Final Results

RNS Number : 1109J

John Lewis Of Hungerford PLC

28 November 2008

 



28 November 2008

John Lewis of Hungerford plc

Final results - year ended 31 August 2008

2008 HIGHLIGHTS

• Sales increase 1% to £4,577,045 (2007 - £4,522,907).

• Net cash inflows from operating activities £236,158 (2007 - £214,703).

• Loss before taxation, share based payments and exceptional expenses

  £(95,925) (2007 - profit £309,772).

COMPANY PROFILE

John Lewis of Hungerford plc ("the Company") designs, manufactures, and retails kitchens, furniture and architectural components direct to the public from its own showrooms throughout the United Kingdom and one Company managed concession.

Manufacturing and administration is carried out from a purpose built factory at Wantage, Oxfordshire constructed in 1998.

The Company's core product line is the "Artisan®" range of kitchens and furniture. In recent years the Company expanded its line of branded products to include the retro style Crème de la Crème kitchen. Over the last year the range has been further expanded to include the Shaker Natural Oak and Walnut collection, the Steamer Bay coastal range and the Cool urban kitchen.

In addition the Company operates a United Kingdom direct mail order business, under the name of Just Doors for replacement kitchen cabinet doors. This is now managed through a licensing agreement set up in March 2007.

For more information about the Company and its products visit our web sites:

www.john-lewis.co.uk 

www.justdoors.co.uk

  CHAIRMAN'S STATEMENT

This is my first report as Company Chairman.

Firstly I would like to acknowledge John Lewis's contribution both as Chairman and as Chief Executive.

John can look back with a great deal of pride and satisfaction on what has been achieved, not just building up John Lewis of Hungerford as a business from scratch, but also the fact it has become a well known, respected and trusted brand, on the high street and in the kitchen industry.

John will continue to contribute to John Lewis of Hungerford plc as a Non Executive Director.

It was also announced in August 2008 that Richard Worthington would step down as Finance Director.

Richard has been with the Company for over 15 years. In that time he has made a significant contribution. It was agreed that now was the right time to seek to appoint a Finance Director who can commit more time to the needs of the business than Richard was able to offer, because of his other public company commitments.

The search for Richard's successor is well advanced. In the meantime his services will continue to be available to us to ensure continuity.

The Board would like to express its thanks to Richard Worthington for all he has achieved within the business.

Jonathan will cover both sales and profit performance in the Business Review that follows.

This year has proved to be very challenging. Our Executive team has been involved in laying very strong foundations to enable the business to grow both sales and revenue in the future.

The main achievements have been the opening of two new showrooms; one in Oxford and the other in Cambridge. Both were opened on time and to agreed costs, and are trading at expected levels, and generating positive customer feedback.

The Company's IT systems have been completely overhauled. Installation of Windows SBS (small business server), SMART (market leading kitchen industry software platform) and SAGE (accountancy software package) were all implemented on time and to agreed costs.

Management's focus for the current year to 31 August 2009 is to use the foundations that have been laid in 2007/08 and drive sales and revenue growth.

At the time of writing this report, the kitchen industry is facing many challenges in a tough trading climate. Your Board believes we are well placed to handle those challenges.

Malcolm R. Hepworth

Non Executive Chairman

  MANAGING DIRECTOR'S BUSINESS REVIEW

Overview

The year to 31 August 2008 has been challenging, but significant progress has been made in a number of areas within the business.

Management focus during the year has been on maintaining sales growth and controlling costs. In what has been a difficult year, much transitional work has been undertaken and completed to underpin the stability of the business.

Summary of Financial Results

Sales increased to £4,577,045 from £4,522,907 in the prior year.

The loss for the year before share based payments, exceptional items and taxation credit amounted to £95,925 (2007 - £309,772 profit).

Cash generated from operations for the year was £236,158 (2007 - £214,703).

At the balance sheet date cash at bank stood at £942,109 (2007 - £784,842) and net funds were £655,893 (2007 - £477,967).

Sales and Products

At 31 August 2008 the Company traded from 9 showrooms and one concession site. During the year, two new showrooms were opened. The first in Cambridge on the 26 April and the second in Oxford on the 7 June. During the year the concession site in Debenhams of  Glasgow was closed as planned.

Overall sales for the year increased by 1% over the prior year to £4,577,045. Unit sales of kitchens fell by 10% but this was offset by a growth in invoice value which was achieved with additional sales of bought in products such as appliances and worktops which tend to achieve a lower gross margin. As a consequence of this change in the overall sales mix, gross margins for the current year were 53.5% against 61.5% in the prior year.

Some improvement in margins was seen in the fourth quarter of the current year as a result of management action to pricing once the impact of the changes to the sales mix had become evident. As a result, gross margins for the second half of the year were 56.2% compared to the 50% achieved in the first half. Maintaining the gross profit percentage achieved in the second half of the current year is seen as realistic for the next 12 months, and there are three strands of activity underway to deal with this change to the sales mix.

Firstly, a feasibility study is underway to assess the viability of manufacturing in house some items which are currently bought in, commencing with certain worktop products. Secondly, increasing the utilisation of our manufacturing asset by the roll out of the Cool kitchen, tested successfully in a number of locations earlier this year, together with the development of further new internally manufactured kitchen ranges and the launch of an on-line shop featuring new and existing furniture lines. Thirdly, a reduction in the cost base to reflect the changes in the operating model.

Following a first half which saw sales increase by 12%, sales in the second half of the year were £2,445,163, a 4% decrease on the second half last year. The primary reason for the decline in second half sales was a very poor third quarter of £841,840, a fall of 23% on the third quarter last year. Sales recovered somewhat in the final quarter achieving a 5% increase on the final quarter last year.

A major contributing factor to the fall off in sales for the third quarter was the need to press ahead with the installation of new operating software and hardware due to the increasing instability of the old system. This resulted in a major but vital heart transplant for the business across all functions. The implementation was completed on time and to budget, but this change did bring considerable short term disruption to the business. This initiative, together with the decision not to run the Spring Sale due to the change in systems meant the focus on sales was not at the usual level during this time.

Marketing

During the year we introduced a new brochure incorporating all our new product lines. The Company web site has also been comprehensively re-developed and now includes a transactional element. This is part of our ambition to make the John Lewis of Hungerford brand more accessible to its target audience.

Customer Service

Customer service remains of paramount importance to us. We are a service business with a very loyal and 'repeat customer' base and positive word of mouth recommendation is essential to our growth. This area has been a major focus for management during the year. We are seeing a sustained improvement in the quality of after sales service to our customers and a corresponding low level of customer complaints.

Manufacturing and distribution

We currently have an annual in-house manufacturing capability of some £7 million at our manufacturing and distribution facility at Wantage. We are currently investigating the feasibility of manufacturing timber worktops in house as the manufacturing process fits well with our existing skill base.

Showrooms

As mentioned earlier in this report, two new showrooms were opened during the year. There are no plans to open any more showrooms in the short term whilst the economic climate remains uncertain, although there is refurbishment work planned for the Fulham and Tunbridge Wells showrooms. Our long term ambition remains to open a minimum of two showrooms a year , once the economic environment improves.

Systems

During the year, as reported above, we completed installation of a new order processing and management information system. This system now provides the framework to underpin our growth plans, provide customers and designers alike with a higher standard of information and give our management team greater visibility on the key performance indicators within the business.

Staff

Key to the Company's performance, is our small team of dedicated employees. I would like to express my thanks to all the Company's management and staff for their hard work and commitment which has contributed significantly to the Company's progress.

The Future

Continuing weakness in the UK housing market and a deteriorating general economic outlook has resulted in an exceptionally challenging trading environment, but our recently enhanced product offering, predominately UK based supply base and our strong brand credentials mean we are well positioned against many competitors within the sector.

Jonathan S Rosby

Managing Director

Profit and Loss Account for the year ended 31 August 2008

	2008	2007
	£	£
Turnover	4,577,045	4,522,907
Cost of sales	(2,129,247)	(1,740,579)
	-----------	-----------
Gross profit	2,447,798	2,782,328
Distribution costs	(518,946)	(527,564)
Administrative expenses
Share Based Payments	(143,633)	(41,537)
Exceptional expenses	(91,511)	(43,734)
Other	(2,019,475)	(1,931,569)
	-----------	----------
Total	(2,254,619)	(2,016,840)
Operating (loss)/profit before share based payments and exceptional expenses	(90,623)	323,195
Operating (loss)/profit	(325,767)	237,924
Interest receivable and similar income	17,219	7,453
Interest payable and similar charges	(22,521) -----------	(20,876) -----------
(Loss)/Profit on ordinary activities before taxation	(331,069)	224,501
Tax on (loss)/profit on ordinary activities	50,704	(55,849)
		-----------
Retained (loss)/profit for the financial year	(280,365)	168,652
	----------	----------
(Loss)/earnings per share
Basic	(0.17)p	0.11p
Fully diluted	(0.17)p	0.11p

The profit and loss account has been prepared on the basis that all operations are continuing operations. 

There are no recognised gains and losses other than those passing through the profit and loss account.

  Balance Sheet as at 31 August 2008

		2008		2007
	£	£	£	£
Fixed assets
Intangible assets		16,606		20,976
Tangible assets		1,846,033		1,609,255
		---------		---------
		1,862,639		1,630,231
Current assets
Stocks	580,868		565,780
Debtors	216,509		249,413
Cash at bank and in hand	942,109		784,842
	---------		---------
	1,739,486		1,600,035
Creditors: amounts falling due within one year	(1,170,209) ---------		(1,004,794) ---------
Net current assets		569,277		595,241
		---------		---------
Total assets less current liabilities		2,431,916		2,225,472
Creditors: amounts falling due after more than one year		(263,466)		(285,870)
Provisions for liabilities and charges		(52,898)		(55,568)
		---------		---------
Total net assets		2,115,552		1,884,034
		=======		=======
Capital and reserves
Called up share capital		186,745		148,745
Share premium account		1,188,021		824,771
Share based payment reserve		170,170		41,537
Other reserves		1,421		1,421
Profit and loss account		569,195		867,560
		---------		---------
Shareholders' funds - all equity interests		2,115,552  =======		1,884,034  =======

The financial statements were approved and signed on behalf of the Board of Directors on 27 November 2008.

Malcolm R Hepworth            Jonathan S Rosby

Director                                Director

  Cash Flow Statement for the year ended 31 August 2008

		2008		2007
	£	£	£	£
Net cash inflow from operating activities		236,158		214,703
Returns on investments and servicing of finance
Interest received	17,219		7,453
Interest paid	(22,521)		(20,876)
	--------		--------
Net cash outflow from returns on investments and servicing of finance		(5,302)		(13,423)
Corporation tax paid		(48,034)		(22,337)
Capital expenditure
Payments to acquire tangible fixed assets	(388,146)		(44,726)
	---------		---------
Net cash outflow from capital expenditure		(388,146)		(44,726)
Equity dividends paid		-		-
		---------		---------
Net cash (outflow)/inflow before financing		(205,324)		134,217
Financing
Issue of new shares	383,250		-
Repayment of Bank Loan	(20,659)		(20,445)
	--------		--------
Net cash inflow/(outflow) from financing		362,591  ---------		(20,445) ---------
Increase in cash		157,267  =======		113,772 ======

1. Preliminary Results

The preliminary results have been extracted from the Company's audited accounts which have been approved and signed by the directors and auditors but have not yet been delivered to the Registrar of Companies. The audited accounts have been prepared under the historical cost convention using the accounting policies set out in the Company's 2008 statutory financial statements.

2. (Loss)/earnings per Share
	2008	2007
(Loss)/earnings per ordinary share is calculated as follows:
Basic
(Loss)/profit attributable to ordinary shareholders	£(280,365)	£168,652
Weighted average number of ordinary shares in issue	167,474,286	148,745,519
(Loss)/earnings per ordinary share	(0.17)p	0.11p
	------------	------------
Fully diluted
(Loss)/profit attributable to ordinary shareholders	£(280,365)	£168,652
Weighted average number of ordinary shares in issue	167,474,286	151,770,461
(Loss)/earnings per ordinary share	(0.17)p	0.11p
	------------	------------
Weighted average number of ordinary shares in issue - basic calculation	167,474,286	148,745,519
Weighted average potential ordinary shares	-	3,024,942
	------------	------------
- fully diluted calculation	167,474,286	151,770,461
	===========	============

All potential ordinary shares are currently anti-dilutive because the Company has reported a loss from continuing operations for the current year, and therefore have been excluded from the diluted earnings per share calculation.

3.  Reconciliation of Movement in Shareholders' Funds
	2008	2007
	£	£
(Loss)/Profit for the financial year	(280,365)	168,652
Share based payments	128,633	41,537
Dividends	-	-
Issue of new shares	383,250	-
	----------	----------
Net addition to shareholders' funds	231,518	210,189
Opening shareholders' funds	1,884,034	1,673,845
	-----------	-----------
Closing shareholders' funds	2,115,552	1,884,034
	========	========

4. 2008 Report and Accounts

Copies of the 2008 report and accounts will be sent to shareholders in due course. Further copies will be available from the Company's nominated adviser, Smith & Williamson Corporate Finance Limited, 25 Moorgate, London, EC2R 6AY for one month from the date of this announcement.

5. Copy of Announcement

A copy of this announcement will be available from the Company's nominated adviser, Smith & Williamson Corporate Finance Limited, 25 Moorgate, London, EC2R 6AY for one month from the date of this announcement.

 

END

 

 

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