Final Results

Actif Group PLC 20 October 2004 Actif Group plc Preliminary results for the year ended 31 July 2004 Summary • Turnover up 7.8% to £27.6 million (2003: £25.6million) • Composite gross margins have decreased to 41.6% from 44.9% as a result of the increasing amount of wholesale and agency business within the Group • Total operating costs increased by 2.9% to £11.3m (2003: £11.0m) • Operating profit of £189,000 (2003: £472,000) • Profit before tax of £85,000 (2003: £333,000) • Basic earnings per share of 0.10p (2003: 0.51p) • Cash generated from operating activities of £0.6m (2003: £1.8m) • Net debt increased by 21.5% to £1.36m (2003: £1.12m) • New store opening programme continued Commenting on these results, David Brock, Chairman said: 'This has been a very disappointing year for the Group. The wholesale business has recovered strongly on the back of opening major new accounts, but the second half performance of our retail business is unacceptable. The necessary actions have been taken to address product weaknesses that contributed to the poor sales performance. The strategy of developing the wholesale and retail sales channels in tandem remains sound and we continue to be confident in the ELLE brand's on-going appeal and market opportunity within the UK and Europe'. Enquiries: Actif Group plc (020 7436 3330) gcg hudson sandler (020 7796 4133) Mark Evans, Chief Executive (m: 07977 018007) Jessica Rouleau / James Sumpster Julian Ghinn, Group Finance Director Chairman's statement The results for the twelve month period to 31 July 2004 represent a very disappointing set back to the profit recovery of the Group, especially given the promise of the first half performance. Weak trading in ELLE retail stores in the late spring and early summer acted as a severe profit depressant on the Group's performance overall. The necessary actions have been taken to address the evident product weaknesses in our ELLE retail collections that contributed to the poor sales performance. The unacceptable performance in our retail activity detracts from the continued underlying progress we are making with our strategy of the tandem development of wholesale and retail sales channels against a backdrop of strong cost management and cash control. We are very pleased with the sustained growth of our wholesale business, and remain confident in the ELLE brand's continued appeal and market opportunities in the UK and European markets in which we operate. Results In the twelve months to 31 July 2004, total Group turnover increased by 7.8% to £27.6m (2003: £25.6m). Composite gross margins have decreased to 41.6% from 44.9% as a result of the wholesale business accounting for a higher proportion of sales than in the prior period. Following the addition of new retail space, costs have increased by 2.9% to £11.3m, representing 40.9% of sales (2003: 42.8% of sales). Total profit before tax decreased by 74% to £85,000 (2003: £333,000) and basic earnings per share were 0.1p (2003: 0.5p). The Group generated £0.6m of cash from operating activities, but net debt rose to £1.4m (2003: £1.1m) following capital expenditure of £0.6m (2003: £1.0m). ELLE Retail Total retail sales in the period decreased by 4.9% to £15.4 million (2003: £16.2 million), which is down by 10.7% like-for-like on an underlying basis. The retail business was affected by a poor performance from our high summer ranges, especially within the Tops category, which accounts for approximately 50% of the retail sales mix. This was compounded by difficult market conditions, particularly in the second half of the year. Retail gross margins are below the comparative period at 58.0% (2003: 59.0%), reflecting an increased need for markdowns to clear slow moving stock. Four new Elle stores opened in the period under review, one short term lease ended and one loss-making store was closed. We also opened five new concessions within the House of Fraser, Allders and Beatties department store groups. ELLE Wholesale Wholesale revenues from our ELLE collections in the period have increased by 32.4% to £7.2 million (2003: £5.4 million). Our strongest product categories within wholesale were sportswear and swimwear, which grew by 49%, following a very successful Spring / Summer season in the UK and continued growth in the key European markets of Spain and France. The other category that is driving wholesale sales performance is nightwear, which lifted 25% on the previous year following a strong Autumn / Winter 2003 season. Wholesale gross profit margins have improved to 30.9% (2003: 29.9%) mainly as a result of changes in the sales mix in favour of product categories that are sold direct or through agents, rather than through distributors at lower margin. Costs Operating costs have increased by 2.9% to £11.3m (2003: £11.0m), which represents 40.9% of sales (2003: 42.8% of sales). Retail operating costs increased by 11.3% to £7.9m, equating to 51.3% of retail sales (2003: £7.1m and 43.8% of sales). This adverse movement on the ratio to sales is reflective of the decrease in retail sales, compounded by the addition of new retail space, where we have yet to see mature revenues. Following the Group's changed approach to wholesale activity that was outlined in our 2003 interim statement, total central overhead was successfully reduced by 10.5% to £3.4m or 12.3% of total sales (2003: £3.8m and 14.8% of total sales). Cash flow Net cash flow from operating activities has decreased by 70% to £0.6m (2003: £1.8m). Capital expenditure decreased to £0.6m (2003: £1.0m) as a result of the scaling back of the prime store opening programme. Projects completed in the year include the new stores in Birmingham, Glasgow, Gunwharf Quays and York; 5 new concessions; the refit of the Bluewater store; and additional retail display equipment. Total working capital has been increased by 8.8% to £3.7m (2003: £3.4m). This increase in working capital is a combination of the following: a 13.4% increase in stock levels to £3.8m (2003: £3.4m), reflecting the increased size of the wholesale business; a 15.8% rise in debtors to £4.4m (2003: £3.8m) and an 18.4% rise in trade and other creditors to £4.5m (2003: £3.8m), mainly due to the increase in stock levels. As a result of the movements outlined above, net debt has increased by 21.5% to £1.4m (2003: £1.1m), resulting in a gearing ratio at the year end of 32% (2003: 27%). Our People On behalf of the Board I would particularly like to thank the Actif Group team. Despite what has been a very challenging and somewhat frustrating year, the teams have demonstrated real determination to learn from our experiences and constantly to strive to make improvements to all areas of the business. Current trading and prospects As at the end of September, overall Group sales were 9% ahead of last year, and Group profits were in line with plan. In our retail business, the difficult trading conditions that we saw in the final quarter of the last financial year continued through August. In common with a number of other fashion businesses, we were up against very strong comparatives from the previous year, when the hot, sunny weather stimulated continued demand for high summer product. As a result, for the 11 weeks to 16th October, our retail business is showing a 14% decrease in both total sales and on a like-for-like basis. Since the end of August we have seen an encouraging reaction to our Autumn / Winter ranges and trading is on an improving trend. Over the past 6 weeks, like-for-like sales are now level with last year. Within wholesale, we have seen overall sales growing in line with expectations and in the two months since the year end wholesale sales have increased by 48% on last year. We are now taking orders for our Spring / Summer 2005 wholesale collection and are seeing indications that our customers are cautious about the prospects for this season, a direct reflection of the difficult season we have just experienced. Whilst we are still expecting sales to increase on last year, the rate of increase is likely to be slower than the past two seasons. September saw the opening of our latest ELLE store in the new Centrale centre in Croydon. We do not anticipate opening any further ELLE stores in the current financial year, but we will continue to follow up potential sites with landlords to ensure we do not miss out on any genuine opportunities in our target catchments. We are also committed to expanding the number of ELLE concessions during the year. Our overall focus and task remains the same: to continue to act for the long term, managing a young, emerging business through to a position of sustained profit and enhanced shareholder value. David Brock Chairman 19 October 2004 Group profit and loss account For the year ended 31 July 2004 Unaudited Audited Notes 2004 2003 £'000 £'000 Turnover 2 27,643 25,575 Cost of sales (16,135) (14,102) __________ __________ Gross profit 11,508 11,473 Other operating expenses (net) (11,319) (11,001) __________ __________ Operating profit 189 472 Interest payable and similar charges (104) (139) __________ __________ Profit on ordinary activities before taxation 85 333 Taxation (22) - __________ __________ Profit for the financial year 63 333 __________ __________ Earnings per share 3 Basic earnings per share 0.10p 0.51p __________ __________ Adjusted basic earnings per share 0.10p 0.59p __________ __________ Diluted earnings per share 0.09p 0.49p __________ __________ Adjusted diluted earnings per share 0.09p 0.56p __________ __________ All amounts relate to continuing activities. Group balance sheet As at 31 July 2004 Unaudited Audited 2004 2003 £'000 £'000 Fixed assets Intangible assets 42 44 Tangible assets 1,896 1,888 __________ __________ 1,938 1,932 Current assets Stocks 3,840 3,385 Debtors 4,374 3,810 Cash at bank and in hand 6 5 __________ __________ 8,220 7,200 Creditors: amounts falling due within one year (5,270) (4,643) __________ __________ Net current assets 2,950 2,557 __________ __________ Total assets less current liabilities 4,888 4,489 Creditors: amounts falling due after more than one year (610) (285) __________ __________ Net assets 4,278 4,204 __________ __________ Capital and reserves Called up share capital 666 657 Share premium account 4,326 4,322 Other reserves 89 89 Profit and loss account (803) (864) _________ _________ Shareholders' funds - all equity 4,278 4,204 __________ __________ Group cash flow statement For the year ended 31 July 2004 Unaudited Audited Notes 2004 2003 £'000 £'000 Net cash inflow from operating activities 4 554 1,818 Returns on investments and servicing of finance (104) (139) Capital expenditure and financial investment (646) (981) __________ __________ Net cash (outflow) / inflow before financing (196) 698 Financing 645 (252) __________ __________ Increase in cash in the year 5 449 446 __________ __________ Notes: 1. Basis of preparation This summary financial information comprises that of Actif Group plc and its UK and overseas subsidiaries for the year ended 31 July 2004. The preliminary announcement, which does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985, is an extract from the Group statutory accounts for the year ended 31 July 2004, which will be delivered to the Registrar of Companies in due course. The auditors have not yet reported on those accounts. The results for the year ended 2 August 2003 have been extracted from the statutory accounts for that period, which have been delivered to the Registrar of Companies and on which the auditors gave an unqualified report. 2 Segment information The turnover and profit before taxation are attributable to the Group's principal activity, being the design, contracted manufacture, wholesale and retail of high quality fashion clothing. a) Analysis of turnover by destination: Unaudited Audited 2004 2003 £'000 £'000 United Kingdom 26,430 24,577 Overseas - European community 1,075 680 Overseas - Non European community 138 318 __________ __________ 27,643 25,575 __________ __________ b) Classes of business Year ended 31 July 2004 Retail Wholesale Third party Group sourcing £'000 £'000 £'000 £'000 Turnover 15,368 7,202 5,073 27,643 Cost of sales (6,460) (4,978) (4,697) (16,135) __________ __________ __________ __________ Gross profit 8,908 2,224 376 11,508 Common costs __________ __________ __________ (11,319) __________ Operating profit 189 Net interest payable (104) __________ Profit before taxation 85 __________ Year ended 2 August 2003 Retail Wholesale Third Group arty Sourcing £'000 £'000 £'000 £'000 Turnover 16,183 5,441 3,951 25,575 Cost of sales (6,628) (3,816) (3,658) (14,102) __________ __________ __________ __________ Gross profit 9,555 1,625 293 11,473 Common costs __________ __________ __________ (10,951) __________ Operating profit 522 Exceptional costs (50) Net interest payable (139) __________ Profit before taxation 333 __________ 3 Earnings per ordinary share The calculations of earnings per share is based on the earnings for the financial period attributable to equity shareholders and the weighted average number of ordinary shares as follows: 2004 2003 Weighted average number of shares: Number Number For basic earnings per share 65,602,836 65,344,571 __________ __________ For diluted earnings per share 69,304,719 68,449,120 __________ __________ Adjusted earnings per share has been calculated after excluding the impact of exceptional items after taxation and the amortisation of goodwill. This has been disclosed to provide shareholders with a better indication of the underlying performance of the Group. Basic/diluted Adjusted 2004 2003 2004 2003 £'000 £'000 £'000 £'000 Profit for the financial year 85 333 85 333 Less taxation (22) - (22) - __________ __________ __________ __________ 63 333 63 333 Exceptional costs - - 50 Amortisation of goodwill - - 3 3 __________ __________ __________ __________ 63 333 66 386 __________ __________ __________ __________ 4 Reconciliation of operating profit to operating cash flows Unaudited Audited 2004 2003 £'000 £'000 Operating profit 189 473 Depreciation charges 697 781 Amortisation of goodwill 3 3 Profit on disposal of fixed assets (4) - (Increase) / decrease in stock (455) 40 Increase in debtors (587) (122) Increase in creditors 711 671 Foreign exchange loss relating to non-operating activity - (28) __________ __________ Net cash inflow from operating activities 554 1,818 __________ __________ 5 Reconciliation of net cash flow to net debt Unaudited Audited 2004 2003 £'000 £'000 Increase in cash in the year 449 446 Cash (inflow)/outflow from decrease in debt and lease financing (745) 252 __________ __________ Change in net debt resulting from cash flows (296) 698 New finance leases 56 - __________ __________ Movement in net debt in year (240) 698 Net debt at 2 August 2003 (1,116) (1,814) __________ __________ Net debt at 31 July 2004 (1,356) (1,116) __________ __________ 6 Annual General Meeting The Annual General Meeting will be held at 20 Little Portland Street, London W1W 8AA on 21 December 2004 at 12 noon. 7. Report and Accounts The annual report and accounts for the year ended 31 July 2004 is being sent to shareholders and will be available, free of charge, from the registered office of the Company at 20 Little Portland Street, London W1W 8AA. This information is provided by RNS The company news service from the London Stock Exchange

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