RNS Number:6995Q
Austin Reed Group PLC
09 October 2003
9 October 2003
AUSTIN REED GROUP PLC
ANNOUNCEMENT OF INTERIM RESULTS
FOR THE PERIOD ENDED 9 AUGUST 2003
Result Highlights
* Profit before taxation including exceptional items of #3.5m
* Profit before tax and exceptionals of #1.1m - reflects the adverse
impact of Regent Street disruption of #0.6m
* Group sales of #56.4m, a decline of 6.5%
* Successful relaunch of the redeveloped Regent Street site on 3
September 2003
* Regent Street sales up 17% since relaunch
* Brand licensing revenue and profits up 35%
* Cost reduction programme generating planned savings
* Sale of non-operational property resulted in an exceptional gain of
#3.3m
* Net assets per share increased to 183p excluding valuation of brands
Roger Jennings, Group Chief Executive, commented:
"We have received a very positive reaction from customers to the new Austin Reed
flagship store in Regent Street and we expect sales to continue to strengthen as
customers rediscover the exceptional product offers and transformed retail
environment.
"The first half was a period of transition as we completed the redevelopment of
Regent Street and implemented a major re-organisation and cost reduction
programme. These changes give a strong foundation for growth and will have an
increasing effect in the remainder of this year and a full impact in 2004 and
beyond."
Enquiries:
Austin Reed Group PLC
Roger Jennings, Group Chief Executive Tel: 020 7534 7703
Geoff Gibson, Group Finance Director
www.austinreedgroup.co.uk
Gavin Anderson & Company
Deborah Walter/Charlotte Stone Tel:020 7554 1400
GROUP OVERVIEW
The first half of the year was, as anticipated, a period of transition for the
Group as we completed the redevelopment of the Austin Reed flagship store in
Regent Street and implemented a major reorganisation and cost reduction
programme. In addition, a number of external factors including the war in Iraq
and SARS, affecting international customers, as well as the congestion charge in
London, contributed to a difficult trading environment, resulting in a more
cautious response from our customers.
Group turnover was #56.4m (2002: #60.3m), a decline of 6.5%, reflecting in part
the disruption caused by the redevelopment of our Regent Street flagship store
which accounted for about #1.1m (27%) of the shortfall. Since our last trading
statement in May, when retail sales had declined by 9% in the 16 weeks up to 17
May 2003, we experienced an improving sales trend enabling retail sales to end
the period 7% down.
Licensing had a strong performance and revenues rose 35% to #1.4m (2002: #1.0m).
Profit before tax and exceptional items was #1.1m (2002: #2.7m). Exceptional
items generated an additional #2.4m of profit before tax, bringing total profit
before tax to #3.5m (2002: #2.7m).
Basic earnings per share, before exceptionals, were 2.5p (2002: 6.0p) and 10.8p
(2002: 6.0p) after exceptionals.
DIVIDEND
The Board has declared an interim dividend of 2.5p, level with last year. The
dividend will be paid on 1 December 2003 to shareholders on the register at the
close of business on 7 November 2003.
AUSTIN REED BRAND
Sales in the first half from the Austin Reed brand in the UK were down on the
previous year by 9.6% in total and 8.7% on a like for like basis. The
anticipated disruption from the Regent Street redevelopment accounted for nearly
40% of the shortfall in total sales, and excluding Regent Street's results,
total sales declined by 7.1%. Sales were also adversely affected by changes in
the structure and delivery pattern of our core ranges. These issues have been
rectified for the second half of the year with increased product choice and
earlier delivery.
The Austin Reed management and senior buying teams have been restructured and we
are confident that the new organisation is effectively addressing the key
issues. As part of this restructuring, we are using the services of Charlie
Allen, a renowned bespoke tailor and designer, and The Bureaux, a fashion trend
and design agency, to revitalise the ranges of both formal and casualwear across
mens and womenswear.
Sales growth was achieved in men's casualwear and women's tailoring and we
continue to achieve improvement in gross profit margins across both men's and
womenswear.
REGENT STREET
Our Austin Reed flagship store in Regent Street was formally relaunched at the
beginning of September, following major redevelopment which has transformed the
retail environment and created 13,000 sq ft of rentable office accommodation.
The new flagship provides an extended range of Austin Reed branded menswear
including classic businesswear, contemporary tailoring, smart casual, weekend
casual, activewear and accessories, together with a womenswear offer focused on
quality tailoring, daywear and occasionwear. In addition, the store is designed
to offer a complete retail experience, which includes Austin's cafe bar,
Equilibrium grooming and treatment rooms for men and women, a new sports area
incorporating a 9-hole putting green, gift collections and a personal shopping
service.
Regent Street represents about 17% of the Austin Reed brand's retail space.
During the first half, as anticipated, sales from Regent Street declined by 22%,
reflecting the disruption caused by the redevelopment. The potential from this
redeveloped store is significant - it has achieved annual sales of over #15m in
the past against sales during the 12 months of the redevelopment period of
#7.8m. In addition, it will positively impact on our brand sales in the rest of
the UK and internationally by strengthening the brand's positioning and
perception as a modern international lifestyle brand.
Initial results are encouraging. In the 5 weeks since the launch, sales have
increased by 17% and the underlying performance, if the results from the third
week - when we experienced unseasonably hot weather - are excluded, gives a
sales growth of 30%.
BRAND LICENSING
One of the highlights of the first half was the excellent performance of the
Group's licensing operations which now include 17 international and brand
extension licence agreements across men's and women's clothing and accessories.
Both revenue and profit were up 35% year on year, at #1.4m and #1.3m
respectively. The total value at retail price of our overseas sales in the first
half was about #80m, underlining the true international value of the brand.
The performance of our new US sportswear and our Japanese casualwear licences
was particularly strong and both have further growth potential. These
developments reflect the successful move by Austin Reed into casualwear.
We actively continue our strategy of developing new markets for the Austin Reed
brand under licence. Shoppers' Stop Ltd, a new licensee for India, is launching
an initial four outlets in Delhi, Bombay and Calcutta in October 2003 and a
further 6 are planned. Additional growth is expected from our international
brand extension licences covering fragrance & bodycare and eyewear. These will
be further strengthened with new ranges next year.
COUNTRY CASUALS BRAND
The Country Casuals business grew by nearly 40% in the 3 years to January 2003
with growth coming from both the Main range and the addition of a focused Petite
collection. This season, the quality classics sector of the market has
experienced difficult trading and this affected Country Casuals' performance. In
the first half, sales were down on the previous year by 6.5% in total and 8.0%
on a like for like basis.
The Petite collection continued to grow and now accounts for 21% of total
Country Casuals sales. We consider that there remains significant further growth
to be achieved from this sector.
Plans are now in place to rejuvenate the Country Casuals Main range, spearheaded
by the appointment of a new design team and to relaunch of the brand in Spring
2004.
The launch of 8 Country Casuals concessions in the Greater Toronto district of
Canada was successfully achieved in early 2003. We are continuing to monitor
performance before commencing the roll out programme which has the potential to
add a further 22 outlets.
REORGANISATION & COST REDUCTION PROGRAMME
A fundamental review to reassess our business model was initiated in January
2003.
Following this review, a major cost reduction programme designed to reduce the
Group's central cost base, was implemented in March 2003. As anticipated, this
programme resulted in the reduction of our total headcount in London and Thirsk
by 19% and delivered the planned cost savings of #0.3m in the first half. We
expect to deliver a further #0.6m savings in the second half and for the full
year ending January 2005, the programme will generate savings of #1.5m.
We have also effectively completed the reorganisation of the management
structure and responsibilities and streamlined our operating processes as
identified in the review. This has resulted in simplified operations and the
refocusing of resources on product design & development and sales.
EXCEPTIONAL ITEMS
The successful sale of a freehold property in Coalville has given an exceptional
profit of #3.3m. The cash consideration of #4.0m is receivable upon completion
of the sale in December 2003. After deducting costs, net proceeds from the sale
are expected to be #3.8m and this value has been included in debtors. The book
value of the property was #0.5m.
During the period, exceptional operating expenses of #0.9m were incurred. These
represent, in part, costs associated with the review of options which followed
an approach in March 2003 which may have led to an offer for the Group. In
addition, redundancy costs associated with the restructuring programme and
settlement costs relating to a longstanding dilapidations claim have been
included in exceptional operating expenses.
The tax credit associated with exceptional items relates only to exceptional
operating expenses. The tax relating to the exceptional gain from the sale of
Coalville property will be completely offset by the allocation of unrelieved
capital losses.
BALANCE SHEET
At 9 August 2003 net assets had increased to #57.5m (2002: #53.3m) representing
183p per share (2002: 169p). These net assets do not include any value attached
to our brands - Austin Reed, Country Casuals and Stephens Brothers.
During the period, fixed asset additions amounted to #7.9m, of which #5.4m
related to the redevelopment of the Regent Street site. As anticipated, this
investment resulted in an increase in net debt. At the end of the period net
debt was #26.4m (2002: #13.2m), which represents gearing of 46% (2002: 25%).
PROPERTY
Throughout 2003, management has continued to focus on maximising value from the
Group's property portfolio.
In February 2003, a freehold store in Leicester was sold and leased back. This
generated proceeds of #0.5m and a profit of #0.1m. In May, we announced the sale
of a freehold property in Coalville, acquired as part of the Country Casuals
acquisition in 1998, which resulted in an exceptional gain of #3.3m.
The Board is currently considering various options for our freehold office
accommodation in Sackville Street adjoining the Regent Street store. This
property is currently valued at #11.1m and options under consideration include
the rental, sale or development of the site. Given the reduced headcount in
London, following the reorganisation, one option under consideration is to move
the Group's offices into the 13,000 sq ft of offices in Regent Street from the
existing 14,400 sq ft in Sackville Street.
OUTLOOK
This year we have undertaken a major reorganisation and put in place new
initiatives that will drive growth through the business.
To regain the dominant market position for Country Casuals, we are repositioning
the ranges and relaunching the brand in Spring 2004. This will be followed by a
significant expansion of the Petite business through launching a wider
collection and increasing distribution in the second half of 2004.
Austin Reed, will continue to maximise the UK and international growth
opportunities from the new Regent Street flagship through promotion and range
extension. Elements of the new flagship store design will also be applied to a
number of key stores and concessions in the UK through a 2-year refurbishment
programme and be incorporated into concessions in international markets.
In addition, for Austin Reed we are designing and developing a new 'soft
tailoring' category for men and 'weekend casual' category for women to be
launched in Spring 2004. Significant changes have also made in our supply chain
management following the reorganisation, one result of which will be improved
buying margins on core ranges in 2004.
In licensing, we will continue to focus on the growth sectors of our existing
licences and on securing new licences. We will benefit in both of these areas
from the impact of the redeveloped flagship store as it promotes and revitalises
the Austin Reed brand image. All licensees attended the launch and plans are in
place to capitalise on the brand's repositioning in international markets.
Current Trading
Total retail sales in the first 8 weeks of the second half are level with the
previous year and down 6% on a like for like basis. The outcome for the second
half and the full year is dependent, as always, on the year end period of
Christmas and the winter sale.
In the first 5 weeks since the relaunch on 3 September, Regent Street has
achieved a 17% sales increase and excluding one unseasonably hot week in mid
September, the average increase is 30%. We expect sales to continue to
strengthen as customers rediscover the exceptional retail offer and the
transformed store.
The first half has been a period of substantial transition as we build the
foundations for future growth. Some of the benefits from this will be seen in
the second half of this year although the full impact will be made next year as
we gain a full year's trading from the new Regent Street store; cost savings of
#1.5m; relaunch of the Country Casuals Main range and Petite collections, and
the redesign and restructuring of the Austin Reed ranges.
Notes to Editors
Austin Reed Group is a fashion retail group managing two exclusive lifestyle
brands:
Austin Reed is a modern quality fashion brand offering men's and women's
formalwear and men's smart casual wear and weekend wear. It has 52 stores
throughout the UK and 36 concessions within department stores. The Austin Reed
brand is also licensed internationally, in the USA, Japan, South Korea, Taiwan,
Thailand, Singapore, Malaysia, Indonesia, Italy and India as well as in the UK.
Country Casuals is a modern classic brand for the 40+ active woman offering
exclusive collections of tailoring and occasion wear. It has 65 stores and 139
concessions throughout the UK. Country Casuals Petite offers a separate range
for women under 5'4".
Austin Reed Group is listed on the London Stock Exchange (ARD.L).
Summarised profit and loss account
Before 28 weeks to 28 weeks to Year to
Exceptionals Exceptionals 9 August 2003 10 August 2002 31 Jan 2003
#'000 #'000 #'000 #'000 #'000
(unaudited) (unaudited) (unaudited) (unaudited) (audited)
___________________________________________________________________________________________________
Turnover 56,390 - 56,390 60,308 116,806
Cost of sales (25,227) - (25,227) (27,236) (53,894)
___________________________________________________________________________________________________
Gross profit 31,163 - 31,163 33,072 62,912
Operating expenses
and other income (29,532) - (29,532) (29,974) (54,627)
Exceptional
operating expenses - (870) (870) - -
___________________________________________________________________________________________________
Operating profit 1,631 (870) 761 3,098 8,285
Exceptional items - 3,255 3,255 - -
___________________________________________________________________________________________________
1,631 2,385 4,016 3,098 8,285
Interest payable (501) - (501) (414) (766)
___________________________________________________________________________________________________
Profit on ordinary
activities before
taxation 1,130 2,385 3,515 2,684 7,519
Taxation (339) 204 (135) (805) (2,070)
___________________________________________________________________________________________________
Profit on ordinary
activities after
taxation 791 2,589 3,380 1,879 5,449
Dividends paid and
proposed
Preference shares (14) (14) (27)
Ordinary shares (770) (774) (2,501)
___________________________________________________________________________________________________
Retained profit
for the financial year 2,596 1,091 2,921
___________________________________________________________________________________________________
Weighted average '000 '000 '000
25p shares in issue
- basic 31,253 31,303 31,245
- diluted 31,581 31,625 31,594
Basic earnings per
25p share
- excluding
exceptional items 2.5p 6.0p 17.4p
- including
exceptional items 10.8p 6.0p 17.4p
Fully diluted
earnings per 25p
share
- excluding
exceptional items 2.5p 5.9p 17.2p
- including
exceptional items 10.7p 5.9p 17.2p
Dividend per 25p share 2.5p 2.5p 8.00p
___________________________________________________________________________________________________
Summarised balance sheet
9 August 10 August 31 January
2003 2002 2003
#'000 #'000 #'000
(unaudited) (unaudited) (audited)
________________________________________________________________________________
Tangible fixed assets 55,052 46,935 49,471
________________________________________________________________________________
Stocks 20,246 18,345 18,121
Debtors 23,708 18,945 20,638
Net debt (26,444) (13,237) (15,253)
Creditors (11,798) (13,594) (13,135)
Dividends and tax (1,532) (2,820) (3,206)
________________________________________________________________________________
Net current assets 4,180 7,639 7,165
________________________________________________________________________________
Provision for liabilities and
charges (1,726) (1,417) (1,726)
________________________________________________________________________________
Net assets 57,506 53,157 54,910
________________________________________________________________________________
Capital and reserves
Called up share capital 8,209 8,206 8,209
Share premium 2,701 2,693 2,701
Revaluation reserve 21,439 21,645 21,439
Retained profit 25,157 20,613 22,561
________________________________________________________________________________
Total shareholders' funds 57,506 53,157 54,910
________________________________________________________________________________
Summarised cashflow statement
28 weeks to 28 weeks to Year to
9 August 2003 10 August 2002 31 Jan 2003
#'000 #'000 #'000
(unaudited) (unaudited) (audited)
________________________________________________________________________________
Profit before interest and
tax 4,016 3,098 8,285
Depreciation charge 1,518 1,447 2,595
(Gain)/loss on disposal of
fixed assets (130) - 79
Other non-cash movements 475 - (39)
Working capital movement
- sale of Coalville property (3,730) - -
- other movements (2,759) (2,988) (4,953)
________________________________________________________________________________
Cashflow from operating
activities (610) 1,557 5,967
Interest paid (544) (642) (956)
Preference dividends paid (14) (14) (27)
Equity dividends paid (1,719) (1,718) (2,500)
Taxation paid (860) (627) (2,142)
________________________________________________________________________________
Net cashflow before investing
activities (3,747) (1,444) 342
Purchase of tangible fixed
assets (7,944) (5,409) (9,724)
Sale of tangible fixed assets 500 - 502
Purchase of own shares - (82) (82)
________________________________________________________________________________
Net cashflow before financing (11,191) (6,935) (8,962)
New shares issued - - 11
________________________________________________________________________________
Movement in net debt (11,191) (6,935) (8,951)
________________________________________________________________________________
Reconciliation of movement in
net debt
Movement in term loan - - -
Movement in cash and cash
equivalents (11,191) (6,935) (8,951)
________________________________________________________________________________
(11,191) (6,935) (8,951)
________________________________________________________________________________
Segment analysis
28 weeks to 28 weeks to
9 August 10 August
2003 2002
#'000 #'000
Turnover by class of business
________________________________________________________________________________
Retail 54,990 59,269
Licensing 1,400 1,039
________________________________________________________________________________
56,390 60,308
________________________________________________________________________________
Turnover by destination
________________________________________________________________________________
United Kingdom 54,601 59,319
Rest of Europe 6 10
North America 999 293
Far East 784 686
________________________________________________________________________________
56,390 60,308
________________________________________________________________________________
28 weeks to 28 weeks to
9 August 10 August
2003 2002
#'000 #'000
Profit/(loss) on ordinary activities
before taxation
________________________________________________________________________________
Retail 1,074 3,203
Licensing 1,312 974
Common costs (755) (1,079)
Interest (501) (414)
________________________________________________________________________________
1,130 2,684
Exceptional operating
expenses (870) -
Exceptional items 3,255 -
________________________________________________________________________________
3,515 2,684
________________________________________________________________________________
The accounting policies and practices applied in this interim report are
consistent with those set out in the audited accounts for the year ended 31
January 2003.
The financial information included in this interim report does not comprise
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The statutory accounts for the year to 31 January 2003, on which the auditors
gave an unqualified opinion, have been filed with the Registrar of Companies.
This interim report will be sent to all shareholders of listed securities on the
register and copies will be available on request to members of the public from
our registrars Capita Registrars , Northern House, Woodsome Park, Fenay Bridge,
Huddersfield HD8 0LA.
This information is provided by RNS
The company news service from the London Stock Exchange
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