Final Results

Ideal Shopping Direct PLC 10 March 2003 10 March 2003 IDEAL SHOPPING DIRECT PLC ANNOUNCEMENT OF FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002 HIGHLIGHTS Financial • Company now restored to profitability following fire that destroyed entire premises of the business in March 2001. New premises opened in September 2002. • Turnover up 84% to £32.6 million (2001: £17.7 million) for full year. • Pre-tax profit of £3.2 million (2001 £3.6 million loss); includes £2 million exceptional profit (2001: £2.9 million) from settlement of loss of profits claim with insurers. • Operating profit at record £1.2 million (£6.5 million loss). • Gross margins increased to 41.4% (2001: 31.8%) due to the effect of stronger buying power and product mix changes. • Cash at 31 December 2002 at £6.2 million. • Earnings per share 15.5p (2001 : 15.3p loss). Television • Management attention focussed on re-establishing business in the wake of the devastating fire has now resulted in rapid sales growth and return to profitability. • With state of the art new premises and studio facilities the business is in a very strong position to capitalise on an expanding market and to grow from a position of relative strength. Catalogue • Catalogue business recommenced trading during the period and the Board's confidence in this operation has been validated by the activity meeting expectations. • Dedicated specialist management team have been hired which will help to exploit new opportunities that are being identified as a result of television shopping knowledge. New Business • Agreement for Ideal Shopping Direct to provide turnkey operation to broadcast an infomercial style shopping channel for Goldshield Plc from Ideal's premises, 'Goldshield Vitality'. Channel successfully launched in January 2003. • Continue strategy to develop and commercialise new concepts for delivering additional revenue streams through maximising utilisation of existing capital assets. Outlook • Trading in January and February in line with expectations. • Following move into new improved premises in September 2002, the television, catalogue and new business operations are all very well positioned to develop the Company's direct mail order business more comprehensively. Commenting on these results, Paul Wright, Chairman and Chief Executive said: "The last year has been a major turning point for Ideal Shopping Direct as the business moved into its new premises following the devastating fire that destroyed everything back in 2001. We have successfully rebuilt both our television and catalogue businesses and with a return to profitability we have renewed vigour to further build on a solid platform in a market that is fast expanding". "Our core customer values of family, friendship and fun set us apart from our competition and continue to drive the appeal of our products and hence growth of the business. The current year has got off to a good start and I look forward with the rest of the team at the Company to an exciting and prosperous year ahead". ENDS Attached are the Chairman's statement, profit and loss account, balance sheet, cashflow statement and associated notes to the accounts. For further information contact: Ideal Shopping Direct Plc Paul Wright, Chairman and Chief Executive Tel: 08700 780 704 E-mail: paul.wright@idealshoppingdirect.co.uk Web: www.idealshoppingdirect.co.uk IKON Associates Adrian Shaw Tel: 01483 535102 Mobile: 0797 9900733 E-mail: adrian@ikonassociates.com KBC Peel Hunt Adam Hart Tel: 020 7418 8900 Notes for editors • Ideal Shopping Direct runs one of the UK's leading live TV Home shopping channels, Ideal World on digital satellite channel 635 and digital cable NTL channel 855. Ideal World broadcasts 24 hours a day including 16 hours of live programmes daily. The channel can currently be accessed by an estimated household population of approximately 7.4 million homes (digital satellite 6.2 million; digital cable NTL 1.2million). • The Company serves the "direct to home" market through both television and mail order catalogue based products. The Company's products have a quintessentially British feel and are focussed on providing a wide variety of products in an entertaining and appealing way, building on three basic principles: family, friendship and fun. The company is based in Peterborough, Cambridgeshire and employs around 500 staff. • Ideal Shopping Direct Plc has been listed on AIM since February 2000. Its market capitalisation as at close of business on Friday, 7 March 2003 at a share price of 42p was £12.2 million. IDEAL SHOPPING DIRECT PLC FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002 CHAIRMAN'S STATEMENT Introduction I am pleased to present my report for the year ended 31 December 2002. We entered 2002 working in portable cabins temporarily erected in our car park and faced difficult and challenging working conditions. In addition, we continued to endure protracted and frustrating negotiations with our insurers over our claim relating to our loss as a result of the devastating fire that took place on 6 March 2001. Here I am to tell you how we did in 2002 in restoring our traditional catalogue business and how we fared in continuing to drive our live interactive television shopping business, Ideal World, and to review the year ended 31 December 2002. Trading Review I am pleased to report a consolidated pre-tax profit for the year of £3.2 million (versus a loss of £3.6 million in 2001), which represents a significant improvement in the trading position for the Company. The operating profit for the year - a Company record - was £1.2 million, versus a loss of £6.5 million in 2001, on a turnover up from £17.7 million in 2001 to £32.6 million for the year to 31 December 2002. There was an exceptional profit of £2 million for the year as a result of the settlement of the loss of profits claim with our insurers. Both turnover and trading profit were in line with market expectations and I believe this set of results further demonstrates the Company's ability to continue to grow, despite the difficulties it faced, because of its unique position of selling products direct to the public through its catalogue titles and television. As reported at the interim stage, in May, we finally agreed a lump sum settlement of £5.25 million with our insurers to settle the outstanding loss of profits and increased cost of working portion of our claim. This injection of cash into the business has effectively provided financial security and has dissipated concerns over cash flow. During the second half, the business was able to continue to focus on driving sales and I am pleased to tell you that in this period sales totalled £21 million against £12 million for the first six months. Sales in the second half were driven primarily through the growth in sales via our TV shopping channel, Ideal World. Cash at Bank at 31 December 2002 totalled £6.2 million. I would like to thank our shareholders for their loyalty and patience through this difficult period and hope that the achievement of profitability has justified their continued support for the Company (earnings per share at 31 December 2002 of 15.5p. This includes the benefit from the exceptional profit of £2 million and tax credit of £1.3 million. Without these unusual items, it would be approximately 4.1p versus a loss of 15.3p at 31 December 2001). Additional financial highlights are covered in the Finance Director's statement. Television (Ideal World Digital Satellite Channel 635 Digital Cable NTL Channel 855) As announced in previous statements, the focus of management attention in the wake of the devastating fire in March 2001 has been to drive the television shopping business, as the Board was convinced this represented a significant and growing market opportunity. This strategy has been rewarded by rapid sales growth and a return to overall profitability after two years of losses. Whilst both turnover and profits are not at the levels previously envisaged when we established the business as a result of the fire, I believe the current results now demonstrate that the original growth target and estimate of the size of the market opportunity were both reliable and achievable. There are an estimated 26 million television households in the UK with still more than 50% yet to convert to multichannel digital television in the coming years. Currently the channel can be accessed by an estimated household population of approximately 7.4 million homes (Digital satellite 6.2 million; Digital Cable NTL 1.2 million). Whilst estimates as to the time span during which the whole of the UK will be able to access multichannel digital television vary, I believe there can be no turning back. I further believe that our business is in a strong position to continue to grow rapidly in this expanding market. Despite the much reported slowing of the economy and the additional uncertainty surrounding a possible war with Iraq, I am satisfied with our recent trading results in January and February 2003. Our impressive performance for the year ended 31 December 2002 when set against the backcloth of our appalling physical operating conditions for most of that year, reconfirms my belief that the future potential for Ideal World is significant. Now we are re-established in our purpose built premises, we can consolidate our position in the market, exploit newly revealed opportunities and continue to grow from a position of relative strength. Catalogue I reported to you at the interim stage that attempts to dispose of our catalogue operation failed and that the Board believed that it was in the best interests of the shareholders to recommence trading this business in order to maximise shareholder value. The Board was confident that this decision would be validated by a return to profitability and that a number of additional opportunities that existed for this business could begin to be exploited. This is proving to be the case. Whilst turnover for this business was significantly lower than historically was the case because fewer catalogues were produced and distributed, the return on this activity proved satisfactory. In addition we have further augmented the operation by recruiting dedicated specialist management and I believe the business can begin to deliver a reliable and growing contribution to the overall Company's results. The knowledge gained from our television shopping channel is also revealing a number of tantalising new catalogue opportunities. New Business Now that we have moved into our new Headquarters, we can begin to utilize our capital assets during our 'downtime' to begin to deliver new revenue streams. The first example of this strategy is the agreement we have reached with Goldshield Plc that was announced recently. Ideal has provided a 'turnkey operation' to them to launch their own health themed TV shopping channel, which is called 'Goldshield Vitality'. This channel is also broadcast from our own premises. This is an infomercial style shopping channel. Board Changes Paul Jephcott resigned as Finance Director on 26 October 2001 and was replaced by Mike Creedon who joined the Company on 26 March 2002. Staff People count and matter. Once again I think it appropriate on behalf of the shareholders to say a simple thank you to the entire family of staff here at Ideal and to my fellow Executive and Non-executive Directors for their unqualified loyalty, support and dedication through what was a year of challenge and change. Conclusion 2002 was a year to remember. We have built a solid base from which to develop and grow. Necessarily, we focused on driving sales, improving margins and reducing overheads. During the last quarter of 2002, we recognized that in order to fulfill our future potential, it would become necessary to invest in attracting new experienced management and this process has already begun and will continue through the coming months -a process which is made easier by reporting this set of results and the move during September 2002 into our new improved premises from our portable cabins in the car park. I remain even more convinced than ever that the Company is uniquely placed to continue to exploit this exciting and rapidly expanding 'direct to home' market. Paul C Wright Chairman and Chief Executive 10 March 2003 FINANCE DIRECTOR'S REPORT Performance Sales grew in total by 84.9% to £32.6m (2001: £17.7m). Gross margins increased to 41.4% (2001: 31.8%). The effect of stronger buying power and product mix changes are reasons for the improvement in margins. The company achieved an operating profit after interest before taxation, insurance-related income and costs, of £1.2m (2001: £6.5m loss) in line with market expectations. The distribution and administrative costs to sales ratio reduced to 37.1% (2001: 66.5%) due to economies of scale within the business model. The benefit of the insurance claims and proceeds is included within the Consolidated Profit and Loss Account. The amount received net of irrecoverable fire costs in 2002 was £2.0m (2001 : £2.9m) Taxation The company has adopted Financial Reporting Standard 19 (FRS 19 - Deferred tax) for the year ended 31 December 2002. The standard requires the provision for future tax liabilities, which arise mainly as a consequence of capital allowances in excess of depreciation. The standard also requires the recognition of deferred tax assets to the extent that they are regarded as recoverable. The adoption of FRS 19 has resulted in an increase to the profit and loss account of £1.3m due to the tax losses carried forward which will be recoverable in future years. This is further explained in note 2 of this statement. Interest The net interest charge during the year decreased from £0.3m to £0.2m, reflecting the increase in cash flow from the insurance settlement of £5.25m in May 2002. Balance Sheet During the year, £6.5m was invested in replacement fixed assets, resulting from the fire in 2001. This investment was primarily funded by the insurers. Cash Flow and Working Capital The net increase in cash was £2.5m which reflects the insurance settlement and the significant increase in the level of business activity. Treasury and Risk Management The principal risks to the company arise from interest rate fluctuations. No transactions of a speculative nature are entered into. The company finances its operations through a mixture of retained profits and medium and long term asset backed finance. The debt instruments used for fixed asset purchase are all at fixed rates of interest. Cash deposits during the year were placed at fixed rates of interest with varying maturity periods. Mike Creedon Finance Director 10 March 2003 CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2002 2002 2002 2001 2001 £'000 £'000 £'000 £'000 Turnover 32,634 17,651 Cost of sales (19,128) (12,030) Gross profit 13,506 5,621 Distribution costs (1,498) (1,145) Administrative expenses (10,611) (10,598) Business interruption claim income 2,213 3,433 Irrecoverable fire costs (170) (555) Total net administrative expenses (8,568) (7,720) Net operating expenses (10,066) (8,865) Operating profit/(loss) 3,440 (3,244) Net interest (202) (340) Profit/(loss) on ordinary activities before taxation 3,238 (3,584) Tax on profit/(loss) on ordinary 1,273 - activities Profit/(loss) for the financial year 4,511 (3,584) Dividends - - Retained profit/(loss) transferred to/(from) reserves 4,511 (3,584) Basic earnings/(loss) per share 15.5p (15.3)p Diluted earnings/(loss) per share 15.4p (15.3)p There were no recognised gains or losses other than the profit for the financial year. All of the above relates to continuing operations. CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2002 2002 2002 2001 2001 £'000 £'000 £'000 £'000 Fixed assets Tangible assets 8,984 3,209 Current assets Stocks 4,373 1,766 Debtors: amounts falling due within one year 766 4,706 Debtors: amounts falling due after more than one year 1,309 - Cash 6,241 3,745 12,689 10,217 Creditors: amounts falling due within one year (9,562) (7,929) Net current assets 3,127 2,288 Total assets less current liabilities 12,111 5,497 Creditors: amounts falling due after more than one year (4,395) (3,132) Provisions for liabilities and charges (1,140) (300) 6,576 2,065 Capital and reserves Called up share capital 875 875 Share premium 9,975 9,975 Profit and loss account (4,274) (8,785) Shareholders' funds 6,576 2,065 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2002 2002 2001 £'000 £'000 Net cash inflow/(outflow) from operating activities 7,793 (3,296) Returns on investments and servicing of finance Interest received 184 106 Interest paid (170) (173) Finance lease interest paid (216) (273) Net cash outflow from returns on investments and servicing of finance (202) (340) Capital expenditure Purchase of tangible fixed assets (5,795) (1,187) Insurance proceeds in respect of tangible fixed assets - 1,825 Net cash (outflow)/inflow from capital expenditure (5,795) 638 Financing Issue of shares - 3,700 Expenses paid in connection with share issues - (206) Receipts from borrowings 1,395 - Repayment of borrowings (264) (264) Capital element of finance lease payments (431) (338) Net cash inflow from financing 700 2,892 Increase/(decrease) in cash 2,496 (106) NOTES 1. Basis of Preparation The financial information set out above in respect of 31 December 2002 does not comprise full accounts within the meaning of Section 240 of the Companies Act 1985. The financial information contained in this announcement in respect of the year ended 31 December 2002, which was approved by the Board on 10 March 2003, does not comprise statutory accounts which have yet to be signed. Those financial statements have not yet been delivered to the Registrar of Companies, nor have the auditors reported on them. 2. Tax Credit The tax credit represents: 2002 2001 £'000 £'000 Corporation tax at 30% (2001: 30%) 36 - Total current tax 36 - Deferred tax: Origination and reversal of timing differences 849 - Adjustments in respect of prior year (2,158) - Total deferred tax (1,309) - Tax on profit/(loss) on ordinary activities (1,273) - The movement of £1,309,000 on deferred tax results principally in respect of the recognition of a deferred tax asset arising from the Company's cumulative tax losses. It is regarded as more likely than not there will be suitable taxable profits to permit the utilisation of such losses. The asset has been disclosed within other debtors falling due after more than one year because the directors cannot be certain as to the timing of the use of the losses. There is no prior year adjustment in respect of FRS 19 because at 31 December 2001 there was not sufficient certainty that the company would utilise the losses. 3. Dividends No dividends have been declared or paid in respect of 2002 or 2001. 4. Earnings/(Loss) per Share The calculation of the basic earnings/(loss) per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year. The calculation of diluted earnings per share is based on the basic earnings per share adjusted to allow for the issue of shares on the assumed conversion of dilutive options. Reconciliation of the earnings and weighted average number of shares used in the calculations are set out below: Earnings 2002 Per share Weighted amount average pence number of £ shares Earnings attributable to ordinary shareholders 4,511,000 29,025,570 15.5 Dilutive effect of securities: Options - 283,666 - Diluted earnings per share 4,511,000 29,309,236 15.4 Earnings 2001 Per share Weighted amount average pence number of £ shares Earnings attributable to ordinary shareholders (3,584,000) 23,475,570 (15.3) Anti-dilutive effect of securities: Options - 65,616 - Diluted loss per share (3,584,000) 23,541,186 (15.3) By virtue of the loss incurred in 2001, a diluted loss per share calculation is not appropriate. 5. Report & Accounts Copies of the Company's annual report & accounts will be posted to shareholders shortly. This information is provided by RNS The company news service from the London Stock Exchange

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