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Hamleys PLC (HVTB)

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Monday 27 May, 2002

Hamleys PLC

Final Results


                                                                  27th May 2002

                  RESULTS FOR THE 12 MONTHS TO 30 MARCH 2002                   

Hamleys plc today announces preliminary results for the 12 months to 30 March
2002.

Financial Highlights

  * Like-for-like sales for the Hamleys brand (including Regent Street and
    Hamleys Direct) up 9.3%
   
  * Bear Factory, in its first full year of operation, achieved a contribution
    of £2.9m.
   
  * New UK stores and a number of franchise agreements are planned for Bear
    Factory for 2002
   
  * Strong Hamleys Direct sales growth (97%) - distribution of 1 million
    catalogues planned for 2002
   
  * Group operating profit from core activities £5.7m (2001: £4.7m)
   
  * Group profit before tax and exceptional items £4.1m (2001: £4.0m)
   
  * Earnings per share 12.0p (2001: 13.6p)
   
  * Adjusted earnings per share from core activities 18.1p (basic 2001 eps:
    13.6p)
   
  * Dividend per share 7.3p (2001: 7.3p)
   
Simon Burke, Chairman, said:

'With our restructuring programme completed, our core businesses have performed
excellently. In the year ahead we will focus on continuing to grow the Hamleys
brand businesses and the Bear Factory, both domestically and internationally.'

An interview with Simon Burke, Chairman, in video/audio and text will be
available from 07:00 on http://www.hamleys.co.uk and http://www.cantos.com

For further information, please call:

Hamleys plc       Simon Burke, Chairman          (020) 7479 7316            
                                                                            
Brunswick         Rebecca Blackwood                                         
                                                                            
                  Melissa McVeigh                                           
                                                                            
                  Carolyn Esser                  (020) 7404 5959            

Chairman's Statement

I am pleased to report good progress in all parts of our business during the
year. As well as the strong increase in underlying operating profit, we have
completed our restructuring programme. We can now focus on building growth in
our core businesses, Hamleys and Bear Factory. This will be achieved through
further upgrading of our offer in Regent Street, expansion of Hamleys Direct,
and the development of Bear Factory through further UK store openings and
overseas franchising.

Financial Results

Group operating profit from core activities increased by 21% to £5.7m despite a
large rise in occupancy costs arising from rent reviews in Regent Street and
our head office, and also the business lost during September and October.

This result is illustrated in the following table:

                                  Hamleys &    Toystack        Total      Total
                                                                               
£millions                      Bear Factory                                    
                                                                               
                                       2002        2002         2002       2001
                                                                               
Operating Profit                        5.7       (0.8)          4.9        4.7
                                                                               
Exceptional Costs                       0.3       (0.7)        (0.4)      (0.1)
                                                                               
                                        6.0       (1.5)          4.5        4.6
                                                                               
Interest                                                       (0.8)      (0.7)
                                                                               
Profit Before Tax                                                3.7        3.9

The costs of the running down and exit from the Toystack chain were absorbed in
the first half of the year. Group profit before tax and exceptional items was £
4.1m (2001: £4.0m) and after exceptional items was £3.7m (2001: £3.9m).

The Hamleys performance strengthened through a like-for-like sales increase of
9.3%, with Regent Street recording an increase of 6.5%, and improving margins.
Bear Factory achieved a contribution of £2.9m, which was a very pleasing
performance from a new business. Central and distribution costs fell by 6% to £
4.9m.

The transformation of Hamleys' operations over the last two years has been
achieved without significant deterioration in its balance sheet position. In
the coming year we intend to use operating cash flow to finance new store
openings and to decrease the level of our borrowing. In the meantime our
interest cover is strong and our existing banking facilities have been renewed
for a further three years.

We will now focus our efforts on our two main activities, the Hamleys business,
both through the Regent Street store and the Hamleys Direct businesses, and
specialist soft toy retailing through the Bear Factory.

Business Overview

The Regent Street store continues to benefit from a change in customer
perception following the refurbishment in 2000 and the improvement in store
management and customer service. Upgrading of the store continued in 2001 as
part of what we see as an ongoing programme of improvement to the store's
environment, range and service.

Hamleys Direct had a very successful year with a sales increase of 97%. The
Hamleys website now features over 2,000 products and is the fastest growing
part of our business having increased sales by 116% in the year.

Hamleys Direct is a vital part of our strategy for the brand, as the means by
which we are extending the Hamleys customer base beyond those who visit Regent
Street. In 2002 we plan to issue 1 million catalogues and enhance our web offer
significantly.

In addition to growing our catalogue and web business, we have also begun 'off
the page' activity, selling exclusive teddy bears at different price points
using full-page adverts in Sunday colour supplements, with very encouraging
results. We are also trialling interactive television offers in partnership
with a major cable operator.

To date, Bear Factory has been a significant success story for Hamleys,
generating a contribution of £2.9m last year. We plan to consolidate this
progress in 2002 by opening further stores, extending our franchise
arrangements and creating a flow of new products to keep the stores' offer
fresh.

People

Every business relies on its people for success. In our case, however, both the
Hamleys and Bear Factory businesses are completely dependent on delivering a
high calibre of expertise and customer service, which in turn needs exceptional
people. It is an important part of our strategy to improve our performance as
an employer.

During the year we have begun the process of obtaining Investors In People
accreditation and we are planning to introduce a Save As You Earn scheme to
encourage our colleagues to become investors in the company on favourable
terms. In the meantime, we continue to enjoy the support and dedication of a
great many talented and energetic people.

Dividend

The board is recommending a final dividend of 5.1p making a total for the year
of 7.3p (2001: 7.3p). If approved the dividend will be paid on 15th August 2002
to shareholders registered at the close of business on 2nd August 2002.

Outlook

Both Hamleys and Bear Factory have made a good start to the new financial year.
The positive impact of our restructuring programme, in particular the
refurbishment of the Hamleys Regent Street store and the development of the
Bear Factory concept, is now showing in the Group's financial performance. Next
year will be underpinned by further sales growth at the Hamleys businesses and
ongoing expansion of the Bear Factory both domestically and through a growing
franchise network.

Simon Burke

Chairman

27th May 2002

                             REVIEW OF OPERATIONS                              

Overview

Throughout the last year, everyone within the Hamleys Group has remained
committed to delivering the three elements that continue to differentiate our
business: magical shopping environments, special and unique product, and
exceptional customer service.

Regent Street

Overall, the store achieved like for like sales growth of 6.5%. Particularly
strong performances were achieved in Pre-school toys (+24% vs. last year),
Radio Control (+29%) and Dolls (+23%).

We continued our programme of improvements to both the structure and
presentation of the store. In particular, improving both the theming and
signage to our basement floor produced strong growth in customer traffic and
sales grew in Computer goods (+15%) and Sports (+60%).

Domestic customers were the principal source of sales growth during the year,
with sales to overseas visitors showing a small decline.

Underpinning the continued development of the Hamleys brand is the knowledge
and expertise of our buyers. Once again, buying margins have increased, by over
1% in the year, due to improved buying terms and a better product mix.

Developing Hamleys' own range of unique and exclusive products remains a key
focus of the business. Helped by their strong profile in the catalogue and
website, sales of own-brand products grew by 30% compared with the previous
year. We expect to introduce a number of new and exclusive lines presented in
new Hamleys branded packaging later this year.

Our progress to date was acknowledged by the toy industry recently when Hamleys
was singled out for a special award for 'Excellence in Retailing' by the
British Association of Toy Retailers.

All of these elements rely upon the excellence and dedication of the Hamleys
team. Our performance as an employer is as important to us as any other measure
of success. In 2001, we set out to demonstrate this by seeking accreditation as
an 'Investor In People', initially within Regent Street and then throughout the
Hamleys Group by the end of 2002.

Regent Street continues to be a strong and increasing source of profit for the
Group. To support our wider development plans, it must, more than ever, be seen
as a magical and prestigious representation of all that the Hamleys brand
stands for.

Direct

The Hamleys Autumn 2001 catalogue performed very well, with sales growing by
140% in the season. This was achieved through a distribution of 400,000
catalogues with average purchase values increasing slightly on last year. In
2002 we plan to issue 1 million catalogues and enhance our web offer
significantly.

Sales of Hamleys own brand product accounted for 27% of all Hamleys Direct
sales during the year.

Whilst the catalogue continues to offer a very select range of around 450
lines, we have been growing the range of product available online at 
www.hamleys.co.uk and now offer around 2,000 lines. Transactions have increased
sharply and the Internet now accounts for 35% of all Direct business.

We plan further upgrades to the website in terms of the functionality, range
and service being offered. With the demise of many of the stand-alone toy
retail websites during 2001, Hamleys is well placed to grow online business
significantly in the coming year.

Other

During the year, we have taken a number of initiatives aimed at improving the
performance of the Hamleys Satellite stores. These have included upgrading
management, improvements to store merchandising and major overhauls to range.
The benefits of this programme were initially held back because of the drop in
airport and tourist traffic in the latter part of 2001. In recent months,
however, we have seen a significant improvement in performance, especially in
the airport stores. We are optimistic that good progress can continue to be
made during the current year.

Bear Factory

This business, which began just over 18 months ago with four pilot stores, is
now an established and highly profitable part of the Hamleys Group.

The conversion of 11 existing stores and the acquisition of seven new sites -
all in high profile regional shopping centres - grew the chain to 22 stores by
Christmas 2001. Customer reaction to Bear Factory continues to exceed our
original expectations and we have succeeded in establishing a loyal and
enthusiastic customer base.

This year we plan to extend the Bear Factory chain with a further seven new
stores in the UK, for which negotiations are well advanced. As part of this, we
will be trialling a smaller format store which, if successful, will
significantly increase the potential size of the Bear Factory business in the
UK. In addition, we have a growing business through our website at 
www.bearfactory.co.uk.

Our ambitions for Bear Factory reach beyond the UK. We have recently signed
franchise agreements with three partners covering a number of overseas
countries. The Alshaya Group is a well-established franchise operator based in
Kuwait and our agreement with them covers the majority of countries in the
Middle East. We have also signed franchise agreements with Retail Entertainment
Limited for the whole of Ireland and with Baugur Sverige AB for Sweden. These
operators are expected to open up to seven Bear Factory stores by March 2003.

There is now significant interest in the Bear Factory concept from potential
franchisees in numerous territories and we anticipate further progress in our
franchising programme during 2002.

John Watkinson

Chief Operating Officer

27th May 2002

                     Consolidated profit and loss account                      
                                                                               
                       For the year ended 30 March 2002                        

                                             Year to             Year to      

                                  Note  30 March   30 March  30 March  31 March
                                                                               
                                            2002       2002      2002      2001
                                                                               
                                          £' 000     £' 000    £' 000    £' 000
                                                                               
                                       Hamleys /   Toystack     Total     Total
                                                                               
                                            Bear   (Note 1)                    
                                         Factory                               
                                                                               
Turnover                                  43,452      2,466    45,918    45,705
                                                                               
Operating profit / (loss) before           5,758      (846)     4,912     4,766
exceptional items                                                              
                                                                               
Costs incurred in strategic                    -          -         -     (146)
review (Hamleys)                                                               
                                                                               
Toystack rebranding related costs              -      (664)     (664)         -
                                                                               
Release of property provision                250          -       250         -
                                                                               
Operating profit / (loss)            1     6,008    (1,510)     4,498     4,620
                                                                               
Net interest payable                                            (785)     (753)
                                                                               
Profit on ordinary activities                                   3,713     3,867
before taxation                                                                
                                                                               
Taxation on profit on ordinary                                (1,196)   (1,011)
activities                                                                     
                                                                               
Profit on ordinary activities                                   2,517     2,856
after taxation                                                                 
                                                                               
Dividends                                                     (1,533)   (1,533)
                                                                               
Retained profit for the year                                      984     1,323
                                                                               
Earnings per share                                                             
                                                                               
Basic                                2                          12.0p     13.6p
                                                                               
Diluted                              2                          12.0p     13.6p
                                                                               
Adjusted                             2                          18.1p      7.4p
                                                                               
Dividends per share                                              7.3p      7.3p
                                                                               
All results are from continuing                                                
businesses                                                                     

                          Consolidated Balance Sheet                           
                                                                               
                               At 30 March 2002                                
                                                                               

                                                       As at                   
                                                                               
                               Note           30 March                 31 March
                                                                               
                                                  2002                     2001
                                                                               
                                                £' 000                   £' 000
                                                                               
Fixed assets                                                                   
                                                                               
Intangible assets                                  105                       98
                                                                               
Tangible assets                                 10,956                    9,004
                                                                               
                                                11,061                    9,102
                                                                               
Current assets                                                                 
                                                                               
Stocks - goods for resale                        5,542                    6,199
                                                                               
Debtors                                          1,373                    1,818
                                                                               
Cash at bank and in hand                         1,279                      762
                                                                               
                                                 8,194                    8,779
                                                                               
Creditors                                                                      
                                                                               
Amounts falling due within one    3           (17,325)                  (5,819)
year                                                                           
                                                                               
Net current (liabilities) /                    (9,131)                    2,960
assets                                                                         
                                                                               
Total assets less current                        1,930                   12,062
liabilities                                                                    
                                                                               
Creditors                                                                      
                                                                               
Amounts falling due after more                       -                 (10,929)
than one year                                                                  
                                                                               
Provisions for liabilities and                   (373)                    (560)
charges                                                                        
                                                                               
Net assets                                       1,557                      573
                                                                               
Capital and reserves                                                           
                                                                               
Called up share capital                          1,167                    1,167
                                                                               
Share premium account                              321                      321
                                                                               
Capital redemption reserve                       6,403                    6,403
                                                                               
Profit and loss account                        (6,334)                  (7,318)
                                                                               
Equity shareholders' funds                       1,557                      573

                       Consolidated Cash Flow Statement                        
                                                                               
                       For the year ended 30 March 2002                        

                                             Note    30 March          31 March
                                                                               
                                                         2002              2001
                                                                               
                                                       £' 000             £'000
                                                                               
Net cash inflow from operating activities       4       7,884             5,000
                                                                               
Returns on investments and servicing of                                        
finance                                                                        
                                                                               
Interest received                                         183               383
                                                                               
Interest paid                                         (1,010)           (1,066)
                                                                               
                                                        (827)             (683)
                                                                               
Taxation paid                                         (1,020)             (386)
                                                                               
Capital expenditure and financial investment                                   
                                                                               
Purchase of intangible fixed assets                      (37)               (8)
                                                                               
Purchase of tangible fixed assets                     (4,669)           (4,241)
                                                                               
                                                      (4,706)           (4,249)
                                                                               
Equity dividends paid                                 (1,533)           (1,519)
                                                                               
Net cash outflow before use of liquid                   (202)           (1,837)
resources and financing                                                        
                                                                               
Financing                                                                      
                                                                               
Receipt of bank loans                                     719             1,963
                                                                               
Movement in cash                                          517               126
                                                                               
Reconciliation to net debt                                                     
                                                                               
Balance at 1 April 2001                              (10,167)           (8,330)
                                                                               
Net cash inflow                                           517               126
                                                                               
Movement in bank borrowings                             (719)           (1,963)
                                                                               
Balance at 30 March 2002                             (10,369)          (10,167)

                      Notes to the Financial Information                       

Note: 1 Segmental Reporting        

                   Year to            Year to      Year            Year to     
                                                    to                         
                                                                               
              30 March   31 March     30     31     30     31     30      31   
                                    March   March  March March   March   March 
                                                                               
                2002       2001      2002   2001   2002   2001   2002    2001  
                                                                               
               £'000       £'000    £'000   £'000  £'000 £'000   £'000   £'000 
                                                                               
                Hamleys satellites)   Bear Factory   Toy stack       To tal    
                  (inc.                                                        
                                                                               
Turnover         30,293      28,981 13,158   1,259 2,467 15,465  45,918  45,705
                                                                               
Gross profit     16,071      14,700  9,138     920   574  6,582  25,783  22,202
                                                                               
Contribution      7,818       7,970  2,854     221 (847)  1,779   9,825   9,970
                                                                               
 Central and ibution                                            (4,913) (5,204)
       Distr Costs                                                             
                                                                               
    Toystack ing        ts                                        (664)       -
     rebrand related                                                           
             cos                                                               
                                                                               
  Release of ty         (Hamleys)                                   250       -
      proper provision                                                         
                                                                               
Costs                in iew                                           -   (146)
incurred      strategic (Hamleys)                                              
                    rev                                                        
                                                                               
Operating                                                         4,498   4,620
profit                                                                         

The results for Toystack operation which has now ceased have been shown in a   
separate column on the face of the profit and loss account as, in the opinion  
of the Directors, this degree of prominence is necessary for a clear           
understanding of the results for the year.                                     
                                                                               
Note 2: Earnings Per Share                                                     
                                                                               
Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary share in issue
during the year of 20,939,290 (2001: 20,939,290).                              
                                                                               
For diluted earnings per share, the weighted average number of ordinary shares 
in issue is adjusted to assume conversion of all dilute potential ordinary     
shares. The Group has only one category of dilutive potential ordinary shares: 
those share options granted to employees where the exercise price is less than 
the average market price of the Company's ordinary shares during the year.     
                                                                               
Adjusted earnings per share is based on the earnings adjusted for exceptional  
items and the results of the Toystack segment. Tax has been adjusted for       
accordingly.                                                                   
                                                                               
Note 3: Bank Borrowings                                                        
                                                                               
Since the year end the Group has renegotiated a new loan facility with the Bank
of Scotland for another three years. The old facility expired on 30 April 2002 
and hence the £11,647,714 loan has been shown within creditors due within one  
year. The loan outstanding at 31 March 2001 was shown within creditors due     
after more than one year.                                                      

Note 4: Reconciliation of operating profit to net cash inflow from operating   
activities                                                                     

                                                              As at       As at
                                                                               
                                                           30 March    31 March
                                                                               
                                                               2002        2001
                                                                               
                                                             £' 000      £' 000
                                                                               
Operating profit                                               4,498    4,620  
                                                                               
Amortisation on intangible fixed                                  30       44  
assets                                                                         
                                                                               
Depreciation on tangible fixed                                 1,593    1,255  
assets                                                                         
                                                                               
Exceptional write off on disposal of                             669        -  
Toystack fixed assets                                                          
                                                                               
Decrease / (increase) in stocks                                  657    (649)  
                                                                               
Decrease in debtors                                              445      616  
                                                                               
Increase/(decrease) in creditors                                 242    (886)  
                                                                               
Decrease in provisions for                                     (250)        -  
liabilities and charges                                                        
                                                                               
Net cash inflow from operating                                 7,884    5,000  
activities                                                                     

Note 5:                                                                        
                                                                               
The preliminary results were approved by the Board of Directors on 24 May 2002.
The financial information contained in this announcement does not constitute   
statutory accounts within the meaning of section 240 of the Companies Act 1985.
The figures for the year 31 March 2001 were extracted from the statutory       
accounts which have been distributed to shareholders and filed with the        
Registrar of Companies containing an unqualified audit report. The accounts for
the year ended 30 March 2002 will be distributed to shareholders prior to the  
Annual General Meeting and filed with the Registrar of Companies following the 
Annual General Meeting.                                                        
                                                                               
Note 6:                                                                        
                                                                               
The consolidated accounts of the group are prepared under the historical cost  
convention and in accordance with applicable accounting standards.             


                                                                

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