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Peacock Group (PEA)

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Wednesday 02 June, 2004

Peacock Group


Peacock Group PLC
02 June 2004

2 June 2004

                              The Peacock Group plc
                    Acquisition of The Fragrance Shop Limited

The Peacock Group plc ("the Group") has acquired the entire share capital of The
Fragrance Shop Limited ("TFS" or "the Business"), a specialist perfume retailer
with 29 outlets.  The total consideration payable is a maximum of £15 million
for the equity of the Business plus the repayment of £1.3 million of third party
term loan balances and the adoption of an overdraft facility of up to £750,000.

The initial consideration of £11.3 million, comprising £10 million for the
equity and the repayment of the £1.3 million loan has been satisfied by £5.65
million in cash and the issue of £5.65 million of new Peacock Group shares.  The
share price utilised was 207.8p resulting in the issue of 2,718,961 new shares.

The remaining deferred equity consideration of up to a maximum of £5 million
will be determined by the post-acquisition operating profit performance of the
business and will be satisfied through the issue of new Group shares.

TFS has significant development potential in the high growth UK fragrance market
and will be developed as an independent format within the Group alongside its
Peacocks and bonmarche divisions.

Reasons for purchase

The acquisition of TFS represents an opportunity for the Group to develop a
third retail format in an attractive and growing market sector.  TFS targets a
similar customer base to the Group's other divisions, with a clear proposition
focused on value.

The Group believes that its management's experience in developing and expanding
retail concepts, combined with its property and store development expertise,
financial resources and Group property covenant, will enable the TFS format to
be rapidly rolled out across the country.  The Group have set a target of a
minimum of 20 stores each year, with an initial target for the chain of over 150
stores in the UK.

The Group also believes that the increase in fragrance usage will continue to
deliver high levels of growth in the value of the market.  TFS is very well
placed to exploit this opportunity given its highly successful store format,
brand identity, excellent relationships with key fragrance houses and ability to
trade from small units at a wide variety of locations.  These include both
primary and secondary shopping centres and high streets.

The acquisition is expected to be earnings neutral in the first year, but
enhance the Group's normalised EPS from the second year of ownership (normalised
profit being profit before goodwill, exceptional items and refurbished stores
asset write-off).

Information on The Fragrance Shop

TFS was established in September 1995 through the purchase of an existing
perfumery business in Liverpool. The initial priority was to develop good
relationships with the major fragrance manufacturers to obtain their trust and
secure their support.  The next stage was to develop a new store format.  In
1999 the store roll-out programme commenced and the business rapidly expanded
into a leading independent specialist fine fragrance retail chain.

TFS sells a wide range of the major fragrance brands at value prices.  This is
complemented by additional ranges of ancillary items, including body care
products and gift sets.  TFS is an authorised distributor for most of the
leading brands including Chanel, Calvin Klein, YSL, Christian Dior, Gucci and

The business currently trades from 29 locations, primarily located in good
quality, secondary shopping centres.  The retail concept has been carefully
developed to operate most effectively from small units, typically 300 to 400
square feet.  These units have strong customer appeal and are open fronted,
enabling the full product range to be prominently displayed and to encourage
impulse purchasing.  Annual sales per square foot average around £1,400.

The retail operation is supported by a very low cost central functions team,
consisting of a small head office and a new 10,500 square feet distribution
centre, both located in Liverpool.  The Managing Director, Mark Williams, joined
the business in 2000 and worked closely with the principal shareholder, Bill
Currie, in the successful development and expansion of the business.  Both Mark
and Bill will remain with the business following acquisition.

The UK fragrance market

The 'authorised' fragrance market is currently worth approximately £700 million
annually, and is significantly higher when the 'grey' or unofficial import
market is included.  In recent years, the market has enjoyed a sustained annual
growth rate, showing 8% for the latest year (Source: FBA).  This has been driven
both by a significant investment in marketing and brand development by the
fragrance houses, and a growing consumer enthusiasm for new fragrance products.

Consumption of fragrance in the UK remains relatively low by international

The fragrance market is changing, with traditional retailers such as department
stores and pharmacy stores losing market share to specialist retailers such as
TFS and The Perfume Shop.

Summary Financial History

Audited figures for TFS for the year ended 31 January 2004 show turnover up 74%
on the prior year at £9 million, with like-for-like sales growing by 16%.
Operating profits were £610,000, more than double the previous year.  Net assets
were £652,000.


The vendors of TFS are Bill Currie (94%) and senior management (6%).

In addition to the initial consideration as set out above, the deferred equity
consideration of up to £5 million, which will be satisfied by the issue of new
Group shares, is payable based on the business achieving the following
post-acquisition annual profitability levels:

•         £1.7 million payable in the event that TFS reports operating profits
in excess of £5m for any year ending 31 March up to and including the year
ending 31 March 2014;

•         a further £1.6 million payable in the event that TFS reports operating
profits in excess of £10m for any year ending 31 March up to and including the
year ending 31 March 2014;

•         a further £1.7 million payable in the event that TFS reports operating
profits in excess of £15m for any year ending 31 March up to and including the
year end 31 March 2014.

Richard Kirk, Group Chief Executive, said: "The Fragrance Shop is a high quality
business with excellent relationships with many of the key fragrance houses.
This strategic acquisition sits well alongside our other formats and provides an
attractive development opportunity for the Group."


The Peacock Group plc                                  Hudson Sandler
Richard Kirk, Group Chief Executive                    Andrew Hayes/ James Hill
Keith Bryant, Group Finance Director                   Tel:  020 7796 4133
Tel:  020 7796 4133 (on 2 June)
Thereafter:  029 2027 0000

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