Final Results

John Lewis Of Hungerford PLC 20 December 2002 John Lewis of Hungerford plc ("the Company") Preliminary Results John Lewis of Hungerford plc. ("The Company") designs, manufactures, and retails kitchens, home office and free standing furniture direct to the public from its own showrooms and Company managed concessions throughout the United Kingdom. The Company also operates a United Kingdom mail order business for replacement kitchen cabinet doors and supplies selected non-branded products to the Netherlands through a distributorship. Manufacturing and administration is carried out from a purpose built factory at Wantage, Oxfordshire constructed in 1998. The Company has recently made major investments in advanced automated manufacturing equipment. Founded in 1972, the Company is committed to the pursuit of excellence in every aspect of its business and endeavours to maintain long-term relationships with its staff, customers and suppliers. A policy of "keep it simple" links with an innovative and a fresh approach to its business. Significant United Kingdom brand recognition has been achieved through long-term sustained advertising in quality magazines. The Company's core product line is the "Artisan(R)" range of kitchens and furniture. In recent years the Company has expanded its line of branded products to include the more contemporary "Shaker" style kitchens and the Just Doors(R) direct mail business for replacement kitchen cabinet doors. The Company's growth strategy remains focused on improving the visibility and availability of its products in the United Kingdom by increasing the number of Company owned retail showrooms and selected concession sites, and by developing its mail order business. For more information about the Company and its products visit our web sites: www.john-lewis.co.uk www.the-home-office.co.uk www.justdoors.co.uk 2002 HIGHLIGHTS • Sales increased 13% over previous year. • Loss for the year before taxation £82,220 (2001 - £122,550 profit). • Net cash inflows from operating activities £256,215 (2001 - £347,309). • Dividend unchanged. CHAIRMAN'S STATEMENT Overview The past year has been a disappointment for your Board. After a very strong first quarter, sales declined sharply and only fully recovered in the last quarter of the financial year. As reported previously, the results have been adversely affected by the unexpected closure of two concessions (for reasons unrelated to the Company's performance) and the subsequent decision by your Board not to proceed for commercial reasons with two potential replacement stores at that time. In addition, extra carrying costs were incurred during the year due to delays in opening our new London showroom at Muswell Hill and, as reported previously, the Company experienced unusually high designer staff vacancies in the year. All of the above circumstances resulted in lost sales opportunities and additional costs being incurred. Results Sales for the year ended 31 August 2002 increased by 13.1% to £3,441,965 compared to £3,042,201 for the previous year. Losses before tax for the same period were £82,220 compared to a profit of £122,550 for the previous year. Losses for the year are stated after charging exceptional expenses of £27,246 relating to store closures. Gross margins declined slightly to 56.6% against 57.4% in the prior year. Unit sales of kitchens and furniture both increased by approximately 11% compared to the prior year. The loss for the financial year after taxation amounted to £77,364 (2001-£84,368 profit). Net cash inflows before financing were £86,526 and after financing £486,526 (2001 - before and after financing £84,037 outflows). Basic losses per share were 0.05p (2001-0.06p earnings). Although a trading loss was reported for the period, the satisfactory level of current trading means that an unchanged dividend of 0.037p per share is being proposed by your Board (2001 - 0.037p). Subject to shareholder approval, the dividend will be payable to shareholders on the register at 6 January 2003 and will be paid on 10 February 2003. Trading Review As indicated above sales revenues during the year were exceptionally volatile. The first quarter results were very strong driven by a highly successful promotion in conjunction with Sainsbury plc. During the second and third quarters sales dropped sharply. Although this may in part have been due to customer reaction to the tragic events of 11 September, we do not believe this to be a highly significant factor in the sales slowdown. During the last quarter of the financial year sales picked up on the back of summer promotional activity. It appears more than ever before that customers are increasingly willing to put off purchasing until encouraged to do so by promotional opportunities. Going forward we are looking to review the Company's promotional calendar to address this changing purchasing pattern. Kitchen sales increased a satisfactory 16% for the year on volume growth of 11%. Furniture sales, which declined sharply in the first half, picked up in the second half ending the year flat against the prior year same period on volumes 11% higher, the latter reflecting promotional discounts. The Just Doors mail order division achieved steady growth with a sales increase of 9% over the prior year. Our challenge for this brand remains finding new ways of advertising and promoting this niche line. Overall, despite the solid increase in sales, profitability was adversely affected by a number of exceptional and special factors which are addressed in the Overview section of this statement. The largest negative impact on profits resulted from the closing of our concessions in London and Bristol at the request of the host stores. We were particularly disappointed to have lost our London concession at Jerry's Home Store in the Fulham Road due to the closure of the host store. This concession was only opened at the beginning of 2001 (having relocated from Liberty in Regent Street) and had been trading exceptionally well. Whilst the direct exceptional cost of closing these two concessions was £27,246, the additional consequential loss of profit is estimated by your Board to be a figure significantly higher than this direct cost. Financial Review The Company continues to have a cash generative business model. Despite reporting a trading loss, Net Cash Inflows from Operating Activities amounted to £256,215 (2001-£347,309). During the year your Board took advantage of currently low interest rates to strengthen the Company's Balance Sheet. A £400,000 - 15 year commercial mortgage has been secured on the Company's freehold land and buildings, which represents less than 30% of the carrying value of this asset. This facility provides cash resources which will enable the Company to reduce or eliminate the need for short term bank financing during periods of low sales revenues. The Company has however retained standby-secured overdraft facilities of £250,000. Capital expenditures in the current year totalled £115,754 and in the main reflects the fitting out costs of the new showroom in Muswell Hill, London. A dividend of 0.037p per share is being proposed on the basis of strong trading results in the current financial year. Outlook Trading during the first three months of the current financial year to 31 August 2003 has been encouraging. Sales have been above your Boards expectations and some 15% ahead of the same period in the prior year. In addition these results have been achieved at a considerably lower promotional cost than in the prior year same period. The Board is also pleased to announce that a new company leased showroom in the Clifton area of Bristol has been secured on satisfactory terms and is expected to open before Christmas 2002. This replaces the concession in Bristol closed last year. In addition the Board is continuing to look for showroom space in west London and other areas of the United Kingdom. The year to 31 August 2002 was an unexpected disappointment and going forward there remains significant uncertainty in the economic environment. Nevertheless your Board considers the business well placed for success in the current financial year. John Lewis Chairman 20 December 2002 Profit and Loss Account for the year ended 31 August 2002 2002 2001 £ £ Turnover 3,441,965 3,042,201 Cost of sales (1,494,198) (1,296,033) ----------- ----------- Gross profit 1,947,767 1,746,168 Distribution costs (637,700) (508,328) Administrative expenses (1,358,026) (1,116,744) ----------- ----------- Operating (loss)/profit (47,959) 121,096 Loss on disposal of fixed assets (27,246) - Interest receivable and similar income 1,074 2,119 Interest payable and (8,089) (665) similar charges ---------- ------------ (Loss)/profit on ordinary (82,220) 122,550 activities before taxation Tax on (loss)/profit on 4,856 (38,182) ordinary activities ----------- ----------- (Loss)/profit for the financial year (77,364) 84,368 Dividends (55,000) (55,000) ----------- ----------- Retained (loss)/profit for (132,364) 29,368 the financial year ======= ======= (Loss)/Earnings per share Basic (0.05)p 0.06p Fully diluted (0.05)p 0.06p 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 2002 2002 2001 £ £ £ £ Fixed assets Intangible assets 29,283 32,087 Tangible assets 1,890,337 1,978,708 ---------- ---------- 1,919,620 2,010,795 Current assets Stocks 172,232 223,564 Debtors 122,252 66,524 Cash at bank and in hand 556,329 84,855 ---------- ---------- 850,813 374,943 Creditors: amounts falling (967,122) (821,352) due within one year ---------- ---------- Net current liabilities (116,309) (446,409) ---------- ---------- Total assets less 1,803,311 1,564,386 current liabilities Creditors: amounts falling (382,790) - due after more than one year Provisions for liabilities (24,786) (36,287) and charges ----------- ----------- Total net assets 1,395,735 1,528,099 ======= ======= Capital and reserves Called up share capital 148,745 148,745 Share premium account 824,771 824,771 Other reserves 1,421 1,421 Profit and loss account 420,798 553,162 ---------- ---------- Shareholders' funds 1,395,735 1,528,099 - all equity interests ======= ======= The financial statements were approved by the Board on 20 December 2002. John L. Lewis Richard D. Worthington F.C.A. Director Director Cash Flow Statement for the year ended 31 August 2002 2002 2001 £ £ £ £ Net cash inflow from 256,215 347,309 operating activities Returns on investments and servicing of finance Interest received 1,074 2,119 Interest paid (8,089) (665) ---------- ---------- Net cash (outflow)/inflow (7,015) 1,454 from returns on investments and servicing of finance Corporation tax (6,645) (1,894) Capital expenditure Payments to acquire (639) (8,599) intangible fixed assets Payments to acquire (115,754) (387,300) tangible fixed assets Receipts from sales 15,364 14,993 of tangible fixed assets ---------- --------- Net cash outflow from (101,029) (380,906) capital expenditure Equity dividends paid (55,000) (50,000) ---------- ---------- Net cash inflow/(outflow) 86,526 (84,037) before financing Financing Mortgage Loan 400,000 - ---------- ---------- Net cash inflow 400,000 - from financing --------- ---------- Increase/(decrease) 486,526 (84,037) in cash ======= ======= 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 2002 statutory financial statements. 2. Reconciliation of Movement in Shareholders' funds 2002 2001 £ £ (Loss)/Profit for the financial year (77,364) 84,368 Dividends (55,000) (55,000) ---------- ----------- Net (reduction from)/addition to shareholders' funds (132,364) 29,368 Opening shareholders' funds 1,528,099 1,498,731 ----------- ------------ Closing shareholders' funds 1,395,735 1,528,099 ======= ======== 3. Earnings per Share Earnings per ordinary share is calculated as follows: 2002 2001 Basic (Loss)/Profit attributable to ordinary shareholders £(77,364) £84,368 Weighted average number of ordinary shares in issue 148,745,519 148,745,519 (Loss)/earnings per ordinary share (0.05)p 0.06p ======== ======== Fully diluted (Loss)/Profit attributable to ordinary shareholders £(77,364) £84,368 Weighted average number of ordinary shares in issue 148,745,519 148,745,519 (Loss)/earnings per ordinary share (0.05)p 0.06p ======== ======== Weighted average number of ordinary shares in issue - basic 148,745,519 148,745,519 calculation Number of shares deemed to have been issued for no consideration - - in respect of share options ------------ ------------- - fully diluted calculation 148,745,519 148,745,519 ======== ======== 4. 2002 Report and Accounts Copies of the 2002 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, No 1 Riding House Street, London, W1A 3AS, 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, No 1 Riding House Street, London, W1A 3AS, for one month from the date of this announcement. -ends- This information is provided by RNS The company news service from the London Stock Exchange

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