RNS Number:3631R
Premier Direct Group PLC
02 April 2008
PREMIER DIRECT GROUP PLC
Interim Results for the six month period ended 31 January 2008
Premier Direct Group Plc ("PDG" or "the Group"), the national shopping-at-work
company based in Newcastle, today announces its interim results.
KEY POINTS
6 months to 6 months to Year to
31 January 31 January 31 July
2008 2007 2007
Unaudited Unaudited Audited
Revenue (�'000) 10,741 12,734 21,157
Operating profit before charging one
off costs (�'000) 1,322 1,131 1,496
Operating profit (�'000) 1,322 1,131 1,138
Profit before tax (�'000) 924 846 537
Basic and diluted earnings per share
(pence) 4.5p 3.4p 2.9p
* Operating profit increased by 17%
* Basic and diluted earnings per share rose by 32%
* Gross margins improved further to 39.5% (2007: 36.3%)
* Benefits of tight cost controls coming through, with administrative
expenses reduced by �0.6m
* Strong purchasing relationships with Far East suppliers enables
sourcing of excellent products at highly competitive prices
* Oriflame trading satisfactory with new version of shopping-at-work
model launched
* Currently trading in line with expectations
Commenting, Eric McClenaghan, Chief Executive said:
"We are pleased to confirm that both the core shopping-at-work business and the
Oriflame cosmetics business continue to trade in line with our expectations. A
reduced overhead and improvements made to the operational structure have proved
highly beneficial, establishing a strong foundation on which to build. PDG has
not been immune to the retail downturn as the reduction in turnover testifies.
However, our ability to grow gross margins while maintaining tight control of
costs has helped us to deliver creditable profits in the first half of the
year."
Contacts
Premier Direct Group 0191 497 4100
Eric McClenaghan, Chief Executive
Christine Stobbs, Finance Director and Company Secretary
KBC Peel Hunt (Nominated Adviser and Broker) 020 7418 8900
David Anderson or Oliver Stratton
Press Enquiries:
Biddicks 020 7448 1000
Zoe Biddick
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT
Introduction
Premier Direct Group Plc ("PDG"), the national shopping-at-work company,
announces interim results for the six months ended 31 January 2008.
The Directors are pleased to confirm that the Group has continued to improve its
profitability. The strategy implemented over the past 18 months to drive the
sustainable development of the distributor network has improved operating
profits, although revenues have been running behind those achieved in H1 2007.
The Board is currently reviewing its strategy regarding the size and managerial
structure of its distributor base. On total sales of �10.7 million (2007: �12.7
million), the Group achieved an operating profit of �1.3 million (2007: �1.1
million). After charging interest of �0.4 million (2007: �0.3 million), profit
before tax of �0.9 million (2007: �0.8 million) was in line with the Board's
expectations.
The core shopping-at-work business and the Oriflame natural skincare products
business both contributed to operating profits in the period.
Operating & Market Review
The Board continues to implement, review and refine the strategy adopted in the
previous financial year. As these results demonstrate, careful management of the
distributor network has enabled us to run the business with fewer distributors
whilst delivering improved results and minimising recruitment expenditure. The
Board continues to monitor and develop its strategy to deliver sustainable
improvements in all areas of the business.
One of the Group's sales initiatives trialled in the period was to increase the
number of sales cycles in the run up to Christmas. The sales cycle in the 12
weeks before Christmas 2007 was changed to four weeks from six weeks but whilst
an increase in sales was generated, the improvement was lower than anticipated.
In addition, the IT system installed in the early summer of 2007, which includes
an integrated planning and forecasting model, generated misleading information
as to active distributor numbers, which directly led to an over-purchasing of
stock.
These factors led to the Group holding approximately �1.5 million more of
non-seasonal stock than it required. In order to meet the Group's short-term
financing requirements, just before the end of the first half in January, PDG
secured new additional short-term bank financing of �1.0 million. The short-term
bank financing has been repaid with the proceeds of a placing, which took place
early in the second half. On 22 February, �1.15 million (net of fees) was raised
by issuing 6,500,000 new Ordinary shares of 1p ("Ordinary Shares") at a placing
price of 20 pence per new Ordinary Share. The Directors and senior management
participated in this placing, committing a total of �430,000.
We have seen the benefits of our cost saving initiatives coming through during
the period, both in terms of reduced administrative expenses, particularly
warehousing and staff costs, and spending on distributor recruitment. As noted
last year, we have operated a Business Coordinator structure for the last 12
months, with each Business Coordinator responsible for field management,
including the training and recruitment of distributors, in approximately eight
areas. The field management structure is under review as we do not believe we
have achieved the right balance between recruitment activities and developing
sales within our existing distributor base.
Nevertheless, we continue to see the benefits of some of the distributor network
management initiatives which we implemented some 18 months ago. For the second
consecutive year, we have seen stable distributor numbers with far fewer
distributors falling away following the intensive Christmas season. As a result,
we are retaining a high proportion of trained, experienced distributors, likely
to generate a consistent level of sales and to necessitate a lower level of
administrative support and training.
We were disappointed with the impact of a four week cycle introduced in the run
up to Christmas. Whilst sales improved, the improvement was insufficient to
justify the levels of extra stock required to service the shorter cycle.
At our peak in November 2007, stock reached �8m which was the principal reason
for the additional fund raising in February 2008. We are very pleased to report
that stock levels are approximately �5.8m at the 31 March 2008 as a result of
many actions taken to reduce stock to a more normal level.
In addition, we have continued to enjoy excellent trading relationships with our
key partners in the Far East. Despite the fact that product costs are coming
under extreme pressure, we are still able to offer first class products at
discounted prices to our customers whilst maintaining our gross margins.
Oriflame is trading satisfactorily and we have recently launched a new version
of the shopping-at-work model to operate alongside the traditional Oriflame
business. This involves recruitment of a new network of distributors dedicated
to selling Oriflame products in the workplace. Initial results have been
encouraging. We are pleased with the recent progress made by our sales managers
operating both models.
Financial Review
Revenue for the half year to 31 January 2008 was �10.7 million compared with
�12.7 million for the half year ended 31 January 2007. However, although Group
gross profit fell from �4.6 million in 2007 to �4.2 million in 2008, largely as
a result of the reduction in revenue, we achieved a 17% increase in operating
profit to �1.3 million (2007: �1.1 million). This improvement was delivered
thanks to the combination of continuing strong purchasing power and the focus on
managing our distributor network and costs in an effective manner.
Revenue of the shopping-at-work business was �9.6 million in 2008 compared with
�11.6 million in 2007. The fall in sales reflects lower activity levels from
existing agents who were 76% active compared to 81% in 2007. Whilst distributor
numbers have been in line with than 2007, average sales per distributor have
fallen by 10%. This 10% reduction is in part due to the rate of product sales
and in part due to fewer sales calls being made, with a slightly reduced number
of products on offer.
Oriflame sales in the half year were �1.1 million (2007: �1.1 million). Whilst
we are pleased that sales have not slipped in this difficult environment, a new
head of sales was appointed in this business in January 2008 to support ongoing
development and early signs are encouraging.
Gross profit margin for the core business is 36.4% (2007: 32.7%). This
improvement in margin reflects the efforts of the purchasing team and the
strength of our relationship with key Far East suppliers which enable us to
continue to source products at extremely competitive prices. The Group's gross
margin is 39.5% (2007: 36.3%). Oriflame gross profit amounted to �0.7 million
(2007: �0.8 million).
Administrative expenses for the core shopping-at-work business reduced from �2.9
million in 2007 to �2.5 million in 2008. Oriflame administrative expenses were
also reduced to �0.4 million (2007: �0.7 million). The decrease in
administrative expenses in the shopping-at-work business reflects cost
reductions across the board but particularly in respect of warehousing and staff
costs. The total Group's administrative expenses in 2008 were �2.9 million
(2007: �3.5 million).
The net interest charge of �0.4 million was �0.1 million higher than the
comparative six months last year as a result of �0.1 million arrangement fee for
the short-term bank financing.
The resulting profit on ordinary activities before taxation for the period was
�0.9 million (2007: �0.8 million). Basic earnings per share increased to 4.5
pence, compared with 3.4 pence in 2007.
Net debt (being bank loans plus hire purchase liabilities less cash at the bank)
remained at �6.3 million at the period end due to inclusion of �1.0 million
short-term bank financing. The short-term financing was repaid on 3 March 2008
reducing debt to �5.3 million. Reduction of the level of bank debt is a key
focus over the next 12 months.
Working capital levels increased as a result of stock levels increasing to �6.9
million (2007: �5.8 million) due to overstocking as noted above and an increase
in trade and other receivables to �3.6 million (2007: �2.6 million).
People
On 27 March 2008 the Board appointed Keith Milton as Commercial Director for the
Group.
Outlook
Despite the issues relating to stock and the pre-Christmas sales cycles
discussed above, the Board expects the results for the year ending 31 July 2008
to be in line with its expectations, after taking account of additional
financing costs relating to short-term bank funding and the share placement.
The Group continues to maintain both gross margins and the operating cost
reductions achieved in the second half of last year, while at the same time
focusing on consolidating the performance of its distributor network. As a
result, the Board expects the Group to continue to trade profitably in the
second half of the current financial year.
The Directors intend to monitor and refine the current strategy in order to
drive long term steady growth in cash generation and profitability for the
Group.
Graham Wilson Eric McClenaghan
Non-Executive Chairman Chief Executive
2 April 2008
Consolidated Income Statement
for six months ended 31 January 2008
Note Six Six
months months Year
ended ended ended
31 31 31
January January July
2008 2007 2007
Unaudited Unaudited Audited
�000 �000 �000
Revenue 10,741 12,734 21,157
Cost of sales (6,495) (8,100) (13,365)
--------- --------- --------
Gross profit 4,246 4,634 7,792
Administrative expenses (2,924) (3,503) (6,654)
Analysed as:
Termination costs - - (195)
Lease costs - - (163)
Other administrative expenses (2,924) (3,503) (6,296)
--------- --------- --------
(2,924) (3,503) (6,654)
--------- --------- --------
Operating profit 1,322 1,131 1,138
Financial income - - 5
Financial expenses (398) (285) (606)
--------- --------- --------
Profit before tax 924 846 537
Taxation 3 - (150) 70
--------- --------- --------
Profit for the year attributable to equity
holders of the parent 924 696 607
--------- --------- --------
Basic earnings per share 4 4.5p 3.4p 2.9p
--------- --------- --------
Diluted earnings per share 4 4.5p 3.4p 2.9p
--------- --------- --------
Dividend per ordinary share paid
in the period/year 1p - -
--------- --------- --------
The Group has no recognised income and expenses other than those included in the
consolidated income statement. All the above results are derived from continuing
operations.
Consolidated Statement of Changes in Equity
for six months ended 31 January 2008
Share Share Retained Total
Capital premium earnings
�000 �000 �000 �000
At 1 August 2007 207 3,596 (151) 3,652
Profit for the period - - 924 924
Equity settled share based
transactions - - 39 39
Dividends - - (207) (207)
------- -------- -------- --------
At 31 January 2008 207 3,596 605 4,408
------- -------- -------- --------
Consolidated Statement of Changes in Equity
for six months ended 31 January 2007
Share Share Retained Total
Capital premium earnings
�000 �000 �000 �000
At 1 August 2006 207 3,596 (826) 2,977
Profit for the period - - 696 696
Equity settled share based
transactions - - 34 34
------- -------- -------- --------
At 31 January 2007 207 3,596 (96) 3,707
------- -------- -------- --------
Consolidated Statement of Changes in Equity
for the year ended 31 July 2007
Share Share Retained Total
Capital premium earnings
�000 �000 �000 �000
At 1 August 2006 207 3,596 (826) 2,977
Profit for the period - - 607 607
Equity settled share based
transactions - - 68 68
------- -------- -------- --------
At 31 July 2007 207 3,596 (151) 3,652
------- -------- -------- --------
Consolidated Balance Sheet
at 31 January 2008
6 months 6 months Year
ended ended ended
31 31 31
January January July
2008 2007 2007
Unaudited Unaudited Audited
�000 �000 �000
Non-current assets
Property, plant and equipment 1,248 1,402 1,483
Intangible assets 5,017 5,954 5,017
Deferred tax assets 401 29 401
--------- --------- --------
6,666 7,385 6,901
========= ========= ========
Current assets
Inventory 6,869 5,776 6,515
Tax receivable 576 385 575
Trade and other receivables 3,552 2,552 1,910
Other financial assets - - 3
Cash and cash equivalents 311 247 141
--------- --------- --------
11,308 8,960 9,144
--------- --------- --------
Total assets 17,974 16,345 16,045
========= ========= ========
Non-current liabilities
Interest-bearing loans and borrowings (2,238) (1,497) (391)
Deferred income (1,245) (1,291) (1,265)
Other payables (478) (700) (478)
Deferred tax liabilities (86) (11) (86)
--------- --------- --------
(4,047) (3,499) (2,220)
--------- --------- --------
Current liabilities
Bank overdraft (2,192) (2,452) (3,490)
Interest-bearing loans and borrowings (2,236) (1,340) (2,363)
Trade and other payables (5,040) (5,288) (4,269)
Deferred income (51) (51) (51)
Other financial liabilities - (8) -
--------- --------- --------
(9,519) (9,139) (10,173)
--------- --------- --------
Total liabilities (13,566) (12,638) (12,393)
========= ========= ========
Net assets 4,408 3,707 3,652
========= ========= ========
Equity attributable to equity holders of
the parent
Share capital 207 207 207
Share premium 3,596 3,596 3,596
Retained earnings 605 (96) (151)
--------- --------- --------
4,408 3,707 3,652
========= ========= ========
Consolidated Cash Flow Statement
for six months ended 31 January 2008
Six Six Year
months months ended
ended 31 ended 31 31
January January July
2008 2007 2007
Unaudited Unaudited Audited
�000 �000 �000
Cash flows from operating activities
Profit for the period 924 696 607
Adjustments for:
Depreciation 218 137 272
Financial income - - (5)
Financial expenses 393 285 606
Gain on sale of property, plant
and equipment 9 - -
Equity settled share-based
payment expenses 39 34 68
Taxation - 150 (70)
--------- --------- ---------
Operating profit before changes
in working capital 1,583 1,302 1,478
(Increase)/decrease in trade and other
receivables (1,643) 55 708
(Increase)/decrease in
inventory (354) 739 148
Increase/(decrease) in trade
and other payables 732 (395) (752)
--------- --------- ---------
Cash generated from the operations 318 1,701 1,582
Tax received - 282 314
--------- --------- ---------
Net cash from operating activities 318 1,983 1,896
--------- --------- ---------
Cash flows from investing activities
Proceeds from sale of property,
plant and equipment 54 - 27
Interest received - - 2
Acquisition of subsidiary, net
of cash acquired - - (449)
Acquisition of property, plant
and equipment (23) (81) (177)
--------- --------- ---------
Net cash from investing activities 31 (81) (597)
--------- --------- ---------
Cash flows from financing
activities
Proceeds from new bank loans 3,000 - -
Interest paid (394) (327) (532)
Repayment of borrowings (1,200) (1,600) (1,900)
Payment of finance lease liabilities (80) (29) (65)
Dividends paid (207) - -
--------- --------- ---------
Net cash from financing activities 1,119 (1,956) (2,497)
--------- --------- ---------
Net increase/(decrease) in cash
and cash equivalents 1,468 (54) (1,198)
Cash and cash equivalents at
beginning of period (3,349) (2,151) (2,151)
--------- --------- ---------
Cash and cash equivalents at
end of period (1,881) (2,205) (3,349)
--------- --------- ---------
Notes to the interim report
1. Basis of Preparation
The Interim financial information has been prepared on the basis of the
accounting polices adopted in the Company's statutory accounts for the year
ended 31 July 2007, as revised for the implementation of specific new or amended
endorsed standards or interpretations.
2. Status of financial information
The interim financial information for the two half year periods has not been
audited or reviewed by the auditors. The comparative figures for the year ended
31 July 2007 are not the Company's statutory accounts for that financial year.
Those accounts have been reported on by the Company's auditors and delivered to
the Registrar of Companies. The report of the auditors was unqualified, did not
include a reference to any matters to which the auditors drew attention by way
of explanation without qualifying their report and did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
3. The tax charge for the period is based on the anticipated effective
tax rate for the year to 31 July 2008. This has been estimated at nil% due to
unutilised tax losses and deferred tax assets brought forward from prior years.
4. The calculation of earnings per share and diluted earnings per share
are based on the following profit after taxation and weighted average numbers of
shares:
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2008 2007
2007
(Unaudited) (Unaudited) (Audited)
Earnings per share
Profit after tax (�'000) 924 696 607
Weighted average number of shares 20,730,920 20,730,920 20,730,920
Diluted earnings per share
Profit after tax (�'000) 924 696 607
Weighted average number of shares 20,730,920 20,773,407 20,801,945
All of the above relate to continuing operations.
5. Dividends
Six months Six months Year
ended ended ended
31 January 31 January 31 July
2008 2007 2007
Unaudited Unaudited Audited
�000 �000 �000
Total dividends paid
2007 final dividend (�0.01 per share) 207 - -
----------- ---------- ----------
207 - -
----------- ---------- ----------
Dividends proposed at period end and not
included as a liability in the accounts
2007 final dividend (�0.01 per share) - - 207
----------- ---------- ----------
- - 207
----------- ---------- ----------
6. The financial information for the six months ended 31 January 2007
(included as comparatives) has been presented consistent with the Group's
adoption of IFRSs as adopted by the EU ("Adopted IFRSs") for the year ended 31
July 2007. An explanation of the transition to Adopted IFRSs in that year can be
found in the published financial statements. The financial information for the
period ended 31 January 2007 was previously prepared under UK GAAP.
7. Copies of the interim report will be sent to all shareholders by 30
April 2008 and will be available to the public after that from the Group's
registered office. It will also be available on the group's website
www.premierdirectgroup.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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