TIDMJLH
RNS Number : 1278R
John Lewis Of Hungerford PLC
07 December 2016
JOHN LEWIS OF HUNGERFORD PLC
FINAL RESULTS
John Lewis of Hungerford plc ("John Lewis of Hungerford" or the
"Company") the specialist kitchen manufacturer and retailer
announces its final results for the year ended 31 August 2016.
Chairman's Statement
This is my first Annual Report as Chairman and as the results
being reported upon cover the period prior to my appointment I will
restrict my comments accordingly.
The last year has seen a number of changes to the composition of
the Board and, on behalf of the Board, I would firstly like to
record our appreciation to its former members for their service to
John Lewis of Hungerford.
Having spent my early weeks within the business speaking to our
key stakeholders, including our highly motivated workforce, I have
been enormously impressed by the commitment and drive shown by our
people. The dedication and professionalism of the team is paramount
and it will only be through these attributes and by working
together to deliver a quality product and service, at the right
price, for our customers that the Company will be successful.
My board colleagues and I will be undertaking a strategic review
of the business over the coming few months. This will be an
all-encompassing piece of work which will allow the team to debate
the key issues within the business, including improving sales
productivity, utilisation of our manufacturing facility, improved
financial and management information and a fresh look at our
marketing proposition. We will report on our conclusions in due
course.
Our new Chief Executive, Kiran Noonan, has moved from being
Sales and Marketing Director, to lead the business forward. As we
work towards further improving our operational efficiencies and
work to deliver shareholder value her undoubted passion and energy
to steer the business through the transformational work required
this coming year will be critical. In this role I will personally
support Kiran in the period ahead.
I am looking forward to working with the Board and will be
steadfast in my approach to deliver shareholder value.
Gary O'Brien
Non-Executive Chairman
Chief Executive's Business Review
Overview
We announce today the fifth consecutive year of sales growth,
which exceeded GBP8 million for the first time to GBP8,180,135.
Despite this it was a year of transition as we took difficult
decisions in recognition that we would fall short in our target of
growing sales to GBP10 million by FY16. In particular the cost
infrastructure put in place to support this objective was
increasingly disproportionate to actual sales performance
necessitating action to realign this.
The loss for the year before taxation and restructuring costs
amounted to GBP215,512. Restructuring costs of GBP200,889 have been
made taking the loss for the year before taxation to
GBP416,401.
In taking the actions we have over this financial year, the
objective of the Board was to position the business to work towards
a return to sustainable profitability without compromising the high
standards of customer service and product quality that our
customers have always enjoyed. I comment more on the cost reduction
programme below but it is my belief that the business has emerged
from this process in a stronger position and I look forward to
leading the business in the next phase of development.
Sales performance
Last year we reported on the challenges in our mature estate
which had experienced a 14% reduction year on year. It is therefore
pleasing that the turnover growth in FY16 includes an improvement
in sales within the majority of these stores, showing a
like-for-like sales growth of c.5% reflecting improved stability in
our design team. Continuing to close the gap between the current
trading and levels achieved in FY14 remains a priority. Harrogate
and Tunbridge Wells were the only two showrooms which did not see
improvements throughout the year, and as announced in August 2016,
the Board took the decision to close these two showrooms. The final
handover of both retail units is now complete with the closure
costs included within the results reported today.
The newer estate, comprising Chiswick, Cobham and Bedrooms
continued to deliver sales growth with like-for-like sales growth
of approximately 2%. The number of kitchens sold in FY16 increased
by 5% to 314 (2015: 298), of which 90% were installed by our
Artisan Installation Service.
The Bedrooms business has maintained its sales level, with
numbers of sales averaging 85 for the last 2 years. The Board
believes there is considerable opportunity to scale this product
area for the Company. Discussions within the strategic review will
include ways in which we can leverage on the success enjoyed from
this new product line to date. The Winchester showroom will be
fitted with Bedrooms in the first half year of the FY17.
The sales performance across the year shows that the first
quarter was marginally behind the previous year, followed by growth
in each of the next three quarters. We made steps in the second
half year towards our objective of achieving greater consistency of
sales across each quarter, which is key to maximising production
and operational efficiencies. An element of seasonality is
inevitable but seeking to smooth production cycles is a focus of
the management team. The demand on the internal service departments
created by this continuous flow of work was met with a drive to
double the efforts of our head office staff to continue to support
the front line team. We have seen significant improvements in the
way our operational functions are led, and the installation service
has continued to deliver efficiencies and profit, in line with the
increase in sales. Customer satisfaction levels, as graded at the
point of sign off have improved to 96% of customers saying they are
happy or very happy with the installation.
2016 2015
--------------- -------- --------
GBP000 GBP000
Turnover 8,180 7,799
Cost of sales (4,114) (3,744)
Gross margin 4,066 4,055
=============== ======== ========
GM% 50% 52%
=============== ======== ========
A lower gross margin for the year at 50.0% (2015: 52.0%) was
attributable to a series of decisions taken to support the business
during this transitional year. In the final quarter, the margin
returned to 54% following decisions taken by the Board from 1st May
2016. Managing our margins is critical and key to our
profitability. Within our purchasing, early planning has resulted
in prices being held for the first half of the new financial year;
the effects of currency fluctuations post Brexit are being
monitored with suppliers of our raw materials. There will be some
impact on the business later in the year and prices may have to be
further increased to offset any impact from Brexit. We continue to
monitor the situation on an ongoing basis.
Products 2016 2015
--------------- -------- --------
GBP000 GBP000
Turnover 7,094 6,769
Cost of sales (3,312) (3,003)
Gross margin 3,782 3,766
=============== ======== ========
GM% 53% 56%
=============== ======== ========
Product Sales include GBP298,000 (2015: GBP242,000) relating to
our bedrooms businesses. As a result of the recent changes in
personnel, the installation of bedrooms into our Winchester
showroom has been delayed into the first half of the new financial
year. Our award winning Pure range continues to grow and the last
two showrooms are having Pure installed in this new financial year.
The range now contributes 20% of total sales.
Installations 2016 2015
--------------- ------- -------
GBP000 GBP000
Turnover 1,086 1,030
Cost of sales (802) (741)
Gross margin 284 289
=============== ======= =======
GM% 26% 28%
=============== ======= =======
Installations sales improved by 5% on the previous year, in line
with the increase in turnover; the bedrooms business is an
installed only product category.
The reduced margin reflects an increase in trade installations
which attract a lower margin. As the trade offering is an area that
the business hopes to continue to build, it will be an area for
discussion in the strategic review.
Cost Reduction Programme
At the time of our interim results we announced our intention to
implement changes to achieve an annualised saving of approximately
GBP300k from the beginning of this financial year. These saving
have been delivered largely through reductions in staffing with a
number of roles reorganised or eliminated.
We remain committed to ensuring our organisational structure is
appropriate for the level of activity undertaken. This contributed
to the decision to close the aforementioned showrooms. We also
believe the decision to amalgamate the roles of Managing Director
and Sales Director, and the transition of the role of Finance
Director to a part time position mean we move into the new
financial year with a leaner operational model more appropriate for
a business of our size and complexity. We expect to appoint a new
Finance Director during the current year and until then the role of
head of finance is being undertaken by an experienced external
consultant. We are entirely committed to ensuring that the new
organisational structure does not have any adverse impact on our
ability to supply a quality product at a competitive price.
In a year where we have seen many changes, we are focused on
creating the right promotional tools to level out some of our
seasonal peaks and allow us to fully maximise the utilisation of
our manufacturing facility. This will further improve upon our
operational efficiencies and reduce additional costs incurred
during peak times. With customer satisfaction level high, we are
confident in our ability to increase the throughput without
compromising on product quality or the final installation standard.
The customer satisfaction baseline must be sustained and improved
upon. We are working hard to capitalise on the recommendations
arising from good customer service.
Store portfolio
The sales performance of our recent store opening supports our
belief that we have a proven new store opening model. We are
confident that given the right location, we have an excellent track
record in creating fresh interest in the JLH brand, in new
geographical territories. However, it would not be appropriate to
commit to further store openings ahead of the outcome of the
strategic review.
The refit of our showroom estate continued with the Pure range
rolled out further this last year in Winchester, Cambridge, Muswell
Hill and Blackheath. Each showroom has seen immediate growth in
sales in this new contemporary category, reflecting the increasing
demand for a more modern alternative from customers who are aligned
to the values of the brand.
The product mix over the last twelve months has continued to see
Pure develop as a substantial part of the range - with the
contribution now at 20%. We continue to see a return to simpler
designs with our Lay-On offering maintaining its average
contribution at c.40% for the last two years.
Customer experience
The decision to close Tunbridge Wells and Harrogate served as a
timely reminder that the location of showrooms is a critical
component in new showroom openings. Without regular footfall, the
showroom relies entirely on the brand marketing and online
presence. As part of the strategic review, the Board will be
looking closely at our brand perception in the marketplace.
Several showrooms continue to see a decline in footfall with
High Street retailers generally seeing a switch to more online
retailing. The investment in a new website in the second half of
the year has delivered an increase in quality business prospects,
which have already delivered additional income. The website is
delivering an increase in appointments, returning the business to
become a Destination Brand once again. The Board are keen to build
on this resurgence and capitalise on this development. In the first
6 months of being live, the new website which was designed and live
from 1 June 2016, has delivered 10% more quality leads. The
increase in social media has seen the business develop its presence
online, including key lifestyle sites and e-marketing. The data
generated from these campaigns will ultimately lead to the
personalisation of our marketing messages, to further improve the
customer experience online.
The improved performance of the mature estate has been primarily
achieved by the improved conversion of prospective customers, with
the sales team focused on ensuring the customer journey is
paramount in their engagement with new business relationships. The
tracking of leads from first enquiry to conversion is now embedded
within the business and is demonstrating opportunities won or lost,
with information that will help inform our strategy going forward
and areas for staff training and development.
Instore experiences have been enhanced by a return in the new
financial year to more ambient environments focused on brand values
which assist in this highly emotive purchasing environment.
Examples of the new seasonal campaigns have re-invigorated the
showrooms and created the opportunity to invite customers to engage
in a warm and relaxed environment.
Our People
We are a small company and therefore unanticipated changes
within our client facing team can have disproportionate impact on
our performance. In previous years, we have seen the impact on the
business, when key members have left and so we are taking steps to
ensure all areas of the business feel supported and valued by the
company.
One new initiative that has ensured that all areas of the
business have a voice is a new regular operational team meeting. A
mix of sales, factory, installation and finance representation has
already contributed to some immediate quick wins such as
improvements in technological support to try and eliminate errors
from the design and manufacturing process, which historically have
had a c.3% impact on gross margin. The flat structure has created
an opportunity for more direct dialogue within the business and we
intend to build on the momentum that has begun following the
changes to create a cohesive and productive work environment.
Current Trading and outlook
On 8 November 2016, we reported the current financial year
despatched sales and forward orders (which we consider to be the
best measure of current trading) for Q1 stood at GBP1.8million
(2015: GBP1.9million). The forward order book remains comparable
with last year at GBP1.3 million (2015: GBP1.3 million).
After the first 12 weeks of the FY17, our current sales and
order book stood at GBP2.4million (2015: GBP2.4million) in line
with the previous year. The forward order book remains comparable
at GBP1.4 million (2015: 1.4 million). With two less showrooms
operating, we are pleased with this performance as we head into our
winter preview.
As a specialist retailer, we rely on the skill, commitment,
drive and enthusiasm of our people, and I would like to thank them
all for their professionalism and dedication during this
transitional year.
Kiran Noonan
Chief Executive Officer
Enquiries:
Gary O'Brien
Non Executive John Lewis of Hungerford
Chairman plc 01235 774300
Kiran Noonan
Chief Executive
Officer
Smith & Williamson Corporate 0117 376
Martyn Fraser Finance Limited 2213
0207 131
Katy Birkin 4000
Income Statement for the
year ended 31 August 2016
2016 2015
GBP GBP
Revenue 8,180,135 7,798,821
Cost of
sales (4,113,599) (3,744,065)
------------ ------------
Gross
profit 4,066,536 4,054,756
Selling and distribution
costs (477,955) (482,273)
Administrative
expenses
Share based
payments - 43,139
Other (3,770,761) (3,717,690)
Other non
recurring
items: - restructuring
costs (200,889) -
------------ ------------
Total (3,971,650) (3,674,551)
Loss from
operations (383,069) (102,068)
Finance
income 361 2,199
Finance
expenses (33,693) (53,958)
------------ ------------
Loss before
tax (416,401) (153,827)
Tax credit 15,997 15,276
------------ ------------
Loss for
the year (400,404) (138,551)
============ ============
Earnings
per share
Basic (0.21)p (0.07)p
Fully
diluted (0.21)p (0.07)p
Balance Sheet as at
31 August 2016
2016 2015
GBP GBP
Non-current assets
Intangible assets 75,300 92,087
Property, plant and
equipment 2,589,316 2,784,262
Trade and other receivables 57,075 57,075
------------ ------------
2,721,691 2,933,424
Current assets
Inventories 212,414 190,209
Trade and other receivables 361,766 306,824
Cash and cash equivalents 1,107,407 1,206,171
------------ ------------
1,681,587 1,703,204
Total assets 4,403,278 4,636,628
------------ ------------
Current liabilities
Trade and other payables (1,967,737) (1,823,312)
Provisions (122,977) -
Borrowings (91,654) (83,252)
------------ ------------
(2,182,368) (1,906,564)
Non-current liabilities
Borrowings (693,012) (785,765)
Deferred tax liabilities - (15,997)
------------ ------------
(693,012) (801,762)
Total liabilities (2,875,380) (2,708,326)
------------ ------------
Net assets 1,527,898 1,928,302
============ ============
Equity
Share Capital 186,745 186,745
Share Premium 1,188,021 1,188,021
Other Reserves 1,421 1,421
Retained Earnings 151,711 552,115
------------ ------------
Total equity 1,527,898 1,928,302
============ ============
Statement of Changes in Equity for the
year ended 31 August 2016
Share Share Other Retained
Capital Premium Reserves Earnings Total
GBP GBP GBP GBP GBP
----------------- -------- ---------- --------- ---------- ----------
At 01 September
2014 186,745 1,188,021 1,421 733,805 2,109,992
Loss for
the year - - - (138,551) (138,551)
Share based
payments - - - (43,139) (43,139)
-------------------- -------- ---------- --------- ---------- ----------
At 31
August
2015 186,745 1,188,021 1,421 552,115 1,928,302
Loss for
the year - - - (400,404) (400,404)
Share based
payments - - - - -
At 31
August
2016 186,745 1,188,021 1,421 151,711 1,527,898
------------------- -------- ---------- --------- ---------- ----------
The total comprehensive income for the
year is (GBP400,404) (2015: (GBP138,551)).
Statement of Cash Flows for the year
ended 31 August 2016
2016 2015
GBP GBP
Cash flows from operating activities
(Loss) / profit from operations (383,069) (102,068)
Amortisation of intangible assets 16,787 16,787
Depreciation and impairment
of property, plant and equipment 324,666 280,315
Share based payments - (43,139)
Loss on disposal of property,
plant and equipment 2,134 29,528
(Increase)/decrease in Inventories (22,205) (7,098)
Increase in receivables (54,942) (12,672)
(Decrease)/Increase in payables 144,424 (41,325)
Increase in provisions 122,977 -
---------- ----------
Cash generated from operations 150,772 120,328
Net taxation paid - -
Net cash from operating activities 150,772 120,328
---------- ----------
Cash flows from investing activities
Purchase of intangible assets - -
Purchase of property, plant
and equipment (212,122) (357,161)
Net proceeds from sale of property,
plant and equipment 80,268 49,044
Interest received 361 2,199
Net cash used in investing activities (131,493) (305,918)
---------- ----------
Cash flows from financing activities
Interest
paid (33,693) (53,958)
Increase in
borrowings - -
Repayment
of borrowings (84,350) (43,995)
Net cash used in financing activities (118,043) (97,953)
---------- ----------
Net increase/(decrease) in cash
and cash equivalents (98,764) (283,543)
---------- ----------
Net cash and cash equivalents
at the start of the year 1,206,171 1,489,714
Net cash and cash equivalents
at the end of the year 1,107,407 1,206,171
========== ==========
Net cash and cash equivalents
comprise:
Cash at bank and in hand 1,107,407 1,206,171
Bank overdrafts - -
1,107,407 1,206,171
========== ==========
Notes
1. Statutory Accounts
The financial information does not constitute statutory accounts
as defined in section 435 of the Companies Act 2006, but has been
extracted from the statutory accounts for the year ended 31 August
2016 on which an unqualified audit report has been issued and which
will be delivered to the Registrar following their adoption at the
Annual General Meeting.
The statutory accounts for the financial year ended 31 August
2015 have been delivered to the Registrar of Companies with an
unqualified audit report.
2. Basis of preparation
The Company's financial statements are prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European
Union and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS.
3. Going concern
The Directors, after reviewing the Company's operating budgets,
investments plans and financing arrangements, consider that the
Company has, at the date of preparing its statutory accounts,
sufficient financing available for the estimated requirements for
the foreseeable future. Accordingly, the Directors are satisfied
that it is appropriate to adopt the going concern basis in
preparing the financial information.
4. Non-recurring items - restructuring costs
During the year, following a review of the Company's trading
estate, the decision was taken to close two poorly performing
stores. Additionally, the Board undertook a comprehensive review of
the organisational structure of the Company's operations with a
view to substantially reducing costs and improving future
productivity. This review resulted in a number of positions being
made redundant or roles being combined.
The costs of the store closures, plus the costs of the other
restructuring measures have been charged to the Income Statement in
the current year and comprise the following items.
2016 2015
GBP GBP
Staff restructuring
costs 140,238 -
Store clearance
expenses 60,651 -
200,889 -
=========== ======
Of the above expenses, the following
have been included as a year-end provision:
2016 2015
GBP GBP
Staff restructuring
costs 100,200 -
Store clearance
expenses 22,777 -
122,977 -
=========== ======
5. Earnings/(loss) per share
2016 2015
Earnings/(loss) per ordinary
share is calculated as
follows:
Basic
Profit/(loss) attributable
to ordinary shareholders
(GBP) (400,404) (138,551)
Weighted average
number of ordinary
shares
in issue 186,745,519 186,745,519
Earnings/(loss)
per ordinary share (0.21)p (0.07)p
------------- ------------
Fully
diluted
Profit/(loss) attributable
to ordinary shareholders
(GBP) (400,404) (138,551)
Weighted average
number of ordinary
shares in issue
and under option 186,745,519 186,745,519
Earnings/(loss)
per ordinary share (0.21)p (0.07)p
============= ============
6. Dividends
The Directors do not recommend payment of a dividend.
7. Posting of Accounts
Copies of the statutory accounts for the financial year ended 31
August 2016 will be posted shortly to shareholders with the notice
of the Annual General Meeting. An electronic copy will be available
on the Company's web-site www.john-lewis.co.uk.
8. Annual General Meeting
The next Annual General Meeting of the Company will take place
at John Lewis of Hungerford, Grove Technology Park, Downsview Road,
Wantage, Oxon OX12 9FA on 31 January 2017 at 2.00 pm.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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