RNS Number:1336T
Hartstone Group PLC
11 December 2003
11 December 2003
(for immediate release)
THE HARTSTONE GROUP PLC
Announcement of Unaudited Preliminary Results
for the six months ended 30 September 2003
* Operating profit before non-recurring and central costs, #0.1 million
(2002: loss of #1.8 million)
* Non- recurring costs of #2.1 million
* Loss before tax of #1.8 million (2002: loss of #2.2 million
* Footwear Licensing agreement with Bennett Footwear Group signed in
September
* Trading in shares transferred to AIM
Commenting on the announcement, Hartstone's Chairman, Shaun Dowling said:
"The new Footwear Licensing Agreement has reduced working capital and given us a licence
income, but we have forfeited the contribution which the footwear division previously made
to company overheads. Further overhead savings are being made."
PRESS ENQUIRIES
The Hartstone Group PLC Tel: 01494 787700
Shaun Dowling, Chairman
THE HARTSTONE GROUP PLC
Unaudited results
for the six months ended 30 September 2003
GROUP RESULTS
In the half year to 30 September 2003, The Hartstone Group PLC made an operating
profit of #0.1 million, (2002: loss of #1.8 million) before non-recurring costs
of #2.1million and central costs of #0.2 million. After net interest payable of
#0.3 million and other finance income of #0.6 million, there was a loss before
tax of #1.8 million (2002: loss of #2.2 million).
The non-recurring costs principally relate to the cost incurred in entering into
a new licensing agreement with Bennett Footwear Group LLC and also to the
closure of full price stores. The other income of #585,000 arose from winding
up a dormant subsidiary pension fund and the taxation charge of #267,000 mainly
relates to this income. There was a cash inflow of #3.7 million as stocks were
reduced in the USA. Debtors increased by #2.7 million, principally due to the
sale of stocks to Bennett Footwear by means of stage payments.
ETIENNE AIGNER
Etienne Aigner, the principal trading company contributing to group results, had
another dismal trading period, as the whole US retail clothing sector remained
depressed, particularly in the early months, and our major customers, the
department stores, continued to lose business to low price chain stores. Sales
in our wholesale footwear division were 22% down on the previous year and sales
in our retail stores in the outlet malls were down by 13%. However, our smaller
accessory business held up well with a 46% increase in sales, but this was not
enough to prevent total sales in US dollars decreasing by 12%. During the
period, four of our five full price stores were closed and the last store was
closed in October, incurring costs of $0.8 million in the current period.
In July I reported that we had been negotiating for several months with a
purchaser and his partners to divest the Aigner business and these negotiations
were aborted. This was followed immediately by negotiations to license our
wholesale footwear business to Bennett Footwear Group LLC which was successfully
accomplished on 23 September 2003.
DIVIDENDS
The group will not be in a position to pay the preference dividend on 2 January
2004 due to the restriction by the US banks on remittances to the UK.
AIM
The company transferred trading in its ordinary and preference shares from the
Official List of the UK Listing Authority to the Alternative Investment Market
of the London Stock Exchange ("AIM") on 10 September 2003. This is a more
appropriate and, in certain circumstances, a cheaper market in which to operate
for a company of our size.
DIRECTORS
Mr Christopher H B Mills was appointed as a non-executive group director of The
Hartstone Group PLC on 14 October 2003. He is Chief Investment Officer and
indirect shareholder of J O Hambro Capital Management Ltd which has a
non-beneficial interest in 15.6% of the company's ordinary shares and 42% of its
preference shares in issue.
FUTURE PROSPECTS
The new licensing agreement will obviously have an impact on the Aigner
business, and also therefore on The Hartstone Group. The principal change will
be a reduction in working capital and bank borrowing, which has enabled Aigner
to enter into a new bank agreement. Although Aigner has gained the benefit of a
monthly license fee from Bennett Footwear, it has forfeited the contribution
which the footwear division previously made to company overheads. As a result,
the management structure has been streamlined, staff have been reduced and
overhead savings have been made.
SHAUN DOWLING
Chairman
11December 2003
The Hartstone Group PLC
Unaudited group profit and loss account
for the six months ended 30 September 2003
6 months 6 months Year
30/09/03 30/09/02 31/03/03
#000 #000 #000
Turnover 33,124 40,075 75,080
Cost of sales (20,625) (27,147) (51,718)
Gross profit 12,499 12,928 23,362
Net operating expenses (14,614) (14,915) (29,939)
Operating profit / (loss) before non-recurring and central costs 129 (1,834) (5,491)
Non-recurring costs (Note 3) (2,088) - (725)
Central Costs (156) (153) (361)
Operating (loss) (2,115) (1,987) (6,577)
Net interest (payable)/receivable (Note 4) (318) (215) (464)
Other finance income 585 - -
(Loss) on ordinary activities before taxation (1,848) (2,202) (7,041)
Taxation (267) (50) 75
(Loss) after taxation (2,115) (2,252) (6,966)
Dividend on non-equity shares (Note 5) (400) (400) (800)
(Loss) for the period transferred from reserves (2,515) (2,652) (7,766)
(Loss) per ordinary share (Note 6)
Basic and diluted (loss) per ordinary share (1.6)p (1.7)p (4.9)p
Adjusted (loss) per ordinary share (0.3)p (1.7)p (4.4)p
The Hartstone Group PLC
Unaudited consolidated balance sheet
at 30 September 2003
Restated
See note 2
30/09/03 30/09/02 31/03/03
#000 #000 #000
Fixed assets
Intangible assets - 35 -
Tangible fixed assets 3,135 4,225 3,948
3,135 4,260 3,948
Current assets
Stocks 10,742 21,394 18,019
Debtors 11,240 11,238 9,000
Cash at bank and in hand 536 935 1,151
22,518 33,567 28,170
Current liabilities
Creditors: Amounts falling due within 1 year (6,354) (4,023) (16,428)
Net current assets 16,164 29,544 11,742
Total assets less current liabilities 19,299 33,804 15,690
Creditors: Amounts falling due after more than 1 year (7,659) (13,576) (876)
Provisions for liabilities and charges (32) (160) (31)
Net assets excluding pension liabilities 11,608 20,068 14,783
Pension liabilities (1,288) (1,719) (1,804)
Net assets including pension liabilities 10,320 18,349 12,979
Capital and reserves:
Share capital 2,584 2,584 2,584
Capital redemption reserve 329 329 329
Profit and loss account 7,407 15,436 10,066
Shareholders' funds 10,320 18,349 12,979
Shareholders' funds represent:
Equity interests 322 8,351 2,981
Non equity interests 9,998 9,998 9,998
10,320 18,349 12,979
The Hartstone Group PLC
Unaudited consolidated statement of cash flows
for the six months ended 30 September 2003
6 months 6 months Year
30/09/03 30/09/02 31/03/03
#000 #000 #000
Net cash flow from continuing operating activities:
Operating (loss) (2,115) (1,987) (6,577)
Depreciation charges 451 626 1,032
Amortisation and permanent diminution in value 22 14 59
Impairment of fixed assets - - 607
Other non-cash items (7) - 122
Working capital movement - decrease in stocks 6,624 1,499 4,766
- (increase) / decrease in (2,741) 1,302 3,219
debtors
- increase in creditors 1,170 371 775
Net cash inflow from operating activities 3,404 1,825 4,003
Returns on investments and servicing of finance 349 (574) (808)
Taxation (189) (148) 62
Capital expenditure and financial investment 164 (611) (1,208)
Cash inflow before financing 3,728 492 2,049
Financing - (decrease) in debt (4,318) (1,591) (2,813)
(Decrease) in cash in the period (590) (1,099) (764)
Reconciliation of net cash flow to movement in net debt:
6 months 6 months Year
30/09/03 30/09/02 31/03/03
#000
#000 #000
(Decrease) in cash in the period (590) (1,099) (764)
Cash outflow from decrease in debt 4,318 1,591 2,813
Change in net debt resulting from cash flows 3,728 492 2,049
Other non cash items - issue costs to be amortised (6) (6) (14)
Translation difference 424 1,333 1,301
Movement in net debt in the period 4,146 1,819 3,336
Opening net debt (10,418) (13,754) (13,754)
Closing net debt (6,272) (11,935) (10,418)
The Hartstone Group PLC
Unaudited interim results
for the six months ended 30 September 2003
Unaudited statement of total recognised gains and losses Restated
See note 2
6 months 6 months Year
30/09/03 30/09/02 31/03/03
#000 #000 #000
(Loss) on ordinary activities after taxation (2,115) (2,252) (6,966)
Exchange (losses) / gains (578) (2,021) (2,086)
Release of deferred tax on exchange gains / (losses) - 400 362
Gain / (loss) on pension assets 434 (926) (1,079)
Total recognised (losses)/ gains for the period (2,259) (4,799) (9,769)
Prior period adjustment - adoption of FRS 17 (523)
Total recognised (losses)/ gains since the last interim (5,322)
report
Unaudited reconciliation of movements in shareholders' funds Restated
See note 2
6 months 6 months Year
30/09/03 30/09/02 31/03/03
#000 #000 #000
Total recognised (losses) for the period (2,259) (4,799) (9,769)
Dividend on non-equity shares (400) (400) (800)
Net (decrease) in shareholders' funds (2,659) (5,199) (10,569)
Opening shareholders' funds (originally #24.1 million before
deducting prior period adjustment of #0.5 million)
12,979 23,548 23,548
Closing shareholders' funds 10,320 18,349 12,979
The Hartstone Group PLC
Notes
Note 1: Interim Report
This interim report was neither audited nor reviewed by the auditors. The
figures for the year to 31 March 2003 were derived from the statutory accounts
for that year. The statutory accounts for the year ended 31 March 2003 have
been delivered to the Registrar of Companies and received an audit report which
was unqualified and did not contain statements under s237 (2) or (3) of the
Companies Act 1985.
The interim report was approved by the Board on 9 December 2003.
The interim report has been prepared using accounting policies that are
consistent with those adopted in the statutory accounts for the year ended 31
March 2003, except for Retirement Benefits. The last actuarial liability
valuations were carried out as at 31 March 2003 and have not been updated as at
30 September 2003. Therefore, the net pension liabilities shown in the balance
sheet have only been adjusted for the movement in value of the UK and US plan
assets and payments made into each plan.
Going concern
In the statutory accounts for the year ended 31 March 2003 we brought to your
attention that the group's principal US operating subsidiary was in breach of
its banking covenants which were to be renegotiated and that the board was
assessing alternative options to maximise the return to shareholders in the
group including the sale and/or licensing of all or part of the US business.
On 23 September 2003 the US business agreed with its lenders new banking
covenants and a new two year $20 million loan, reducing to $10 million by 31
March 2004. On 23 September 2003 the US business entered into a seven year
licensing agreement with the Bennett Footwear Group LLC to license its branded
footwear business in return for a royalty fee and also entered into additional
supplementary agreements, for varying periods, for both parties to provide
additional related services to each other.
The directors consider that in preparing these interim accounts they have taken
into account all information that could be reasonably expected to be available
including forecasts incorporating the effects of the new trading arrangement and
they consider that it is appropriate to prepare these accounts on a going
concern basis, consistent with the basis of preparation in the statutory
accounts for the year ended 31 March 2003.
Note 2: Restatement of comparatives
The early adoption of FRS 17, Retirement Benefits, in the year ended 31 March
2003 required a change to the accounting treatment of pensions. As a result the
prior period results have been restated accordingly as follows:
Consolidated balance sheet
Creditors due < Pension Profit and loss
1 year Liabilities account
#000
#000 #000
As previously reported at 30 September 2002 (4,293) - 16,885
Adoption of FRS 17 at 30 September 2002 270 (1,719) (1,449)
30 September 2002 restated (4,023) (1,719) 15,436
The Hartstone Group PLC
Notes (continued)
The movement of #1.4 million in the profit and loss account in the period ended
to 30 September 2002, shown above, represented the movement in the pension plan
asset values at that date which have been reflected in the Statement of Total
Recognised Gains and Losses.
Under FRS 17, the difference between the market value of the assets of the
group's UK and US defined benefit pension funds and the present value of the
accrued pension liabilities is shown as a liability on the balance sheet.
Previously, the only balance sheet item recognised was a provision representing
the deficit between the market value of the assets and the present value of the
liabilities of the US pension scheme which was frozen in 1992. The movement on
this deficit has been charged to the profit and loss account in prior years.
Note 3: Non-recurring costs
Non-recurring costs principally comprise the costs associated with entering into
the agreement to license its branded wholesale footwear business amounting to
#1.5 million, transaction costs associated with the aborted sale of the US
business amounting to #0.1 million and costs associated with the closure of the
Full Price division amounting to #0.5 million.
In the year to 31 March 2003 non-recurring costs principally comprised the
impairment of the Full Price division fixed assets and certain other
professional fees.
Note 4: Net interest (payable) / receivable 6 months 30/ 6 months Year
09/03
30/09/02 31/03/03
#000
#000 #000
Net interest charge
- payable on loans and overdrafts (268) (278) (556)
- interest receivable 12 104 142
(256) (174) (414)
Foreign exchange losses (56) (35) (36)
Refinancing costs (6) (6) (14)
(318) (215) (464)
Note 5: Dividend 6 months 30 6 months Year
/09/03
30/09/02 31/03/03
#000
#000 #000
Non Equity Shares - preference dividend 4p per preference 400 400 800
share, 2 July 2003
With cash transfers to the UK restricted by the US banks, the Group will not be in a position to pay the
preference dividend on 2 January 2004, and the dividends will continue to be rolled up for future payment.
The Hartstone Group PLC
Notes (continued)
Note 6: (Loss) per ordinary share
Basic and diluted loss per ordinary share is calculated using a loss of #2.5 million (2002: loss of #2.7
million), after deducting preference dividends, and a weighted average number of ordinary shares in issue of
158,485,711 (2002: 158,484,612).
The cumulative, convertible preference shares are anti-dilutive.
The adjusted loss per ordinary share is calculated using the basic loss of #2.5 million (#2002: loss of #2.7
million), stated above, and adding back non-recurring costs of #2.1 million (2002: #nil) and using the
weighted average number of ordinary shares stated above. This measure shows the loss per share of the
underlying business excluding one-off charges for transaction fees, the costs of entering into the footwear
licensing agreement and the closure of the Full Price division.
Note 7: Analysis of cash and indebtedness 6 months 30 6 months Year
/09/03
30/09/02 31/03/03
#000
#000 #000
Secured US bank loans (6,808) (12,870) (11,569)
Cash and bank balances 536 935 1,151
(6,272) (11,935) (10,418)
Note 8: Taxation
The charge principally arises on the income received from the settlement of the David Dixon Pension Fund,
which is included in other finance income, and US State taxes.
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