Final Results

John Lewis Of Hungerford PLC 03 January 2008 John Lewis of Hungerford plc Final results - year ended 31 August 2007 2007 HIGHLIGHTS Sales increase 13% to Â£4,522,907 (2006 - Â£3,990,510). Profit before taxation, first time application of FRS20 and executive performance bonuses Â£309,772 (2006 - Â£63,458). Net cash inflows from operating activities Â£214,703 (2006 - Â£384,948). Board significantly strengthened with the appointment of new Executive Directors. 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 and Company managed concessions throughout the United Kingdom. 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(R)" range of kitchens and furniture. In recent years the Company expanded its line of branded products to include the retro style Creme de la Creme 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 I am pleased to report on a year of great progress. Our new executive team, under the leadership of Jonathan Rosby, Managing Director, is now delivering tangible results not only in terms of the financial numbers but also in the development of the John Lewis of Hungerford brand. Sales in the year to 31 August 2007 grew 13% to Â£4,522,907. Importantly, sales of core kitchen products increased 21% by value and 28% in units. Profits before taxation (and before the first time application of accounting standard FRS20 and executive performance bonuses) grew an impressive 388% to Â£309,772. As set out in the Business Review that follows, the year under review saw significant organisational changes being introduced across almost all aspects of our business. The Company has introduced exciting new product lines, greatly enhanced customer service and made other operational changes that it is expected will further accelerate sales growth and improve profitability over the coming years. Management's focus for the current year to 31 August 2008 is to further drive revenue growth from existing showrooms and also to selectively open more showrooms across the UK. This is needed to provide greater customer access to John Lewis of Hungerford products. The Board looks to the future with confidence. John L. Lewis Non Executive Chairman 3 January 2008 MANAGING DIRECTOR'S BUSINESS REVIEW Sales and Products The year to 31 August 2007 has been about building solid foundations for the future whilst delivering improved financial results. Management focus for the year has been to drive sales of core kitchen products, increase productivity from the existing estate, and improve customer service whilst maintaining control of costs. At 31 August 2007 the Company traded from seven showrooms and two concession sites. A third concession site was closed on 31 August 2006. Subsequent to the year-end it was further decided to close the Company concession located in Debenhams of Glasgow. This will cease trading from the beginning of April 2008. Overall sales for the year increased 13% to Â£4,522,907. However, as set out later in this report, this masks the success we have had by giving priority to our most profitable core kitchen business, and the reduced number of trading outlets. Revenues from the sales of kitchens in the year increased 21% and the number of kitchens sold rose by 28%. All showrooms achieved an increase in the number of kitchens sold. Although there was an increase in sales discounting during the year (due in the main to our decision to run three Sale periods rather than the historical two), this discount cost was offset by distribution costs and other administrative expenses all reducing as a percentage of sales from 59.7% to 54.4%. This resulted in our overall operating margin (before share based payments and performance bonus) improving to 7.1% from 2.1% in the prior year. In contrast to kitchen sales, unit sales of furniture declined 19% primarily because we moved our sales focus to selling only those furniture lines that carried adequate margins. During the year we completed a commercial review of the Company's entire product line. As a result several product categories have been removed from the range including bathrooms, shutters and a number of ancillary furniture and accessory items that did not provide adequate profit margins. This decision has allowed us to focus on our more profitable kitchen and related furniture business and to achieve maximum commercial leverage from both our brand strength and manufacturing capabilities. As part of our drive to increase kitchen sales and improve productivity, two new kitchen ranges (one in oak and one in walnut) were introduced in April and May 2007. Displays of these new products were installed in eight locations along with complimentary furniture pieces. New products introduced also included an extensive range of solid wood and granite work surfaces together with performance upgrades and internal accessories. The range of appliance brands offered has also been increased from two to four. Two further new kitchen ranges have been introduced into selected showrooms in November 2007 being the 'Cool' urban range and the 'Steamer Bay' coastal range. These introductions will then give the Company comprehensive market coverage and will complete our product line up. All the new ranges will be manufactured in-house at the Company's factory at Wantage. Marketing In marketing we are currently working on a new brochure that will incorporate all our new product lines. The Company web site is also being comprehensively re-developed and will include 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 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. A Customer Service and Installations Manager was appointed in November 2006 and this has led to major changes in how the Company addresses this important aspect of our business. With new policies and procedures now in place, we are seeing a sustained improvement in the quality of after sales service to our customers and a corresponding sharp reduction in customer complaints. Manufacturing and Distribution A review of operations within our manufacturing and distribution facility at Wantage shows that we currently have an annual in-house manufacturing capability of some Â£7million at selling prices that can be reached with minimal increases in central overhead. A reconfiguration of the existing facility with the addition of a mezzanine floor would increase manufacturing capacity by a further third. There is also a further option to extend the present 20,000 sq. ft. facility by a further 50% on land already owned by the Company (subject to planning permission). Properly configured this would give us a potential annual manufacturing and distribution capacity of some Â£15million at selling prices. This would be sufficient to support a UK network of around 30 John Lewis of Hungerford showrooms. Showrooms We have identified more than twenty locations in the UK with a sufficient density of our target households to justify the opening of a showroom. We are actively seeking to open at least two new showrooms in the financial year ending 31 August 2008 and a further three showrooms for the financial year ending 31 August 2009. In all cases priority will be given to locations within the southeast, south and southwest, which is where demand for our brand is strongest. Such sites will also allow us to leverage our current distribution and installation infrastructure. Systems An essential part of stabilising our business and building the foundations for growth, has been investment in new systems. Subsequent to the year-end we commenced installation of new operating software in readiness for the Winter 2007 Sale. This system will provide 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 success. The Future The Board and executive management believe that with the changes already initiated, there is every prospect of further significant improvement in the financial performance of the Company. We see a future that establishes John Lewis of Hungerford, as THE attractive, good value, individual, alternative to both mass market and premium branded kitchens. Jonathan S. Rosby Managing Director 3 January 2008 Profit and Loss Account for the year ended 31 August 2007 2007 2006 Â£ Â£ Turnover 4,522,907 3,990,510 Cost of sales (1,740,579) (1,524,020) ----------- ----------- Gross profit 2,782,328 2,466,490 Distribution costs (527,564) (516,942) Administrative expenses Share Based Payments (41,537) - Performance Bonus (43,734) - Other (1,931,569) (1,865,011) ---------- ----------- Total (2,016,840) (1,865,011) ------------------ --------- -------- Operating Profit before share based payments and performance bonus 323,195 84,537 ------------------ --------- -------- Operating Profit 237,924 84,537 Interest receivable and similar income 7,453 640 Interest payable and similar charges (20,876) (21,719) ----------- ----------- Profit on ordinary activities before taxation 224,501 63,458 Tax on profit on ordinary activities (55,849) (12,097) ----------- ----------- Retained profit for the financial year 168,652 51,361 ---------- ----------- Earnings per share Basic 0.11p 0.03p Fully diluted 0.11p 0.03p 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 2007 2007 2006 Â£ Â£ Â£ Â£ Fixed assets Intangible assets 20,976 25,344 Tangible assets 1,609,255 1,732,296 --------- --------- 1,630,231 1,757,640 Current assets Stocks 565,780 455,746 Debtors 249,413 151,546 Cash at bank and in hand 784,842 671,070 --------- --------- 1,600,035 1,278,362 Creditors: amounts falling (1,004,794) (1,008,433) due within one year --------- --------- Net current assets 595,241 269,929 --------- --------- Total assets less 2,225,472 2,027,569 current liabilities Creditors: amounts falling (285,870) (305,945) due after more than one year Provisions for liabilities (55,568) (47,779) and charges --------- --------- Total net assets 1,884,034 1,673,845 ======= ======= Capital and reserves Called up share capital 148,745 148,745 Share premium account 824,771 824,771 Share based payment reserve 41,537 - Other reserves 1,421 1,421 Profit and loss account 867,560 698,908 --------- --------- Shareholders' funds - all equity interests 1,884,034 1,673,845 ======= ======= The financial statements were approved and signed on behalf of the Board of Directors on 3 January 2007. John L. Lewis Richard D. Worthington F.C.A. Director Director Cash Flow Statement for the year ended 31 August 2007 2007 2006 Â£ Â£ Â£ Â£ Net cash inflow from 214,703 384,948 operating activities Returns on investments and servicing of finance Interest received 7,453 640 Interest paid (20,876) (21,719) -------- -------- Net cash outflow from returns on (13,423) (21,079) investments and servicing of finance Corporation tax paid (22,337) (5,811) Capital expenditure Payments to acquire (44,726) (37,763) tangible fixed assets --------- --------- Net cash outflow from (44,726) (37,763) capital expenditure Equity dividends paid - - --------- --------- Net cash inflow before 134,217 320,295 financing Financing Repayment of Loan (20,445) (19,439) -------- -------- Net cash (outflow) from (20,445) (19,439) financing --------- --------- Increase in cash 113,772 300,856 ======= ======= 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 2007 statutory financial statements. 2. Reconciliation of Movement in Shareholders' Funds 2007 2006 Â£ Â£ Profit for the financial year 168,652 51,361 Share based payments 41,537 - Dividends - - ---------- ---------- Net addition to shareholders' funds 210,189 51,361 Opening shareholders' funds 1,673,845 1,622,484 ----------- ----------- Closing shareholders' funds 1,884,034 1,673,845 ======== ======== 3. Earnings/(loss) per Share Earnings per ordinary share is calculated as follows: 2007 2006 Basic Profit attributable to ordinary Â£168,652 Â£51,361 shareholders Weighted average number of ordinary shares 148,745,519 148,745,519 in issue Earnings/(loss) per ordinary share 0.11p 0.03p ========== ========== Fully diluted Profit attributable to ordinary Â£168,652 Â£51,361 shareholders Weighted average number of ordinary shares 151,770,461 148,745,519 in issue Earnings per ordinary share 0.11p 0.03p =========== =========== Weighted average number of ordinary shares 148,745,519 148,745,519 in issue - basic calculation Weighted average potential ordinary shares 3,024,942 - ------------ ------------ - fully diluted calculation 151,770,461 148,745,519 ============ ============ 4. 2007 Report and Accounts Copies of the 2007 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, free of charge, for one month from the date of this announcement. 5. Copy of Announcement A copy of this announcement will be available from the nominated adviser, Smith & Williamson Corporate Finance Limited, 25 Moorgate, London, EC2R 6AY, for one month from the date of this announcement. For further information, please contact: Nicola Horton / David Abbott Nominated Adviser Smith & Williamson Corporate Finance Limited Tel: 020 7131 4000 -ends- This information is provided by RNS The company news service from the London Stock Exchange

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