribution to the future earnings of the group over the next three years. The Board is committed to a three to five year programme which we believe willdeliver enhanced returns to shareholders and will continue to capitalise uponour key strength of managing international brands for further global growth. Results Turnover declined to £29.9 million (2006: £38.5 million). On a comparable basisif sales of YSL are excluded, turnover rose to £29.9 million from £10.1 millionin the six months to 30 September 2006. Operating profit declined to £1.2 million (2006: £5.0 million). Profit beforeTaxation was lower at £0.5 million (2006: £4.0 million) and basic earnings pershare declined to 1.2p from 10.2p in 2006. Dividends The Board has agreed to a payment of an interim dividend of 1.1 pence (2006: 1.5pence) to shareholders on the register at 15 January 2008. It is the Board'sintention to maintain the total dividend distribution at 3.75 pence per sharefor the year to 31 March 2008. Board Changes and Management Structure In July 2007, Marchpole announced that John Harrison, Group Finance Directorwould be stepping down from the Board and he has since left the Company. RaymondHarris, formerly the senior independent non-executive Director, has now taken onthe role of Finance Director and is contracted to remain in this position untilat least the end of the current financial year. In addition John Macaulay hasbeen appointed Group Financial Officer. John has over 15 years experience insenior financial positions in the clothing business. In August 2007, Marchpole strengthened its Board with the appointment of JohnMolloy as a Non Executive Director. John brings valuable retail experience tothe group having spent his career with C&A. The Board have also restructured the management of the operating subsidiaries toenhance performance and improve corporate governance in the internationalsubsidiaries. Licences Emanuel Ungaro and Ungaro Homme We continue to work closely with the House of Ungaro to establish Emanuel Ungaroand the Ungaro Homme diffusion label as a worldwide menswear brand. The sales of Emanuel Ungaro and Ungaro Homme in Europe, including the UK, areencouraging despite the difficult trading conditions. During the period, Frank Boclet a leading fasion designer was appointed as Creative Director and his first line Emanuel Ungaro collection has exceeded Company expectations, withsignificant forward orders following a very successful Paris Fashion Show inJuly. An important development for the brand was our breakthrough into the SouthAmerican market. The first long term licence and distribution agreements forEmanuel Ungaro and Ungaro Home in South America, were signed with TEXTRON SA,the leading Colombian menswear retailer and manufacturer with 28 stores. In addition there will be four new flagship stores in Azerbaijan, Bucharest,Colombia and Uzbekistan which will open during spring 2008. Marchpole's strong sourcing capabilities have resulted in improved margins inthe US business but an extremely difficult retail environment in North Americahas resulted in a disappointing sales performance. We have restructured the USbusiness which will result in significant cost savings during the second half ofthe financial year. Jean-Charles de Castelbajac S.A. ("JCC") We continue to work with Jean-Charles de Castelbajac to build upon the successof the brand to date. Good progress has been made and, on a like-for-like basis,sales of JCC have increased by 5 per cent and royalty income has increased by 50per cent on the back of the new licensing agreements put in place during theprevious twelve months. During the period a partnership agreement has been signed with the headwearcompany New Era. Significantly JCC has also signed an exclusive partnership with global denimbrand, Lee Cooper Inc, for an initial period of five years. Under the terms ofthe agreement JCC will design two new premium denim lines and casual tops forthe Spring/Summer 2008 season. This collection will be the only premium denimcollection and casual tops offered by Lee Cooper and will be sold in JCCflagship stores worldwide and also initially in 110 of 670 Lee Cooper storesworldwide. The Russian, Eastern European and Middle and Far Eastern markets are provingparticularly strong for the JCC brand, and we have signed two major long termdistribution agreements for these regions. In Russia we have signed an exclusivecontract with The Crocus Group, one of the leading luxury goods retailers inRussia, and our flagship store in the Crocus City Mall in Moscow, opens thiswinter. Our exposure to the Russian market has also driven our expansion intoother Eastern European states, where our goods are stocked in over sixty stores. The Middle East distribution agreement with The Chalhoub Group, which haspromoted luxury brands in the region for over 50 years, has resulted in JCCclothing and accessories now being distributed throughout the Middle East. In the USA JCC has increased its distribution to 60 multi-brand storesincluding, initially, 6 out of Bloomingdale's 35 stores. To support the established popularity of the Castelbajac brand in Japan andKorea, Marchpole signed a new distribution agreement with Coronet, a member ofthe Itochu Group, in July. In addition we continued to strengthen the JCC brandpresence in the Far East with the opening of a new flagship store in Tokyo. Greenmark Limited The business of Greenmark Limited, the footwear designer and importers is nowfully integrated into the Group. In the first six months this subsidiary hasmade very good progress in terms of sales growth and also has diversified addingnew sourcing areas in the Far East, resulting in new cost effective productionwhich has led to an expansion in sales. Homebody Limited We remain committed to the global expansion of this luxury brand and we continueto make progress with increased sales and distribution. In the USA the brand isstocked in Neiman Marcus, Saks and Nordstrom and in the UK in Harrods womens,mens and maternity departments. In September, we launched a new multi-lingualwebsite to support and broaden our distribution network for the completeHomebody range and we look forward to growing this part of the business. Boateng Despite the dispute over licence arrangements with Bespoke Couture, Marchpole'scommitment to developing the brand remains unaltered. The Company continues tosell the Boateng collection and we have experienced an increase in sales ordersyear on year. Outlook Trading conditions during the current year are proving to be difficult howeverall of our international brands some of which are in their infancy are developing to plan. We have restructured some areas of the business to improve efficiency and reduce cost. While we expect to achieve a much stronger performance in the second half, we expect that the results for the year as a whole will be slightly lower than anticipated. We are confident that the foundations we have laid during this period allied tothe income from the new licensing and sales agreements and flagship storeopenings will lead to strong and sustained sales growth and enhancedprofitability in financial years 2009 and 2010. We are also examiningacquisition opportunities to increase our portfolio of brands and broaden anddiversify our distribution channels. We remain committed to deliver enhanced returns for our shareholders and areconfident the group will achieve this. Christopher PhillipsChairman UNAUDITED CONSOLIDATED INCOME STATEMENTFor the six months ended 30 September 2007 6 months to 30 6 months to 30 Year ended 31 September 2007 September 2006 March 2007 Total Total Total Notes £'000 £'000 £'000 Revenue 3. 29,851 38,560 90,534Cost of sales (21,229) (25,522) (63,470) -------- -------- ---------Gross profit 8,622 13,038 27,064Distributioncosts (1,499) (544) (4,229)Administrativeexpenses (5,939) (7,471) (14,906)Fair value ofnet assetsacquired inexcess of fairvalue ofpurchaseconsideration - - 2,124 -------- -------- ---------Operatingprofit 1,184 5,023 10,053Net financecosts (731) (1,045) (1,730) -------- -------- ---------Profit beforetax 3. 453 3,978 8,323Tax 5. (135) (1,217) (2,096) -------- -------- ---------Profit forperiod 318 2,761 6,227Minorityinterest - 17 - -------- -------- ---------Profit for theperiodattributableto equityshareholders 318 2,778 6,227 ======== ======== ========= Earnings pershare basic 4. 1.2p 10.2p 23.0pEarnings pershare diluted 4. 1.2p 10.2p 22.0p UNAUDITED CONSOLIDATED BALANCE SHEETAs at 30 September 2007 As at As at As at 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000 Non-current assetsGoodwill 6,137 4,291 4,062Other intangible assets 3,702 2,245 9,920Property, plant and equipment 1,032 1,052 1,088 --------- ------- ------ 10,871 7,588 15,070Current assetsInventories 5,448 7,150 3,797Trade and other receivables 23,521 18,627 14,284Cash and cash equivalents 1,213 8,195 2,342 --------- ------- ------ 30,182 33,972 20,423Current liabilitiesTrade and other payables (6,281) (10,105) (9,446)Current tax liabilities (3,286) (3,587) (2,604)Bank overdrafts and loans (15,718) (13,896) (2,512)Deferred tax liabilities (140) (72) (353) --------- ------- ------ (25,425) (27,660) (14,915) Net current assets 4,757 6,312 5,508 Non-current liabilitiesDeferred tax liabilities (661) (369) (2,498)Loans (2,894) (1,965) (3,541) --------- ------- ------- (3,555) (2,334) (6,039) --------- ------- -------Net assets 12,073 11,566 14,539 ========= ======= ======= Capital and reservesShare capital 1,373 1,360 1,373Share premium account 2,800 2,800 2,800Other reserves 374 290 374Hedging and translation reserves (796) (424) (751)Retained earnings 8,322 7,618 10,743 --------- ------- -------Total shareholders' equity 12,073 11,644 14,539Minority Interest - (78) --------- ------- -------Total equity 12,073 11,566 14,539 ========= ======= ======= UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITYFor the six months ended 30 September 2007 Share Share Other Hedging and Retained Total capital premium reserve translation earnings reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 31 March 2006 1,360 2,798 290 (212) 5,537 9,773 Shares issued in theperiod 13 2 - - - 15Credit in respect ofshare option charge - - 84 - - 84Profit for theperiod - - - - 6,227 6,227Foreign exchangemovement - - - (539) - (539)Dividends - - - - (1,021) (1,021) ------- -------- ------- ------- ------- -------As at 31 March 2007 1,373 2,800 374 (751) 10,743 14,539 Shares issued in the period - - - - - -Credit in respect of share option charge - - - - - -Profit for theperiod - - - - 318 318Prior yearadjustment - - - - (2,124) (2,124)Foreign exchangemovement - - - (45) - (45)Dividends - - - - (615) (615) ------- -------- ------- ------- ------- -------As at 30 September2007 1,373 2,800 374 (796) 8,322 12,073 ------- -------- ------- ------- ------- ------- UNAUDITED CONSOLIDATED CASH FLOW STATEMENTFor the six months ended to 30 September 2007 6 months to 6 months to Year to 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000 Note Net cash from operating activities 2. (14,419) 2,918 12,518 Investing activitiesInterest received -Purchase of property, plant andequipment (98) (74) (282)Purchase of intangibles - (48) (63)Acquisition of subsidiary - (292) (3,305) --------- ---------- ---------Net cash used in investingactivities (98) (414) (3,650) --------- ---------- --------- Financing activitiesDividends paid (615) (612) (1,021)Repayments of borrowings 305 (2,981) (404)Repayments of obligations underfinance leases (16)Proceeds on issue of shares - - 15New bank loans raised - 1,705 1,683Increase in bank facilities 13,698 - (6,535) --------- ---------- ---------Net cash from financing activities 13,388 (1,888) (6,278) --------- ---------- --------- Net increase/(decrease) in cash andcash equivalents (1,129) 616 2,590 --------- ---------- --------- Cash and cash equivalents atbeginning of period 2,342 (248) (248) --------- ---------- ---------Cash and cash equivalents at end ofperiod 1,213 368 2,342 ========= ========== ========= NOTES TO THE UNAUDITED FINANCIAL STATEMENTSFor the six months ended 30 September 2007 1. Basis of preparation These unaudited condensed consolidated interim financial statements have been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards and have been prepared using the same accounting policies as set out in the Group's Annual Report for the year ended 31 March 2007. The unaudited financial information presented in this interim statement does not constitute full financial information within the meaning of Section 240 of the Companies Act 1985. The Group income statement for the year ended 31 March 2007 and the Group balance sheet at that date have been extracted from the statutory accounts for the period, which have been delivered to the Registrar of Companies. The auditors opinion on these accounts was unqualified and does not contain a statement made under section 273(2) and section 237(3) of the companies act 1985. 2. Notes to the cash flow statement 6 months to 6 months to Year to 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000 Operating profit from continuing operations 1,184 5,023 10,053 Net gain on derivatives 45 - 99 Depreciation of property, plant and equipment 163 163 335 Amortisation of intangible assets 250 120 461 Share option charge - - 84 Excess of fair value net assets acquired over fair value consideration released to income statement - - (2,124) Foreign exchange 91 - - -------- ---------- --------- Operating cash flows before movements in working capital 1,733 5,306 8,908 (Increase)/decrease in inventories (1,651) (3,215) 168 (Increase)/decrease in receivables (9,237) 2,126 9,391 Increase/(decrease) in payables (4,533) (208) (2,260) -------- ---------- --------- Cash generated by operations (13,688) 4,009 16,207 Income taxes paid - (46) (1,959) Overdrafts (731) (1,045) (1,730) -------- ---------- --------- Net cash inflow/(outflow) from operating activities (14,419) 2,918 12,518 -------- ---------- --------- 3. Geographical segments The group operates in the single business segment of high fashion apparel design, marketing and distribution. The group has sales operations located in the UK, Europe and America, and a procurement office in Hong Kong. The following table provides an analysis of the group's sales and operating profit before tax by geographical market, irrespective of the origin of the goods/services: Turnover analysis by geographical origin of sales: 6 months to 6 months to Year to 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000 United Kingdom 23,173 29,967 75,195 Europe & rest of world 4,159 3,366 6,835 North America 2,519 5,227 8,504 -------- ---------- --------- 29,851 38,560 90,534 -------- ---------- --------- Geographical analysis of profit on ordinary activities before taxation: 6 months to 6 months to Year to 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000 -------- ---------- --------- United Kingdom 250 4,024 9,191 Europe & rest of world 831 63 (953) North America (628) (110) 85 -------- ---------- --------- 453 3,978 8,323 -------- ---------- --------- 4. Earnings per share The calculation of the basic and diluted earnings per share is based on the following data: 6 months to 6 months to Year to 30-Sep-07 30-Sep-06 31-Mar-07 £'000 £'000 £'000 Net profit attributable to equity holders of the parent 318 2778 6227 -------- ---------- --------- Weighted average number of ordinary shares in issue 27,340,813 27,209,247 27,253,918 Effect of dilutive potential ordinary shares 2,383 141,000 3,476 -------- ---------- --------- 27,343,196 27,350,247 27,257,394 -------- ---------- --------- Earnings per share (pence) Basic 1.2 10.2 23 Diluted 1.2 10.2 23 Following the consolidation of ordinary shares the prior period's results have been restated. 5. Taxation A provision for corporation tax has been made using the rate of 30% on profit before taxation. 6. Reserves On the acquisition of Greenmark Limited completed in the year to 31 March 2007, the value of customer relationships of Greenmark Limited was provisionally valued at £8m. This figure has now been reviewed and reduced to £2m. The resulting adjustment of £2.124m has been set against reserves. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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