Company Announcements
Final Results
Related Companies
BEALE PLC
("BEALES" OR THE "GROUP")
RESULTS FOR THE YEAR ENDED 1 NOVEMBER 2014
26th February 2015
Beale PLC, the specialist department store operator, announces Preliminary Results for the 52 weeks ended
1 November 2014.
l Gross sales (inclusive of concession sales and VAT) reduced 3.6% to £116.2m (2013: £120.6m) affected by;
o Two store closures during the year, Keighley Home (losses) and Harrogate (site development)
o Planned exit from loss making TV/Audio product category during 2012/13
o Change of promotional stance during the first quarter 2012/13
l Like for like (excluding closures) gross sales were only 1.1% lower;
o Quarter on quarter management led like for like sales improvement;
Q1:-4.4%, Q2:-0.6%, Q3: +0.2%, Q4:+1.9%
o Positive trend has continued into the current year
l Gross margin improved from 52.1% to 53.3%, a two year rise of 270 basis points as a result of;
o Improved intake margin through better sourcing & buying
o Less use of promotional markdowns
o Better stock control and resultant lower stock loss
o Improved brands and mix of own bought and concession products and services
l Loss before interest, tax, depreciation, amortisation and exceptional items reduced substantially 44% to £0.6m (2013: £1.1m);
o Gross profit gains secured £0.6m
o Inflationary administrative expenses totally mitigated by improved cost controls
l Operating Loss before exceptional items reduced substantially to £2.0m (2013: £3.3m)
l Pre-tax loss after exceptional items £4.6m (2013: £4.1m);
o Includes £1.4m increase in non-cash charge for embedded derivative revaluation
o Includes £0.4m increase in non-cash finance charge on preference shares
· During the 14 days of Christmas and New Year from 21 December 2014, gross sales increased 6.1%; for the first 16 weeks of the current financial year like for like gross sales were 1.7% ahead of the previous year
· The balance sheet retains £4.8m of net assets (2013: £6.6m)
· Post period under review, bid of £1.2m for the business announced and subsequently declared unconditional, additional financing secures the required growth capital for investment in the store estate and helps to confirm the long term viability of Beales.
Michael Hitchcock CEO commented:
"Much was achieved during 2014 towards our strategic objectives in the turnaround of the Beales business and since the period end, trading has continued to improve further following actions taken to revitalise the business. A quarter on quarter improvement in like for like sales through 2014, an improvement in gross margin, a material reduction in the operating losses and continued improvement in the operational management of the business, are all indicators that the business is responding positively to the actions taken. The business is stronger as a result, with options to move forward now with a far greater degree of confidence having secured a bid for the business which comes with up to £2 million of capital growth funding."
Further Information
Beale PLC Tel: 01202 552 022
Michael Hitchcock, Chief Executive
Shore Capital Tel: 0207 408 4090
Anita Ghanekar
Edward Mansfield
Buchanan Tel: 0207 466 5000
Charles Ryland
Sophie McNulty
Gabriella Clinkard
Group Strategic Report
Beales ambition is to be the local high street department store at the heart of the community, securing repeat business by offering the best customer experience which, aligned to absolute fiscal responsibility, is the foundation of all successful businesses.
What we do and where we do it?
About the Group
Founded in 1881, today Beales operate a Group of 29 distinctive department stores, predominantly in secondary and tertiary market towns, across the country, from Hexham in the north, Bournemouth in the south, Lowestoft in the east and Southport in the West.
Its revenue is derived through selling product it has bought for resale, both food and non-food, and taking a commission on product and services sold by concessions selling their own product and services, both food and non-food.
The objective of Beales is to provide a quality mix of both branded and own branded product and services to the local community, giving an exemplary and traditional local customer experience, selling at a higher price to that which it was bought and operating the business at the most cost effective level possible. Beales offers branded, functional and aspirational merchandise and services for men, women, children and the home, tailored to the individual local requirements of our customers, the discerning ABC1 consumer, who is seeking quality, style and value for money.
The Group is proud of its individuality and unique heritage, which is drawn on to provide exceptional levels of personal customer experience. This experiential journey starts online and via social media, continuing to visually through the windows and the store entrances and into the store environments, which are all being enhanced and updated constantly to meet the customers' expectations.
The Group continues to develop its internet sales, with the introduction of many new ranges, some of which may not be available in all stores. Visit www.beales.co.uk to review our wide range of direct delivered merchandise. Beales offers a loyalty card scheme, Love Rewards, which it launched in May 2012 and now has close to 440,000 members.
Beales can be summarised as a business which is 'asset rich', i.e. it owns £19.0m of freehold and long leasehold property assets and £14.6m of stock, yet 'cash poor', i.e. it has £16.5m of net debt and has produced net trading cash outflows for a number of years. Since the current CEO, Michael Hitchcock, joined the business in May 2012 as interim CFO, considerable progress has been made to generate and secure value for Beales Shareholders during a period of uncertainty for secondary and tertiary high street retailers and at a time when material risks have faced the business. In particular, initiatives were put in place to refinance the business and to rebuild and refocus the brand with material consequential improvements to gross margin and operating performance.
This was initially achieved by closing the Company backed store card, closing surplus operating assets, exiting loss making stores where lease terms allowed, removing inefficient and non-productive operational costs and introducing more efficient retail processes into the business. This assisted with the immediately required first refinance of the business's debt, with its then current lender HSBC and allowed the second timely and more appropriate refinance of the businesses debt, with its current lender Burdale.
Following the appointment to CEO in February 2013, Michael Hitchcock along with the Trading Director Tony Richards, sought to operate Beales more akin to its heritage of a trusted, local and community based secondary and tertiary high street department store. The business moved entirely away from constant promotional discounting which was causing dissention both internally with staff, brands and concessions and externally with customers. The business also exited loss making categories such as TV/Audio.
Through the continuation of exiting loss making stores where lease terms allowed, removing inefficient and non-productive operational costs and introducing more efficient retail processes into the business, and alongside regaining both brands and concessions belief in the Beales brand name, the operational performance of Beales has improved markedly over the last two years.
Group Strategic Report continued
Beales intends to exploit its position in the predominantly secondary and tertiary high street locations where it trades and actively works with the local community to give customers a reason to continue to come back onto the high street. All recent evidence suggests a move towards localised and frequent shopping trips. Collaborating with local councils and local Business Improvement Districts will ensure that Beales plays its own part in the rejuvenation of the UK's High Streets. Occupying one of the biggest sites, if not the biggest site in these high streets, provides the opportunity for brands new, re-emerging or traditional, to enter, return or remain on the high street at minimal risk.
Strategy
The ongoing strategy for Beales turnaround is to continue with the following initiatives,
1. Exit operating units, concession brands and categories that are not commercial or economically viable
2. Introduce new products and categories to fulfil the objective of being the local high street department store of choice
3. Continue the extensive cultural change within the business to ensure the customer interests are always the top priority for every employee and deliver the best customer experience every time
4. Continue the reorganisation of internal structures to make processes more efficient and cost effective, maximising synergies wherever possible
5. Secure the retention of funding to ensure Beales remains a going concern, and utilise the injection of growth capital secured through the declared unconditional bid for Beales, to invest in the store estate
and to consolidate the following initiatives,
1. Position Beales at the heart of the community it trades in, by turning over excess space for community use
2. Leverage the considerable talent and resource it has at the centre, to offer management services to other independent department stores around the UK
3. Utilise the material freehold and leasehold assets that Beales owns to facilitate the generation of cash to reinvest back into their stores
4. Build on the more recent investment in Beales online offer to replicate the in-store experience
5. Build on the click and collect service it currently provides
Progress Indicators
Progress will be measured by the financial results of Beales, namely loss reduction and then profit making and cash self-sufficiency. As the business turns itself around - execution to the highest standard of the initiatives listed above will continue to move the business from loss making to profit making, towards cash self-sufficiency and to one which affords growth both organically and through acquisition. Everyday standard retail KPIs such as sales per square foot, average transaction value, gross margin, cost percentages and many more, are constantly referred to as guidance to ensure the critical objectives set out above are achieved.
|
|
52 weeks to 1 November 2014 £000 |
Restated 52 weeks to 2 November 2013 £000 |
53 weeks to 3 November 2012 £000 |
52 weeks to 29 October 2011 £000 |
|
Number of Trading Units |
29 |
31 |
33 |
33 |
|
Operating loss before exceptional items |
(1,925) |
(2,530) |
(2,936) |
(3,832) |
|
Loss before interest, tax, depreciation and amortisation and before exceptional items |
(623) |
(1,118) |
(1,353) |
(2,013) |
|
Net (decrease)/increase in cash and cash equivalents in the period |
(1,085) |
(696) |
(289) |
272 |
|
Net Debt |
(16,461) |
(14,846) |
(15,346) |
(11,009) |
Group Strategic Report continued
Review
Business Context
The period since the end of the last financial year (2 November 2013) has seen continued improvement in the turnaround of the Beales business. A quarter on quarter improvement in like for like sales, an improvement in gross margin, a material reduction in the operating losses and continued improvement in the operational management of the business. The business is stronger as a result, with options to now move forward with a far greater degree of confidence having subsequently secured a bid for the business which comes with a minimum of £1 million and up to £2 million of capital growth funding (see further progress below).
Quarter on quarter like for like sales improvement:
During the year ended 1 November 2014, the quarter on quarter improvement in like for like sales shows the operational turnaround is gaining momentum.
|
Quarter 1 |
-4.4% |
very poor start to the Autumn/Winter season in 2013 due to warm weather |
|
Quarter 2 |
-0.6% |
strong Easter trading and seasonal weather for start of Spring/Summer 2014 season |
|
Quarter 3 |
+0.2% |
strong late summer trading as consumer confidence rose |
|
Quarter 4 |
+1.9% |
the fourth quarter improvement would have been materially higher, had it not been for a now recognised unseasonably warm autumn |
Gross margin improvement:
The year ended 1 November 2014 has seen a further increase of 120bp in gross margin, following the 150bp increase in gross margin for the year ended 2 November 2013. Over the space of two years gross margin has improved nearly 3 percentage points. This has been achieved through better own bought product sourcing and buying, delivering a higher intake margin, and less use of promotional markdown and the continued reduction in stock loss, delivering a higher retained margin.
Material reduction in operating losses:
Having secured the improvement in both like for like sales and gross margin, the business has strenuously worked to mitigate away any inflationary and contractual cost increases that it has been faced with. Further diligent control over staff rotas and the improvement in back office processing has enabled material reductions in certain cost areas to leave administrative costs level with last year and £4.8m lower than two years ago.
Gains in operational management:
There was far more stability in the trading stance of Beales across the year ended 1 November 2014. It was the first complete trading calendar with none of the previous management's favoured 'Mega' promotions, and was rewarded with a 1.8% improvement in gross profit against a 3.6% reduction in gross sales, compared to the prior year. There were fewer concession partner administrations across the same period compared to the prior year, one versus five, which minimised the disruption to trading. The concessions 'mats' across the entire business were 100% full very early into the trading period, with new concessions such as Woods of Dorchester, Bobbi Brown, Bon Marche, Dorothy Perkins, and Gagliardi all opening across varying stores.
Business interruption and retail unpredictability:
There were a number of interruptions to trade across the financial year. Two store closures, Keighley Home store and Harrogate; a warm autumn at the start of the year held back sales at full margin; floods in spring across much of the country not only held back sales at full margin but also prevented sales in some circumstances. The abnormal and unhelpful weather patterns across the year were negatively correlated with the normally expected seasonal product launches.
Stronger business:
The people changes made in the prior year, the ongoing material cultural shift in the business, the focus on creating 'the best customer experience', playing to our position at the heart of the community and being local, have all created a game change in the performance and turnaround of Beales. We have continued to invest in the Web platform to maximize the opportunity for growth through this channel. The business currently has a list of both new and existing high street retail brands keen to join Beales in the future when the opportunity presents itself. The foundation has been laid and the launch pad created for the further turnaround following the subsequently secured bid for the business which comes with a minimum of £1 million and up to £2 million of capital growth funding (see further progress below).
Group Strategic Report continued
Clear vision:
The vision for Beales is very clear with (1) the need to secure an injection of growth capital into the business to create a buffer against any short term retail shocks (achieved subsequent to the year end; see further progress below), (2) to exit up to five loss making stores that drain in total c£1.5m of cash each year, and (3) invest in strategic store refits to retain and attract key cosmetic and fashion brands, which in turn attract further quality brands into the Beales stores.
Further progress - Offer for Beales
Since the year end, the Board has made further progress to confirm the long term viability of Beales. On 19 January 2015 the Boards of Beales and English Rose Enterprises Limited (English Rose), a company controlled by Andrew Perloff, announced that they had reached agreement on the terms of a recommended cash offer by English Rose for the entire issued and to be issued ordinary share capital of Beales (the "Offer").
Under the terms of the Offer, which was subject to the conditions and further terms set out in the announcement and the full terms and conditions set out in the Offer Document issued on 29 January 2015, Beales Shareholders who accepted the Offer were entitled to receive for each Beales Share 6p in cash. The Offer valued the entire issued ordinary share capital of Beales at approximately £1.23 million.
The Board of Beales carefully considered the terms of the Offer. Under the Code, the Beales Directors were required to obtain independent advice on the Offer and to make the substance of such advice and its own views known to Beales Shareholders.
The Offer Price represented a discount of approximately 48 per cent. to the Closing Price of 11.5p per Beales Share on 16 January 2015, being the last business day prior to the date of the announcement. The Board of Beales believed that the Offer Price was disappointing and that in different circumstances it could have achieved a price that would value the business and assets of Beales more fully.
However, the complex capital structure inherited by the current Beales Board imposed a number of restrictions on Beales' ability to fund its activities, including the requirement for the Concert Party (a group of companies and individuals controlled by Andrew Perloff) to agree to any of the alternative funding options the Beales Board had identified. As a result, Beales may have been unable to generate sufficient cash flows to meet its longer term financial commitments in the future. Accordingly, the Beales Board believed that Beales Shareholders should carefully consider the future risks facing the Group and may wish to accept the Offer, depending on their own individual circumstances and appetite for risk.
As was seen in early Autumn/Winter 2014 when the UK retail sector suffered a period of weak trading given the unseasonably warm weather, Beales trading remains volatile and difficult to predict. Importantly, the Board of Beales, giving consideration to its statutory and regulatory obligations to consider the medium to long term prospects of the Group, believed that the business required additional capital to maintain and accelerate the pace of the turnaround of the business, so as to ensure that it is robust in the event of further negative market dynamics and/or future balance sheet commitments which could otherwise have a significantly detrimental impact on the Group.
In this context, the Board of Beales appointed PriceWaterhouseCoopers LLP (PwC) in October 2014 to review the Group's financial position and to consider options to raise additional capital. As part of this exercise, Beales and PwC held discussions with the two largest shareholders of Beales and with the Group's lender, Burdale Financial Ltd, now referred to as Wells Fargo Capital Finance. A number of options were considered, but the Beales Board believed that none could realistically deliver greater value to Beales Shareholders without the agreement of the Concert Party. As an alternative, English Rose put forward the Offer.
With the Offer being declared wholly unconditional on the 20 February 2015, the Concert Party has committed to support the business with additional growth capital which is expected to improve the future security of the business, its employees and the Beales pension schemes. English Rose has also extended the offer period to 12 March 2015 in case other shareholders now wish to accept.
Group Strategic Report continued
The Offer has been declared unconditional in all respects and on no event of default having arisen (save where such event of default has been waived by Wells Fargo Capital Finance) under the Facility, Portnard (a company controlled by Andrew Perloff) has agreed that it will procure the lodging of a £2.0 million deposit with Wells Fargo Capital Finance. On receipt of such deposit, under the terms of the Collateralised Term Loan Facility, Wells Fargo Capital Finance will make £1.0 million available for immediate use by Beales (subject to the Facility continuing to be available for drawdown at that time and in addition to any current ability to draw down on the Facility), with a further amount up to a maximum of £1.0 million potentially being made available to Beales by Wells Fargo Capital Finance (through the Collateralised Term Loan Facility subject to the re-registration of Beales as a private company and to further conditions which may be agreed and which may include recommendations arising from English Rose's detailed operational and strategic review with Beales' management. English Rose has indicated its intention to work closely with management to assess the options available to Beales to protect, promote and develop its business.
Market Overview
The retail sector saw an improving second half of the year as people started to feel more confident about their jobs and their financial security. The improvement has been limited as the pace of real wage growth was held back by inflation running at higher rates that wage increases. The independent department store sector is still under increasing pressure with more and more stores and chains coming up for sale and a number of solus units falling into administration as they have been unable to facilitate the access to higher levels of working capital funding.
Customers have continued to shop cleverly and seek out products which come with a promotion and/or a discount and prioritizing value; the first area customers go to in store is still the 'sale' rail. As customer confidence has improved, notwithstanding the 'perverse' British weather, they have also started to move into the full price product at the start of each fashion season.
The vagaries of the English weather have also served to make it very difficult, for fashion in particular, to form any sort of normal sales pattern; warm and wet when fashion dictates it should be cold and dry and cold and wet when fashion dictates it should be warm and dry.
Online is becoming an ever more established and greater share of the retail market with huge sums of money being invested to offer an Omni-channel route to market.
Principal Risks and Uncertainties
The principal risks and uncertainties have not changed from last year and the Board continues to apply mitigating actions. All retailers continue to face a very challenging and competitive trading environment. Sound risk management is an essential discipline for running the business efficiently.
Beales, as with all retailers, is highly operationally cost geared, i.e. there are a majority of costs that need to be spent before any sales are made, which means relatively small movements in sales and gross margin can materially affect the profitability of the business, both positively and negatively. To that end and given the absolute levels of losses before interest, tax, depreciation and amortisation generated by Beales, and covenants set based on the trading cash flow of the business, there will always be uncertainty.
The nature of risk is that no list can be totally comprehensive, though the Directors believe the principal risks and uncertainties faced and the mitigating actions taken to manage these risks and uncertainties are as follows:
The single biggest risk is our customers continued uncertainty resulting from the long period of austerity that the UK has been through, the forthcoming General Election in the UK and instability in the Eurozone. Beales may offer the best customer experience with the best looking shops and the best product, but if the customers do not have increasing free disposable cash, and an increasing propensity to spend, the trading results will be negatively affected. A slowing return of consumer confidence and any resultant need for increased discounting and promotions to stimulate demand, adversely impacts on revenues and margins. In mitigation we:
• Continually review the markets and performances of the trading environment;
• Balance our exposure by managing product mix, supplier mix and profit margins;
• Regularly monitor strategic key performance indicators; and
• Seek to enhance our sourcing margins and improve commercial terms.
Group Strategic Report continued
Weather plays an important factor in the short term trading of any retailer, particularly those which have a core fashion offer and are dependent upon a 'normal' spring/summer and autumn/winter weather sequence; the mitigation to this, to an extent, is to adopt a more trans-seasonal product buying strategy.
Concession product or business failure: the last financial year has shown a much reduced level of disruption to trading through concession failure and poor product or line failure, however as the prior year showed, the level of disruption can be much higher. These events are synonymous with the prevailing economic state of the nation. The business mitigates the likelihood of these events through careful and considered choice of concession partners.
In uncertain economic conditions the level of resources may be inappropriate to deliver the expected business benefits. In mitigation we:
• Regularly review the Group corporate plan against expectation;
• Monitor our cost controls against structured financial plans and act accordingly; and
• Invest in appropriate systems to cost effectively monitor performance and add value.
Cash resources; Beales, being asset rich and cash poor with a material external debt needs to generate cash through sales. In the event that sales do not meet targets, to ensure that the terms of the external debt are met, other mitigating measures will need to be adopted to generate cash. In mitigation we:
• Maintain a strong relationship with major stakeholders;
• Ensure consistent and disciplined monitoring of working capital; and
• Review the allocation of Group resource and capital investment on a daily basis.
The Group may lose expertise with resignation of key Directors and senior management who are key to delivering success. In mitigation we:
• Seek to motivate all colleagues to fulfil Group targets;
• Have an ethos of candid and honest communication;
• Relevant review of remuneration appropriate to all areas of the business; and
• Seek to develop our people to take on greater responsibility.
The Group has continued to work within its lending facilities. However, the Group is subject to a number of risks and uncertainties, the principal ones being set out above, which it continually reviews in determining that the Group continues to operate as a going concern. Please refer to the Going Concern statement note 1
Other Key Considerations
Employees
People and their characters are at the centre of every retail business and Beales places the highest attention on securing and retaining the best talent open to them. Beales recognises that to ensure repeat business you need the right character of people working in stores. Choice of character in the first instance is a critical recruitment factor for the business.
Beales is continuing its strategy of ensuring that its employees look forward to coming into work. Culturally the business has moved forward massively and this positive momentum will be continued.
There are basic and expected requirements from all our employees, all geared at giving the customers the best customer experience. In turn we strive to give back to our employees' career opportunities, training and development, and financial incentives and rewards wherever and whenever possible.
The analysis of gender of our employees at year end is set out below:
|
|
Male |
Female |
|
Directors |
2 |
0 |
|
Senior Managers |
48 |
79 |
|
Employees |
244 |
1,054 |
|
Total |
294 |
1,133 |
Group Strategic Report continued
Environment
Beales has an ageing property estate which in turn makes energy efficiency challenging; however Beales takes every opportunity to limit the energy it uses, actively monitoring energy use each hour across each building to ensure responsible and efficient use. All locations undertake to recycle materials of every sort wherever possible and to dispose of waste in the proficient and prescribed manner.
Human rights
Beales does not have a specific human rights policy at present but it does have policies representative of human rights principles.
Beales does not have a specific sourcing policy at present but it makes every effort to ensure that where it buys direct, or where it buys through a third party, the rights of all workers are respected.
Beales is an equal opportunities employer and actively seeks to protect the rights of all individuals to be free from discrimination or harassment. It operates a very strict and diligent approach to human rights ensuring each individual has the right and appropriate opportunities afforded to each human being.
Social and community issues
Beales places significant emphasis on the local area it serves. All stores have a chosen local charity which they support in a number of ways and seek to allow local groups to use the store as fund raising venues or provide resources to support local events in the community.
Beales is a huge supporter of the initiative to put the high street at the heart of local communities. This forms one strand of the strategy outlined above and adds to the initiatives already being undertaken by Beales, the 'local high street department store' of choice.
Signed on behalf of the Board
Michael Hitchcock
Chief Executive
Overview
As we progressed through this financial year, it became increasingly apparent that the UK economy was improving. This was reflected by a cautious increase in consumer confidence in their own disposable income and consequently their spending power. We reported in our September trading statement that the 'improving macro-economic environment and a more positive consumer, aligned with a more seasonal weather pattern in the second half of the year, had improved trading markedly.' This was evidenced by our increasing quarter on quarter like for like percentage sales increases in 2013/14. However, in common with many other UK retail businesses, the arrival of autumn seasonal merchandise in our stores, coincided with a prolonged period of unseasonably warm weather, which negatively impacted sales, through to the end of the financial year at the beginning of November and indeed this trend continued until the end of that month.
Operationally, Beales has returned to its core brand heritage as a trusted, local and community based department store chain, located in secondary and tertiary locations. We offer our customers access to great value, brands and quality products through a balanced mix of own bought products and concession brands, through which we have once again, enhanced margin this year. We worked hard to address the concession partner challenges we suffered last year with failure/underperformance and I am pleased to report that all concession space in our stores is now filled. Our decision to move away from constant promotional discounting has paid dividends with many high street brands seeking to work with us as future concession partners. Our loyalty programme continues to go from strength to strength and has now attracted c. 440,000 members since its launch in May 2012. It is appropriate that I give great praise to our people, throughout our business for their dedication and hard work, to deliver great customer service which differentiates us from our competitors, builds Beales brand loyalty, generating future footfall and sales.
Recent Events
As you are all aware, Beales is a business in turnaround and once again, we have continued to concentrate and focus all our efforts and available resources, to the very best of our ability, on what we can control. Whilst further positive progress has been made in 2013/14 towards the Group's major objective of returning our business to profitability, significant challenges remain which cannot be ignored and must be addressed by the Board on behalf of shareholders. Specifically, these challenges relate to the Board's statutory and regulatory obligations to consider the medium to long-term prospects of Beales, together with the future financial obligations that result from legacy balance sheet issues arising from the ARCS transaction in 2011.
The Board concluded that in order to maintain and accelerate the pace of the progress made in the business turnaround to date, further capital was required to invest in the Beales business, not only in store environments, but also to insulate our business from the volatility of the marketplace and vagaries of our UK climate. We engaged PriceWaterhouseCoopers LLP to investigate all options to raise additional capital, but none could be implemented without the agreement and consent of the major shareholder, Andrew Perloff (and connected parties). As an alternative, subsequent discussions resulted in a recommended cash offer agreed between the Boards of Beale Plc and English Rose, a vehicle used by Andrew Perloff (and his connected parties) for this transaction. This offer was announced to all shareholders in January 2015 for their consideration.
Your Board believes that the offer was disappointing and that in different circumstances it would have achieved a price that would value the business and assets of Beales more fully. However, the capital structure of Beales inherited by the current Board is complex and restrictive. The forecast impact of this capital structure on the ability to fund our activities going forward, coupled with the requirement of the major shareholder to agree and consent to any of the alternative funding options your Board had identified, led us to conclude that we may be unable to generate sufficient cash flows to meet our longer term financial commitments.
On 20 February 2015, English Rose exercised their right to waive an acceptance condition of not less than 75% in nominal value of Beale Plc shares, having achieved 63%, and declared the bid unconditional.
Chairman's Statement continued
Results
The Group loss before tax for the year (52 weeks ended 1 November 2014) was £4.6m after exceptional charges of £0.1m (further details of which are detailed in the Financial Review). This was £0.5m worse than the previous year's (52 weeks ended 2 November 2013) £4.1m loss after exceptional charges of £0.8m. This reduction was due to the revaluation of the embedded derivative and additional non-cash finance expenses relating to the preference shares, offset by improved margin and continuing cost savings achieved through our ethos of fiscal responsibility. Sales were negatively impacted by Board decisions to exit a loss-making store in Keighley Home and a landlord decision to close Harrogate for redevelopment. Sales were also affected by the decisions made by the Board last year to exit loss-making TV and audio categories and stop 'Mega' promotions which chased sales at the detriment of margin, whilst devaluing our Beales brand proposition and confusing our customers, suppliers and concessionaires.
Gross sales (including VAT and Concession Sales) for the 52 weeks ended 1 November 2014 were £116.2m (52 weeks ended 2 November 2012 £120.5m). Gross profit for the year was £34.0m (2013: £33.4m) and was achieved at a much improved margin of 53.3% (2012: 52.1%). As mentioned earlier, Sales were negatively impacted by store closures in 2013/14 and Board decisions in 2012/13 to exit TV/Audio categories and stop 'Mega' promotions.
Excluding the preference shares, net debt of £9.2m at 1 November 2014 is £0.8m higher than the previous year (2013: £8.4m) due mainly to the operating loss on ongoing trading.
A more detailed review of Group performance can be found in the Chief Executive's Statement. The financial results are discussed in greater detail in the Financial Review.
Trading Update
Beales had a much better start to the new financial year than in 2013/14, despite the warm autumn weather which impacted demand for seasonal merchandise and the growing impact of 'Black Friday' (28 November) which some commentators believe has changed the shape of Christmas trading and the emphasis on January sales. Like for like sales (including concessions and VAT) were 1.5% higher for the nine weeks to 3 January 2015 compared to the same period last year on an improved margin. Total sales including concessions and VAT were 1.1% lower in the same period to 3 January 2015 due to the store closures mentioned earlier.
Christmas trading was good in a very competitive and challenging environment. During the 14 days of Christmas, like for like sales were 6.1% higher than the same period last year.
Overall, for the first 16 weeks of the current financial year compared to the same period last year, like for like sales were 1.7% higher, than the same period last year, and with continuing progress in raising the retained margin on products and services.
Board Succession
On 26 June 2014, John Chillcott retired as a non executive director from the Board. John had acted as a non independent non executive director looking after ARCS interests since the completion of the ARCS transaction in 2011. The directors are grateful to John for his considerable contribution.
On 22 July 2014, following consultation with Panther Securities Plc and Simon Peters, the Board decided that there was no longer a necessity for a Panther representative on the Board of Beale Plc. Consequently Simon Peters was removed as a non-independent non executive director representing the interests of Panther Securities Plc/Maland Pension Funds and Andrew Perloff. The Board wish to thank Simon for his contribution.
Chairman's Statement continued
Staff
I would like to place on record, on behalf of the Board and shareholders, our enormous thanks and gratitude to all Beales staff throughout our Group, wherever they work - whether in stores or head office. I would like to thank each and every one of them for their shared desire to play their part in the turnaround and for their support, loyalty and commitment. We recognise the massive contribution you continue to play in the turnaround of this business and could not do this without you.
It is also appropriate that I express on behalf of the Board and shareholders of Beale Plc, our sincere appreciation to our most valued concession partners, suppliers and to AIS, a key buying group. I thank you for your contribution and value our partnership and the business looks forward to continuing to work with you in the future.
Banking Facilities and Going Concern
We are very appreciative of the financial support and partnership extended to us by Burdale with whom we began a three-year loan facility in February 2013 subsequently extended to 1 April 2016. We continue to have an excellent working relationship with them.
As you would expect, the Group continues to manage its cash very closely and has worked within its facility during the 2013/14 financial year. I have already mentioned that Beales operates in a very challenging and competitive trading environment and there are a number of risks and uncertainties facing the Group that are likely to impact its future development, performance and position. The Board continually assesses the Group's performance and manages those risks and uncertainties by careful consideration of the appropriate resources required by the Group and makes decisions accordingly.
The Board believes that the Group should be able to operate within its borrowing facilities for at least the next 12 months and the Board has therefore continued to adopt the going concern basis in preparing the annual report and accounts, as detailed in the Financial Review.
Outlook
As we look forward to the rest of 2014/15, we hope that consumer confidence and spending will continue to increase as the economy follows its predicted course of recovery. However, as I said last year, we recognise that with continued recovery comes the prospect of increased interest rates and also the possibility of higher taxes, both of which will impact on disposable incomes. On top of that, we have a General Election in May 2015. As I said earlier, we at Beales will continue to concentrate and focus all of our effort and available resources on what we can control to the very best of our ability.
Finally, I would like to pay particular thanks to Michael Hitchcock for his exemplary leadership and, together with Tony Richards, for their continuing superlative efforts and achievements over the last financial year.
Will Tuffy
Independent Non-Executive Chairman
Financial Review
Overview of the Year
The business has continued to reset the operational cost base throughout the year and is now operating close to its optimum leveraged level for a retailer of its size. At the head office in particular the cost as a percentage of sales are the lowest they have been for many years. Initiatives to drive the sales line will now ensure the maximum productivity from this fixed cost base. Further initiatives have been taken to maximise the availability of cash resources and minimise the level of debt in the business. The business has sought to work with all key stakeholders to ensure as much cash as possible remains in the business and put to best use.
The loss after taxation increased from £4.0m to £4.2m. £1.4m of the loss is the reduction in the value of the embedded derivative asset and £0.8m of the loss is linked to the movement in the carrying value of the preference shares, both of which are non-cash items. The balance sheet net asset value of £4.8m (2013: £6.6m) contains freehold assets of £12.5m (2013: £12.4m), long leasehold assets of £6.5m (2013: £5.5m) and a stock balance of £14.6m (2013: £15.2m).
Since 1 February 2013 the business' loan facility has been with Burdale. Having the Group loan facility with Burdale has allowed the Board to allocate greater focus on the running of the department store business, rather than continually facing the possibility of covenant breaches. Burdale have been a highly supportive lender to Beales throughout their ongoing association.
Results
Gross sales, which include VAT and concessional sales, decreased to £116.2m (2013: £120.5m). During the year, the Group ceased trading in two stores, Harrogate and Keighley Home. Excluding the two stores which closed, gross sales were 1.1% down on the previous year. Revenue from continuing operations fell to £63.8m from £64.1m. During the year 22 of the Group's restaurants/cafes within the department stores became own services rather than being concessionees. As a consequence concession sales now account for 45.6% (2013: 48.8%) of gross sales.
Gross margin rose from 52.1% to 53.3%. This is the result of improved intake margin, lower promotional markdowns and discounts, reduced stock losses and provisions.
Total administration expenses fell from £36.7m to £36.0m. The business strenuously worked to mitigate away any inflationary and contractual cost increases that the business has been faced with, diligent control over staff rotas and the improvement in back office processing.
During the year there was a net exceptional charge of £0.1m (2013: net exceptional charge £0.8m); this related to refinancing costs.
The operating loss has decreased to £2.0m (2013: £3.3m).
The net cost of financing the business rose from £0.8m to £2.6m, 86% of the current year's cost comes from the finance charge on the preference shares and the reduction in the carrying value of the embedded derivative which are non-cash adjustments.
The Group has property operating leases which include agreed annual rent charges across the lease term. IAS 17 Leases states that operating lease expenses should be recognised straight line over the lease.
Prior to the current financial year the Group had not complied with this requirement. Consequently, as at the year ended 1 November 2014 the Board corrected this position by processing an adjustment to prior year opening reserves and losses. The adjustment to the Group reserves as at 3 November 2012 was £0.7m. The Group have also restated the loss for the period to 2 November 2013 from continuing operations attributable to equity members from £3.9m to £4.0m.
Taxation
Deferred tax is provided in the accounts at 20%. There is a deferred tax credit of £0.4m (2013: credit £0.1m).
Financial Review continued
Earnings
The loss per share and diluted loss per share was 20.4p (2013: loss per share and diluted loss per share 19.5p).
Loss before interest, depreciation, amortisation, exceptional items and tax reduced to £0.6m (2013: £1.1m loss).
No dividends were paid in the year (2013: nil per share). The Board considers that a significant trading improvement will be necessary before dividends are paid.
Pensions
The Group's defined benefit pension plans are closed to future accrual and all ongoing pension benefits to employees are provided on defined contribution basis.
From 1 September 2013, the Group's defined contribution pensions are provided via a Group Personal Pension Scheme with Scottish Widows and the People's Pension as part of Auto-enrolment.
At the year end, there was a pension surplus under IAS19 in the Group's closed defined benefit pension plans of £2.2m (2013: £0.8m); details of this are shown in note 34 of the financial statements. The total actuarial gain for the period was £1.4m (2013: £1.5m).
During the year the Group continued to meet the contribution schedules agreed with the trustees for both schemes, contributing £0.2m (2013: £0.5m). Agreement was reached with the trustees of the Beales scheme regarding the triennial valuation based upon the year end of October 2013. For the first three months of the financial year, a monthly contribution of £41,667 was paid into the scheme. Following discussions between the Group and the pension trustees no contribution has been paid to the scheme between 1 February 2014 and 1 November 2014. The Denners scheme October 2011 triennial valuation has been finalised by the actuary and no employer contributions are required. The calculations for the Denners scheme triennial valuation for the year ended 1 November 2014 are ongoing.
Group systems
The Group systems are being continually improved to allow expedient and more effective decision making; retail is a 24/7 sector which requires information on a real time basis to be able to react to customer demands, market trends and environmental changes. The business is specifically investing in the tills used in over half the stores to align them on to one system. The improved alignment will continue to drive further efficiency cost savings.
Financial Review continued
Treasury and banking
Treasury activities are governed by procedures and policies approved by the Board. The Group's policy is to take a conservative stance on treasury matters and no speculative positions are taken in financial instruments. The treasury function manages the Group's financial resources in the most appropriate and cost-effective manner.
Following the impairment of Beale PLC's investment in J.E. Beale PLC, there are no longer sufficient distributable reserves to redeem the preference shares early and given that the Company would be unable to borrow at the required rate to take advantage of the repayment option in terms of the underlying preference shares, management have valued the embedded derivative at nil.
The valuation of the preference shares is based on an amortised cost model. Following the impairment of the investment in J.E. Beale PLC in the current year, Beale PLC has insufficient distributable reserves to make redemptions or pay dividends as they fall due. At the present time, the Group is unable to assess with any reasonable certainty when Beale PLC will have sufficient distributable reserves available to make any redemption of or pay dividends on the preference shares. Accordingly, under IAS 39.9, the Group has used the contractual cashflows over the full contractual term of the financial instrument in arising at the carrying value of the preference shares.
The Burdale loan has been extended by 2 months to 1 April 2016. The terms of the facility are for up to a maximum £12.0m senior secured credit facilities. The actual value that the Group can borrow is determined by the Group stock and property value and following the declaration of the unconditional bid, there is a further £2.0m cash collateral, £1.0m available immediately, which will increase the borrowing capability. The maximum the Group could borrow from Burdale in the year ended 1 November 2014 was £9.4m The bank facilities include a financial covenant which requires the Group to procure that the trading cash flow in respect of each review period as set out in the facility agreement shall not be less than the amounts agreed between the Group and the lender, calculated on the basis of the financial projection.
In addition there is a condition that for a period of 14 days between 1 December and 31 January each year drawings do not exceed £2.5m except that for the periods 1 December 2013 to 31 January 2014 and 1 December 2014 to 31 January 2015, in which case the limit shall be £3.0 million.
The facilities are secured by a first debenture over the Group assets (excluding the Kendal freehold to the extent of the Beales Pension Trustee charge). The Group is dependent on bank support to remain as a going concern. Furthermore, given the size of the Group's borrowing its loss will be affected by variations in interest rates.
Going Concern
Please see the full going concern note in note 1.
Balance sheet and cash flow
The balance sheet retains a net asset value of £4.8m (2013: £6.6m).
Inventories have been reduced by £0.7m in part as a result of the closure of Harrogate and Keighley Home stores and due to improved monitoring and management of stock balances. The revaluation of freehold and the long leasehold increased fixed assets by £1.3m. The restricted cash balance at the end of last year was released during the year. Other movements include the revaluation of the carrying value of the preference shares £0.8m and a restatement to lease provisions £0.8m in relation to accounting for lease incentives which has been corrected as a prior year adjustment. Total net borrowing (excluding the preference shares and restricted cash) is £9.2m (2013: 8.4m), including both current and non-current elements.
During the year the net decrease in cash and cash equivalents was £1.1m (2013: £0.7m) which reflects the financing and repayment of the net debt £0.6m and minimal capital expenditure of £0.5m. The prior period was impacted by the cash inflow arising on the closure of the store card. The business has been very adept managing its working capital which has generated a net inflow of cash of £0.8m.
Financial Review continued
Capital and Financial Risk Management
The Group manages its capital to ensure that it can continue as a going concern. The capital structure of the Group consists of borrowings, preference shares, cash, cash equivalents, share capital, share premium account, revaluation reserve, ESOP reserve and retained earnings.
The Group's Treasury function provides services to the business, co-ordinates access to domestic financial markets, monitors and manages the financial risks relating to the operations of the Group. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The Corporate Treasury function reports to the Board regularly. No dividend accrues on the preference shares until five years from the date of issue. Thereafter a preferential dividend of 8% per annum will be payable on each of the preference shares for 4 years, increasing to 9% thereafter. The preference shares can be repaid at any time at no penalty. In the event that the Company should fail to redeem preference shares or pay a dividend an additional dividend becomes payable at 4% 12 months after the due date.
The valuation of the embedded derivative has decreased to nil as the Directors have reassessed the inputs to the valuation model.
The Group's activities do not expose it to changes in foreign exchange rates as nearly all imports are purchased in sterling. However, the Group is exposed to interest rate risk because entities in the Group borrow funds from third parties, the interest rates on which are linked to LIBOR.
Consolidated Income Statement
For the 52 weeks ended 1 November 2014
|
|
Notes |
52 weeks to 1 November 2014 £000 |
Restated Note 4 52 weeks to 2 November 2013 £000 |
|
Gross sales* |
2 |
116,215 |
120,526 |
|
Revenue - continuing operations |
2 |
63,766 |
64,098 |
|
Cost of sales |
|
(29,751) |
(30,698) |
|
Gross profit |
|
34,015 |
33,400 |
|
Administrative expenses |
|
(35,940) |
(35,930) |
|
Exceptional administrative expenses |
5 |
(69) |
(800) |
|
Total administrative expenses |
|
(36,009) |
(36,730) |
|
Operating loss before exceptional items |
|
(1,925) |
(2,530) |
|
Operating Loss - continuing operations |
|
(1,994) |
(3,330) |
|
Finance expense |
|
(1,210) |
(789) |
|
Revaluation of embedded derivative |
|
(1,407) |
- |
|
Finance income |
|
- |
1 |
|
Loss on ordinary activities before taxation |
|
(4,611) |
(4,118) |
|
Taxation credit |
|
420 |
112 |
|
Loss for the period from continuing operations attributable to equity members of the parent |
|
(4,191) |
(4,006) |
|
Basic loss per share |
3 |
(20.4p) |
(19.5p) |
|
Diluted loss per share |
3 |
(20.4p) |
(19.5p) |
* Gross sales include revenue from concession sales and VAT.
Consolidated Balance Sheet
As at 1 November 2014
|
|
|
1 November 2014 £000 |
Restated Note 4 2 November 2013 £000 |
Restated Note 4 3 November 2012 £000 |
|
Non-current assets |
|
|
|
|
|
Goodwill |
|
892 |
892 |
892 |
|
Property, plant and equipment |
|
24,309 |
23,852 |
25,204 |
|
Financial assets |
|
40 |
- |
16 |
|
Derivative asset |
|
- |
1,407 |
1,416 |
|
Retirement Benefit asset |
|
2,234 |
789 |
- |
|
|
|
27,475 |
26,940 |
27,528 |
|
Current assets |
|
|
|
|
|
Inventories |
|
14,595 |
15,254 |
15,816 |
|
Trade and other receivables due within one year |
|
2,395 |
2,640 |
5,191 |
|
Trade and other receivables due after one year |
|
- |
9 |
104 |
|
Cash and cash equivalents |
|
189 |
194 |
454 |
|
Restricted Cash |
|
- |
1,000 |
- |
|
|
|
17,179 |
19,097 |
21,565 |
|
Total assets |
|
44,654 |
46,037 |
49,093 |
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
(13,208) |
(13,788) |
(14,449) |
|
Provisions |
|
(118) |
(100) |
(271) |
|
Lease provisions |
|
(390) |
(106) |
(106) |
|
Preference shares |
|
- |
- |
(307) |
|
Borrowings and overdraft |
|
(1,896) |
(1,816) |
(255) |
|
Tax liabilities |
|
(35) |
(35) |
(35) |
|
|
|
(15,647) |
(15,845) |
(15,423) |
|
Net current assets |
|
1,532 |
3,252 |
6,142 |
|
Non-current liabilities |
|
|
|
|
|
Preference shares |
|
(7,257) |
(6,426) |
(6,213) |
|
Borrowings |
|
(7,497) |
(7,798) |
(9,025) |
|
Retirement benefit obligations |
|
- |
- |
(1,171) |
|
Lease provisions |
|
(6,031) |
(5,814) |
(4,366) |
|
Deferred tax |
|
(2,455) |
(2,610) |
(3,066) |
|
Obligations under finance leases |
|
(975) |
(977) |
(978) |
|
Total liabilities |
|
(24,215) (39,862) |
(23,625) (39,470) |
(24,819) (40,242) |
|
Net assets |
|
4,792 |
6,567 |
8,851 |
|
Equity |
|
|
|
|
|
Share capital |
|
1,026 |
1,026 |
1,026 |
|
Share premium account |
|
440 |
440 |
440 |
|
Revaluation reserve |
|
10,157 |
9,226 |
9,082 |
|
Capital redemption reserve |
|
570 |
570 |
54 |
|
ESOP reserve |
|
(10) |
(8) |
(15) |
|
Retained earnings |
|
(7,391) |
(4,687) |
(1,736) |
|
Total equity |
|
4,792 |
6,567 |
8,851 |
Consolidated Statement of Comprehensive Loss
|
|
|
52 weeks to 1 November 2014 £000 |
Restated 52 weeks to 2 November 2013 £000 |
|
Actuarial gain on pension scheme |
|
1,397 |
1,465 |
|
Revaluation reserve |
|
1,303 |
- |
|
Tax on revaluation reserve |
|
(258) |
258 |
|
Tax on items taken directly to equity |
|
(26) |
(1) |
|
Net income recognised directly in equity |
|
2,416 |
1,722 |
|
Loss for the period |
|
(4,191) |
(4,006) |
|
Total comprehensive loss for the period |
|
(1,775) |
(2,284) |
Consolidated Statement of Changes in Equity
|
|
|
52 weeks to 1 November 2014 £000 |
Restated 52 weeks to 2 November 2013 £000 |
|
Opening equity |
|
6,567 |
9,533 |
|
Prior year adjustment |
|
- |
(682) |
|
Revised opening equity |
|
- |
8,851 |
|
Total comprehensive loss for the period |
|
(1,775) |
(2,284) |
|
Total movements in equity for the period |
|
(1,775) |
(2,284) |
|
Closing equity |
|
4,792 |
6,567 |
|
|
Share capital £000 |
Share premium account £000 |
Revaluation reserve £000 |
Capital redemption reserve £000 |
ESOP reserve £000 |
Retained earnings £000 |
Total £000 |
|
As previously reported |
1,026 |
440 |
9,082 |
54 |
(15) |
(1,054) |
9,533 |
|
Impact to restatement (see Note 4) |
- |
- |
- |
- |
- |
(682) |
(682) |
|
Restated 3 November 2012 |
1,026 |
440 |
9,082 |
54 |
(15) |
(1,736) |
8,851 |
|
Loss for year |
- |
- |
- |
- |
- |
(4,006) |
(4,006) |
|
Redemption of preference shares |
- |
- |
- |
516 |
- |
(516) |
- |
|
Deferred tax change on revaluation reserve |
- |
- |
258 |
- |
- |
- |
258 |
|
Tax on comprehensive income |
- |
- |
- |
- |
- |
(1) |
(1) |
|
Transfer |
- |
- |
(114) |
- |
- |
114 |
- |
|
Gain |
- |
- |
- |
- |
7 |
(7) |
- |
|
Net actuarial gain |
- |
- |
- |
- |
- |
1,465 |
1,465 |
|
Restated 2 November 2013 |
1,026 |
440 |
9,226 |
570 |
(8) |
(4,687) |
6,567 |
|
Loss for year |
- |
- |
- |
- |
- |
(4,191) |
(4,191) |
|
Revaluation |
- |
- |
1,303 |
- |
- |
- |
1,303 |
|
Deferred tax change on revaluation reserve |
- |
- |
(258) |
- |
- |
- |
(258) |
|
Tax on comprehensive income |
- |
- |
- |
- |
- |
(26) |
(26) |
|
Transfer |
- |
- |
(114) |
- |
- |
114 |
- |
|
Gain |
- |
- |
- |
- |
(2) |
2 |
- |
|
Net actuarial loss |
- |
- |
- |
- |
- |
1,397 |
1,397 |
|
1 November 2014 |
1,026 |
440 |
10,157 |
570 |
(10) |
(7,391) |
4,792 |
Consolidated Cash Flow Statement
For the 52 weeks ended 1 November 2014
|
|
Notes |
52 weeks to 1 November 2014 £000 |
Restated 52 weeks to 2 November 2013 £000 |
|
Cash flows generated from operating activities before interest and tax |
6 |
94 |
1,927 |
|
Interest paid |
|
(380) |
(368) |
|
Interest received |
|
- |
1 |
|
Net cash flow (used in)/generated from operating activities |
|
(286) |
1,560 |
|
Cash flows from investing activities |
|
|
|
|
Purchase of property, plant and equipment |
|
(456) |
(675) |
|
Purchase of investment |
|
(40) |
- |
|
Proceeds from maturing investment |
|
- |
37 |
|
Net cash used in investing activities |
|
(496) |
(638) |
|
Cash flows from financing activities |
|
|
|
|
Preference shares redeemed |
|
- |
(515) |
|
Net expense from obligations under finance leases |
|
(2) |
(1) |
|
Decrease in bank loans |
|
(51) |
(977) |
|
Decrease in Panther/ARCS Loan |
|
(250) |
(125) |
|
Net cash used in financing activities |
|
(303) |
(1,618) |
|
Net decrease in cash and cash equivalents in the period |
|
(1,085) |
(696) |
|
Cash and cash equivalents (including overdrafts and restricted cash) at beginning of period |
|
(247) |
449 |
|
Cash and cash equivalents (including overdrafts and restricted cash) at end of period |
|
(1,332) |
(247) |
|
|
||||
|
1 |
Accounting policies |
|||
|
|
General information The financial information set out above does not constitute the Group's statutory accounts for the periods ended 1 November 2014 or 2 November 2013. The financial information for 2014 and 2013 is derived from the statutory accounts for those years. The statutory accounts for 2013 have been delivered to the Registrar of Companies. The statutory accounts for 2014 will be delivered to the Registrar of Companies following the Group's annual general meeting. The Group auditors, Deloitte LLP, have reported on the 2014 and 2013 accounts, their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498 (2) or (3) Companies Act 2006. The preliminary announcement is prepared on the basis of the accounting policies as set out in the previous annual financial statements. The information included in this preliminary announcement is based on the Group's financial statements which are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use in the EU. The Group expects to publish full financial statements that comply with IFRS on 18 March 2015. |
|||
|
|
Going concern |
|||
|
|
On 1 February 2013 the Group entered into a new three year loan facility with Burdale Financial Limited. The terms of that loan facility are for up to a maximum of £12.0m Senior Secured Credit Facilities. The facilities are secured by a debenture over most of the present and future assets and undertakings of the Group. The new bank facilities include one financial covenant which requires the Group to procure that trading cash flow in respect of each review period as set out in the facility agreement shall not be less than the amounts agreed between the Group and the lender based on financial projections. At the moment the trading cash flow covenants are only stated to the end of October 2015. The bank facility states that, for covenant levels beyond October 2015, the Lender, acting reasonably, will determine new trading cash flow covenant levels for the following financial year or remainder of the lending facility based on the Annual Revised Forecasts and consistent with the methodology applied by the Lender in determining the financial covenant levels set out in the agreement. In addition there is a condition that for a period of 14 days between 1 December and 31 January each year drawings do not exceed £2.5m other than the periods 1 December 2013 to 31 January 2014 and 1 December 2014 to 31 January 2015 where the limit shall be £3.0m. Subsequent to the year ended 1 November 2014, executive management have secured an extension to the loan facility, on all existing terms, to 1 April 2016.
All retailers face a very challenging and competitive trading environment and there are a number of risks and uncertainties facing the Group which are likely to impact its future development, performance and position. We are continually assessing our performance and managing these risks and uncertainties in considering the appropriate resources required for the Group. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review and the financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk, interest rate risk, market risk and liquidity risk.
The Directors have prepared forecast information for the 2014/15 year and a three year corporate plan. Based on these forecasts, forward covenant tests to October 2015, after applying financial sensitivities based on reasonably possible alternative trading scenarios and mitigating actions, show that the covenant is not forecast to be breached in the period to October 2015 and that the business can work within its available facilities. Since the year end, the Board has made further progress to create additional headroom to borrowing facilities in case of negative trading movements. This has been secured following the declared unconditional bid for the business and the capital injection that comes with that bid (see the Group Strategic Report for full details). The forecast and corporate plan are based on market data and past experience and the Directors have formed a judgement that at the time of approving these financial statements, based on those forecasts and projections, there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. On this basis the directors continue to adopt the going concern basis of accounting in preparing the financial statements.
The Director's statement that the business is a going concern has been prepared in accordance with "Guidance on going concern and liquidity risk: guidance for Directors UK companies 2009".
|
|
||
|
2 |
Revenue |
|
||
|
|
The entire Group's revenue is derived from retail sales made in the UK. Revenue includes the commission earned on sales made by concession outlets. |
|
||
|
|
|
52 weeks to 1 November 2014 £000 |
52 weeks to 2 November 2013 £000 |
|
|
|
Gross sales |
116,215 |
120,526 |
|
|
|
VAT |
(19,178) |
(19,934) |
|
|
|
Gross sales (exc. VAT) Agency sales less commission |
97,037 (33,271) |
100,592 (36,494) |
|
|
|
Revenue |
63,766 |
64,098 |
|
|
|
|
|
||||
|
|
|
Analysis of gross sales (excluding VAT) and revenue: |
||||
|
|
|
52 weeks to 1 November 2014 |
52 weeks to 2 November 2013 |
|||
|
|
|
Gross Sales £000 |
Revenue £000 |
Gross sales £000 |
Revenue £000 |
|
|
|
Own bought sales |
52,755 |
52,755 |
51,407 |
51,407 |
|
|
|
Concession sales |
44,260 |
10,990 |
49,083 |
12,589 |
|
|
|
Interest on customer accounts |
21 |
21 |
102 |
102 |
|
|
|
|
97,036 |
63,766 |
100,592 |
64,098 |
|
|
3 |
Loss per share |
|
|
|
|
|
52 weeks to 1 November 2014 |
Restated 52 weeks to 2 November 2013 |
|
|
Weighted average number of shares in issue for the purpose of basic earnings per share |
20,524,797 |
20,524,797 |
|
|
Dilution - share reward schemes |
- |
228,312 |
|
|
Diluted weighted average number of shares in issue |
20,524,797 |
20,753,109 |
|
|
|
£000 |
£000 |
|
|
Loss for basic and diluted earnings per share |
(4,191) |
(4,006) |
|
|
|
|
|
|
|
|
Pence |
Pence |
|
|
Basic loss per share |
(20.4) |
(19.5) |
|
|
Basic loss per share before exceptional item |
(20.1) |
(15.6) |
|
|
Diluted loss per share |
(20.4) |
(19.5) |
|
No dividend was paid (2013: nil per share).
The loss attributable to ordinary shareholders and weighted average number of ordinary shares for
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
6 |
Reconciliation of operating loss to net cash flow from operating activities
|
|
||||||
|
|
|
|
|
|
||||
|
|
|
52 weeks to 1 November 2014 £000 |
Restated 52 weeks to 2 November 2013 £000 |
|
|
|||
|
|
Operating loss |
(1,994) |
(3,330) |
|
|
|||
|
|
Adjustments for: Cash disbursements of pension obligations (net of charge included within the income statement) |
(48) |
(495) |
|
|
|||
|
|
Loss on disposal |
- |
33 |
|
|
|||
|
|
Fixed Asset Impairment |
- |
582 |
|
|
|||
|
|
Profit on disposal of investment |
- |
(21) |
|
|
|||
|
|
Depreciation |
1,302 |
1,412 |
|
|
|||
|
|
Decrease in inventories |
659 |
562 |
|
|
|||
|
|
Decrease/(increase) in trade and other receivables |
254 |
2,646 |
|
|
|||
|
|
(Decrease)/increase in trade and other payables |
(79) |
538 |
|
|
|||
|
|
Cash generated from/(utilised in) operations |
94 |
1,927 |
|
|
|||
|
|
|
|||||||
|
7 |
Analysis of net debt |
|
|
|||
|
|
Group |
2 November 2013 £000 |
Cash flow £000 |
Non Cash Item £000 |
1 November 2014 £000 |
|
|
|
Cash at bank and in hand Restricted cash Overdraft |
194 1,000 (1,441) |
(5) (1,000) (80) |
- - - |
189 - (1,521) |
|
|
|
Debt due within one year Debt due after one year** |
(247) (375) (14,224) |
(1,085) - 301 |
- - (831) |
(1,332) (375) (14,754) |
|
|
|
|
(14,846) |
(784) |
(831) |
(16,461) |
|
|
|
Finance lease* |
(977) |
2 |
- |
(975) |
|
|
|
|
|
|
|
||
8 Report and Accounts
Copies of the Group's Annual Report and Accounts will be sent to shareholders and will be shown on the Group's website www.beales.co.uk in due course. Further copies may be obtained from the Group secretary at Beale Plc, The Granville Chambers, 21 Richmond Hill, Bournemouth BH2 6BJ.
This information is provided by RNS
You are here: news > regulatory news
10 Lower Thames St,
London EC3R 6EN