Final Results
April 09 2001 - 3:00AM
UK Regulatory
RNS Number:8165B
Oasis Stores PLC
9 April 2001
Oasis Stores Plc
Preliminary Results
Oasis Stores Plc, the women's fashion retailer, today announces preliminary
results for the 52 weeks ended January 27 2001.
Summary:
* Turnover up to #138.1m (2000: #131.8m)
* Profit before tax and exceptional items down to #8.0m (2000: #11.1m)
* Full review of supply chain completed
* Renewed focus on core brand values and margin improvement; benefits expected
to accrue in the current year
* Michael Bennett, Maurice Bennett and Vivian Scott to move to non-executive
roles
* Oasis sales for the first 9 weeks of the year up 14% in total; like for like
sales up 5%
* Continuing review of strategic options to maximise shareholder value
Commenting on the results, Derek Lovelock, Chief Executive said:
"Following years of rapid physical expansion we have concentrated on ensuring
that Oasis has in place the disciplines and controls that will be essential if
we are to maximise the brand's potential. Very good progress has been made and
we expect to see the benefits feeding through in the current year. In the
short-term, we are determined to drive a better performance from our existing
space.
Oasis has retained its unique appeal and we will be implementing a number of
in-store initiatives to enhance it. Current trading is showing encouraging
progress."
Enquiries:
Oasis Stores Plc 020 7452 1025
Derek Lovelock, Chief Executive
Richard Glanville, Finance Director
Financial Dynamics 020 7269 7144
Tom Baldock
Preliminary Statement
INTRODUCTION
The Company's financial performance for the 52 weeks ended January 27th 2001
was impacted by the continuation of challenging high street trading conditions
and a number of issues within the business associated with years of rapid
turnover growth. These issues are being dealt with energetically by Derek
Lovelock and the team.
In many ways 2000 represented a watershed. During the year, management set
about implementing the business disciplines to underpin Oasis as it moves to
the next phase of its growth. As outlined below, there remains much to be
done in the current year and beyond, but we are convinced that the business is
now on the right path towards re-establishing profitable growth for
shareholders.
FINANCIAL SUMMARY
During the year, the board reviewed the effectiveness of the Company's supply
chain. A review of the merchandising processes revealed that the company was
carrying forward too much stock from prior seasons. This was addressed in our
summer sale, depressing margin at the interim. During the second half of the
year a thorough review of the processes supporting the design and manufacture
of garments revealed an excessive stock of raw materials. As a result a
one-off exceptional charge of #1.9m has been made.
Turnover at #138.1m rose 5% over the previous year's #131.8m, with like for
like sales reduced by 1%.
Operating profits fell by 26% to #8.4m. Profits before tax and exceptional
items dropped from #11.1m in 2000 to #8.0m. Pre-exceptional earnings per share
fell to 11.28p (2000: 14.49p).
Capital expenditure during the year was reduced from #11.7m to #6.6m. Net cash
inflow for the year was #0.7m against an outflow of #5.9m last year.
OPERATING REVIEW
Oasis Retail
Brand Building
Oasis continues to enjoy a strong market position, targeting young women at
the upper end of the middle market with a fashion offer that spans clothing,
footwear, jewellery and accessories. In a market that is crowded and
competitive, our customer loyalty continues to translate into sales densities
that remain high for the sector.
The key strategic challenge for management is to maintain Oasis' individuality
despite the enlarged scale of the business - delivering a differentiated brand
whilst ensuring that the high sales densities translate into corresponding
profitability.
A number of initiatives were taken during the year to reinforce the core
differentiating values of Oasis. These values are encapsulated in London's
Argyll Street store, which opened in October 2000. At Argyll Street, there is
a tangible development of ideas and creativity - more colour and innovation in
equipment, props and visuals; fun elements in the changing rooms and
throughout the store which also provide a higher level of customer service.
We have also sought to focus the Design & Buying teams on delivering an offer
that personifies the Oasis "difference" - unique in fabrication with a high
level of detail and at a quality that is a 'cut above' the average.
Our brand values are showcased at our www.oasis-stores.com website, which has
seen its on-line community grow significantly since launch; we have been
successful in driving loyalty and conversion through this medium.
Margins
During the year the gross margin decreased from 51.4% to 50.6%.
Within this overall decline, the first half was impacted by 2.0% by the
clearance of excess stock in the Spring sales. However, despite lower sales,
the second half saw a 0.2% improvement in the margin, reflecting significant
improvements at intake level due to improved supply chain practices, including
a very positive contribution from our Hong Kong buying office. In addition,
better merchandising practices and more rigorous control of stocks have
ensured that the costs of markdown are minimised in the event of lower sales
whilst improving cover and quality of stock.
Unfortunately, margin improvements achieved through the actions taken above
were diluted due to problems in Home Production, the department through which
we design and manage the manufacture of a significant proportion of our range.
Quality and late delivery problems were impacting the margin adversely.
During the year, we therefore made significant operational improvements in
structure, responsibilities and internal processes that are already beginning
to benefit the business.
As we reported in January, problems associated with poor controls, led to the
accumulation of an excessive stock of raw materials and therefore a one-off
provision at the year-end of #1.9m was taken.
The benefits accruing from the hard work that has gone into improving the
underlying margin are already flowing into the business and have laid strong
foundations for progress in future years.
Physical Expansion
We opened 17 new stores including 4 relocations and 4 closures leading to a
net increase of 9 stores at the year-end. Over the same period, trading
square footage increased by 14% to 230,000 square feet.
In prior years we have sought to drive sales growth principally through new
store openings. As the company prepares for the next stage in its growth,
management's main focus has been realigned to maximise sales from existing
square footage. In the short-term this will remain our priority but in the
future we continue to believe that there will be scope for the further
expansion of trading space.
International
Overseas licensees contributed #0.8m to operating profit from #0.7m in the
previous year.
Our franchise business continues to grow successfully as we develop and
consolidate our presence in existing markets as well as enter new territories.
International demand for Oasis franchises is very encouraging, reflecting both
the success of our existing franchisees and the qualities of the brand. There
are plans to open at least 8 new stores in the current year, including our
first in Cyprus.
Coast
The performance of Coast, our brand targeting 30-45 year-old women, was
disappointingly inconsistent during 2000, in particular during the Christmas
trading period.
New openings will now be focused on department store concessions where Coast's
performance is much better than in stand-alone stores. We intend to open at
least 10 new concessions this year, a programme that we expect to continue
over the coming years.
BOARD CHANGES
Richard Glanville was appointed to the board on 1st December 2000 as Finance
Director following the resignation of Dominic Lavelle. An FCCA with a breadth
of financial and general business experience incorporating roles as IT
Director, Finance Director and Commercial Director within major blue chips
such as Kingfisher, Sears and Hays, Richard's range of skills gives him a
comprehensive understanding of the relationship between systems and business
controls.
In December 2000 Peter Evans resigned as IT Director and Richard Glanville has
now assumed his responsibilities for Information Systems and Logistics.
Derek Lovelock has now been Chief Executive of the company for 18 months and
it is an appropriate time for further board changes. From the AGM Michael
Bennett will assume the role of non-executive Chairman and Maurice Bennett,
together with Managing Director Vivian Scott, will become non-executive
directors
STRATEGY
We have already made significant progress in preparing Oasis for the next
phase of its growth. Last year we began developing Oasis' brand
differentiation whilst improving underlying margins and productivity. We
expect some of the benefits to be realised in the current year but much work
remains to be done.
We believe that the colour, excitement and boutique feel to be found at our
website and in Argyll Street is far more in tune with our core values than the
minimalist store design of the refitted stores introduced over the last two
years. Implementing the lessons learned from Argyll Street is therefore a
priority and it is our intention to introduce the differentiated elements of
the concept to existing Oasis stores in the current year. This will improve
productivity and profitability at minimal cost.
Further improvements will be made to the supply chain to ensure the delivery
to our stores of a well-designed, exciting and affordable product of improved
quality, thereby embodying the differentiated brand values that are so
important to our customer.
By driving efficiencies at the same time as investing in our brands we believe
Oasis will return to delivering improving returns to its shareholders.
Offer Discussions
Discussions are continuing with potential offerors for the Company, including
a management team led by Derek Lovelock, but these discussions remain at an
early stage.
DIVIDENDS
The Directors are recommending a final dividend of 4.1p per share making a
total dividend for the year of 7.0p (8.5p 1999/2000). Subject to shareholder
approval the final dividend will be paid on 27th July 2001 to those
shareholders on the register at the close of business on 22nd June 2001.
In determining the level of the final dividend to recommend to shareholders
and hence the total dividend for the year, the Board has had regard not only
to the results for the 52 weeks ended January 27th 2001, but also to the
anticipated performance of the business in the current financial year.
OUTLOOK
For the first 9 weeks of the new financial year, Oasis sales have risen 14%
and like for like sales by 5%. Margins are improving and stocks are lower and
cleaner.
Coast has achieved a sales increase of 25% with 6% like for like. Margins are
also rising and stock is turning faster than last year.
The Board is confident that it now has in place the right strategy to achieve
profitable growth during the current year and beyond.
OASIS STORES PLC
PROFIT AND LOSS ACCOUNT
FOR THE 52 WEEKS ENDED 27th JANUARY, 2001
2001 2000
Restated
#m #m
Turnover 138.1 131.8
Cost of sales
- before exceptional item (70.6) (65.3)
- exceptional item (1.9) -
(72.5) (65.3)
Gross profit 65.6 66.5
Distribution costs (52.0) (47.7)
Administrative expenses (7.1) (7.5)
Other operating income 0.0 0.0
Operating profit - before exceptional item 8.4 11.3
- exceptional item (1.9) -
6.5 11.3
Interest receivable and similar income 0.1 0.0
Interest payable and similar charges (0.5) (0.2)
Profit on ordinary activities before taxation
- before exceptional item 8.0 11.1
- exceptional item (1.9) -
6.1 11.1
Taxation (2.1) (3.5)
Profit for the financial period and profit
on ordinary activities after taxation 4.0 7.6
Dividends (3.7) (4.5)
Retained profit for the period 0.3 3.1
2001 2000
pence pence
Earnings per share - basic 7.59 14.49
Earnings per share - basic (before exceptional 11.28 14.49
item)
Other than the profit for the period, which was entirely derived from
continuing activities, there were no recognised gains or losses during the
current and previous period.
Historical cost profits are identical to those profits disclosed above.
OASIS STORES PLC
BALANCE SHEET AS AT 27th JANUARY, 2001
2001 2000
#m #m
Fixed assets
Intangible fixed assets - goodwill 0.2 0.2
Tangible fixed assets 26.4 26.9
Total fixed assets 26.6 27.1
Current assets
Stocks 17.5 18.2
Debtors 6.8 6.5
Cash at bank and in hand 2.6 3.5
26.9 28.2
Creditors
Amounts falling due within one year (19.7) (22.2)
Net current assets 7.2 6.0
Total assets less current liabilities 33.8 33.1
Creditors
Amounts falling due after more than one (0.6) (0.2)
year
Provisions for liabilities and charges (0.5) (0.5)
Net assets 32.7 32.4
Capital and reserves
Called up share capital 5.2 5.2
Profit and loss account 27.5 27.2
Equity shareholders' funds 32.7 32.4
OASIS STORES PLC
CASH FLOW STATEMENT
FOR THE 52 WEEKS ENDED 27th JANUARY, 2001
2001 2000
Restated
#m #m
Net cash inflow from operating activities 15.3 14.9
Returns on investments and servicing of finance
Interest received 0.1 0.0
Interest paid (0.5) (0.2)
Net cash outflow from returns on investments and
servicing of finance (0.4) (0.2)
Tax paid (3.1) (4.4)
Purchase of fixed assets (6.8) (12.7)
Sale of tangible fixed assets 0.2 0.1
Sale of current asset investment - 0.9
Net cash outflow from
Capital expenditure & financial investments (6.6) (11.7)
Equity dividends paid in the period (4.5) (4.5)
Increase/(Decrease) in cash in the period 0.7 (5.9)
NOTES TO THE ACCOUNTS
1. Turnover and Operating Profit
Turnover arises from the sales by the Company to third parties net of
discounts and value added tax and royalty income.
2001 2000
#m #m
GEOGRAPHICAL ANALYSIS
TURNOVER
United Kingdom:
- Oasis retail 112.7 108.5
- Oasis mail order 0.2 0.2
- Coast retail 6.4 5.7
- Total 119.3 114.4
Ireland - Oasis retail 10.7 9.8
Germany - Oasis retail 3.6 3.7
Rest of Europe, Middle and Far East
- overseas licensing 4.5 3.9
138.1 131.8
Turnover by country of destination is not materially different from turnover
by country of operation.
Turnover arises entirely from fashion retailing and may also be analysed as
follows:
Turnover:
European retailing:
- Oasis retail 127.0 122.0
- Oasis mail order 0.2 0.2
- Coast retail 6.4 5.7
- Total 133.6 127.9
Overseas licensing 4.5 3.9
138.1 131.8
European retailing 12.8 18.1
Overseas licensing 0.8 0.7
13.6 18.8
Unallocated net expenses (7.1) (7.5)
Operating profit 6.5 11.3
2. 2000 Comparative Figures
The comparative figures for the 52 weeks ending 29th January 2000, have been
restated to reflect a reclassification of early settlement discounts received
for prompt payment. These are now included in Cost of Sales, having previously
been classed as Interest receivable. The amount of the reclassification and
increase to Operating Profit in 2001 is # 1,284,000.
(2000 - # 1,081,000)
3. Exceptional item
During the second half of the year, the company carried out a thorough review
of the processes supporting the design and manufacture of garments. The
outcome of this review meant that the carrying value of raw material stock was
too high and in order to reflect the realisable value of the raw material
stock going forward, a one-off write down of #1,937,000 has been made in this
year's accounts.
4 Reconciliation of Operating profit to net cash inflow from operating
activities
2001 2000
Restated
#m #m
Operating profit 6.5 11.3
Depreciation charges 7.0 6.6
Loss on sale of fixed assets 0.2 0.5
Decrease/(Increase) in stocks 0.7 (3.3)
Increase in debtors (0.3) (1.2)
Increase in creditors 1.2 1.0
Net cash inflow from operating activities 15.3 14.9
The Directors recommend a final dividend of 4.10 pence per share (2000:
5.60p), which added to the interim dividend of 2.90 pence (2000: 2.90p), gives
a total dividend payable for the year of 7.00 pence per share (2000: 8.50p).
The final dividend will be paid on 27th July, 2001 to shareholders whose names
appear on the Register of Members at the close of business on 22nd June, 2001.
The Annual General Meeting of Oasis Stores Plc will be held at the offices of
SG Securities (London) Limited, Exchange House, Primrose Street, London EC2A
2DD on 12th June, 2001, at 11:00am.
Copies of the Annual report and Accounts will be sent to shareholders in due
course and additional copies will be available from the Company's registered
office: 13-16 Lakeside, Stanton Harcourt, Witney, Oxon, OX29 5TR.
5 Earnings per Share
The calculation of basic earnings per share is based on the profit on ordinary
activities after taxation of #3,980,000 (2000: #7,599,000) and a weighted
average of 52,457,175 ordinary shares in issue during the year (2000:
52,457,175).
An additional measure of basic earnings per share has been included on the
face of the profit and loss account. This is basic earnings before exceptional
item and is based on the profit on ordinary activities after taxation before
exceptional item of #5,917,000.
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