RNS Number:7775S
Lambert Howarth Group PLC
12 March 2002
12 March 2002
LAMBERT HOWARTH GROUP p.l.c
Preliminary Results
Highlights
Turnover increased by 12.6% to £151.9m (2000: £134.9m) following a full
year's contribution from Orient Sourcing Services Limited
Profit before tax, goodwill and exceptional items £8.1m (2000: £11.3m),
reflecting the adverse performance in now discontinued operations
Earnings per share before goodwill and exceptional items 25.0p (2000:
37.0p)
Expansion into Europe through the acquisition of Natural Selection
International in December
Newly formed Brands Division granted major licences with French
Connection and Lulu Guinness
Commenting on the results, Robert Garfit, Chairman, said:
"Although the trading environment remained difficult, 2001 was a year of
significant achievement. We reviewed the Group's activities thoroughly and
successfully disposed of our non-core operations to focus solely on footwear,
accessories and homeware. We have also firmly established our Brands division
following two major licence wins and extended our activities into Europe via the
acquisition of Natural Selection in Spain. The year has started well and I
believe that the strategy that we now have in place puts us in a strong position
going forward."
For further information:
Lambert Howarth Group p.l.c 020 7258 9988
Robert Garfit, Chairman
John Gibson, Group Finance Director
Financial Dynamics 020 7831 3113
Charlie Armitstead
Chairman's statement
Results for the year to 31 December 2001
Trading conditions during 2001 were difficult and our retail sales suffered
throughout the spring and were hampered further by the poor economic environment
in the second half of the year. However, there was a marked improvement towards
the year end and the Christmas trading period was strong.
The group's turnover increased by 12.6% to £151.9 million from £134.9 million in
the previous year principally as a result of the acquisition of Orient Sourcing
Services Limited at the end of 2000. Operating profit on continuing activities,
before goodwill amortisation, was £9.4 million compared with £9.8 million last
year.
Profit on ordinary activities before tax, goodwill and exceptional items was
£8.1 million compared with £11.3 million in the previous year as the group
experienced sustained pressure on margins and adverse performance in now
discontinued operations.
The exceptional items, totalling £2.3 million excluding goodwill adjustments,
represent the aggregate of the closure costs of Global Homeware, the General
Trade Footwear division, sale of the Safety Footwear business and the gains on
the sale of surplus properties.
Earnings per share calculated before goodwill and exceptional items were 25.0p
against 37.0p in 2000.
In view of the company's performance, the Board is proposing a final dividend of
5.0p per share (11.0p per share in 2000) which, together with the interim
dividend, makes a total for the year of 8.0p per share (15.0p per share in
2000). The final dividend will be paid on 14 May 2002 to shareholders on the
register on 12 April 2002.
Strategy
Throughout the year the management has focused on developing the group's
strategy of establishing itself as a comprehensive accessory supplier. As a
result the group has withdrawn from a number of its non core activities that
were no longer offering adequate growth potential in order to concentrate solely
on footwear, accessories and homeware. The business is now in a much stronger
position to drive future profitability and growth.
We have looked for opportunities to extend our activities outside the UK and on
18 December 2001 we acquired Natural Selection International SA based near
Barcelona. We intend to develop this business alongside Orient and increase the
Spanish company's limited product range significantly.
Our newly founded Brands division, Concept LH, is now firmly established
following the grant of licences towards the end of 2001 by French Connection and
Lulu Guinness, both skilled international retailers. We believe this business
represents an exciting opportunity for the group with significant growth
prospects for the medium term. The initial launch of products in the UK and USA
is in the spring of this year.
Board
As announced at the time of our interim results in 2001, I will be standing down
as Chairman and leaving the group following the Annual General Meeting in May.
Similarly, James Howarth, the great grandson of the founder of the group, is
also standing down from the Board in May and leaving the group in August 2002.
It is gratifying for both James and I to see the major advance the group has
made in the last 12 months to reposition its activities to create a stronger and
more diversified business.
The stewardship from Fred Vinton, incoming Chairman, will add experience as the
group grows internationally and in the drive to enhance shareholder value.
Outlook
From a difficult start in 2001, your Board and senior management have worked
hard to maintain the group's capability to design and resource high quality
footwear, homeware and accessories. Furthermore the actions that we have taken
to renew the group's focus have been significant. The year has started well and
I believe that the strategy we now have in place puts us in a strong position
going forward.
Chief Executive's review of operations
2001 has been a challenging year for the group. We have reviewed the group's
operations and implemented a rationalisation programme to eliminate areas of
under performance and to focus on our core activities where we see growth
opportunities.
The rationalisation included the closure of our Marks and Spencer homeware
division (Global Homeware) and the General Trade Footwear division, both of
which have been successfully completed, together with the sale of our Safety
Footwear business. The exceptional costs of this programme, partially offset by
the sale of surplus properties which resulted in an exceptional profit on
disposal of £0.9 million, amounted to £2.3 million prior to goodwill adjustments
of £5.5 million. The withdrawal from these areas of business has released cash
for investment in our core activities where we see potential for higher returns.
We have reviewed our footwear and accessories operations and reduced costs to
improve profitability. The benefits of this action are expected to be
experienced fully in 2002. We will continue to ensure we match resource levels
with demand, across our business.
The concentration of resources and management in our main areas of activity in
footwear, accessories, homeware and brands enables us to build a group which is
a leading fashion accessory supplier serving markets in the UK and overseas.
Market conditions remain competitive but we are confident that the hard work we
have put into restructuring the business will provide us with opportunities from
which we can deliver better returns.
Operations
Our operations are organised under three divisional structures: Marks and
Spencer, (footwear and accessories); Brands (footwear and accessories) and
Orient (homeware).
Marks and Spencer division
Footwear
We experienced difficult trading conditions during the year and demand was
initially weak before a sales uplift in the autumn. The Christmas season
produced an increase in sales over 2000.
The range of Footglove shoes, which we supply exclusively to Marks and Spencer,
were especially popular and they experienced a significant increase in demand
over the previous year. However, pressure on margins caused us to experience a
decline in profitability.
We have focused our attention on design and development to create ranges to
excite the customer to stimulate increased demand for our products.
Accessories
Sales were higher in 2001 than in the previous year with our products providing
a strong appeal to the customer although our profitability was reduced. We
believe the accessories operation to be an exciting part of our business. The
key for success in this area comes from innovation and design which we are well
placed to deliver.
Brands division
During the year our new Brands division, Concept LH, advanced its plans to
establish a significant business within the footwear and accessories market. We
succeeded in securing licences to supply footwear for French Connection and Lulu
Guinness, with ranges to be available in stores for the coming autumn season.
Each of these brands has a strong following in its own market areas. French
Connection and FCUK enjoy high brand recognition for fashion clothing and Lulu
Guinness occupies a place in the luxury market, especially in the USA, for
designer bags.
We will design, develop and supply product under the licence agreements, working
closely with each partner. The ranges for the first season, now developed, have
been received with enthusiasm. We are confident we will build a significant
brands business in the fashion accessories market where we have identified an
increased demand for products which co-ordinate with premium fashion clothing.
Orient division
Orient has continued to perform well, achieving sales expectations and
contributing significantly to the group's profitability. The extension of the
product offer to include bedding to complement the range of soft furnishings
with home accessories and giftware provides us with greater opportunities to
grow the business.
As part of our stated strategy of expansion into mainland Europe we acquired
Natural Selection International, a Spanish home accessory company, at the end of
December 2001 for an initial consideration of £1 million with a potential
further payment to the vendors of up to £0.5 million dependent upon profit
performance. Natural Selection with its product synergies and common supply
sources affords us considerable growth potential for our homeware operation.
People
We have a committed and highly talented team who have demonstrated
professionalism and loyalty in what has been a difficult year. I would like to
thank them all on behalf of the Board.
Consolidated profit and loss account
for the year ended 31 December 2001
2001 2001 2001 2000
Group profit and
loss
Goodwill Group Group
before amortisation/ Profit Profit
goodwill write-off & Loss & Loss
£'000 £'000 £'000 £'000
Turnover (including share of joint ventures)
Continuing operations 130,585 - 130,585 105,042
Acquisitions 33 - 33 -
130,618 - 130,618 105,042
Discontinued operations 22,807 - 22,807 30,962
153,425 - 153,425 136,004
Less: share of turnover of joint ventures (1,512) - (1,512) (1,153)
Turnover 151,913 - 151,913 134,851
Cost of sales (116,440) (3,440) (119,880) *(101,343)
Gross profit 35,473 (3,440) 32,033 33,508
Net operating expenses (26,130) - (26,130) (23,674)
Operating profit
Continuing operations 9,311 (3,440) 5,871 8,256
Acquisitions (26) - (26) -
9,285 (3,440) 5,845 8,256
Discontinued operations 58 - 58 1,578
Group operating profit 9,343 (3,440) 5,903 9,834
Share of operating profit in joint ventures 119 - 119 17
Total operating profit: group and share of joint 9,462 (3,440) 6,022 9,851
ventures
Profit on disposal of surplus properties 851 - 851 -
Cost of termination of discontinued operations (3,066) (5,493) (8,559) -
Interest receivable 179 - 179 305
Amounts written off investments (106) - (106) -
Interest payable (1,523) - (1,523) (396)
(Loss)/profit on ordinary activities
before taxation 5,797 (8,933) (3,136) 9,760
Tax on (loss)/profit on ordinary activities (1,626) - (1,626) (3,455)
(Loss)/profit for the financial year 4,171 (8,933) (4,762) 6,305
Dividends (1,816) - (1,816) (3,340)
Retained (loss)/profit for the financial year 2,355 (8,933) (6,578) 2,965
(Loss)/earnings per share
Basic (21.0p) 29.7p
Goodwill amortisation and write-off 39.4p 7.3p
Exceptional items (including amounts written off
investments) 6.6p -
Basic before goodwill amortisation and write-off and
exceptional items 25.0p 37.0p
Diluted (19.4p) 29.5p
*Includes goodwill amortisation of £1,558,000.
Consolidated balance sheet
at 31 December 2001
2001 2000
£'000 £'000
Fixed assets
Intangible assets 29,791 34,820
Tangible assets 10,810 13,091
Investments in joint ventures
Share of gross assets 737 1,124
Share of gross liabilities (435) (1,014)
302 110
Other investments - 106
302 216
40,903 48,127
Current assets
Stocks 22,921 21,772
Debtors 13,326 14,553
Cash at bank and in hand 3,915 7,665
40,162 43,990
Creditors: amount falling due within one year 25,969 27,092
Net current assets 14,193 16,898
Total assets less current liabilities 55,096 65,025
Creditors: amount falling due after more than one year 9,182 17,561
Provisions for liabilities and charges 168 171
Net assets 45,746 47,293
Financed by
Capital and reserves
Called up share capital 2,269 2,264
Deferred shares 2,500 2,500
Contingent shares 250 750
Share premium account 685 634
Merger and other reserves 20,224 20,224
Profit and loss account 19,818 20,921
Equity shareholders' funds 45,746 47,293
Consolidated cash flow statement
for the year ended 31 December 2001
2001 2000
£'000 £'000
Net cash inflow from operating activities 7,163 2,815
Returns on investments and
Servicing of finance
Interest received 179 311
Interest paid (1,549) (228)
(1,370) 83
Taxation (4,410) (4,875)
Capital expenditure
and financial investment 1,817 (4,703)
Acquisitions and disposals
Purchase of subsidiary undertakings (1,611) (244)
Net cash acquired with
subsidiary undertakings 223 734
Disposal of subsidiary undertakings 1,420 -
32 490
Equity dividends paid to shareholders (3,174) (3,067)
Cash inflow/(outflow) before financing 58 (9,257)
Financing
Issue of ordinary share capital 56 70
Loan note deposit made (6,000) -
Hire purchase repayments - (4)
(5,944) 66
Decrease in cash in the year (5,886) (9,191)
Reconciliation of movements in group
shareholders' funds
for the year ended 31 December 2001
2001 2000
£'000 £'000
(Loss)/profit for the financial year (4,762) 6,305
Dividends (1,816) (3,340)
(6,578) 2,965
Share capital issued for cash 56 70
Share capital including premium, issued to vendors of
acquired business - 2,356
Deferred and contingent shares to be issued (500) 3,250
Expenses of share issue charged to share premium
account - (191)
Goodwill previously written off through reserves 5,493 -
Exchange difference arising on consolidation (18) (3)
Net (reduction)/addition to shareholders' funds (1,547) 8,447
Opening equity shareholders' funds 47,293 38,846
Closing equity shareholders' funds 45,746 47,293
Notes
1. Basic earnings per share has been calculated by dividing the profit
for the financial year by 22,690,830 (2000: 21,227,890) being the weighted
average number of 10p ordinary shares in issue during the year ended 31 December
2001.
For diluted earnings per share, the weighted average number of ordinary shares
is adjusted to assume conversion of all dilutive potential ordinary shares. The
weighted average number of shares used in this calculation for 2001 is
24,565,340 (2000: 21,361,795 shares).
Supplementary basic earnings per share has been calculated to
exclude the effect of goodwill and exceptional items. The adjusted numbers
provide a more meaningful view of the group's underlying operating performance.
2. The figures included in this preliminary announcement are extracted
from the audited financial statements which will shortly be issued to
shareholders. The figures do not constitute statutory accounts within the
meaning of Section 240 (5) Companies Act 1985.
3. Exceptional items
(a) Profit on disposal of surplus properties
A number of surplus properties have been disposed of during the year generating
an exceptional profit on disposal of £851,000.
The anticipated tax payable on this exceptional item is £ nil.
(b) Cost of termination of discontinued operations
Loss/costs Goodwill Total
£'000 £'000 £'000
Loss on sale of Safety Footwear business 510 326 836
Cost of discontinuance of Homeware business 454 5,167 5,621
Cost of discontinuance of General Trade
Footwear business 2,102 - 2,102
3,066 5,493 8,559
The losses include the write-off of goodwill previously written off against
reserves.
The anticipated tax relief on this exceptional item is £823,000.
(c) Amounts written off investments
Based on the directors' valuation the value of the unlisted investments has been
written down by £106,000 in the year to a carrying value of £ nil.
The anticipated tax relief on this exceptional item is £ nil.
4. Acquisition of Natural Selection International SA
On 18 December 2001, the group, through its subsidiary Orient Sourcing Services
Limited, acquired the entire share capital of Natural Selection International
SA. The principal activity of Natural Selection is the design, import and
distribution of soft furnishings, housewares and giftware to the retail trade.
On completion of the acquisition £1,000,000 was paid in cash. A further amount
payable in cash (up to a maximum of £500,000) is expected to become due in June
2002 if certain performance targets are achieved.
The total consideration is based on a multiple of eight times the profit on
ordinary activities for the year ending 31 March 2002 after a 30% notional tax
charge, with a maximum consideration payable of £1,500,000.
The book and provisional fair values of the assets and liabilities acquired in
the transaction were as follows:
Book value Revaluation Provisional
fair value
£'000 £'000 £'000
Fixed assets 28 - 28
Stocks 671 (85) 586
Debtors 723 - 723
Cash 223 - 223
Creditors (577) - (577)
Net assets acquired 1,068 (85) 983
Provisional
fair value
£'000
Consideration
Cash 1,000
Contingent consideration 500
Total consideration 1,500
Cost of acquisition 79
1,579
Goodwill 596
The goodwill arising from this acquisition is being amortised on a straight-line
basis over ten years. Such a period is judged as the time over which the value
of underlying business is expected to exceed the value of the underlying assets.
The amortisation charged to the profit and loss account for 2001 amounts to £
nil.
The revaluation is a provision against stock to reflect the current estimate of
its recoverability. The revaluation is provisional pending final review of
judgmental areas by all directors and will be finalised in the financial
statements for 2002.
From the date of acquisition to 31 December 2001, the acquisition contributed
£33,000 to turnover, and a loss before and after interest of £26,000. The
acquisition utilised £33,000 of the group's net operating cash flow.
5. Intangible assets
Goodwill
£'000
Cost
At 1 January 2001 36,548
Additions (Natural Selection) 596
Adjustments to goodwill (see below) (2,185)
At 31 December 2001 34,959
Aggregate amortisation
At 1 January 2001 1,728
Charge for the year 3,440
At 31 December 2001 5,168
Net book value at 31 December 2001 29,791
Net book value at 31 December 2000 34,820
The goodwill arising on the acquisition of Orient Sourcing Services Limited has
been reassessed by the directors as a result of a further review of the fair
value of assets and contingent consideration during the hindsight period as
permitted by FRS7.
This information is provided by RNS
The company news service from the London Stock Exchange
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