Half Yearly Report

RNS Number : 5554M

John Lewis Of Hungerford PLC

08 May 2015

 

JOHN LEWIS OF HUNGERFORD PLC

("John Lewis of Hungerford" or the "Company")

Interim results

CHAIRMAN'S STATEMENT

This interim statement covers the six month period to 28 February 2015.

Financial performance

The results we are reporting today reflect the challenges created by the staffing changes previously reported. Whilst the first half year is traditionally our weaker trading period it is particularly disappointing to have to report an operating loss of £174k for the half year, following two consecutive years in which we made a profit in our first half  (2014: £66,000, 2013: £35,000).

The loss reflects that a number of investments have been made in our business to support the delivery of our strategic plan which anticipated continued turnover growth. However, turnover for the period was static at £3.5 million (2014: £3.6 million), due entirely to a decline in like for like sales from our existing estate.

In particular the unplanned departure of three of our highest performing sales people from our top showroom had a significant impact.  This included two of our most experienced designers both of whom elected to pursue alternative careers away from kitchen design.  Addressing this became a focus of management during the period and as a consequence we have had to divert senior resource into the showroom to rebuild the client base and secure a pipeline of activity into the second half year. However, this movement of senior staff has had a knock on effect elsewhere in the company, which is borne out by the result for the period.

Segmental information

Products	2015	2014
	£000	£000
Turnover	3,104	3,123
Cost of sales	(1,307)	(1,333)
Gross margin	1,797	1,790

The results shown above were derived from our total estate which includes sales from the new showrooms that were opened last year.  Combined sales from our two new showrooms of £520,000 achieved business objectives and made a significant contribution to sales. Our bedroom business continues to grow with sales of £143,000 during the period (2014: £105,000) and is gaining a strong reputation with a high number of successful installations completed. It is our intention to create further bedroom display areas over time, as space allows.

As part of our focus on improving sales our other priority has been to review the general productivity and skill levels across the entire sales team. As a result, further salespeople left the business as part of a managed programme. Although, coupled with the unplanned changes referred to above, this has created temporary challenges the Board believes that revitalising sales performance within our mature estate to be a critical component of driving an improved financial performance.

I am pleased to report we are making some progress in addressing these staffing changes, with a number of high calibre people recently recruited. As with all new recruits, it will take some time for them to complete their training.

Installations	2015	2014
	£000	£000
Turnover	444	450
Cost of sales	(323)	(322)
Gross margin	121	128

Our artisan installation service continues to trade in line with kitchen volume, so consequently sales were static for the period.  As well as making a valuable financial contribution we continue to believe controlling the installation process plays a critical role in enhancing customer's experience of the brand.

Investment in the Future

The first half of the year has seen further investment in our existing showroom estate as we focus on rolling out the new contemporary Pure and Urban ranges following successful testing in Fulham and Chiswick. This has led to comprehensive refits at both our Harrogate and Oxford showrooms, improving the competiveness of the offering and generating fresh interest at both locations.

We continue to focus our efforts on meeting the customer demand for our new contemporary products and have three further refits planned for this financial year.

In the factory we have replaced our increasingly unreliable and expensive to maintain spray line of 13 years with new machinery and this investment combined with the purchase of new finishing and sanding technology will stand us in good order to meet future production demands in a competitive way.

Cash flow

Cash at bank and in hand at the end of the period was £863,000 (2014: £720,000) inclusive of customer deposits and advance payments. Our bank loans at the end of the period were £816,000 repayable within 10 years.

Current trading

We believe the best measure of current trading to be the aggregate of our dispatched sales and the forward order book, being committed orders for which deposits have been taken. At the end of the period the aggregate of these stood at £4.3 million in line with the comparable period last year. Our statutory revenue recognition policy remains that we only recognise sales at the point orders are dispatched.

An update on trading will be made in June, following completion of the third quarter, ending 31^st May 2015. Although the second half year is traditionally our stronger trading period we now consider it unlikely that the losses in the first half will be recovered in full and so expect to report a loss for the full year.

New showrooms

Successful new showrooms are dependent on location, product selection and great people.

Whilst we remain vigilant for opportunities in suitable localities our immediate priority is to recruit and train talented salespeople across our existing store portfolio. Once these people are in place and our existing business is secure, your Board believe it may be appropriate to continue with the cautious expansion of our showroom portfolio.

Outlook

The Company maintains its focus on long standing heritage and brand loyalty. The recent change in PR Company has led to improved coverage in key titles and we have seen an improvement in enquiries and interest in the business. The customer journey continues to be at the heart of everything we do for all areas of the Company.

We are fortunate to have a management team with a proven ability to react quickly to both opportunities and threats presented by volatile economic conditions. The business continues to look forward with confidence that once internal staffing issues are resolved we will be able to return to profitable sales growth.

Malcolm Hepworth

Chairman

Enquiries:
Malcolm Hepworth, Chairman	John Lewis of Hungerford plc	01235 774300
Martyn Fraser	Smith & Williamson Corporate Finance Limited	0117 376 2213

INCOME STATEMENT
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2015
								Audited
								Year
			Unaudited 6 months ended					ended
			28 February		28 February			31 August
			2015		2014			2014
			£'000		£'000			£'000
		Note
Revenue			3,548		3,573			7,416
Cost of sales			(1,630)		(1,655)			(3,530)
Gross profit			1,918		1,918			3,886
Selling and distribution costs			(267)		(288)			(499)
Administration expenses:
Share based payments			-		-			(43)
Other			(1,825)		(1,564)			(3,250)
Total			(1,825)		(1,564)			(3,293)
(Loss)/profit before share based payments			(174)		66			137
(Loss)/profit from operations			(174)		66			94
Finance income			3		1			2
Finance expenses			(33)		(17)			(37)
(Loss)/Profit before tax			(204)		50			59
Taxation			-		-			(15)
(Loss)/profit after taxation			(204)		50			44
(Loss)/earnings per share		2
Basic			(0.11)p		0.03p			0.02p
Fully diluted			(0.11)p		0.03p			0.02p
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2015
								Audited
								Year
			Unaudited 6 months ended					ended
			28 February		28 February			31 August
			2015		2014			2014
			£'000		£'000			£'000
(Loss) / profit for the period			(204)		50			44
Total Comprehensive Income			(204)		50			44
BALANCE SHEET
AS AT 28 FEBRUARY 2015
			Unaudited		Unaudited			Audited
			28 February		28 February			31 August
			2015		2014			2014
			£'000		£'000			£'000
Non-Current Assets
Intangible assets			103		129			109
Tangible assets			2,629		2,494			2,690
Trade and other receivables			57		57			57
			2,789		2,680			2,856
Current assets
Inventories			235		214			183
Trade and other receivables			367		274			294
Cash and cash equivalents			863		720			1,490
			1,465		1,208			1,967
Current liabilities			(1,538)		(1,306)			(1,905)
Net current (liabilities)/assets			(73)		(98)			62
Total assets less current
liabilities			2,716		2,582			2,918
Non-current liabilities			(779)		(494)			(777)
Provisions for liabilities
and charges			(31)		(16)			(31)
Net Assets			1,906		2,072			2,110
Equity
Share capital			187		187			187
Other reserves			1		1			1
Share premium account			1,188		1,188			1,188
Retained Earnings			530		696			734
Total Equity			1,906		2,072			2,110
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2015
	Share	Share	Other		Retained
	Capital	Premium	Reserves		Earnings			Total
	£'000	£'000	£'000		£'000			£'000
At 31 August 2013 (Audited)	187	1,188	1		646			2,022
Profit for the period	-	-	-		50			50
At 28 February 2014 (Unaudited)	187	1,188	1		696			2,072
Loss for the period	-	-	-		(5)			(5)
Share based payments	-	-	-		43			43
At 31 August 2014 (Audited)	187	1,188	1		734			2,110
Loss for the period	-	-	-		(204)			(204)
At 28 February 2015 (Unaudited)	187	1,188	1		530			1,906
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2015
			Unaudited		Unaudited			Audited
			6 months		6 months			Year
			ended		ended			ended
			28 February		28 February			31 August
			2015		2014			2014
			£'000		£'000			£'000
(Loss)/Profit from operations			(174)		66			94
Depreciation and amortisation			164		125			288
Share based payments			-		-			43
Increase / (decrease) in inventories			(52)		(22)			9
Increase / (decrease) in receivables			(73)		(37)			(57)
(Decrease) / increase  in payables			(361)		(217)			382
Loss / (profit) on disposal of property plant and equipment			(7)		9			4
Net cash from operating activities			(503)		(76)			763
Cash flows from financing activities			(34)		(36)			280
Cash flows from investing activies			(90)		(290)			(676)
Net (decrease) / increase in cash and cash equivalents			(627)		(402)			367
Net cash and cash equivalents at the start of the year			1,490		1,122			1,123
Net cash and cash equivalents at the end of the year			863		720			1,490
NOTES:
1.        This interim financial statement has been prepared on the basis of accounting policies adopted by the Company and set out in the annual report and accounts for the year ended 31 August 2014. The Company does not anticipate any change in these accounting policies for the year ended 31 August 2015.  As permitted, this interim report has been prepared in accordance with the AIM Rules and not in accordance with IAS 34 "Interim financial reporting".
2.        Basic and fully diluted loss per ordinary share is calculated as follows:
			6 months		6 months			Year
			ended		ended			ended
			28 February		28 February			31 August
			2015		2014			2014
Profit / (loss) attributable to ordinary shareholders (£'000)			(204)		50			44
Weighted average number of shares in issue			186,745,519		186,745,519			186,745,519
Dilution due to share options			-		11,853,752			16,263,222
Shares used to calculate diluted earnings per share			186,745,519		198,599,271			203,008,741
Basic earnings per ordinary share (pence)			(0.11) p		0.03 p			0.02 p
Diluted earnings per ordinary share (pence)			(0.11) p		0.03 p			0.02 p
At 28th February 2015 the basic and diluted loss per share is the same, as the vesting of share option awards would reduce the loss per share and is, therefore, anti-dilutive.
3.        Copies of the 2015 interim accounts will be available to shareholders on the Company's website  www.john-lewis.co.uk

 

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