Final Results

Actif Group PLC 31 October 2001 31 October 2001 ACTIF GROUP PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2001 Operational Summary * Turnover up 73% to £24.4 million (2000: £14.1 million) * Pre-tax loss £1.98m resulting largely from the costs associated with the launch and subsequent closure of the Joe Boxer brand in the UK * Gross margin increased from 36.2% to 41.2% due to the increased proportion of retail business * Major cost reduction programme completed * Mark Evans, new Chief Executive, appointed 1st August 2001 * Stabilisation of trading in second half - particularly as a result of improving contribution from core ELLE brand * Two prime ELLE stores and 14 ELLE concessions opened * ELLE licence re-aligned to strengthen retail rights in UK and relinquish non-core products and territories * Post year end like-for-like retail revenues ahead of comparable period last year and wholesale like-for-like revenues in line with budget David Brock, Chairman of Actif Group, commented: 'The Board has taken significant steps to improve our performance in the short and longer term. I am pleased to report a stabilisation of the trading performance in the second half and since the year-end sales have been in line with expectations. While it has been a difficult year for the Group we believe that we are well placed to exploit the potential of the ELLE brand and restore profitability to our core business.' Enquiries: Actif Group plc Hudson Sandler Mark Evans, Chief Executive Piers Hooper Simon Banfield, Finance Director Tel: +44 (0) 20 7436 3330 Tel: +44 (0) 20 7796 4133 31 October 2001 ACTIF GROUP PLC ('ACTIF' OR THE 'COMPANY') PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JULY 2001 CHAIRMAN'S STATEMENT This has been a disappointing year for the Group, having recorded a pre-tax loss of £1.98 million and is the result of a number of contributing factors, the most important of which has been the cost associated with the launch and subsequent closure of the Joe Boxer brand in the UK. Of the pre-tax loss for the period £1.19 million is attributable to the Joe Boxer operation which has now been terminated. Lower than expected sales from our core ELLE brand, as a result of the prevailing difficult market conditions in the first half of the year as well as a disappointing reaction to our Spring/Summer range, also had a negative impact. In the second half of the year the Board has taken significant steps to improve our performance in the short and longer term. We now have a new Chief Executive, Mark Evans, who joined on 1st August 2001 and he has already made a substantial contribution to the business. We have undertaken an extensive review of the cost base and have completed a major cost reduction programme, which will significantly reduce central overheads going forward. Additionally we have extended and amended our licence agreement with ELLE to operate retail for a further two years while strengthening our retail rights in the UK. I am pleased to report that we have seen a stabilisation of the trading performance in the second half of the year, with an operating profit before exceptional items of £193,000 in comparison to the operating loss before exceptional items in the first half of £757,000. Financial Performance Group turnover for the period increased by 73% to £24.4 million (2000: £14.1 million) reflecting the increase in the number of stores and concessions. Composite gross margin has increased from 36.2% to 41.2% as a result of the retail business accounting for a greater proportion of sales than in the prior period. The Group operating loss of £1.1 million includes an operating loss of £523,000 incurred by the Joe Boxer business, which has been discontinued. The loss before tax of £1.98 million includes exceptional items amounting to £1.2 million. These are in respect of the termination of the Joe Boxer operation (£662,000), the launch costs of the Joe Boxer brand (£341,000) and the permanent impairment loss on a leasehold property (£200,000). We have continued to make substantial investment in the future development of the business. Capital expenditure during the year amounted to £1.55 million for the ELLE business, of which £1.2 million was incurred on the development of new ELLE retail selling space. Retail Business Retail turnover for the period increased from £3.8 million to £14.1 million, reflecting a year in which several new stores and concessions were opened and a full year's turnover from the stores which opened in the prior year. On a like for like basis retail sales are up 8%, although comparatives are available for less than half of the annual turnover due to the immature nature of parts of the business. The retail gross margin has decreased from 56.2% last year to 53.4%. This is explained by the Joe Boxer retail gross margin for the year, which was only 27.5% due to the clearance of excess stocks. If the effect of this is discounted, then gross margin increased from 56.2% to 57.0%. During the year the Company has opened two further ELLE prime stores in Southampton and Milton Keynes bringing the total number of prime stores to six. The Company also opened 14 department store concessions during the period, of which 12 are within House of Fraser. At the end of the period the Group had increased its ELLE retail selling space to 46,500 square feet compared to 32,000 square feet at the end of last year. Wholesale Business In the UK, ELLE wholesale sales declined by 15% to £4.9 million (2000: £5.8 million). However this was in line with expectations following the conversion of a number of wholesale customers, including House of Fraser, to retail concessions at the beginning of the financial year. Export sales during the year increased by 18% to £3.0 million (2000: £2.5 million). In addition, our Ted Baker agency sales increased by 24% to £2.4 million, albeit at a lower margin. Wholesale margins, excluding Ted Baker agency sales, have reduced from 32.5% to 29.8%. This is attributable to the discounted sale of excess retail stocks to wholesale customers in order to protect the retail margin. Board Changes On 5 March 2001 Peter Roberts resigned as Non-executive Chairman to pursue other business interests. I was pleased to accept the role as Non-executive Chairman, having been with the Group since January 2000 as a Non-executive Director. On 30 April 2001 Martin Parker resigned from the Board to take early retirement, having held the position of Retail Managing Director. Martin Lent resigned as Chief Executive on 31 July 2001 to continue his other business interests and was succeeded by Mark Evans on 1 August 2001. I am delighted to welcome Mark to the Board and believe that his proven management skills will contribute to building a successful team and driving growth. Our people On behalf of the Board I would particularly like to thank our people, who have responded so well to the demanding conditions experienced in the year. They have faced up to these challenges and continued to provide a level of service which is valued by our customers. Current Trading and Prospects Since the year end, revenues from our ELLE retail business have continued to increase with like for like sales for the first quarter ahead of the comparable period last year. ELLE wholesale sales are in line with budget for the first quarter of the year. As part of the ELLE licence amendment that I have referred to previously, the Group has agreed to relinquish certain non-core product categories and territories and retail rights for the rest of Europe. I believe that this realignment will allow the Group to concentrate its financial and design resources on fewer products and territories, thus improving the focus and commerciality of the product. Whilst it has been a difficult year for the Group we believe that the realignment of our ELLE licence will enable us to focus more effectively on the key profit drivers of the business. This, together with the cost reduction programme that we have already implemented, means that we are well placed to exploit the potential of the ELLE brand and to restore profitability to our core business. Group profit and loss account For the year ended 31 July 2001 Unaudited Audited Continuing Discontinued Continuing Operations Operations Total Operations Notes 2001 2001 2001 2000 £'000 £'000 £'000 £'000 Turnover 2 22,702 1,732 24,434 14,100 Cost of sales (13,103) (1,256) (14,359) (8,993) __________ __________ __________ __________ Gross profit 9,599 476 10,075 5,107 Other operating expenses (10,181) (999) (11,180) (5,080) (net) __________ __________ __________ __________ Operating (loss)/profit (382) (182) (564) 201 before exceptional costs Exceptional costs: Costs of restructuring (174) for flotation Permanent diminution in (200) (200) asset value Launch costs (341) (341) Operating (loss)/profit (582) (523) (1,105) 27 Exceptional cost of - (662) (662) - termination of operation __________ __________ __________ __________ (Loss)/ profit on ordinary 2 (582) (1,185) (1,767) 27 activities before interest __________ __________ Interest payable and (214) (133) similar charges __________ __________ Loss on ordinary activities (1,981) (106) before tax Tax 1 (13) __________ __________ Loss for the financial year (1,980) (119) Dividend proposed - - (2) preference shares __________ __________ Loss for the year taken to (1,980) (121) reserves __________ __________ (Loss)/earnings per share 3 Basic loss per share (3.04p) (0.28p) __________ __________ Adjusted (loss)/earnings (1.19p) 0.05p per share __________ __________ Diluted loss per share (3.04p) (0.28p) __________ __________ Adjusted diluted (loss)/ (1.19p) 0.03p earnings per share __________ __________ Group balance sheet As at 31 July 2001 Unaudited Audited 2001 2000 £'000 £'000 Fixed assets Intangible assets 50 85 Tangible assets 2,356 1,852 __________ __________ 2,406 1,937 Current assets Stocks 4,347 4,301 Debtors 4,037 2,282 Cash at bank and in hand 7 739 __________ __________ 8,391 7,322 Creditors: amounts falling due within one year (6,467) (2,973) __________ __________ Net current assets 1,924 4,349 __________ __________ Total assets less current liabilities 4,330 6,286 Creditors: amounts falling due after more than one (911) (868) year __________ __________ Net assets 3,419 5,418 __________ __________ Capital and reserves Called up share capital 655 655 Share premium account 4,322 4,340 Other reserves 89 89 Profit and loss account (1,647) 334 __________ __________ Shareholders' funds - all equity 3,419 5,418 __________ __________ Consolidated cash flow statement For the year ended 31 July 2001 Unaudited Audited Notes 2001 2000 £ £ '000 '000 Net cash outflow from operating 4 (670) (2,049) activities Returns on investments and servicing (217) (148) of finance Taxation (21) (129) Capital expenditure and financial (1,346) (1,271) investment __________ __________ Net cash outflow before financing (2,254) (3,597) Financing 312 4,844 __________ __________ (Decrease)/increase in cash in the 5 (1,942) 1,247 year __________ __________ 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 2001. The results have been prepared using accounting policies consistent with those presented in the 2000 financial statements. 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 2001, 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 31 July 2000 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, the design, contracted manufacture, wholesale and retail of high quality fashion clothing. a) Analysis of turnover by destination: 2001 2000 £'000 £'000 United Kingdom 21,463 11,576 Overseas - European community 1,991 1,669 Overseas - Non European community 980 855 __________ __________ 24,434 14,100 __________ __________ b) Classes of business Year ended 31 July 2001 Third party Wholesale Retail Group sourcing £'000 £'000 £'000 £'000 Turnover 2,401 7,900 14,133 24,434 Cost of sales (2,223) (5,549) (6,587) (14,359) __________ __________ __________ __________ Gross profit 178 2,351 7,546 10,075 __________ __________ __________ __________ Common costs (10,639) __________ Operating loss (564) Exceptional costs (1,203) Net interest payable (214) __________ Loss before taxation (1,981) __________ The exceptional costs of £1,203,000 relate to launch costs, the termination of the Joe Boxer operation and the impairment loss on a leasehold property. Year ended 31 July 2000 Third party Wholesale Retail Group Sourcing £'000 £'000 £'000 £'000 Turnover 1,937 8,336 3,827 14,100 Cost of sales (1,695) (5,623) (1,675) (8,993) __________ __________ __________ __________ Gross profit 242 2,713 2,152 5,107 __________ __________ __________ __________ Common costs (4,906) __________ Operating profit 201 Exceptional costs (174) Net interest payable (133) __________ Profit before taxation (106) __________ The exceptional item of £174,000 relates to the costs of restructuring for flotation. 3. (Loss)/earnings per ordinary share The calculations of (loss)/earnings per share is based on the (loss)/earnings for the financial period attributable to equity shareholders and the weighted average number of ordinary shares as follows: 2001 2000 Number Number Weighted average number of ordinary shares: 65,144,571 43,397,384 __________ __________ Weighted average number of ordinary shares and 68,829,858 59,338,217 potential ordinary shares __________ __________ For the year ended 31 July 2001 the potential ordinary shares are non-dilutive. Adjusted earnings per share has been calculated after excluding the impact of exceptional items after taxation (£1,203,000) and the amortisation of goodwill (£3,000). 4. Reconciliation of operating loss to operating cash flows Unaudited Audited 2001 2000 £'000 £'000 Operating (loss)/profit (1,105) 27 Exceptional cost of termination of operation (662) - Depreciation charges 881 432 Amortisation of goodwill and licences 9 1 Loss/(profit) on disposal of fixed assets 26 (1) Impairment loss 415 - Non-cash exceptional costs of flotation - 88 Increase in stock (46) (2,051) Increase in debtors (1,755) (418) Increase/(decrease) in creditors 1,567 (127) __________ __________ Net cash outflow from operating activities (670) (2,049) __________ __________ 5. Reconciliation of net cashflow to movement in net debt Unaudited Audited 2001 2000 £'000 £'000 (Decrease)/increase in cash in the year (1,942) 1,247 Cash outflow from decrease in debt and lease financing 490 239 __________ __________ Change in net debt resulting from cash flows (1,452) 1,486 New secured loans (820) (688) New finance leases (455) (133) __________ __________ Movement in net debt in year (2,727) 665 Net debt at 1 August (370) (1,035) __________ __________ Net debt at 31 July (3,097) (370) __________ __________ 6. The Annual General Meeting will be held at 20 Little Portland Street, London W1W 8AA on 22 January 2002 at 12.00 noon.

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