Final Results

Retail Stores PLC 23 September 2004 FOR IMMEDIATE RELEASE 23rd September 2004 RETAIL STORES PLC: PRELIMINARY RESULTS FOR THE YEAR ENDED 30th JUNE 2004 Contact: Iain Renwick, Chief Executive, Retail Stores Plc Tel: 020 7734 1234 Baron Phillips, Baron Phillips Associates Tel: 020 7920 3161 CHAIRMAN'S STATEMENT for the year ended 30th June 2004 --------------------------------- Although the overall outturn for the year has been disappointing, with a marginal drop in sales, the figures mask the considerable changes which have been made within Liberty over the past 12 months. It is also encouraging to note the sales trend of the second half of the year, which saw an 6% rise in turnover. The past year has witnessed a further dramatic transformation at Liberty as we have restructured and repositioned the business. I believe the impact of that transformation is now being seen in the flagship store. Under the direction of Iain Renwick, Chief Executive, there have been a number of key senior appointments throughout the Liberty operation but with particular emphasis on buying and design. Because of the relatively long lead time in retailing, the effects of these changes are now highly visible within the store, and will be even more so as we progress towards Christmas. In line with many other retailers, we felt the continued impact of the Gulf War and fewer tourists, especially in the first half of the year. As a result, Christmas trading in 2003 was late to build and therefore the Winter sales were brought forward with emphasis on clearing Autumn stocks. However it was pleasing to see stronger sales through Spring, which were driven primarily by womenswear, beauty and menswear. Additionally our fabric wholesale business performed well, generating a 9.5% increase in sales over last year. Turnover for the 12 months to 30th June 2004 dipped slightly to £39.5m from £40.1m in the previous year. Gross margins for the year also fell slightly from 44.4% to 43.9% reflecting the aggressive clearance of Autumn/Winter and prior seasons' stock in January to provide a cleaner inventory profile in the second half of the year. At the operating level before exceptional costs, last year's losses of £1.5m rose to £3.2m, leading to losses before tax of £6.2m against £4.6m last year. Losses per share were 32.3p compared to 24.3p for the previous year. There was a small increase in the value of our properties, principally the flagship store, up from £79.1m to £81.1m while the brand value remained the same at £18.2m. Great progress is being made to re-establish Liberty's uniqueness both as a West End retailer and as a brand. This is becoming increasingly evident in a number of key product areas, such as, ladies fashion, accessories, men's fashion, beauty and home, especially furniture. As a result we are laying the foundations of a solid recovery in margins throughout those key product areas where we have been under-performing in previous years. An important sector for us is Liberty Branded Products. Our own branded products set both our unique style tone whilst also generating healthy margins. The recent appointment therefore of Tamara Salman, previously with Prada and Romeo Gigli in Milan, as the Director of Design for Liberty Branded Product, and the building of a dedicated team, has been an important step forwards in creating long-term profitability at Liberty. Our priority is to increase the level of own brand products within the store over the next few years aiming for 25% of all sales by 2007. The success of our own brand products will be monitored closely and assessed for suitability for wider distribution and wholesaling opportunities as success is achieved. We have adopted a new approach to certain key departments, such as furniture, bed linen, bath and fashion accessories, which will clearly position Liberty as a speciality retailer offering a different and dynamic product range in the unique environment of London's West End. The new concepts have been created by our in-house teams who have developed standards of product display and presentation that deliver a clear Liberty style in fashion, fashion accessories and home products. There has been a phased unveiling of these new concepts that began in July 2004 with the introduction of fashion accessories, this programme will continue throughout the Autumn as the new furniture and home floors are unveiled. The early indications are that our new approach is being well received. We launched our new Autumn/Winter fashion ranges earlier than last year and the initial reaction is encouraging. We believe that the impact of the new management team, new product concepts and their successful introduction into the store will continue to grow sales and improve profitability. Just before the year-end we strengthened the Board with two key appointments. Fraser Allan became the new Finance Director, replacing Nick Mather who left to pursue other interests, having made an important contribution to Liberty's transformation. Fraser joined us from Fired Earth where he had been Chief Executive from 1999 until 2003, during which time he successfully developed the business and realised shareholder value through a trade sale in 2001. We also announced the appointment of Christian Viros as a Non-Executive Director. Christian spent more than 10 years as President and Chief Executive of the Swiss watch company Tag Heuer. Under his direction sales increased some seventeenfold to £250m, he sold the business to the luxury goods group LVMH. Christian then became President of the LVMH watches and jewellery division and a member of its Group Executive Committee until the end of 2001. I would like to take this opportunity to thank all the staff and my fellow directors for their hard work over the year as well as welcoming those who have joined the Liberty family over the past few months. It is difficult to forecast how the current year is likely to develop. I can say that we have made tremendous progress in transforming Liberty and bringing back its sense of style and excitement, on which its historic success was built. The early indications are that the changes we have implemented are being well received and I look forward to the year ahead with great anticipation. Richard Balfour-Lynn Chairman 23rd September 2004 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 30th June 2004 ------------------------------------ Year Period ended ended 30th 30th June June 2004 2003 (restated)* Notes £'000 £'000 Turnover 1 39,527 40,070 Cost of sales (22,193) (22,264) ----------------------------------------------------------------------------- Gross profit 17,334 17,806 Selling and distribution costs (including exceptional operating charges) (21,354) (20,956) Administrative expenses (2,919) (2,671) Other operating income 3,353 3,608 ----------------------------------------------------------------------------- Operating loss on ordinary activities before interest and taxation (3,586) (2,213) ----------------------------------------------------------------------------- Operating loss before exceptional operating charges (3,219) (1,519) Exceptional operating charges 2 (367) (694) ----------------------------------------------------------------------------- Operating loss on ordinary activities before interest and taxation (3,586) (2,213) ----------------------------------------------------------------------------- Net interest payable and similar charges 3 (2,606) (2,435) ----------------------------------------------------------------------------- Loss on ordinary activities before taxation (6,192) (4,648) Taxation on loss on ordinary activities 4 (682) (467) ----------------------------------------------------------------------------- Loss on ordinary activities after taxation (6,874) (5,115) Equity minority interests (360) (310) Non-equity minority interests (55) (55) ----------------------------------------------------------------------------- Loss attributable to ordinary shareholders (7,289) (5,480) Undeclared non-equity preference dividends (23) (23) ----------------------------------------------------------------------------- Retained loss for the year (7,312) (5,503) ----------------------------------------------------------------------------- Basic and diluted loss per share 5 (32.3p) (24.3p) Basic and diluted loss per share before exceptional operating charges 5 (30.7p) (21.3p) ------------------------------------------------------------------------------ All operations are continuing. The results for the year ended 30th June 2003 have been restated to accord with the amendment to FRS5 that was published in November 2003. This has no effect on the gross profit/(loss) or results below that level in the profit and loss account. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 30th June 2004 ----------------------------------------------------------- Year Period ended ended 30th June 30th June 2004 2003 £'000 £'000 Loss for the year (7,289) (5,480) Unrealised surplus on revaluation of property 3,464 1,651 Currency translation differences on foreign currency net investments 5 (141) ----------------------------------------------------------------------------- Total recognised gains and losses for the year (3,820) (3,970) ----------------------------------------------------------------------------- All recognised gains and losses are attributable to equity shareholders' interests. RECONCILIATIONS OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 30th June 2004 --------------------------------------------------- 2004 2003 £'000 £'000 Opening shareholders' funds 48,699 52,669 Loss for the financial year (7,289) (5,480) Undeclared non-equity preference dividends (23) (23) Net revaluation surplus on fixed assets 3,464 1,651 Currency translation differences on foreign currency net investments 5 (141) Unpaid non-equity preference dividends 23 23 ------------------------------------------------------------------------------ Closing shareholders' funds 44,879 48,699 ------------------------------------------------------------------------------ Included in closing shareholders' funds is an amount attributable to non-equity shareholders. CONSOLIDATED BALANCE SHEET at 30th June 2004 -------------------------- 30th 30th June June 2004 2003 Notes £'000 £'000 Fixed assets Intangible asset 18,200 18,200 Tangible assets 6 81,103 79,029 ----------------------------------------------------------------------------- 99,303 97,229 ----------------------------------------------------------------------------- Current assets Stocks 7 6,343 5,537 Debtors: amounts falling due after more than one year 878 1,138 amounts falling due within one year 5,869 6,132 Cash 13 4,490 4,513 ----------------------------------------------------------------------------- 17,580 17,320 Creditors: amounts falling due within one year 8 (14,534) (12,423) ----------------------------------------------------------------------------- Net current assets 3,046 4,897 ----------------------------------------------------------------------------- Total assets less current liabilities 102,349 102,126 Creditors: amounts falling due after more than one year 9 (55,009) (51,109) ----------------------------------------------------------------------------- Net assets 47,340 51,017 ----------------------------------------------------------------------------- Capital and reserves Called up share capital 6,036 6,036 Merger reserve 10 61,503 61,503 Revaluation reserve 10 12,337 8,887 Profit and loss account 10 (34,997) (27,727) ----------------------------------------------------------------------------- Total shareholders' funds 44,879 48,699 Analysed as: Equity shareholders' funds 44,402 48,245 Non-equity shareholders' funds 477 454 ----------------------------------------------------------------------------- Equity minority interests 1,883 1,740 Non-equity minority interests 578 578 ----------------------------------------------------------------------------- 47,340 51,017 ----------------------------------------------------------------------------- CONSOLIDATED CASH FLOW STATEMENT for the year ended 30th June 2004 --------------------------------- 2004 2003 Notes £'000 £'000 Net cash inflow from operating activities 11 520 4,606 Returns on investments and servicing of finance 12 (2,640) (3,471) Tax paid (766) (375) Capital expenditure (1,148) (2,329) ----------------------------------------------------------------------------- Net cash outflow before financing and use of liquid resources (4,034) (1,569) Management of liquid resources (500) - Financing 4,000 3,000 ----------------------------------------------------------------------------- (Decrease)/increase in cash during the year (534) 1,431 ----------------------------------------------------------------------------- RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT for the year ended 30th June 2004 ------------------------------------------------------- 2004 2003 Notes £'000 £'000 (Decrease)/increase in cash during the year 13 (534) 1,431 Increase in liquid resources 13 500 - Increase in loans during the year 13 (4,000) (3,000) ------------------------------------------------------------------------------ Increase in net debt during the year (4,034) (1,569) Translation differences 13 11 (164) ------------------------------------------------------------------------------ Movement in net debt during the year (4,023) (1,733) Opening net debt 13 (43,487) (41,754) ------------------------------------------------------------------------------ Closing net debt 13 (47,510) (43,487) ------------------------------------------------------------------------------ NOTES TO THE ACCOUNTS --------------------- 1. DIVISIONAL ANALYSIS ---------------------- Loss Loss before before interest Net interest Net and Operating and operating Turnover taxation Assets Turnover taxation assets 2004 2004 2004 2003 2003 2003 (restated) £'000 £'000 £'000 £'000 £'000 £'000 By class of business: Retail 27,139 (5,651) 90,122 28,753 (3,985) 92,381 Wholesale 12,388 2,065 2,446 11,317 1,772 1,750 ------------------------------------------------------------------------------------- 39,527 (3,586) 92,568 40,070 (2,213) 94,131 ------------------------------------------------------------------------------------- By geographical origin: United Kingdom 33,940 (4,774) 91,736 34,516 (3,318) 93,205 Japan 5,587 1,188 832 5,554 1,105 926 ------------------------------------------------------------------------------------- 39,527 (3,586) 92,568 40,070 (2,213) 94,131 ------------------------------------------------------------------------------------- By geographical destination: United Kingdom 28,571 30,380 Japan 5,585 5,738 Other 5,371 3,952 ------------------------------------------------------------------------------------ 39,527 40,070 ------------------------------------------------------------------------------------ Historically, sales from concessions have been shown on a gross basis in accordance with industry practice. Following the amendment to FRS5, sales from concession departments are now shown on a commission only basis as follows:- 2004 2003 £'000 £'000 Gross turnover 45,213 46,550 Less concession departments turnover net of commission (5,686) (6,480) ------------------------------------------------------------------------------ Net turnover 39,527 40,070 ------------------------------------------------------------------------------ The segmental analysis of operations reflects the structure of the Group. Retail includes the UK retail operations at Regent Street and Heathrow. Wholesale includes the results of the UK and Japanese fabric businesses. Net operating assets exclude short term deposits, cash and loans. The Retail loss before interest and taxation includes net rental income from properties and is after deducting exceptional operating charges. The reconciliation of net assets shown in the consolidated balance sheet to net operating assets is as follows:- 2004 2003 £'000 £'000 Net assets in consolidated balance sheet 47,340 51,017 Cash (see note 13) (4,490) (4,513) Bank loans (see note 9) 49,718 47,627 ------------------------------------------------------------------------------ Net assets as above 92,568 94,131 ------------------------------------------------------------------------------ 2. EXCEPTIONAL OPERATING CHARGES -------------------------------- 2004 2003 £'000 £'000 Redundancy and recruitment costs 367 643 Closure costs - 51 ------------------------------------------------------------------------------ 367 694 ------------------------------------------------------------------------------ During the year the Group completed a major restructuring of its management and business operations that commenced in the prior year; these costs are not expected to re-occur. 3. NET INTEREST PAYABLE AND SIMILAR CHARGES ------------------------------------------- 2004 2003 £'000 £'000 Interest payable on: Bank loans and overdrafts (2,626) (2,525) Loan from ultimate holding company (35) - Non bank interest (19) (24) ------------------------------------------------------------------------------ (2,680) (2,549) Less bank and other interest received 74 114 ------------------------------------------------------------------------------ (2,606) (2,435) ------------------------------------------------------------------------------ 4. TAXATION ON LOSS ON ORDINARY ACTIVITIES ------------------------------------------ 2004 2003 £'000 £'000 UK corporation tax on UK results - - Overseas tax Withholding tax written off (232) - Japanese tax on Japanese profits (483) (498) Adjustments in respect of prior years 33 31 ------------------------------------------------------------------------------ (682) (467) ------------------------------------------------------------------------------ The tax on loss on ordinary activities has been reduced from the amount that would arise from applying the prevailing corporation tax rate as follows:- 2004 2003 £'000 £'000 UK corporation tax credit at 30% on Group losses before tax 1,858 1,394 Permanently disallowable expenditure and unrelieved losses (2,496) (890) Taxation on chargeable gains in excess of accounting profits - (110) Withholding tax written off (232) - Taxation on overseas earnings at a higher rate than UK corporation tax (126) (167) Tax losses brought forward utilised in the period 208 100 Adjustments to taxation charge in respect of prior years 33 31 Excess of capital allowances over/(under)depreciation 73 (825) ------------------------------------------------------------------------------ Current taxation charge (682) (467) ------------------------------------------------------------------------------ 5. LOSS PER SHARE ----------------- The basic and diluted loss per share figures are calculated by dividing the loss after taxation and minority interests by the weighted average number of ordinary shares in issue for both years of 22,602,808. 2004 2003 Basic Basic and and 2004 diluted 2003 diluted £'000 pence £'000 pence Loss for the financial year and loss per ordinary share (7,312) (32.3p) (5,503) (24.3p) Exceptional operating charges 367 1.6p 694 3.0p ------------------------------------------------------------------------------- Loss for the financial year and loss per ordinary share before exceptional operating charges (6,945) (30.7p) (4,809) (21.3p) ------------------------------------------------------------------------------- As the exercise price of share options is equal to the average share price for the year there is no difference between the basic loss per share and the diluted loss per share. 6. TANGIBLE FIXED ASSETS ------------------------ Group Short Fixtures & Freehold leasehold equipment Total £'000 £'000 £'000 £'000 Cost or valuation At 1st July 2003 36,750 39,308 6,819 82,877 Additions 23 38 866 927 Disposals - - (88) (88) Revaluation (1,223) 3,277 - 2,054 ------------------------------------------------------------------------------ At 30th June 2004 35,550 42,623 7,597 85,770 ------------------------------------------------------------------------------ Depreciation At 1st July 2003 - (93) (3,755) (3,848) Charge for the year (725) (717) (875) (2,317) Disposals - - 88 88 Revaluation 725 685 - 1,410 ------------------------------------------------------------------------------ At 30th June 2004 - (125) (4,542) (4,667) ------------------------------------------------------------------------------ Net book value at 30th June 2004 35,550 42,498 3,055 81,103 ------------------------------------------------------------------------------ Net book value at 30th June 2003 36,750 39,215 3,064 79,029 ------------------------------------------------------------------------------ During the year, long leasehold costs (£40m) and accumulated depreciation (£0.6m) were reclassified to short leasehold to reflect the Group's accounting policy. The comparatives have been restated accordingly. Valuation --------- All of the Group's properties were valued at 30th June 2004 by qualified professional valuers working for the Company of DTZ Debenham Tie Leung, Chartered Surveyors, ('DTZ') acting in the capacity of External Valuers. All such valuers are Chartered Surveyors, being members of the Royal Institution of Chartered Surveyors. All properties were valued on the basis of Market Value and in accordance with the RICS Appraisal and Valuation Standards 5th Edition ('the Manual'). The valuation of the properties was £77.9m (a valuation surplus of £3.4m), which is reflected in the table above. 7. STOCKS --------- 2004 2003 £'000 £'000 Raw materials 481 405 Work in progress 25 63 Finished goods 5,837 5,069 ------------------------------------------------------------------------------ 6,343 5,537 ------------------------------------------------------------------------------ 8. CREDITORS: amounts falling due within one year ------------------------------------------------- 2004 2003 £'000 £'000 Trade creditors 7,122 5,275 Amounts owed to fellow subsidiary undertakings 852 674 Corporation tax 251 507 Other taxes and social security 626 538 Other creditors 1,761 1,340 Non-equity minority interest dividend payable 27 55 Accruals and deferred income 3,895 4,034 ------------------------------------------------------------------------------ 14,534 12,423 ------------------------------------------------------------------------------ 9. CREDITORS: amounts falling due after more than one year ---------------------------------------------------------- 2004 2003 £'000 £'000 Bank loans 50,000 48,000 Less issue costs (282) (373) ------------------------------------------------------------------------------ Bank loans net of debt issue costs 49,718 47,627 Amounts owed to ultimate holding company 2,031 - Amounts owed to fellow subsidiary undertakings 3,194 3,194 Other creditors 66 288 ------------------------------------------------------------------------------ 55,009 51,109 ------------------------------------------------------------------------------ 10. MOVEMENT ON RESERVES ------------------------ Profit Merger Revaluation and loss reserve reserve account £'000 £'000 £'000 Group At 1st July 2003 61,503 8,887 (27,727) Loss retained for the year - - (7,312) Surplus arising on revaluation of properties - 3,464 - Currency translation differences on foreign currency net investments - - 5 Transfer of depreciation on revaluation of fixed assets - (14) 14 Unpaid non-equity preference dividends - - 23 ------------------------------------------------------------------------------ At 30th June 2004 61,503 12,337 (34,997) ------------------------------------------------------------------------------ 11. RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES ---------------------------------------------------------------------- 2004 2003 £'000 £'000 Operating loss (3,586) (2,213) Depreciation 2,317 2,557 Loss on disposal of fixed assets - 57 Decrease in provisions - (120) (Increase)/decrease in stock (804) 633 Decrease in debtors 281 2,880 Increase in creditors 2,312 812 ------------------------------------------------------------------------------ Net cash inflow from operating activities 520 4,606 ------------------------------------------------------------------------------ 12. RETURNS ON INVESTMENTS AND SERVICING OF FINANCE --------------------------------------------------- 2004 2003 £'000 £'000 Equity dividend paid to minorities (224) (172) Non-equity dividend paid to minorities (82) (132) Bank arrangement fees - (457) Interest paid (2,408) (2,806) Interest received 74 96 ------------------------------------------------------------------------------ Returns on investments and servicing of finance (2,640) (3,471) ------------------------------------------------------------------------------ 13. ANALYSIS OF NET DEBT ------------------------ Movement Foreign during currency 2004 year translation 2003 £'000 £'000 £'000 £'000 Available cash 3,990 (534) 11 4,513 Short term investments 500 500 - - ------------------------------------------------------------------------------ Cash at bank and in hand 4,490 (34) 11 4,513 Ultimate holding company loan due after more than one year (see note 9) (2,000) (2,000) - - Bank loan due after more than one year (see note 9) (50,000) (2,000) - (48,000) ------------------------------------------------------------------------------ Net debt (47,510) (4,034) 11 (43,487) ------------------------------------------------------------------------------ 14. FINANCIAL INFORMATION ------------------------- The financial information set out above does not constitute the Company's statutory accounts for the period ended 30th June 2004 or 29th June 2003 but is derived from those accounts. Statutory accounts for 2003 have been delivered to the Registrar of Companies, and those for 2004 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985. 15. DESPATCH OF ACCOUNTS ------------------------ The audited accounts of the Company are expected to be sent to shareholders during October 2004. Thereafter copies will be available from the Company Secretary, Filex Services Limited, 179 Great Portland Street, London, W1W 5LS. This information is provided by RNS The company news service from the London Stock Exchange

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