TIDMLBE
RNS Number : 3855J
Liberty PLC
30 March 2010
LIBERTY PLC:
FINAL RESULTS FOR 12 MONTHS TO 31 DECEMBER 2009
OPERATING HIGHLIGHTS
_______________________________________________________________________________
___
· 20% revenue uplift to GBP59.6m against GBP49.9m last year.
· Flagship store sales 18% higher at GBP37.3m against GBP31.5m a year
earlier
· Since the February 2009 "Renaissance of Liberty" launch, Liberty has
produced positive EBITDA for the first time in ten years
· Liberty accepted as showcase for established international and new
design talent including Grayson Perry, Alexander McQueen, Ronnie Wood and Stella
McCartney.
· March 2010 - contracts exchanged for the sale and leaseback of the
iconic flagship store for GBP41.5m
"Liberty has demonstrated its ability to buck economic and retail trends by
returning to profitability during one of the worst downturns in recent retail
history. It has created an environment that is increasingly appealing to an ever
widening customer base while at the same time enhancing the brand and the values
that it represents."
Geoffroy de La Bourdonnaye
Chief Executive
Liberty Plc
Contact:
+--------------------------+------------------------------+
| Richard Balfour-Lynn, | Tel: 020 7706 2121 |
| Chairman, Liberty | |
+--------------------------+------------------------------+
| Geoffroy de La | Tel: 020 7734 1234 |
| Bourdonnaye, CEO, | |
| Liberty | |
+--------------------------+------------------------------+
| Paul Harris, Finance | Tel: 020 7734 1234 |
| Director, Liberty | |
+--------------------------+------------------------------+
| Baron Phillips, Baron | Tel: 020 7920 3161 |
| Phillips Associates | |
+--------------------------+------------------------------+
| Nicola Marrin, Seymour | Tel: 020 7107 8018 |
| Pierce | |
+--------------------------+------------------------------+
| | |
+--------------------------+------------------------------+
CHAIRMAN'S STATEMENT
_______________________________________________________________________________
___
This has probably been the most exciting, and successful, year in Liberty's
recent history, despite the challenging economic environment. All our principal
performance indicators rose strongly as the Company is beginning to benefit from
the changes introduced by the current management team and for the first time in
a decade Liberty has recorded a positive EBITDA for a 12 months trading period.
At the heart of this sea change was last February's launch of the Renaissance of
Liberty, which revitalised the Regent Street flagship store and attracted
increasing number of customers as well as strong media attention. The result was
a 18% revenue lift in the store for the year to 31 December 2009 to GBP37.3m
against GBP31.5m for the previous 12-month period.
This excellent performance should be seen against a background of extremely
difficult trading conditions, especially in the retail sector. Importantly the
revenue uplift within the flagship store was a major contributor to the
Company's overall 19% increase in like-for-like revenue over the year to
GBP59.6m against GBP49.9m last time.
Once more Liberty fabrics performed strongly, generating revenue 23% higher at
GBP21.5m compared to GBP17.4m in the previous year, although a major factor in
the uplift in our Japanese fabrics business was currency conversion. While in
Yen terms Japanese revenue increased by 9%, when converted to Sterling the rise
was some 43%.
Importantly for Liberty this stronger overall performance has meant the Company
has delivered positive EBITDA for the year of approximately GBP0.1m against a
negative GBP3.9m for the 2008 period. Pre-tax losses after depreciation and
interest reduced from GBP7.0m last year to GBP4.5m for the 2009 period,
reflecting close cost control. We have also benefited from the recovering
commercial property market as the Tudor Building freehold has been revalued
upwards to GBP30.25m as at 31 December 2009 against GBP28.8m at June 2009,
further underpinning the value of Liberty.
On 15 March 2010 we announced that contracts had been exchanged for the sale of
the freehold of the Tudor Building for GBP41.5m, a considerable uplift over the
31 December 2009 valuation. As part of the proposed freehold sale, Liberty will
lease back the Great Marlborough Street flagship store on a 30 year operating
lease at an initial annual rent of GBP2.1m, with fixed five yearly uplifts.
While our top line performance has been strong, margins across the various
divisions have come under pressure over the course of the year resulting in an
overall fall in gross margin from 47% in the year to December 2008 to 45% for
the year under review.
Over the course of the year we have continued to fine-tune our restructuring of
the business as it constantly evolves to meet the demand of both customers and
changing market conditions. Apart from the impact of the Renaissance of Liberty
on the flagship store itself, we have made key changes to other parts of the
business, particularly the Liberty of London brand.
As shareholders are aware, we took the decision to close the Sloane Street
stand-alone Liberty of London store following an unsolicited approach from a
French retailer which paid us a GBP0.7m premium for our lease. Since the
year-end we have conducted an internal reorganisation of Liberty of London and
slimmed down the operation expanding the brand across a wider product mix. We
are confident that this change will enhance profitability.
Since Autumn we have embarked on a strategic review of the business with the
principal aim of identifying options that would enable us to build upon
Liberty's recent success and to develop and grow its business. We are examining
a number of options in great detail as we seek to develop a strategy that is
best for Liberty, its employees and its shareholders.
On 12 March 2010 we announced that the Company had received approaches that
could lead to an offer being made for the business. We will report back to
shareholders if any of the approaches we have received lead to an offer being
made for the Company.
It has been an exciting year for Liberty. Increasing numbers of new customers
are discovering both the flagship store and our internet-based shop for the
first time. We have re-captured our reputation for offering customers cutting
edge design in a unique retail environment. Our focus for the current year is to
further develop that reputation and to become firmly established as London's
leading iconic retail destination.
We continue to make progress and 2010 has started well. While there are some
signs of a return to economic stability, the uncertainties surrounding the year
ahead make it difficult to forecast performance with certainty. But we do have
an excellent management team that continues to breathe new life into Liberty and
develop the business in a sustainable way. To that end I am cautiously
optimistic about the coming year as we build on the success of the past 12
months.
Richard Balfour-Lynn
Chairman
Liberty Plc
30 March 2010
CHIEF EXECUTIVE'S REVIEW
_______________________________________________________________________________
___
This has been an historic year for our iconic brand. For the first time in a
decade Liberty has produced positive EBITDA against a background of possibly one
of the most difficult economic environments the retail sector has experienced
since the early 1990s.
As shareholders know, much of this success has been driven by the highly
acclaimed Renaissance of Liberty which was launched in February 2009. Looking
back at the launch, which was opened by Slumdog Millionaire actress Freida
Pinto, it is clear that the Renaissance was a watershed for both the flagship
store and the brand itself.
In many ways the Renaissance re-captured the original spirit of Liberty:
quirkiness and cutting edge design, all set in a redesigned store. This not only
brought back many of our former customers but attracted many thousands of new
customers who began to explore the store and brand for the first time.
Very quickly Liberty became the watchword for new and exciting fashion with many
brands being introduced by the store to London for the first time. As well as
showcasing established international designers, during 2009 we did much to
promote young British designers both the little known as well as the well known.
These included Michael Birch, Lost Property, Alexander McQueen, Stella
McCartney, Nudie, Grayson Perry, Barbour and Ronnie Wood.
Once more, Liberty was offering an exciting, eclectic but accessible fashion
unavailable elsewhere in London, right across the fashion palette - from scarves
to jewellery, from dresses to perfume, and bags to sunglasses. Liberty was even
home to Hermès' first ever pop-up shop which was a tremendous success.
The result was an overall 20% uplift in Liberty's like-for-like revenues for
2009 to GBP59.6m against GBP49.9m during the previous year. Sales at the
flagship store also rose strongly with total revenue for 2009 18% higher at
GBP37.3m against GBP31.5m a year earlier.
What has been particularly pleasing is that we have maintained the momentum
established at the time of the Renaissance launch not only through the 2009
Spring/Summer seasons but also through Autumn/Winter and into the first quarter
of 2010.
2009 also saw the introduction of the Liberty Style Service which has attracted
a new group of VIP's to the store. The Style Service offers one-to-one styling
advice to individual customers that helps them to select not only the most
appropriate range of garments but also the most suitable accessories that
complement those choices. It enables the serious customer to access the entire
Liberty range in one room and allows them to experiment in a discreet
environment as well as enhancing their shopping experience.
While it is often fashion and designers that capture the headlines as well as
customers hearts, Liberty has made great progress in other areas too. Our
well-established fabrics business has had another record year as demand for new
designs as well as the back catalogue continues unabated.
Not only have collaborations with designers such as Grayson Perry delivered
great results but our fabrics have been used in some unlikely settings, such as
recycled coffee bags. This eco-bag from Lost Property took the humble coffee
bean bag, lined it with a Liberty print and created another fashion must-have
that flew out of the door at GBP50 a time. We also re-introduced a collection of
souvenir items such as mugs and handkerchiefs, all with Liberty prints. These
instant gifts, which we brought to the store during Summer 2009, have been
extremely successful and we continue to sell them today.
Additionally we have created new, and even more vibrant, prints in a range of
different fabrics that have included silk and wool for the first time. This
division has been supported by an expanded commercial team.
The end result has been another extremely strong contribution from our fabrics
division that saw revenue rise a further 23% to GBP21.5m compared to GBP17.4m in
2008, which in itself was a record performance. As has been noted in the
Chairman's Statement, the Japanese element of our Fabrics division benefited
from a strong Yen in comparison to the Pound as it produced a 43% increase in
revenue in our financial statements.
It is also pleasing to see our Internet division making solid progress over the
year. Clearly the division is benefiting from the increased exposure the Liberty
brand is receiving, both at home and internationally. As we expanded our on-line
store it attracted a growing customer base, which was particularly evident in
the run-up to Christmas as sales of seasonal gifts grew rapidly. We believe this
division has a great future and will be a major component in the business as we
go forward.
As shareholders know we took the strategic decision to close our Knightsbridge
stand-alone Liberty of London store in the Summer of 2009. The decision was
principally taken as we had received an extremely attractive offer for our lease
on the shop in Sloane Street. In turn this gave us the opportunity to
re-structure the division by re-modelling the brand and product offer across the
Liberty range, as well as exploring other opportunities to develop Liberty of
London both at home and internationally.
There is no doubt in our mind that 2009 has been a year of great progress for
the business with all divisions reporting sustainable growth, at a time when
there is great uncertainty in the economy and the political climate. All our
operating divisions delivered EBITDA growth and it is satisfying to be able to
report that our Internet business, which was only launched in July 2008 is
already breaking even at the EBITDA level.
Liberty has demonstrated its ability to buck economic and retail trends by
returning to profitability during one of the worst downturns in recent retail
history. It has created an environment that is increasingly appealing to an ever
widening customer base while at the same time enhancing the brand and the values
that it represents. Once more Liberty has become an exciting, eclectic but
accessible place to shop and therefore we view the future with confidence.
Geoffroy de La Bourdonnaye.
Chief Executive
30 March 2010
KEY FINANCIAL HIGHLIGHTS
_______________________________________________________________________________
___
Liberty Plc is in the process of transforming itself into a dynamic retail
destination, underpinned by a strong and expanding retail brand. The historical
trading and balance sheet performance of Liberty Plc is summarisedbelow:-
+-------------------------------------------+------------+------------+
| | Year ended | Year ended |
+-------------------------------------------+------------+------------+
| | 31 | 31 |
| | December | December |
+-------------------------------------------+------------+------------+
| | 2009 | 2008* |
+-------------------------------------------+------------+------------+
| Financial performance | GBP'000 | GBP'000 |
+-------------------------------------------+------------+------------+
| Revenue | 59,620 | 49,889 |
+-------------------------------------------+------------+------------+
| EBITDA before brand expenditure | 3,004 | 1,822 |
| and reorganisation costs | | |
+-------------------------------------------+------------+------------+
| EBITDA | 108 | (3,868) |
+-------------------------------------------+------------+------------+
| Results from operating activities before | 54 | (535) |
| brand expenditure, reorganisation costs | | |
+-------------------------------------------+------------+------------+
| Brand expenditure | (2,761) | (4,344) |
+-------------------------------------------+------------+------------+
| Reorganisation costs | (135) | (1,346) |
+-------------------------------------------+------------+------------+
| Profit on lease surrender | 85 | - |
+-------------------------------------------+------------+------------+
| Loss before taxation | (4,456) | (6,975) |
+-------------------------------------------+------------+------------+
| | | |
+-------------------------------------------+------------+------------+
| | 31 | 31 |
| | December | December |
+-------------------------------------------+------------+------------+
| | 2009 | 2008 |
+-------------------------------------------+------------+------------+
| Balance sheet composition | GBP'000 | GBP'000 |
+-------------------------------------------+------------+------------+
| Intangible assets - brand and goodwill | 18,382 | 18,382 |
+-------------------------------------------+------------+------------+
| Property, plant and equipment | 31,859 | 31,006 |
+-------------------------------------------+------------+------------+
| Net debt | (23,543) | (19,937) |
+-------------------------------------------+------------+------------+
| Net assets | 24,622 | 29,835 |
+-------------------------------------------+------------+------------+
* Restated as a result of adoption of IFRIC 13: customer loyalty programmes -
see note 1.
Business risks and uncertainties
The Board and the Senior Executive team identify and evaluate risks and
uncertainties in the period covered by the Group Business Plan and design
controls to mitigate these. Responsibility for management of each key risk is
identified and delegated by the Board to specific Executive Directors and Senior
Executives within each of the Group's operating businesses.
This section describes some of the specific risks that could materially affect
the Group's businesses. The risks outlined below should be considered in
connection with any financial and forward-looking information in the financial
statements. The risks below are not the only ones that the Group faces and some
that the Group does not currently believe to be material could later turn out to
be material. These risks could materially affect the Group's business, its
operating profits, earnings, net assets, liquidity and capital resources.
Economic, political, social and regulatory changes adversely affecting the
Group's financial performance
The Group is exposed to the risks of global and regional adverse political,
economic and financial market developments (including recession, inflation and
currency fluctuations), that could lower the Group's revenues and operating
results in the future.
The Group's results could also be adversely affected by events that reduce
domestic or international travel, such as actual or threatened acts of terrorism
or war, epidemics, travel-related accidents or industrial action, increased
transportation and fuel costs and natural disasters.
Financial market volatility adversely affecting the Group's financial
performance
Most of the risks faced by the Group at the date of this report emanate from the
volatility of financial markets, the resultant reduction in supply of credit and
its significant increase in cost. This was accentuated during 2008, arising
from the rapid deterioration in financial markets in the UK, and has continued
to be a management focus during 2009. For Liberty, these risks fall into a
number of categories as set out below, all of which are proactively managed by
the Board.
Liquidity risk affects the Group, in that this could result in it being unable
to meet its financial obligations as they fall due. The Board's approach to
managing liquidity is to ensure, as far as possible, that the Group has
sufficient liquidity to meet its liabilities, without incurring unacceptable
losses or risking damage to the Group's reputation and business. The Group uses
detailed divisional cash flow reporting to assist the Board in monitoring cash
flow requirements and optimising cash returns on investments across the whole
Group.
The Group's variable rate borrowings are exposed to a risk of change in cash
flows due to changes in interest rates. Investments in short-term receivables
and payables are not exposed to interest rate risk.
Reliance on bank loan and support from the Group's ultimate parent
Note 1 to the consolidated financial statements summarises liquidity risks
associated with the financing arrangements of the Group.
Technology and systems disruption adversely affecting the Group's efficiency
To varying degrees, the Group is reliant upon information technologies and
systems for the running of its businesses, particularly those which are highly
integrated with business processes. Any disruption to those technologies or
systems could adversely affect the efficiency of the business.
Loss of key management personnel
The Group is reliant on its team of executives. The future success of the Group
depends on the ability of its existing management team, the identification and
appointment of suitable additional executives when required, and on the Group's
ability to motivate and retain staff with the requisite experience.
Changes in fashion trends
Liberty is dependent upon its ability to interpret and offer fashion products
that consumers wish to purchase. The Liberty printed fabric business is
susceptible to industry change. Failure to be successful in this area of
activity, particularly noting the long lead times before product is available
for sale in the Store, would cause an adverse impact on Liberty's revenues and
profitability.
Reliance on reputation of Liberty of London brand
If an event occurred that materially damaged the reputation of any of Liberty's
core brands or there was a failure to sustain the appeal of Liberty's brands to
its customers, this could have an adverse impact on Liberty's revenues and
resultant shareholder value.
In addition, the value of Liberty's brands is influenced by a number of external
factors including consumer preference and perceptions. Liberty is focused on
service delivery to ensure that the product provided matches customer
preferences. Strict controls are in place to help ensure adherence to all
legislative aspects affecting the business and experienced executives manage
these important areas of Liberty.
Potential uninsured product liability claims
Many manufacturers and retailers are potentially vulnerable to product liability
claims. Liberty conducts regular reviews with its external insurance agent to
assess potential insurance risk and to ensure that adequate product and public
liability insurance is in place. Liberty could also face liability and/or
reputational damage relating to counterfeit products. Accordingly, Liberty
pursues all copyright and trademark infringement to the extent necessary to
protect its intellectual property rights that would be materially affected.
Pension scheme shortfalls
The Liberty Retail Plc Pension Scheme, which is a defined benefit pension
scheme, is currently showing a deficit of GBP2.8m. The level of deficit of the
scheme has fluctuated significantly over the last 12 months. If the value of the
Scheme assets were to decline materially relative to its liabilities, the
pension scheme would be likely to show an increased deficit and Liberty might be
required to make additional contributions to cover this shortfall. This would
have an adverse impact on cash flow available to the Group, with resultant
adverse effects on the cash flow and net worth of the Group.
Management and Pension Scheme Trustees meet regularly and have made major
changes to the investment strategy of the Scheme over recent years, to respond
to changes in the market and to underpin its financial performance. They also
receive advice from external actuaries and investment advisers which assists in
mitigating this risk through the Scheme's diversified investments and risk
minimisation strategy.
Foreign exchange fluctuations
The Group settles a significant proportion of its merchandise purchases in
foreign currency. The Group mitigates to a large extent the effect of any
adverse movement in exchange rates by arranging forward exchange contracts.
Consolidation of the Group's Japanese Fabric business in these Financial
Statements includes the impact of the movement in the Sterling/Yen exchange rate
during the year and at the year end on the results and Balance Sheet of the
foreign operations. No specific hedging instruments are deployed against
dividend receipts in Yen from Liberty Japan as the financial effect is
considered by the directors of Liberty not to be material.
Ownership of Grade II listed building
The Group owns the freehold interest in the Tudor Building on Great Marlborough
Street. The bank facility requires that drawdown on the bank debt does not
exceed 67% of the value of the property. This covenant is tested quarterly. The
existing use value of this property may decline, adversely impacting Shareholder
value. In order to protect this the Board reviews the market value of the
property at least twice a year against external professional valuations and
reviews insurance cover on a regular basis throughout the year and in detail at
the insurance renewal date of May in each year.
The Tudor Building is a Grade II listed building and may require significant
investment to refurbish departments within the store as well as to maintain the
interior and exterior fabric of the building. The board of the operational
business undertakes ongoing assessments of refurbishment expenditure with
internal project managers and external quantity surveyors in order to ensure,
where reasonably possible, that cost is minimised and value protected.
Currently the business is heavily reliant on its principal retail trading
location in the heart of London's West End. The development of a wholesale
distribution network for Liberty product as well as the new transactional
website is expected to help reduce the Company's reliance on the sales activity
of the Tudor Building.
Changes in tax legislation materially changing the tax paid by the Group
The Group is exposed to financial risks from increases in tax rates and changes
in the basis of taxation, including corporation tax and VAT. The engagement of
experienced executives within the Group and by its parent undertaking to handle
these matters enhances the protection to the Group in this area of its
activities. The Group and its parent undertaking also maintain a regular
monitoring of legislative proposals and undertakes detailed analysis and review
with external (non-audit related) advisers to evaluate and, if possible,
mitigate the impact of the changes.
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2009
_______________________________________________________________________________
__________
+------------------------------------+-------+--------------+-----------+
| | | Year ended | Year |
| | | | ended |
+------------------------------------+-------+--------------+-----------+
| | | 31 December | 31 |
| | | | December |
+------------------------------------+-------+--------------+-----------+
| | | 2009 | 2008 * |
+------------------------------------+-------+--------------+-----------+
| |Notes | GBP'000 | GBP'000 |
+------------------------------------+-------+--------------+-----------+
| Revenue | 2 | 59,620 | 49,889 |
+------------------------------------+-------+--------------+-----------+
| Cost of sales | | (33,650) | (27,561) |
+------------------------------------+-------+--------------+-----------+
| Gross profit | | 25,970 | 22,328 |
+------------------------------------+-------+--------------+-----------+
| Selling and distribution costs | | (25,138) | (24,310) |
+------------------------------------+-------+--------------+-----------+
| Administrative expenses | | (4,828) | (4,934) |
+------------------------------------+-------+--------------+-----------+
| Other operating income | | 1,154 | 691 |
+------------------------------------+-------+--------------+-----------+
| Results from operating activities | | (2,842) | (6,225) |
+------------------------------------+-------+--------------+-----------+
| Gain on lease surrender | 7 | 85 | - |
+------------------------------------+-------+--------------+-----------+
| Finance income | | 853 | 1,439 |
+------------------------------------+-------+--------------+-----------+
| Finance expenses | | (2,552) | (2,189) |
+------------------------------------+-------+--------------+-----------+
| Loss before taxation | | (4,456) | (6,975) |
+------------------------------------+-------+--------------+-----------+
| Taxation | 4 | (690) | (395) |
+------------------------------------+-------+--------------+-----------+
| Loss for the year | | (5,146) | (7,370) |
+------------------------------------+-------+--------------+-----------+
| Attributable to: | | | |
+------------------------------------+-------+--------------+-----------+
| Equity shareholders of the Company | | (5,200) | (7,424) |
+------------------------------------+-------+--------------+-----------+
| Minority interests | | 54 | 54 |
+------------------------------------+-------+--------------+-----------+
| Loss for the year | | (5,146) | (7,370) |
+------------------------------------+-------+--------------+-----------+
| Loss per share (basic and diluted) | 5 | (23.0p) | (32.8p) |
+------------------------------------+-------+--------------+-----------+
All results relate to continuing operations. The notes form part of these
financial statements.
* Restated as a result of adoption of IFRIC 13: customer loyalty programmes -
see note 1.
CONSOLIDATED BALANCE SHEET
at 31 December 2009
_______________________________________________________________________________
___
+----------------------------------+-------+----------------+-----------+
| | | 31 December | 31 |
| | | | December |
+----------------------------------+-------+----------------+-----------+
| | | 2009 | 2008 |
+----------------------------------+-------+----------------+-----------+
| |Notes | GBP'000 | GBP'000 |
+----------------------------------+-------+----------------+-----------+
| Non-current assets | | | |
+----------------------------------+-------+----------------+-----------+
| Intangible assets and goodwill | 6 | 18,382 | 18,382 |
+----------------------------------+-------+----------------+-----------+
| Property, plant and equipment | 7 | 31,859 | 31,006 |
+----------------------------------+-------+----------------+-----------+
| | | 50,241 | 49,388 |
+----------------------------------+-------+----------------+-----------+
| Current assets | | | |
+----------------------------------+-------+----------------+-----------+
| Inventories | | 12,017 | 9,190 |
+----------------------------------+-------+----------------+-----------+
| Trade and other receivables | 8 | 9,507 | 10,108 |
+----------------------------------+-------+----------------+-----------+
| Cash and cash equivalents | 9 | 1,943 | 1,903 |
+----------------------------------+-------+----------------+-----------+
| Derivative financial instruments | 12 | - | 341 |
+----------------------------------+-------+----------------+-----------+
| | | 23,467 | 21,542 |
+----------------------------------+-------+----------------+-----------+
| Total assets | | 73,708 | 70,930 |
+----------------------------------+-------+----------------+-----------+
| Current liabilities | | | |
+----------------------------------+-------+----------------+-----------+
| Derivative financial instruments | 12 | (1) | - |
+----------------------------------+-------+----------------+-----------+
| Trade and other payables | 11 | (31,871) | (23,689) |
+----------------------------------+-------+----------------+-----------+
| Tax payable | | (393) | (157) |
+----------------------------------+-------+----------------+-----------+
| | | (32,265) | (23,846) |
+----------------------------------+-------+----------------+-----------+
| Non-current liabilities | | | |
+----------------------------------+-------+----------------+-----------+
| Loans and borrowings | 10 | (12,542) | (14,633) |
+----------------------------------+-------+----------------+-----------+
| Employee benefits | | (2,814) | (2,066) |
+----------------------------------+-------+----------------+-----------+
| Provisions | | (1,465) | (550) |
+----------------------------------+-------+----------------+-----------+
| | | (16,821) | (17,249) |
+----------------------------------+-------+----------------+-----------+
| Total liabilities | | (49,086) | (41,095) |
+----------------------------------+-------+----------------+-----------+
| Net assets | | 24,622 | 29,835 |
+----------------------------------+-------+----------------+-----------+
| Equity | | | |
+----------------------------------+-------+----------------+-----------+
| Share capital | | 6,036 | 6,036 |
+----------------------------------+-------+----------------+-----------+
| Other reserves | | 69,221 | 68,271 |
+----------------------------------+-------+----------------+-----------+
| Retained earnings | | (51,459) | (45,242) |
+----------------------------------+-------+----------------+-----------+
| Total equity attributable to | | 23,798 | 29,065 |
| shareholders of the Company | | | |
+----------------------------------+-------+----------------+-----------+
| Minority interests | | 824 | 770 |
+----------------------------------+-------+----------------+-----------+
| Total equity | | 24,622 | 29,835 |
+----------------------------------+-------+----------------+-----------+
The notes form part of these financial statements. Approved by the Board of
Directors on 30 March 2010 and signed on its behalf by:
+--------------------------------+-------------------------------------+
| Richard Balfour-Lynn | |
| | Geoffroy de La Bourdonnaye |
+--------------------------------+-------------------------------------+
| Chairman | Chief Executive |
+--------------------------------+-------------------------------------+
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2009
_______________________________________________________________________________
__________________________________
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | Total | | |
| | | | | | | equity | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | Share | Merger | Revaluation | Translation | Retained | Attributable | Minority | Total |
| | | | | | | to | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | capital | reserve | reserve | reserve | earnings | Shareholders | interest | equity |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Balance at 1 January | 6,036 | 61,503[2] | 6,768[2] | 1,113[1] | (46,355)[1] | 29,065 | 770 | 29,835 |
| 2009 | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Foreign exchange | - | - | - | (251) | - | (251) | - | (251) |
| translation differences | | | | | | | | |
| for foreign operations | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Revaluation of property, | - | - | 950 | - | - | 950 | - | 950 |
| plant and equipment | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Defined benefit pension | - | - | - | - | (966) | (966) | - | (966) |
| scheme actuarial gains, | | | | | | | | |
| net of tax | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Loss for the year | - | - | - | - | (5,200) | (5,200) | 54 | (5,146) |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Share based payments | - | - | - | - | 200 | 200 | - | 200 |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Balance at 31 December | 6,036 | 61,503[2] | 7,718[2] | 862[1] | (52,321)[1] | 23,798 | 824 | 24,622 |
| 2009 | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
[1] Disclosed as 'Retained earnings' in consolidated balance sheet.
[2]Disclosed as 'Other Reserves' at 31 December 2009 totalling GBP69,221,000 in
consolidated balance sheet.
Translation reserve: The translation reserve represents the movement on the
translation of assets and liabilities held or recorded in foreign currencies
other than Sterling at the balance sheet date. Exchange differences arising in
the ordinary course of trading are included in the Income Statement.
Merger Reserve: This arose when the Company acquired its subsidiaries in 2000 at
a premium to the nominal value of the shares issued on acquisition.
Revaluation Reserve: Freehold property is included in the Consolidated Balance
Sheet at its market value at the Balance Sheet date, on the basis of an annual
external valuation. Surpluses or deficits arising on valuation are transferred
to the revaluation reserve to the extent that a credit balance exists in the
valuation reserve in respect of the property concerned.
Minority Interests: This represents the 9 ½% preference shares in the Company's
wholly owned subsidiary Liberty Retail Plc.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2008
_______________________________________________________________________________
_________________________________
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | Total | | |
| | | | | | | equity | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | Share | Merger | Revaluation | Translation | Retained | Attributable | Minority | Total |
| | | | | | | to | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | capital | reserve | reserve | reserve | earnings | Shareholders | interest | equity |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Balance at 1 January | 6,036 | 61,503[2] | 10,288[2] | 43[1] | (36,912)[1] | 40,958 | 578 | 41,536 |
| 2008 | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Foreign exchange | - | - | - | 1,070 | - | 1,070 | - | 1,070 |
| translation differences | | | | | | | | |
| for foreign operations | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Revaluation of property, | - | - | (3,520) | - | - | (3,520) | - | (3,520) |
| plant and equipment | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Defined benefit pension | - | - | - | - | (2,019) | (2,019) | - | (2,019) |
| scheme actuarial gains, | | | | | | | | |
| net of tax | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Loss for the year | - | - | - | - | (7,424) | (7,424) | 192 | (7,232) |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
| Balance at 31 December | 6,036 | 61,503[2] | 6,768[2] | 1,113[1] | (46,355)[1] | 29,065 | 770 | 29,835 |
| 2008 | | | | | | | | |
+--------------------------+---------+-----------+-------------+-------------+-------------+--------------+----------+---------+
[1] Disclosed as 'Retained earnings' in consolidated balance sheet.
[2]Disclosed as 'Other Reserves' at 31 December 2008 totalling GBP68,271,000 in
consolidated balance sheet.
Translation reserve: The translation reserve represents the movement on the
translation of assets and liabilities held or recorded in foreign currencies
other than Sterling at the balance sheet date. Exchange differences arising in
the ordinary course of trading are included in the Income Statement.
Merger Reserve: This arose when the Company acquired its subsidiaries in 2000 at
a premium to the nominal value of the shares issued on acquisition.
Revaluation Reserve: Freehold property is included in the Consolidated Balance
Sheet at its market value at the Balance Sheet date, on the basis of an annual
external valuation. Surpluses or deficits arising on valuation are transferred
to the revaluation reserve to the extent that a credit balance exists in the
valuation reserve in respect of the property concerned.
Minority Interests: This represents the 9 ½% preference shares in the Company's
wholly owned subsidiary Liberty Retail Plc.
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2009
+----------------------------------------------+----------+-----------+
| | Year | Year |
| | ended | ended |
+----------------------------------------------+----------+-----------+
| | 31 | 31 |
| | December | December |
+----------------------------------------------+----------+-----------+
| | 2009 | 2008 |
+----------------------------------------------+----------+-----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+----------+-----------+
| Loss for the year | (5,146) | (7,370) |
+----------------------------------------------+----------+-----------+
| Adjustments | | |
+----------------------------------------------+----------+-----------+
| Taxation | 690 | 395 |
+----------------------------------------------+----------+-----------+
| Finance income | (853) | (1,439) |
+----------------------------------------------+----------+-----------+
| Finance expenses | 2,552 | 2,189 |
+----------------------------------------------+----------+-----------+
| Gain on lease surrender | (85) | - |
+----------------------------------------------+----------+-----------+
| Depreciation of property, plant and | 2,278 | 2,357 |
| equipment | | |
+----------------------------------------------+----------+-----------+
| Equity-settled share based payments | 200 | - |
+----------------------------------------------+----------+-----------+
| Cash flows from operations before changes in | (364) | (3,868) |
| working capital | | |
+----------------------------------------------+----------+-----------+
| Change in inventories | (2,827) | (1,595) |
+----------------------------------------------+----------+-----------+
| Change in trade and other receivables | 601 | (3,296) |
+----------------------------------------------+----------+-----------+
| Change in trade and other payables | 2,655 | 1,789 |
+----------------------------------------------+----------+-----------+
| Change in provisions and employee benefits | 555 | - |
+----------------------------------------------+----------+-----------+
| Cash generated from / (used in) operating | 620 | (6,970) |
| activities | | |
+----------------------------------------------+----------+-----------+
| Interest paid | (292) | (877) |
+----------------------------------------------+----------+-----------+
| Taxation paid | (386) | (303) |
+----------------------------------------------+----------+-----------+
| Net cash used in operating activities | (58) | (8,150) |
+----------------------------------------------+----------+-----------+
| Cash flows from investing activities | | |
+----------------------------------------------+----------+-----------+
| Interest received | 2 | - |
+----------------------------------------------+----------+-----------+
| Proceeds from sale of lease | 593 | - |
+----------------------------------------------+----------+-----------+
| Purchase of property, plant and equipment | (2,768) | (2,483) |
+----------------------------------------------+----------+-----------+
| Net cash used in investing activities | (2,173) | (2,483) |
+----------------------------------------------+----------+-----------+
| Cash flows from financing activities | | |
+----------------------------------------------+----------+-----------+
| Proceeds from drawdown of borrowings | (2,091) | 1,633 |
+----------------------------------------------+----------+-----------+
| Proceeds from drawdown from related parties | 4,361 | 6,543 |
+----------------------------------------------+----------+-----------+
| Proceeds from settlement of derivatives | 121 | - |
+----------------------------------------------+----------+-----------+
| Net cash from financing activities | 2,391 | 8,176 |
+----------------------------------------------+----------+-----------+
| Net increase / (decrease) in cash and cash | 160 | (2,457) |
| equivalents | | |
+----------------------------------------------+----------+-----------+
| Opening cash and cash equivalents | 1,903 | 4,296 |
+----------------------------------------------+----------+-----------+
| Currency translation differences | (120) | 64 |
+----------------------------------------------+----------+-----------+
| Closing cash and cash equivalents | 1,943 | 1,903 |
+----------------------------------------------+----------+-----------+
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 31 December 2009
1. ACCOUNTING POLICIES
Reporting Entity
Liberty Plc (the "Company") is a company domiciled in the United Kingdom. The
address of the Company's registered office is 179 Great Portland Street, London
W1W 5LS. The consolidated financial statements of the Company at, and for the
year ended, 31 December 2009 comprise the Company and its subsidiaries (together
referred to as the "Group" and individually as "Group entities"). The Group is
primarily involved in the operation of a retail luxury goods store and the
manufacture of fabric and luxury goods.
Basis of preparation
The Group financial statements for the year ended 31 December 2009 have been
prepared in accordance with International Financial Reporting Standards as
adopted by the EU ("Adopted IFRS"). The Company has elected to prepare its
parent company financial statements in accordance with UK GAAP.
These financial statements incorporate the results of Liberty Plc and its
subsidiary undertakings. The results have been prepared on the basis of the
accounting policies adopted in the financial statements of the Group for the
year ended 31 December 2009, consistently applied in all material respects.
The Group is dependent for its future working capital, and ongoing investment in
Liberty of London and the flagship store, on cash generated from its operations,
cash holdings of GBP1.9m at 31 December 2009, funds provided to it through a
GBP20m revolving credit and ancillary facilities with Bank of Scotland (the
'bank facility') and a GBP16.5m facility provided by MWB Group Holdings Plc
('MWB'), the Company's ultimate parent company.
On 12 March 2010 the Group exchanged contracts for the sale of the freehold
interest in the Tudor Property for GBP41.5m to Sirosa Liberty Ltd (see note 14).
Under the terms of the proposed deal, the Group will take an institutional 30
year lease on the building at an initial annual rent of GBP2.1m. (The sale is
conditional on approval by the shareholders of Liberty's 68% shareholder, MWB
Group Holdings Plc, which is expected to be sought during April 2010.)
Management intend that the proceeds from the sale of the property will be used
to repay the bank facility and the facility provided by MWB as well as fund
future working capital.
The Group reported an operating loss of GBP2.8m for the year ended 31 December
2009. At 31 December 2009, the Group had net assets of GBP24.6m, net current
liabilities of GBP8.8m (which included a loan of GBP12.9m from MWB provided
under a facility expiring in 31 December 2010), and further net debt of GBP10.6m
(which included an amount drawn down under the bank facility of GBP12.5m, the
term of which runs to 31 December 2011). The availability of additional
drawings from MWB up to the facility limit of GBP16.5m is subject to the
financial position of MWB. Having made appropriate enquiries about MWB's
financial position, the Directors are confident that the full MWB facility will
be available to the Group throughout its term.
The nature of the Group's business is such that there can be unpredictable
variations in the timing of cash inflows and performance. This is amplified in
the business risks and uncertainties section in the Report of the Directors.
The Directors recognise that, in the current economic environment, risks may
exist regarding the achievability of forecast sales and margins within different
parts of the Group and the timing of cash flows. The Directors have prepared
projected cash flow information for the period to 31 December 2011 (the
'Projections'). The Projections are based on reasonable assumptions and show
that the Group is capable of operating within the facilities currently available
and meeting the financial covenant tests for the full term covered by the
Projections.
The Group has three covenant tests in relation to its bank facility, namely Loan
to Value Security Cover, Debt Service Cover and Senior Interest Cover, with
Liberty of London brand costs and other one-off costs excluded from the test of
the latter two. Security Cover requires the loan to be no more than 67% of the
Realisation Value of the Tudor Building. At 31 December 2009, the Tudor
Building was valued at GBP30.25m, and GBP12.5m of facilities were utilised.
Accordingly, the Loan to Value Security Cover was only 41% at that date,
demonstrating significant headroom. Sufficient headroom is also forecast over
the period covered by the Projections. Debt Service Cover requires the ratio of
EBITDA to Total Debt Service to be not less than 1.25:1. This covenant was met
for the year ended 31 December 2009 with continuing headroom forecast over the
period covered by the Projections. Senior Interest Cover requires the ratio of
EBIT to Senior Interest to be not less than 1.5:1. This covenant was first
tested at 31 December 2009 and was met with continuing headroom forecast over
the period covered by the projections. Liberty trading results for the first
part of 2010 have been strong, and demonstrate sales levels well ahead of 2008
levels, thus underpinning the Projections. The Directors continue to monitor
adherence to these covenants carefully and to take reasonable steps to ensure
adherence at all times. The bank facility also permits the Group to cash cure
any breach that might occur within 14 days of the relevant test date.
The Directors have tested the impact of variations from the Projections by
assessing adequacy of the Group's funds, and the ability of the Group to operate
within the financial covenants, under a combination of different scenarios
constructed to reflect reasonable possible downside risks to the assumptions
contained within the Projections. In such downside scenarios, the ability to
continue to operate within the facilities available and maintain compliance with
the financial covenants would be dependent on implementing various cost saving
initiatives and mitigating actions referred to below within the timescales
required, should these downside scenarios crystallise. These cost saving
initiatives and mitigating actions, all of which are already formulated, are
under the control of the Board and can be implemented as required.
After making enquiries, and considering the uncertainties as described above,
the Directors have a reasonable expectation that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future. For these reasons, the Directors consider it appropriate to prepare the
financial statements on a going concern basis.
The consolidated financial statements are prepared on the historical cost basis
except for the freehold property and derivative financial instruments which are
measured at fair value.
These consolidated financial statements are presented in UK Sterling, which is
the Company's functional currency. All financial information has been rounded
to the nearest thousand pounds.
Use of estimates and judgements
The preparation of financial statements requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses. Actual
results may differ from these estimates. Estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised and in any future
periods affected.
In particular, information about significant areas of estimation, uncertainty
and critical judgements in applying accounting policies that have the most
significant effect on the amount recognised in the financial statements are
described in the following notes:
· Note 6 - the assumptions used to assess value in use for impairment
testing of the Group's brand.
· Note 7 - the valuation of the Group's property
Basis of consolidation
Where necessary, adjustments are made to the information included in the
financial statements of subsidiaries to bring their accounting policies in line
with those used by the Group and so reflect that information on a consistent
basis with the rest of the Group.
Subsidiaries are entities controlled by the Group. Control exists when the
Group has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
In assessing control, potential voting rights that are currently exercisable or
convertible are taken into account.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases. Dilution gains and losses on increases in minority interests,
where no change of control results, are recognised directly in equity. Where
necessary, accounting policies of subsidiaries are changed on acquisition to
align them with the policies adopted by the Group.
Intra-group balances and transactions and any unrealised income and expenses
arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements.
Goodwill
Goodwill arises on the acquisition of subsidiaries, associates and joint
ventures.
Goodwill represents the excess of the cost of the acquisition over the Group's
interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities of the acquiree. When the excess is negative (negative
goodwill), it is recognised immediately in the income statement.
Goodwill arising on the acquisition of a minority interest in a subsidiary
represents the excess of the cost of the additional investment over the carrying
amount of the net assets acquired at the date of exchange.
Goodwill is measured at cost less impairment losses. In respect of equity
accounted investees, the carrying amount of goodwill is included in the carrying
amount of the investment.
Brands
In accordance with IFRS 3, brands acquired by the Group are initially included
in the financial statements at their fair value. The Directors consider that
the Group's brand has an indefinite useful life due to the durability of its
underlying businesses which has been demonstrated over many years. An annual
assessment of the useful life is performed at the end of each financial year.
Accordingly, the brand has not been amortised but has instead been subject to an
impairment assessment conducted at each financial year end. Where this reveals
a surplus, the value of the brand is retained, where it reveals a deficit, the
brand is written down and the deficit is charged to the income statement.
Subsequent expenditure on the brand is recognised in the income statement when
incurred.
Subsidiary companies
The subsidiary undertakings of the Company are all engaged in retail activities,
wholesale distribution or licensing activities, or act as intermediary holding
companies for such operations.
Property, plant and equipment
Property is land and buildings held for use in the production or supply of goods
or services, or for administrative purposes, and are stated in the balance sheet
at their revalued amounts, being the fair value, determined from market-based
evidence and appraisals undertaken by professional valuers at the balance sheet
date.
Any revaluation increase arising on the revaluation of such land and buildings
is credited to the revaluation reserve within equity, except to the extent that
it reverses a revaluation decrease for the same asset previously recognised as
an expense, in which case the increase is credited to the income statement to
the extent of the decrease previously charged. A decrease in carrying amount
arising on the revaluation of such land and buildings is charged as an expense
in the income statement to the extent that it exceeds the balance, if any, held
in the revaluation reserve relating to previous revaluations of that asset.
The gain or loss on disposal or retirement of property, plant and equipment is
determined by comparing the sale proceeds with the carrying amount of the asset
at the date of disposal or retirement, and is recognised in the income
statement. When revalued assets are sold, the amounts included in the
revaluation reserve relating to those assets are transferred directly to
retained earnings.
Depreciation is charged so as to write off the cost or valuation of property,
plant and equipment, other than land and property under construction and less
residual amounts, using the straight line method, over their following estimated
useful lives:-
+------------------------------------------------+-----------------------+
| Freehold property | 100 years |
+------------------------------------------------+-----------------------+
| Air conditioning and lifts or plant forming | 15 years |
| part of the property | |
+------------------------------------------------+-----------------------+
| Fixtures and equipment | 5 to 10 years |
+------------------------------------------------+-----------------------+
| IT equipment | 3 to 7 years |
+------------------------------------------------+-----------------------+
Freehold land is not depreciated.
Assets held under operating leases are not recognised as assets of the Group.
Rentals payable are recognised in the Income Statement on a straight-line basis
over the term of the lease.
Impairment
The carrying amounts of the Group's non-financial assets other than inventories
are reviewed at each balance sheet date to determine whether there is any
indication of impairment. If any such indication exists, the asset's recoverable
amount is estimated. For intangible assets that have an indefinite useful life,
the recoverable amount is estimated at each balance sheet date.
The recoverable amount of an asset or cash generating unit is the higher of its
value in use and its fair value, less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a
pre- tax discount rate that reflects current market assessments of the time
value of money, and the risks specific to the asset. For the purpose of
impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the "cash
generating unit").
For the purpose of impairment testing the brand, the cash generating unit
comprises all the businesses in the Group, as all these revenues are dependent
on the brand.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit/group of units exceeds its recoverable amount. Impairment
losses are recognised in the income statement. Impairment losses recognised in
respect of cash-generating units are allocated first to reduce the carrying
amount of any intangible asset allocated to the unit and then to reduce the
carrying amount of other assets in the unit on a pro-rata basis.
Impairment losses, on assets other than goodwill, recognised in prior periods
are assessed at each reporting date for any indications that the loss has
decreased or no longer exists. An impairment loss is reversed if there has been
a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset's carrying amount
does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss has been recognised.
Impairment losses in respect of goodwill are not reversed.
Inventories
Inventories are measured at the lower of cost and net realisable value. Cost is
based on the first in, first out principle and comprises direct materials and,
where applicable, direct labour costs and those overheads that have been
incurred in bringing inventories to their existing location and condition. Net
realisable value represents the estimated selling price less all estimated costs
of completion and costs to be incurred in marketing, selling and distribution.
Foreign currency
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the dates of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated at
the foreign exchange rate ruling at that date. Foreign exchange differences
arising on transactions are recognised in the income statement. Non-monetary
assets and liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date of the
transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated at a foreign exchange
rates ruling at the dates the fair value was determined.
The assets and liabilities of foreign operations, including goodwill and fair
value adjustments arising on consolidation, are translated at foreign exchange
rates ruling at the balance sheet date. The income and expenses of foreign
operations are translated at an average rate for the year where this rate
approximates to the foreign exchange rates ruling at the dates of the
transactions.
Exchange differences arising from the translation of foreign operations are
taken directly to the translation reserve.
Financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash
and cash equivalents, loans and borrowings and trade and other payables.
Non-derivative financial instruments are recognised initially at fair value.
Subsequent to initial recognition, non-derivative financial instruments are
measured at amortised cost using the effective interest method, less any
impairment losses.
Cash and cash equivalents comprise cash balances and call deposits. Bank
overdrafts that are repayable on demand and form an integral part of the Group's
cash management are included as a component of cash and cash equivalents for the
purpose only of the statement of cash flows.
The Group's activities expose it primarily to the financial risk of changes in
exchange rates and foreign exchange rates on its trading operations with
overseas suppliers and customers. The Group uses an extendable forward plus
financial instrument to reduce the exposure of the business to foreign currency
risk.
Derivatives are recognised initially at fair value; attributable transaction
costs are recognised in the income statement as incurred. Subsequent to initial
recognition, derivatives are measured at fair value.
Changes in the fair value of derivative financial instruments that are
designated and effective as cash flow hedges are recognised directly in equity
to the extent that the hedge is effective. To the extent the ineffective
changes impair value, they are recognised in the income statement. If the cash
flow hedge of a firm commitment or a forecast transaction results in the
recognition of an asset or a liability, then, at the time the asset or liability
is recognised, the associated gains or losses on the derivative that had
previously been recognised in equity are included in the initial measurement of
the asset or liability. For hedges that do not result in the recognition of an
asset or a liability, amounts deferred in equity are recognised in the income
statement in the same period in which the hedged item affects net income.
Changes in the fair value of derivative financial instruments that do not
qualify for hedge accounting are recognised in the income statement as they
arise.
Ordinary share capital is classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are recognised as
a deduction from equity, net of any tax effects.
Derivatives
The fair value of forward exchange contracts is based on their listed market
price, if available. If a listed price is not available then fair value is
estimated by discounting the difference between the contractual forward price
and the current forward price for the residual maturity of the contract using a
risk free interest rate based on government bonds.
Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, the risks specific to the liability.
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due. Obligations for contributions to defined contribution
pension schemes are recognised as an expense in the Income Statement.
The Group's net obligation in respect of defined benefit pension schemes is
calculated separately for each scheme by estimating the amount of future benefit
that employees have earned in return for their service in the current and prior
periods; that benefit is discounted to determine its present value at the date
of the financial statements. Any unrecognised past service costs and the fair
value of any scheme assets is deducted in calculating the Group's net obligation
to the scheme for the retirement benefits to be provided. The discount rate
used is the yield at the balance sheet date on AA credit rated bonds that have
maturity dates approximating to the term of the Group's obligations under the
scheme, and which are denominated in the same currency in which the benefits are
expected to be paid. The calculation is performed annually by a qualified
actuary using the projected unit credit method. When the calculation results in
a benefit to the Group, the recognised asset is limited to the net total of any
unrecognised past service costs and the present value of any future refunds from
the scheme or reductions in future contributions to the scheme.
When the benefits of a scheme are improved, the portion of the increased benefit
relating to past service by employees is recognised as an expense in the income
statement on a straight-line basis over the average period until the benefits
become vested. To the extent that the benefits vest immediately, the expense is
recognised immediately in the income statement.
Revenue
Revenue is measured at the fair value of consideration received or receivable
and represents amounts receivable for goods and services provided in the normal
course of business, net of staff discounts and the costs of loyalty scheme
rewards and is stated net of value added tax and other sales-related taxes.
Revenue on Flagship and Liberty of London store sales of goods and commission on
concession sales are recognised when goods are sold to the customer. Internet
and Fabric sales are recognised when the goods are delivered to the customer.
Revenue from gift vouchers and gift coins sold by the Group is recognised on
redemption of the gift voucher or gift coin. It is the Group's policy to sell
its products to the end customer with a right of return. Accumulated experience
is used to consider the need for a provision for such returns on an annual
basis.
Based on past experience, it is not possible to make a reliable estimate of the
amount of goods that will be returned and therefore no deferred revenue is
recognised in relation to the right of return offered to customers.
Cost of sales
Cost of sales comprises the cost of goods sold, together with the direct costs
incurred in managing and operating the Group's operating activities.
Share-based payment transactions
The share option programme allows certain employees to acquire shares in the
Group.
The fair value of options granted to employees is recognised as an employee
expense, with a corresponding increase in equity, over the period in which the
employees become unconditionally entitled to the options. The fair value of the
options granted is measured using an option valuation model, taking into account
the terms and conditions upon which the options were granted. The amount
recognised as an expense is adjusted to reflect the actual number of share
options that vest except where forfeiture is due only to share prices not
achieving the threshold for vesting.
Dividends
Dividends that have been approved by shareholders at previous Annual General
Meetings are included within liabilities. Dividends proposed at the balance
sheet date that are subject to approval by shareholders at the annual general
meeting are not included as a liability in the current period's financial
statements. Dividend income is recognised in the income statement on the date
the Group entity's right to receive the income is established.
Finance income and expenses
Finance income comprises interest receivable on funds invested and dividend
income. Interest income is recognised in the income statement as it accrues,
using the effective interest rate method. All interest payable is charged to the
Income Statement.
Finance expenses comprise interest paid or payable that are recognised in the
Income Statement.
Taxation
The income tax expense in the Consolidated Income Statement comprises current
and deferred tax. Income tax expense is recognised in the Consolidated Income
Statement except to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for the following temporary differences: the
initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or
loss, and differences relating to investments in subsidiaries and jointly
controlled entities to the extent that it is probable that they will not reverse
in the foreseeable future. In addition, deferred tax is not recognised for
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted at the reporting date. Deferred tax assets and
liabilities are only offset if there is a legally enforceable right to offset
current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax entities
but they intend to settle current tax liabilities and assets on a net basis, or
their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future
taxable profits will be available against which the temporary difference can be
utilised. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realised.
Additional income taxes which arise from the distribution of dividends are
recognised at the same time as the liability to pay the related dividend is
recognised.
Debt/equity
Under IAS 32, preference shares are classed as equity instruments in the
financial statements of Liberty Retail Plc, and in the consolidated financial
statements of Liberty Plc as:
· the preference shares include no contractual obligation to deliver cash
or another financial asset to another entity; and
· they include no contractual obligation to exchange financial assets or
financial liabilities with another entity under conditions that are potentially
unfavourable to the issuer.
Adoptions of standards and interpretations during the year
Revised IAS 1 Presentation of Financial Statements (2007) introduces the term
"Total Comprehensive Income", which represents changes in equity during a period
other than those changes resulting from transactions with owners in their
capacity as owners. Total Comprehensive Income may be presented in either a
single statement of comprehensive income (effectively combining both the income
statement and all non-owner changes in equity in a single statement), or in an
income statement and a separate statement of comprehensive income. Revised IAS
1, which is mandatory for the Group's 2009 consolidated financial statements, is
expected to have a significant impact on the presentation of consolidated
financial statements.
The Group has applied revised IAS1 Presentation of financial statements, which
became effective on 1 January 2009. This presentation has been applied in this
Financial Report for the year ended 31 December 2009. Comparative information
has been re-presented so that it is also in conformity with the revised
standard. Since the change in accounting policy only impacts presentation
aspects, there is no impact on the previously disclosed pre-tax profit of the
Group.
Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations
clarifies the definition of vesting conditions, introduces the concept of
non-vesting conditions, requires non-vesting conditions to be reflected in
grant-date fair value and provides the accounting treatment for non-vesting
conditions and cancellations. The amendments to IFRS 2 are mandatory for the
Group's 2009 consolidated financial statements, with retrospective application.
The Group has not yet determined the potential effect of the amendment, although
the Directors do not consider it will be material in the context of the
Company's consolidated financial statements as a whole.
IFRS 8 The Group has adopted IFRS 8 Operating Segments with effect from 1
January 2009. This new accounting policy in respect of segment operating
disclosures has not led to a change in the number and/or definition of segments
previously presented, on the basis that the information disclosed is consistent
to that provided to the Board of Liberty Plc, led by the Chief Executive, who is
the Group's chief operating decision maker.
IFRIC 14 and IAS 19 The limit on a defined benefit asset, minimum funding
requirements and their interaction. IFRIC 14 provides additional guidance on
assessing the amount that can be recognised as an asset of a defined benefit
pension surplus and as a consequence the amount of deferred tax on that surplus.
The Group has assessed the impact of IFRIC 14 and IAS 19 at 31 December 2009.
The adoption of IFRIC 14 at 31 December 2009 had no impact on the balance sheet
of the Group at 31 December 2008. Had IFRIC 14 been applied at 1 January 2008,
the net liability on the balance sheet at that date would have been GBP1.5
million.
Revised IAS 23 Borrowing Costs requires that an entity capitalise borrowing
costs directly attributable to the acquisition, construction or production of a
qualifying asset as part of the cost of that asset and removes the option to
expense the related borrowing costs. The revised IAS 23 is mandatory for the
Group's 2009 consolidated financial statements and accords with the policy
already adopted by the Group. In accordance with the transitional provisions,
the Group will apply the revised IAS 23 to qualifying assets for which
capitalisation of borrowing costs commences on or after the effective date.
Therefore there is no impact on prior periods in the Group's 2009 consolidated
financial statements.
IFRIC 13 The Group has applied in its Financial Statements IFRIC 13 which
clarifies the accounting treatment for customer loyalty programmes. This
standard has been applied retrospectively in accordance with IAS8 and
comparatives have been restated accordingly.
As a result of the Group's adoption of IFRIC 13; customer loyalty programmes,
the Directors have reviewed the accounting policy in respect of the treatment of
the Liberty Card reward programme. As a result of this amendment, the Directors
believe that it is more appropriate to deduct these costs from revenue as
opposed to charging them as a marketing expense as was the case in previous
years. The Group therefore adopted a revised accounting policy for such costs in
line with IFRIC 13 and will recognise all costs related to the programme within
revenue.
The effect of this change was to reduce revenue in the year ended 31 December
2008 by GBP270,000, and to reduce selling and distribution costs by the same
amounts. Accordingly, this has no effect on the pre-tax profits as previously
reported by the Group.
New standards and interpretations not yet adopted
A number of new standards, amendments to standards and interpretations have been
issued recently but are not effective for the financial year ended 31 December
2009. Accordingly, they have not been applied in preparing these financial
statements. Their adoption is not expected to have a material affect on the
financial statements. The main standards that may affect future financial
statements of the Group are:-
· IFRS 3 (Revised) 'Business Combinations' (effective from 1 July 2009)
broadens the definition of a business, requires contingent consideration to be
fair valued, transaction costs other than share and debt issue costs to be
expensed as incurred, any pre-existing interest in an acquiree to be measured at
fair value with the gain or loss recognised in profit or loss and minority
interests to be either measured at its fair value or at its proportionate
interest in the identifiable assets and liabilities of the acquiree on a
transaction by transaction basis. The Group has not yet determined the potential
effect of this standard, although the Directors do not consider it will be
material to the consolidated financial statements as a whole.
· IAS 27 'Consolidated and Separate Financial Statements'(effective 1 July
2009) requires accounting for ownership changes in a subsidiary while
maintaining control to be recognised as an equity transaction. If control of a
subsidiary is lost, any interest retained is to be measured at its fair value
and the gain or loss recognised in profit or loss. The Group has not yet
determined the potential effect of this standard, although the Directors do not
consider it will be material to the consolidated financial statements as a
whole.
2. SEGMENT REPORTING
_______________________________________________________________________________
___
Segment information is presented in respect of the Group's businesses and
geographical segments. The primary format is based on the Group's management
and internal reporting structure.
Segment results, assets and liabilities include items directly attributable to a
segment as well as those that can be allocated on a reasonable basis.
Inter-segment pricing is determined on an arm's length basis. Unallocated items
comprise mainly central loans and borrowings and related expenses, corporate
assets (primarily the Company's head office operations) and tax assets and
liabilities.
Segment capital expenditure is the total cost incurred during the year to
acquire property, plant and equipment.
Operating segments
The Group has three reportable segments, as described below, which are the
Group's strategic business units. The strategic business units offer different
products and services, and are managed separately. For each of the strategic
business units, the Group's CEO reviews internal management reports on a monthly
basis. The following summary describes the operations in each of the Group's
reportable segments:
· Retail including Liberty of London retail and Internet; the UK retail
operations at Regent Street and the transactional internet site;
· Wholesale Fabric; the results of the UK and Japanese fabric businesses.
· Liberty of London Wholesale; our branded product that is distributed
globally.
The Retail business purchases stock from both the Wholesale Fabric business and
Liberty of London Wholesale. In addition the Liberty of London Wholesale
business purchases stock from Wholesale Fabric.
Information regarding the results of each reportable segment is included below.
Performance is measured on Revenue, Profit/(Loss) and EBITDA as included in the
internal management reports that are reviewed by the Group's CEO. EBITDA is used
to measure performance as management believes that such information is the most
relevant in evaluating the results of certain segments relative to other
entities that operate within the Retail and Wholesale industry. Inter-segment
pricing is determined on an arm's length basis.
Cash balances and bank loans are allocated to Retail as this division utilises
the cash balances and buildings against which debt is secured.
The primary format of the segmental information in respect of the Group's
business is based on its internalreporting structure. Segment results include
items directly attributable to a segment as well as those that can be allocated
on a reasonable basis. Inter-segment pricing is determined on an arms length
basis.
Revenue from no single customer represents more than 10% of the Group's total
external revenues.
Geographical segments
In presenting information on the basis of geographical segments, segmental
revenue and assets are based on the geographical location of the assets.
The Group operates substantially from the UK although its Wholesale Fabric and
Liberty of London businesses have a global outreach through a sales team and
agents' network. In addition the Wholesale Fabric business operates a fully
owned Japanese subsidiary.
+--------------------+----------+----------+---------+----------+----------+---------+
| | Year ended 31 | Year ended 31 |
| | December 2009 | December 2008 |
+--------------------+-------------------------------+-------------------------------+
| | External | Internal | Total | External | Internal | Total |
+--------------------+----------+----------+---------+----------+----------+---------+
| | 2009 | 2009 | 2009 | 2008 | 2008 | 2008 |
| | | | | * | * | * |
+--------------------+----------+----------+---------+----------+----------+---------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------------+----------+----------+---------+----------+----------+---------+
| Revenue by | | | | | | |
| business division | | | | | | |
+--------------------+----------+----------+---------+----------+----------+---------+
| Retail including | 37,311 | - | 37,311 | 31,497 | - | 31,497 |
| Liberty of London | | | | | | |
| retail and | | | | | | |
| Internet | | | | | | |
+--------------------+----------+----------+---------+----------+----------+---------+
| Wholesale fabric | 21,484 | 953 | 22,437 | 17,426 | 700 | 18,126 |
+--------------------+----------+----------+---------+----------+----------+---------+
| Liberty of London | 825 | 2,663 | 3,488 | 966 | 2,219 | 3,185 |
| wholesale | | | | | | |
+--------------------+----------+----------+---------+----------+----------+---------+
| | 59,620 | 3,616 | 63,236 | 49,889 | 2,919 | 52,808 |
+--------------------+----------+----------+---------+----------+----------+---------+
| Revenue by | | | | | | |
| geographical | | | | | | |
| origin | | | | | | |
+--------------------+----------+----------+---------+----------+----------+---------+
| United Kingdom | 49,555 | 3,616 | 53,171 | 42,832 | 2,919 | 45,751 |
+--------------------+----------+----------+---------+----------+----------+---------+
| Japan | 10,065 | - | 10,065 | 7,057 | - | 7,057 |
+--------------------+----------+----------+---------+----------+----------+---------+
| | 59,620 | 3,616 | 63,236 | 49,889 | 2,919 | 52,808 |
+--------------------+----------+----------+---------+----------+----------+---------+
* Restated as a result of adoption of IFRIC 13: customer loyalty programmes -
see note 1.
+----------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
+----------------------------------------------+----------+----------+
| | 31 | 31 |
| | December | December |
+----------------------------------------------+----------+----------+
| | 2009 | 2008 * |
+----------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+----------+----------+
| Revenue by geographical destination | | |
+----------------------------------------------+----------+----------+
| United Kingdom | 39,441 | 33,342 |
+----------------------------------------------+----------+----------+
| Japan | 10,211 | 7,124 |
+----------------------------------------------+----------+----------+
| Other | 9,968 | 9,423 |
+----------------------------------------------+----------+----------+
| | 59,620 | 49,889 |
+----------------------------------------------+----------+----------+
* Restated as a result of adoption of IFRIC 13: customer loyalty programmes -
see note 1.
+----------------------------------------------+----------+-----------+
| | Year | Year |
| | ended | ended |
+----------------------------------------------+----------+-----------+
| | 31 | 31 |
| | December | December |
+----------------------------------------------+----------+-----------+
| | 2009 | 2008 |
+----------------------------------------------+----------+-----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+----------+-----------+
| (Loss) / profit by business division | | |
+----------------------------------------------+----------+-----------+
| Retail including Liberty of London retail | (4,897) | (7,067) |
| and Internet | | |
+----------------------------------------------+----------+-----------+
| Wholesale fabric | 3,775 | 3,738 |
+----------------------------------------------+----------+-----------+
| Liberty of London wholesale (including brand | (1,478) | (2,552) |
| expenditure) | | |
+----------------------------------------------+----------+-----------+
| Provision for unrealised profit | (242) | (344) |
+----------------------------------------------+----------+-----------+
| Results from operating activities | (2,842) | (6,225) |
+----------------------------------------------+----------+-----------+
| Gain on Lease surrender | 85 | - |
+----------------------------------------------+----------+-----------+
| Net finance expenses | (1,699) | (750) |
+----------------------------------------------+----------+-----------+
| Taxation | (690) | (395) |
+----------------------------------------------+----------+-----------+
| Loss for the year | (5,146) | (7,370) |
+----------------------------------------------+----------+-----------+
| (Loss) / profit for the year by geographical | | |
| origin | | |
+----------------------------------------------+----------+-----------+
| United Kingdom | (4,354) | (7,124) |
+----------------------------------------------+----------+-----------+
| Japan | 1,512 | 899 |
+----------------------------------------------+----------+-----------+
| Operating loss | (2,842) | (6,225) |
+----------------------------------------------+----------+-----------+
| Gain on lease surrender | 85 | - |
+----------------------------------------------+----------+-----------+
| Net finance expenses | (1,699) | (750) |
+----------------------------------------------+----------+-----------+
| Taxation | (690) | (395) |
+----------------------------------------------+----------+-----------+
| Loss for the year | (5,146) | (7,370) |
+----------------------------------------------+----------+-----------+
+----------------------------------------------+----------+-----------+
| | 31 | 31 |
| | December | December |
+----------------------------------------------+----------+-----------+
| | 2009 | 2008 |
+----------------------------------------------+----------+-----------+
| Net assets | GBP'000 | GBP'000 |
+----------------------------------------------+----------+-----------+
| By business division | | |
+----------------------------------------------+----------+-----------+
| Retail including Liberty of London retail | 20,172 | 10,159 |
| and Internet | | |
+----------------------------------------------+----------+-----------+
| Wholesale fabric | 16,597 | 14,112 |
+----------------------------------------------+----------+-----------+
| Liberty of London wholesale | (12,147) | 5,564 |
+----------------------------------------------+----------+-----------+
| | 24,622 | 29,835 |
+----------------------------------------------+----------+-----------+
| By geographical origin: | | |
+----------------------------------------------+----------+-----------+
| United Kingdom | 21,635 | 27,071 |
+----------------------------------------------+----------+-----------+
| Japan | 2,987 | 2,764 |
+----------------------------------------------+----------+-----------+
| | 24,622 | 29,835 |
+----------------------------------------------+----------+-----------+
+----------------------------------------------+----------+-----------+
| EBITDA | GBP'000 | GBP'000 |
+----------------------------------------------+----------+-----------+
| By business division | | |
+----------------------------------------------+----------+-----------+
| Retail including Liberty of London retail | 4,693 | 1,651 |
| and Internet | | |
+----------------------------------------------+----------+-----------+
| Wholesale fabric | 4,238 | 4,206 |
+----------------------------------------------+----------+-----------+
| Liberty of London wholesale | (2,213) | (2,715) |
+----------------------------------------------+----------+-----------+
| Reorganisation | (135) | (1,346) |
+----------------------------------------------+----------+-----------+
| Support Costs | (6,475) | (5,664) |
+----------------------------------------------+----------+-----------+
| | 108 | (3,868) |
+----------------------------------------------+----------+-----------+
Concession revenue
Sales from concession departments are included on a commission only basis within
revenue above. Gross revenue of concession departments was as follows:
+---------------------------------------------+-----------+-----------+
| | Year | Year |
| | ended | ended |
+---------------------------------------------+-----------+-----------+
| | 31 | 31 |
| | December | December |
+---------------------------------------------+-----------+-----------+
| | 2009 | 2008 |
+---------------------------------------------+-----------+-----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------+-----------+-----------+
| Gross revenue of concession departments | 11,145 | 9,379 |
+---------------------------------------------+-----------+-----------+
3. EARNINGS BEFORE INTEREST, TAXATION, DEPRECIATION AND AMORTISATION
("EBITDA")
_______________________________________________________________________________
___
+------------------------------------------------+----------+----------+
| | Year | Year |
| | ended | ended |
+------------------------------------------------+----------+----------+
| | 31 | 31 |
| | December | December |
+------------------------------------------------+----------+----------+
| | 2009 | 2008 |
+------------------------------------------------+----------+----------+
| The EBITDA of the Group is calculated as | GBP'000 | GBP'000 |
| follows: | | |
+------------------------------------------------+----------+----------+
| Results from operating activities | (2,842) | (6,225) |
+------------------------------------------------+----------+----------+
| Add depreciation of property, plant and | 2,278 | 2,357 |
| equipment for the year | | |
+------------------------------------------------+----------+----------+
| Operating EBITDA | (564) | (3,868) |
+------------------------------------------------+----------+----------+
| Gain on lease surrender | 85 | - |
+------------------------------------------------+----------+----------+
| Write down of fixtures charged against lease | 587 | - |
| surrender (note 7) | | |
+------------------------------------------------+----------+----------+
| Total EBITDA for the year | 108 | (3,868) |
+------------------------------------------------+----------+----------+
4. TAXATION
_______________________________________________________________________________
__
The taxation charge for the year in the Income Statement arose as follows:
+-----------------------------------------+--------------+------------+
| | Year ended | Year ended |
+-----------------------------------------+--------------+------------+
| | 31 December | 31 |
| | | December |
+-----------------------------------------+--------------+------------+
| | 2009 | 2008 |
+-----------------------------------------+--------------+------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------+--------------+------------+
| Foreign tax | | |
+-----------------------------------------+--------------+------------+
| Tax on Japanese profits for the year | (690) | (395) |
+-----------------------------------------+--------------+------------+
No tax was recognised directly in equity during the year ended 31 December 2009
or during the previous year.
The taxation charge has been reduced from the amount that would arise from
applying the prevailing corporation tax rate to the loss before taxation in the
Consolidated Income Statement, as follows:
+---------------------------------------------+------------+-----------+
| | Year ended | Year |
| | | ended |
+---------------------------------------------+------------+-----------+
| | 31 | 31 |
| | December | December |
+---------------------------------------------+------------+-----------+
| | 2009 | 2008 |
+---------------------------------------------+------------+-----------+
| | GBP'000 | GBP'000 |
+---------------------------------------------+------------+-----------+
| UK corporation tax credit at 28% (2008: | 1,248 | 1,988 |
| 28.5%) on Group loss before tax | | |
+---------------------------------------------+------------+-----------+
| Excess of depreciation charged over capital | (638) | (672) |
| allowances claimed | | |
+---------------------------------------------+------------+-----------+
| Accounting profit on disposal greater than | (142) | - |
| chargeable gains | | |
+---------------------------------------------+------------+-----------+
| Expenditure permanently disallowed for | (1,060) | (1,573) |
| taxation purposes and unrelieved tax losses | | |
+---------------------------------------------+------------+-----------+
| Taxation on overseas earnings at higher | (264) | (138) |
| rate than UK corporation tax | | |
+---------------------------------------------+------------+-----------+
| Tax losses brought forward utilised | 166 | - |
+---------------------------------------------+------------+-----------+
| Taxation charge for the year | (690) | (395) |
+---------------------------------------------+------------+-----------+
5. LOSS PER SHARE
_______________________________________________________________________________
__
The loss per share figures are calculated by dividing the loss attributable to
equity shareholders of the Company for the year, by the weighted average number
of ordinary shares in issue during the year, as follows:-
+--------------------------------------+---------+-----------+-----------+
| | | Year | Year |
| | | ended | ended |
+--------------------------------------+---------+-----------+-----------+
| | | 31 | 31 |
| | | December | December |
+--------------------------------------+---------+-----------+-----------+
| | | 2009 | 2008 |
+--------------------------------------+---------+-----------+-----------+
| Loss for the year attributable to | GBP'000 | (5,200) | (7,424) |
| equity shareholders of the Company | | | |
+--------------------------------------+---------+-----------+-----------+
| Weighted average number of ordinary | '000 | 22,603 | 22,603 |
| shares in issue during the year | | | |
+--------------------------------------+---------+-----------+-----------+
| Loss per share (basic and diluted) | Pence | (23.0p) | (32.8p) |
+--------------------------------------+---------+-----------+-----------+
As the basic EPS is negative, in line with IAS 33 Earning per Share, share
options are not considered dilutive.
6. INTANGIBLE ASSETS AND GOODWILL
_______________________________________________________________________________
_
+----------------------------------------+----------+---------+---------+
| | Goodwill | Brand | Total |
+----------------------------------------+----------+---------+---------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------------------+----------+---------+---------+
| Balance at 1 January 2008 and 1 | 182 | 18,200 | 18,382 |
| January 2009 | | | |
+----------------------------------------+----------+---------+---------+
| Balance at 31 December 2008 and 31 | 182 | 18,200 | 18,382 |
| December 2009 | | | |
+----------------------------------------+----------+---------+---------+
Assessment of the useful life and impairment testing on the carrying value of
the Brand
The Directors consider that the Group's brand has an indefinite life due to the
durability of the underlying business. This has been demonstrated over many
years. Accordingly the brand has not been amortised but has instead been
subject to an annual impairment review. An external professional valuation of
the Liberty brand was undertaken by Equilibrium Consulting at 31 December 2007.
The principal assumptions in the 2007 valuation included a discount rate of
10.2% and a long term growth assumption of 2% into perpetuity. At 31 December
2009, the value in use was determined by discounting future cash flows generated
from continuing use of the cash generating unit. This is based on projected
cash flows in the Company's 5 year business plan and further projections for
years 6 to 10 to produce a 10 year cash flow model. A 2% growth assumption has
been applied to cash flows at the end of year 10. Forecast annual revenue
growth included in the projections is 5.8% in 2010, 3.4% by year 5 reflecting
the 5 year business plan and 3.2% by year 10. The cash flows generated from the
business plan project net outflows in 2009 and 2010 with net cash inflows
beginning in 2011. A pre-tax discount rate of 10% was applied to resultant cash
flows to determine present day value in use, reflecting current market
assessments of risk specific to the asset. The values assigned also represent
assessments of future trends in the retail industry and are based on both
external sources and internal historical data. The above calculation of value in
use is particularly sensitive in two areas: a movement of 1% in the discount
rate would affect the calculated value of the brand by GBP5m, and a movement of
1% in future planned net cash inflows before capital expenditure, central costs
and working capital movements would affect the calculated value of the brand by
approximately GBP7m. The impairment review at 31 December 2009 supported the
value in use of the Liberty brand at more than the book value of GBP18.2m at
which it has been included in the financial statements of the Group throughout
the year accordingly the brand has been retained at a value of GBP18.2m in these
financial statements.
7. PROPERTY, PLANT AND EQUIPMENT
_______________________________________________________________________________
__
+----------------------------+------------+---------------+------------+
| | Freehold | Plant, | |
| | | machinery, | |
| | | fixtures | |
+----------------------------+------------+---------------+------------+
| | property | & equipment | Total |
+----------------------------+------------+---------------+------------+
| | GBP'000 | GBP'000 | GBP'000 |
+----------------------------+------------+---------------+------------+
| Cost or valuation | | | |
+----------------------------+------------+---------------+------------+
| At 1 January 2009 | 25,595 | 16,428 | 42,023 |
+----------------------------+------------+---------------+------------+
| Additions | - | 2,768 | 2,768 |
+----------------------------+------------+---------------+------------+
| Disposals | | (724) | (724) |
+----------------------------+------------+---------------+------------+
| Revaluation | 612 | - | 612 |
+----------------------------+------------+---------------+------------+
| At 31 December 2009 | 26,207 | 18,472 | 44,679 |
+----------------------------+------------+---------------+------------+
| Depreciation | | | |
+----------------------------+------------+---------------+------------+
| At 1 January 2009 | - | (11,017) | (11,017) |
+----------------------------+------------+---------------+------------+
| Charge for the year | (338) | (1,940) | (2,278) |
+----------------------------+------------+---------------+------------+
| Disposals | - | 137 | 137 |
+----------------------------+------------+---------------+------------+
| Revaluation | 338 | - | 338 |
+----------------------------+------------+---------------+------------+
| At 31 December 2009 | - | (12,820) | (12,820) |
+----------------------------+------------+---------------+------------+
| Net book value at 31 | 26,207 | 5,652 | 31,859 |
| December 2009 | | | |
+----------------------------+------------+---------------+------------+
On 19 June 2009 Liberty surrendered the lease on its Sloane Street store for a
cash premium of GBP700,000. As a result, Liberty released a rent-free provision
with residual value of GBP79,000 previously held as a liability and incurred
costs of GBP107,000. In addition, fixtures and fittings relating to the shop
with a net book value of GBP587,000 were deemed to have no further value in use
and written off, giving rise to a net gain on lease surrender of GBP85,000.
Valuation
The Group's property, plant and equipment is primarily located in the United
Kingdom, with a minor amount located in Japan. The Group's property was valued
at 31 December 2009 by qualified professional valuers working for the company of
DTZ, Chartered Surveyors, ("DTZ"), acting in the capacity of External Valuers.
All such valuers are Chartered Surveyors, being members of the Royal Institution
of Chartered Surveyors ("RICS").
DTZ act as valuers to the Group and undertake half year and year end valuations
for accounting purposes. DTZ has been carrying out this valuation instruction
for the Group for a continuous period since 1999 and Paul Wolfenden has been the
signatory of Valuation Reports provided to the Group for the same period. In
addition, DTZ provide ad-hoc valuation advice to the Group. DTZ is a wholly
owned subsidiary of DTZ Holdings plc. In the financial year to 30 April 2009,
the proportion of total fees payable by the Group to the total fee income of DTZ
Holdings plc was less than 5%. It is not anticipated that this situation will
vary in terms of the financial year of DTZ to 30 April 2010. DTZ has not
received any introductory fees or acquisition fees in respect of the property
owned by the Liberty Group within the 12 months prior to the date of valuation.
The valuation was carried out in accordance with the RICS Appraisal and
Valuation Standards 6th Edition ("the Manual") and the property was valued on
the basis of Existing Use Value. Existing Use Value is defined in the Manual as
the estimated amount for which a property should exchange on the date of
valuation between a willing buyer and a willing seller in an arm's length
transaction, after proper marketing, wherein the parties had acted
knowledgeably, prudently and without compulsion, assuming that the buyer is
granted vacant possession of all parts of the property required by the business
and disregarding potential alternative uses and any other characteristics of the
property that would cause its Market Value to differ from that needed to replace
the remaining service potential.
The valuation includes the land and buildings; the trade fixtures, fittings,
furniture, furnishings and equipment; and the market's perception of the trading
potential excluding personal goodwill; together with an assumed ability to renew
existing licences, consents, certificates and permits. The value excludes
consumables and stock in trade. The valuation excludes any goodwill associated
with the management by the Company or its subsidiaries.
The valuation of the Tudor property and fixtures totalled GBP30.3m, including
fixtures and equipment with a net book value of GBP4.0m at 31 December 2009.
The historic cost of the Group's property at 31 December 2009 includes
capitalised interest of GBP0.2m (2008: GBP0.2m).
8. TRADE AND OTHER RECEIVABLES
_______________________________________________________________________________
___
+----------------------------------------------+------------------+-------------------+
| | 31 | 31 |
| | December | December |
+----------------------------------------------+------------------+-------------------+
| | 2009 | 2008 |
+----------------------------------------------+------------------+-------------------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+------------------+-------------------+
| Trade receivables | 7,996 | 7,772 |
+----------------------------------------------+------------------+-------------------+
| Amount due from related parties (note 13) | - | 12 |
+----------------------------------------------+------------------+-------------------+
| Other receivables | 565 | 1,211 |
+----------------------------------------------+------------------+-------------------+
| Prepayments and accrued income | 946 | 1,113 |
+----------------------------------------------+------------------+-------------------+
| | 9,507 | 10,108 |
+----------------------------------------------+------------------+-------------------+
9. CASH AND CASH EQUIVALENTS
_______________________________________________________________________________
__
+------------------------------------------------+----------+----------+
| | 31 | 31 |
| | December | December |
+------------------------------------------------+----------+----------+
| | 2009 | 2008 |
+------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+------------------------------------------------+----------+----------+
| Cash and cash equivalents | 1,943 | 1,931 |
+------------------------------------------------+----------+----------+
| Less bank overdraft | - | (28) |
+------------------------------------------------+----------+----------+
| Net cash and cash equivalents per consolidated | 1,943 | 1,903 |
| cash flow statement | | |
+------------------------------------------------+----------+----------+
10. LOANS AND BORROWINGS
The Group's interest-bearing loans and borrowings are measured at amortised
cost. Details of the Group's exposure to interest rate, foreign currency and
liquidity risk are set out in note 12.
The Group utilises a financing facility provided by Bank of Scotland ("BOS") for
a loan facility of GBP20m which comprises a revolving credit facility of GBP15m
and an ancillary facility of GBP5m. At 31 December 2009, the Group has drawn
GBP12.5m(2008: GBP14.6m) of the GBP15m revolving credit facility and GBP0.9m
(2008: GBP0.2m) of the ancillary facility.
Terms and debt repayment schedule
The Group's loans are denominated in Sterling and no foreign exchange risk
existed on its debt arrangements during the year ended 31 December 2009 or
during the previous year. The Group's loans bear variable rates of interest
which are set by reference to Bank of Scotland base rate as follows:-
+--------------+-----------+----------+---------+----------+---------+----------+
| | | | 31 December | 31 December |
| | | | 2009 | 2008 |
+--------------+-----------+----------+--------------------+--------------------+
| | Nominal | Latest | Face | Carrying | Face | Carrying |
| | interest | year of | value | amount | value | amount |
| | rate per | maturity | | | | |
| | annum | | | | | |
+--------------+-----------+----------+---------+----------+---------+----------+
| | | | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+--------------+-----------+----------+---------+----------+---------+----------+
| | | | | | | |
+--------------+-----------+----------+---------+----------+---------+----------+
| Secured bank | 2.5% | 2011 | 12,542 | 12,542 | 14,633 | 14,633 |
| loan | | | | | | |
+--------------+-----------+----------+---------+----------+---------+----------+
The facility has a term that runs until December 2011, at which time, or prior
to which, discussions will be held with BOS with regard to refinancing,
repayment or extending the loan repayment date.
The bank loan is secured on freehold property with a carrying amount of GBP30.3m
(2008:GBP28.8m) (see note 7), a debenture and corporate guarantee provided by
Liberty Plc in favour of BOS.
Net debt
+------------------------------------------------+----------+----------+
| | 31 | 31 |
| | December | December |
+------------------------------------------------+----------+----------+
| | 2009 | 2008 |
+------------------------------------------------+----------+----------+
| | GBP'000 | GBP'000 |
+------------------------------------------------+----------+----------+
| Current liabilities | | |
+------------------------------------------------+----------+----------+
| Cash and cash equivalents | 1,943 | 1,903 |
+------------------------------------------------+----------+----------+
| Derivative financial instruments | (1) | 341 |
+------------------------------------------------+----------+----------+
| Related party balances (note 13) | (12,943) | (7,548) |
+------------------------------------------------+----------+----------+
| Non-current liabilities | | |
+------------------------------------------------+----------+----------+
| Secured bank loan | (12,542) | (14,633) |
+------------------------------------------------+----------+----------+
| Net debt | (23,543) | (19,937) |
+------------------------------------------------+----------+----------+
Undrawn facilities
At 31 December 2009, the Group had GBP2.5m (2008: GBP0.4m) of undrawn credit
financing facilities available for use by the Group.
Funding financial risk
The Group's funding financial risk centres on the total interest cost incurred
on the Group's short and medium term loans, which at 31 December 2009 included
bank borrowings of GBP12.5m (2008: GBP14.6m). The Board has currently chosen to
retain the bank borrowings at variable rates due to the low level of current
interest rates. The Board reviews this policy on a regular basis to ensure good
management of its exposure to interest rate fluctuations.
11. TRADE AND OTHER PAYABLES
_______________________________________________________________________________
___
+----------------------------------------------+----------+-----------+
| | 31 | 31 |
| | December | December |
+----------------------------------------------+----------+-----------+
| | 2009 | 2008 |
+----------------------------------------------+----------+-----------+
| | GBP'000 | GBP'000 |
+----------------------------------------------+----------+-----------+
| | | |
+----------------------------------------------+----------+-----------+
| Trade payables | 12,169 | 9,349 |
+----------------------------------------------+----------+-----------+
| Amounts due to related parties (note 13) | 12,943 | 7,548 |
+----------------------------------------------+----------+-----------+
| Other payables | 487 | 1,436 |
+----------------------------------------------+----------+-----------+
| PAYE, NIC and VAT | 1,579 | 1,157 |
+----------------------------------------------+----------+-----------+
| Accruals and deferred income | 4,693 | 4,199 |
+----------------------------------------------+----------+-----------+
| | 31,871 | 23,689 |
+----------------------------------------------+----------+-----------+
The Group's exposure to currency and liquidity risk related to trade and other
payables is disclosed in note 12.
Amounts due to related parties relate to amounts due to MWB Group Holdings Plc.
The loan was provided under a facility that had a term that ran to December
2010. Subsequent to the year end, this facility was extended to 30 June 2011.
Drawings under this facility incur interest at a rate of 9% per annum.
12. FINANCIAL INSTRUMENTS
Overall summary
The Group has exposure to the following principal risks in the operation and
management of its business:-
(i) Liquidity risk;
(ii) Market risk;
(iii) Interest rate risk;
(iv) Currency risk; and
(v) Credit risk.
Set out below is information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and managing
risk, and the Group's management of capital. Further quantitative disclosures
are included throughout these consolidated financial statements.
The Directors have overall responsibility for the establishment and oversight of
the Group's risk management framework.
The Group's risk management policies are established to identify and analyse the
risks faced by the Group, to set appropriate risk limits and controls, and to
monitor risks and adherence to limits. Risk management policies to provide
protection for the Group's activities are reviewed during the year to reflect
changes in market conditions. The Group, through its management standards and
procedures, aims to develop a disciplined and constructive control environment
in which employees understand their roles and obligations. This is managed and
controlled through a detailed funding policy and capital management strategy,
details of which are set out below.
The Group borrows from banks at variable rates of interest. The Group does not
use hedging arrangements to speculate on interest rate movements.
The Group's treasury policies are designed to ensure that sufficient committed
loan facilities are available to support current and future business
requirements. Cash and loan management is a core feature of the Board's
business model and two year rolling cash flow forecasts, updated on a monthly
basis, are controlled by the Executive Directors to manage these requirements.
Liquidity risk
Note 1 to the financial statements refers to liquidity risks associated with the
financing arrangements of the Group.
Market risk
Market risk that affects the Group is the risk that changes in market prices,
such as interest rates, foreign currency rates and equity prices, will affect
the Group's income or the value of its holdings of financial instruments. The
objective of the Group's market risk management is to manage and control market
risk exposures within acceptable parameters, while seeking to optimise returns
to shareholders.
The Group buys derivatives for its financial liabilities, and also incurs
financial liabilities, in order to manage market risks. The Group does not
enter into hedge contracts on a speculative or trading basis.
Equity price risk arises generally from available-for-sale equity securities
held within the Liberty Retail Plc pension scheme. These investments are held
to meet the funded and unfunded portion of the Group's defined benefit pension
obligations. Group Management monitors the mix of debt and equity securities in
this investment portfolio using pro-active third party advice. Material
investments within the portfolio are managed on an individual basis and all buy
and sell decisions are approved by the Trustees of the pension scheme, in
conjunction with Senior Executives of the Group. The investment portfolio of
the pension scheme at its most recent year end of 2 June 2008 totalled GBP16.0
million and the current value of pension scheme liabilities, which are valued
principally by reference to investment bond yields, totalled GBP18.9 million.
The primary goal of the Group's available-for-sale equity securities investment
strategy is to maximise investment returns commensurate with acceptable levels
of risk, in order to meet as much as possible the Group's defined scheme pension
obligations. Management is assisted in this regard by professional external
advisors.
Interest rate risk
The Group's variable rate borrowings are exposed to a risk of change in cash
flows due to changes in interest rates. The Group may hold financial
instruments to hedge financial risk on finance drawn for its operations, or for
the temporary investment of short-term funds, and to manage the interest rate
risks arising from its operations and sources of finance. In addition, various
financial amounts - for example trade debtors and trade creditors - arise
directly from the Group's normal trading operations.
The Group's interest rate is set at a margin above the Bank of Scotland's base
rate. If the base rate had increased by 1% point during the year the Group
would have incurred an extra interest cost of GBP0.1m.
Currency risk
Substantially all Group revenue is denominated in Sterling, the Group's
functional currency. The Group is currently mainly exposed to currency risk on
sales and purchases that are denominated in Euros and US dollars. Payments in
Euros accounted for 17% (2008: 14%) and payments in US dollars accounted for 5%
(2008: 3%) of total payments in the year to 31 December 2009. The Group uses
forward exchange contracts to hedge its currency risk, most of which have a
maturity of less than one year from the balance sheet date. The Group does not
have any loans taken out by any Group entities, in any currency other than
Sterling.
As 88% (2008: 91%) of the Group's net assets are denominated in Sterling, the
Group did not have a material exposure to foreign currency risk at 31 December
2009 or at the previous year end. The remaining 12% (2008: 9%) of Group assets
are denominated in Japanese Yen. Accordingly, strengthening of Sterling against
the Yen would not have had a material effect on the Group at 31 December 2009 or
at the previous year end.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The risk to the Group arises principally from the Group's
receivables from customers.
The Group's exposure to credit risk is influenced mainly by the individual
characteristics of each customer. The demographics of the Group's customer
base, including the general default risk in the principal sectors in which the
Group operates, has less of an influence on credit risk. The Group maintains
credit insurance which protects against any bad debt that may arise, with an
excess of GBP1,000 payable per claim.
For many years, losses from impairment of the Group's customer receivables have
been minimal and this continued during the year ended 31 December 2009.
Customers that are graded as high risk are placed on a restricted customer list,
and future sales are only made on a restricted basis.
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure.
The maximum exposure to credit risk at the reporting date was:
+---------------------------------+----------+------------+-----------+
| | | 31 | 31 |
| | | December | December |
| | | 2009 | 2008 |
+---------------------------------+----------+------------+-----------+
| | | GBP'000 | GBP'000 |
+---------------------------------+----------+------------+-----------+
| Trade receivables | | 7,996 | 7,772 |
+---------------------------------+----------+------------+-----------+
| Cash and cash equivalents | | 1,943 | 1,903 |
+---------------------------------+----------+------------+-----------+
| | | 9,939 | 9,675 |
+---------------------------------+----------+------------+-----------+
The ageing of trade receivables at 31 December 2009 was as follows:-
+-----------------------+-----------+------------+-------------+------------+
| | Gross | Impairment | Gross | Impairment |
+-----------------------+-----------+------------+-------------+------------+
| | 31 | provision | 31 | provision |
| | December | | December | |
+-----------------------+-----------+------------+-------------+------------+
| | 2009 | 31 | 2008 | 31 |
| | | December | | December |
+-----------------------+-----------+------------+-------------+------------+
| | | 2009 | | 2008 |
+-----------------------+-----------+------------+-------------+------------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+-----------------------+-----------+------------+-------------+------------+
| Not overdue | 3,635 | - | 4,210 | - |
+-----------------------+-----------+------------+-------------+------------+
| 0-30 days overdue | 1,646 | - | 695 | - |
+-----------------------+-----------+------------+-------------+------------+
| 31-120 days overdue | 2,248 | - | 2,628 | (67) |
+-----------------------+-----------+------------+-------------+------------+
| 120 days to one year | 548 | (107) | 359 | (93) |
| overdue | | | | |
+-----------------------+-----------+------------+-------------+------------+
| More than one year | 166 | (140) | 94 | (54) |
| overdue | | | | |
+-----------------------+-----------+------------+-------------+------------+
| | 8,243 | (247) | 7,986 | (214) |
+-----------------------+-----------+------------+-------------+------------+
The impairment provision at 31 December 2009 of GBP247,000 relates to debts
mainly from overseas customers that are not covered by insurance.
Based on historic default rates, the Board believes that no material amount of
impairment allowance is necessary in respect of trade receivables not past due
or past due by up to 120 days. The majority of the balance relates to customers
that have good financial track records with the Group.
The movement in the allowance for impairment in respect of trade receivables
during the year was as follows:
+-------------------------------------+---------------+----------------+
| | 2009 | 2008 |
+-------------------------------------+---------------+----------------+
| | GBP'000 | GBP'000 |
+-------------------------------------+---------------+----------------+
| Balance at start of year | (214) | (100) |
+-------------------------------------+---------------+----------------+
| Impairment loss provided | (33) | (114) |
+-------------------------------------+---------------+----------------+
| Balance at end of year | (247) | (214) |
+-------------------------------------+---------------+----------------+
The allowance account in respect of trade receivables is used to record
impairment losses unless the Group is satisfied that no recovery of the amount
owing is possible; at that point the amounts considered irrecoverable and is
written off against the financial asset directly.
+-------------------------------------+---------------+-----------------------------+
| Liquidity risk - maturity analysis | | |
+-------------------------------------+---------------+-----------------------------+
| | | |
+-------------------------------------+---------------+-----------------------------+
| Non derivative financial | < 1 year | Between 1 & 2 |
| liabilities | | years |
+-------------------------------------+---------------+-----------------------------+
| | GBP'000 | GBP'000 |
+-------------------------------------+---------------+-----------------------------+
| Trade and other payables | (18,928) | |
+-------------------------------------+---------------+-----------------------------+
| Amounts due to related parties | (12,943) | |
+-------------------------------------+---------------+-----------------------------+
| Secured bank loan | | (12,542) |
+-------------------------------------+---------------+-----------------------------+
Determination of fair values
The following tables show the carrying amounts and fair values of the Group's
financial instruments at 31 December 2009 and at the previous year end. The
carrying amounts are included in the Group balance sheet. The fair values of the
financial instruments are the amounts at which the instruments could be
exchanged in a current transaction between willing parties.
+-------------------------------------+---------------+----------------+
| | 2009 | 2008 |
+-------------------------------------+---------------+----------------+
| | GBP'000 | GBP'000 |
+-------------------------------------+---------------+----------------+
| Balance at start of year | 341 | - |
+-------------------------------------+---------------+----------------+
| Fair Value changes through Income | (219) | 341 |
| Statement | | |
+-------------------------------------+---------------+----------------+
| Fair Value of contracts settled | (123) | - |
+-------------------------------------+---------------+----------------+
| Balance at end of year | (1) | 341 |
+-------------------------------------+---------------+----------------+
The carrying amounts of financial assets and liabilities, together with their
fair values at 31 December 2009 and at the previous year end, were as follows:-
+---------------------------------+----------+----------+----------+----------+
| | 31 December 2009 | 31 December |
| | | 2008 |
+---------------------------------+---------------------+---------------------+
| | Carrying | Fair | Carrying | Fair |
| | amount | value | amount | Value |
+---------------------------------+----------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+---------------------------------+----------+----------+----------+----------+
| | | | | |
+---------------------------------+----------+----------+----------+----------+
| Amounts due to related party | (12,943) | (12,943) | (7,548) | (7,548) |
+---------------------------------+----------+----------+----------+----------+
| Trade and other receivables | 9,507 | 9,507 | 10,108 | 10,108 |
+---------------------------------+----------+----------+----------+----------+
| Cash and cash equivalents | 1,943 | 1,943 | 1,903 | 1,903 |
+---------------------------------+----------+----------+----------+----------+
| Secured bank loan and overdraft | (12,542) | (12,542) | (14,633) | (14,633) |
+---------------------------------+----------+----------+----------+----------+
| Trade payables | (12,169) | (12,169) | (9,349) | (9,349) |
+---------------------------------+----------+----------+----------+----------+
| Other payables | (487) | (487) | (1,436) | (1,436) |
+---------------------------------+----------+----------+----------+----------+
| | (26,691) | (26,691) | (20,955) | (20,955) |
+---------------------------------+----------+----------+----------+----------+
Fair value hierarchy: Financial instruments carried at fair value are defined as
Level 2 under IFRS 7.
13. RELATED PARTY BALANCES AND TRANSACTIONS
_______________________________________________________________________________
__
+---------------------------------------------+-----------+------------+
| | 31 | 31 |
| | December | December |
+---------------------------------------------+-----------+------------+
| | 2009 | 2008 |
+---------------------------------------------+-----------+------------+
| Trade and other receivables (note 8) | GBP'000 | GBP'000 |
+---------------------------------------------+-----------+------------+
| Amounts due from related parties | | |
+---------------------------------------------+-----------+------------+
| Wholly owned subsidiaries of a fellow | - | 12 |
| subsidiary, MWB Business Exchange Plc | | |
+---------------------------------------------+-----------+------------+
| | - | 12 |
+---------------------------------------------+-----------+------------+
+---------------------------------------------+-----------+------------+
| Current liabilities | | |
| Trade and other payables (note 11) | | |
+---------------------------------------------+-----------+------------+
| MWB Group Holdings Plc | | |
+---------------------------------------------+-----------+------------+
| Loan | 10,904 | 6,543 |
+---------------------------------------------+-----------+------------+
| Other | 2,039 | 1,005 |
+---------------------------------------------+-----------+------------+
| | 12,943 | 7,548 |
+---------------------------------------------+-----------+------------+
+---------------------------------------------+-----------+------------+
| Related party transactions during the year | | |
+---------------------------------------------+-----------+------------+
| Wholly owned subsidiaries of MWB Group | - | 56 |
| Holdings Plc for administrative fees paid | | |
| during the year | | |
+---------------------------------------------+-----------+------------+
14. POST BALANCE SHEET EVENT
_______________________________________________________________________________
__
On 12 March 2010 the Group exchanged contracts for the sale of the freehold
interest in the Tudor Property for GBP41.5m to Sirosa Liberty Ltd. Under the
terms of the proposed deal, the Group will take a 30 year operating lease on the
building at an initial annual rent of GBP2.1m, with fixed five yearly uplifts
The sale is conditional on approval by the shareholders of Liberty's 68%
shareholder, MWB Group Holdings Plc, which is expected to be sought during April
2010. The Board of MWB Group Holdings Plc which owns 15.8% of its issued share
capital of MWB Group Holdings Plc has confirmed its approval of the sale, and
shareholders associated with the Board owning a further 17.5% have also
confirmed their approval to the sale.
15. ACCOUNTS AND FINANCIAL INFORMATION
_______________________________________________________________________________
__
The financial information for the years ended 31 December 2009 and 31 December
2008 contained in this preliminary announcement was approved by the Board on 29
March 2010. This announcement does not constitute statutory accounts of the
Company within the meaning of section 435 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2008 have been delivered to
the Registrar of Companies. Statutory accounts for the year ended 31 December
2009 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting. The auditors have reported on both these sets of
accounts. Their reports were not qualified and did not contain a statement under
section 237(2) or (3) of the Companies Act 1985 in respect of the year ended 31
December 2008 and section 498(2) or (3) of the Companies Act 2006 in respect of
the year ended 31 December 2009.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND
FINANCIAL STATEMENTS
The directors are responsible for preparing the Annual Report and the group and
parent company financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare group and parent company financial
statements for each financial year. As required by the AIM Rules of the London
Stock Exchange they are required to prepare the group financial statements in
accordance with IFRSs as adopted by the EU and applicable law and have elected
to prepare the parent company financial statements in accordance with UK
Accounting Standards and applicable law (UK Generally Accepted Accounting
Practice).
Under company law the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the group and parent company and of their profit or loss for that period. In
preparing each of the group and parent company financial statements, the
directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- for the group financial statements, state whether they have been prepared in
accordance with IFRSs as adopted by the EU;
- for the parent company financial statements, state whether applicable UK
Accounting Standards have been followed, subject to any material departures
disclosed and explained in the financial statements; and
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the group and the parent company will continue in
business.
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the parent company's transactions and disclose
with reasonable accuracy at any time the financial position of the parent
company and enable them to ensure that its financial statements comply with the
Companies Act 2006. They have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets of the group and to prevent
and detect fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the company's website. Legislation in the
UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
- the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the company and the undertakings
included in the consolidation taken as a whole; and
- the directors' report includes a fair review of the development and
performance of the business and the position of the issuer and the undertakings
included in the consolidation taken as a whole, together with a description of
the principal risks and uncertainties that they face.
By order of the Board
+--------------------------------+-------------------------------------+
| Richard Balfour-Lynn | |
| | Geoffroy de La Bourdonnaye |
+--------------------------------+-------------------------------------+
| Chairman | Chief Executive |
+--------------------------------+-------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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