RNS Number : 3268F
Land of Leather Holdings plc
08 October 2008
8 October 2008
Land of Leather Holdings plc
Preliminary results for the year ended 3 August 2008
Land of Leather, the UK's leading, specialist, national leather sofa retailer announces its preliminary results for the year ended 3
August 2008.
Highlights for the 53 weeks ended 3 August 2008
* Revenue �232m (2007: �240m)
* Total sales orders down 20.5%
* Like for like sales orders down 28.9%
* Gross profit margin 42.1% (2007: 44.6%)
* Profit before taxation and exceptional items of �2.3m (2007: �18.5m)
* Loss before tax of �0.4m (2007: �16m)
* Basic earnings per share before exceptional items of 17.83 pence (2007: 259.83 pence)
* Significant cost reduction programme implemented and focus on cash management
* A successful Placing and Open Offer raised �13.5m (net of expenses) in July 2008
* Cash of �15.1 million, no debt (2007: �25.5m)
* Appointment of Steve Jenkins as CEO with effect from 4 August 2008, following retirement of Paul Briant
Enquiries:
Land of Leather Hudson Sandler
Clive Hatchard James White
Tel: 01474 543 291 Tel: 020 7796 4133
A copy of the presentation of these results to analysts will be available later today from the Company's website
(www.landofleather.co.uk).
CHAIRMAN'S STATEMENT
The past year has been one of the most difficult for the retail furniture industry in many years. Trading conditions have been severely
affected by the impact of the "credit crunch" on housing transaction levels, consumer confidence and spending on bigger ticket discretionary
items. Despite these very difficult conditions, the business has reported a profit before tax and exceptional items of �2.3m (2007:
�18.5m).
In response to the rapid deterioration of the trading conditions during the financial year, the management has acted quickly by focusing
on reducing costs, conserving cash and more recently improving gross margins. In the absence of traditional sources of working capital
finance, and our bankers' request to be partially cash covered for a contingent liability on merchant services, the Company raised �13.5m
(net of expenses) through a Placing and Open Offer in July 2008. We are extremely grateful to our shareholders and the institutions who have
supported the management, who themselves contributed in total �3m to the equity fund raising, in these difficult market conditions.
Financial review
Revenue has decreased by only 3% to �232m (2007: �240m), despite a lower sales order intake in the year of 20.5%, due to delivering
sales relating to the high opening order book brought forward in July 2007. The total sales order decline of 20.5% includes a like-for-like
sales order decline of 28.9% mitigated by sales from new stores opened in 2008 and those trading for a full year which were opened in 2007.
The decline in the gross margin, from 44.6% to 42.1%, was a consequence of higher worldwide freight rates and a strong sales promotions
programme, predominantly in the first half of the year, aimed at stimulating sales volumes. Operating costs before exceptional items
increased by �6.6m primarily due to the costs associated with new stores opened in the last two years.
Profit before tax and exceptional items reduced by �16.2m to �2.3m (2007: �18.5m). The financial period includes several exceptional
items which equate to an overall net cost of �2.7m (2007: �2.5m). This resulted in a loss before tax of �0.4m (2007 profit: �16m). Basic
earnings per share were a loss of 12.1 pence per share (2007: earnings of 225.7 pence per share), and earnings per share before exceptional
items reduced to 17.8 pence per share (2007: 259.7 pence per share).
The business has historically been strongly cash generative. However, in the year ended 3 August 2008, the Company reported a net cash
outflow of �23.9m (2007: �14.4m cash inflow) before receipt of the �13.5m net proceeds of the equity fund raising. This cash outflow relates
principally to items considered either one-off or not likely to recur in the current financial year. A one-off cash outflow related to the
termination of a foreign currency hedging contract whilst non-recurring items, at least for the current financial year, included share
buybacks, the payment of the 2007 financial year final dividend and a reversal of an exceptionally high level of customer deposits held at
the previous year end. Overall the net cash outflow for the year ended 3 August 2008 was �10.4m post receipt of the net proceeds of the
equity fundraising.
As a result of the new equity funding, the Company has a substantial net cash balance at 3 August 2008 of �15.1m, (2007: �25.5m) of
which �4.5m is held by our bankers as cash collateral and therefore not available to the Group for working capital.
Equity fund raising and share price
The Company issued 29.9 million new shares (post the ten for one consolidation of ordinary shares) at 50 pence per share in July 2008
which raised �13.5m net of issue costs. The new fund raising was accompanied by a ten for one consolidation in the number of ordinary shares
in issue. As at 3 August 2008, there were 34.8 million new ordinary shares (excluding the 158,750 shares purchased by the employee benefit
trust) in issue, with a closing market price of 39.75 pence. The current share price reflects the severe difficulties in the UK economy and
retail sector which has a disproportionate impact on big ticket retailers like ourselves. These factors will continue to affect the
Company's share price whilst they persist.
Cash management
A significant number of actions have been implemented by management to both reduce costs and conserve the Company's cash resources. The
actions to reduce operating costs are expected to derive in the region of �17m annual savings, which includes substantial savings in
advertising, staff costs and discretionary spend. These areas are discussed in more detail in the Business Review. These actions include
agreeing with certain directors and senior managers a salary deferment until market conditions improve. This initiative, together with
having fewer directors, will result in an annual cashflow saving of 25% of total basic salaries. Other actions that have been taken
include:
New store opening programme
In the past three years, the cash generative nature of the Company's business model allowed the management to open stores successfully
and consistently ahead of schedule. Land of Leather now has 109 stores across the UK and Republic of Ireland and is in a position to
suspend the new store opening programme during this difficult retail climate to focus on extracting the best performance from the existing
stores. This decision will conserve substantial amounts of cash as in the last financial year, for example, the Company incurred new store
capital expenditure of over �3.7 million.
Dividend
The board announced at the time of its half year results in March 2008 that it would not be paying an interim dividend and that the full
year dividend would be assessed in the light of the financial results of the year and trading conditions at that time. The board is not
proposing a final dividend for the financial year ended 3 August 2008 and it does not anticipate resuming the payment of dividends in the
current year ending 2 August 2009.
Mezzanine floor installations
We have suspended the programme of fitting mezzanine floors into the existing store portfolio in order to reduce capital expenditure.
In addition, no refurbishments are planned and all repair and maintenance work will relate only to that required for normal operational or
health and safety reasons.
Working capital
Management is concentrating on reducing the level of stock in the business and working with suppliers to ensure that all product is
purchased on suitable credit terms. We are confident our suppliers currently have access to adequate trade insurance to support their credit
lines to the business and we continue to keep trade insurers appraised of the trading position of the business and the actions implemented
to reduce costs and conserve cash.
People
As at 3 August 2008 we had 946 employees compared to an average of 1,061 employees throughout the financial year. Our people are
critical to the success of the business. This is even more so in the particularly difficult and challenging market we are currently facing.
I would like to thank all of our employees for their exceptional effort and commitment through these times.
The Board
With the interim results reported in March 2008, the Company announced the retirement of Paul Briant effective from 3 August 2008.
Beyond the end of this financial year, Paul has agreed to stay with the business as a consultant for an initial period of one year (which
may be extended by the Company for a further year) to continue the smooth handover of responsibilities and to provide specific advice and
support on buying product.
Steve Jenkins was appointed CEO on 4 August 2008. Steve has had a career in the furniture industry spanning 25 years. Steve joined Land
of Leather in 1999 and was appointed Managing Director in 2004.
I would like to thank Paul for the huge commitment and contribution he has made to the business since founding it in 1997 and I wish him
a happy and long retirement.
Patrick Deigman resigned as a non-executive director in April 2008 due to ill health and Gillian Wilmot, a non-executive director, will
be leaving the Board at the end of December 2008 to focus on other business opportunities.
Outlook
It has been a very difficult year and we expect, and are planning for, the challenging market conditions to remain throughout 2008 and
2009.
It is anticipated that the first half of the new financial year will be particularly difficult due to the low opening order book and
tougher sales comparatives. As always, the Boxing Day sale trading period will be very important for the business and the actions taken by
the management in reducing costs and conserving cash means the business is better placed to withstand the difficult market conditions.
Roger Matthews
Chairman
8 October 2008
BUSINESS REVIEW
New store roll-out
The Group opened 15 new stores during the year ended 3 August 2008, which brings the total number of stores in the portfolio to 109.
This includes 7 concessions in other retailers' stores. The new stores were Wetherby, Grantham, Cannock, Wigan, Cardiff, Warrington,
Southport, Drogheda, Wrexham, Stirling, Huddersfield, Galway, Gillingham, Droitwich and Yeovil. They were all opened in the first half of
the year, with the exception of Yeovil which opened in May 2008.
Although management have decided to postpone the store roll out programme to conserve cash during the very challenging market
conditions, in the medium term it is confident of its ability to open a total of 160 stores across the UK and Republic of Ireland.
Store portfolio
Over a number of years, we have been increasing and improving our store portfolio by opening new stores, refurbishing older format
stores and installing mezzanines in existing stores where appropriate. At the start of the financial year, the total space within the store
portfolio was 1.23 million sq. ft. of which approximately 226,000 sq.ft. of this was sublet to concessions. The 15 new stores and 2
mezzanine installations completed in the financial year increased the total space within the stores to 1.46m sq. ft. at 3 August 2008, of
which we traded from 1.19m sq. ft. This represents an increase of 19% in both total space and traded space.
The average size of a Land of Leather store is 13,100 sq. ft. After taking into account store concessions and non-retail
(storage/office) space, the average net trading space is 10,600 sq. ft.
During the 2008 financial year, we completed mezzanine installations in the Plymouth and Romford stores, which both re-opened in August
2007. This investment has increased the total space available on mezzanine floors to 389,000 sq. ft. at 3 August 2008 from 312,000 sq. ft.
at the previous year end. In total, 57 out of the 109 stores operating at 3 August 2008 have a mezzanine floor compared to 44 out of 94
stores at the start of the 2008 financial year.
Concessions
The Group's principal concession partner at the start of the financial year, The Sleep Depot, went into administration in April 2008. At
the time of administration The Sleep Depot occupied 186,000 sq.ft of space in 71 of our stores, which generated an annualised income of �4.8
million. The Group was able to re-let space in 28 stores to the bed division of Homestyle Group in June 2008 and has utilised the remaining
additional space to introduce a new range of fabric sofas. As a result of the loss of The Sleep Depot, the total number of concessions as at
3 August 2008 was 48 occupying 135,000 sq.ft compared to 84 concessions which occupied 226,000 sq. ft. at the start of the financial year.
The concession rent received in the year ended 3 August 2008 reduced to �5.2 million from �5.5 million the previous year, although this
included 8 months income from The Sleep Depot; annualised concession rent at 3 August 2008 is estimated at �3.5 million although the
Homestyle concessions income is based on turnover and may therefore fluctuate.
The concession partners within our stores at 3 August 2008 include Homestyle Bed Division (28), Paul Simon (8), Relax Furniture (3),
Carpetright (4) and Hammonds (5).
Suppliers and product range
We specialise in leather sofas with our stores displaying a range of between 40 and 70 different models. The product range is selected
to appeal to the mass market and avoid over exposure to fashion orientated designs, colours or styles. Since the year end, we have
introduced a new range of fabric sofas into 60 stores. The initial range consisted of 7 models, which will be increased to 12 fabric models
in time for the January Sale. The additional store space recovered from The Sleep Depot and the fewer number of new concession partners in
the more difficult retail climate has enabled this new fabric range to be introduced without reducing the size of the leather range and
hence the ability to offer the widest choice of leather sofas on retail parks. The new fabric range provides an opportunity to enter a new
�1.8bn market with minimal entry cost given the available floor space.
It is estimated that approximately half of all sofa customers are undecided between leather and fabric prior to making their final
purchase decision. Consequently, we believe that the introduction of a fabric sofa range can increase our sales conversion rate to those
customers undecided on what type of sofa they want.
The business used 26 different suppliers in the year ended 3 August 2008 (2007: 39 suppliers) with the top 10 suppliers representing
approximately 88% (2007: 86%) of total product supplied. The business has increasingly moved its product sourcing to the Far East, with 84%
(2007: 82%) of products shipped from China and total Far East suppliers representing 96% (2007: 92%) of purchases.
The Group has good working relationships with its major suppliers, each of whom has worked with the business or its management for many
years. We believe our position as the UK's only national upholstery retailer specialising in leather sofas enables us to source on very
attractive terms. We continue to work closely with our suppliers to ensure the high quality of our products and all suppliers recently
agreed to a newly introduced vendor manual to standardise product quality.
Group litigation order
The Company is one of several retailers named as a defendant in a Group Litigation Order concerning alleged skin irritations caused by a
mould inhibitor, di-methyl fumarate ("DMF") contained within sachets inside certain leather sofas. The inclusion of the substance was taken
by two of the Company's suppliers in an attempt to maintain the quality of the goods during shipping. The Company was not aware of this.
The Company has now received written assurances from all of its suppliers that they do not use DMF and independently tests samples of
all furniture for the presence of this substance so as to ensure that further instances cannot occur.
Marketing and advertising
The Group slightly reduced its advertising spend in the year ended 3 August 2008 to �21.4 million from �22 million the previous year,
which equated to 9.2% of revenue in both years. However, the expenditure in the year ended 3 August 2008 was heavily biased to the first
half year as the Company took the decision to reduce significantly advertising in the last four months of the financial year. In the period
from February 2008 to July 2008 the advertising spend totalled �7.2 million compared to �10.4 million in the comparative period. The
decision to reduce advertising was a result of the diminishing returns being achieved from promotional activity as the tough economic
conditions became more widespread. The Group still pursues an active marketing strategy and remains the third largest advertiser in the
upholstery sector behind the market leader, DFS, and Harveys.
The principal medium for Land of Leather's marketing campaign remains television, which represented 45% of total expenditure (2007:
53%). The majority of the remaining advertising spend is dedicated to the national tabloid press, although the proportion of the total spend
on this medium reduced to 24% from 27% the previous year. The business also invested 12.1% of its advertising expenditure on two direct mail
campaigns in the year ended 3 August 2008 (2007: 6.3%) although the return from this was below expectations and as such will not be repeated
in the current financial year.
Distribution and logistics
The Group operated from eight regional distribution centres at 3 August 2008, providing a total distribution space of 599,500 sq. ft. as
at 3 August 2008. This was unchanged during the year, following a 37% increase in space the previous financial year. Since the year end, the
business has taken action to reduce distribution costs to reflect the lower activity levels by closing the warehouses in Belfast and
Northfleet in August 2008 and reducing space in the Tamworth and Uddingston centres. This restructuring will reduce total warehouse space
by approximately 190,000 sq. ft.
The final delivery to the customer is undertaken by third party carriers who are paid directly by the customer upon delivery. The use of
in-house distribution centres enables full control over stock levels and delivery scheduling but with a variable transport cost base which
provides flexibility in peak delivery periods. In the year ended 3 August 2008 the distribution costs represented 5.2% of revenue (2007:
5.0%).
People and training
As at 3 August 2008, the business employed 946 people (2007: 1,019 people). The net reduction of 73 people is due to an increase driven
by the 15 stores opened in the financial year less a reduction following a redundancy programme and non-replacement policy in order to lower
operating costs. Staff numbers have been reduced further since the year end to 861 following the closure of the two warehouses.
Our staff are key to the success of the business and the continuation of the high customer service levels that we provide. We have
previously recognised this contribution by widening share ownership through both an executive share option plan and a Group wide Save As You
Earn scheme; at 3 August 2008 there were 103 people with share options and 58 members of the Save As You Earn scheme.
Revenue
Revenue decreased by 3% to �231.9m in the year ended 3 August 2008 (2007: �240m). The 28.9% reduction in like for like sales
significantly reduced delivered sales but the effect was substantially offset by the 15 new stores opened in the year (�11.1m), together
with the full year impact of the 15 stores opened in the previous year ended 29 July 2007 (�9.1m) and a reduction in the closing order book
(�24.0m). The negative like for like sales orders for the year of 28.9% included a reduction in the average order value of 3.5% to �950
(inc. VAT).
Gross margin
The overall gross margin reduced by 250 bps to 42.1% compared to the previous year ended 29 July 2007. The gross margin reduction was
caused by strong promotional activity particularly in the first half of the year which led to a higher proportion of lower margin products,
a tendency for customers to trade down due to lower disposable income and increased worldwide freight costs. The gross margin improved
slightly in the second half of the year to 42.2% compared to 41.8% in the first half which reflected a move away from the very aggressive
promotional activity. The reported margin in the second half year would have been higher had it not been adversely affected by the need to
clear the excess level of stock following a disappointing January Sale.
Other operating income
Other operating income relates to rental income received from letting space to third party concessions inside Land of Leather stores
(�5.0m) and rent from sub-lessees in four empty properties (�0.2m). The income reduced by �0.6m to �5.2m due to the loss of The Sleep Depot
concession rent from April 2008 when it went into administration.
Operating expenses
Operating expenses pre-exceptional items increased by 7.4% to �96.0m (2007: �89.4m). The significant areas which contributed to the
overall �6.6m cost increase include new store openings in the current year (�3.9m) and the annualised cost of previous year new store
openings (�3.0m) but these costs were mitigated by lower bonuses (�1.4m) and lower advertising spend (�0.6m).
Profit before tax and exceptional items
The Group has reported profit before tax and exceptional items of �2.3m compared to �18.5m last year. The overall operating profit
margin equates to 1.0% (2007: 7.3%) which reflects the lower gross margin and the effect of relatively high fixed costs, notwithstanding
management's actions on costs, typical of retail businesses.
Exceptional items
The year ended 3 August 2008 includes an exceptional gain of �1.6m in respect of the Sterling/Dollar hedge contract which reflects the
movement in the mark to market value between 29 July 2007 (�7.5m) and the settlement date of 21 August 2007 (�5.9m) when it was terminated
early.
The net exceptional charge of �2.7m in the year ended 3 August 2008 relates to four exceptional costs less the �1.6m exceptional credit
on termination of the hedge contract. The four exceptional cost items include:
* An increase in the onerous lease provision of �1.4m in respect of two empty properties. The provision represents six years future
cost and was increased due to the exceptional retail conditions making the ability to sublet or reuse the properties more difficult;
* The business incurred �1.6m legal and professional costs due to financial restructuring, and the need to maintain credit card
clearing facilities;
* Impairment of branch fixed assets has been recognised totalling �0.6m and
* The Company is one of 71 retailers included in a Group Litigation Order related to alleged skin irritations caused by a mould
inhibitor product contained within certain leather sofas. The exception costs incurred include refunds to customers, replacement sofas,
product rectification and legal and professional costs.
Finance revenue
Finance revenue relates to interest receivable which reduced in the year to �0.6m (2007: �0.9m) reflecting the lower average cash
balance.
Profit before taxation
The reported loss before tax for the year ended 3 August 2008 is �0.4m compared to a profit of �16m the previous year.
Taxation
The effective rate of corporation tax for the year ended 3 August 2008 before allowing for exceptional items is 51.4% which is
substantially higher than the comparative of 29.0%. The previous year benefited from a credit in respect of prior years (�0.3m) and deferred
taxation (�0.4.m); excluding these credits the effective tax rate would have been 33.3% which is more in line with the Company's
expectations. The current year effective tax rate is distorted by the disallowable expenditure primarily relating to the new store roll-out
programme which has increased the effective tax rate substantially as a percentage against the lower profit levels notwithstanding the
absolute value of the disallowed expenditure remaining broadly stable.
Earnings per share
Basic and diluted earnings per share were a loss of 12.1 pence (2007: 225.6 pence basic and diluted).
The basic and diluted earnings before exceptional items were both 17.8 pence (2007: 259.83 pence, 259.74 pence diluted).
No final dividend is proposed (2007: 12.5 pence full year dividend) in order to conserve cash resources during the difficult retail
conditions.
Balance sheet
The balance sheet has net assets of �35.9m at 3 August 2008 (2007: �30.6m) which includes cash of �15.1m (2007: �25.5m) and no debt. The
increase in net assets reflects the new equity funds raised in July 2008 of �13.5m (net of expenses) less the dividends paid relating to the
year ended 29 July 2007 and share purchases for cancellation for the Employee Benefit Trust.
Capital expenditure
Total capital expenditure in the year ended 3 August 2008 amounted to �5.6m (2006: �8.6m) before contributions from landlords. The
capital expenditure primarily comprised investment in the 15 new stores (�3.7m) and major refurbishments of existing stores incorporating
new mezzanine floors (�0.4m). The reduction in capital expenditure compared to the previous year, despite the same number of new stores
being opened, can be attributed to the fact that nine stores in the current year were opened in the first month and hence the majority of
the capital expenditure was incurred in the 2007 financial year.
The cost of fitting out new stores is partially funded by contributions from landlords and in the year ended 3 August 2008 the Group
received �1.8m (2007: �2.0m) in landlord inducements which are credited to the Income Statement over the full period of the lease.
Capital expenditure in the current year ending 2 August 2009 will be limited to essential maintenance expenditure as the new store and
mezzanine installation programmes have been suspended.
Working capital
Overall net working capital in the year ended 3 August 2008 increased by �4.4m compared to a reduction of �14m the previous year.
Following an exceptionally high level of sales activity in July 2007, just prior to the end of the 2007 financial year, the Company
started the 2008 financial year with an unseasonally high level of customer deposits (�16.1m). The effect on working capital was that a
return to more normal levels of customer deposits of �6.6m during the year ended 3 August 2008 resulted in a net outflow of working capital
of �9.5m, compared to an inflow from customer deposits in the 2007 financial year of �7.1m.
The movement in working capital would be more consistent between the 2008 and 2007 financial years after adjusting for the unusual
movement in customer deposits as this shows a reduction of �5.5m in the year to 3 August 2008 compared to �6.9m the previous year.
Financial structure
As at 3 August 2008 the Group had net cash of �15.1m (2007: �25.5m) which included customer deposits of �6.6m (2007: �16.1m). The level
of cash in excess of customer deposits therefore reduced slightly to �8.5m from �9.4m at the previous year end.
The Group's bankers withdrew its loan facilities in May 2008 and separately charged �4.5m of the Group's cash balance as security for
providing credit card clearing facilities. The �4.5m charged cash is not available to the Group for working capital purposes. It was the
inability to obtain new bank facilities for working capital and the need to provide cash collateral to its bankers which, in part, led the
Group to raise �15m new equity funds from its shareholders in July 2008.
Cash flow
The cash flow statement for the year ended 3 August 2008 shows a cash outflow from operations of �4.0m compared to an inflow of �33.8m
in 2007. This significant difference primarily relates to lower profitability (impact of �16.4m) and the working capital movement (impact of
�18.4m) as explained above.
The overall cash outflow in the year ended 3 August 2008 was �23.9m before receipt of the net �13.5m (after expenses) from the new
equity fund raising in July 2008. In addition to working capital movements above, the principal cash outflows are viewed as either one-off
or not likely to recur in the current financial year and relate to �5.9m for the termination of the Sterling/Dollar hedge contract early in
August 2007; �4.4m as payment of the 2007 financial year final dividend; and �3.1m for the purchase of own shares.
Treasury and risk management
The Group has no debt and as such the Group does not currently have interest rate hedging policies. However, the Company is exposed to
foreign currency movements, in particular the US Dollar, relating principally to stock purchases from the Far East, where 40% of its
purchases are made in US Dollars. The Group does not currently have facilities to enter new foreign currency contracts and therefore for the
time being will remain exposed to movements in the value of sterling against the US dollar and the Euro.
Steve Jenkins Clive Hatchard
Chief Executive Officer Chief Financial Officer
08 October 2008 08 October 2008
Consolidated income statement
For the 53 weeks ended 3
August 2008
Notes 53 weeks trading to 3.8.08 52 weeks trading to 29.7.07
Before exceptional Exceptional items Total Before exceptional Exceptional items
Total
items items
�000 �000 �000 �000 �000 �000
(note 3) (note 3)
Revenue 2 231,993 (141) 231,852 239,980 -
239,980
Cost of sales (134,235) 1,529 (132,706) (133,019) (2,463)
(135,482)
Gross profit 97,758 1,388 99,146 106,961 (2,463)
104,498
Other operating income 5,211 - 5,211 5,766 -
5,766
Distribution costs (12,120) - (12,120) (12,078) -
(12,078)
Administration and other costs (89,052) (4,103) (93,155) (83,029) -
(83,029)
Operating profit / (loss) 1,797 (2,715) (918) 17,620 (2,463)
15,157
Finance costs (73) - (73) (47) -
(47)
Finance revenue 628 - 628 920 -
920
Profit / (loss) before tax 2,352 (2,715) (363) 18,493 (2,463)
16,030
Income tax expense 4 (1,208) 796 (412) (5,380) 739
(4,641)
Profit / (loss) for the period 1,144 (1,919) (775) 13,113 (1,724)
11,389
Attributable to Equity holders 1,144 (1,919) (775) 13,113 (1,724)
11,389
of the parent
Earnings per share
Basic earnings per share 6 / 7 17.83 (12.08) 259.83
225.67
(pence)
Diluted earnings per share 6 / 7 17.83 (12.08) 259.74
225.59
(pence)
Consolidated balance sheet
As at 3 August 2008
Notes Group
As at 3.8.08 As at 29.7.07
�000 �000
ASSETS
Non-current assets
Property, plant and equipment 27,539 25,754
Intangible assets - goodwill 6,168 6,168
Intangible assets - brand 13,300 13,300
Intangible assets - software 940 768
47,947 45,990
Current assets
Inventories 13,936 15,354
Trade and other receivables and prepayments 7,919 8,685
Income tax receivable 2,210 -
Cash and cash equivalents 15,117 25,514
39,182 49,553
TOTAL ASSETS 87,129 95,543
Current liabilities
Trade and other payables 34,690 44,481
Financial instruments 209 7,736
Income tax payable - 1,374
Provisions 8 717 494
35,616 54,085
Non-current liabilities
Other payables 8,432 7,436
Provisions 8 1,722 408
Deferred income tax liabilities 5,421 2,969
15,575 10,813
Total liabilities 51,191 64,898
NET ASSETS 35,938 30,645
EQUITY AND LIABILITIES
Equity attributable to equity holders of
the parent
Share capital 9 3,494 508
Share premium 9 27,505 16,947
Other reserves (78) (124)
Employee Benefit Trust (4,001) (2,211)
Retained earnings 9,018 15,525
TOTAL EQUITY 35,938 30,645
Consolidated statement of changes in equity
Share capital Share premium Retained earnings EBT reserve Other reserves Total equity
�000 �000 �000 �000 �000 �000
At 30 July 2006 508 16,947 9,453 0 (21) 26,887
Profit for the period - - 11,389 - - 11,389
Movements in cash flow hedges - - - - (247) (247)
Deferred tax on cash flow - - - - 74 74
hedges
Currency translation reserve - - - - 70 70
EBT purchase of shares - - - (2,211) - (2,211)
Dividends paid - - (5,437) - - (5,437)
Share-based payment - - 120 - - 120
At 29 July 2007 508 16,947 15,525 (2,211) (124) 30,645
Loss for the period - - (775) - - (775)
Movements in cash flow hedges - - - - 247 247
Deferred tax on cash flow - - - - (74) (74)
hedges
Currency translation reserve - - - - (136) (136)
EBT purchase of shares - - - (1,790) - (1,790)
Purchase of Company shares (9) - (1,242) - 9 (1,242)
Dividends paid - - (4,370) - - (4,370)
Rights issue 2,995 11,978 - - - 14,973
Rights issue - professional - (1,420) - - - (1,420)
fees and costs
Share-based payment - - (120) - - (120)
At 3 August 2008 3,494 27,505 9,018 (4,001) (78) 35,938
Consolidated cash flow statement
For the 53 weeks ended 3 August 2008
Notes 53 weeks trading to 52 weeks trading to
3.8.08 29.7.07
�000 �000
Profit before tax (363) 16,030
Amortisation of intangible 109 61
assets
Depreciation and impairment of property, plant and 3,065 1,756
equipment
(Credit) / charge for share (120) 136
option schemes
Exceptional non-cash item : derivative instrument (1,622) 2,463
(credit) / charge
Non-cash ineffective 209 -
derivative instrument charge
Loss on disposal of property, 89 190
plant and equipment
Interest receivable (628) (920)
Interest payable 73 47
Inventories decrease / 1,419 (3,202)
(increase)
Receivables decrease / 708 (11)
(increase)
Payables (decrease) / increase 3 (6,587) 17,161
Unrealised exchange (350) 80
translation differences
Cash generated from operating (3,998) 33,791
activities
Income tax paid (1,618) (3,997)
Net cash flows from operating (5,616) 29,794
activities
Cash flows from investing
activities
Purchase of property, plant (5,363) (8,220)
and equipment
Purchase of intangible assets (281) (358)
- software
Proceeds from disposal of property, plant and 17 -
equipment
Interest received 686 920
Net cash flows from investing (4,941) (7,658)
activities
Cash flows from financing
activities
Net proceeds from rights issue 13,553 -
of ordinary shares
Share purchase for EBT (1,790) (2,211)
Share buy-back (1,242) -
Financial instrument buy-out (5,867) -
Dividends paid to equity (4,370) (5,437)
holders of the parent
Interest paid (123) (47)
Other financing cash flows - -
Net cash flows from financing 161 (7,699)
activities
Net increase / (decrease) in cash and cash (10,397) 14,437
equivalents
Cash and cash equivalents at 25,514 11,077
beginning of period
Cash and cash equivalents at 15,117 25,514
end of period
Notes to the Financial Statements
1 Basis of preparation
The principal accounting policies are set out in the Group's financial statements for the year ended 29 July 2007.
This preliminary announcement has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the
European Union (EU)
which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), and applied in accordance
with the provisions
of the Companies Act 1985.
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of
the Companies Act
1985.
The financial statements, which form the basis of this preliminary announcement, have been prepared on a going concern basis which
assumes that the Group
will be able to meets its liabilities as they fall due for the foreseeable future. The Directors have produced cash flows forecasts
which indicate that the
Group can continue as a going concern. In preparing those forecasts, the Directors have taken into account the following material
uncertainties:
* The achievability of forecast sales orders and revenues, especially in the post Christmas sale period, in the current tough economic
environment
* The value and timing, in the current climate, of a number of initiatives to reduce costs and conserve cash. The Directors are
implementing a significant
number of such initiatives, some of which are directly controllable such as advertising spend
* Trade insurers to key suppliers confirmed their intention to make facilities available at the time of the fundraising in June 2008 and
is currently
adequate. However, th
Having taken these uncertainties into account, the Directors believe it is appropriate to prepare the accounts on a going concern basis.
The auditors report in the statutory accounts of the group for the 53 weeks ended 3 August 2008, which is not qualified, contains an
emphasis of matter
drawing attention to the material uncertainties referred to above relating to the Group's ability to continue as a going concern. The
statutory accounts will
be delivered to the Registrar following the Company's forthcoming Annual General Meeting.
2 Revenue segment analysis
The primary segment reporting format is determined to be geographic
segments as the Group's risks and rates of return are affected
predominantly by the geographical location of operations.
There is considered to be no secondary segment as, by business activity,
revenue arises wholly in the Group's principal activity, the retail of
upholstery furniture.
Geographical analysis of revenue is by origin and is not significantly
different from revenue by destination.
There were no discontinued operations during the period under review.
There has been no inter-segmental revenue, and all sales arise from
external sources.
53 weeks trading to 3.8.08 52 weeks trading to 29.7.07
UK ROI Total UK ROI Total
�000 �000 �000 �000 �000 �000
Segment revenue 213,153 18,840 231,993 216,814 23,166 239,980
3 Exceptional items 53 weeks trading to 3.8.08
52 weeks trading to
29.7.07
Derivative Gain Onerous Lease Re-structure Allergy Claim
Impairment Total Total
�000 �000 �000 �000
�000 �000 �000
Sales : - - - 141
- 141 -
Cost of sales: (1,622) - - 93
- (1,529) 2,463
Administration - 1,394 1,637 458
614 4,103 -
costs:
(1,622) 1,394 1,637 692
614 2,715 2,463
Items which are both material and non-recurring are presented as exceptional items.
Current Period
The exceptional credit relates to the buy-out in August 2007 of the US dollar foreign exchange extendible ratio collar option whose fair
value was recognised in accordance with IAS39 in July 2007.
Due to the requisite revaluation and draw-down of the contract, the liability at 29 July 2007 of �7,488,000 exceeded the cost of buy-out
of �5,867,000.
The exceptional debit on onerous leases relates to extending the period over which this provision is calculated from 2 years to 6 years
for the two retail properties leased, but not currently
occupied by Land of Leather. The provision has been increased due to the current economic and retail conditions making it difficult to
envisage sub-letting, assigning or re-using the property in
the original two year time scale.
Restructuring costs relate to the professional costs incurred by the Group in obtaining alternative sources of finance in July 2008.
Allergy claim costs are the costs associated with the alleged allergic reaction to some sofas by customers. The exceptional item includes
the cost of refunds to customers, replacement sofas,
product rectification and legal and professional costs.
The impairment of branch tangible fixed assets of �614,443 during the year arose on reducing the carrying value of branch tangible
assets. The impairment represents the shortfall between the net
present value of forecast cash flows generated by the branch and the carrying value of the net tangible assets, and where it is forecast
that the shortfall is permanent.
Prior year
The exceptional item incurred in the prior period relates to the non-cash charge arising from the movement in the mark to market
valuation of the US dollar foreign exchange extendible ratio collar
option contract in accordance with IAS39.
The tax impact in the income statement relating to the exceptional item in the current period and comparative period are tax credits of
�796k, and �739k respectively.
4 Income Tax 53 weeks trading to 52 weeks trading to
3.8.08 29.7.07
�000 �000
The major components of income tax expense for the periods under review are :
Current income tax (1,956) 5,235
Adjustments in respect of current income tax of previous years (11) (337)
Total current income tax (1,967) 4,898
Adjustments in respect of deferred income tax of previous years 94 181
Deferred tax - reversal and origination of temporary differences 2,285 (82)
Adjustment to deferred tax for reduced income tax rate in April - (356)
2008
Tax charge / (credit) in the income statement 412 4,641
5 Share consolidation
On 15 July 2008, the company consolidated each ten ordinary one pence shares into one ordinary 10 pence share. Commentaries in notes 6
and 7 are based on new ordinary ten
pence shares, and comparative figures have been adjusted accordingly.
6 Earnings per
ordinary share
Basic earnings per share figures are calculated by dividing profit after tax for the period by the weighted average number of
ordinary shares in issue during the period less the weighted average number of ordinary shares held by the employee benefit trust,
and the Company's re-purchase of its own shares.
Diluted earnings per share figures are calculated by dividing profit after tax for the period by the weighted average number of
ordinary shares in issue during the period, increased by the dilutive effect of potential ordinary shares from the three share
option schemes, and the savings related share option scheme. Diluted earnings per share calculations exclude shares purchased by
the employee benefit trust and shares bought back by the company.
Options under the executive share option schemes were granted in November 2006 and October 2007, under the long term incentive
plan in November 2007 and under the savings related share option scheme, in May 2007.
The options granted under the share option schemes are not dilutive as the average share price during the year is lower than the
exercise price of the share options in each scheme. The options could be dilutive in the future.
53 weeks trading to 52 weeks trading to
3.8.08 29.7.07
Earnings
Net (loss) / profit attributable to ordinary equity holders of (775) 11389
the parent (�000)
Weighted average number of ordinary shares in issue in the 5,082,521 5,082,521
period
Rights Issue : weighted average number of shares 1,533,583 -
Weighted average number of shares held by the EBT (142,375) (35,783)
Weighted average number of shares re-purchased by the Company in (58,416) -
the period
Weighted average number of shares for calculating basic earnings 6,415,314 5,046,738
per share
Basic earnings per share (pence) (12.08) 225.67
Weighted average number of shares for calculating basic earnings 6,415,314 5,046,738
per share
Effect of dilutive options - 1,867
6,415,314 5,048,605
Diluted earnings per share (pence) (12.08) 225.59
7 Earnings per ordinary share before exceptional items
The Group presents exceptional items on the face of the income statement. This presentation allows shareholders to identify and assess
more easily the trends in trading
financial performance before recognising these unusual items.
Therefore, for comparative purposes, earnings per share is also presented on this basis, calculated on net profit before exceptional
costs but after income tax:
Net profit / (loss) attributable to ordinary equity holders of the parent (�000)
(775) 11,389
Exceptional items after tax (�000)
1,919 1,724
Net profit attributable to ordinary equity holders before exceptional items (�000)
1,144 13,113
Basic earnings per share before exceptional items (pence)
17.83 259.83
Diluted earnings per share before exceptional items (pence)
17.83 259.74
8 Provisions
Two provisions remain at 3 August 2008 which total �2.439m.
A provision of �2.18m has been made for the expected costs of maintaining
empty properties, comprising rent, service charges and rates. The
provision has been calculated for a 6 year period (July 2007: 2 year
period), discounted to present value.
During the year one property was assigned, reducing the number of empty
properties to two.
A provision of �0.26m was created on 3 August 2008 to cover the potential
costs of replacing furniture or the payment of refunds to customers with
alleged sofa allergies.
9 Share capital
The issued share capital of the Company has changed during the year.
During the year, the Company purchased 916,500 of its own one pence
ordinary shares at an average price of 135.9 pence per share. The Company
made these purchases before the consolidation of ordinary one pence shares
into ten pence ordinary shares effected on 15 July 2008.
On 15 July 2008 the Company consolidated 10 one pence ordinary shares into
one new ten pence ordinary share.
On 15 July 2008 qualifying shareholders were given the opportunity to
subscribe for 29,945,226 Open Offer ten pence shares at a price of 50
pence per share. The Company issued 29,945,226 ten pence ordinary shares.
As at 3.8.08 As at 29.7.07
� Number � Number
Balance at start of 508,252 50,825,210 508,252 50,825,210
period
Share buy back by the company in the period (9,165) (916,500) - -
Ordinary shares of 499,087 49,908,710 508,252 50,825,210
one pence
15 July 2008
Consolidation of one pence shares into one new ordinary share of 499,087 4,990,871 - -
ten pence
Share issue - new ordinary shares of ten pence 2,994,523 29,945,226 - -
Balance at period 3,493,610 34,936,097 508,252 50,825,210
end
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FSDEFWSASEES
Land Of Leather (LSE:LAN)
Gráfico Histórico do Ativo
De Mai 2024 até Jun 2024
Land Of Leather (LSE:LAN)
Gráfico Histórico do Ativo
De Jun 2023 até Jun 2024
