RNS Number:6523F
Hot Tuna (International) plc
12 October 2007
Press Release 12 October 2007
Hot Tuna (International) PLC
("Hot Tuna" or "the Group")
Preliminary Results
Hot Tuna (International) PLC (AIM:HTT), a lifestyle apparel brand with authentic
surf heritage, announces its Preliminary Results for the year ended 30 June
2007.
Highlights
* Revenue increased 68.2% to #619,131 (FY 2006: #367,992)
* Loss from operations #3,703,805 (FY 2006: loss #2,051,476)
* Cash expenditure during the period reflects the Group's commitment to
investing in strong management to drive the Group to the next phase of its
strategy
* Appointment of Niels Juul as CEO in June 2007, who has implemented a
strategic review to restructure the business, focusing on driving sales
growth
* Sourcerite International Inc. appointed as Hot Tuna's Middle Eastern
distributor, with plans for Sourcerite to open a Hot Tuna store in Dubai in
autumn 2008
* Orders secured from Jacks' Surfboards and Diane Beachwear in the USA, as
well as a number of independent retailers in the UK and Australia,
including Myer and David Jones
Commenting on the results, Niels Juul, Chief Executive of Hot Tuna
(International) PLC, said: "This has been a period of significant change for the
Group; since I joined Hot Tuna in June 2007 I have undertaken a strategic review
of the Group, and consequently been able to streamline many of the processes
within the business, using the funds raised in December 2006. These changes to
our processes will start to have a real impact on the business. I will be
closely overseeing the design process, and continuing to pursue the
opportunities for partnerships, and we look forward to realising the potential
in the brand over the coming year."
- Ends -
For further information:
Hot Tuna (International) PLC
Ranjit Murugason, Chairman Tel: +44 (0) 20 7372 9378
ranjit_murugason@hottunaplc.com
Seymour Pierce Limited
Mark Percy / Parimal Kumar Tel: +44 (0) 20 7107 8000
www.seymourpierce.com
Media enquiries:
Abchurch
Henry Harrison-Topham / Chris Lane Tel: +44 (0) 20 7398 7700
chris.lane@abchurch-group.com www.abchurch-group.com
CHAIRMAN'S STATEMENT
The Directors of Hot Tuna (International) PLC have pleasure in presenting the
Company and Group's results for the year ended 30 June 2007.
Over the last twelve months, we have made significant progress in
re-establishing Hot Tuna as a leading global surf and youth lifestyle brand.
Despite challenging market conditions and a particularly poor summer in 2007
resulting in sales for the period being lower than expectations, we are
encouraged nonetheless by the fact that retail sales of surf and related
products have climbed by over 15% in the last 2 years and that this sector still
remains one of the fastest growing sectors within the apparel industry.
Surfing, today, is no longer seen as a 'rebel' past time but another healthy fun
sport and lifestyle that everyone can enjoy. We believe that our strategy to
position Hot Tuna as a global surf and youth life style brand will benefit from
this sector growth.
During the past twelve months, there have been many affirmations of the
Company's growing strength and presence in the industry including the addition
of Elle Macpherson to the Company's Board of Directors. We were also privileged
to be able to appoint Niels Juul as Chief Executive Officer on June 1 2007.
Niels joins us from the world renowned Von Dutch apparel business where he was
Managing Director and within three months of joining the Company implemented
clear leadership and direction that we believe will take Hot Tuna to the next
level in our quest to rank shoulder-to-shoulder with the biggest names in surf
fashion and youth lifestyle.
Fundraising
As a result of the successful fundraising in December 2006, the Company has been
able to expedite the strategic plan to improve the distribution and
manufacturing process. The capital raising exercise generated #4.2 million
(before expenses) via a placing of 28,024,994 new ordinary shares of nominal
value 1p each, at 15p per share. These shares were issued together with
warrants, in the ratio of one warrant for every two placing shares.
In March 2007, the Group also agreed a maximum #2.5m equity-based credit
facility with Cornell Capital Partners LLP. Cornell Capital Partners LLP also
subscribed to convertible loan notes worth US$450,000.
Results Summary
The Group operating loss for the year of #3.7m included employee costs of #1.5m
(2006:#0.7m), production and manufacturing costs of #0.5m (2006:#0.1m) and
marketing costs of #0.6m (2006:#0.1m). The high cash expenditure reflects the
Group's commitment to commissioning the right management and personnel to drive
the Group into the next phase of its strategy.
Hot Tuna has incurred approximately #2m of non-cash expenses up to 30 June 2007,
including #0.2m bad debt and inventory write-offs and #1.7m of exceptional
share-based payment charges incurred in accordance with IFRS2 requirements and
#0.1m outside equity interests were absorbed in recognition of the fact that
these amounts would not be re-couped in the future. The share-based payments,
which have been charged as an "exceptional item", were incurred in order to
appoint key personnel to the Hot Tuna team during the year. This charge does
not affect the ability of the Company to pay dividends going forward nor does it
affect the net assets of the Group. It is strictly a charge to reserves in
accordance with current accounting standards. As at the 30 June 2007, the
Group had cash reserves of #1.9m (2006:#1.5m) and a net current asset position
of #2.2m (2006:#1.5m).
Colleagues and Partners
On behalf of the Board I wish to thank my fellow directors, our employees and
our partners for their energy and commitment and to extend our sincere thanks to
all of them for their hard work and dedication. We look forward to driving the
business forward and taking the business of surf to new heights through the
merits of Hot Tuna.
RANJIT MURUGASON
CHAIRMAN
11 October 2007
CHIEF EXECUTIVE OFFICER'S REVIEW
It gives me great pleasure to give my first Chief Executive's statement since
joining the Company on 1 June 2007.
During 2007, the Group has made significant strides and secured the delivery of
its products into important independent retailers in all of its core markets.
Strategic Review
Since I have taken on my new role, the Board and I have been focusing on driving
sales growth as well as creating efficiencies that will ultimately generate cost
savings and improved margins for the Group. Hot Tuna have planned the global
launch of their product for Spring/Summer 2008 and up until this season the
operations have not been cohesive and as a result of many inefficiencies the
margins generated and the operating result have not been favourable.
The first improvement in our process recommended during my global strategic
review was a reduction in the number of manufacturing partners (from fourteen to
three). This will enable quicker delivery times and added reliability through
stronger relationships. Most importantly we will be in a much stronger position
to negotiate better prices and therefore secure better margins. Additionally, we
are in the process of establishing our own sourcing office in Shanghai. From
here we will co-ordinate our production, quality control and global logistics,
leading to substantial improvements in delivery rates and making sure that Hot
Tuna is not only a strong brand but also a credible and efficient supplier for
our distributors and main retail partners.
Secondly, our team will be moving to a new showroom in the Cooper Building in
downtown Los Angeles, where Hot Tuna will feature alongside many other reputable
fashion and sportswear leaders. The new showroom will give us instant access to
fashion buyers whilst serving as our design, marketing and branding
headquarters. Furthermore, I will oversee all aspects of the design process
from this central location whereas previously our designers were based across
our three regional offices. These changes will reduce the overall design time by
six to eight weeks, which is significant not only in terms of reducing the cost
of the process, but it will also allow the Company to secure more orders by
offering a quicker time to market.
Operational Review
United States
The US launch plan was to establish an initial account base of 'A' grade
independent surf retailers. The Company succeeded in securing orders from Jacks'
Surfboards, (voted Retailer of the Year 2006 by the Surf Industry Manufacture
Association (SIMA)). Jacks' Surfboards are based in four locations in
California, namely Huntingdon Beach, Newport Beach, Corona del Mar and Dana
Point. Orders were also received from key accounts and trendsetting retailers in
New York, Miami, Dallas, San Francisco and other major cities across the USA.
Additionally, the Company has fulfilled orders from Diane Beachwear, a leading
swimwear retailer with fourteen stores in southern California and the Cocoa
Beach Surf Company (based in Florida). Cocoa Beach houses the largest surf
complex in the world and is the location of Hot Tuna's first concept store
launched in Spring 2006.
United Kingdom
The appetite for the brand within the UK is strong and this is illustrated by
orders received from some of the most respected independents, including: Fluid,
Two Seasons, Cult Clothing, Shore Watersports, Free Spirit, Extreme Pie, Shred
Head and Surfdome.
Free Spirit is currently the largest and most prominent group on the high street
for surf lifestyle and stocks all the main surf lifestyle brands. Free Spirit
has 38 stores nationwide. Extreme Pie is the online and mail order retail
division of the Extreme Group and is now one of Europe's largest online board
action sports stores. The Extreme Group possesses a large customer base with the
Extreme channel broadcasting non-stop through satellite.
In addition to the above, we have secured orders from Otto, the mail order and
online sales group, who own titles such as Freemans and Grattan. Otto have
established a new mail-order catalogue and online business called "Oli", which
will feature Hot Tuna men's apparel and women's swimwear going forward. Early
sell through results have been very positive, with the Hot Tuna ranking in the
top twenty selling men's brands.
Australia
In Australia, Hot Tuna has re-launched into the key independents including,
amongst others, Glue, Surf Vision and Beach Street, however, our greatest
achievement has been to secure orders from both Myer and David Jones, on a
national level.
Myer is Australia's largest department store with 60 stores nationwide. Myer
placed orders for the Hot Tuna boy's clothing range (8-16 years) and delivery of
these products commenced during July 2007 to all Myer stores. Myer are also
implementing 15 Hot Tuna concept stores into their retail premises which will be
used to market and sell Hot Tuna accessories (backpacks, caps, wallets and
sunglasses). The first sell through reports have been very encouraging,
illustrating sell through of approximately 20% weekly, which is very impressive
by industry standards.
Distribution
Hot Tuna is continuing to pursue strong partnerships with distributors globally
and will continue to foster new and lucrative relationships as the year goes on.
Presently, we have distributors in Spain, Portugal and the Canary Islands, and
most recently in the Middle East. In addition to selling apparel through
established retail outlets, we have also reached an agreement with Sourcerite,
our Middle Eastern distribution partner, to open a dedicated Hot Tuna store in
Dubai by autumn 2008, which will significantly raise the brand's profile in this
region.
Marketing and Promotion
On the marketing front we have successfully re-launched our new website and
established an online sales store in the USA, which is expected to be rolled out
globally. Hot Tuna has also been receiving a lot of encouraging fashion press
from the recent trade shows and promotional activities, including most recently,
the Mercedes Benz fashion show and the Home Boy Industries Charity Day in
California.
Hot Tuna has also recently signed a sponsorship agreement with another famous
Australian brand, Carlton Cold, which is owned by Foster's Brewing Group.
Carlton Cold is aimed at adventure lifestyle-seekers, male and female 18-35
year-olds, as is Hot Tuna's surf apparel. Carlton Cold will support Hot Tuna's
surf team through a number of branding initiatives, and similarly Hot Tuna will
support promotions run by Carlton Cold with Hot Tuna merchandise. The alignment
of the two brands will raise awareness of the Hot Tuna brand and also facilitate
Carlton Cold's launch of their brand in the UK. This support marketing gives Hot
Tuna access to new platforms and is intended to further drive the Group's
penetration of the trendy young adult market.
Hot Tuna also continues to support the sport of surfing through sponsoring
athletes, events and grass roots surfing and surf schools. In August 2006, Hot
Tuna signed former World No. 11 and X-Games Champion surfer Shea Lopez to its
roster as lead team rider. Under the Hot Tuna banner, Lopez shot to the top of
the 2007 Association of Surfing Professionals (ASP) ratings and as of the date
of press, he was the No. 2 surfer on the ASP World Qualifying Series (WQS) tour.
In the United Kingdom, BPSA champion Micah Lester and British Professional
Surfing Association (BPSA) ranked No. 7 Toby Atkins were retained by Hot Tuna,
ensuring a steady stream of national media play at the core of their sport, and
top-flight representation at the highest levels of European and Australian
competition.
In March, the whole Hot Tuna surf team converged on Hot Tuna's birthplace in
support of the Company's crown-jewel event of the year, the ASP 4-star-rated Hot
Tuna Central Coast Pro Surfing Championship, held at Soldiers Beach, NSW,
Australia. More recently, Hot Tuna was the sponsor of the prestigious BPSA Tour,
held at Widemouth Bay, Cornwall.
From sponsorship of world-class talent and championships, to support of local
and regional athletes and events, Hot Tuna retains its global stature as a
surfer's surfing brand true to the sport and spirit of authentic surf culture.
Moving Forward
The year ahead looks very exciting and it has begun in a very positive manner.
Subsequent to our recent brand "makeover" Hot Tuna have gained some high
profile publicity and fashion trend spotting authorities have recently
recognised Hot Tuna as one of the top ten swim brands to watch for 2008 (WGSN
August DNR magazine). We have also strengthened the talent within our team, with
the likes of Anna Kenney, one of the leading swimwear designers in the USA
(former Ocean Pacific and Ralph Lauren) who brings tremendous experience and
creativity to the team.
Building on the great initial success of our kids ranges in Australia, we are
also looking forward to the global launch of the HT kids wear in the fall of
2008.
We remain very confident about the future of the brand and delivering results to
our shareholders at same time as fostering a great, supportive working
environment for all of our employees.
NIELS ANDERS JUUL
CHIEF EXECUTIVE OFFICER
12 October 2007
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2007
NOTES Year ended Period ended
30/06/07 30/06/06
# #
Continuing Operations
Revenue 619,131 367,992
Cost of sales (481,725) (204,658)
Gross profit 137,406 163,334
Other operating income 5,107 4,642
Selling and marketing expenses (596,101) (383,196)
General and administrative (3,210,406) (1,833,161)
expenses
Depreciation (39,811) (3,095)
Loss from operations (3,703,805) (2,051,476)
Exceptional share-based (1,689,790) -
payment charge
Investment income 71,250 39,474
Loss on disposal of property, (3,906) (949)
plant and equipment
Finance costs (6,909) (4,841)
Loss before tax (5,333,160) (2,017,792)
Tax - -
Loss after tax (5,333,160) (2,017,792)
Loss for the year/period (5,333,160) (2,017,792)
Attributable to:
Equity holders (5,333,160) (1,975,718)
Minority interest - (42,074)
(5,333,160) (2,017,792)
Loss per share
Basic and Diluted 2 (0.08) pence (0.06) pence
CONSOLIDATED BALANCE SHEET AS AT 30 June 2007
2007 2006
Group Group
# #
ASSETS
Non-current assets
Goodwill 207,338 237,338
Other intangible assets 5,238,338 5,251,429
Property, plant and equipment 124,134 73,616
5,569,810 5,562,383
Current assets
Inventories 398,614 171,674
Trade and other receivables 523,843 183,624
Cash and cash equivalents 1,891,997 1,524,255
2,814,454 1,879,553
Total assets 8,384,264 7,441,936
LIABILITIES
Current liabilities
Bank loans and overdraft - 110,842
Trade and other payables 496,394 281,626
Convertible loan note 106,042 -
602,436 392,468
Net current assets 2,212,018 1,487,085
Non-current liabilities
Convertible loan note 111,056 -
111,056 -
TOTAL LIABILITIES 713,492 392,468
Net assets 7,670,772 7,049,468
EQUITY
Share capital 773,799 488,010
Share premium reserve 9,611,701 6,092,232
Share-based payment reserve 2,266,645 576,855
Merger reserve 1,474,000 1,474,000
Warrant reserve 799,842 486,557
Foreign exchange reserve 53,663 (4,017)
Shares to be issued - 25,000
Retained loss (7,308,878) (1,975,718)
Equity attributable to equity 7,670,772 7,162,919
holders of the parent
Minority interest - (113,451)
Total equity 7,670,772 7,049,468
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2007
Share Share Share-based Other Warrant Retained Total Minority Total
capital premium payment reserves reserve profit/ interest equity
account reserve (loss)
CONSOLIDATED
# # # # # # # # #
Balance at 1 July
2006 488,010 6,092,232 576,855 1,494,983 486,557 (1,975,718) 7,162,919 (113,451) 7,049,468
Net loss for the
period - - - - - (5,333,160) (5,333,160) 113,451 (5,219,709)
Exchange
differences arising
on translation of
overseas operations - - - 57,680 - - 57,860 - 57,680
Total recognised
income and expense
for 2007 - - - 57,680 - (5,333,160) (5,275,480) 113,451 (5,162,029)
Share conversion
and issue 285,789 3,729,685 - (25,000) - - 3,990,474 - 3,990,474
Costs of share
issue and
conversion - (210,216) - - - - (210,216) - (210,216)
Warrants
Subscribed - - - - 313,285 - 313,285 - 313,285
Employee share
option scheme - - 1,689,790 - - - 1,689,790 - 1,689,790
Balance at 30 June
2007 773,799 9,611,701 2,266,645 1,527,663 799,842 (7,308,878) 7,670,772 - 7,670,772
STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD ENDED 30 JUNE 2006
Share Share Share Other Warrant Retained Total Minority Total
capital premium based reserves reserve profit/ interest equity
account payment (loss)
reserve
CONSOLIDATED
# # # # # # # # #
Balance at 1 April
2005 - - - - - - - - -
Net loss for the
period - - - - - (1,975,718) (1,975,718) (42,074) (2,017,792)
Exchange differences
arising on
translation of
overseas operations - - - (4,017) - - (4,017) - (4,017)
Total recognised income
and expense for 2006 - - - (4,017) - (1,975,718) (1,979,735) (42,074) (2,021,809)
Share conversion and
issue 488,010 7,390,490 - 1,474,000 - - 9,352,500 - 9,352,500
Costs of share
issue and
conversion - (1,298,258) - - - - (1,298,258) (71,377) (1,369,635)
Warrants Subscribed - - - - 486,557 - 486,557 - 486,557
Shares to be issued - - - 25,000 - - 25,000 - 25,000
Employee share
option scheme - - 90,695 - - - 90,695 - 90,695
Share based payments
to advisors - - 312,172 - - - 312,172 - 312,172
Share based payment
on acquisition - - 173,988 - - - 173,988 - 173,988
Balance at 30 June
2006 488,010 6,092,232 576,855 1,494,983 486,557 (1,975,718) 7,162,919 113,451 7,049,468
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2007
NOTES
Group Group
Year Ending Period Ending
30/06/07 30/06/06
# #
NET CASH USED IN OPERATING ACTIVITIES 3 (3,920,529) (1,925,622)
INVESTING ACTIVITIES
Currency revaluation reserve - (4,017)
Payments for purchase of controlled entity - (606,770)
Cash funding on purchase of controlled - (178,333)
entities
Payments for intangible assets - (283,000)
Interest received 71,250 39,474
Purchases of property, plant and equipment (93,620) (38,446)
NET CASH USED IN INVESTING ACTIVITIES (22,370) (1,071,092)
FINANCING ACTIVITIES
Proceeds on issue of convertible notes 217,098 -
Proceeds from issue of share capital 4,093,543 4,520,969
NET CASH INFLOW FROM FINANCING ACTIVITIES 4,310,641 4,520,969
Net increase in cash and cash equivalents 367,742 1,524,255
CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR/PERIOD 1,524,255 -
CASH AND CASH EQUIVALENTS AT END OF YEAR/
PERIOD 3 1,891,997 1,524,255
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2007
1. BASIS OF PREPARATION
The results for the year ended 30 June 2007 have been prepared on accounting
policies which are consistent with those used in the preparation of the
financial statements of the Group for the period ended 30 June 2006.
The consolidated financial information for the year ended 30 June 2007 has been
prepared on a basis consistent with the previous period and in accordance with
applicable International Financial Reporting Standards (IFRS) as adopted by the
European Union. The preliminary announcement does not constitute the Group
statutory financial statements within the meaning of s.240 of the Companies Act
1985.
The financial information included in this announcement has been extracted from
the un-audited financial statements for the year ended 30 June 2007 and the
audited financial statements for the year ended 30 June 2006.
The Group's 2007 Annual Report and Financial statements are to be delivered to
the Registrar of Companies following the Company's Annual General Meeting on 19
November 2007. The Group's 2006 accounts, which contain an unqualified audit
report, have been filed with the Registrar of Companies.
2. LOSS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
Year ended 30/06/07 Period ended 30/06/06
# #
Earnings
Earnings for the purposes of basic earnings per share net loss (5,333,160) (1,975,718)
for the period attributable to equity holders of the parent
Number of shares
Weighted average number of ordinary shares for the purposes of 65,230,931 32,471,760
basic earnings per share
The denominator for the purpose of calculating the basic earnings per share has been adjusted to reflect
all capital raisings. Due to the loss incurred in the period, there is no dilution effect resulting from
the issue of share options, warrants and shares to be issued.
3. RECONCILIATION OF PROFIT FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES (NOTES TO THE CASH
FLOW STATEMENT)
Group Group
Year Period Ending
Ending 30/06/07 30/06/06
# #
Loss from operations (3,703,805) (2,051,476)
Adjusted for:
Depreciation of property, plant and 39,811 3,095
equipment
Loss on disposal of property, plant and 3,906 949
equipment
Share-based payment expense - 90,695
Operating cash flows before movements in
working capital (3,660,088) (1,956,736)
Increase in inventories (226,940) (27,109)
Increase in receivables (230,674) (102,162)
Increase in payables 204,082 165,227
Cash used in operations (253,532)) 35,956
Interest (Paid) (6,909) (4,841)
NET CASH FROM OPERATING ACTIVITIES (3,920,529) (1,925,622)
Group Group Period
Year Ending Ending
30/06/07 30/06/06
(#) (#)
Cash and cash equivalents 1,891,997 1,524,255
This information is provided by RNS
The company news service from the London Stock Exchange
END
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