TIDMBON
RNS Number : 7758R
Bonmarche Holdings PLC
19 June 2018
19 June 2018
Bonmarché Holdings plc
("Bonmarché" or the "Company" or the "Group")
Preliminary Results for the 52 week period ended 31 March
2018
Bonmarché, one of the UK's largest women's value fashion
retailers, reports its preliminary results for the 52 week period
ended 31 March 2018.
Financial Highlights:
-- PBT GBP8.0m (FY17: GBP5.8m), an increase of 38.1%
-- Underlying PBT GBP8.0m (FY17: GBP6.3m), an increase of 27.0%
-- Total revenue GBP186.0m (FY17*: GBP190.1m)
-- Online sales up 34.5%, store like-for-like sales down 4.5%
-- Online sales participation increased to 9.5% of total sales (FY17: 7.0%)
-- Basic EPS 13.1p (FY17: 9.2p), an increase of 42.4%
-- Inventory levels reduced by 4.8% to GBP23.9m
-- Cash generated from operations GBP10.6m (FY17: GBP9.5m)
-- Recommended final dividend increased to 5.25p per share,
bringing the total for FY18 to 7.75p, an increase of 8.5% (FY17
total dividend: 7.14p)
Operational Highlights:
-- Delivered profit growth in line with Board's expectations in
a challenging market, through strong online growth, and tight
control of gross margin and costs
-- Improved cross-functional working resulted in good progress
modernising the Bonmarché proposition
-- Strong online sales growth and increased profitability has
been driven by multiple improvements to online customer experience
and more effective marketing
-- Product highlights included a relaunched, higher quality
denim range giving real authority in this area. A more agile supply
base enables us to react more quickly to customer demands
-- Made tangible improvements in customer service such as
in-store ordering, a simplified loyalty scheme, and a greater focus
on in-store customer service during peak shopping hours
-- Maintained flexibility of store estate to allow rapid
reaction to future changes in consumer shopping preferences
* "FY17" refers to the 53 week period ended 1 April 2017
Helen Connolly, Chief Executive of Bonmarché, commented:
"Against the backdrop of challenging trading conditions, I am
pleased that we have delivered an increase in profit before tax
compared to last year.
"We have made good progress in all areas, particularly online,
where we have seen strong growth, whilst also making improvements
through a number of other self-help initiatives including the
product proposition, the loyalty scheme, and developing a more
agile supply base.
"Whilst we expect the market to remain difficult, trading since
the beginning of the new financial year has been stronger than
during H2 of FY18, and is in line with the Board's expectations. We
have a clear strategy in place to continue to improve our
proposition, which we expect to do during FY19 and beyond. We
remain confident that with its unique offering, aimed at fashion
and value conscious women, Bonmarché is well positioned for future
growth."
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.
For further information regarding Bonmarché, please call:
Bonmarché Holdings plc c/o FTI +44 (0)20
Helen Connolly, Chief Executive 3727 1000
Stephen Alldridge, Finance Director
FTI Consulting - Communications advisor
Jonathon Brill
Georgina Goodhew
Eleanor Purdon
Fiona Walker +44 (0)20 3727 1000
Notes to Editors:
Bonmarché is one of the UK's largest women's value fashion
retailers, focused on selling clothing and accessories in a wide
range of sizes, via its own store portfolio and online. Established
in 1982, Bonmarché has 35 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
As expected, the retail clothing market remained difficult
during FY18. However, whilst the high street challenges continued,
online sales were more resilient, due to both the evolution of our
customers' shopping habits, and the improvements we have made to
our online store. Overall, demand was stronger during the first
half of the year but fell back noticeably and remained weak during
the autumn and through the winter.
Despite this backdrop, I am pleased with the progress that has
been made, enabling us to report respectable growth in profit
before tax. Strong online growth, good work in mitigating currency
headwinds and tight control of costs all played their part in
offsetting the decline in sales in the bricks and mortar
stores.
Overall, through improved cross-functional working and more
agile trading, we have made good progress in all areas,
particularly online; we have also made a number of notable
improvements to the product proposition, and to the efficiency of
the loyalty scheme through reducing discounting.
We remain confident that the expected increase in the population
of people aged 50+ over the next several years makes Bonmarché's
market positioning increasingly attractive. The unique proposition
for fashion and value conscious, mature women, through online and
store channels, continues to differentiate Bonmarché from other
retailers.
The strategy remains straightforward and broadly as set out
previously - the main themes are to retain a clear view and
understanding of our customers, to improve the effectiveness of our
operations, and ultimately to grow through modernising every aspect
of the customer proposition.
Employees
The effort and commitment of Bonmarché's employees has continued
to be exemplary, and on behalf of the Board and management team, I
would like to take this opportunity to thank them for their support
and continuous hard work.
The Board
Following several changes to the composition of the Board in
FY17, FY18 has been a year of stability with regard to the makeup
of the Board. The only change has been in relation to the Board
Observer appointed under the terms of Sun's relationship agreement,
whereby Tim Stubbs replaced Michael Kalb on 8 August 2017.
Corporate governance
Throughout the year the Group complied with the UK Corporate
Governance Code requirements in respect of Board and 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.
Dividend
As a statement of the Board's confidence in the prospects of the
business, the dividend has been maintained in recent years, despite
the level of profits being lower than previously. The Group
operates a progressive dividend policy, with the intention that as
profits increase, the level of dividend will also increase.
Accordingly, the Board is recommending a final dividend of 5.25
pence per share in respect of FY18, making the total dividend for
the year 7.75 pence per share, a growth of 8.5%. If approved by
shareholders at the AGM on 26 July 2018, the dividend will be paid
on Friday 3 August 2018 to shareholders on the register as at the
close of business on Friday 29 June 2018.
Outlook
Trading since the beginning of the new financial year has been
in line with the Board's expectations. The financial position of
the business continues to be sound, with no net debt, and the
robust balance sheet provides a stable platform for the future.
We will continue to improve our proposition, through the
implementation of a series of self-help initiatives. Whilst we
anticipate that the market will remain difficult, we expect these
ongoing improvements to make a real difference to customers, and we
look forward, with confidence, to delivering further progress in
the coming financial year.
John Coleman
Chairman
19 June 2018
Operating and Financial review
Summary
The Group's profit before tax ("PBT") for the 52 week period
ended 31 March 2018 ("FY18") was GBP8.0m, a GBP1.7m, or 27.0%,
increase on the FY17 underlying PBT of GBP6.3m. Online sales grew
strongly throughout the financial year, against comparatives that
became more difficult in the fourth quarter; however, store sales
were disappointing. Overall, we are pleased with the progress this
result represents, in a retail clothing market that became more
challenging as the year progressed.
Whilst total sales for the year therefore declined slightly, the
gross margin percentage was resilient in the face of an adverse FX
movement, which was largely mitigated through tight stock control
and improvements to the loyalty scheme, which led to lower
discounting. Through improved operational efficiency and reduced
but more effective marketing expenditure, we made significant
overhead cost savings.
The Group's financial position remains sound, and the Board is
recommending a final dividend of 5.25 pence per share in respect of
FY18, making total dividends for the year 7.75 pence per share.
This represents an increase of 8.5% in the full year dividend.
Profit and Loss Summary FY18 FY17 *
GBPm GBPm Change
------------------------------- ------ ------- --------
Revenue 186.0 190.1 (2.1%)
Product gross margin 108.6 111.5 (2.5%)
Product gross margin % 58.4% 58.6% (20bps)
Underlying operating expenses 100.5 105.0 4.2%
Underlying operating expenses
% 54.1% 55.2% 110bps
PBT 8.0 5.8 38.1%
Underlying PBT 8.0 6.3 27.0%
Underlying PBT margin % 4.3% 3.3% 100bps
Basic EPS 13.1p 9.2p 42.4%
Underlying basic EPS 13.1p 10.1p 29.7%
Dividend per share 7.75p 7.14p 8.5%
------------------------------- ------ ------- --------
* Note: the FY17 figures in this table are stated on a 53 week
basis
Memo information: 52 weeks 53 weeks
ended ended
31 March 1 April Increase/ Increase/
2018 2017
Underlying EBITDA and PBT GBP'000 GBP'000 (decrease) (decrease)
GBP'000 %
------------------------------- ----------- ---------- ------------- -------------
Profit before taxation 8,000 5,793 2,207 38.1%
Exceptional items - 507 (507) -
------------------------------- ----------- ---------- ------------- -------------
Underlying profit before
taxation 8,000 6,300 1,700 27.0%
------------------------------- ----------- ---------- ------------- -------------
Net finance costs 102 157 (55) (35.0%)
Depreciation and amortisation 4,833 4,830 3 0.1%
------------------------------- ----------- ---------- ------------- -------------
Underlying EBITDA 12,935 11,287 1,648 14.6%
------------------------------- ----------- ---------- ------------- -------------
Statutory basic earnings
per share (pence) 13.1p 9.2p 3.9p 42.4%
Underlying basic earnings
per share (pence) 13.1p 10.1p 3.0p 29.7%
------------------------------- ----------- ---------- ------------- -------------
Other memo information: 52 weeks 53 weeks
ended ended
31 March 1 April Decrease Decrease
2018 2017 GBP'000 %
GBP'000 GBP'000
------------------------------- ----------- ---------- ------------- -------------
Property lease costs 19,358 19,710 352 1.8%
------------------------------- ----------- ---------- ------------- -------------
Sales
To provide a like for like sales comparison against the FY17
financial year, which comprised the 53 week period ended 1 April
2017, the table below shows the FY17 sales for the 52 weeks ended 1
April 2017 as a comparator to the 52 week period of FY18. The
53(rd) week in FY17 delivered total revenue of GBP3.1m, giving
total FY17 revenue of GBP190.1m, compared to GBP187.0m on a 52 week
basis, and per the table below.
Memo FY18 FY17 FY18 % increase
vs. /(decrease)
FY17
------------------------------------- ------- ------- ------ -------------
LFL sales 186.4 195.1 (8.7) (4.5%)
New stores FY17 7.6 5.3 2.4 45.4%
New stores FY18 1.9 0.0 1.9 100.0%
Stores relocated in the period 5.5 5.5 0.0 0.2%
Sales from stores closed in period 0.4 2.6 (2.2) (83.5%)
Online 21.2 15.8 5.4 34.5%
------------------------------------- ------- ------- ------ -------------
Total sales (incl. VAT) 223.1 224.3 (1.2) (0.5%)
------------------------------------- ------- ------- ------ -------------
VAT (37.1) (37.3) 0.2 (0.5%)
------------------------------------- ------- ------- ------ -------------
Total revenue (52 week basis) 186.0 187.0 (1.0) (0.5%)
------------------------------------- ------- ------- ------ -------------
Memo: LFL and online sales combined 207.7 210.9 (3.2) (1.5%)
------------------------------------- ------- ------- ------ -------------
Online sales grew by 34.5%, and sales from stores open
throughout both periods ("like for like" or "LFL" sales) declined
by 4.5%. There was a net increase in sales of GBP2.1m due to new
selling space, and total sales therefore decreased by 0.5% compared
to the equivalent 52 week period in FY17. The sales increase from
new space was derived from stores that opened during FY17,
contributing a full year's sales during FY18; sales from stores
which were opened during FY18 were broadly matched by a reduction
in sales as a result of stores closed during the year.
The online sales performance was very encouraging, resulting in
an increase in the online participation to 9.5% from the 7.0% of
FY17. This:
-- endorses our focus on the online channel and suggests that we have been effective in making improvements;
-- confirms that our strategy to keep pushing for significant
growth from this channel is right; and
-- indicates that the overall product/price proposition is
capable of delivering strong growth.
Store sales were disappointing overall, but the performance was
not even throughout the year. The store LFL was strong during Q1
and during September, leading to a strong H1 growth compared to the
previous year, but store sales weakened significantly in H2, with
October, December and March being especially poor. Whilst
opportunities remain to improve the proposition, the online
performance suggests that the proposition was competitive, and we
therefore conclude that external market factors were a significant
contributor to the store performance.
Product gross margin
We highlighted in last year's annual report that the devaluation
of the pound against the dollar following the Brexit vote would
have a negative impact on the gross margin, resulting in FY18's
gross margin being lower than FY17's. The FY18 gross margin decline
of 20bps versus FY17 was smaller than we had expected. Our policy
to hedge future currency exposure has delayed the impact of the
currency fluctuations, however, there will be a further negative
impact on the FY19 gross margin as hedges put in place during FY18
mature.
The buying team has worked well during the year to refine the
supplier base, and to work with suppliers to buy as efficiently as
possible, mitigating the adverse impact of currency movements. In
addition, and where appropriate in the context of the competitive
environment, we have increased some selling prices, but have not
sought to pass on in full to customers the higher cost of imports.
The evolution in the mix of products sold has also had the effect
of raising the average selling price.
The higher than expected margin was chiefly due to a reduction
in discounting compared to last year, an achievement we are pleased
with in such difficult market conditions. This resulted from a
combination of the following actions or initiatives:
-- We have referred previously to working in a more agile
fashion. Applying this approach, last year we bought a lower
proportion of stock in advance of the selling season, allowing
committed stock levels to be kept lower than they would otherwise
have been. If demand is lower than expected, as transpired, further
stock remains unbought, reducing the overall stock level and
consequently requiring less discounting to achieve a low end of
season, or "terminal", stock level.
-- The more agile buying approach also enabled plans to be
altered in response to demand/performance. For example, in FY18,
the quantity of tops bought was lower than originally planned, as
this category was selling poorly, and the plan was altered to raise
the quantity of leisurewear, which sold well.
-- The greater flexibility also allowed repeat buys of certain
lines which had sold strongly following initial release.
-- As discussed in the Strategy update, by targeting discounts
given to Bonus Club members more effectively, we reduced the cost,
whilst improving the overall offer.
-- The promotional calendar has been revised, and made more
flexible, to reduce discounts whilst retaining a high enough
cadence of promotions to keep customers interested and engaged.
Operating expenses
Operating expense summary
FY17 figures in this table FY18 FY17
are on a 53 week basis GBP'm GBP'm Change
------------------------------- -------- -------- -------
Revenue 186.0 190.1 (2.1%)
Underlying operating expenses (100.5) (105.0) (4.2%)
Underlying operating expenses
% (54.1%) (55.2%) 120bps
------------------------------- -------- -------- -------
Underlying operating expenses fell to GBP100.5m, a reduction of
4.2% from FY17's GBP105.0m as a result of:
-- FY18 being a 52 week reporting period, and thus a week shorter than FY17;
-- the non-recurrence of certain one off costs which affected FY17; and
-- a focus on reducing costs, to mitigate the effect of weaker
than expected sales and from the FX headwind noted above.
The 53(rd) week that was added to FY17's reporting calendar to
realign the financial year end date with the calendar, required an
additional GBP1.9m of costs to be accounted for within FY17. There
was no corresponding requirement in respect of FY18.
Certain costs were incurred in FY17 which were not expected to
repeat in FY18, most notably the costs of making changes to the
head office structure.
As noted in the Strategy update, there has been a focus on
improving operational efficiency and effectiveness, particularly in
stores and the distribution centre. In some instances the
improvements will facilitate an increase in flexibility or
improvement in customer service, but primarily the intention has
been to reduce costs. This effort has helped mitigate the impact of
the difficult trading environment, as well as instances of
unavoidable high inflation such as the statutory increase in the
hourly minimum/living wage.
Marketing costs were significantly lower than in FY17, when
approximately GBP1m was spent on a national TV advertising campaign
which was not repeated in FY18. Some of the saving was reinvested
in other forms of offline marketing such as the catalogues that
will continue to form an important part of our marketing mix, but
some flowed through to the bottom line. Online marketing costs were
also lower than the previous year following the appointment of a
new digital marketing agency, and better management of the agency
by the online team.
Overall LFL store rent deflation was 0.3%; the property
portfolio is discussed in the Strategy update. The recent changes
to the business rates arrangements tended to increase the rates
charges for prime shop locations and reduce the cost of secondary
locations, which produced a net reduction in business rates for
Bonmarché.
There was no net change in the depreciation charge, although
this is expected to increase in future years, reflecting the
continuing investment in systems, improvements to the customer
proposition, and new stores.
There were some cost increases, for example due to the opening
of new stores in FY17 & 18 (despite the reduction in store
numbers at the year end, the timing of openings/closures resulted
in an overall increase in costs), and a reduction in the rent free
benefit as the accounting amortisation periods for some landlord
incentives expired.
The operating expense ratio fell to 54.1% from 55.2%, an
improvement of 110bps. Through the operational improvements
described in the Strategy update, we will seek to improve this
ratio further for FY19, although total operating expenses for FY19
will increase compared to FY18.
Net finance costs
Net finance costs remain insignificant and broadly in line with
the previous year. The charges comprise the cost of maintaining the
Group's GBP10m revolving credit facility, which remained undrawn
throughout the period, and the cost of finance lease/hire purchase
agreements, net of interest received on deposits.
Tax
The effective tax rate for FY18 decreased by 270bps to 20.4%
(FY17: 23.1%), 140bps higher than the statutory rate of 19.0%
(FY17: 20.0%).
The decrease was a result of:
-- a 100bps reduction in the statutory rate;
-- the increase in the PBT compared to FY17 being
proportionately greater than the change in depreciation and other
items in respect of which the statutory profit must be adjusted to
arrive at the taxable profit, reducing the ratio of tax to
statutory PBT. This equated to a 90bps reduction in the effective
rate;
-- FY18's capex comprising a lower proportion of non-qualifying
expenditure than FY17's, equating to a 80bps reduction.
Principally, this was due to only 10 new stores being opened in
FY18 compared to 25 in FY17.
The effective tax rate applicable to the Group is usually higher
than the statutory rate due to part of the costs of fitting out new
stores being disallowable expenditure in the calculation of capital
allowances.
Earnings per share and dividends
The statutory basic earnings per share for the year were 13.1
pence (FY17: 9.2 pence). The underlying basic earnings per share
(before charging exceptional costs) were also 13.1 pence (FY17:
10.1 pence).
Whilst the level of profits in recent years has been lower than
previously, the dividend has been maintained, as a mark of the
Board's confidence in the prospects of the Group, and of the
Group's strong cash position, which has not created the need for
any reduction. The Group operates a progressive dividend policy,
meaning that if profits increase, the level of dividend should also
increase. Accordingly, the Board is recommending a final dividend
in respect of FY18 of 5.25 pence per share, making the total
dividend for the year 7.75 pence per share, a growth of 8.5%. If
approved by shareholders at the AGM on 26 July 2018, the dividend
will be paid on Friday 3 August 2018 to shareholders on the
register as at the close of business on Friday 29 June 2018.
When the Group first listed on the public markets in 2013, it
stated that the progressive dividend policy would operate within
the guideline of maintaining a dividend cover of 2.5x to 3.0x
earnings. In maintaining the dividend in recent years, the Board
has deviated from this range, for example, the cover in respect of
the FY17 dividend was 1.4x, and cover in respect of the proposed
FY18 dividend is 1.6x. Although these covers are lower than the
stated range, this has not created any difficulty in relation to
cashflow, and, therefore, the Board has decided to review whether
the required cover range should be reduced. We will communicate any
revision to the policy at the time of updating on our Q1 results,
on 26 July 2018.
Stock
The value of stock held at the Group's premises at the end of
March was GBP1.6m higher than last year, reflecting a short term
increase required in preparation for the relaunch of the formal
trouser ranges. Due to this stock arriving early, the value of
stock in transit from suppliers (included within stock and
creditors) was GBP2.8m lower than last year, resulting in a slight
overall decrease in the value of stock reported at the year-end, to
GBP23.9m from FY17's GBP25.1m.
Although the overall stock level is broadly similar to last
year, the mix is better; the value of terminal stock from the
autumn/winter 2017 selling season is 28% lower at the end of FY18
than last year, at GBP2.0m compared to GBP3.3m last year. The
reduction is greater when measured in units of stock, with 222,000
units held at the end of FY18 compared to 328,000 at the end of
FY17, a 32% reduction. This lower terminal stock level facilitates
easier back of house operations in stores, a less cluttered sales
floor, and reduces the future discount requirement.
Capital Expenditure
Capital additions in relation to investments in property, plant
and equipment, and intangible assets during FY18 totalled GBP6.7m
(FY17 total: GBP10.0m).
The major areas of investment were:
FY18 FY17
GBP'm GBP'm
------ ------
Stores 2.8 3.4
Systems 3.2 5.6
Other 0.7 1.0
------ ------
Total 6.7 10.0
====== ======
The investment in stores comprised new stores and concessions
and store maintenance, which are discussed in more detail in the
Strategy update. The investment in systems is a primarily in
connection with the ongoing programme to replace the Group's legacy
systems, which also receives further comment in the Strategy
update.
"Other" comprises smaller items, including the cost of lease
renewals.
Cash flow and cash position
FY18 FY17
GBP'000 GBP'000
-------- ---------
Profit before tax 8,000 5,793
Depreciation & amortisation 4,833 4,830
Working capital movements (2,487) (1,308)
Capital expenditure (6,776) (10,981)
Tax paid (1,513) (1,805)
Dividends (3,459) (3,413)
Other 148 43
Net cash outflow for the year (1,254) (6,841)
======== =========
Opening net cash balance 5,535 12,376
Closing net cash balance 4,281 5,535
The Group's net cash balance decreased to GBP4.3m from FY17's
closing balance of GBP5.5m, principally due to two timing
differences which are expected to reverse during FY19:
-- a short term timing difference arose over the year end, due
to the Good Friday bank holiday on 30 March 2018 causing the credit
card debtor to increase by cGBP0.5m compared to FY17; and
-- the bringing forward of stock purchases ahead of the trouser
re-launch, as noted above, also brought forward the timing of the
corresponding payments, reducing the year end cash balance.
Capital expenditure payments were GBP6.8m, GBP4.2m lower than in
FY17 which included a higher than normal level of payments on
account of GBP4.0m relating to the prior year. Dividend and tax
payments were broadly in line with the prior year.
It is worth noting that the cash position at the year end
represents the lowest point in the Group's cash operating cycle,
due to sales levels during the preceding quarter being lower than
at other times of the year, and as a result of to several large
payments falling due shortly before each year end. To put this into
context, the average month end net cash balance during FY18 was
approximately GBP15.0m.
The Group maintained its GBP10.0m revolving credit facility with
Barclays Bank plc, which expires at the end of March 2020 and
remained undrawn throughout the period.
Impact of IFRS16, leases
From the beginning of FY20, the Group will be required to adopt
IFRS16 in its accounting for leases. This will have a significant
impact on the Group's balance sheet and EBITDA, but the impact on
PBT should be significantly smaller. The nature of the calculations
makes it difficult to produce reliable estimates based on shorthand
methods, therefore, we will perform the detailed calculations
required in respect of each individual lease before publishing an
illustration of the expected effect. This process will take some
time, and we will provide a more detailed update when we report our
interim results in November.
Strategy update
Overview, customers and market positioning
As a retailer of women's clothing, Bonmarché aims to serve the
target market by recognising that it has particular requirements in
terms of style, fit and quality. Fit is an especially important
product attribute for Bonmarché's customers, and we also offer a
broader range of sizes than many competitors, as well as a broader
range of lengths in trousers and skirts. By focusing on sizing and
fit, we continue to differentiate ourselves from other
retailers.
Bonmarché's average prices are typically positioned between the
true discounters and the mid-market. Whilst price is important,
especially in the current market, "value for money" is more
relevant as we do not seek to compete on price alone, but rather to
focus on the whole customer proposition.
We operate in a highly competitive market, and, as has been
widely reported, the conditions faced by fashion retail have been
very difficult in recent times. We believe that our focus on
fashion and value conscious mature women, and our ability to offer
the convenience of shopping on the high street, in outlets and
garden centres, as well as online, continues to differentiate us
from other retailers. Meanwhile, the expected increase in the
population of people aged 50+ over the next several years, makes
our market positioning attractive.
Having defined our target customers and market positioning, the
concept of our strategy is straightforward: to gain a greater share
of the market by constantly improving our offer at a faster rate
than our competitors. The narrative which follows sets out the main
ways in which we seek to do this.
The guiding themes to the approach are as set out
previously:
-- modernisation of the customer proposition;
-- supported by a clear view of our customers; and
-- improve the effectiveness of operational execution.
We categorise the plan into five main functional headings:
1. Product
2. Online
3. Loyalty
4. Stores
5. Systems/processes.
Overall, through improved cross-functional working and more
agile trading, we have made good progress in all areas. The area
that has contributed most strongly to this year's growth in profits
has been online; we have also made a number of notable improvements
to the product proposition, and to the efficiency of the loyalty
scheme through reducing discounting. Sound progress has been made
in the other areas to prepare for growth in the future.
Product
Product range
The proposition is led by the product offer, and customers have
continued to embrace its more modern look and feel. Under the
guiding principle of appealing to our model customer profile,
"Lisa", we have made progress in several key categories.
Denim was relaunched in all stores following a successful trial
and this new range achieved a 50% increase in sales compared to the
previous equivalent. This reflected the new range's higher quality,
greater "authenticity" (the credibility of the styling), as well as
an improved end to end execution of how the proposition is
presented to customers, including new display fixtures, more
informative point of sale material and staff training.
Other highlight performances included leisurewear, driven by
improved fabric quality and feel, and the introduction of stretch
fabrics. Casual blouses, designed to complement our strong denim
offer, proved successful, as did swim and resort wear due to
improved fit, quality and better co-ordination with other parts of
the range. The discontinuation of peripheral product categories
such as Ann Harvey and menswear during the year have enabled better
use of space and improved product/sales densities so key categories
can be displayed with greater authority.
There are still areas of the product proposition where there is
scope to improve. Our performance during the autumn/winter season
on knitwear was poor, as our ranges lacked enough casual / warmer
weight knitwear, and there were also some size availability issues.
We under estimated the extent to which our customers would choose
separates and more versatile products that could be worn several
ways, over traditional dresses and party wear categories, which
consequently sold poorly.
The focus of our attention in the future will be on product
categories in which our market share under-indexes the market, for
example coats, and leisurewear, in respect of which there are
further opportunities despite the strong performance this autumn.
We under index in dresses, which is the most searched for online
category, and in relation to which, we have identified the
opportunity to improve our proposition, including the introduction
of styles exclusively available online.
Mark Heyes
Mark Heyes has continued to work closely with Bonmarché as a
brand ambassador, supporting messaging on point of sale material,
and augmenting our style credentials through "Mark's picks",
highlighting items he believes customers will particularly like.
Mark also provides valuable online content, for example a video,
which explains the different body shapes catered for in the new
denim ranges, and helps customers decide which version of jean
would best suit their own needs. Culturally, Mark is a great fit
and we are delighted with the chemistry that has developed.
Supply chain
During the year we introduced new suppliers which can deliver
with a shorter lead time, enabling our trading model to become more
agile and providing greater ability to trade within the season and
respond faster to customer demands. An example of how this has
improved performance was in the leisurewear category, which we were
able to support through an increased level of stock purchasing in
season, at the expense of jersey tops, which were performing less
strongly. This more agile trading model has also contributed to our
ability to reduce stock levels.
We held our first supplier conference in September 2017, to
increase the effectiveness of partnerships with suppliers. The
conference enabled us to deliver a consistent message about the way
we want to work with them, and it provided a mechanism for
interactive feedback and the exchange of views. The timing of the
event enabled us to discuss ways of mitigating the impact of the
recent adverse foreign exchange movements, ways of achieving
further increases in the agility of the supply chain, and supply
chain compliance. This last point has a broad reach, and includes
ethical standards and compliance, as well as operational matters
like standardisation of boxes in which stock is delivered,
improvements in which will allow us to improve efficiency in our
distribution operation.
Through a continued focus, and investment in the team, we have
continued to improve our ethical credentials; Bonmarché's ethical
compliance score assessed by the ETI improved from 31% to 41%,
which represents a good rate of progress compared to peers. This is
the third such assessment we have undertaken, and each one has
shown an improvement, with the first score measured in 2015 being
25%. This is an ongoing part of our strategy and we seek to achieve
steady improvements in the ETI score as our ethical maturity
develops.
Online
The online performance has been the stand out of the year; after
a disappointing performance during FY17, online sales growth was
strong throughout the period with sales up 34.5%. It is
particularly encouraging that during the second half of the
financial year when store sales were poor, online sales maintained
a 30% year on year growth rate, against a stronger H2 comparative
last year.
The more streamlined structure introduced in FY17, stronger
leadership, and working more closely with other parts of the
business have all made the online team more effective. As a result,
many improvements have been made to the online store, the aggregate
effect of which has been a much better shopping experience for
customers and increased sales. Profitability has improved
dramatically, most notably due to much more efficient
marketing.
The following examples provide a brief overview of the work
which has contributed to the growth in the online profit:
-- Through better management, and a switch to a new marketing
agency, online marketing is now more efficiently targeted, which
has supported the sales growth and delivered a significant
reduction in the cost of customer acquisition.
-- We improved our delivery offer so that customers now benefit
from free delivery above a certain spend threshold. We continue to
trial different thresholds, which may alter at different times of
the year or to coincide with promotions.
-- The level of online discounts has been more tightly
controlled during this financial year, achieved through more
discipline in the use of promotional discounts, and as a result of
the improved product selling better without recourse to
discounting.
-- On and off-line marketing have been supported by further
improvements to the look and commerciality of the catalogues we
produce several times per year. Their primary purpose is to
encourage customers to visit the website, stores, or both and they
have become increasingly effective in doing so.
We believe that online shopping's share of consumer spending
will continue to rise, especially for our segment of the market,
and a major strategic focus for the future is to seek continuous
improvements to this channel, and make multi-channel customer
journeys more seamless. There are many opportunities in this area
and, as technology advances, further opportunities will arise.
Key priorities for FY19 include:
-- Introducing online exclusive ranges and brands to enhance the
offer - which will also be available in selected stores;
-- Improving online content, using professional copywriting, and
models in the photography of products. This increases the cost of
display, but is expected to be profitable;
-- Continuing to improve the experience or "shopability" of the
website, for example, during H1 FY19, the checkout process will be
improved to remove the need to redirect customers to a different
page to make payment, and thus speed up the process. The nature of
online shopping is such that we expect this seemingly trivial
detail to have a beneficial effect on sales;
-- Making the interaction between online and store shopping more seamless;
-- Improving the delivery options for customers, and making the whole experience slicker;
-- Using customer data more effectively, for example to improve
the engagement our customers have with our marketing
communications, by making them more personalised; and
-- Maintaining the focus on profitability, particularly in
relation to marketing and fulfilment.
Loyalty
The "Bonus Club" loyalty scheme is well established and popular
with customers; there are 1.7m members who have shopped with us
within the last 12 months. However, whilst popular and valuable, it
needs modernising. To ensure that any changes are received
positively, during the year we have tested altering a variety of
parameters, to inform decisions about how to update the scheme with
the aim of increasing its appeal, more effectively recognising
differing levels of loyalty, and reducing the total discounts by
targeting them more effectively.
A successful change implemented during H2 as a result of these
tests, was to improve our "Spend and Save" scheme in response to
customer feedback. In addition to being popular, the change has
reduced the level of "Spend and Save" discounts, contributing to
the year on year reduction in total markdown.
In FY19 and FY20, the planned developments to the loyalty scheme
fall under the broad headings of:
1. Relaunch
2. Improve customer experience
3. Make more effective use of it to deliver marketing messages.
The timing of some of these activities has been planned to fit
logically with other interconnected developments, for example to
coincide with systems improvements, or to tie in with changes
required under the new General Data Protection Regulation
("GDPR").
1. Relaunch
The entire suite is to be relaunched during FY19 including, for
example, updated membership cards, welcome packs and an improved
design for regular communications.
2. Improve customer experience
Later in FY19, a "VIP" membership level will be added, to
recognise and reward higher levels of loyalty. This level will
provide various additional benefits which can't be bought and which
we hope members will place a higher value on than the cost to
deliver. The aim of this tier will be to incentivise members to
reach the level at which they qualify as a VIP, by shopping more
with Bonmarché.
The Bonus Club was designed before Bonmarché operated a
transactional website. The growth in online sales has created a
requirement to address a disconnection in our legacy systems which
has prevented customers from interacting with the scheme across
store and online channels. The system developments to improve this
aspect of the customer experience are due to be completed during H1
FY19.
3. Make more effective use of it to deliver marketing messages
There is an opportunity to make communications and offers to
members more personalised, to increase their relevance and support
the development of loyalty towards the brand.
Our review of the scheme has reinforced our view that, for the
foreseeable future, paper mailers and catalogues will play a major
part in marketing communications, and we will continue to refine
our approach to this, with a particular emphasis on the look and
feel of the catalogues which we publish five times per year.
Other developments include a new promotional calendar and the
provision of a new toolkit/guidelines for stores to support them in
improving the customer experience for members.
Good progress has been made to improve our data security
arrangements in preparation for the GDPR which came into force on
25 May 2018. The dedicated project established in preparation for
this involved multiple workstreams, covering areas such as customer
contact permissions, developing or updating data and security
policies, reviews of supplier arrangements, a significant training
programme for all colleagues, and technical upgrades to IT
infrastructure. Working to this deadline was the first phase of a
continual process of improving compliance arrangements, for
example, it will be necessary to update and refresh training
periodically for colleagues who interact with customer data, to
ensure that compliance levels are maintained.
Stores
From a channel perspective, FY18's growth has been driven mainly
by online sales. At 9.5%, Bonmarché's online sales penetration
still has some way to go before reaching a level of approximately
15 - 20% which is typical in the market, and, therefore, we expect
channel growth to continue to be much stronger online than in
stores.
Despite the growing popularity of online shopping and the
challenge currently faced by some high street locations, a great
number of our customers and potential customers still like to shop
on a high street, or at least, to visit a shop as part of an
increasingly sophisticated shopping journey, that could result in
the final purchase (or return) of an item being made either online
or in store. For this reason, an appropriately configured store
estate will, for the foreseeable future, continue to form a key
part of our strategy.
For some customers, and for some shopping trips, stores will
continue to be the sole channel they interact with; increasingly
though, the stores will play a role in supporting online sales
growth. We are already experiencing this through our in store
ordering facility, introduced during H1 FY18 and achieving sales of
GBP2m by the end of the financial year.
Despite the continuing role of the store portfolio, we recognise
the speed with which the landscape is changing, and the uncertainty
inherent in the evolution of shopping patterns. To help mitigate
any potential risk associated with this, we maintain a cautious
approach to entering into store leases, and at the end of the
financial year, our average store lease had only 3.5 years
remaining. This affords flexibility in the event that changing
shopping patterns dictate a significant shift in the nature of the
store portfolio. It also helps ensure that the rents are at market
levels.
Our strategy for operating the stores falls under four broad
headings, in respect of each of which we comment briefly below:
1. Locations
2. Four wall fabric
3. People
4. Customer experience/journey
1. Locations
With 325 stores in the U.K., we are well represented. There
remain a small number of locations which could become attractive if
a suitable store at the right rent becomes available, but, overall,
we do not expect the number of stores to increase significantly in
the short to medium term. Meanwhile, almost all stores are
profitable (when measured on a "four wall" basis, i.e. without any
subjective apportionment of central overhead costs), and so long as
this remains the case, we expect the configuration of the store
portfolio to remain broadly similar for the foreseeable future,
with no more than a handful of stores opening or closing during
FY19, subject to the uncertainties noted above.
Ten new stores were opened during the period, which are trading
in line with the Board's expectations, and will pay back the
initial capital investment within three years. Three of the new
stores were relocations of existing ones, and we closed nine
marginal garden centre/concession sites at their natural lease
breaks, so overall store numbers decreased by two during the year.
The movement in store numbers during the period is shown in the
table below:
Number of stores As at Opened Closed As at
1 31 Mar
Apr 2018
2017
----------------------------- ------ ------- ------- --------
Solus Bonmarché stores 271 6 0 277
Solus Bonmarché stores
relocated n/a 3 3 n/a
Garden centre concessions 35 0 4 31
Other concessions 21 1 5 17
Total 327 10 12 325
During FY18, 42 leases were renewed, resulting in an overall
rent reduction of 4% on the subject properties, and there were 23
rent reviews (19 of which were recorded at a nil increase),
resulting in an overall rent increase on the subject properties of
2%.
2. Four wall fabric
Our stores are in good repair and we incur a stable annual
expenditure to maintain them. In addition, during FY18 we made
targeted investments to keep the visual appeal of the shops up to
date, such as new fixtures to complement the denim launch.
To inform future investment plans for the stores, we will be
undertaking a project to document an updated "brand inventory" for
each store, to enable capital expenditure to be targeted
effectively and help inform future decisions about whether to
relocate, stay put, or close a store.
3. People
At the beginning of the financial year, we completed a major
restructure of the retail field team, designed to allow area
managers to spend more time supporting individual stores, to regain
focus on basic retail disciplines.
Having completed this restructuring, we began a major new
project, due to complete later in FY19, to improve operational
efficiency in stores. This is part of a wider programme being
undertaken throughout the business, designed in part to mitigate
the sharp wage rate inflation due to the operation of the
minimum/living wage. This has been a challenging time for the
people affected, and we have striven to manage the process in a
sensitive and collaborative manner. To its great credit, and
despite the disruption caused by this type of process, the retail
team has meanwhile embraced a number of new initiatives during the
year, and remains dedicated to offering customers the best
service.
One such initiative has been the installation of cameras to
monitor footfall in all stores, which was completed during H1. The
immediate benefit was to give the retail team a better
understanding of the real peaks and troughs in customer flow, which
has given stores the insight to place more focus on serving
customers at busy times, and de-prioritise activities that are not
of direct benefit to customers (such as stock checking or
administration) so that they can be dealt with at a quieter time.
The next phase has been to review customer conversion, to improve
it in the stores where it is notably below average; during FY19,
the focus will broaden to encompass high performing stores but with
lower conversion, with the aim of "making the best better".
4. Customer experience/journey
The fourth component of the stores strategy is to combine the
threads of location, four wall fabric and people, together with
other enabling activities (such as technology), to ensure that the
process of shopping is pleasant and easy.
The in store ordering facility described above is an example of
progress made during the year; the forthcoming improvements to the
Bonus Club, illustrate improvements in the pipeline. Inevitably,
much of the focus on the customer experience/journey will relate to
multi-channel initiatives; the relevance of capturing them under
the heading of "stores" is to ensure that where the store is a
touch point on the customer's journey, the experience is coherent
and consistent.
Systems & processes
ERP
Ongoing progress has been made on the broad-reaching project to
replace the legacy ERP system with a cloud-based Microsoft
"Dynamics 365" system.
To ensure we balance the speed of implementation and risk
management, we have hired appropriate expertise (comprising a
significant contractor contingent), including in H2 of FY18 a new
Technology & Change Director. We have striven to maintain a
high level of support from "business owners", so that the
implementations of the new systems are not seen as I.T. projects,
but business projects which are a central part of the strategy to
modernise.
We remain confident that the project will achieve its primary
objective - to replace successfully the legacy system - and will
also deliver significant business benefits in the future.
Meanwhile, the core financial ledger part of the new system, which
was implemented during the early part of FY18, completed its first
year-end process successfully.
Other software developments
As noted above in the section on loyalty, during FY19 we will
introduce a software development to enable the Bonus Club to
operate in a multi-channel way.
As part of the continuous process of seeking ways to improve the
customer journey, we will introduce a new online payments service
during FY19.
Finally for FY19, we plan to introduce an improved customer
fulfilment option using a partner third party, interfacing to our
systems. We will provide more details in relation to this in our
interim report in November.
Operational projects and developments
We seek to make continuous improvements to our operation, to
meet evolving customer needs, and to minimise costs in the face of
continuing inflationary pressures. The following are examples of
initiatives undertaken during FY18 and/or planned for FY19.
-- Logistics review - in addition to the extensive work to make
store operations more efficient, we have launched a parallel
process in the logistics operation. The first step was a strategic
review carried out in early FY18 which identified a number of
opportunities to improve or modernise the operation, and reduce
costs. The first stage of implementation was to bring about a
sharpened focus on improving the basics, for example reducing the
number of steps needed to complete a picking operation, re-laying
part of the distribution centre, and increasing the picking and
packing productivity of the e-commerce operation. There are further
stages to come during FY19, upon which we will report in due course
as they are completed.
-- At the beginning of FY19, we began a procurement review,
covering all non-stock purchases, to ensure that we procure goods
and services at the right cost, quality, and level of service,
supported by appropriate governance processes.
-- Data security continues to have a high profile within the
business. This complements the work to comply with the GDPR, and
has been prioritised according to the results of a gap analysis
carried out in H1 FY18 by a specialist third party security
consultancy.
People
During FY17 we carried out a restructuring of the head office
team, to facilitate more effective working practices and to improve
organisational capability. That exercise provided a good basic
structure, which has been refined during FY18. A number of key
hires were made during the year, including a new Trading Director
and Technology and Change Director.
Within the technology and change teams in particular, the makeup
of the workforce has evolved differently to the rest of the head
office team. There are now a significant number of individuals
engaged as self-employed contractors, to provide flexibility to
meet the rapidly changing requirements of different phases of
projects, and to meet the preferences of many people who work in
this space, who value flexibility.
Throughout FY18, and continuing into FY19, in response to
changing customer needs, slower high street sales growth, and
increasing inflationary pressures, there has been a particular
focus on improving operational efficiency, as referenced above in
relation to stores and logistics operations. During FY19 particular
emphasis is being placed on managing the impact on colleagues, and
ultimately, to ensure that the changes support, not detract from,
improving how customers experience Bonmarché.
Work to ensure compliance with the GDPR regime touches many
parts of the business, and since most of our colleagues interact
with customers, preparing for GDPR entails a major education and
training programme. This was developed during the latter part of
FY18 ready for implementation during H1 FY19, as part of the wider
GDPR compliance project described above.
Outlook
Whilst we expect the market to remain difficult, our focus will
be on continuing to improve our proposition through a number of
self-help initiatives, which we expect to drive further progress
for the business during the new financial year.
Trading since the beginning of the new financial year has been
stronger than during H2 of FY18, and is in line with the Board's
expectations. 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 will issue our first trading update in relation to the
current financial year on 26 July 2018, 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 2018 19 June 2018
Consolidated income statement
for the 52 weeks ended 31 March 2018
Group
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
Note GBP'000 GBP'000
------------------------------------- ----- ---------- -------------
Revenue 186,014 190,068
Cost of sales (144,452) (146,302)
------------------------------------- ----- ---------- -------------
Gross profit 41,562 43,766
Administrative expenses (25,780) (29,580)
Distribution costs (7,680) (8,236)
------------------------------------- ----- ---------- -------------
Operating profit 2 8,102 5,950
------------------------------------- ----- ---------- -------------
Analysed as:
Operating profit before exceptional
items 8,102 6,457
Exceptional items 3 - (507)
------------------------------------- ----- ---------- -------------
Finance income 53 33
Finance costs (155) (190)
------------------------------------- ----- ---------- -------------
Profit before taxation 8,000 5,793
Taxation 4 (1,629) (1,339)
------------------------------------- ----- ---------- -------------
Profit for the period 6,371 4,454
------------------------------------- ----- ---------- -------------
Earnings per share (pence)
Basic 5 13.1 9.2
Diluted 5 12.8 9.1
------------------------------------- ----- ---------- -------------
Consolidated statement of comprehensive income
for the 52 weeks ended 31 March 2018
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
GBP'000 GBP'000
--------------------------------------------- --------- -------------
Profit for the period 6,371 4,454
---------------------------------------------- --------- -------------
Other comprehensive (expense)/income:
Items that may be reclassified subsequently
to profit or loss:
Cash flow hedges:
- fair value movements in other
comprehensive income (7,764) 7,571
- transfer from cash flow hedge
reserve to profit or loss (3,732) (5,647)
Tax on cash flow hedges 2,184 (318)
---------------------------------------------- --------- -------------
Total other comprehensive (expense)/
income for the period (9,312) 1,606
---------------------------------------------- --------- -------------
Total comprehensive (expense)/income
for the period (2,941) 6,060
---------------------------------------------- --------- -------------
Consolidated balance sheet
as at 31 March 2018
Group
------------------------
As at As at
31 March 1 April 2017
2018
GBP'000 GBP'000
------------------------------------ --------- -------------
Non-current assets
Property, plant and equipment 17,132 17,042
Intangible assets 7,520 5,782
Investments in subsidiaries - -
Derivative financial instruments 153 -
Deferred tax asset 45 103
------------------------------------- --------- -------------
Total non-current assets 24,850 22,927
------------------------------------- --------- -------------
Current assets
Inventories 23,857 25,087
Trade and other receivables 16,321 15,122
Cash and cash equivalents 5,267 6,946
Derivative financial instruments - 6,704
Deferred tax asset 939 -
------------------------------------ --------- -------------
Total current assets 46,384 53,859
------------------------------------- --------- -------------
Total assets 71,234 76,786
------------------------------------- --------- -------------
Current liabilities
Trade and other payables (33,492) (36,561)
Financial liabilities (382) (426)
Current taxation payable (706) (592)
Derivative financial instruments (4,945) -
Deferred tax liabilities (56) (1,329)
------------------------------------- --------- -------------
Total current liabilities (39,581) (38,908)
------------------------------------- --------- -------------
Non-current liabilities
Other payables (2,315) (1,861)
Financial liabilities (604) (985)
Deferred tax liabilities (172) (200)
------------------------------------- --------- -------------
Total non-current liabilities (3,091) (3,046)
------------------------------------- --------- -------------
Total liabilities (42,672) (41,954)
------------------------------------- --------- -------------
Net assets 28,562 34,832
------------------------------------- --------- -------------
Equity
Share capital 500 500
Share premium 1,496 1,496
EBT reserve (1,265) (1,307)
Cash flow hedge reserve (3,882) 5,430
------------------------------------- --------- -------------
Retained earnings b/f 28,713 27,645
Profit for the period 6,371 4,454
Other changes in retained earnings (3,371) (3,386)
------------------------------------- --------- -------------
Retained earnings 31,713 28,713
------------------------------------- --------- -------------
Total equity 28,562 34,832
------------------------------------- --------- -------------
Consolidated statement of changes in equity
for the 52 weeks ended 31 March 2018
Cashflow
Share Share EBT hedge Retained Total
capital premium reserve reserve earnings equity
Group Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------------- ----- -------- -------- -------- --------- --------- --------
Balance at 27 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
credit - - - - 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
Profit for the period - - - - 6,371 6,371
Cash flow hedges
* fair value movements in other comprehensive income - - - (7,764) - (7,764)
* transfer from cash flow hedge reserve to profit or
loss - - - (3,732) - (3,732)
Tax on cash flow hedges - - - 2,184 - 2,184
---------------------------------------------------------- ----- -------- -------- -------- --------- --------- --------
Total comprehensive income
for the period - - - (9,312) 6,371 (2,941)
Share-based payment reserves
credit - - - - 130 130
Distribution of own shares
from EBT - - 42 - (42) -
Equity dividends paid 6 - - - - (3,459) (3,459)
---------------------------------------------------------- ----- -------- -------- -------- --------- --------- --------
Balance at 31 March 2018 500 1,496 (1,265) (3,882) 31,713 28,562
---------------------------------------------------------- ----- -------- -------- -------- --------- --------- --------
Consolidated statement of cash flows
for the 52 weeks ended 31 March 2018
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
Note GBP'000 GBP'000
------------------------------------------- ----- --------- -------------
Cash flows from operating activities
Cash generated from operations 7 10,578 9,499
Interest paid (139) (132)
Tax paid (1,513) (1,805)
------------------------------------------- ----- --------- -------------
Net cash generated from operating
activities 8,926 7,562
------------------------------------------- ----- --------- -------------
Cash flows from investing activities
Purchases of property, plant and
equipment (3,959) (7,682)
Purchases of intangible assets (2,817) (3,299)
Interest received 55 33
------------------------------------------- ----- --------- -------------
Net cash used in investing activities (6,721) (10,948)
------------------------------------------- ----- --------- -------------
Cash flows from financing activities
Purchase of own shares for EBT - (42)
Dividends paid 6 (3,459) (3,413)
Proceeds from HP and finance lease
arrangements - 1,090
Capital element of HP and finance
lease rental payments (425) (304)
------------------------------------------- ----- --------- -------------
Net cash used in financing activities (3,884) (2,669)
------------------------------------------- ----- --------- -------------
Net decrease in cash and cash equivalents (1,679) (6,055)
Cash and cash equivalents at the
beginning of the period 6,946 13,001
------------------------------------------- ----- --------- -------------
Cash and cash equivalents at the
end of the period 5,267 6,946
------------------------------------------- ----- --------- -------------
Reconciliation of net cash flow to movement in net cash
Group
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
Note GBP'000 GBP'000
--------------------------------------- ----- --------- -------------
Opening net cash 5,535 12,376
--------------------------------------- ----- --------- -------------
Net cash outflow from activities (1,679) (6,055)
Decrease/(Increase) in debt financing 425 (786)
--------------------------------------- ----- --------- -------------
Movement in net cash (1,254) (6,841)
--------------------------------------- ----- --------- -------------
Closing net cash 8 4,281 5,535
--------------------------------------- ----- --------- -------------
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 52 weeks ended 31 March 2018 ('Annual Report 2018') and has
been agreed with the auditors for release. The Annual Report 2018
includes an unqualified audit report and does not contain any
statement under s498 of the Companies Act 2006. The Annual Report
2018 will be filed with the Registrar of Companies in due course
and will be available to shareholders from 29 June 2018.
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 53 weeks ended 1 April 2017 and the 52 weeks
ended 31 March 2018.
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):
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
GBP'000 GBP'000
---------------------------------------- --------- -------------
Share-based payment charge 130 27
Depreciation of property, plant and
equipment:
- owned 3,563 2,937
- held under finance lease and HP
agreement 392 295
Amortisation of intangible assets 1,075 643
Operating lease payments:
- plant and machinery 814 433
- land and buildings 19,358 19,710
Rent-free amortisation (1,157) (1,556)
(Profit)/loss on disposal of property,
plant and equipment (201) 919
Loss on disposal of intangible assets 4 36
----------------------------------------- --------- -------------
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:
Group
-------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
Footnote GBP'000 GBP'000
------------------------------------- ---------- ---------- -------------
Implementation of new EPOS system a - 417
Restructuring and recruitment costs b - 90
- 507
----------------------------------------------------------- -------------
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.
4. Taxation
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
GBP'000 GBP'000
------------------------------------------ --------- -------------
Current tax:
Current tax on profits for the period 1,619 1,397
Adjustments in respect of prior periods 8 (8)
------------------------------------------ --------- -------------
Total current tax 1,627 1,389
------------------------------------------ --------- -------------
Deferred tax:
Origination and reversal of temporary
differences 65 (35)
Adjustments in respect of prior periods (63) (20)
Changes in tax rate - 5
------------------------------------------ --------- -------------
Total deferred tax 2 (50)
------------------------------------------ --------- -------------
Tax expense reported in the consolidated
income statement 1,629 1,339
------------------------------------------ --------- -------------
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:
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
GBP'000 GBP'000
------------------------------------------ --------- -------------
Profit before tax 8,000 5,793
------------------------------------------ --------- -------------
Profit on ordinary activities multiplied
by rate of corporation tax in the UK of
19% (2017: 20%) 1,520 1,159
Tax effects of:
Other timing differences 56 (1)
Expenses not deductible for tax purposes 108 204
Effects of changes in tax rate - 5
Adjustments in respect of prior periods (55) (28)
------------------------------------------ --------- -------------
Tax charge 1,629 1,339
------------------------------------------ --------- -------------
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 17% from 1 April 2020.
5. Earnings per share
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
---------------------------------------------- --------- -------------
Profit attributable to ordinary shareholders
(GBP'000) 6,371 4,454
---------------------------------------------- --------- -------------
Basic earnings per share (pence) 13.1 9.2
Diluted earnings per share (pence) 12.8 9.1
---------------------------------------------- --------- -------------
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.
Group
---------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
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) (116,928) (853,061)
-------------------------------------------- ------------ -------------
Weighted average number of shares for
calculating diluted earnings per share 49,901,222 49,165,089
Weighted average number of potentially
dilutive share awards (1,129,280) (837,945)
-------------------------------------------- ------------ -------------
Weighted average number of shares for
calculating basic earnings per share 48,771,942 48,327,144
-------------------------------------------- ------------ -------------
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:
Group
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
GBP'000 GBP'000
---------------------------------------------- --------- -------------
Profit attributable to ordinary shareholders 6,371 4,454
Exceptional items - 507
Tax deduction in relation to exceptional
items - (101)
---------------------------------------------- --------- -------------
Underlying profit attributable to ordinary
shareholders 6,371 4,860
---------------------------------------------- --------- -------------
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
Pence Pence
--------------------------------------------- --------- -------------
Underlying basic earnings per share (pence) 13.1 10.1
Underlying diluted earnings per share
(pence) 12.8 9.9
--------------------------------------------- --------- -------------
6. Dividends
The Directors have recommended a final dividend of 5.25 pence
per share, amounting to a dividend of GBP2.6m, in respect of the 52
weeks ended 31 March 2018. It will be paid on 3 August 2018 to
shareholders on the register of members as at the close of business
on 29 June 2018, subject to approval of shareholders at the Annual
General Meeting to be held on 26 July 2018. In line with the
requirements of IAS 10 'Events After the Reporting Period', this
dividend has not been recognised within these results.
Dividends returned in relation to the Restricted Share Plan
relate to prior period dividend payments made for management shares
granted under the terms of the Restricted Share Plan. Under the
terms of the Plan, 20% of the share awards vested on each
anniversary of the grant. Dividend payments made in relation to the
unvested element of the share awards are returned to the Company in
the event of an employee's departure from the Plan.
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
GBP'000 GBP'000
----------------------------------------- --------- -------------
Equity - ordinary dividends paid during
the period
Final dividend of 4.64 pence per share
(2017: 4.64 pence per share) 2,255 2,279
Interim dividend of 2.5 pence per share
(2017: 2.5 pence per share) 1,216 1,215
Dividends returned in relation to the
Restricted Share Plan (12) (81)
----------------------------------------- --------- -------------
Dividends paid during the period 3,459 3,413
----------------------------------------- --------- -------------
7. Cash generated from operations
Group
------------------------
52 weeks 53 weeks
ended ended
31 March 1 April 2017
2018
GBP'000 GBP'000
------------------------------------------- --------- -------------
Profit before tax 8,000 5,793
Adjustments for:
- depreciation 3,955 3,232
- amortisation of intangible assets 1,075 643
- (Profit)/loss on disposal of property,
plant and equipment (201) 919
- loss on disposal of intangible assets 4 36
- share-based payment debit 130 27
- net finance costs/income 102 157
- decrease/(increase) in inventories 1,230 (792)
- increase in trade and other receivables (1,216) (299)
- decrease in trade and other payables (2,501) (217)
-------------------------------------------- --------- -------------
Cash generated from operations 10,578 9,499
-------------------------------------------- --------- -------------
8. Analysis of net cash
Group
------------------------
31 March 1 April 2017
2018
GBP'000 GBP'000
-------------------------------------------- --------- -------------
Cash and cash equivalents 5,267 6,946
Finance lease and HP agreement liabilities (986) (1,411)
--------------------------------------------- --------- -------------
Net cash 4,281 5,535
--------------------------------------------- --------- -------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR GGUMWQUPRGQR
(END) Dow Jones Newswires
June 19, 2018 02:00 ET (06:00 GMT)
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