24 September 2008

LAURA ASHLEY HOLDINGS plc

("the Group")

Laura Ashley today announces unaudited interim results for the 26 weeks to 26 July 2008 that show increased sales, improved margins and continued profit growth and the payment of an interim dividend. This performance has been achieved against a backdrop of difficult economic conditions.

Highlights

• Total Group sales up 5.5% to £120.2m (2007: £113.9m).

• 1 percentage point margin improvement.

• Increase in UK retail sales by 7.3% to £95.7m.

• Profit before taxation and exceptionals up 13% to £4.5m (2007: £4.0m).

• Exceptional gain of £0.2 million (2007: £2.4 million). 

• Interim dividend of 0.5 pence per share  (10% of nominal value) will be paid on 7 November 2008 (2007: 0.5 pence per share) 

• UK selling space up 11% to 835,000 sq. ft. in the period with 20 new stores opened in the first half of the year (Jan 2008: 751,000 sq. ft).

• E-Commerce sales have overtaken Mail Order sales for the first time.

Commenting on the results, K P Khoo, Chairman, said:

"Once again we have delivered another trading period of higher sales, margins and profit. I am very pleased that we have achieved this against a continuing difficult economic climate.  Trading conditions on the high street this year have been extremely challenging, with no indication that the economic situation is likely to improve in the short-term.  However, I do believe we are well positioned with our continued focus on operational efficiency, product differentiation and innovation. In addition, I am delighted with the growing success of our E-commerce business and our store re-alignment programme and I am confident about the prospects of our franchise partners, particularly in Asia."

Enquiries:

Overview

For the 26 weeks to 26 July 2008, we are pleased to report an increase of 13% in profit before taxation and exceptional items to £4.5m, compared to £4.0m in 2007. 

Total Group sales were up by £6.3m (5.5%) to £120.2m, compared to £113.9m in the previous year.  Total UK retail sales increased in all categories except Furniture, which was marginally below last year. For the 26 weeks ended 26 July 2008, total UK store sales were up 7.3% to £95.7m (LFL -8.1%*) Total sales growth has primarily been driven by our store realignment programme.

Gross margins have also increased by 1 percentage point in the first half of this financial year as a result of our ongoing focus on improved product offering and better sourcing.  Operating expenses, excluding exceptional items, have risen by 7.9% to £53.2m (2007: £49.3m), primarily as a result of new store openings over the last twelve months, which have resulted in higher UK store property and employment costs. 

The exceptional item for the current period of £0.2m relates to the gain on disposal of a store. In 2007, the exceptional gain of £2.4m was primarily due to a large credit which occurred as a result of a pension transfer value exercise. Including exceptional gains, profit before taxation for the 26 weeks to 26 July 2008 decreased by 27% to £4.7m (2007: £6.4m).  

The Board has approved an interim dividend of 0.5 pence per share (10% of nominal value) that will be paid on 7 November 2008 (2007: 0.5p). 

* Laura Ashley calculates like-for-like sales after taking into account cannibalisation from stores opened as part of its store realignment strategy

Product

The relative split of UK sales in the 26 weeks to 26 July 2008 is as follows: Home Accessories 28% (H1 2007: 29%), Furniture 26% (H1 2007: 27%), Decorating 24% (H1 2007: 25%) and Fashion 22% (H1 2007: 19%). 

Home Accessories 

The Home Accessories product category includes lighting, gifts, bed linen, rugs, throws and cushions. The products epitomise Laura Ashley's focus on distinctive, inspirational and quality product offerings. 

For the 26 weeks ended 26 July 2008, sales of Home Accessories were up 1.6% (LFL -13.3%).  We have seen strong growth in our Lighting and Home Accessories areas. Glass lamp bases and chandeliers continue to be successful and new innovative lighting products such as Bluma, Harrington and Lara all performed well. Our door stops, signs, photo frames and home fragrances, especially the new fresh linen and jasmine range, have all been key products contributing to Home Accessories' performance.

Furniture

The Furniture product category includes upholstered furniture, beds and cabinet furniture. 

The retail environment in the UK has been extremely challenging and, in particular sales of 'big ticket' items have been adversely impacted.  For the 26 weeks ended 26 July 2008, Furniture sales were down 2.0% (LFL -13.2%).

We continue to deliver product differentiation and innovation, as seen in the successful launch of our Kempton chairs and Avignon cabinet furniture. Extensions to existing ranges, such as the Padstow and Kendal sofas and Darwin chairs, have also performed well. 

Decorating

This category includes curtains, fabric, paint, decorative accessories and wall coverings. During the 26 weeks ended 26 July 2008, Decorating sales were up 3.8% (LFL -8.3%).

Our Made-to-Measure curtains and our statement print wallpaper were the best performing product ranges. Sales of our Made-to-Measure curtains were driven by the continued success of plain and embroidered silks and strong statement fabrics such as Marcianna cranberry and Ellington teal.

Wallpaper performance was driven by statement wallpapers with key colours such as linen, cranberry and duck egg. Short lead times from our factory in Wales continue to allow us to react to customer demand for best selling patterns and recolour popular prints within the season, which has led to improved sales.

Fashion

For the 26 weeks ended 26 July 2008, UK retail Fashion sales increased, despite tough market conditions, by 23.9% (LFL +6.7%) mainly driven by a stronger product offer and the added space from new store openings. 

Product categories that performed particularly well were knitwear which saw the third successive season of significant growth. Dresses also performed successfully, with a stronger co-ordinated offer across the collection in terms of colour, size and print. 

UK Operations

Retail Stores

At 26 July 2008, the property portfolio in the UK comprised 225 stores, up from 208 six months ago. In the 26 weeks ended 26 July 2008, total selling space increased by 11% to 835,000 square feet. We have three main store types: mixed product stores (124), Home stores (69) and Home concession stores (32). We have continued to build on our strategy of identifying more cost effective locations and have opened 20 new stores in the first half, totalling 91,000 square feet of selling space. As part of the process of realigning our stores, three stores were closed (7,000 square feet) during the first half.

In the medium term, we intend to continue our store development programme, subject to our normal stringent property selection criteria.

Direct Sales

Our Direct Sales which comprise E-Commerce and Mail Order remain a vital part of our multi-channel retail strategy, representing 12% of total UK retail sales. For the 26 weeks ended 26 July 2008, total Direct sales were up 8.6% on last year driven by the increase in E-Commerce sales. Within this figure and reflecting the trend we have seen over the last three years, Mail Order sales were down 15.0% and E-Commerce sales were up 43.0%.  For the first time, E-Commerce sales have overtaken Mail Order sales during the period.

International Operations

There are currently 216 franchised stores in 25 countries worldwide. Franchising activities outside the UK continue to be an important part of the Laura Ashley brand. In the 26 weeks ended 26 July 2008, franchise revenues decreased by £0.9m to £8.7m due to the temporary effects of our previously-announced strategic review with some of our franchisees. Recent trading with franchisees gives us confidence that normal performance will be resumed for year-end.

Our Asian franchise partner has major plans to develop the China market where it has been agreed that 80 stores will be opened over the next five years. Opportunities with partners in various other territories are close to finalisation.

In the 26 weeks ended 26 July 2008, licensing income decreased by £0.1m to £1.8m, due mainly to lower sales from North American licensees.

Dividend

A final dividend in respect of the financial year ended 26 January 2008 of 1.0 pence per ordinary share (20% of nominal value) was paid on 6 June 2008. When taken with a first interim dividend of 0.5 pence per share and a second interim dividend of 0.5 pence per share, this took the total dividend for the year ended 26 January 2008 to 2.0 pence per share. 

On 23 September 2008, the Board approved the payment of an interim dividend of 0.5 pence per ordinary share (10% of nominal value). This interim dividend will be paid on 7 November 2008 to holders of ordinary shares on the register at the close of business on 17 October 2008.

The Board will continue to review dividend payments on the basis of annual profitability taking into account the future development of the business.

Current Trading and Outlook

In the 33 weeks to 13 September 2008, total UK retail sales were up 4.3%. For the same period, like-for-like sales were down -11.6%. Margin rates have continued to improve compared to the same period last year. However, the tough trading conditions experienced in the first half continue, with little sign of the UK retail market in which we operate improving.  

We continue to exploit opportunities within and outside the UK to expand the business through our various channels.  We are working on improvements to our website to increase the visits and sales, as we consider it a key part of our business. Our product offerings continue to be innovative and design led with strong statement fabrics and wallpaper as evidenced by successful new product launches and extensions of best selling existing products. Improvements in service levels include shortening lead times and selectively increasing our total selling space through our store realignment programme.  

In light of the current economic climate, we are approaching the second half of this year cautiously.  

  Responsibility Statement

We confirm that to the best of our knowledge:

• The condensed set of financial statements has been prepared in accordance with IAS 34;

• The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

• The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of material related party transactions and changes therein).

By order of the Board

David Cook

Finance Director

The Group's results shown above are derived entirely from continuing operations.

There were no recognised gains or losses other than those included in the Condensed Group Income Statement.