22nd Jun 2007 07:01
Beale PLC22 June 2007 22 June 2007 INTERIM RESULTS Beale PLC, the specialist department store operator, announces Interim Resultsfor the 26 weeks ended 28 April 2007. • Profit before tax fell from £2.01 million to £875,000 as the retail environment continues to be very challenging as predicted in the trading update issued on 25 May 2007 • Revenue, which excludes VAT and the non-commission element of sales made by concessions, also declined from £32.4 million (2006: £34.3 million), down 5.5% • Competition remains intense and factors such as higher interest rates and taxation have made consumers more cautious about spending • Gross margins maintained at broadly comparable levels to last year, while administrative expenses increased by just 1% • Cosmetics performance was strong and there were more positive returns from other product categories Mike Killingley, Chairman, commented: "Since Christmas we have seen a decline infootfall, and hence turnover, in all the towns in which we trade." He added: "We still believe that our trading strategy is appropriate for ourtarget market, but in response to these trading conditions we have made a numberof further modifications and enhancements to it. These include a critical reviewof the balance of our basic stock assortment, and an increase in advertisingspend and our monthly promotions, while retaining our focus on maintaining grossmargins." For further information: Beale PLC Tavistock Communications Corporate SynergyAllan Allkins, Chief Executive Lulu Bridges Barrie NewtonKen Owst, Finance Director Polly Hutchinson Tel: 01225 424666Tel: 020 7920 3150 (22 June only) Tel: 020 7920 3150Tel: 01202 552022 (thereafter) BEALE PLC Chairman's statement - 26 weeks to 28 April 2007 Financial results Profit before tax for the 26 weeks to 28 April 2007 was £875,000, against £2.01million for the equivalent period last year. Gross sales, which include the fullvalue of concession sales and VAT, were 4.2% lower at £57.0 million (2006: £59.5million). Like for like sales fell by 4.3%. Revenue, which excludes VAT and the non-commission element of sales made byconcessions, also declined, by 5.5% to £32.4 million (2006: £34.3 million). The retail environment continues to be very challenging. Not only is competitionintense, but factors such as higher interest rates and taxation have madeconsumers more cautious about spending. The second half of our last financialyear, to 28 October 2006, had been encouraging, but since Christmas we have seena decline in footfall, and hence turnover, in all the towns in which we trade. In light of the continuing lack of high street price inflation we have done wellto maintain gross margins at broadly comparable levels to last year, while ouradministrative expenses increased by just 1%. We still believe that our trading strategy is appropriate for our target market,but in response to these trading conditions we have made a number of furthermodifications and enhancements to it. These include a critical review of thebalance of our basic stock assortment, and an increase in our monthlypromotions, while retaining our focus on maintaining our gross margins. Inaddition we shall be increasing our advertising spend as a percentage of ourtotal turnover to nearer the industry average. We have also begun a furtherreview of our cost base. From 2008 we plan to begin sourcing some of ourhomewares direct from the Far East, which will enhance gross margins andincrease our competitive edge. Cosmetics performance was strong and there were more positive returns from otherproduct categories. However we experienced continued volatility in homewares,particularly big ticket items. Dividend In light of these results and earlier statements your Board has decided not topay an interim dividend (2006: 1.1p per share). We shall make a decision onwhether to recommend a final dividend later in the year, and we shall need tosee evidence of a sustainable improvement in trading results if we are to do so. Balance sheet As a result of the reduction in sales and an increase in some of our productranges our inventory levels were 10% higher than at the equivalent stage lastyear, at £9.6 million (2006: £8.8 million). Net debt was £5.3 million, comparedwith £1.9 million at 29 April 2006. The increase principally reflects thishigher inventory level and the substantial capital expenditure incurred in thesecond half of last year. We continue to trade well within our available bank facilities. Outlook The first half of our year is traditionally stronger than the second half,because it includes the benefit of Christmas/New Year trading. Unless there is asignificant increase in sales during the rest of the financial year we expectthat the Group will make a loss for the 53 week period ending 3 November 2007.We see no immediate evidence of an improvement in the trading environment fordepartment stores such as Beales. I have already outlined above the steps wehave taken and are continuing to take to mitigate the adverse effect of thesetrading conditions, and our plans are based on the assumption that there will beno improvement in trading in the immediate future. In the first 6 weeks of the second half, to 9 June 2007, gross sales were 0.4%below those for last year, and like for like gross sales were down 4.4%, apattern broadly consistent with trading for the 26 weeks under review. We also believe that it would be in shareholders' interests if we could enhanceearnings by acquiring or merging with other businesses - at the right price -which fit our skills and product mix. We continue to seek such opportunities. Mike Killingley, Chairman21 June 2007 Independent Review Report to Beale PLC Introduction We have been instructed by the Company to review the financial information forthe six months ended 28 April 2007 which comprise the consolidated incomestatement, the consolidated balance sheet, the consolidated statement ofrecognised income and expense, the consolidated cash flow statement, theconsolidated reconciliation of changes in equity and related notes 1 to 9. Wehave read the other information contained in the interim report and consideredwhether it contains any apparent misstatements or material inconsistencies withthe financial information. This report is made solely to the Company in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe Company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures are consistent withthose applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with International Standards on Auditing (UK andIreland) and therefore provides a lower level of assurance than an audit.Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 28 April 2007. Deloitte & Touche LLPChartered AccountantsSouthampton, United Kingdom21 June 2007 Consolidated Income StatementUnaudited 26 weeks to 26 weeks to 52 weeks to 28 April 29 April 28 October 2007 2006 2006 Notes £000 £000 £000------------------------------------------------------------------------------Gross sales* 2 57,021 59,494 107,018------------------------------------------------------------------------------Revenue 2 32,416 34,304 59,864Cost of sales (14,773) (15,801) (26,964)-------------------------------------------------------------------------------Gross profit 17,643 18,503 32,900Administrative expenses (16,642) (16,464) (32,471)-------------------------------------------------------------------------------Operating profit 1,001 2,039 429Interest payable (134) (49) (134)Interest receivable 8 23 29------------------------------------------------------------------------------Profit on ordinary activitiesbefore tax 875 2,013 324Tax 4 (350) (805) (284)-------------------------------------------------------------------------------Profit for the period fromcontinuing operations 525 1,208 40------------------------------------------------------------------------------Basic earnings per share (pence) 5 2.56p 5.89p 0.19pDividend paid per share 7 1.1p 1.1p 2.2p * Gross sales reflect revenue inclusive of concession sales and VAT from continued operations. Consolidated Balance SheetUnaudited 28 April 29 April 28 October 2007 2006 2006 £000 £000 £000------------------------------------------------------------------------------ Non-current assets Goodwill 892 892 892Property, plant and equipment 30,196 29,075 30,698Financial assets 17 17 17Deferred tax asset 1,308 1,888 1,308------------------------------------------------------------------------------ 32,413 31,872 32,915 Current assets Inventories 9,634 8,765 11,560Trade and other receivables 5,586 5,935 5,793Tax asset - - 126Cash and cash equivalents 115 107 119------------------------------------------------------------------------------ 15,335 14,807 17,598Total assets 47,748 46,679 50,513------------------------------------------------------------------------------ Current liabilities Trade and other payables (8,801) (7,869) (10,475)Tax liabilities (224) (1,107) -Bank overdrafts (651) (540) (516)------------------------------------------------------------------------------ (9,676) (9,516) (10,991) Net current assets 5,659 5,291 6,607Total assets less current liabilities 38,072 37,163 39,522Non-current liabilities Bank loan (4,750) (1,500) (6,500)Retirement benefit obligations (5,199) (7,132) (5,199)Deferred tax liabilities (5,937) (5,811) (5,937)Obligations under finance leases (975) (973) (974)------------------------------------------------------------------------------ (16,861) (15,416) (18,610)Total liabilities (26,537) (24,932) (29,601)-------------------------------------------------------------------------------Net assets 21,211 21,747 20,912============================================================================== Equity Share capital 1,026 1,026 1,026Share premium account 440 440 440Revaluation reserve 8,926 9,021 8,981Capital redemption reserve 242 242 242ESOP reserve (53) (54) (56)Retained earnings 10,630 11,072 10,279------------------------------------------------------------------------------Total equity 21,211 21,747 20,912============================================================================== Consolidated Statement of Recognised Income and Expense Unaudited 26 weeks to 26 weeks to 52 weeks to 28 April 29 April 28 October 2007 2006 2006 £000 £000 £000------------------------------------------------------------------------------ Actuarial gain on pension scheme - - 799Tax on items taken directly to equity - - (240)-------------------------------------------------------------------------------Net income recognised directly in equity - - 559Profit for the period 525 1,208 40------------------------------------------------------------------------------Total recognised income and expense for the period 525 1,208 599============================================================================== Consolidated Reconciliation of Changes in EquityUnaudited 26 weeks to 26 weeks to 52 weeks to 28 April 29 April 28 October 2007 2006 2006 Note £000 £000 £000------------------------------------------------------------------------------Opening equity 20,912 20,765 20,765Total recognised income and expense for the period 525 1,208 599Dividends paid 7 (226) (226) (452)-------------------------------------------------------------------------------Total movements in equity for the period 299 982 147Closing equity 21,211 21,747 20,912============================================================================== Consolidated Cash Flow StatementUnaudited 26 weeks to 26 weeks to 52 weeks to 28 April 29 April 28 October 2007 2006 2006 Note £000 £000 £000------------------------------------------------------------------------------ Cash flows from operating activities before interestand tax 8 2,722 2,654 1,190Interest paid (136) (61) (117)Interest received 8 30 29Tax paid - - (251)-------------------------------------------------------------------------------Net cash flow from operating activities 2,594 2,623 851------------------------------------------------------------------------------ Cash flows from investing activitiesPurchase of property, plant and equipment (758) (678) (3,640)Proceeds from sale of property, plant and equipment - 13 8------------------------------------------------------------------------------Net cash used in investing activities (758) (665) (3,632)-------------------------------------------------------------------------------Cash flows from financing activitiesDividends paid (226) (226) (452)(Repayment of)/increase in loans (1,750) (2,500) 2,500Net proceeds from obligations under finance leases 1 1 2------------------------------------------------------------------------------Net cash (used in)/generated from financing activities (1,975) (2,725) 2,050------------------------------------------------------------------------------Net decrease in cash and cash equivalents in the period (139) (767) (731) Cash and cash equivalents at beginningof period (397) 334 334------------------------------------------------------------------------------Cash and cash equivalents at end of periodBank overdrafts and cash (536) (433) (397)=============================================================================== Analysis of Consolidated Net Debt Unaudited 26 weeks to 26 weeks to 52 weeks to 28 April 29 April 28 October 2007 2006 2006 £000 £000 £000 Cash at bank 115 107 119 Bank overdrafts (651) (540) (516)-------------------------------------------------------------------------------Cash and cash equivalents (includingoverdrafts) (536) (433) (397)Borrowings:Due between two and five years (4,750) (1,500) (6,500)-------------------------------------------------------------------------------Total borrowings (4,750) (1,500) (6,500)-------------------------------------------------------------------------------Net debt (5,286) (1,933) (6,897)=============================================================================== Notes to the Consolidated Financial Statements Unaudited 1. Basis of preparation The Interim Financial Statements for the 26 weeks ended 28 April 2007 have been prepared on the basis of the accounting policies set out in the Group's financial statements for the 52 weeks ended 28 October 2006. 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. 26 weeks to 26 weeks to 52 weeks to 28 April 29 April 28 October 2007 2006 2006 £000 £000 £000------------------------------------------------------------------------------ Gross sales 57,021 59,494 107,018VAT (8,165) (8,468) (15,214)-------------------------------------------------------------------------------Gross sales (excluding VAT) 48,856 51,026 91,804Agency sales less commission (16,440) (16,722) (31,940)-------------------------------------------------------------------------------Revenue 32,416 34,304 59,864------------------------------------------------------------------------------ 3. Segment information The directors regard the business as one segment. 4. Corporation tax charge Interim period taxation is accrued based on an estimated effective tax rate of 40% (6 months ended 29 April 2006: 40%). The total tax charge for the 52 weeks ended 28 October 2006 was calculated at 88%. 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 26 weeks to 52 weeks to 28 April 29 April 28 October 2007 2006 2006 £000 £000 £000 EarningsEarnings for the purposes of basic anddiluted earnings per share 525 1,208 40------------------------------------------------------------------------------Number of sharesWeighted average number of ordinaryshares for the purpose of basicearnings per share and for purposes ofdiluted 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 dilutedearnings per share. 6. Goodwill As at 29 April 2006 the directors carried out an impairment review as required by IAS 38. Having carefully reviewed the Ealing store's trading performance, the board concluded that it was appropriate to write off the total balance sheet value of goodwill relating to the acquisition of the Ealing store. A charge of £197,000 is included within administrative expenses in the income statement for the 26 weeks to 29 April 2006 and the 52 weeks to 28 October 2006. 7. Dividends The dividends shown in the period are those actually declared in line with IAS 10. During the first half year, a dividend of 1.1p (2006: 1.1p) per share was paid to the shareholders. 8. Reconciliation of operating profit to cash generated from operations 26 weeks to 26 weeks to 52 weeks to 28 April 29 April 28 October 2007 2006 2006 £000 £000 £000------------------------------------------------------------------------------Operating profit 1,001 2,039 429Adjustments for:Depreciation 1,260 1,240 2,566Impairment of goodwill - 197 197Loss on fixed asset disposals - 25 48Decrease/(increase) in inventories 1,926 1,990 (805)Decrease in trade and other receivables 207 322 477Decrease in trade and other payables (1,672) (3,159) (587)Other non cash movements - - (1,135)-------------------------------------------------------------------------------Cash generated from operations 2,722 2,654 1,190============================================================================== 9. Basis of financial information The Interim Financial Statements, approved by the Board of directors on 21 June 2007, do not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The 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 the Interim Financial Statements for the 52 weeks ended 28 October 2006 does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The statutory accounts for the 52 weeks ended 28 October 2006, which were prepared under IFRS, have been delivered to the Registrar of Companies. The Auditors' report on these accounts was unqualified and does not contain a statement made under Section 237(2) and Section 237(3) of the Companies Act 1985. The financial year ended 3 November 2007 is a 53 week year. 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