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Homestyle Group PLC (HME)

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Wednesday 30 August, 2006

Homestyle Group PLC

Final Results

Homestyle Group PLC
30 August 2006

                                                                  30 August 2006

                              HOMESTYLE GROUP PLC

        UNAUDITED PRELIMINARY RESULTS FOR THE 61 WEEKS TO 1st JULY 2006

Homestyle is a national multiple retailer operating across the UK specialising
in furniture retailing through its Furniture Division (170 Harveys stores) and
Beds Division (392 outlets across Bensons, Sleepmasters and Bed Shed brands).

Commenting on the period, Donald Macpherson, Chairman, said: 'Following the
re-financing of the Group in June 2005, the last year has been a period of
stabilisation and reinvigoration for our businesses.  The result of this work is
an improving profitability trend and trading operations that are much better
positioned to deliver profitable long-term growth.'

Highlights

•   Overall performance reflects legacy of previously announced historic
    problems.
    -    61 weeks to 1st July 2006: turnover of £507.3m with pre-tax loss of
         £20.6m before reorganisation costs at Harveys of £4.0m. Loss before 
         tax of £24.6m.
    -    26 weeks to 29th October 2005: turnover of £182.8m with pre-tax loss
         of £23.3m before one-off items.
•   Much improved performance as year progressed with recovery initiatives being 
    rolled out.
    -    52 weeks to 1st July 2006: turnover of £451.1m with pre-tax loss of
         £5.0m before one-off items of £4.0m in relation to reorganisation costs 
         at Harveys.
•   Harveys sales order growth of 15.5% in 52 weeks to 1st July 2006.
•   Progress on Harveys' legacy supply chain issues, but one-off distribution 
    costs incurred in supporting sales growth
•   Beds Division new management team appointed and business re-energised
•   Relationship with Steinhoff companies working well leading to improved 
    product innovation and commercial terms


Commenting on the outlook for the Company, Donald Macpherson, Chairman, said:

'Against the backdrop of difficult trading conditions, we have taken a number of
decisive actions to improve performance.   As a result, our businesses are in
more robust health than at any point for some years and are facing the future
with fresh enthusiasm.

We have a strong balance sheet, rejuvenated trading businesses, a dedicated
management team and an exciting commercial partnership with Steinhoff; the
ingredients are now in place for long term success.'

ENQUIRIES:

Homestyle Group PLC                                Hudson Sandler

Ian Topping, Chief Executive                       Jessica Rouleau / Kate Hough
Tim Kowalski, Finance Director

Tel:  020 7796 4133 on 30 August 2006              Tel:  020 7796 4133
Tel:  01925 647 200 thereafter


Chairman's Statement

Following the re-financing of the Group in June 2005, the last year has been a
period of stabilisation and reinvigoration for our businesses.  The re-financing
marked a welcome watershed and an opportunity to rebuild. Since then,
significant challenges in the trading environment combined with management
changes and a variety of operational issues have all been addressed through
decisive action by a largely new executive team.  The result of this work is an
improving profitability trend and trading operations that are much better
positioned to deliver profitable long-term growth.  The commercial partnership
with our majority shareholder, Steinhoff, has been a notable success opening up
new sources of product to our businesses on improved commercial terms.  The full
benefits of this relationship are only now beginning to come through.

Financials

As previously announced, we have changed the accounting period to align with
Steinhoff's year end.  Turnover for the 61 weeks to 1st July 2006 was £507.3m
with a pre-tax loss of £20.6m before reorganisation costs of £4.0m. Loss before
tax was £24.6m. However, for the 52 weeks ending 1st July 2006, the results are
considerably better with turnover of £451.1m generating a pre-tax loss of £5.0m
before one-off reorganisation costs of £4.0m.  These figures largely reflect the
financial difficulties the Group was facing prior to the refinancing and at the
start of the 61 week period on which we are reporting.  The balance sheet has
been strengthened with net assets as at 1 July 2006 of £62.5m (30th April 2005:
£14.2m net liabilities) and net gearing of 29%.  The overall pensions deficit
before tax has decreased by £6.5m to £10.9m with plans in place to reduce it
further. The Board does not propose to pay a dividend for the period.

Furniture division

Our trading operations have faced quite different challenges during the last
year.  The furniture division trading under the Harveys brand from 170 locations
across the UK was able to benefit from the renewed financial strength of the
Group by recommencing national advertising thereby raising brand awareness
considerably.  Combined with more attractive store layouts and improved value
product ranges, this resulted in like for like sales order growth of 15.5% in
the 52 weeks to 1st July 2006.

Unfortunately, this sales success was held back by legacy supply chain processes
which have subsequently been reorganised and resulted in one-off distribution
costs of £4m in the period.  A new logistics management team has now been
appointed and considerable improvements have been achieved in stock management
and through a reduction in warehouse space since the reorganisation.

The furniture division results for the 61 week period to 1st July 2006 show
turnover of £288.0m and an operating loss of £22.8m before one-off items.  The
corresponding figures for the 52 weeks to 1st July 2006 are turnover of £262.2m
and an operating loss of £10.4m before one-off items.  This result is a clear
step forward from the operating loss of £24.9m before one-off items, recorded in
the 26 weeks to 29 October 2005.  The action plan in place to address issues
that have held back the financial performance in recent months is already
driving improvements and the future prospects are starting to look much
brighter.

The large property portfolio occupied by Harveys in the UK has generated a
number of trading opportunities, which we are only beginning to address.  During
the year we have closed 7 stores, relocated 2 stores and opened 2 stores and we
see further opportunities to rebalance our retail portfolio going forward.

Beds division

The beds division retails from 392 stores under three separate fascias: Bensons,
Sleepmasters and Bed Shed.  The departure of most of the former senior
management team after the refinancing caused a number of operational problems
during the period.  A loss of momentum in the division was apparent throughout
2005 as the incumbent management worked out their notice periods through to
September of that year and as we focused on putting in place a new management
team with the right skills and experience.  A new Divisional Managing Director,
Bill Carrahar, was appointed in late 2005 together with new Operations Directors
for each of the three fascias and new marketing, buying and personnel
appointments in the largest fascia, Bensons.  The new team is coming together
well and re-energising the business. This new momentum is reflected in improved
product ranges, better sales management disciplines and refreshed promotional
campaigns.

During the period, concession arrangements were terminated by the two retail
chains with which formal long-term agreements were not in place.  This resulted
in a short-term loss of turnover and one-off asset write offs from exiting the
stores.  We believe that the business will be stronger in the long-term as it is
no longer exposed to the unpredictable actions of other retailers.

To counteract the impact of this loss of turnover, the new management team has
opened 41 new stores since the end of the last financial year with much more
secure arrangements in place.  Further expansion is planned during the
forthcoming year.

The beds division results for the 61 weeks to 1st July 2006 show turnover of
£219.3m generating an operating profit of £3.4m.  The corresponding figures for
the 52 weeks to 1st July 2006 are turnover of £188.9m and an operating profit of
£5.6m.  In light of the exceptional issues that the division has had to address,
outlined above, this is a respectable performance and the changes that have been
made leave the Division well positioned for the future.

Board

During the year a number of Board changes took effect.  I was confirmed as
Chairman in January 2006.  In September 2005, we were pleased to announce the
appointment of David Sussman as a non-executive Director.  David is the Chairman
of JD Group, one of the largest retail groups in South Africa and we are already
benefiting from his commercial experience and extensive knowledge of the retail
sector.  Sarah Grunewald, a non-executive Director since December 2003, resigned
from the Board in September 2005.

Martin Towers, a non-executive Director since February 2004, is retiring from
the Board with effect from today.  We are most grateful to Martin for his
enormous support and valuable contribution during the last two years as the
Group has been restructured and refinanced.  Rian du Plessis, a non-executive
Director since July 2005, will take on the important role of Audit Committee
Chairman and David Sussman will become the Senior Independent Director with both
posts arising as a result of Martin's departure.

Outlook

As with other retailers, recent trading conditions through the warmer summer
period have been testing for our businesses.

Against the backdrop of difficult trading conditions, we have taken a number of
decisive actions to improve performance.  As a result, both divisions are in
more robust health than at any point for some years and are facing the future
with fresh enthusiasm.  We have a strong balance sheet, rejuvenated trading
businesses, a dedicated management team and an exciting commercial partnership
with Steinhoff; the ingredients are now in place for long-term success.

Donald Macpherson
Chairman
30 August 2006


Homestyle Group PLC
Consolidated Income Statement
for the 61 weeks to 1 July 2006
                                                                                       61 weeks to          52 weeks to
                                                                                       1 July 2006        30 April 2005
                                                                                       (unaudited)           (restated)
                                                                    Note                      £000                 £000

Revenue - continuing operations                                      6                     507,286              453,573

Cost of Sales - continuing operations                                                    (262,336)            (229,587)
Gross profit                                                                               244,950              223,986

Other operating income                                                                         114                   28
Selling and Distribution costs                                                           (236,477)            (190,304)
Administrative expenses                                                                   (31,994)             (46,914)
Operating loss - continuing operations                               6                    (23,407)             (13,204)

Operating loss - continuing operations is stated after charging

Settlement of VAT dispute (including professional fees)              1                           -             (19,729)
Provision for Harveys onerous leases                                 1                           -              (7,595)
Professional fees relating to restructuring review                   1                           -                (990)
Reorganisation of Harveys supply chain                               1                     (4,030)                    -

Interest receivable                                                                             69                   28
                                                                                           (1,424)              (4,106)

Finance costs
Pension finance cost                                                                         (376)                (333)
Finance costs on restructuring                                                                   -              (7,929)
Fair value adjustments to financial instruments                                                535                    -
Total finance costs                                                                        (1,196)             (12,340)
Loss before taxation                                                 2                    (24,603)             (25,544)
Taxation                                                             3                       (378)                3,760

Loss for the period from continuing operations                                            (24,981)             (21,784)
Loss for the period from discontinued operations                                                 -              (2,138)

Loss attributable to the equity holders of the parent                                     (24,981)             (23,922)

Loss per share from continuing operations
Basic and diluted                                                    5                     (10.6)p              (33.3)p

Loss per share from continuing and discontinued operations
Basic and diluted                                                    5                     (10.6)p              (36.6)p



Homestyle Group PLC
Consolidated Balance Sheet
as at 1 July 2006
                                                                                       1 July 2006        30 April 2005
                                                                                       (unaudited)           (restated)
                                                                                              £000                 £000
Non-current assets
Goodwill                                                                                    90,654               90,654
Other intangible assets                                                                        129                  137
Property, plant and equipment                                                               43,829               51,968
Deferred tax assets                                                                          7,182                9,144
                                                                                           141,794              151,903
Current assets
Inventories                                                                                 38,541               38,422
Trade and other receivables                                                                 39,588               31,502
Cash and cash equivalents                                                                      392                2,032
                                                                                            78,521               71,956
Total assets                                                                               220,315              223,859

Current liabilities
Trade and other payables                                                                 (107,109)            (100,191)
Retirement benefit obligation                                                              (1,572)              (1,572)
Tax liabilities                                                                            (6,662)             (27,271)
Obligations under finance leases                                                             (240)              (1,017)
Bank overdrafts and loans                                                                 (11,445)             (68,488)
Loan notes                                                                                 (1,670)              (2,050)
Other loan                                                                                 (5,000)                    -
Short term provisions                                                                      (6,521)              (3,587)
                                                                                         (140,219)            (204,176)
Net current liabilities                                                                   (61,698)            (132,220)
Non-current liabilities
Trade and other payables                                                                   (3,322)              (4,166)
Retirement benefit obligation                                                              (9,370)             (15,907)
Tax liabilities                                                                            (1,563)              (1,875)
Obligations under finance leases                                                                 -                (313)
Loan notes                                                                                   (374)                (414)
Long term provisions                                                                       (2,984)             (11,162)
                                                                                          (17,613)             (33,837)
Total liabilities                                                                        (157,832)            (238,013)
Net assets/(liabilities)                                                                    62,483             (14,154)
Equity
Share capital                                                                               64,769               17,037
Share premium account                                                                      130,211               79,229
Merger reserve                                                                              38,649               38,649
Capital redemption reserve                                                                     288                  288
Other reserve                                                                                    -                1,731
Reserve for treasury shares                                                                (4,880)              (4,910)
Retained earnings                                                                        (166,554)            (146,178)
Total equity                                                                                62,483             (14,154)


Homestyle Group PLC

Consolidated Cash Flow
for the 61 weeks to 1 July 2006
                                                                                       61 weeks to          52 weeks to
                                                                                       1 July 2006        30 April 2005
                                                                                       (unaudited)           (restated)
                                                                                              £000                 £000
Cash flows from operating activities
Operating loss                                                                            (23,407)             (13,204)
Operating loss from discontinued activities                                                      -                  601
Depreciation and fixed asset impairments                                                    11,534               10,205
Amortisation of other intangibles                                                                8                    7
Share based payments charge                                                                     30                   60
Cash effect of settlement of VAT structural guarantee                                     (14,625)               16,500
Loss on disposal of property, plant and equipment                                            4,830                    -
Landlords' inducements                                                                     (5,272)              (1,782)
Property provisions                                                                        (5,244)                3,270
Pension contributions charged to provisions                                                (1,259)              (1,600)
Operating cash flows before changes in working capital                                    (33,405)               14,057
Increase in inventories                                                                      (119)              (7,255)
Increase in trade and other receivables                                                    (6,353)             (13,015)
Decrease in trade and other payables                                                         (718)             (10,230)
Cash generated by operations                                                              (40,595)             (16,443)
Taxation refunded                                                                              509                4,356
Interest paid                                                                              (1,590)              (9,471)
Net cash flows from operating activities                                                  (41,676)             (21,558)

Cash flows from investing activities
Interest received                                                                               69                   28
Purchase of property, plant and equipment                                                  (9,020)             (10,725)
Proceeds on disposal of property, plant and equipment                                        3,826                3,594
Disposal of subsidiary                                                                           -               42,544
Disposal of investments                                                                          -                2,600
Net cash outflow for capital expenditure and financial investment                          (5,125)               38,041
Cash flows from financing activities
Proceeds of bank and other loans                                                             5,000               20,314
Repayment of bank loans                                                                   (59,584)             (34,823)
Repayment of obligations under finance leases                                              (1,090)                (787)
Repayment of loan notes                                                                      (420)                (199)
Proceeds on issue of share capital                                                          98,714                  286
Increase/(decrease) in bank overdrafts                                                       2,541             (10,532)
Net cash flows from financing activities                                                    45,161             (25,741)
Net decrease in cash and cash equivalents                                                  (1,640)              (9,258)
Opening cash and cash equivalents                                                            2,032               11,290
Closing cash and cash equivalents                                                              392                2,032


Homestyle Group PLC
Consolidated Statement of Recognised Income and Expense
for the 61 weeks to 1 July 2006
                                                                                       61 weeks to          52 weeks to
                                                                                       1 July 2006        30 April 2005
                                                                                       (unaudited)           (restated)
                                                                                              £000                 £000

Actuarial gains/(losses) on defined benefit pension schemes                                  5,279              (3,686)
Deferred tax effect of actuarial gain/(loss)                                               (1,584)                1,106
Cancellation of warrants issued to the banks                                                 1,731                    -
Net income /(expense) recognised directly in equity                                          5,426              (2,580)

Loss for the period                                                                       (24,981)             (23,922)
Total recognised income and expense for the period                                        (19,555)             (26,502)
Adjustment on first time adoption of IAS 32 and IAS 39                                       (821)                    -
Total recognised expense since prior year balance sheet                                   (20,376)             (26,502)


Reconciliation of changes in equity                                                           £000

At 30 April 2005                                                                          (14,154)
Adjustment on first time adoption of IAS 32 and IAS 39                                       (821)
At 1 May 2005                                                                             (14,975)
Issue of ordinary share capital                                                             98,714
Share based payments                                                                            30
Other gains and losses                                                                       3,695
Loss for the period                                                                       (24,981)
At 1 July 2006                                                                              62,483


       Homestyle Group PLC
       Notes to the Preliminary Announcement
                                                                                       61 weeks to          52 weeks to
                                                                                       1 July 2006        30 April 2005
                                                                                       (unaudited)           (restated)
1       Items charged to operating loss                                                       £000                 £000

       Reorganisation of Harveys supply chain                                                4,030                    -
       Settlement of VAT dispute (including professional fees)                                   -               19,729
       Provision for Harveys onerous leases                                                      -                7,595
       Professional fees relating to restructuring review                                        -                  990
                                                                                             4,030               28,314

2      Loss on ordinary activities before taxation                                            £000                 £000

       The following items have been included in arriving at operating loss
       Depreciation of property, plant and equipment
        - owned assets                                                                      10,874                9,315
        - under finance leases                                                                 660                  394
       Loss on disposal of fixed assets                                                      4,830                    -
       Landlord's inducements                                                              (5,272)              (1,782)
       Other operating lease rentals payable
        - plant and machinery                                                                2,988                2,738
        - property                                                                          62,684               51,734

3      Taxation on loss on ordinary activities                                                £000                 £000

       Current tax
       U.K. Corporation tax at 30.0% (2005: 30.0%) on loss for the period                        -                  555
       Deferred taxation
       Origination and reversal of timing differences                                        (378)                3,205
       Total taxation credit                                                                 (378)                3,760

4      Dividend

       The directors do not propose to declare a dividend (2005 - nil).


                                                                                       61 weeks to          52 weeks to
                                                                                       1 July 2006        30 April 2005
                                                                                       (unaudited)           (restated)
5      Loss per share                                                                         £000                 £000

       Loss for the period from continuing operations                                     (24,981)             (21,784)
       Loss for the period from discontinued operations                                          -              (2,138)
       Loss attributable to the equity holders of the parent                              (24,981)             (23,922)

                                                                                               000                  000
       Weighted average number of shares:
       For basic earnings per share                                                        236,433               65,356

6      Segmental information                                                                  £000                 £000
       Analysis of revenue
       Continuing
       Furniture retailing                                                                 288,001              253,495
       Bed retailing                                                                       219,285              200,078
       Total                                                                               507,286              453,573
       Discontinued
       Home Textiles Retailing                                                                   -               11,395
                                                                                           507,286              464,968
       Analysis of operating loss
       Continuing
       Furniture retailing                                                                (26,776)             (26,331)
       Bed retailing                                                                         3,369               13,127
                                                                                          (23,407)             (13,204)
       Discontinued
       Home Textiles Retailing                                                                   -                  601
                                                                                          (23,407)             (12,603)
       Total finance costs                                                                 (1,196)             (14,918)
       Loss before taxation                                                               (24,603)             (27,521)
       Taxation                                                                              (378)                3,599
       Loss after taxation                                                                (24,981)             (23,922)

7      Basis of accounts

       Whilst the financial information included in this preliminary announcement has been
       computed in accordance with International Financial Reporting Standards (IFRSs), this
       announcement does not itself contain sufficient information to comply with IFRSs. The
       Company will publish full financial statements that comply with IFRSs in due course.

8      General information

       The financial information set out in the announcement does not constitute the
       company's statutory accounts for the 61 weeks ended 1 July 2006 or the 52 weeks ended
       30 April 2005. The financial information for the 52 weeks ended 30 April 2005 is
       derived from the statutory accounts for that year which have been delivered to the
       Registrar of Companies. The auditors reported on those accounts; their report was
       unqualified and did not contain a statement under s. 237(2) or (3) Companies Act
       1985. The statutory accounts for the 61 week period ended 1 July 2006 will be
       finalised on the basis of the financial information presented by the directors in
       this preliminary announcement and will be delivered to the Registrar of Companies
       following the company's annual general meeting

       Copies of this announcement will be posted to shareholders and are available to
       members of the general public from the Company's registered office:  Homestyle Group
       PLC, 520 Europa Boulevard, Westbrook, Warrington WA5 7TP


                                                                                                            52 weeks to
                                                                                                            1 July 2006
                                                                                                            (unaudited)
9      Segmental Information Pro Forma                                                                             £000

       The following segmental analysis is provided to show the comparable twelve month
       periods to the Group's new accounting year end for continuing activities.  The
       figures have been extracted from the Group's statutory accounts for the period as
       adjusted by the results for the two month period of May and June 2005 from management
       accounts. This information will not form part of the audited financial statements.

       Analysis of revenue


       Furniture retailing                                                                                      262,210
       Bed retailing                                                                                            188,889
       Total                                                                                                    451,099
       Analysis of operating loss before reorganisation costs

       Furniture retailing                                                                                     (10,396)
       Bed retailing                                                                                              5,598
                                                                                                                (4,798)

       Finance costs - net                                                                                        (236)
       Pre- tax loss before reorganisation costs                                                                (5,034)
       Reorganisation costs                                                                                     (4,030)
       Loss before tax                                                                                          (9,064)





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