TIDMACR
RNS Number : 1083J
Abbeycrest PLC
27 June 2011
Final Results 2011
Abbeycrest plc ("Abbeycrest" or the "Group"), a leading
international jewellery designer, manufacturer and distributor,
announces its audited final results for the year ended 28 February
2011.
Financials
-- Revenue of GBP38.5m (2010: GBP39.7m)
-- Adjusted operating profit before exceptional items and depreciation
and amortisation of GBP0.6m (2010: GBP1.8m)
-- Operating loss of GBP2.1m (2010: GBP2.4m profit) after exceptional
operating costs of GBP1.8m (2010: GBP1.5m income)
-- Net debt remained the same as the prior year at GBP5.6m
(2010: GBP5.6m)
Operational summary
-- Board strengthened with appointments of Simon Lazenby, Sarah
Carpin and Kathryn Davenport
-- Julie Large, previously Creative Director at Hot Diamonds,
appointed Creative Director at Brown & Newirth (R) in January
-- Successful consolidation of Group's Hong Kong activities
into Abbeycrest Thailand
Post year end summary
-- Revised property lease termination agreement with Moorgarth
Property Investments
-- Revised and extended facilities with the Group's lenders
in the UK and Thailand
Simon Ashton, Executive Chairman, said: "Although trading
conditions in our core markets remain difficult, the Group has made
a satisfactory start to the current financial year. The benefits of
consolidating our Hong Kong and Thailand operations are becoming
evident and our Essentials division is trading in line with the
board's expectations, albeit against a continuing backdrop of
long-term pressure on precious metal prices.
"The board remains firmly of the view that the strategy of
moving towards higher value-added, branded jewellery collections is
aligned to current and expected global jewellery trends and we are
seeing definite signs of progress".
For further information, please contact:
Abbeycrest plc Tel: 0113 397 0864
Simon Ashton, Executive Chairman www.abbeycrest.co.uk
Evolution Securities Limited Tel:0113 243 1619
Joanne Lake/Peter Steel www.evosecurities.com
Rawlings Financial PR Limited Tel: 01653 618 016
Catriona Valentine www.rawlingsfinancial.co.uk
Chairman's Statement
The year to 28 February 2011 proved to be difficult for
Abbeycrest. Having spent the previous two years refocusing and
streamlining the Group's activities, our higher value-added
collections did not make the progress anticipated and the Group's
activities in its traditional markets continued to be affected by
further volume decline and margin pressures.
In light of these challenging conditions, we have taken action
to review our strategy and reduce costs further and, in doing so,
secured the ongoing support of our lenders.
Results
Group revenue fell by 3% to GBP38.5m (2010: GBP39.7m). The
decline in sales volumes was significantly more when factoring in
the effect of an average monthly gold price of GBP825 per ounce, a
30% increase over 2010 (GBP636 per ounce). The sustained rise in
gold prices (2010: 25%) continues to have an impact on consumer
demand, with hallmarking of gold in the UK falling by over 16%
during the year under review.
Rising commodity prices and retailer action to protect volume
have combined to squeeze margins. Value-added for the year fell to
32.8% (2010: 35.8%) giving rise to a pre-tax loss before
exceptional items of GBP1.1m (2010: profit GBP0.1m).
The Essentials division, which serves volume markets with
mainstream precious metal jewellery products, generated turnover of
GBP25.8m (2010: GBP27.2m), a fall of 5%. Restating 2011 sales at
2010 gold prices would indicate a like-for-like reduction closer to
15%. This decline in sales led to a lower contribution to fixed
overheads and an erosion of operating margin before exceptional
items to 2.4% (2010: 5.7%), with the division recording an
operating profit before exceptional items of GBP0.6m (2010:
GBP1.6m).
In response to this, we have implemented a number of initiatives
to improve the contribution to fixed overheads and deliver more
effective product development. In April, we completed the
consolidation of Abbeycrest Hong Kong's activities into Abbeycrest
Thailand's operations. This will result in the transfer of
previously outsourced product, and associated margin, into the
Group's own manufacturing resource, coupled with tighter control on
new product development.
Our Brands division, which supplies the higher-end jewellery
sector with branded jewellery collections, recorded an operating
profit before exceptional items of GBP0.2m (2010: GBP0.4m) on
similar turnover of GBP12.7m (2010: GBP12.5m). This decline in
profitability of GBP0.2m was due solely to the previously notified
underperformance of Brown & Newirth Limited, Abbeycrest's
wedding and commitment ring specialist and was attributable to a
short term loss of management focus and margin control.
We addressed the situation promptly with significant changes to
systems and personnel. We have also sought to strengthen the value
in product design and branding at Brown & Newirth(R) by
appointing Julie Large (previously with Hot Diamonds), a proven
Creative Director with brand experience. A number of new
collections have already been launched and others are being
developed for a September 2011 launch, under Julie's guidance.
These remedial actions, together with a redundancy programme,
form part of the restructuring of our Essentials and Brands
divisions to establish a lower yet more responsive cost base.
These, coupled with a re-assessment of the onerous lease provision,
have resulted in exceptional costs for the year of GBP1.9m (2010:
gain GBP1.5m). Pre-tax loss, after these exceptional costs, was
GBP3.0m (2010: profit GBP1.6m which included a GBP1.5m exceptional
gain). By the year end, net debt remained in line with the previous
year at GBP5.6m (2010: GBP5.6m). No final dividends are
proposed.
Property lease
On 27 August 2009, Abbeycrest entered into deeds of variation
giving it the right to terminate leases over its former head office
and car park at Wilmington Grove, Leeds on 28 September 2011, upon
payment of a total fee of GBP405,746, comprising one year's rent on
the combined site. Prior to this deed of variation, Abbeycrest
would have remained a tenant, with the associated costs, until June
2021.
On 4 May 2011, the board announced revised termination
arrangements with the lessor, Moorgarth Property Investments
Limited, and gave notice that these leases would terminate with
effect from 28 September 2011. Under the revised arrangements,
termination is conditional on payment of a total fee of GBP406,000,
to be paid in two instalments, being GBP200,000 on or before 28
September 2011 and GBP206,000 on or before 28 February 2012. Until
paid, amounts outstanding will be secured by way of a third ranking
fixed and floating charge over the assets of Abbeycrest and its
subsidiaries. Termination is also conditional on Abbeycrest
continuing to comply with the terms of the existing leases until 28
September 2011.
Funding
On 31 May 2011, the board announced revised and extended
facilities with its lenders in the UK and Thailand.
Burdale Financial Limited ("Burdale"), the Group's senior
lender, has agreed to extend the renewal date of the Group's UK
facility to 9 March 2014 and to re-set the associated covenants. As
a result of a transfer in the Group's working capital requirements
from the UK to Thailand, Abbeycrest's UK facility limit with
Burdale was reduced from GBP8.0m to GBP4.0m, thereby reducing
future under-utilisation costs. All other principal terms and
conditions remain unchanged.
Abbeycrest Thailand Limited has also agreed an increase of
GBP3.0m in its seasonal working capital facilities with its
long-standing finance provider, Siam Commercial Bank PCL ("SCB").
This comprises an increase of GBP2.6m in its invoice finance
facility and an additional short term loan of GBP0.4m to facilitate
the consolidation of Abbeycrest's Hong Kong activities into its
Thai facility.
The extended SCB facilities, which now total GBP8.8m, cover the
Thai facility's expected peak working capital requirements of the
August to December 2011 period and are renewable annually. All
other principal terms and conditions remain unchanged.
Based on current forecasts, the Group needs either to extend the
current facilities or reduce the working capital requirement by
GBP0.4m in October 2011 during the peak funding period. The board
is currently exploring a number of viable options to enable them to
achieve this. Further details regarding this matter are provided in
Note 1b "Going concern".
Board changes
Sarah Carpin and Kathryn Davenport were appointed to the board
as non-executive directors on 12 May 2010. Graham Partridge
resigned from the board on 30 September 2010 and Simon Lazenby was
appointed as Group Finance Director on the same date. Nick Hamley
also stepped down from the board on 30 September 2010. I would,
once again, like to welcome Simon, Sarah and Kathryn and thank them
for their valuable contribution since joining.
Strategy
The global jewellery retailing market showed signs of recovery
in 2010, albeit largely restricted to the luxury segment and Asia
Pacific region. These are segments not historically served by
Abbeycrest but continue to form a key tenet of our medium to long
term strategy.
We continue to press on with our plans to build branded
jewellery collections and penetrate growing luxury segments. These
plans include, amongst other things:
-- supporting the growth of the Brown & Newirth(R) brand
through a selective retail presence;
-- building Brown & Newirth's(R) share of the UK engagement
ring market to that of its wedding band share, through new
collections backed by visual merchandising; and
-- recruiting Key Account Managers into the Essentials division
to develop its Asia-Pacific markets.
Our ability to invest beyond organic growth remains restricted
by Abbeycrest's past financial performance and historic market
positioning. Despite these constraints, we have made tangible
progress with a number of positive developments, including our
re-branding of 'Brown & Newirth(R) ', the launch of a signature
collection by 'Sarah Ho', an award winning jewellery designer, and
the introduction of 'TLC', a market-leading warranty and support
package.
Current trading and outlook
Although trading conditions in our core markets remain
difficult, the Group has made a satisfactory start to the current
financial year. Following the remedial actions set out above, Brown
& Newirth(R) and the rest of the Brands division's key
performance indicators continue in line with the board's
expectations. The benefits of consolidating our Hong Kong and
Thailand operations are becoming evident and our Essentials
division is trading in line with the board's expectations, albeit
against a continuing backdrop of long-term pressure on precious
metal prices.
The board remains firmly of the view that the strategy of moving
towards higher value-added, branded jewellery collections is
aligned to current and expected global jewellery trends and we are
seeing definite signs of progress. Our more immediate plans
include:
-- opening our first retail store under the Brown &
Newirth(R) brand - providing the blue-print to replicate across
select locations in future;
-- launching an online shop to support the above Brown &
Newirth(R) retail programme - providing the opportunity to test new
concepts and build brand recognition;
-- transferring the expertise of Julie Large, Brown &
Newirth's(R) Creative Director, to reshape Essentials product range
into fashion-led collections - providing its customers with a
stronger product proposition; and
-- appointing a Sales & Marketing Director to support the
Essentials division's Managing Director, Kerry Benson - providing
additional impetus to capture targeted customers and markets.
Senior management throughout the Group, and their teams, are
undertaking an ambitious programme to change internal culture and
market perception, product proposition and brand value with a view
to achieving sales growth and margin improvement. This is not an
easy task, with a capacity to invest only in moderation; but the
board maintains its belief that, once this process is complete, the
Group will be much better positioned to capitalise on the
opportunities identified in the global jewellery market.
Simon Ashton
Chairman
27 June 2011
Financial Risks and Uncertainties
Principal Risks Relating to the Group
The directors do not consider that the principal risks and
uncertainties have changed since the publication of the annual
report for the year ended 28 February 2010. A detailed explanation
of the risks relevant to the Group is included in the annual report
for the year ended 28 February 2011.
The price volatility of some of the raw materials purchased by
the Group, in particular precious metals, could have a material
adverse effect on the Group and its ability to reflect raw material
price movements in the Group's selling prices and in its finance
headroom.
The Group may be affected adversely by global economic
conditions.
Limitations on the Group's ability to fund its longer term
financing requirements could affect the Group adversely.
The Group is exposed to currency fluctuations which could impact
its results, cash flow and/or financial condition materially.
The Group is exposed to interest rate fluctuations which could
impact its results, cash flow and/or financial condition
materially.
The Group's business may be affected by the default of
counterparties in respect of monies owed to the Group.
The occurrence of major operational problems could have a
material adverse effect on the Group.
The Group may be exposed to refinancing risks.
Risks associated with the industry
The markets in which the Group operates are highly competitive
with respect to price, geographic distinction, functionality, brand
recognition and the effectiveness of sales and marketing.
The markets in which the Group operates experience seasonal
variations in revenues and operating profits.
Consolidated Income Statement
Year to Year to
28 February 28 February
2011 2010
Notes GBP'000 GBP'000
Revenue 2 38,529 39,663
Operating costs (40,633) (37,257)
------------- -------------
Operating (loss)/profit (2,104) 2,406
Finance costs 4 (866) (851)
------------- -------------
(Loss)/profit before taxation (2,970) 1,555
Analysis of (loss)/profit before
taxation
(Loss)/profit before taxation
and exceptional items (1,093) 55
Exceptional items - operating
costs 3 (1,777) 1,500
Exceptional items - finance costs 3 (100) -
------------- -------------
(Loss)/profit before taxation (2,970) 1,555
------------- -------------
Tax on (loss)/profit - -
------------- -------------
(Loss)/profit for the year attributable
to equity shareholders of the
parent (2,970) 1,555
------------- -------------
(Loss)/profit per share - basic
and diluted 5 (4.0)p 3.2p
Consolidated Statement of Comprehensive Income
Year to Year to
28 February 28 February
2011 2010
GBP'000 GBP'000
(Loss)/profit for the period (2,970) 1,555
-------------- --------------
Other comprehensive costs
Cash flow hedges:
Losses recognised directly in
equity (31) 1,193
Exchange losses on retranslation
of foreign operations 15 (1,263)
-------------- --------------
Other comprehensive costs (16) (70)
-------------- --------------
Total comprehensive (costs)/income
for the year attributable to
equity shareholders of the parent (2,986) 1,485
-------------- --------------
Consolidated Balance Sheet
28 February
2010
28 February As restated,
2011 note 6
Notes GBP'000 GBP'000
Assets
Non-current assets
Goodwill 1,866 1,866
Other intangible assets 385 358
Property, plant and equipment 3,486 4,240
Deferred tax assets 102 102
------------ --------------
5,839 6,566
------------ --------------
Current assets
Inventories 6 6,964 8,046
Trade and other receivables 5,127 5,982
Cash and cash equivalents 210 493
------------ --------------
12,301 14,521
------------ --------------
Liabilities
Current liabilities
Borrowings (5,783) (5,920)
Trade and other payables (4,382) (3,896)
Corporation tax - -
Provisions 7 (915) (602)
------------ --------------
(11,080) (10,418)
------------ --------------
Net current assets 1,221 4,103
------------ --------------
Non-current liabilities
Financial liabilities
Borrowings (51) (176)
Provisions 7 (185) (724)
------------ --------------
(236) (900)
------------ --------------
Net assets 6,824 9,769
------------ --------------
Shareholders' equity
Share capital 8 3,371 3,371
Share premium account 7,066 7,066
Merger reserve 199 199
Cumulative translation reserves 2,338 2,354
Retained earnings (6,150) (3,221)
------------ --------------
Total shareholders' equity 6,824 9,769
------------ --------------
Consolidated Cash Flow Statement
Year to Year to
28 February 28 February
2011 2010
Notes GBP'000 GBP'000
Cash flow from operating activities
(Loss)/profit after tax (2,970) 1,555
Tax charge - -
Depreciation and amortisation 865 874
Share based payment 41 230
Finance costs 4 966 851
------------- -------------
(1,098) 3,510
Decrease in inventories 1,058 1,298
Decrease in receivables 855 4,721
Increase/(decrease) in payables 301 (7,503)
Finance costs paid (966) (851)
Taxation paid (49) (65)
------------- -------------
Net cash inflow from operating
activities 101 1,110
------------- -------------
Purchase of property, plant and
equipment (118) (284)
Proceeds from sale of property,
plant and equipment - 3
Purchase of intangible fixed assets (4) (89)
------------- -------------
Net cash used in investing activities (122) (370)
------------- -------------
Cash flow from financing activities
Issue of ordinary shares - 1,620
Proceeds of borrowings - 185
Repayment of borrowings (395) (2,776)
Leased gold facility movement 14 859
Capital element of finance lease
rental payments (120) (297)
------------- -------------
Net cash used in financing activities (501) (409)
------------- -------------
Net (decrease)/increase in cash (522) 331
Cash and cash equivalents at beginning
of year 213 (118)
------------- -------------
Cash and cash equivalents at end
of year (309) 213
------------- -------------
Cash and cash equivalents comprise:
Cash and cash equivalents in the
balance sheet 210 493
Bank overdrafts (519) (280)
------------- -------------
(309) 213
------------- -------------
Consolidated Statement of Changes in Equity
Cumulative
Share Share Merger translation Hedging Retained
capital premium reserve reserve reserve earnings Total
Balance at 1
March 2010 3,371 7,066 199 2,354 - (3,221) 9,769
Loss for the
period - - - - - (2,970) (2,970)
Exchange
losses on
retranslation
of foreign
operations - - - (16) - - (16)
-------- -------- -------- ------------ -------- --------- --------
Total
comprehensive
income for
the period - - - (16) - (2,970) (2,986)
Share based
payment - - - - - 41 41
-------- -------- -------- ------------ -------- --------- --------
Balance at 28
February
2011 3,371 7,066 199 2,338 - (6,150) 6,824
-------- -------- -------- ------------ -------- --------- --------
Cumulative
Share Share Merger translation Hedging Retained
capital premium reserve reserve reserve earnings Total
Balance at 1
March 2009 2,922 5,665 199 2,424 - (4,776) 6,434
Profit for the
period - - - - - 1,555 1,555
Exchange
losses on
retranslation
of foreign
operations - - - (70) - - (70)
-------- -------- -------- ------------ -------- --------- --------
Total
comprehensive
income for
the period - - - (70) - 1,555 1,485
-------- -------- -------- ------------ -------- --------- --------
Gross issue of
share capital 449 1,797 - - - - 2,246
Issue costs - (396) - - - - (396)
-------- -------- -------- ------------ -------- --------- --------
Balance at 28
February
2010 3,371 7,066 199 2,354 - (3,221) 9,769
-------- -------- -------- ------------ -------- --------- --------
Notes to the financial statements
1. Basis of preparation
While the financial information included in the annual financial
report announcement has been prepared in accordance with the
recognition and measurement principles of International Financial
Reporting Standards as endorsed for use in the European Union
(IFRSs), this announcement does not contain sufficient information
to comply with IFRSs.
a) Directors' responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
-- The Group financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and Article 4 of the IAS
Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the
Group.
-- The annual report includes a fair review of the development
and performance of the business and the financial position of the
Group and the parent Company, together with a description or the
principal risks and uncertainties that they face.
The Directors' responsibilities pursuant to DTR4 were approved
by the Chairman, S. Ashton.
b) Going concern
The financial statements have been prepared on a going concern
basis.
As described in the Chairman's Statement, the current economic
environment is challenging and the Group has reported an operating
loss for the year ended 28 February 2011. The Group has been
adversely affected by the significant rise in the gold price which
has increased working capital balances and reduced demand for the
Group's products.
Based on current forecasts, the Group needs to either extend the
current facilities or reduce working capital requirement by GBP0.4m
in October 2011, during the peak funding period. The Directors are
currently exploring a number of viable options available to them to
achieve this.
After the year end on 31 May 2011, the Group successfully
re-negotiated its facilities with its lenders in the UK and
Thailand. Based on the success the Group has had on managing its
working capital requirements, the current balance sheet positions
and the on-going relationships with the Groups lenders, the
Directors are confident that the Group will be able to either
extend its facilities further or reduce its working capital
position during the peak funding period and are therefore confident
that the Group will have adequate resources to continue in
operational existence.
For the above reasons, the Directors have prepared the financial
statements on a going concern basis. However, these conditions
indicate the existence of a material uncertainty which may cast
significant doubt about the Group's ability to continue as a going
concern and therefore it may be unable to realise its assets and
discharge its liabilities in the normal course of business. The
financial statements do not contain any adjustments which may be
required if the Group was unable to continue as a going
concern.
c) Statutory accounts and Auditors' emphasis of matter
The financial information set out in this announcement does not
constitute the Group's statutory accounts for the years ended 28
February 2010 or 28 February 2011 within the meaning of Companies
Act 2006 section 435, but is derived from those accounts. Statutory
accounts for the year ended 28 February 2010 have been delivered to
the Registrar of Companies and those for 28 February 2011 will be
delivered following the Company's Annual General Meeting. Their
report for the year end 28 February 2011 did not contain statements
under S498(2) or (3) of the Companies Act 2006 and their report for
the year ended February 2010 did not contain statements under
s498(2) or (3) of the Companies Act 2006. Their report for 28
February 2010 and 28 February 2011 included reference to the
material uncertainty in respect of the current borrowing facilities
to which the auditors drew attention by way of emphasis of matter
without qualifying their report.
d) Changes in accounting policies
There were no new standards, interpretations and amendments,
effective for the first time from 1 March 2010, which had a
material effect on the financial statements.
2. Segmental analysis
The Group has two main reportable segments:
(i) Brands division - this division is the Group's vehicle for
increased penetration of higher value segments of the jewellery
market. Its objective is to appeal to the most fashion conscious
buyers through the creation of highly innovative branded jewellery
collections and differentiated service propositions.
(ii) Essentials division - this division represents the bulk of
the retained historic business of Abbeycrest. Its role is to
continue to exploit the Group's supply capabilities across existing
mainstream markets in much the same way as before; only with
heightened consumer focus; product differentiation and account
management. This is the Group's foundation.
Factors that management used to identify the Group's reportable
segments
The Group's reportable segments are strategic business units
that offer different products. They are managed separately because
each business requires different marketing strategies.
Measurement of operating segment profit or loss, assets and
liabilities
The accounting policies of the operating segments are the same
as those described in the summary of significant accounting
policies.
The Group evaluates performance on the basis of EBITDA and
profit or loss from operations before tax not including
non-recurring losses, such as restructuring costs and goodwill
impairment and also excluding the effects of share based
payments.
Segment assets exclude tax assets used primarily for corporate
purposes. Details are provided in the reconciliation from segment
assets and liabilities to the Group position.
The following shows the revenues and results by reportable
segment for the year ended 28 February 2011:
Brands Essentials
division division Total
GBP'000 GBP'000 GBP'000
Revenue 12,735 25,794 38,529
---------- ----------- ---------
Segment result (786) 120 (666)
Unallocated costs (1,438)
Finance costs (866)
---------
Loss before income tax (2,970)
---------
Tax charge -
---------
Loss for the period (2,970)
---------
Unallocated costs relates to central costs and income, including
exceptional items.
Operating profit margins
Brands Essentials
division division Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
EBITDA before exceptional
items 366 1,360 (1,158) 568
Less
Depreciation of tangible
fixed assets (163) (521) - (684)
Amortisation of intangible
fixed assets (1) (210) - (211)
---------- ----------- ------------ ---------
Operating profit before
exceptional items 202 629 (1,158) (327)
Exceptional items -
operating costs (988) (509) (280) (1,777)
---------- ----------- ------------ ---------
Operating (loss)/profit (786) 120 (1,438) (2,104)
---------- ----------- ------------ ---------
EBITDA margin before
exceptional items 2.9% 5.3% - 1.5%
---------- ----------- ------------ ---------
Operating margin before
exceptional items 1.6% 2.4% - -0.8%
---------- ----------- ------------ ---------
Segmental assets as at 28 February 2011 were as follows:
Brands Essentials
division division Unallocated Reconciliation Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total
assets 12,943 17,165 14,720 (26,688) 18,140
---------- ----------- ------------ --------------- ---------
The reconciling items relate to the elimination of intercompany
balances of GBP18,783,000 and fixed asset investments of
GBP7,905,000 on consolidation.
Non-current asset additions totalled GBP109,000 of which
GBP82,000 related to the Brands division and GBP27,000 related to
the Essentials division.
The following shows the revenues and results by reportable
segment for the year ended 28 February 2010:
Brands Essentials
division division Total
GBP'000 GBP'000 GBP'000
Revenue 12,478 27,185 39,663
---------- ----------- ---------
Segment result 411 1,555 1,966
Unallocated income 440
Finance costs (851)
---------
Profit before income tax 1,555
---------
Tax charge -
---------
Profit for the period 1,555
---------
Unallocated income relates to central costs and income,
including exceptional items.
Operating profit margins
Brands Essentials
division division Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
EBITDA before exceptional
items 547 2,288 (1,060) 1,775
Less
Depreciation of tangible
fixed assets (136) (611) - (747)
Amortisation of intangible
fixed assets - (122) - (122)
---------- ----------- ------------ ---------
Operating profit before
exceptional items 411 1,555 (1,060) 906
Exceptional items -
operating costs - - 1,500 1,500
---------- ----------- ------------ ---------
Operating profit 411 1,555 440 2,406
---------- ----------- ------------ ---------
EBITDA margin before
exceptional items 4.4% 8.4% - 4.5%
---------- ----------- ------------ ---------
Operating margin before
exceptional items 3.3% 5.7% - 2.3%
---------- ----------- ------------ ---------
Segmental assets as at 28 February 2010 were as follows:
Brands Essentials
division division Unallocated Reconciliation Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total
assets 12,942 19,501 14,035 (25,391) 21,087
---------- ----------- ------------ --------------- ---------
The reconciling items relate to the elimination of intercompany
balances of GBP17,486,000 and fixed asset investments of
GBP7,905,000 on consolidation.
Non current asset additions totalled GBP373,000 of which
GBP169,000 related to the Brands division and GBP204,000 related to
the Essentials division.
The Group operates from three main geographical regions: the
United Kingdom, Thailand and Hong Kong.
United Kingdom Thailand Hong Kong Total
2011 2010 2011 2010 2011 2010 2011 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total
revenue 13,693 14,630 19,519 20,242 5,317 4,791 38,529 39,663
-------- -------- -------- --------- -------- -------- -------- --------
Total
assets
by
location 6,247 7,846 10,698 11,206 1,195 2,035 18,140 21,087
-------- -------- -------- --------- -------- -------- -------- --------
Total revenues are allocated based on the country of origin.
No customers represented 10% or more of the Group's revenue
(2010: no customers).
Total assets are allocated based on where the assets are
located.
3. Exceptional items
2011 2010
GBP'000 GBP'000
Exceptional items - operating
costs
Onerous lease provision 280 (1,500)
Brands division restructure 988 -
Essentials division restructure 509 -
------------ ------------
1,777 (1,500)
Exceptional items - finance costs
Financing costs 100 -
------------ ------------
Total exceptional items 1,877 (1,500)
------------ ------------
Operating costs
Exceptional operating costs incurred during the year ended 28
February 2011 comprise:
(i) The onerous lease provision relates to management's
re-assessment of the obligations under the tenancy agreement and
associated unavoidable costs for the Group's former Head Office
premises at Wilmington Grove in Leeds. The Group benefited from a
write-back of exceptional operating costs for the year ended 28
February 2010 of GBP1.5m as a result of the agreement with its
landlord to grant an option to break the lease at the Group's
former Head Office premises at Wilmington Grove in Leeds, in
September 2011.
(ii) The Brands division restructure relates to stock reduction,
redundancy, professional and other costs arising from the
fundamental review of the business and structure of the Brands
division.
(iii) The Essentials division restructure relates to stock
reduction, redundancy, professional and other costs following a
fundamental review of the division, resulting in the consolidation
of the division's sourcing into Thailand.
Finance costs
The re-banking costs in 2011 relate to facility fees and
associated legal costs.
4. Financing costs
2011 2010
GBP'000 GBP'000
Finance costs
- bank borrowings (502) (613)
- interest payable on leased gold facility (20) (17)
- bank charges (344) (221)
--------- ---------
Finance costs (866) (851)
--------- ---------
5. (Loss)/profit per share
The weighted average number of shares is as follows:
2011 2010
Number of shares Number of shares
Weighted average number of shares:
For basic (loss)/profit per share 73,548,641 47,947,545
For diluted (loss)/profit per
share 73,548,641 47,992,545
2011 2010
GBP'000 GBP'000
Financial (loss)/profit for the
year (2,970) 1,555
------------------ ------------------
(Loss)/profit per share
- basic and diluted (4.0)p 3.2p
The loss per ordinary share and diluted loss per ordinary share
are equal because share options are only included in the
calculation of diluted earnings per share if their issue would
decrease net profit or increase the net loss per share.
6. Inventories
2011 2010
GBP'000 GBP'000
Raw materials 3,129 4,410
Work in progress 1,057 592
Finished goods 2,778 3,044
--------- ---------
6,964 8,046
--------- ---------
Inventories include provisions totalling GBP565,000 (2010:
243,000) to write-down the cost on inventories to net realisable
value.
7. Provisions
Onerous lease
GBP'000
At 1 March 2010 1,326
Utilised in year (506)
Provided in the year 280
--------------
At 28 February 2011 1,100
--------------
The onerous lease provision is repayable as follows:
2010
2011 As restated
GBP'000 GBP'000
In one year or less 915 602
Between one and two years 185 724
--------- -------------
1,100 1,326
--------- -------------
The Group had a tenancy agreement for property at Wilmington
Grove, Leeds which did not expire until June 2021. As part of the
reorganisation of the UK business during the year ended 28 February
2009, a decision was made to vacate the premises and management
considered the tenancy agreement to be onerous.
Management have negotiated a break clause for September 2011 and
have reassessed the onerous lease provision.
Management have assessed the obligations under the tenancy
agreement and associated unavoidable costs of GBP1.1m. Management
have not included any income against the cash outflows due to the
sublease potential being assessed as low. The net cash outflows
have been discounted at a rate of 4.5% considered to be markets
current assessment of the time value of money.
8. Called up share capital
The Company's share capital comprises the following shares:
2011 2011 2010 2010
No. of shares GBP'000 No. of shares GBP'000
Authorised:
Ordinary shares of 1p
each 100,000,000 1,000 100,000,000 1,000
Ordinary deferred
shares of 9p each 29,217,691 2,630 29,217,691 2,630
--------------- --------- --------------- ---------
129,217,691 3,630 129,217,691 3,630
--------------- --------- --------------- ---------
2011 2011 2010 2010
No. of shares GBP'000 No. of shares GBP'000
Allotted, called-up
and fully paid:
Ordinary shares of 1p
each 74,142,691 741 74,142,691 741
Ordinary deferred
shares of 9p each 29,217,691 2,630 29,217,691 2,630
--------------- --------- --------------- ---------
103,360,382 3,371 103,360,382 3,371
--------------- --------- --------------- ---------
Details of classes of share capital
Holders of ordinary shares are entitled to attend and vote at
General Meetings and, on a poll, each holder will have one vote per
share. Ordinary shares rank pari passu with each other in respect
of dividends and on a return of capital or a winding up.
Holders of deferred shares are not entitled to receive notice of
or attend at any General Meetings. They are not entitled to receive
a dividend. On a winding-up of the Company they are entitled to the
amount paid up on that share but only after the payment of the
capital paid up on each ordinary share of one pence in the share
capital of the Company and the further payment of GBP10,000,000 on
each such ordinary share. They are not entitled to receive a share
certificate.
9. Share based payments
Total share options granted are shown in the table below:
2011 2010
Weighted Weighted
average average
exercise exercise
Number price Number price
Outstanding at 1 March 45,000 103.00p 83,835 79.26p
Granted during the year 12,330,949 8.60p - -
Lapsed (4,760,474) 7.66p (38,835) 52.00p
------------ ---------- --------- ----------
Outstanding at 28 February 7,615,475 8.53p 45,000 103.00p
These are made up of:
Exercisable at the end
of the year 1,523,095 7.95p 45,000 103.00p
------------ ---------- --------- ----------
Outstanding and subject 6,092,380 8.67p - -
to vesting conditions
at the end of the year
------------ ---------- --------- ----------
The Company had not granted any options under the Executive
Share Option Scheme which, at 28 February 2011, had not been
exercised in respect of ordinary shares. A reconciliation of option
movements over the year to 28 February 2011 is shown below:
2011 2010
Weighted Weighted
average average
exercise exercise
Number price Number price
Outstanding at 1 March 45,000 GBP1.03 83,835 GBP0.79
Lapsed (45,000) GBP1.03 (38,835) GBP0.52
--------- ---------- --------- ----------
Outstanding at 28 February - - 45,000 GBP1.03
--------- ---------- --------- ----------
On 14 April 2010, following approval by the Company's
Remuneration Committee, the Group granted each of its executive
Directors options under the Abbeycrest 2010 Approved Executive
Share Option Plan and the Abbeycrest 2010 Unapproved Executive
Share Option Plan. In total, 9,430,949 Ordinary shares of 1 pence
each in the share capital of the Company were granted for GBPnil
consideration. A further 2,900,000 Ordinary shares of 1 pence each
in the share capital of the Company were granted to executive
Directors and certain employees for GBPnil consideration on 4
November 2010.
The options granted under the Unapproved Plan have an exercise
price of 9.00 pence per Ordinary share. The options granted under
the Approved Plan have an exercise price of 7.38 pence per Ordinary
share. The exercise of options is dependent upon eligible employees
meeting performance criteria. The options are settled in equity
once exercised.
If the options remain unexercised after a period of ten years
from the date of grant, the options expire. Options are forfeited
if the employee leaves the Group before the options vest.
Details of the scheme are given below:
Number Exercise Earliest
Employees of Performance price exercise Expiry
Grant date entitled options conditions (p) date date
Approved
Plan
14 April 14 April 14 April
2010 3 1,219,512 Time served 7.38 2010 2020
4 4
4 November November November
2010 5 580,000 Time served 7.38 2010 2020
Share price 4
4 November target and 30 June November
2010 5 300,000 EPS target 7.38 2011 2020
Share price 4
4 November target and 30 June November
2010 5 933,008 EPS target 7.38 2012 2020
Unapproved
Plan
14 April 14 April 14 April
2010 3 666,677 Time served 9.00 2010 2020
Share price
14 April target and 30 June 14 April
2010 3 2,829,284 EPS target 9.00 2011 2020
Share price
14 April target and 30 June 14 April
2010 3 4,715,476 EPS target 9.00 2012 2020
Share price 4
4 November target and 30 June November
2010 5 570,000 EPS target 9.00 2011 2020
Share price 4
4 November target and 30 June November
2010 5 516,992 EPS target 9.00 2012 2020
The number and weighted average exercise price of share options
under the Approved Plan are as follows:
2011 2010
Number Weighted Number Weighted
average average
exercise exercise
price price
Outstanding at 1 March - - - -
Granted 3,032,520 7.38p - -
Lapsed (813,008) 7.38p - -
---------- ---------- ------- ----------
Outstanding at 28 February 2,219,512 7.38p - -
---------- ---------- ------- ----------
Exercisable at 28 February 986,504 7.38p - -
The number and weighted average exercise price of share options
under the Unapproved Plan are as follows:
2011 2010
Number Weighted Number Weighted
average average
exercise exercise
price price
Outstanding at 1 March - - - -
Granted 9,298,429 9.00p - -
Lapsed (3,902,466) 9.00p - -
------------ ---------- ------- ----------
Outstanding at 28 February 5,395,963 9.00p - -
------------ ---------- ------- ----------
Exercisable at 28 February 536,591 9.00p - -
Charge to the income statement:
2011 2010
GBP'000 GBP'000
Share-based payment charge 41 230
--------- ---------
The share-based payment of GBP41,000 in the year ended 28
February 2011 relates to the grant of options. The share-based
payment of GBP230,000 in the year ended 28 February 2010 relates to
the settlement of liabilities owing to Moorgarth Investments
Limited and Agilo.
2,000,000 Ordinary shares of 1 pence each were issued at 5 pence
per share to Moorgarth Investments Limited in full satisfaction of
a fee payable for entering into a deed of variation for an
operating lease.
2,625,000 Ordinary shares of 1 pence each were issued to Agilo
at an issue price of 5 pence each in full satisfaction of the lump
sum interest charges accrued up to 31 August 2009.
Fair value assumptions of share-based payments
The estimate of fair value of share-based awards is calculated
using the Black-Scholes option pricing model. The following
assumptions were used for options granted during the period:
Approved Unapproved Approved Unapproved
14 April 14 April 4 November 4 November
Grant date 2010 2010 2010 2010
Share price at date
of grant (p) 7.38 7.38 6.13 6.13
Exercise price (p) 7.38 9.00 7.38 7.38
Vesting period (days) 1 605 362 429
Expected volatility 75% 75% 75% 75%
Option life (years) 10 10 10 10
Expected life (years) 3.0 1.8 3.0 1.2
Risk-free rate 1.83% 1.83% 1.05% 1.05%
Expected dividends
expressed as a dividend
yield 0% 0% 0% 0%
The expected volatility is based on the historic volatility of
the Company's share price over the last four years.
10. Related party transactions
The Group has taken advantage of the exemption in IAS24 "Related
party transactions" from disclosing transactions between subsidiary
companies. There are no other related party transactions to
disclose.
11. 2011 Annual Report and Accounts and Notice of Annual General
Meeting
The 2011 Annual Report and Accounts and Notice of Annual General
Meeting will be made available to view on the Company's website at
www.abbeycrest.co.uk later today and will be sent to Shareholders
shortly thereafter. A copy of the document will also be submitted
to the National Storage Mechanism later today and will be available
for inspection at www.hemscott.com/nsm.do.
The Company's Annual General Meeting will be held at the offices
of Pinsent Masons LLP, 1 Park Row, Leeds, LS1 5AB at 2.00 pm on 24
August 2011.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR DKQDKPBKDPAB
Abbeycrest (LSE:ACR)
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Abbeycrest (LSE:ACR)
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