TIDMBON
RNS Number : 4003I
Bonmarche Holdings PLC
19 June 2017
19 June 2017
Bonmarché Holdings plc
("Bonmarché" or the "Company" or the "Group")
Preliminary Results for the 53 week period ended 1 April
2017
Bonmarché, one of the UK's largest women's value retailers,
reports its preliminary results for the 53 week period ended 1
April 2017.
Financial Highlights:
-- Total revenue GBP190.1m (FY16*: GBP188.0m)
-- Store like-for-like sales down 4.3%, online sales up 2.2%
-- Group PBT GBP5.8m (FY16*: GBP9.6m)
-- In line with revised expectations, underlying PBT GBP6.3m (FY16*: GBP10.6m)
-- Underlying basic EPS 10.1p (FY16*: 18.3p)
-- Cash generated from operations GBP9.5m (FY16*: GBP13.2m)
-- Recommend final dividend 4.64 pence per share, bringing the
total for year to 7.14 pence (FY16*: 7.14p)
Strategic Highlights:
Bonmarché remains well placed to serve the 50 plus women's value
clothing market.
Aim - grow by implementing robust and credible plan:
-- Develop and modernise product, guided by single, clear customer profile
-- Unlock true potential of Bonus Club loyalty scheme
-- Build on foundations laid in FY17 to drive online performance
-- Modernise store experience and improve consistency through renewed retail focus
-- New systems & processes, carefully implemented, to enable modernisation
-- Clearer vision & mission to form the pivot for more effective ways of working
Helen Connolly, Chief Executive of Bonmarché, commented:
"Since joining the business almost a year ago, I have been
struck by the passion and drive of colleagues throughout the
business and I am confident that with our current focus on
modernising and improving the offering for our customers, we remain
well placed to serve the 50 plus women's value clothing market.
"A combination of internal and external factors over the past
year prevented us from improving at the rate we had aimed for.
However, we believe that the business is now well positioned, with
a compelling proposition and robust plan.
"As outlined previously, it is clear that the direction of
travel is broadly right, albeit the effectiveness of execution
needs to improve. Our update today provides further detail on the
areas where we see the greatest opportunities and how we are
already beginning to address these.
"I would like to thank all my colleagues for their continued
dedication to Bonmarché, and I look forward to updating on our
progress over the coming year as we drive forward our strategy to
successfully grow profitable sales by gaining market share".
Analyst Meeting
A meeting for analysts will be held today at the offices of FTI
Consulting, 200 Aldersgate, London, EC1A 4HD, commencing at
9.30am.
Bonmarché Holdings plc c/o FTI +44 (0)20
Helen Connolly, Chief Executive 3727 1000
Stephen Alldridge, Finance Director
FTI Consulting - Communications
adviser
Jonathon Brill, Georgina Goodhew, +44 (0)20 3727
Eleanor Purdon 1000
Investec Bank plc - Broker
Garry Levin, David Flin, Alex +44 (0)20 7597
Wright 5970
'(*) 52 weeks ended 26 March 2016
Notes to Editors:
Bonmarché is one of the UK's largest women's value retailers,
focused on selling stylish, affordable, quality clothing and
accessories in a wide range of sizes, via its own store portfolio
and online. Established in 1982, Bonmarché has more than 30 years
of experience in this market segment, operating across the UK.
Forward looking statements
Certain statements within this report may constitute "forward
looking statements" which relate to all matters that are not
historic facts, including anticipated financial and operational
performance, business prospects and similar matters. These forward
looking statements reflect the Board's current expectations
concerning future events and actual results may differ materially
from current expectations or historic results. Any such forward
looking statements are subject to risks and uncertainties,
including but not limited to, failure by Bonmarché to accurately
predict customer fashion preferences, decline in the demand for
products offered by Bonmarché, competitive influences, changes in
the level of store traffic or consumer spending habits, the
effectiveness of Bonmarché's brand awareness and marketing
programmes, general economic conditions or a downturn in the retail
industry.
CHAIRMAN'S STATEMENT
The market backdrop to FY17 was more challenging than we had
expected, even in the context of the cautious state of mind which
prevailed a year ago. The decline in the apparel market created by
factors such as price and wage inflation, uncertainty linked to the
referendum on Brexit and unseasonal weather patterns meant that in
order to grow, Bonmarché needed to deliver a significantly improved
offer to its customers.
Disappointingly, and for reasons set out in the Operating and
Financial Review below, the rate of improvement was slower than
anticipated and therefore we were unable to secure the increase in
market share necessary to deliver the result we had aimed for.
Nevertheless, I am pleased with the manner in which management has
risen to the challenge and, as a result, the business is now
significantly stronger than it was a year ago, with a plan which
has evolved to reflect the changing market dynamics.
As a retailer serving the 50 plus women's value clothing market,
I believe that the rationale for Bonmarché's strategic positioning
remains compelling. Despite the difficulties in the apparel market,
the size of the demographic group on which we focus is still
forecast to increase in the coming years. In addition, this sector
continues to be relatively poorly served which presents us with a
great opportunity. The continuing validity of our strategic
positioning means that there is no requirement for significant
change and therefore the strategy is evolutionary, and low-risk.
The main themes, all of which are covered in greater detail in our
Strategy Update, are:
1. simplification of how we think of our customers. We have
reduced the number of model customer profiles used to inform
planning and decision making from the previous four, to one, to
make it easier for our colleagues to achieve the improvements in
execution for which we strive;
2. to bring about a modernisation of the proposition we offer to
the customer, encompassing the clothes we sell, the service we
provide and the way we interact; and
3. improved execution through a renewed focus on basic retail
good practice (which applies as much to a multi-channel offering as
it does to traditional high street shopkeeping) and better
co-ordinated working within the business.
Bonmarché's employees have worked tirelessly through what
continues to be a challenging but exciting journey for the business
as we focus on delivering our strategic plan, and on behalf of all
of the Board and management team I would like to take this
opportunity to thank them for their continued support and hard
work.
The Board
On 15 August 2016, Helen Connolly joined the Group and the Board
as Chief Executive Officer, to lead the business in its next phase
of development. Helen has extensive relevant retail experience,
most recently working at Asda where she was Senior Buying Director
for the George clothing business. Helen has already made a great
contribution, having navigated the business through a particularly
difficult trading period, and established sound plans for the
future.
On 8 April 2016, Mark McClennon joined us as an independent
Non-executive director. Until recently Mark was CIO (Consumer) at
Unilever plc, and has recently taken up an appointment as CIO of
Burberry plc. We are already benefiting from Mark's experience and
wisdom as we implement the business change programme described in
the Operating and Financial Review. On the same date, Sergei
Spiridonov joined the Board as Sun's nominee director, replacing
Michael Kalb as a non independent Non-executive director. Sergei
also brings valuable experience, most recently prior to joining
Sun, as part of Tesco's strategic transformation team and prior to
that as a partner with McKinsey & Company. Meanwhile, Michael
Kalb continues his association with the Company, as a Board
Observer.
Corporate governance
For the first two weeks of the financial year (until 8 April
2016), only one independent Non-executive director, other than
myself, served on the Board. However, Mark McClennon's appointment
brought us into full compliance with the UK Corporate Governance
Code in this respect. Mark also joined the Remuneration, Audit and
Nomination committees, bringing us also into full compliance with
the Code requirement for committee membership.
The Code's "comply or explain" approach permits listed companies
some degree of flexibility to apply governance principles other
than in strict accordance with the Code, for example, to take
account of differences in business size and complexity. Bonmarché's
small size and straightforward business model would afford us the
opportunity to use this flexibility, but we have not sought to do
so and believe that we are fully compliant with the Code, save as
described above.
Dividend
The Board is recommending a final dividend of 4.64 pence per
share in respect of FY17 which is in line with last year's final
dividend, making total dividends for the year 7.14 pence per share,
also in line with the total dividends paid in respect of FY16. If
approved by shareholders at the AGM on 27 July 2017, the dividend
will be paid on Friday 4 August 2017 to shareholders on the
register as at the close of business on Friday 30 June 2017.
Outlook
Trading since the beginning of the new financial year has been
in line with the Board's expectations and the financial position of
the business continues to be sound, with no net debt and a balance
sheet which provides a stable platform for the future.
We believe that the challenging market conditions are likely to
continue but, as noted above, we are confident in our strategy and
remain focused on executing it successfully. We believe that the 50
plus market continues to be under-served and this, combined with
the forecast increase in the number of people who are potential
customers for Bonmarché, positions us well for future growth. We
therefore aim to meet our overriding objective of growing
profitable sales by gaining market share.
John Coleman
Chairman
19 June 2017
Operating and Financial Review
Overview of results
FY17 was a challenging year; the apparel market has been in
decline, with demand affected by consumers' response to factors
such as inflation, the referendum on Brexit, and unseasonal weather
patterns, which, as we have noted in the past, significantly
influence our customers' shopping habits. However, our objective
was to grow by gaining market share, and we have not achieved this.
We have learned much as a result, and believe that we are in better
shape now than we were a year ago. In particular, we have in place
plans that we believe are robust and credible and which we believe
will lead to growth despite the difficult market. In this review we
describe the financial performance and operational factors which
put it into context, and provide an update on our strategic
progress and plans.
The Group's profit before tax ('PBT') was GBP5.8m (FY16:
GBP9.6m) and, in line with our revised expectations, underlying PBT
(profit before tax and exceptional items) was GBP6.3m (FY16:
GBP10.6m). The underlying PBT margin was 3.3%, compared to 5.6% in
the prior year.
The reporting period under review includes a 53(rd) week to more
closely align our reporting year-end with our accounting reference
date of 31 March. To aid comparisons with FY16's 52 week reporting
period, we include references where appropriate to the
corresponding FY17 figures for the 52 week period ended Saturday 25
March 2017 as well as for the 53 week period ended 1 April
2017.
The Board is recommending a final dividend of 4.64 pence per
share in respect of FY17 which is in line with last year's final
dividend, making total dividends for the year 7.14 pence per share,
also in line with the total dividends paid in respect of FY16.
Profit and loss summary FY17 FY16 Change
FY17 figures in this table GBP'm GBP'm
are on a 53 week basis
------------------------------- -------- ------- ---------
Revenue 190.1 188.0 1.1%
Product gross margin 111.5 107.6 3.6%
Product gross margin % 58.6% 57.3% 130bps
Underlying operating expenses (105.0) (96.9) (8.4%)
Underlying operating expenses
% 55.2% 51.5% (370bps)
PBT 5.8 9.6 (39.4%)
Underlying PBT 6.3 10.6 (40.6%)
Underlying PBT margin
% 3.3% 5.6% (230bps)
Basic EPS 9.2p 16.1p (42.9%)
Underlying basic EPS 10.1p 18.3p (44.8%)
Proposed final dividend
per share 4.64p 4.64p 0.0%
Sales
Total sales for the 53 weeks ended 1 April 2017 decreased by
0.5% compared with the corresponding 53 week period ended 2 April
2016; store LFL sales decreased by 4.3% and online sales grew by
2.2%. The two tables below show the sales growth/decline by each
main channel, for the 53 week and 52 week periods.
We measure two key performance indicators in relation to sales -
store LFL sales, and the percentage of total sales represented by
online sales. We expect online sales to be an area of growth, hence
the focus on this KPI.
The store LFL sales result provides a good indication of
performance in the underlying business and has the benefit of being
widely understood. In the future, interpreting this stand-alone
measure may become harder as the interplay between customer
journeys in stores and online becomes increasingly integrated;
nevertheless we expect this to continue to be an important
indicator for the foreseeable future.
Sales growth from new stores (stores opened during this period
and opened during the previous financial year which have traded for
their first full year) continues to be important; however, we
expect the rate of growth from new stores to gradually reduce as
the chain approaches maturity over the next several years, and we
do not treat new store sales growth as a KPI.
Due to the inclusion of the 53(rd) week in FY17, in order to aid
comparisons, the FY16 figures in the table below represent the 53
weeks ended 2 April 2016.
Increase/
Sales analysis Increase/ (decrease)
(GBP'm) 53 week basis FY17 FY16 (decrease) %
-------------------------- ------- ------- ------------ ------------
LFL sales (1) 192.5 201.1 (8.6) (4.3%)
New stores from FY16 11.1 5.3 5.8 108.2%
New stores from FY17 6.4 0.0 6.4 100.0%
Sales from stores closed
in period 2.0 7.1 (5.1) (71.0%)
Online sales 16.1 15.8 0.3 2.2%
Total sales (incl.
VAT) 228.1 229.3 (1.2) (0.5%)
-------------------------- ------- ------- ------------ ------------
Other (2) 0.0 0.1 (0.1) (36.7%)
VAT (38.0) (38.2) 0.2 (0.4%)
Total revenue 190.1 191.2 (1.1) (0.5%)
-------------------------- ------- ------- ------------ ------------
Memo: LFL and online
sales combined 208.6 216.8 (8.2) (3.8%)
-------------------------- ------- ------- ------------ ------------
In addition, the table below shows the FY17 sales on a 52 week
basis so that they may be compared with the FY16 figures as
reported last year. The 52 week FY17 figures are for the 52 weeks
ended 25 March 2017.
Increase
Sales analysis Increase/ / (decrease)
(GBP'm) 52 week basis FY17 FY16 (decrease) %
-------------------------- ------- ------- ------------ --------------
LFL sales (1) 188.6 197.9 (9.3) (4.7%)
New stores from FY16 10.9 5.2 5.7 111.5%
New stores from FY17 6.1 0.0 6.1 100.0%
Sales from stores closed
in period 2.0 7.0 (5.0) (71.0%)
Online 15.7 15.4 0.3 1.8%
Total sales (incl.
VAT) 223.3 225.5 (2.2) (0.9%)
-------------------------- ------- ------- ------------ --------------
Other (2) 0.0 0.1 (0.1) (36.7%)
VAT (37.2) (37.6) 0.4 (0.8%)
Total revenue 186.1 188.0 (1.9) (1.0%)
-------------------------- ------- ------- ------------ --------------
Memo: LFL and online
sales combined 204.3 213.3 (9.0) (4.2%)
-------------------------- ------- ------- ------------ --------------
1. Each year, new stores that have been open throughout the
previous financial year become classified as 'LFL' stores.
Therefore, within the prior year comparative, the split between LFL
and new stores alters each year, and the analysis of the FY16 'LFL'
sales and 'new store' sales differs from the corresponding analysis
for FY16 shown in last year's Annual Report. The total sales and
total revenue figures in the FY16 column are unaffected.
2. 'Other' comprises the net effect of revenue from the
wholesale supply of goods to a franchise partner with a single
store in Gibraltar, less the value donated to charitable causes,
being the proceeds from selling Bonmarché carrier bags. Although
immaterial, we include the reference to give visibility of the
reconciliation between the figures we use to derive LFL percentages
and the statutory revenue figures.
LFL sales
Store LFL sales decreased by 4.3%, or 4.7% on a 52 week basis.
Data from Kantar, a market research firm, indicates that during the
52 week period ended 12 March 2017, the total 50+ women's outer and
sportswear market (our closest benchmark index) fell by 4.1%, a
level of decline which we did not foresee at the beginning of the
year. However, despite the greater than expected market decline,
our LFL sales should have been more resilient. As set out in the
Strategy Update, we have a clear plan in place to develop and
improve the customer proposition to ensure that, in future, the
Group is better positioned to increase its market share
profitably.
In common with many retail businesses, Bonmarché's profits are
highly sensitive to changes in sales; consequently the fall in LFL
sales was the principal driver of the fall in PBT compared to the
previous period. As always, sales were affected by a range of
factors, both internal and external, which we have outlined
below.
Internal factors:
-- Product
o Long lead times and a supply base heavily dominated by China
as a country of origin restricted our ability to react to changes
in seasonal demand and offer diversity of product handwriting.
o Too significant a shift towards ranges with a casual end use,
sales of which tend to be particularly dependent on weather, and
therefore did not perform well this year. In addition, this year's
casual ranges were not sufficiently appealing to our customers.
o Not enough focus on innovation or "newness" compared to
product we have offered customers previously. Our customers
typically shop with us regularly and we must ensure that we
continually create a reason for them to buy - this is therefore a
key focus for the coming year.
-- Loyalty - "Bonus Club"
The customer loyalty scheme remains valuable, with approximately
1.6m active customers. Feedback from a customer survey carried out
in early March 2017 indicated that the scheme is still popular and
well liked. However, the scheme did not contribute to sales growth
during the year for the following reasons:
o The level of membership has not grown as the focus had drifted
away from signing up new customers. This is linked to the wider
point made below regarding basic retail disciplines and will be
addressed through a renewed focus in the coming year.
o Certain elements of the scheme need modernising; for example
the online experience is not seamlessly linked to the store
experience.
o We are not fully utilising the data which the scheme provides,
for example, to engage more effectively with customers, or reward
the most loyal customers to make them feel truly valued.
-- Basic retail disciplines
o These have not been maintained to a consistently high enough
standard throughout the store estate and a sharper focus is
required on things which matter the most to our customers. A
significant change to the retail management structure was completed
just after the year-end, which is discussed in further detail in
the Strategy Update.
External factors
-- As already noted, the market in which we operate declined.
-- BHS, a significant competitor, went into administration in
April 2016. Over the following months it cleared its residual stock
at discounted prices prior to closing its stores, which adversely
affected Bonmarché's sales in late April and May 2016. However,
during the second half of the year, once all the BHS stores had
closed, our sales benefited and, over the year as a whole, we
estimate that the effect on Bonmarché's sales was broadly neutral.
During the coming year this should have a slightly positive effect
on our sales.
-- Retailers are sometimes perceived to be overeager to refer to
the weather as the cause of poor performance; nevertheless it does
have a significant effect on our business, both positively and
negatively. The weather pattern during the first half of the year
provided a disincentive for consumers to shop for seasonal
clothing, impacting footfall; however, the impact in the second
half proved neutral, if not favourable.
Sales from new stores
During the year we opened 4 new solus stores, 6 stores within
garden centres and 12 other concessions, relocated 3 solus stores
and closed 7 stores (see table below). The average number of
outlets open during the year was 321 (FY16: 302). The net
additional sales accruing in FY17 as a result of opening and
closing stores was GBP7.1m. This comprised the sales from new
stores which opened during the year (GBP5.8m), a full year of sales
from the stores which opened during the previous financial year and
therefore only traded for part of FY16 (additional GBP6.4m in
FY17), less the reduction in sales resulting from stores which
closed during the period but that had traded throughout FY16
(GBP5.1m).
Number of stores As at Opened Closed As at
26 Mar 1 Apr
2016 2017
---------------------- -------- ------- ------- -------
Solus Bonmarché
stores 270 4 3 271
Solus Bonmarché
stores relocated n/a 3 3 n/a
Garden centre
concessions 30 6 1 35
Other concessions 12 12 3 21
Total 312 25 10 327
---------------------- -------- ------- ------- -------
Overall, the performance of the new stores was in line with the
investment return targets, with average paybacks within 3 years for
solus stores and 1.5 years for concessions. During the coming year
we expect to open approximately 5 new solus stores and
approximately 10 concessions/other locations, and, as part of the
ongoing management of the store portfolio, will close approximately
6 stores/concessions at the end of their leases or at lease break
points.
The majority of stores we closed were concessions, which, having
traded for a year, did not meet the required performance criteria
and were closed after the lease break which we build into all
concession agreements. In addition, we closed two "pop up" stores
which we had traded on a short terms basis with an option to extend
the term if the location proved appropriate for a more permanent
store and, we closed three stores as part of an exercise to
relocate within the same town.
Online sales
Online sales represent sales transacted through Bonmarché's
website. This represents a slight change from our previous
practice, when we reported "multi-channel" sales which included
sales made via the Bonmarché website and from other channels - the
Ideal World TV shopping channel, and from stores hosted on eBay and
Amazon. These other channels were peripheral and generated
insignificant profits, and to help improve our focus on the parts
of the business that we expect to contribute more to growth, during
the year, we ceased selling from them. We will continue to review
whether these or other similar channels may be worth reconsidering
at some point in the future, but there are currently no plans to do
so.
To show more clearly the true sales from Bonmarché's own online
store, the sales from these discontinued channels have been
reclassified within "Sales from stores closed in period" in the
sales analysis tables shown above and "Online" now only includes
sales from the Bonmarché website. The tables below show the
year-on-year sales from each of the components of what we formerly
called "multi-channel".
Multi-channel sales FY17 FY16 Increase/ Increase
analysis GBP'm GBP'm (decrease) / (decrease)
(incl. VAT, 53 weeks) GBP'm %
------------------------ ------- ------- ------------ --------------
Online 16.1 15.8 0.3 2.2%
TV shopping 0.4 0.7 (0.3) (46.6%)
Amazon 0.2 0.2 (0.0) (5.1%)
eBay 0.1 0.2 (0.1) (29.1%)
Multi-channel sales FY17 FY16 Increase/ Increase
analysis GBP'm GBP'm (decrease) / (decrease)
(incl. VAT, 52 weeks) GBP'm %
------------------------ ------- ------- ------------ --------------
Online 15.7 15.4 0.3 1.8%
TV shopping 0.4 0.7 (0.3) (45.7%)
Amazon 0.2 0.2 (0.0) (3.5%)
eBay 0.1 0.2 (0.1) (27.8%)
Online sales increased by 2.2%, or 1.8% on a 52 week basis, and
represented 7.1% of total FY17 sales (FY16: 6.9%). Although sales
grew, we consider this a poor performance, given the general trend
of consumers increasingly switching channels to embrace a
multi-channel approach. However, we were pleased that our
performance improved significantly during the year, with the first
quarter's 4.1% sales decline contrasting with 15.2% growth in the
fourth quarter. We expect to see this trend continue as the
benefits of our new Demandware web platform are realised (see
below).
There are factors which affect sales that are common to both the
high street stores and the online store such as the appeal of
product ranges, availability of the right product at the right
time, strength of demand for seasonal clothing, and consumer
confidence/disposable income. This is illustrated by the fact that
both channels grew by approximately 8% more in the second half of
the year than in the first.
Nevertheless, the improvement in the online performance
throughout the year reflects the steady progress made to improve
the online offering, most notably launching a new site on a
"Demandware" platform at the end of September 2016, with no
disruption as a result of this move. Having introduced the new
platform, during the second half of the year we began to unlock the
benefits of its new features, and believe that the improved
performance since Christmas is partly as a result of this.
Product gross margin
The product gross margin percentage ("gross margin" or "margin")
comprises two main components - the margin that would result if no
discounts were applied (the "bought-in margin" or "BIM"), and the
level of discounting to achieve actual sales - referred to as
"markdown". The combination of these components is the product
gross margin.
The margin was 58.6%, 130bps higher than the 57.3% we reported
last year. The increase in margin was a result of a higher BIM, as
the markdown level was slightly higher than in the previous
year.
The BIM% result was better than we had expected at the beginning
of the year. Most of the stock we buy is paid for in US dollars,
which were slightly more expensive in FY17 than in FY16. Other
things being equal, this would have caused a slight reduction in
the BIM%, but although there is work to do on the supply base,
through careful management of the existing supply base and buying
process, we have succeeded in achieving an increase in the BIM%. It
is worth noting that the sharp fall in the value of the pound
during the year did not affect us significantly, as we had
contracted for the currency we needed when rates were higher.
However the weaker pound will begin to affect us during FY18 and
the full effect will be felt during FY19. Whilst in isolation this
represents a significant cost increase, the additional time in
which to react will help us to mitigate this as effectively as
possible.
The higher year-on-year markdown was a result of the poor sales
in the first half of the year, when we took the action necessary to
clear slow-selling stock. During the second half of the year,
markdown levels were lower than in FY16, with most of the reduction
occurring after the "Black Friday" event, in late November and
December, when we avoided using excessive discounts to buy sales.
We worked hard to minimise discounting during this peak selling
period, which in recent years has become an increasing challenge as
more of our competitors begin what used to be termed their "January
sales" well before Christmas. The extent to which we can maintain
margin in December in future years depends heavily on the success
of our proposition and external market pressures, but we will
continue our efforts to minimise discounting during this
period.
Income statement 53 weeks 52 weeks
ended ended Increase/ Increase/
1 April 26 March
2017 2016 (decrease) (decrease)
GBP'000 GBP'000 GBP'000 %
------------------------- ---------- ---------- ------------- -------------
Revenue 190,068 187,963 2,105 1.1%
Cost of sales (146,302) (143,033) (3,269) (2.3%)
Gross profit 43,766 44,930 (1,164) (2.6%)
------------------------- ---------- ---------- ------------- -------------
Administrative
expenses (29,580) (26,572) (3,008) (11.3%)
Distribution costs (8,236) (8,665) 429 5.0%
Operating profit 5,950 9,693 (3,743) (38.6%)
------------------------- -------------
Analysed as:
Operating profit
before exceptional
items 6,457 10,735 (4,278) (39.9%)
Exceptional items (507) (1,042) 535 51.3%
------------------------- ---------- ---------- ------------- -------------
Finance income 33 49 (16) (32.7%)
Finance costs (190) (184) (6) (3.3%)
------------------------- ---------- ---------- ------------- -------------
Profit before
taxation 5,793 9,558 (3,765) (39.4%)
========================= ========== ========== ============= =============
Taxation (1,339) (1,783) 444 24.9%
Profit for the
period 4,454 7,775 (3,321) (42.7%)
------------------------- ---------- ---------- ------------- -------------
Memo information: 53 weeks 52 weeks
ended ended Increase/ Increase/
Underlying EBITDA 1 April 26 March
and PBT 2017 2016 (decrease) (decrease)
GBP'000 GBP'000 GBP'000 %
------------------------- ---------- ---------- ------------- -------------
Profit before
taxation 5,793 9,558 (3,765) (39.4%)
Exceptional items 507 1,042 (535) (51.3%)
Underlying profit
before taxation 6,300 10,600 (4,300) (40.6%)
------------------------- ---------- ---------- ------------- -------------
Net finance costs 157 135 22 16.3%
Depreciation and
amortisation 4,830 3,751 1,079 28.8%
Underlying EBITDA 11,287 14,486 (3,199) (22.1%)
------------------------- ---------- ---------- ------------- -------------
Statutory basic
earnings per share
(pence) 9.2p 16.1p (6.9p) (42.9%)
Underlying basic
earnings per share
(pence) 10.1p 18.3p (8.2p) (44.8%)
Other memo information: 53 weeks 52 weeks
ended ended
1 April 26 March
2017 2016 (Increase) (Increase)
GBP'000 GBP'000 GBP'000 %
------------------------- ---------- ---------- ------------- -------------
Property lease
costs 19,710 18,032 (1,678) (9.3%)
Operating expenses
Operating expense summary FY17 FY16 Change
FY17 figures in this table GBP'm GBP'm
are on a 53 week basis
------------------------------- -------- ------- ---------
Revenue 190.1 188.0 1.1%
Underlying operating expenses (105.0) (96.9) (8.4%)
Underlying operating expenses
% 55.2% 51.5% (370bps)
Underlying operating expenses comprise the cost of operating our
high street and online stores, distribution centre and
administrative overheads such as salaries, marketing costs,
depreciation and amortisation.
Underlying operating expenses grew from GBP96.9m to GBP105.0m or
8.4% year on year (FY16 growth on FY15: 7.8%). Expressed as a
percentage of revenue, underlying operating expenses increased to
55.2% from 51.5%. The main factors driving this increase are set
out below:
-- The increase in store numbers from the new stores opened
during the year, and having the stores opened in the prior year
open for a full year, resulted in an increase in costs of
GBP3.3m.
-- During the year changes were made to the structure of the
head office teams, which will create savings in future years but
within FY17 the costs of the restructuring absorbed most of the
saving. The average number of people employed in the head office
during FY17 was 191, compared to 198 during FY16.
-- The increase in the Living Wage during the year resulted in
an additional cost of approximately GBP1.3m. GBP1.0m of this cost
was absorbed through changes in store staffing, principally by
increasing the flexibility of the model so that staffing can be
better matched to customer needs.
-- FY17's marketing costs were GBP1.2m higher than FY16, mostly
as a result of the national TV advertising campaign.
-- Improvements in efficiency and a reduction in the volume of
units handled created a year-on-year reduction in distribution
costs of GBP0.4m.
-- The cost of software licences/support increased by GBP0.9m.
The level of expenditure previously has been very low, due to the
old age of the systems. As we continue to modernise we will see
further increases in software costs; however we expect the benefits
to outweigh the costs.
-- Depreciation and amortisation costs increased by GBP1.1m as
we continued to invest in the capability of the business.
-- FY17's 53(rd) week required an additional GBP1.9m of costs to
be accounted for compared to a 52 week period.
Interest
There has been no change in the capital structure during the
year (other than in relation to a new hire purchase agreement,
described in the cash flow and cash position section below) and
therefore the GBP0.2m net interest charge was in line with the
previous year's net interest charge. Throughout the year our
GBP10.0m bank facility remained undrawn. The interest charge
represents the cost of maintaining the unused facility and finance
charges on finance leases and a hire purchase agreement.
Exceptional items
In FY17, GBP0.5m of expenses were classified as "exceptional".
Most of the costs of implementing the new retail EPOS system
introduced in September 2016 were capitalised, but GBP0.4m was
classified as an operating expense, which, as it was a one-off
cost, has been treated as exceptional. The balance related to the
recruitment of Helen Connolly. Both items arose in the first half
of the year.
In FY16, GBP1.0m of expenses were classified as "exceptional",
which related to the listing of the Company's shares on the
Official List of the Main Market of the London Stock Exchange in
October 2015.
Tax
The effective tax rate for FY17 was 23.1% (FY16: 18.6%), 3.1%
higher than the statutory rate of 20.0%.
The FY17 effective tax rate was representative of what we would
consider to be the normal level; the effective rate applicable to
the Group is usually higher than the statutory rate due to part of
its shopfitting costs being disallowable expenditure in the
calculation of capital allowances.
The FY16 tax charge was lower than normal as it included a
GBP0.4m adjusting credit in respect of FY14, following the release
of a provision. Without this credit, the FY16 effective tax rate
would have been 22.9%, 2.9% higher than the statutory rate of 20.0%
and broadly in line with the FY17 effective rate.
Further details regarding the Group's approach to tax, the tax
expense, tax cash payments and the total tax contribution made by
the Group will be included in the Corporate Social Responsibility
section of the FY17 Annual Report.
Earnings per share and dividends
The statutory basic earnings per share for the year were 9.2
pence (FY16: 16.1 pence). The underlying basic earnings per share
(pre-exceptional costs) were 10.1 pence (FY16: 18.3 pence).
The Board is recommending a final dividend of 4.64 pence per
share in respect of FY17 which is in line with last year's final
dividend, making total dividends for the year 7.14 pence per share,
also in line with the total dividends paid in respect of FY16. The
maintenance of the proposed dividend at this level reflects the
Board's belief in the future prospects of the business; however the
dividend cover to which this equates is significantly lower than
the 2.5x to 3.0x target range we have previously quoted. The
Board's expectation therefore is that in the future, even if
profits increase, dividends will not grow until the dividend cover
has become re-established within the target range.
If approved by shareholders at the AGM on 27 July 2017, the
dividend will be paid on Friday 4 August 2017 to shareholders on
the register as at the close of business on Friday 30 June
2017.
Cash flow and cash position
Funds generated from operations were GBP9.5m (FY16: GBP13.2m).
The Group's net cash balance decreased by GBP6.8m to GBP5.5m (FY16
balance: GBP12.4m).
As noted above, the FY17 reporting period included a 53(rd)
week, which moves the period-end balance sheet date a week later in
relation to the Group's cash operating cycle. This reduced the
reported funds generated from operations by approximately GBP2.9m,
as significant payments are normally made during the 53(rd) week.
It should be noted that this was purely a result of the change in
the period-end date, and has no effect at all on the true cash
position or liquidity of the Group.
We noted in last year's report that GBP4.0m of capex-related
payments expected to be made during FY16 were eventually made in
FY17, resulting in a higher than anticipated cash balance at 26
March 2016, but a higher level of payments during FY17 than we
would otherwise have reported.
In accordance with our plans to invest in improving our business
systems and processes, capital expenditure payments increased from
FY16's GBP5.0m to GBP11.0m, although this GBP11.0m includes the
GBP4.0m noted above which related to FY16.
Tax payments were GBP0.7m lower than in FY16 and the level of
dividend payments was similar year on year. In FY17 the Group
received GBP1.1m of proceeds from a new hire purchase agreement
used to fund part of the hardware (tills) for the new store EPOS
system completed during the year.
Throughout the period, the Group has maintained a GBP10.0m
revolving credit facility with Barclays Bank plc, which was due to
expire in November 2017. In February 2017 we agreed an extension of
the facility and it now expires at the end of March 2020. The
facility remained undrawn throughout the period.
Stock
Stock at the year-end was GBP25.1m (FY16: GBP24.3m), a 3.3%
increase on last year.
The value of stock held at the Company's premises at the year
end was GBP1.4m lower than last year; however, we also include
within the total stock figure the cost of stock in transit from
suppliers to Bonmarché's distribution centre. The value of stock in
transit was GBP2.2m higher at the end of FY17 than at the end of
FY16. The magnitude of this difference is not unusual, as at this
point in the trading cycle, stock levels are building and timing
differences of this nature are common.
Levels of residual stock from the autumn/winter 2016 season are
in line with normal levels.
Capital Expenditure
Investment in property, plant and equipment, and intangible
assets during FY17 totalled GBP10.0m comprising GBP6.7m of tangible
assets and GBP3.3m of intangibles (FY16 total: GBP5.7m). Note that
this GBP10.0m is the "additions" figure added to the balance sheet;
the corresponding cash paid during the year relating to capex was
GBP11.0m, which differs from the "additions" figure due to the
capital creditor/accrual reducing by GBP1.0m during the year.
As noted above, GBP4.0m of capital additions accounted for
during the year related to items we had expected to bring into use
during FY16.
The major areas of investment were:
GBP'm
------
Stores 3.4
Systems 5.6
Other 1.0
------
Total 10.0
======
The investment in stores comprised new stores and concessions
and store maintenance. The GBP5.6m spent on systems incorporates
the GBP3.3m of intangible asset additions, which all relates to
computer software. During the year, the new EPOS system was
completed, the online store was moved to a new "Demandware"
platform, and work began to replace the core business operating
("ERP") system. "Other" comprises smaller items, including the cost
of lease renewals.
Strategy update
In last November's Interim Results report, we described the main
components of our strategy, following the completion of Helen
Connolly's initial review of the business. We outlined that the
strategy entails the making of a series of changes on an ongoing
basis to improve the customer proposition, rather than bringing
about a major strategic repositioning.
We stated that the direction of travel was right, but that the
effectiveness of execution needed improvement. This theme continues
to be relevant and we are making good progress in identifying the
changes needed and embedding them into everyday operations. Our
ability to improve further the effectiveness of execution will be
significantly enhanced in the coming years by the introduction of
the new processes and systems described in more detail below.
During the year we have established the key tenets of how we
work, which are to maintain a clear focus on basic operational
disciplines, concentrating on the major tasks which will deliver
most value, and ensuring that different functions of the business
operate cohesively together. We will pay close attention during
FY18 to reinforcing and maintaining these disciplines.
Product Strategy
Single, clear customer profile - "Lisa"
Bonmarché's target market remains unchanged: women aged 50+, and
one of the things which makes us different is our understanding of,
and focus on, the needs of this group, particularly in terms of
style, fit and quality.
Creating a shared understanding of customers throughout the
business is essential if we are to succeed in serving them. For
internal planning purposes, we previously defined "model" customers
with reference to four personas, or profiles. This represented a
step in the right direction when it was introduced but eventually
proved to be too complex. We have therefore changed this internal
guidance to refer to a single profile we have named "Lisa". We
believe this simpler, clearer picture of our customers will help
promote a shared understanding, and therefore make it easier for
our colleagues to achieve the improvements in execution for which
we strive.
Lisa represents the sweetspot of our aim; we will continue to
offer more traditional lines but their proportion of the range will
reduce progressively, as we gain comfort that our existing
customers are buying into the "sweetspot" product which will
ultimately comprise more modern lines with broad appeal to our
target market.
Modernisation and broad appeal
The requirement to offer modern products which have a broad
appeal, delivered through improved execution, is the common theme
running through the product strategy - informed throughout by
reference to what Lisa would want to wear.
In the narrative relating to the year's sales performance, we
noted certain areas of weakness in the product ranges. As the year
progressed we began to see improvements, with significant parts of
the autumn/winter 2016 ranges being better than the previous
season's equivalent. This reflects the influence which Geraldine
Higgins has begun to exert, having joined as Product Director in
January 2016.
Bonmarché product DNA
We are fortunate to have a large group of loyal customers who
know and like Bonmarché. But there is an even larger number of
potential customers within our target market who have not yet
discovered us.
Historically, one of the difficulties we have faced in
communicating what Bonmarché means to new customers is that we have
lacked a clearly defined "product DNA" or "handwriting"; in effect,
it has not been clear to customers "what we are known for".
Informed by the Lisa customer profile, assisted by the new tools we
will have at our disposal later in the year (see "Systems and
processes" section below), and driven by the new team, honing of
this product DNA will be something which will gather pace this
year.
"Buy now, wear now"
Whilst we are constantly working on ways to mitigate the effect
the weather has on performance, the nature of our business is such
that it will always create volatility in sales levels, especially
when looking at short term patterns and unseasonal extremes. Looked
at over a long enough period, its effect should, in theory, be
broadly neutral.
However, we are taking proactive steps to try and decrease the
impact the weather has on our sales performance. We are responding
to the increasing "Buy now, wear now" trend where we are seeing
that customers are increasingly buying for immediate wear, instead
of purchasing in anticipation of wearing later in the season when,
for example, the weather gets colder. We are changing our buying
approach to reflect this alteration in consumer behaviour. Where
practicable, we are also increasing the emphasis on categories that
are less likely to be affected by weather.
Responding more quickly to customer wants and needs
Stocking an appropriate mix of "wear now" clothes is one facet
of meeting customers' needs. Another is being able to adapt to
short term changes in demand, for example in response to changes in
tastes, or a strong reaction to a certain style. Our supply chain
has historically been too inflexible to allow us to adapt during a
season. To address this, a focus this year, which will become an
ongoing feature of how we work, is to develop a more agile trading
model.
This agile trading model has entailed introducing new suppliers,
and developing different ways of working with some existing ones.
In addition to greater flexibility, this evolution of the supply
chain will allow us to modernise the product handwriting,
increasing the appeal to customers. Our management of the supply
chain is also developing; for example we have an opportunity to
make better use of market intelligence to anticipate trends and
inform our buying decisions.
We believe there will be a significant sales and margin
opportunity through improving the extent to which the right product
is available in the right place at the right time. Part of the
solution to this lies in the planning and the inbound supply chain
as discussed above, and the other part lies in the outbound supply
chain, or how we distribute stock to customers via our stores or
online. With our existing systems we have limited scope to change
the way we operate in this area but, later in FY18, as the new
systems begin to enable new ways of working, we expect to be able
to improve availability and realise the opportunity. The benefits
should be visible to customers during FY19.
We have also made progress in developing our ethical trading
credentials and this will continue to be an area of focus. In July
2016 we submitted our second report to the Ethical Trading
Initiative ("ETI"), which showed an improvement in our performance
from 25% to 31%, resulting in an upgrade in our membership status
from "Foundation" to "Improver".
Pricing - offering value for money
There is no change in how we see the juxtaposition of our price
position and the rest of the market, but during the year we
identified the need to sharpen the execution of our pricing
strategy. Essentially this means ensuring that our entry prices
(the prices of the cheapest items within a given part of the range,
for example the cheapest t-shirt) are particularly competitive and
ensuring the value is clearly visible to the customer. Conversely,
where we are offering exceptional value, for example with a unique
or highly specified item, it is important that we charge an
appropriately higher price, so that customers can more clearly
distinguish between the different levels within the range.
Monitoring this and making adjustments will be a continuous
process, which will be helped through the use of the new planning
tools which will be available as our new ERP system comes into
use.
Loyalty
Nurturing the Bonus Club loyalty scheme
The Bonus Club loyalty scheme is well established; it provides a
rich source of data and a very effective way to engage with our
customers, 1.6m of whom have shopped with us within the last 12
months. In November's Interim Results report we noted that
nurturing this scheme will be a key part of our strategy, and since
then our plans have taken greater shape.
Since its introduction the Bonus Club has not changed a great
deal, which, as the ways that customers interact with us become
more complex and the need to be different becomes more important,
creates a significant opportunity to improve it. The improvements
will take the form of many details, most of which are relatively
straightforward to implement, although some will need testing to
validate assumptions before being introduced. The main objectives
are to:
-- recognise and reward our most loyal customers more
effectively. At present we do not make enough of a distinction
between our most loyal customers and others;
-- make proper use of the data we already have available, in
creating recognition for the most loyal customers, but also using
it to make better informed decisions about other aspects of our
business. Although the data has been available, we have not made
full use of it. The benefits of this will take time to manifest
themselves, but we have taken the first important step in our
journey, which is to recognise the gap;
-- make Bonus Club work seamlessly for customers, online and in
stores. Bonus Club was conceived before Bonmarché had a website,
and the limitations of our legacy systems have prevented customers
from being able to use their loyalty cards online as easily as in
stores. The modernisation we have completed already, such as
replacing the EPOS system in stores last year, and the further
modernisation which will result from the systems to be introduced
later this year, will enable us to address this;
-- remove features which frustrate customers. The survey which
we carried out in March 2017 provided feedback on various aspects
of the scheme, as a result of which, we are testing changes;
and
-- keep focused on getting the basics right. For example, as
noted above, increasing emphasis on signing up new customers to the
scheme.
Brand development
Mark Heyes began working with us as a "brand ambassador" at the
beginning of the financial year, and we are pleased with the way
this relationship is developing. Mark is a TV presenter who
regularly appears with Lorraine Kelly on ITV's breakfast TV show.
Mark has shown great enthusiasm for Bonmarché and what it stands
for, and has an intuitive understanding of "Lisa". We believe that
Mark resonates very well with our customers and is a particularly
good fit with "Lisa". We hope to generate significant positive
consumer-facing media coverage with Mark's help, and to develop
content for our website which customers will find engaging.
TV advertising campaign
In the autumn, following a test carried out in northern regions
during autumn 2015, we ran a three-week national advertising
campaign using TV, radio and print media designed to introduce
potential customers to Bonmarché. Despite some positive indications
from indirect measures, the results of this advertising were not
conclusive nor compelling enough to justify further expenditure and
we will therefore not be repeating this activity in the foreseeable
future.
Online
During the first half of the year, the main focus was on
developing the new, improved online store on a "Demandware"
platform. The performance of the "Venda" site we had used since
2012 had progressively deteriorated, as had the support from the
supplier. The new site was successfully launched at the end of
September and provides a far more flexible tool that will help us
to serve our customers more effectively. It is also a more robust
platform, leading to better performance (and therefore customer
experience) at peak times.
Since Christmas, we have been developing our multi-channel
strategy with the support of an external consultant who has a
strong track record in e-commerce. The plan comprises many
improvements, which we expect to contribute to a better online
experience and sales growth. We will continue to deploy external
resource on an ad-hoc basis when we think it will be beneficial.
The list below provides an indication of some individual parts of
the plan:
-- improve the effectiveness of online marketing activity.
Previous paid online marketing had been inefficient in returning
profitable customer traffic to the website. Refocusing on the right
parameters and better management of the digital marketing agency
brought about a swift improvement. We have strengthened the
management in this area to ensure that the focus is maintained;
-- make better use of offline marketing. With a large store
estate, offline marketing should be an important tool for us, but
it had become under-utilised. A good illustration of this is our
catalogue which we have reinvigorated by improving the look and
feel through paying better attention to basic detail. This can be a
powerful driver of traffic to the site and is firmly re-established
as part of the marketing mix. The catalogue will be given an extra
dimension using content contributed by, or relating to, Mark Heyes,
for example with suggestions for customers about how to choose and
wear the products featured;
-- introduce an engaging online catalogue to inspire our online
visitors and make it easy for them to buy outfits. This will use
the model and location images from the paper catalogue to create
online look books and promote outfits, with the ability for
customers to shop directly from the content;
-- reviewing and re-reviewing the customer journey throughout
the customer browsing and buying process. This will help to
identify and deal with "friction points" which make it more
difficult to shop and therefore reduce sales. The reviewing will be
a constant process; one of the biggest opportunities will come from
improving the checkout process which currently requires too many
steps. Another important part of the plan to improve the customer
journey is making the experience more seamless when moving between
online and store channels. This is noted above in relation to Bonus
Club but there is also work to be done to improve the general
shopping experience. One such example, in-store ordering, is
discussed below in the "Stores" section;
-- improve how products are presented online. There is an
opportunity to make it easier for customers to "shop" for our
clothes. This is closely related to the customer journey point
above, but specifically addresses the question of how products are
arranged and displayed - an analogy would be that in a bricks and
mortar store this would address for example the adjacencies and
visual merchandising methods. Improvements have been made during
FY17 but there is further opportunity to improve this aspect of the
online store; and
-- improved the organisational structure. We have made changes
to the organisational structure to make it more natural for
colleagues to think about the needs of the online store and our
physical store estate simultaneously when planning. This had not
always happened historically, resulting in an experience for the
customer that was not seamless.
Stores
Our store estate provides a good platform from which to grow and
is close to being, what we consider to be, an optimal number of
stores. We expect to continue to open new stores and concessions in
modest numbers. After taking into account stores which we close, we
anticipate that the total number of trading sites will increase by
approximately 10 per year over the next several years.
Generally, the sizes and locations of our stores continue to be
appropriate for our business, the rent levels are sensibly set and
lease terms remain flexible. This flexibility enables us to close
stores if our requirements change, or if store performances alter,
and is a useful defensive strength in a time characterised by some
uncertainty over how shopping patterns will affect the shape of
retail estates in the medium to long term.
During the year we completed the replacement of the fascias in
the remaining 40 stores, having begun a programme covering the
whole estate in FY15. All stores now have the new
fascia/store-front, with the exception of a small number where, for
example, a closure is imminent and there would be no purpose in
making the investment.
During the year we have made a number of changes to improve
customers' experience of our stores, or to improve their
multi-channel experience, and we are excited about the plans in
place for FY18, which include:
-- online ordering "proof of concept" trial. Shortly after the
year end we introduced a "proof of concept" trial in 70 stores to
test in-store online ordering, through which a store colleague can
order an item for a customer if it is not available at that time in
the store. This appears to have been a great success, having proved
popular with store colleagues and customers alike. On the strength
of this trial we will roll this capability out to all the remaining
stores during the first half of FY18. This has been enabled by the
new EPOS system and the Demandware web platform we implemented
during the year;
-- restructuring of the retail field team. We completed a major
restructure of the retail field team shortly after the year end.
The previous structure was too flat and the spans of responsibility
were too wide, with one of the main resultant problems being that
regional managers were spending too little time in stores
supporting/leading the store teams. The new structure addresses
this, and has been introduced to coincide with a refocus on getting
the basic retail disciplines right: despite the advances in
technology and changes in consumer preferences, some things do not
change and we had lost some of our focus on these vitally important
basics. We expect this initiative to bear fruit in the new
financial year;
-- monitoring customer footfall. For many years we have wanted
to monitor footfall to help us better understand customer behaviour
and, in particular, our relative success in converting footfall
into sales. We previously lacked the infrastructure to do this but,
by utilising in-store connectivity created as part our
infrastructure project to prepare stores for the new tills, we have
been able to also install footfall cameras. A recent trial has
proved that the devices work, and all stores will be thus equipped
by the end of September 2017. This will provide a very useful tool
to help direct the efforts of the newly refocused retail field
teams; and
-- effectiveness of window displays. Our window displays should
provide inspiration and give customers a reason to visit.
Previously, they lacked appeal for our customers, so we have begun
to give more attention to this area. The footfall counters should
help provide a more tangible measure than we previously had of the
success of window displays, and the sharpened focus on retail
basics should increase the effectiveness of the execution of the
displays.
Systems and processes
Until 2016, aside from the web platform, Bonmarché's IT systems
were generally over 10 years old, with the ERP and EPOS system
nearer 20 years old. As a result, the systems and the processes
surrounding them were out of date, and a great deal of manual work
has been needed to operate the business. This has become more
challenging in the last several years, as the pace of change in
customer demands has increased. We began planning for this in 2013,
and last year successfully completed two major projects - the
replacement of the EPOS system in stores, and the replacement of
the web platform.
In the summer of 2016 we began the next major phase of
modernisation, to replace the core ERP system. Broadly, this
comprises the financial ledgers and control system, and the stock
control system covering all stock movements from source to
store.
Historically, new technology has often been the dominant
consideration in the context of such IT enabled projects, sometimes
to the detriment of equally important organisational
considerations. However, this is not the path we are following. We
are treating the project as primarily a process of organisational
change which is enabled by technology, since the way we work will
be so transformed that the process needs to be actively planned,
resourced and managed from a wider perspective. To ensure that we
execute this successfully, in late 2015, we began to establish a
"Business Change" team. As a business change project, there are
three workstreams which are running in parallel, all of which are
equally important:
1. technology;
2. functional; and
3. organisational change.
We expect this investment to yield significant benefits, some of
which we have referred to in the foregoing sections of the strategy
update. The systems will enable improved planning, better
visibility of, and access to, data, simpler processes and greater
responsiveness and will be a significant step towards multi-channel
integration. Ultimately, this should improve customers' experiences
as well as making it easier for our colleagues to do their jobs. We
expect to begin to realise these benefits during FY19.
The technology platform we have selected is Microsoft's Dynamics
AX7 platform (since rebranded "Dynamics 365 for Operations") in
conjunction with K3 Retail's "ax|is fashion" retail adaptation. We
have successfully passed the first major milestone: the
implementation of the financial ledgers module, which came into use
at the end of April 2017.
To strengthen our governance in this area and provide mentoring
to the Business Change team, Mark McClennon joined the Board in
April 2016 as an independent Non-executive director. Mark was until
recently CIO (Consumer) at Unilever plc, and is currently Global
CIO at Burberry plc.
People
The revised head office structure resulting from changes made
last autumn has bedded in successfully and we do not anticipate the
need for further changes to the overall structure in the coming
year. Along with Helen Connolly's appointment, the most significant
change in relation to personnel has been the restructure of the
retail field teams, described above in the section on stores.
During the year, emphasis has been placed on working in a more
effective way, the two main themes of which are:
-- to maintain a clear focus on basic operational disciplines
(to get the basics right), concentrating on the major tasks which
will deliver most value; and
-- ensuring that different functions of the business operate cohesively together.
We have overhauled the structure of meetings and have introduced
clearly defined key performance indicators which will be used in
managing the business.
During this year we will re-launch Bonmarché's vision and
mission statements. Our aim in doing this will be to make them more
meaningful for colleagues, yet simpler and thus more likely to
"live" as expressions of what we are and how we work.
Outlook
We believe that the challenging clothing market conditions we
experienced during FY17 are likely to prevail during the new
financial year. Nevertheless the size of our target market is
forecast to increase due to the established changes in the
demographic makeup of the population and, in our view, this market
continues to be under-served. We are confident in our strategy of
improving our proposition to customers through a series of
developments across all areas of the business, which add up to more
than the sum of their parts. Our task and focus for the coming year
is therefore to execute this strategy successfully and thereby meet
our overriding objective to grow profitable sales by gaining market
share.
Trading since the beginning of the new financial year has been
in line with the Board's expectations and the financial position of
the business continues to be sound, with no net debt and a balance
sheet which provides a stable platform for the future.
In line with our previous practice we will issue our first
trading update in relation to the current financial year on 27 July
2017, the date of the AGM, at which point we will report on the
first quarter's sales.
Helen Connolly Stephen Alldridge
Chief Executive Finance Director
19 June 2017 19 June 2017
Consolidated income statement
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
Note GBP'000 GBP'000
-------------------------------------------- ----- ----------------- -----------------
Revenue 190,068 187,963
Cost of sales (146,302) (143,033)
-------------------------------------------- ----- ----------------- -----------------
Gross profit 43,766 44,930
Administrative expenses (29,580) (26,572)
Distribution costs (8,236) (8,665)
Operating profit 2 5,950 9,693
-------------------------------------------- ----- ----------------- -----------------
Analysed as:
Operating profit before exceptional items 6,457 10,735
Exceptional items 3 (507) (1,042)
-------------------------------------------- ----- ----------------- -----------------
Finance income 33 49
Finance costs (190) (184)
-------------------------------------------- ----- ----------------- -----------------
Profit before taxation 5,793 9,558
Taxation 4 (1,339) (1,783)
-------------------------------------------- ----- ----------------- -----------------
Profit for the period 4,454 7,775
============================================ ===== ================= =================
Earnings per share (pence)
Basic 5 9.2 16.1
Diluted 5 9.1 15.7
Consolidated statement of comprehensive income
53 weeks 52 weeks
ended ended
1 April 26 March
2017 2016
GBP'000 GBP'000
------------------------------------------------------------------ ---- ----------- -----------
Profit for the period 4,454 7,775
------------------------------------------------------------------ ---- ----------- -----------
Other comprehensive
income/(expense)
Items that may be
reclassified subsequently
to profit or loss:
Cash flow hedges
* fair value movements in other comprehensive income 7,571 4,326
* transfer from cash flow hedge reserve to profit or
loss (5,647) (3,508)
Tax on cash
flow hedges (318) (164)
--------------------------------------------------------------------------- ----------- -----------
Total other
comprehensive
income for the
period 1,606 654
--------------------------------------------------------------------------- ----------- -----------
Total comprehensive
income for the
period 6,060 8,429
=========================================================================== =========== ===========
Consolidated balance sheet
As at As at
1 April 2017 26 March 2016
GBP'000 GBP'000
---------------------------------- -------------- ---------------
Non-current assets
Property, plant and equipment 17,042 14,488
Intangible assets 5,782 3,163
Deferred tax asset 103 118
Total non-current assets 22,927 17,769
Current assets
Inventories 25,087 24,295
Trade and other receivables 15,122 14,880
Cash and cash equivalents 6,946 13,001
Derivative financial instruments 6,704 4,780
-------------------------------------- -------------- ---------------
Total current assets 53,859 56,956
-------------------------------------- -------------- ---------------
Total assets 76,786 74,725
-------------------------------------- -------------- ---------------
Current liabilities
Trade and other payables (36,561) (38,098)
Financial liabilities (426) (210)
Current taxation payable (592) (1,008)
Deferred tax liabilities (1,329) -
Total current liabilities (38,908) (39,316)
-------------------------------------- -------------- ---------------
Non-current liabilities
Other payables (1,861) (1,518)
Financial liabilities (985) (415)
Deferred tax liabilities (200) (1,276)
-------------------------------------- -------------- ---------------
Total non-current liabilities (3,046) (3,209)
Total liabilities (41,954) (42,525)
-------------------------------------- -------------- ---------------
Net assets 34,832 32,200
====================================== ============== ===============
Equity
---------------------------------- -------------- ---------------
Share capital 500 500
Share premium 1,496 1,496
EBT reserve (1,307) (1,265)
Cash flow hedge reserve 5,430 3,824
Retained earnings 28,713 27,645
-------------------------------------- -------------- ---------------
Total equity 34,832 32,200
====================================== ============== ===============
Consolidated statement of changes in equity
Cash
flow
Share Share EBT hedge Retained Total
capital premium reserve reserve earnings equity
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------------------------- ------ -------- -------- -------- -------- ----------- ---------
Balance at 28 March 2015 500 1,496 (1,249) 3,170 23,349 27,266
Profit for the period - - - - 7,775 7,775
Cash flow hedges
* fair value movements in other comprehensive income - - - 4,326 - 4,326
* transfer from cash flow hedge reserve to profit or
loss - - - (3,508) - (3,508)
Tax on cash flow hedges - - - (164) - (164)
--------------------------------------------------------------- ------ -------- -------- -------- -------- ----------- ---------
Total comprehensive income for the period - - - 654 7,775 8,429
Share-based payment reserves credit - - - - (44) (44)
Purchase of own shares for EBT - - (16) - - (16)
Equity dividends paid 6 - - - - (3,435) (3,435)
--------------------------------------------------------------- ------ -------- -------- -------- -------- ----------- ---------
Balance at 26 March 2016 500 1,496 (1,265) 3,824 27,645 32,200
Profit for the period - - - - 4,454 4,454
Cash flow hedges
* fair value movements in other comprehensive income - - - 7,571 - 7,571
* transfer from cash flow hedge reserve to profit or
loss - - - (5,647) - (5,647)
Tax on cash flow hedges - - - (318) - (318)
--------------------------------------------------------------- ------ -------- -------- -------- -------- ----------- ---------
Total comprehensive income for the period - - - 1,606 4,454 6,060
Share-based payment reserves debit - - - - 27 27
Purchase of own shares for EBT - - (42) - - (42)
Equity dividends paid 6 - - - - (3,413) (3,413)
--------------------------------------------------------------- ------ -------- -------- -------- -------- ----------- ---------
Balance at 1 April 2017 500 1,496 (1,307) 5,430 28,713 34,832
=============================================================== ====== ======== ======== ======== ======== =========== =========
Consolidated statement of cash flows
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
Note GBP'000 GBP'000
--------------------------------------------------------- ----- --------------- ---------------
Cash flows from operating activities
Cash generated from operations 7 9,499 13,204
Interest paid (132) (128)
Tax paid (1,805) (2,549)
--------------------------------------------------------- ----- --------------- ---------------
Net cash generated from operating activities 7,562 10,527
--------------------------------------------------------- ----- --------------- ---------------
Cash flows from investing activities
Purchases of property, plant and equipment (7,682) (4,342)
Purchases of intangible assets (3,299) (647)
Interest received 33 49
Net cash used in investing activities (10,948) (4,940)
--------------------------------------------------------- ----- --------------- ---------------
Cash flows from financing activities
Purchase of own shares for EBT (42) (16)
Dividends paid 6 (3,413) (3,435)
Proceeds from finance lease and HP arrangements 1,090 -
Capital element of finance lease and HP rental payments (304) (194)
Net cash used in financing activities (2,669) (3,645)
--------------------------------------------------------- ----- --------------- ---------------
Net (decrease) / increase in cash and cash equivalents (6,055) 1,942
Cash and cash equivalents at beginning of the period 13,001 11,059
--------------------------------------------------------- ----- --------------- ---------------
Cash and cash equivalents at the end of the period 6,946 13,001
--------------------------------------------------------- ----- --------------- ---------------
Reconciliation of net cash flow to movement in net cash
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
Note GBP'000 GBP'000
--------------------------------------------- ----- --------------- ---------------
Opening net cash 12,376 10,240
--------------------------------------------- ----- --------------- ---------------
Net cash (outflow) / inflow from activities (6,055) 1,942
(Increase) / decrease in debt financing (786) 194
--------------------------------------------- ----- --------------- ---------------
Movement in net cash (6,841) 2,136
--------------------------------------------- ----- --------------- ---------------
Closing net cash 8 5,535 12,376
============================================= ===== =============== ===============
1 Basis of preparation
The financial information, which comprises the consolidated
income statement, consolidated statement of comprehensive income,
consolidated balance sheet, consolidated statement of changes in
equity, consolidated statement of cash flows and related notes,
does not constitute full accounts within the meaning of s435 (1)
and (2) of the Companies Act 2006. The financial information is
derived from, and consistent with, the Group's financial statements
for the 53 weeks ended 1 April 2017 ('Annual Report 2017') and has
been agreed with the auditors for release. The Annual Report 2017
includes an unqualified audit report and does not contain any
statement under s498 of the Companies Act 2006. The Annual Report
2017 will be filed with the Registrar of Companies in due course
and will be available to shareholders from 23 June 2017.
The Group financial statements have been prepared on the going
concern basis and in accordance with IFRS and IFRS Interpretation
Committee ('IFRIC') interpretations, as adopted by the European
Union and with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. The Group financial statements have
been prepared under the historical cost convention, as modified for
the revaluation of financial assets and financial liabilities at
fair value through profit and loss. The Group financial statements
are presented in thousands of Pounds Sterling ('GBP'000') except
when otherwise indicated. Accounting policies have been
consistently applied to all financial periods presented. The
accounting period of the Group ends on the Saturday falling nearest
to 31 March each year. In some years this requires 53 weeks to be
reported. The accounting periods in these financial statements are
the 52 weeks ended 26 March 2016 and the 53 weeks ended 1 April
2017.
The preparation of the Group financial statements in conformity
with IFRS requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities and the reported
amounts of revenue and expenses during the reporting period.
Although these estimates are based on management's reasonable
knowledge of the amount, event or actions, actual results may
differ from those estimates.
2 Operating profit
Operating profit is stated after charging / (crediting):
Note 53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
GBP'000 GBP'000
--------------------------------------------------- ------ --------------- ---------------
Share-based payment charge / (credit) 27 (44)
Depreciation of property, plant and equipment
- owned 2,937 2,926
- held under finance lease and HP agreement 295 221
Amortisation of intangible assets 643 380
Operating lease payments
* plant and machinery 433 401
* land and buildings 19,710 18,032
* Rent free amortisation (1,556) (1,382)
Loss on disposal of property, plant and equipment 919 177
Loss on disposal of intangible assets 36 47
Foreign exchange losses / (gains) 434 (773)
-------------------------------------------------------------- --------------- ---------------
3 Exceptional items
Items that are material either because of their size or nature,
or that are non-recurring, are considered as exceptional items and
are presented within the line items to which they best relate. The
exceptional items as detailed below have been included in
administrative expenses in the income statement.
Exceptional items comprise:
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
Footnote GBP'000 GBP'000
------------------------------------- ---------- ---------------- ---------------
Implementation of new EPOS system a 417 -
Restructuring and recruitment costs b 90 -
Legal and professional fees c - 1,042
===================================== ============ ============== ===============
Footnotes
a) Training expenses incurred in the period in relation to the
implementation of a new EPOS system across the store estate. Other
costs in relation to implementing this project have been treated as
capital expenditure.
b) Costs relating to the recruitment of the new Chief Executive
who joined the Group in August 2016.
c) Legal and professional fees comprise costs incurred in
relation to the admission of Bonmarche Holdings plc to the Official
List of the London Stock Exchange on 19 October 2015.
4 Taxation
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
GBP'000 GBP'000
----------------------------------------------------------- --------------- ---------------
Current tax:
Current tax on profits for the period 1,397 2,295
Adjustments in respect of prior periods (8) (403)
------------------------------------------------------------ --------------- ---------------
Total current tax 1,389 1,892
------------------------------------------------------------ --------------- ---------------
Deferred tax:
Origination and reversal of temporary differences (35) (128)
Adjustments in respect of prior periods (20) -
Changes in tax rate 5 19
Total deferred tax (50) (109)
------------------------------------------------------------ --------------- ---------------
Tax expense reported in the consolidated income statement 1,339 1,783
============================================================ =============== ===============
The tax on the Group's profit before tax differs from the
theoretical amount that would arise using the weighted average tax
rate applicable to profits of the consolidated entities as
follows:
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
GBP'000 GBP'000
--------------------------------------------------------------------------------- --------------- ---------------
Profit before tax 5,973 9,558
---------------------------------------------------------------------------------- --------------- ---------------
Profit on ordinary activities multiplied by rate of corporation tax in the UK of
20% 1,159 1,912
Tax effects of:
* Other timing differences (1) (92)
* Expenses not deductible for tax purposes 204 347
Effects of changes in tax rate 5 19
Adjustments in respect of prior periods (28) (403)
Tax charge 1,339 1,783
================================================================================== =============== ===============
Factors that may affect future tax charges:
Further changes to the UK corporation tax rates were
substantively enacted as part of the Finance Bill 2015 and the
Finance Bill 2016. These include a reduction to the main rate to
reduce it to 19% from 1 April 2017, and a further reduction to 17%
from 1 April 2020.
5 Earnings per share
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
-------------------------------------------------------- --------------- ---------------
Profit attributable to ordinary shareholders (GBP'000) 4,454 7,775
----------------------------------------------------------- --------------- ---------------
Basic earnings per share (pence) 9.2 16.1
Diluted earnings per share (pence) 9.1 15.7
----------------------------------------------------------- --------------- ---------------
Basic and diluted earnings per share are calculated by dividing
the profit for the year attributable to equity shareholders by the
weighted average number of shares in issue.
For the calculation of basic and diluted earnings per share, the
weighted average number of shares excludes the general shares held
by the Employee Benefit Trust (jointly owned shares held by the
Employee Benefit Trust are not excluded). For the calculation of
diluted earnings per share only, the weighted average number of
shares in issue is further adjusted to assume conversion of all
potentially dilutive ordinary shares. These represent the shares
granted under the Long Term Incentive Plans.
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
Number Number
------------------------------------------------------------------------------ --------------- ---------------
Weighted average number of ordinary shares in issue 50,018,150 50,018,150
Less: shares held by the Employee Benefit Trust (weighted average) (853,061) (383,878)
-------------------------------------------------------------------------------- --------------- ---------------
Weighted average number of shares for calculating diluted earnings per share 49,165,089 49,634,272
Weighted average number of potentially dilutive share awards (837,945) (1,380,112)
-------------------------------------------------------------------------------- --------------- ---------------
Weighted average number of shares for calculating basic earnings per share 48,327,144 48,254,160
-------------------------------------------------------------------------------- --------------- ---------------
Underlying earnings per share
The Directors have also chosen to present an alternative
earnings per share measure, with profit adjusted for exceptional
items, as in their opinion it better reflects the Group's
underlying performance. For the purposes of this measure,
underlying profit is as follows:
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
GBP'000 GBP'000
--------------------------------------------------------- --------------- ---------------
Profit attributable to ordinary shareholders 4,454 7,775
Exceptional items 507 1,042
Tax deduction in relation to exceptional items (101) -
--------------------------------------------------------- --------------- ---------------
Underlying profit attributable to ordinary shareholders 4,860 8,817
========================================================= =============== ===============
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
Pence Pence
----------------------------------------------- --------------- ---------------
Underlying basic earnings per share (pence) 10.1 18.3
Underlying diluted earnings per share (pence) 9.9 17.8
=============================================== =============== ===============
6 Dividends
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
GBP'000 GBP'000
--------------------------------------------------------------------- --------------- ---------------
Equity - ordinary
Final dividend of 4.64 pence per share (2016: 4.5 pence per share) 2,279 2,219
Interim dividend of 2.5 pence per share (2016: 2.5 pence per share) 1,215 1,216
Dividends returned in relation to the Restricted Share Plan (81) -
--------------------------------------------------------------------- --------------- ---------------
Dividends paid during the period 3,413 3,435
---------------------------------------------------------------------- --------------- ---------------
The Directors have proposed a final dividend of 4.64 pence per
share amounting to a dividend of GBP2.3m in respect of the 53 weeks
ended 1 April 2017. It will be paid on 4 August 2017 to
shareholders on the register of members as at the close of business
on 30 June 2017, subject to approval of shareholders at the Annual
General Meeting to be held on 27 July 2017. In line with the
requirements of IAS 10 'Events after the reporting period', this
dividend has not been recognised within these results.
7 Cash generated from operations
53 weeks ended 52 weeks ended
1 April 2017 26 March 2016
GBP'000 GBP'000
---------------------------------------------------------- --------------- ---------------
Profit before tax 5,793 9,558
Adjustments for :
* Depreciation 3,232 3,147
* Amortisation of intangible assets 643 380
* Loss on disposal of property, plant and equipment 919 177
* Loss on disposal of intangible assets 36 47
* Share-based payment debit / (credit) 27 (44)
* Net finance costs / income 157 135
* Decrease / (increase) in inventories (792) 499
* Increase in trade and other receivables (299) (56)
* Decrease in trade and other payables (217) (639)
Cash generated from operations 9,499 13,204
=========================================================== =============== ===============
8 Analysis of net cash
1 April 2017 26 March 2016
GBP'000 GBP'000
-------------------------------------------- ------------- --------------
Cash and cash equivalents 6,946 13,001
Finance lease and HP agreement liabilities (1,411) (625)
--------------------------------------------- ------------- --------------
Net cash 5,535 12,376
============================================= ============= ==============
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GMGMVLRNGNZM
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June 19, 2017 02:00 ET (06:00 GMT)
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