Moss Bros Group PLC
12 October 2006
INTERIM RESULTS FOR THE SIX MONTHS ENDED 29 JULY 2006
HIGHLIGHTS
Financial
• Pre-tax profit of £0.8m (last year £1.7m).
• Revenue of £63.3m (last year £62.4m): like for like revenue down
0.72%.
• Gross profit percentage increased from 53.1% to 53.5%.
• Operating costs +3.2% (controllable costs - 0.1%) like for like.
• Average cash balance £8.4m (last year £6.8m).
• Nine new Moss stores opened in the first half.
• Two new Hugo Boss stores at Manchester (Trafford Park) and
Sheffield (Meadowhall).
• Current trading: revenue in the first 10 weeks of the second half
+2.9%, like for like flat. Margin growth of 0.7 percentage points.
• Michael Hitchcock appointed Finance Director.
• Interim dividend 0.5p (last year 0.5p).
Commenting on the results, Philip Mountford, Chief Executive, said:
'The results for the first six months were in line with expectations following
our pre close statement made on 8th August. The menswear retail sector
experienced a generally challenging environment during this period. The fall in
like for like revenues followed seven consecutive half year periods of like for
like growth. These results have also been affected by a significant increase in
property and utility costs, which disproportionately affect the first half,
which has lower sales than the second half.
'Trading in the first ten weeks of the second half has not shown the growth in
revenues we anticipated. There have however been improvements in gross margin
and Fashion in particular has achieved good growth. The inventory and cash
positions have continued to be satisfactory and during the first six months we
have moved to our new distribution centre, and operations have now stabilised.
'Nevertheless the performance of Moss has not been satisfactory and to address
this I have taken direct responsibility for its operations, merchandising and
buying activities until Moss is back on plan. In the current tough competitive
environment the vigorous actions necessary to improve the Moss performance are
now being taken. It takes time to recover from problems in retailing but the
balance of the year of 16 weeks normally represents 40% of our total sales and
provides an opportunity to regain momentum.
'We have appointed Michael Hitchcock as our new Group Finance Director. Michael
has a strong record working in the retail sector most recently at Ottakars and
we are looking forward to benefiting from his experience in the future.'
For further information please contact:
Moss Bros Group Plc Telephone: 0207 447 7239
Philip Mountford, Chief Executive
Diana Whitehead, Group PR Manager
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INTERIM RESULTS FOR THE SIX MONTHS ENDED 29 JULY 2006
In line with general retail sales trends, the Company experienced a challenging
first six months of the year. Trading conditions were tougher than had been
previously expected and this was reflected in the fall in like for like
revenues, which follows seven consecutive half-year periods of like for like
growth.
Revenues for the 26 weeks increased by 1.4% on last year but like for like sales
were down 0.72%. Gross profit for the half was up 2.2% and margin increased to
53.5%.
Trading Results
2006/07 2005/06
-------------------------------------------
1st Half 1st Half 2nd Half
--------------------------------------------------------------------------------
Sales v last year (like for like) -0.7% +2.8% +2.3%
% Gross profit 53.5% 53.1% 52.8%
% Gross profit v last year (% points) +0.4% +1.0% +0.4%
--------------------------------------------------------------------------------
Operating profit £m 0.6 1.5 4.4
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Moss (118 stores) traded broadly in line with general trends in the menswear
sector, and has seen like for like revenue slip 1.6% whilst achieving margin
percentage growth ahead of last year up 0.5%.
The improvement in margin came from the improved intake margin generated by the
new supply chain initiatives as well as lower markdowns on the back of improved
sell-through of the Spring/Summer ranges. Margin was helped by the development
of own brands including Ventuno 21, Blazer and Dehavilland - which now represent
48.6% of the Moss business.
Suit sales continue to show good growth up 7.7% and dresswear is up 9.2% showing
a continuing strong return to formal dressing.
Casualwear for the first time in seven seasons has seen a dip in sales. The
Spring/Summer collection did not appeal to the customer and we have aggressively
cleared the product. The reaction to the Autumn/Winter collection is
significantly stronger and casualwear remains a key element to the business.
The Moss brand remains committed to offering customers good quality branded
product at competitive prices. The brand has seen strong growth over the last
four years and the commitment to product and the strategy to grow the brand
continues.
The refit programme is continuing with increasing focus being given to the new
store format, which is being developed to provide a bright and inviting
environment with clear brand zoning. The first Ventuno 21 shop-in-shop will be
opened in the new Cardiff concept shop, which opens later this year.
Sales in factory outlets continue to grow delivering positive profit
contributions in the first half. The growth in margin being achieved further
establishes the outlets as an extension to the high street. During the first
half, Street was opened and further opportunities are being explored.
Philip Mountford has taken direct control of Moss, overseeing operations and
buying; David Pidgeon has left the business.
Fashion sales were up 0.7% like for like on last year and margin improved 1.0%.
The focus now given specifically to this part of the business is providing
renewed enthusiasm for the brands.
Cecil Gee (18 stores) rolled out its new concept to a further two stores in the
half year. A total of five Cecil Gee stores have now been refitted within the
last 18 months.
A number of new power brands have been recruited by the Cecil Gee fascia, such
as Diesel and Replay. These will help drive sales in the second half.
Hugo Boss (13 stores) revenues were up 2.5%; the Company opened one new store in
Trafford Park, Manchester that is trading ahead of expectation. Since the end of
the first half a new store has also been opened at Meadowhall, Sheffield.
Canali has had a strong finish to the half in spite of being partly closed for
11 weeks during a major shop refit. Revenues post refit have increased +41%.
Total operating costs were up 5.3% on last year; after adjusting for the impact
of new and closed stores, like for like operating costs were up 3.2%.
Controllable costs were down 0.1% like for like, however, the significant
increases in property and utility costs were reflected in the increase in fixed
costs up £1.1m (6.6%) like for like. This increase in fixed costs has had a
disproportionate impact on the profits for the first half of the year, which has
lower sales than the second half.
Cash Flow
The Company's cash position continues to improve: the average cash balance in
the first half of £8.4m was £1.6m up on the first half of last year. The cash
balance at the end of the first half increased by £0.4m to £10.7m.
Capital expenditure in the half was £4.8m, an increase of £2.3m on last year. Of
this, £1.4m was spent on opening nine new Moss stores and the Hugo Boss store in
Trafford Park Manchester. These stores are forecast to achieve positive
contribution this year: Hugo Boss in Trafford Park has already seen significant
contribution since it opened in March. £1.8m has been spent in the first half on
the relocation of the distribution centre from Stratford to Barking which is
largely covered by compensation payments received. The majority of the remaining
capital expenditure was spent on refitting several stores, which have seen, on
average, a 12% sales lift post refit.
The Canali store benefited from a £0.5m refit. Sales post refit have exceeded
expectations with sales gains of 41%.
Following the successful launch of the Cecil Gee concept stores in Brent Cross,
Gateshead, Lakeside and Edinburgh, a further £0.4m has been invested in
refitting the Bluewater store.
Further expenditure is planned on refitting two major Hugo Boss stores, two
outlets and at least six Moss stores during the second half.
The Distribution Centre at Stratford has been vacated to make way for
development work on the London 2012 Olympic site and the business has moved to a
new purpose built facility at Barking.
Inventory at the half year was up 5% on July 2005 on retail space up 8% and
terminal inventory has continued to be successfully cleared throughout the
period.
Earnings Per Share and Dividend
Basic earnings per share were 0.61p against 1.29p last year.
The Board is recommending an interim dividend of 0.50p per share (2005/06
interim 0.50p). This will be paid on 22 November 2006 to shareholders on the
register at the close of business on 20 October 2006.
Outlook
The UK menswear sector remains challenging and highly competitive. Sales growth
in the first 10 weeks of the second half have improved relative to the first 26
weeks with like for like retail revenues flat but margin has improved by 0.7
percentage point.
The cash and inventory positions remain satisfactory. The management team
remains focused on driving like for like sales growth in the last quarter of the
year and has taken the necessary actions to regain momentum.
CONSOLIDATED INCOME STATEMENT
6 months to 6 months to Year to
29 July 06 30 July 05 28 January 06
£'000 £'000 £'000
------------------------------------------
Revenue 63,272 62,377 132,813
Cost of sales (29,441) (29,280) (62,552)
------------------------------------------
Gross profit 33,831 33,097 70,261
Administrative expenses (2,199) (2,404) (5,189)
Shops' selling and marketing costs (31,013) (29,147) (59,170)
------------------------------------------
Operating profit before financing
income 619 1,546 5,902
Financial income 186 158 305
------------------------------------------
Profit before taxation 805 1,704 6,207
Taxation (241) (526) (1,958)
------------------------------------------
Profit after taxation 564 1,178 4,249
------------------------------------------
Basic earnings per share 0.61 p 1.29 p 4.62 p
Diluted earnings per share 0.60 p 1.25 p 4.54 p
CONSOLIDATED BALANCE SHEET
As at As at As at
29 July 2006 30 July 2005 28 January 2006
£'000 £'000 £'000
---------------------------------------------
Assets
Property, plant and equipment 22,076 21,122 21,059
Lease prepayments 3,115 2,386 2,919
----------- ---------------------------------
Total non-current assets 25,191 23,508 23,978
Inventories 23,666 22,449 21,704
Trade and other receivables 6,233 5,163 7,310
Cash and cash equivalents 10,662 10,250 17,655
---------------------------------------------
Total current assets 40,561 37,862 46,669
---------------------------------------------
Total assets 65,752 61,370 70,647
---------------------------------------------
Equity
Issued capital 4,678 4,603 4,652
Share premium account 8,400 8,028 8,316
Retained earnings 37,672 35,540 38,320
---------------------------------------------
Total equity 50,750 48,171 51,288
---------------------------------------------
Liabilities
Other payables 1,400 971 1,249
Deferred tax liabilities 2,626 952 2,385
---------------------------------------------
Total non-current liabilities 4,026 1,923 3,634
---------------------------------------------
Trade and other payables 10,976 11,276 15,725
---------------------------------------------
Total current liabilities 10,976 11,276 15,725
---------------------------------------------
Total liabilities 15,002 13,199 19,359
---------------------------------------------
Total equity and liabilities 65,752 61,370 70,647
---------------------------------------------
CONSOLIDATED STATEMENT OF CASHFLOWS
6 months to 6 months to Year to
29 July 2006 30 July 2005 28 January 2006
£'000 £'000 £'000
---------------------------------------------
CASHFLOWS FROM OPERATING ACTIVITIES
Profit before taxation 805 1,704 6,207
Adjustments for:
Profit on sale of non-current assets (443) (86) (31)
Interest received (186) (158) (305)
Depreciation 2,368 2,101 4,233
Equity settled share-based
payment expenses 87 48 125
Decrease/(increase) in
trade and other receivables 1,077 877 (1,270)
Increase in inventories (1,962) (1,092) (347)
Decrease in trade and other payables (4,624) (6,814) (2,046)
Tax refunded/(paid) 25 - (25)
---------------------------------------------
Net cash from operating activities (2,853) (3,420) 6,541
---------------------------------------------
CASHFLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of non-current assets 600 100 100
Proceeds from sale of investments - - 90
Interest received 186 158 305
Compensation for
acquisition of non-current assets 1,071 - -
Acquisition of non-current assets (4,808) (2,488) (5,160)
---------------------------------------------
Net cash from investing activities (2,951) (2,230) (4,665)
---------------------------------------------
CASHFLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of
share capital 20 - 337
Dividends paid (1,209) (915) (1,373)
--------------------------------------------
Net cash from financing activities (1,189) (915) (1,036)
--------------------------------------------
Net (decrease)/increase in
cash and cash equivalents (6,993) (6,565) 840
Cash and cash equivalents
at beginning of period 17,655 16,815 16,815
--------------------------------------------
Cash and cash equivalents
at end of period 10,662 10,250 17,655
--------------------------------------------
STATEMENT OF RECOGNISED INCOME AND EXPENDITURE
Share Share Retained
Capital Premium Earnings Total
£'000 £'000 £'000 £'000
---------------------------------------------
At 29 January 2005 4,603 8,028 35,229 47,860
Shares issued 49 288 337
Proceeds from QUEST 90 90
Employee share based payments 125 125
Profit after taxation 4,249 4,249
Dividends (1,373) (1,373)
---------------------------------------------
At 28 January 2006 4,652 8,316 38,320 51,288
Shares issued 4 16 20
Proceeds for share issues previously
reported as from QUEST 22 68 (90) -
Employee share based payments 87 87
Profit after taxation 564 564
Dividends (1,209) (1,209)
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At 29 July 2006 4,678 8,400 37,672 50,750
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NOTES TO THE INTERIM RESULTS FOR THE SIX MONTHS TO 29 JULY 2006
1. Basis of preparation
These condensed consolidated interim financial statements have been prepared on
the basis of the recognition and measurement requirements of IFRSs for interim
financial statements. The condensed consolidated interim financial statements do
not include all of the information required for full financial statements.
The comparative figures for the 52 weeks ended 28 January 2006 are the Company's
statutory accounts for that financial year. Those accounts have been reported on
by the Company's auditors and delivered to the Registrar of Companies. That
report of the auditors was unqualified and did not contain statements under
section 237(2) or (3) of the Companies Act 1985.
The interim information for the 26 weeks ended 29 July 2006 and 30 July 2005 has
not been audited or reviewed by the auditors.
The preparation of financial information in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting policies are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of revision and future periods if the revision affects both current and future
periods.
2. Significant accounting policies
Accounting policies adopted have been applied consistently and are consistent
with those set out in the accounts for the year ended 28 January 2006.
3. Property transactions
Shops selling and marketing costs include £443,000 of gains on disposal of
non-current assets during the period (2005: £86,000). In addition, the Company
received an interim payment of £1,626,000 for the compulsory relocation of the
Company's distribution centre. After matching a portion of the £1,626,000
against directly attributable costs incurred in the relocation and recognised in
the income statement (so that the net impact on the profit for the period is
nil), £1,071,000 is allocated to the property, plant and equipment additions for
the new distribution centre.
4. Seasonality
The Company's operations have historically experienced higher revenue during the
second half of the financial year. This is primarily due to the Christmas period
and post Christmas sale. Accordingly, the results of operations for the interim
period are not indicative of the results, which may be expected for the entire
financial year.
5. Earnings per share
Basic earnings per ordinary share are based on the weighted average of
92,992,399 (July 2005: 91,572,615; January 2006: 91,894,428;) ordinary shares in
issue during the period and are calculated by reference to the profit
attributable to shareholders of £564,000 (July 2005: £1,178,000; January 2006:
£4,249,000;). Diluted earnings per ordinary share are based upon the weighted
average of 94,577,476 (July 2005: 94,215,981; January 2006: 93,555,869;)
ordinary shares, which takes into account share options outstanding and are
calculated by reference to the profit attributable to shareholders as stated
above.
6. Dividends
The following dividends were paid in the period:
---------------------------------------------
6 months to 6 months to Year to 28
29 July 2006 30 July 2005 January 2006
£'000 £'000 £'000
---------------------------------------------
Final dividend 1.30 pence per share
(2005: 1.00 pence per share) 1,209 920 920
Interim dividend 0.50 pence
per share - - 460
Write back of waived dividends
on shares held by Quest - (5) (7)
---------------------------------------------
1,209 915 1,373
---------------------------------------------
The Directors have declared a dividend of 0.50 pence per share, totalling
£468,000, payable on 22 November 2006.
7. Interim Report
This interim report is available on application from the Company Secretary, Moss
Bros Group Plc, 8 St Johns Hill London SW11 1SA.
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