13th Apr 2006 07:01
Moss Bros Group PLC13 April 2006 MOSS BROS GROUP PLC Preliminary results for the year ended 28 January 2006 HIGHLIGHTS Financial • Pre-tax profit of £6.2m (Ly: £5.7m) • Pre-tax profit before one-off restructuring costs (£0.5m) of £6.7m (Ly: £5.7m restated) up 16% • Like for like sales up 2.5% • Gross profit percentage increased to 52.9% (Ly: 52.4%) • Average cash balance for the year up 7% with year-end cash balance of £17.7m (Ly: £16.8m) • Final dividend proposed of 1.30p (1.80p for the year up 20%) • Current trading: like for like sales in the first ten weeks of the new financial year which excludes the Easter trading period, up 2%. Business Overview • A focussed business delivering sales growth in both Mainstream and Fashion • Opening of ten new Moss stores increasing retail space by 5% • Margin growth achieved from better sourcing and product selection • Product and own brand development driving sales and margin growth • Mail order and internet shopping launched • New store concepts developed for both Moss and Cecil Gee Commenting on the results, Philip Mountford, Chief Executive, said: "The Company continued to make good progress during the last financial year withlike for like sales growth up again for the third year in succession at 2.5%against the background of a challenging retail environment. The fourth quarterwas particularly encouraging with like for like sales up 4%. "The opening of ten new Moss stores during 2005 demonstrates the opportunitythere is to grow the business and with five new Moss stores already open thisyear, Moss is leading the growth in the business. The introductions of mailorder and on-line shopping during 2005 were an important development on which weintend to build for the future. "Product and brand development across both Mainstream and Fashion is one of themain contributors to our continued success. This development has attracted newcustomers into the stores and a clearer understanding of our core customers hashelped ensure the product matches the customers' expectations. The recent launchof our fifth Cecil Gee concept store in Bluewater has been well received anddemonstrates how the Company has developed and emphasises the need tocontinually review and enhance the offer to customers in both terms of productand store experience. The planned roll out of the Ventuno 21 brand, for fashionconscious 21-25 year olds, into a shop-in-shop concept is a further example ofthe importance of brand development. "The Company's investment in and support of the Hugo Boss brand continues; therange selection supported by the quality environment supports high customerretention. Our fourteenth Boss store opened in Trafford Park last month. "During the first ten weeks of the new financial year, like for like sales areup 2.0% (estimated at 2.5% adjusting for the timing of Easter) and margins havebeen held. Our planning assumes we will need to continue to over see significantincreases in property costs, including utility expenses and property taxes. "There remains substantial opportunity to realise our potential from bothexisting and new stores as well as from the advancements in the product offer.The business remains focussed on producing profitable growth and on establishingthe Company as the best men's retailer in the UK." For further information please contact: Moss Bros Group Plc Telephone: 020 7447 7394 07870 593 405Philip Mountford, Chief Executive Andrew Barclay, Head of Marketing REVIEW Results Overview Pre-tax profit for the year for Moss Bros Group Plc was £6.7m before one-offrestructuring costs of £0.5m, against £5.7m last year. The trading performance of the Company continued to improve with sales and grossprofit up 2.5% like for like and gross margin percentage up half a percentagepoint from 52.4% to 52.9%. 2005/06 -----------------------------------------Trading results (like for like)* 1st Half 2nd Half Full Year Sales v last year +2.8% +2.3% +2.5%% gross profit 53.1% 52.8% 52.9%% gross profit v last year +1.0% +0.4% +0.5%-------------------------------------------------------------------------------Profit before tax £1.7m £4.5m £6.2m *Like for like represents financial information for stores open during both thecurrent and prior financial years Business Overview Financial Performance The results have improved significantly during the last four years, moving froma £7m operating loss in 2002 (under UK GAAP) to an operating profit of £5.9mthis year - a swing of £13m. Quality and service The Company aims to deliver its customers value for money and understands theremust be no compromise on quality or service. The ability to build on anunderstanding of customer requirements in terms of the buying environment hasbeen a major contributor to improving the results, together with ongoinginvestment in the selection, training and motivation of quality staff. Meeting aspirations The trading strategy for each of the Company's two trading streams - Mainstreamwhich includes Moss, Factory Outlets and Moss Hire, and Fashion comprising CecilGee, Hugo Boss and Canali - is designed to meet the needs and aspirations of thecustomers. Finding the source Sourcing cost-effective quality materials and identifying a quality workforceare key parts of the Company's strategy. But finding the right product at theright price is only part of the challenge; bringing it to the market place intime to achieve business deadlines is also an essential part of the strategy andcritical to its success. New sources In the past twelve months, the Company has continued to work on sourcingproducts from areas which can offer the right mix of 'Just-in-Time' delivery andcompetitive pricing, without compromising on quality. There has been asignificant move towards sourcing from the expanding European Union, andspecifically from Eastern Europe, while Asia remains a major part of theCompany's sourcing strategy where appropriate. Sourcing and pricing More efficient sourcing has an effect on pricing, ultimately benefiting thecustomer. In the past twelve months, unit volumes have grown by 10.1% whilst theaverage price has reduced by 6.8%. Availability Availability of product is a major factor in profitability and customersatisfaction. In the past three years, availability of stock has improved from73% to 92%. The next objective is to increase this to 95% in core product lines.This will be achieved by better merchandising placement, the introduction of newsystems and the ongoing analysis of the lifespan of products. Improving margins Driving down the cost price of garments, using the resources and talents of anincentivised and targeted buying team, has seen gross margins improve from 44%in 2002 to a level of nearly 53% this year. The objective is to achieve afurther one point margin increase in each of the next two years. Customer confidence The Company's philosophy is focused around consumers who are confident, andaware of what 'Good' means whilst providing them with the right product at theright price: quality will not be compromised. We will maintain our insistence onthe very highest standards of product, workmanship and service, while continuingto source new products and services. Customers are getting better product thanever before, and can buy with confidence secure in the knowledge that they aremore likely to be able to buy what they want where they want. Product and range development There was an aggressive push throughout the year on range development in threekey brands - Blazer, Dehavilland and Ventuno 21. Each brand has its ownidentity, targeted at a specific market sector. Customers believe in the brandcredibility, and the brands provide each part of the Company with a differentstyle or identity. Blazer Blazer is a brand synonymous with traditional European styling and is targetedat the sophisticated, cosmopolitan European consumer. Dehavilland Dehavilland is an entry price point brand, offering quality casual and formalwear at a mid-range price. It offers consumers a great deal for their money. Ventuno 21 Of the three brands, Ventuno 21 represents the largest area of potential growth.It is aimed at fashion-conscious 21-to-25 year-olds, and offers fashion productsat high street prices. Its identity is best summed up by a great fashion suitwhich has all the elements of the latest catwalk fashion but is available at acommercial price. Mail Order and Internet Shopping Mail Order and Internet shopping are significant areas for growth. The websitehas had over 53,000 hits since it was launched in September 2005. The websitehas recently been revamped, and the second edition of the brochure is due to bepublished, in April 2006. Both will now be updated biannually. Outlook The management team has traded the business through a tough, competitive andchallenging period, and is well positioned to take the Company further forwardby means of a targeted expansion strategy. Mainstream currently has 116 stores, and it is believed, based on marketresearch, that there is an opportunity to achieve a significant level of furthergrowth, perhaps to a level of 200 stores within the next three-to-five years. To support this growth and to minimise any potential disruption to the business,the Company has signed a new lease on a new purpose built warehouse, ahead ofthe Compulsory Purchase Order which will be served on the Company's existingwarehouse facility as part of the London 2012 Olympic bid. The Company willtransfer its warehouse operation into the new facilities over the coming yearduring a period which will cause least disruption to the business. Negotiationswith the London Development Agency have been ongoing for some time to facilitatea smooth move. Business Development Review Developing people It has been a key part of our strategy for the past two years to develop peoplewithin the business. To this end, an in-house selling academy has been createdto develop both the technical understanding of product and the selling skills ofsales consultants and managers. Units-per-transaction This philosophy has allowed the business to train over 75% of its salesconsultants and managers over the past two years, and has resulted in anincrease of 6% in units-per-transaction. This increase is one of the biggest keydrivers in customer service, resulting in improved customer satisfaction andoptimum capitalisation on individual sales and is recognised as a keyopportunity to grow sales. It further benefits staff, who are incentivised onthe basis of numbers of units sold, as well as on the level of sales. In thisway, staff are made aware of the importance of knowing their product, which alsohas clear benefits for the discerning consumer. The Company does not encourage a hard-sell approach, but recognises thatcustomers like to be served by staff who are able to explain both the technicaland commercial aspects of products, and to make suggestions, where appropriate,concerning complementary purchases. Senior Management Training and Development The Company continues to develop key people through a course of structuredaway-days where senior managers are encouraged to participate in training whichfamiliarises them with business unit and overall strategies. Scholarships Staff are also encouraged to enrol for special scholarship schemes, whichinvolve attending an external management course at an Oxford-based summer schoolover a five-day period. This is a scheme which provides clear benefits for boththe Company and staff, who are able to assess their progress and measure itagainst that of their peers. Improving operational efficiency The Company strives to improve operational efficiencies. It continues to reviewthe flow of customers into its stores, and to analyse store-specific staffrequirements, as a means of effectively serving customers during key tradingperiods. Business models are developed, and internal procedures, ranging frompayroll structures to full-to-part-time ratios, are analysed. The overallobjective is to provide customer satisfaction while improving profits throughincreased sales and higher levels of units-per-transaction. Fleet review The Company is currently reviewing the use of its own fleet of vehicles fordeliveries to its stores. This year, significant efficiency savings have beenachieved by reorganising deliveries to areas such as the North-East of Englandand Scotland, in some cases replacing courier services with more efficient,overnight transportation alternatives. Mainstream Moss This year, Moss has recorded a like for like sales growth of 4.7%, with 1.1%point margin increase on last year. This has been achieved through bettersourcing as well as through better full-price sell-throughs, providing thecustomer with the right branded goods at the right price. Expansion plans Management believes that there are a further 80 locations within the UK whereMoss can trade profitably. Ten new Moss stores have been opened this year, andthe strategy for 2006 envisages up to 15 further new store openings, of whichfive have already opened. The expansion strategy is to create 2,000 to 4,000 sq ft stores in suburbantowns, cities and other locations where the market place can support a Mossstore. Selection of these sites is determined by specific experience and data.This includes continuing analysis of what drives customer-spending patterns, andtakes into account regional variations and preferences. Concept stores During 2006, the new concept store will be rolled out and used to open stores inmajor cities and during the ongoing refurbishment programmes. This concept willalso be used to refurbish the existing city store portfolio. The concept takesthe business forward in terms of visual and stock presentation, creating abright, light, clean environment with the emphasis on lines and brands, enablingthe consumer to shop in a friendly environment, with ease of product selection.The key priority is to attract new customers without alienating core consumers. Factory Outlets The factory outlets enjoyed an extremely successful year, with a like-for-likegrowth of 5.1%, and a 10.2% increase in gross profit. This has been achievedthrough a clear in situ strategy across the Moss fascia which has allowedmargin-rich products to be brought in from suppliers. This has to date provedsuccessful and instrumental in current plans to expand the factory outletportfolio further. As part of the factory outlet strategy a new outlet at Castleford was opened inthe fourth quarter with Street opening in the first quarter of the new financialyear. The new factory outlet concept produces a 20% increase in linear footage,allowing increased product ranges to be held in the same space and to presentthe products in a much more attractive and customer-friendly environment. Weplan further openings in 2006. Hire As the market leader in the UK hire market, with an approximate market share of25%, Moss Hire facilitated hire garments last year for in excess of 28,000weddings and fitted in excess of 180,000 customers for black-tie events. Thegrowth in the junior hire market continues to represent a significantopportunity. The wedding market continues to be stable. Although there has been a decrease inthe number of weddings, there has been an increase in the number of peoplewearing morning suits and in the size of wedding parties. There has also been an increase in the number of university-related events, andin the growth of student events styled on the US school prom model. The Company has been focusing on maintaining its No 1 position in the hiremarket, and on the recruitment of larger teams of experienced managers. Investing in stock To ensure that supply meets demand, there has been a substantial investment instock. Last year alone, investment reached £1.5m, and is expected to exceed £7mover four years. There is now a wide range of accoutrements, including whitesuits, Nehru collars, velvet tailoring, and highland dress. Moss Hire philosophyis to invest in the best and newest products, while maintaining its leadingposition in the more traditional lines. Expansion into more flamboyant andcolourful lines, in pursuit of the so-called 'celebrity' image, sits alongsidefashionable black-tie thinking at Moss Hire to provide the ultimate one-stopshop for hire wear. Instant hire In addition, Moss Hire remains the only national chain which can offer instantdress wear hire. Fashion Cecil Gee The new concept store roll out programme has now reached five stores. Thesestores have achieved a like for like sales growth of 10%. This concept will nowbe rolled out in Meadowhall in the second half. Hugo Boss There are currently 13 Hugo Boss stores in the UK, with plans to open atMeadowhall following the successful launch at Trafford Park in March 2006.Management believes that there are opportunities within key areas such as HugoBoss shoes, sportswear and accessories, as part of the strategy to create threeclearly defined brands - black, orange and green - which are targeted atdifferent segments of the market and which attract fashion-focused customers aswell as the traditional branded consumer into the stores. Hugo Boss is one of the leading brands in the fashion world, and the Companycontinues to refurbish and redesign the Hugo Boss stores to maintain this image. Canali The Company owns the only franchise for Canali within the UK and, due to itssuccess over the last five years is currently expanding the retail space by 40%to build on this success. The additional space will enable us to grow the casualwear, shoes and accessory ranges, as well as create a clearly defined luxurysuiting room. FINANCIAL REVIEW Costs Total costs increased by 2.5% in the year. After stripping out new and closedstores, like for like operating costs in the year increased by 2.3%; despitelike for like occupancy costs including rent, rates, service charge andutilities increasing 4.6% in the year. Improved management within stores hasenabled the Company to control payroll costs with like for like labour costs uponly 2.2% including the effect of the increase in minimum wage. Customer facing costs, such as marketing, which has focussed on initiatives suchas the city store concept and the new store expansion plan, have increased by14%. During the year the Company incurred one-off restructuring costs amounting to£0.5m. Of the £0.5m, £0.4m related to the re-organisation of the Company and£0.1m to the impairment in value of a non-profit making store. Investment Capital expenditure in the year was £5.2m, against depreciation of £4.2m. Thisincluded the opening of ten new Moss stores, the refitting of four stores inline with the new Cecil Gee concept, and the development of the factory outletconcept. There has also been further investment in the Company's fleet ofvehicles. Cash The underlying cash position continued to improve: the average cash balancethroughout the year was 7% up on last year, with the year-end cash balancestanding at £17.7m, £ 0.8m up on last year. Inventory Terminal inventory continued to be successfully cleared during the year with thetotal closing inventory position up only 1.6% compared with an increase inretail space of 5%. Trade and Other Payables Trade and other payables reduced by £2.0m, which is largely attributable toreductions in trade payables, due to the utilisation of cash to maximisediscounts and the timing of inventory intake. Corporation Tax The Company has losses brought forward which are now almost fully utilised Earnings per share and dividend Earnings per share: 4.62 pence per share compared to 3.98 pence per share lastyear. The Board is recommending a final dividend of 1.30 pence per share which inaddition to the interim dividend of 0.50 pence per share paid in November 2005represent a 20% increase on last year. The final dividend will be paid on 15June 2006 to shareholders on the register at the close of business on 12 May2006. Print resolution images are available for the media to view and download free ofcharge from http://www.vismedia.co.uk Moss Bros Group Plc Consolidated Income Statement For the year ended 28 January 2006 Year to Year to 28 January 2006 29 January 2005-------------------------------------------------------------------------------- Audited Audited £'000 £'000--------------------------------------------------------------------------------Revenue 132,813 130,203Cost of sales (62,552) (61,911)--------------------------------------------------------------------------------Gross Profit 70,261 68,292 Administrative expenses (5,189) (5,257)Shops selling and marketing costs (59,170) (57,554)--------------------------------------------------------------------------------Operating Profit (see note 7) 5,902 5,481Financial income 305 265Financial expenses - (2)--------------------------------------------------------------------------------Profit before Taxation 6,207 5,744Taxation (1,958) (2,097)--------------------------------------------------------------------------------Profit after Taxation Attributable toEquity Holders of the Parent 4,249 3,647--------------------------------------------------------------------------------Basic earnings per share 4.62p 3.98pDiluted earnings per share 4.54p 3.90p-------------------------------------------------------------------------------- CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Year to Year to 28 January 2006 29 January 2005 Audited Audited £'000 £'000--------------------------------------------------------------------------------Profit for the Year Attributable to EquityHolders of the Parent 4,249 3,647-------------------------------------------------------------------------------- Consolidated Balance Sheet As at 28 January 2006 As at As at 28 January 2006 29 January 2005 Audited Audited £'000 £'000--------------------------------------------------------------------------------Assets Property, plant and equipment 21,059 20,207Lease prepayments 2,919 2,913--------------------------------------------------------------------------------Total Non-Current Assets 23,978 23,120 Inventories 21,704 21,357Trade and other receivables 7,310 6,040Cash and cash equivalents 17,655 16,815--------------------------------------------------------------------------------Total Current Assets 46,669 44,212--------------------------------------------------------------------------------Total Assets 70,647 67,332-------------------------------------------------------------------------------- EquityIssued capital 4,652 4,603Share premium account 8,316 8,028Retained earnings 38,320 35,229--------------------------------------------------------------------------------Total Equity 51,288 47,860-------------------------------------------------------------------------------- Liabilities Other payables 1,249 845Deferred tax liabilities 2,385 427--------------------------------------------------------------------------------Total Non-Current Liabilities 3,634 1,272-------------------------------------------------------------------------------- Trade and other payables 15,725 18,200--------------------------------------------------------------------------------Total Current Liabilities 15,725 18,200--------------------------------------------------------------------------------Total Liabilities 19,359 19,472--------------------------------------------------------------------------------Total Equity and Liabilities 70,647 67,332-------------------------------------------------------------------------------- Consolidated Statement of Cash Flows For the year ended 28 January 2006 Year to Year to 28 January 2006 29 January 2005 Audited Audited £'000 £'000 -------------------------------------------------------------------------------Cashflows from Operating Activities 6,207 5,744Profit before taxation Adjustments for: (Profit)/loss on sale of non-current assets (31) 45Interest received (305) (265)Depreciation 4,233 3,945Equity settled share-based payment expenses 125 86(Increase)/decrease in trade and other receivables (1,270) 204Increase in inventories (347) (1,786)Decrease in trade and other payables (2,046) (1,960)Tax paid (25) ---------------------------------------------------------------------------------Net Cash from Operating Activities 6,541 6,013--------------------------------------------------------------------------------Cashflows from Investing Activities Proceeds from sale of non-current assets 100 453Proceeds from sale of investments 90 16Interest received 305 265Acquisition of non-current assets (5,160) (4,891)--------------------------------------------------------------------------------Net Cash from Investing Activities (4,665) (4,157)--------------------------------------------------------------------------------Cashflows from Financing Activities Proceeds from the issue of share capital 337 19Dividends paid (1,373) (1,373)--------------------------------------------------------------------------------Net Cash from Financing Activities (1,036) (1,354)--------------------------------------------------------------------------------Net increase in cash and cash equivalents 840 502Cash and cash equivalents at beginning of year 16,815 16,313--------------------------------------------------------------------------------Cash and cash equivalents at end of year 17,655 16,815-------------------------------------------------------------------------------- Notes to the Preliminary ResultsFor the year ended 28 January 2006 1. Accounting policies adopted are consistent with those set out in the interim report for the six months ended 30 July 2005. These can be seen at www.mossbros.co.uk. 2. Statement of Changes in Equity Year ended 28 Year ended 29 January 2006 January 2005 £'000 £'000--------------------------------------------------------------------------------Total Equity at beginning of year 47,860 45,465Net profit for the year 4,249 3,647Dividends (1,373) (1,373)Issue of shares 337 19Proceeds from QUEST 90 16Share based payments 125 86--------------------------------------------------------------------------------Net movement equity during the year 3,428 2,395--------------------------------------------------------------------------------Total equity at end of year 51,288 47,860-------------------------------------------------------------------------------- 3. Basic earnings per ordinary share are based on the weighted average of 91,894,428 (2005: 91,545,602) ordinary shares in issue during the year and are calculated by reference to the profit attributable to shareholders of £4,249,000 (2005: £3,647,000). Diluted earnings per ordinary share are based upon the weighted average of 93,555,869 (2005: 93,552,349) ordinary shares which takes into account share options outstanding and are calculated by reference to the profit attributable to shareholders as stated above. 4. The figures for the year ended 29 January 2005 and for the year ended 28 January 2006 are extracted from the statutory accounts for the year ended 28 January 2006 which has been reported on by the Company's auditors but not delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237(2) or 237(3) of the Companies Act 1985. 5. The Board has resolved to declare a year-end dividend of 1.30 pence per share (2005: 1.00 pence per share). 6. Like for like comparatives remove the impact of net store openings. 7. Restructuring costs comprise: Year ended 28 Year ended 29 January 2006 January 2005 £'000 £'000--------------------------------------------------------------------------------Former Director's compensation 186 -Other restructuring costs 207 -Impairment of non-current assets 70 - ---- --- 463 - ----- ----- This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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