TIDMTHT
RNS Number : 5342Y
Thorntons PLC
25 February 2013
For immediate release
Thorntons Plc ("Thorntons" or "the Company")
Announcement of Half Year Results
Thorntons today announces its half year results for the 28 weeks
ended 12(th) January 2013.
Financial
-- Revenues up 2.9% to GBP133.7 million (2012: GBP130.0
million).
-- Profit before tax and exceptional items rose by GBP2.2
million to GBP5.3 million (2012: GBP3.1 million).
-- Profit after tax rose by 49.3% to GBP4.0 million (2012:
GBP2.7 million)
-- Exceptional items total GBP0.7 million (2012: GBP2.4 million)
consisting of impairment and onerous lease provision movements.
-- Cash generated from operations GBP15.0 million (2012: GBP11.6
million).
-- Net debt at period end was GBP17.5 million (2012: GBP16.2
million).
-- There is no interim dividend (2012: Nil).
Operational
-- Sales of Thorntons branded product in the UK Commercial
channel increased strongly by 16.1% to GBP51.8 million (2012:
GBP44.6 million).
-- Significant market share gains in UK Commercial channel.
-- Own Store sales declined by 8.3% to GBP62.6 million (2012:
GBP68.3 million), mainly due to the closure of a further 13 stores
in line with the long-term strategy. Like for like sales decreased
by 1.5%.
-- Franchise sales declined by 25.4% to GBP5.0 million (2012:
GBP6.7 million), mainly reflecting the placing into administration
of our major franchisee in May 2012.
-- Thorntons Direct sales declined by 11.9% to GBP5.9 million
(2012: GBP6.7 million) due to the late deployment of our new
website and operational issues in the peak selling period.
-- International sales grew by 57.7% to GBP4.1 million (2012:
GBP2.6 million).
-- Sales of Private Label grew to GBP3.9 million from GBP0.8
million.
-- As a consequence of the continued rebalancing of sales away
from Own Stores into Commercial channels gross margin declined by
1.1% points.
Jonathan Hart, Thorntons' Chief Executive, commented:
"We are encouraged by the overall progress we made during the
first half of the year. This performance demonstrates that our
strategy is generating results as we continue to rebalance the
business, revitalise the brand and restore profitability.
"Our customers have responded positively to our increased focus
on innovation, value and service and our market share has grown
further. This reflects the continued strength of the Thorntons
brand across our multi-channel distribution model.
"Whilst trading since the period end has been in line with our
expectations, we look forward to our important spring trading
seasons of Mothers' Day and Easter which will be key to the outcome
of the full year. We have strong trading plans in place and
exciting new products across all channels. We are confident in the
actions we are taking but remain cautious given the continuing
challenge of the economic climate."
For further information please contact:
Nadja Vetter / Georgina Hall, Cardew Group T: 020 7930 0777
This document contains certain statements that are
forward-looking statements. They appear in a number of places
throughout this document and include statements regarding our
intentions, beliefs or current expectations and those of our
officers, Directors and employees concerning, amongst other things,
our results of operations, financial condition, liquidity,
prospects, growth, strategies and the business we operate. By their
nature, these statements involve uncertainty since future events
and circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements
reflect knowledge and information available at the date of
preparation of this document and, unless otherwise required by
applicable law, the Company undertakes no obligation to update or
revise these forward-looking statements. Nothing in this document
should be construed as a profit forecast. The Company and its
Directors accept no liability to third parties in respect of this
document save as would arise under English law.
Half-year management report
Introduction
In the first half of the financial year further progress has
been made in transforming Thorntons in line with our strategy by
rebalancing our business, revitalising our brand and restoring
profitability. This has resulted in an encouraging trading
performance over the important Christmas period. Whilst the economy
continues to have a real impact on our customers, our plans have
been constructed accordingly, with a strong focus on innovation,
value and service. We have been encouraged by the positive response
to the actions that we have taken over the past 18 months and
believe that these results illustrate the strength of our
multi-channel model and endorse our Company strategy.
During the period under review profit before tax and exceptional
items was GBP5.3 million (2012: GBP3.1 million). Having considered
the current and future capital requirements of the business, the
Board has decided not to recommend an interim dividend (2012: nil
pence). The Board intends to adopt a progressive dividend policy as
soon as the trading performance and prospects for the business
allow.
Overall sales increased by 2.9% to GBP133.7 million (2012:
GBP130.0 million) reflecting the continued strength of the
Thorntons brand with our customers and the appropriateness of our
strategy to make our products available where our customers want to
buy them. In this respect, we were particularly pleased with the
continued strong growth of the Thorntons brand in our Commercial
channel where our share of the boxed chocolate and Christmas
seasonal specialities markets grew significantly. Additionally, we
saw strong growth in International and Private Label sales as we
pursued the initiatives outlined earlier in the financial year
albeit from a small base.
This positive growth supports our plan for our Commercial
channel to become the largest channel over the next couple of years
while significantly reducing our Own Stores estate to between 180
and 200 stores in the medium term, creating a profitable and
sustainable retail presence where our brand can be brought to life
for our customers.
We continue to make good progress with our store closure
programme first outlined in June 2011 and are on track to close
approximately 40 stores over the course of this financial year and
a similar number the year after.
The period saw further successful product innovation as we
continued to revitalise the Thorntons brand, encouraging brand
reappraisal and repeat purchases. Amongst a large number of new
lines, we launched a new range of boxed chocolates aimed at the
everyday gifting market, created several new large-format boxes for
gifting and sharing, and introduced two iconic Continental items;
our first advent calendar for grown-ups and a wonderful table
centrepiece, both of which sold out in our Own Stores. Our
traditional and new seasonal specialities sold well across all
channels, with advent calendars and our new and refreshed Santa and
reindeer models delivering particularly strong sales.
Retail
Own Stores
During the period, Own Store sales reduced by 8.3% to GBP62.6
million (2012: GBP68.3 million), mainly as a result of store
closures. Like for like sales decreased by 1.5% (2012: --5.5%),
reflecting the continued challenges for the High Street and for our
core customers.
Ahead of the peak selling season we further invested in new
merchandising initiatives in more than 100 of our top stores,
creating improved presentation of our key offers, investing in
space to re-present our famous Continental range as well as
improving focus on our "Finishing Touches" of new gift wrap, bows
and tags, all of which were well received by our customers. Efforts
to improve the customer experience were rewarded with good growth
in customer ratings, advocacy and intention to revisit,
particularly over our busiest trading period.
We closed 13 stores (2012: 20 stores) over the period at a cost
of GBP0.4 million (2012: GBP0.7 million), mainly in line with lease
expiry. We are on track with our programme to close approximately
40 stores during this financial year, the majority of which are
back-weighted to the final quarter in order to take advantage of
trading through Christmas and the key spring seasons. We ended the
first half with 317 stores.
Franchise
Franchise sales declined by 25.4% to GBP5.0 million (2012:
GBP6.7 million). Whilst our franchisees also suffered from the
widespread pressure on consumers and general High Street weakness,
the main reason for the decline was the loss of sales following the
placing into administration of our major franchisee in May
2012.
Although our franchisees approached the key Christmas season
with caution, we saw good sales of our seasonal ranges and have
received a positive response to the new ranges for the Spring
seasons.
Interest in our new "mini-franchise" format translated into ten
new openings during the period. We opened a further six
full-franchise stores, which demonstrates the continued
attractiveness of Thorntons' proposition to the independent card
and gift retailer.
During the period four franchises closed, resulting in 189
franchises at the end of the period.
Thorntons Direct
Thorntons Direct had a disappointing period in both the
corporate and consumer parts of this channel. Sales declined 11.9%
to GBP5.9 million (2012: GBP6.7 million).
Corporate sales suffered as our customers continued to tighten
expenditure in light of economic pressures. However, it was our
consumer online business that provided the greatest challenges. Our
new website was delayed and was launched in Autumn 2012 without the
planned full functionality and consumer offer. This was compounded
by operational issues at our peak period during which we moderated
marketing efforts in order to protect customer service.
These issues are being resolved and we anticipate returning to
good growth during the Spring season. We remain confident of the
significant potential to grow the consumer online element of this
channel and will seek to invest further in developing this
important contributor to our multi-channel offer.
Sales & Operations
UK Commercial
Sales of Thorntons branded product increased strongly by 16.1%
to GBP51.8 million (2012: GBP44.6 million). The attractiveness of
our quality and value was demonstrated by significant growth in
market share in both the boxed chocolate and Christmas specialities
markets building on previous gains.
Promotional activity continues to be prevalent in today's
competitive retail environment and we worked closely with our
Commercial customers to ensure attractive offers whilst protecting
margin.
Sales were driven by further improvements in depth and breadth
of distribution, a large number of Thorntons-branded bays and
feature space across the major grocers and some effective off-shelf
promotions. Additionally, we commenced the roll-out of our famous
Continental brand into this channel with encouraging initial
results. We approach the Spring seasons with confidence supported
by a strong Easter order book.
International
International sales grew strongly by 57.7% to GBP4.1 million
(2012: GBP2.6 million). Six months ago we outlined a new structured
approach to developing our business outside of the UK. We have been
particularly pleased with the reception towards Thorntons in our
first target markets and have been rewarded with encouraging
seasonal and year-round sales in South Africa and Australia
alongside good growth in the UAE in both grocery and tax-free
locations.
Whilst we remain focused on our strategy and efforts to
revitalise our business at home, we will continue to take sensible
steps to accelerate our growth internationally and consider the
performance in this period as a positive start towards growth that
should make a meaningful profit contribution in a three to
five-year timeframe.
Private Label
Sales of Private Label grew to GBP3.9 million from GBP0.8
million in the same period last year. Early in 2012 we responded to
interest from third parties wanting us to produce for them under
their own label. This had been an area from which we had hitherto
withdrawn due to low profitability. We have been pleased that the
interest in our quality, innovation and flexibility has been
matched by efficiencies in our production ensuring that this has
now become a profitable line of business.
Operations
It is important for our long-term rebalancing strategy to
maintain production volumes, and in the period under review overall
production volume grew. During our peak season we produced, packed
and despatched a record number of items supported by our
warehousing and distribution partner DHL. Again we demonstrated our
agility and flexibility in being able to respond to fast-changing
demands from our channels in addition to delivering new supply
chain solutions for new domestic and international customers.
Overall stock and customer service levels were managed closely and
we ended the Christmas period with clean seasonal stocks. Stock
levels at the end of the period were below forecast and last year's
levels.
In terms of input costs, despite some ingredient costs now being
lower than the recent peaks, other costs continue to trade around
their market highs. Our procurement extends on a global basis and
we continue to take opportunities to buy forward in order to secure
prices in core commodities, thereby enabling more robust
planning.
Margin and operating expenses
Gross margins declined by 1.1 percentage points compared to the
same period last year. This was primarily due to the increased mix
of lower gross margin sales through our Commercial channels which
accounted for a decline of 1.4 percentage points. A further 0.1
percentage point reduction was caused by lower overhead costs
absorbed into balance sheet stock levels at the half-year end.
Offsetting these was a positive variance of 0.4 percentage points
due to, in aggregate, improved trading margins.
Operating expenses before exceptional items reduced by 4.3% to
GBP49.7 million (2012: GBP52.0 million). This was primarily due to
lower costs from our Own Stores as we continued with our closure
programme as well as the continued benefits of our on-going
procurement improvement programmes.
Other operating income reduced to GBP710,000 (2012: GBP838,000)
due mainly to slightly lower sales through our product licensing
partners.
Financial position
The Company's strategy to rebalance sales across distribution
channels has had the anticipated effect of restoring the
profitability and cash generating potential of the business in the
first half of the current financial year.
Reported pre-exceptional PBT in the first half was GBP5.3
million (2012: GBP3.1million). Pre-exceptional EBITDA also
increased year on year to GBP10.6 million (2012: GBP9.0
million).
The lower level of stock held at the half end is a good
indicator of our continued tight control over cash which, when
combined with increased profitability and working capital
management, contributed to improved cash generation of GBP15.0
million (2012: GBP11.6 million).
The Company has committed unsecured bank facilities of GBP57.5
million which expire in October 2015. The committed borrowing
facilities have financial covenants attached which are tested half
yearly. At the 12 January 2013 testing date all of the covenant
tests were passed.
We expect that the Company will operate within the terms of its
borrowing facilities and covenants for the foreseeable future.
Accordingly, after making appropriate enquiries, the Directors
believe that the Company has adequate resources to continue as a
going concern.
Exceptional costs
In the first half year under review, the Company has incurred
gross impairment and onerous lease charges of GBP0.7 million (2012:
GBP2.4 million). Further details of exceptional items are contained
in note 6.
Taxation
The total tax charge after exceptional items for the period
under review was GBP1.3 million (2012: GBPnil) with the underlying
tax rate amounting to 27.8% (2012: 29.1%) of profit before tax.
This is higher than the statutory rate of 23.75% (2012: 25.75%)
mainly due to the effect of permanently disallowable items and
depreciation on assets for which the Group receives no tax
allowances.
Pension Scheme
The valuation of the Thorntons' Pension Scheme as at 30 June
2012 has been updated on an actuarial basis, applying current
discount and inflation rate assumptions and incorporating the
valuation of the plan assets as at 12 January 2013. The deficit is
now GBP30.9 million (2012: GBP29.1 million). The scheme will close
to future benefit accrual for employee members on 5 April 2013.
Board changes
Martin George joined the Board on 1 November 2012 as an
independent Non-Executive Director, bringing extensive experience
in consumer brand development as well as commercial and general
management.
Paul Wilkinson, formerly our Senior Independent Director,
succeeded John von Spreckelsen as Chairman upon his retirement from
the Board on 1 February 2013. Keith Edelman, Non-Executive
Director, succeeded Paul Wilkinson as Senior Independent Director
on the same date.
On behalf of the Board, the Executive team and everyone at
Thorntons, I would like to thank John for his contribution, support
and passionate commitment to the Company over the past six years.
He has steered Thorntons through an unprecedented period of
economic difficulty and was instrumental in the decision to de-risk
a retail-centric business by creating the multi-channel model that
serves our business and our customers well today.
Principal risks and uncertainties
Key risks are regularly reviewed by the Executive Directors and
Senior Management. The key risks and uncertainties facing the
business are detailed in note 18.
Outlook
Despite an encouraging performance during the first half of the
financial year, we recognise this as a single and important step in
a journey that will still take several years. The broader economic
environment has remained challenging and we anticipate that 2013
will present more of the same in terms of weak consumer sentiment
and activity. Since our statement on 16 January 2013, trading
across our sales channels has been in line with our
expectations.
We have strong plans for our key Spring trading seasons of
Mothers' Day and Easter with further innovation in exciting new
products, packaging and merchandising. As last year, we have
planned cautiously for our Own Store and Franchise channels but
anticipate further growth in sales and market share this Easter in
our UK Commercial channel. We have a strong order book to support
this. As ever, the performance of the Company over these important
seasons will define the outcome for the year as a whole.
There is still much to do in delivering our vision for the
future of Thorntons. We are confident in our strategy and in the
actions we have taken.
Rebalancing should see good growth in Commercial sales and a
return to growth in Thorntons Direct with further Own Store
closures in line with our lease expiry profile.
Revitalising should see further exploitation of the inherent
strengths of our brand, delivering more product innovation. We will
also make further progress towards a comprehensive refresh of our
range and packaging in line with our new brand look and feel, which
will start to become available to our customers in the second half
of 2013.
Restoring profitability is our core commitment. Margin
improvement and cost control remain our key priorities. We are
confident that we have the right plans and have taken the
appropriate actions to deliver this.
As ever, the Board is sincerely grateful for the continued
support from all of our customers and would like to express our
appreciation to our loyal staff and franchisees.
On behalf of the Board
Jonathan Hart
Chief Executive
22 February 2013
Consolidated income statement
28 weeks ended 12 January 2013
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
Note GBP'000 GBP'000 GBP'000
--------------------------------------------- ----- ----------- ---------- ----------
Revenue 5 133,697 129,979 217,144
Cost of sales (78,364) (74,710) (121,507)
--------------------------------------------- ----- ----------- ---------- ----------
Gross profit 55,333 55,269 95,637
Operating expenses
- operating expenses before exceptional
items (49,745) (51,974) (94,349)
- exceptional items 6 (714) (2,448) (3,065)
--------------------------------------------- ----- ----------- ---------- ----------
Total operating expenses (50,459) (54,422) (97,414)
--------------------------------------------- ----- ----------- ---------- ----------
Other operating income 710 838 1,474
--------------------------------------------- ----- ----------- ---------- ----------
Operating profit
- operating profit before exceptional items 6,298 4,133 2,762
- exceptional items 6 (714) (2,448) (3,065)
--------------------------------------------- ----- ----------- ---------- ----------
Total operating profit/(loss) 5 5,584 1,685 (303)
--------------------------------------------- ----- ----------- ---------- ----------
Finance income - - 2
Finance costs 6 (995) (1,067) (1,913)
Profit/(loss) before taxation
- profit before taxation and exceptional
items 5,303 3,066 851
- exceptional items 6 (714) (2,448) (3,065)
--------------------------------------------- ----- ----------- ---------- ----------
Total profit/(loss) before taxation 5 4,589 618 (2,214)
--------------------------------------------- ----- ----------- ---------- ----------
Taxation
- taxation before exceptional items 7 (1,322) (399) 846
- exceptional items 6 43 392 470
--------------------------------------------- ----- ----------- ---------- ----------
Total taxation (1,279) (7) 1,316
--------------------------------------------- ----- ----------- ---------- ----------
Profit/(loss) attributable to owners of
the parent
- profit attributable to owners of the
parent before exceptional items 3,981 2,667 1,697
- exceptional items 6 (671) (2,056) (2,595)
--------------------------------------------- ----- ----------- ---------- ----------
Total profit/(loss) attributable to owners
of the parent 3,310 611 (898)
--------------------------------------------- ----- ----------- ---------- ----------
Earnings/(loss) per share
Basic 8 4.9p 0.9p (1.4)p
Diluted 8 4.8p 0.9p (1.4)p
--------------------------------------------- ----- ----------- ---------- ----------
All activities in both the current and previous periods relate
to continuing operations.
The notes form an integral part of this condensed set of
financial statements.
Consolidated statement of comprehensive income
28 weeks ended 12 January 2013
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ----------- ---------- ---------
Profit/(loss) for the period 3,310 611 (898)
-------------------------------------------------------- ----------- ---------- ---------
Other comprehensive (expense)/income:
- actuarial loss recognised in the defined benefit
pension scheme (3,546) (4,549) (7,197)
- movement of deferred tax on pension liability 586 987 1,359
-------------------------------------------------------- ----------- ---------- ---------
Total other comprehensive expense (2,960) (3,562) (5,838)
-------------------------------------------------------- ----------- ---------- ---------
Total comprehensive income/(expense) for the financial
period attributable
to owners of the parent 350 (2,951) (6,736)
-------------------------------------------------------- ----------- ---------- ---------
The notes form an integral part of this condensed set of
financial statements.
Consolidated statement of changes in equity
28 weeks ended 12 January 2013
Ordinary Share Retained
shares premium earnings Total
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ----- --------- -------- --------- --------
At 25 June 2011 6,837 13,768 (1,296) 19,309
------------------------------------------- ----- --------- -------- --------- --------
Profit for the period - - 611 611
Other comprehensive expense - - (3,562) (3,562)
------------------------------------------- ----- --------- -------- --------- --------
Total comprehensive income for the period
ended 7 January 2012 - - (2,951) (2,951)
------------------------------------------- ----- --------- -------- --------- --------
Transactions with owners:
- share-based payment credit - - (496) (496)
- dividends 9 - - (168) (168)
------------------------------------------- ----- --------- -------- --------- --------
At 7 January 2012 6,837 13,768 (4,911) 15,694
------------------------------------------- ----- --------- -------- --------- --------
At 30 June 2012 6,837 13,768 (8,658) 11,947
------------------------------------------- ----- --------- -------- --------- --------
Profit for the period - - 3,310 3,310
Other comprehensive expense - - (2,960) (2,960)
------------------------------------------- ----- --------- -------- --------- --------
Total comprehensive income for the period
ended 12 January 2013 - - 350 350
------------------------------------------- ----- --------- -------- --------- --------
Transactions with owners:
- share-based payment charge - - 168 168
At 12 January 2013 6,837 13,768 (8,140) 12,465
------------------------------------------- ----- --------- -------- --------- --------
The notes form an integral part of this condensed set of
financial statements.
Consolidated balance sheet
as at 12 January 2013
Unaudited Unaudited Audited
12 January 7 January 30 June
2013 2012 2012
Note GBP'000 GBP'000 GBP'000
--------------------------------------------- ----- ----------- ---------- --------
Assets
Non-current assets
Intangible assets 10 2,071 2,316 2,140
Property, plant and equipment 11 44,412 49,351 47,221
Deferred tax assets 2,692 596 2,346
--------------------------------------------- ----- ----------- ---------- --------
49,175 52,263 51,707
--------------------------------------------- ----- ----------- ---------- --------
Current assets
Inventories 29,336 31,147 38,070
Trade and other receivables 32,890 27,553 15,467
Cash and cash equivalents 13b 12,660 1,919 2,918
--------------------------------------------- ----- ----------- ---------- --------
74,886 60,619 56,455
--------------------------------------------- ----- ----------- ---------- --------
Total assets 124,061 112,882 108,162
--------------------------------------------- ----- ----------- ---------- --------
Equity and liabilities
Shareholders' equity attributable to owners
of the parent
Ordinary shares 6,837 6,837 6,837
Share premium 13,768 13,768 13,768
Retained deficit (8,140) (4,911) (8,658)
--------------------------------------------- ----- ----------- ---------- --------
Total equity 12,465 15,694 11,947
--------------------------------------------- ----- ----------- ---------- --------
Liabilities
Current liabilities
Trade and other payables 43,245 42,213 27,559
Borrowings 28,500 15,898 30,354
Current tax liabilities 796 316 370
Provisions for liabilities 1,383 1,470 1,410
--------------------------------------------- ----- ----------- ---------- --------
73,924 59,897 59,693
--------------------------------------------- ----- ----------- ---------- --------
Non-current liabilities
Borrowings 1,653 2,261 1,653
Retirement benefit obligations 12 30,892 29,118 29,080
Other non-current liabilities 2,399 2,481 2,490
Provisions for liabilities 2,728 3,431 3,299
--------------------------------------------- ----- ----------- ---------- --------
37,672 37,291 36,522
--------------------------------------------- ----- ----------- ---------- --------
Total liabilities 111,596 97,188 96,215
--------------------------------------------- ----- ----------- ---------- --------
Total equity and liabilities 124,061 112,882 108,162
--------------------------------------------- ----- ----------- ---------- --------
The notes form an integral part of this condensed set of
financial statements.
Consolidated statement of cash flows
28 weeks ended 12 January 2013
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
Note GBP'000 GBP'000 GBP'000
---------------------------------------------- ----- ----------- ---------- ---------
Cash flows from operating activities 13a 14,998 11,598 1,497
Corporate taxation (paid)/received (613) 630 628
Net cash generated from operating activities 14,385 12,228 2,125
---------------------------------------------- ----- ----------- ---------- ---------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 75 442 539
Purchase of property, plant and equipment (2,068) (2,948) (4,875)
---------------------------------------------- ----- ----------- ---------- ---------
Net cash used in investing activities (1,993) (2,506) (4,336)
---------------------------------------------- ----- ----------- ---------- ---------
Cash flows from financing activities
Interest paid (796) (1,305) (2,222)
Capital element of finance lease repayments (854) (1,482) (2,234)
Borrowings repaid (1,000) (6,600) 8,000
Dividends paid - (168) (167)
---------------------------------------------- ----- ----------- ---------- ---------
Net cash used in financing activities (2,650) (9,555) 3,377
---------------------------------------------- ----- ----------- ---------- ---------
Net increase in cash and cash equivalents 9,742 167 1,166
Cash and cash equivalents at beginning
of period 2,918 1,752 1,752
---------------------------------------------- ----- ----------- ---------- ---------
Cash and cash equivalents at end of period 13b 12,660 1,919 2,918
---------------------------------------------- ----- ----------- ---------- ---------
The notes form an integral part of this condensed set of
financial statements.
Notes to the half-year financial statements
1 General information
Thorntons PLC ("the Company") is a company incorporated and
domiciled in the UK and is listed on the London Stock Exchange. The
address of the Company's registered office is Thornton Park,
Somercotes, Derbyshire DE55 4XJ.
The principal activities of the Company and its subsidiaries
during the period were the manufacturing, retailing and
distribution of high-quality confectionery and other sweet
foods.
The condensed and consolidated set of half-yearly financial
statements ("the financial statements") for the 28 weeks ended 12
January 2013 was approved by the Directors on 25 February 2013.
These financial statements do not comprise statutory accounts
within the meaning of Section 434 of the Companies Act 2006. The
financial information contained in this set of financial statements
in respect of the 53 weeks ended 30 June 2012 has been extracted
from the Annual Report and Accounts, which were approved by the
Board of Directors on 11 September 2012 and delivered to the
Registrar of Companies. The report of the auditors on those
accounts was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under Section 498 of
the Companies Act 2006.
The half-year results for the current and comparative periods
are unaudited. The auditors have carried out a review of these
financial statements for the 28 weeks ended 12 January 2013 and
their report is set out below.
2 Basis of preparation
This condensed set of financial statements for the 28 weeks
ended 12 January 2013 has been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services
Authority and with IAS 34 'Interim financial reporting' as adopted
by the European Union ("EU"). This condensed set of financial
statements should be read in conjunction with the annual financial
statements for the 53 weeks ended 30 June 2012, which have been
prepared in accordance with International Financial Reporting
Standards ("IFRS") as adopted by the EU.
3 Accounting policies
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 30 June 2012, as
described in those annual financial statements.
The following new standards, amendments to standards or
interpretations are mandatory for the first time for the financial
year ending 29 June 2013 but are not considered to have a
significant impact:
-- Amendment to IAS 12 'Income taxes' on deferred tax; and
-- Amendment to IAS 1, 'Presentation of financial statements' on other comprehensive income.
4 Estimates
The preparation of half-yearly financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed consolidated half-year financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 30 June 2012,
with the exception of changes in estimates that are required in
determining the provision for income taxes and disclosure of
exceptional items.
5 Segmental reporting
The Executive Directors review the Group's internal reporting in
order to assess performance and allocate resources. The operating
segments of the Group have been determined on this basis.
All revenue arises from UK operations to external customers and
therefore the Executive does not consider the business from a
geographic perspective, only an operational one. Two reportable
segments have been identified: "Retail" which incorporates Own
Stores, Franchise and Thorntons Direct; and "Sales &
Operations" ("S&O") encompassing the Commercial trading channel
and manufacturing operations. One Commercial customer represents
greater than 10% of Group revenue, with revenue in the period of
GBP18.3 million (2012: GBP16.7 million).
The Executive assesses the performance of the operating segments
based on a measure of operating profit. Costs specific to Head
Office and finance costs are not included in the result for each
operating segment as these costs are not managed on a segmented
basis.
Total segment assets exclude IT assets, non-trade receivables
and cash and cash equivalents as these are managed centrally.
Assets are located in the UK.
Unaudited Unaudited Audited
28 weeks ended 28 weeks ended 53 weeks ended
12 January 2013 7 January 2012 30 June 2012
-------------------------------------- ----------------------------------- -------------------------------------
Retail S&O Central Total Retail S&O Central Total Retail S&O Central Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------- -------- -------- -------- ---------- -------- -------- -------- ---------- -------- -------- ---------
Total revenue 73,449 60,248 - 133,697 81,653 48,326 - 129,979 132,150 84,994 - 217,144
---------------------- -------- -------- -------- -------- ---------- -------- -------- -------- ---------- -------- -------- ---------
Depreciation
and amortisation 1,571 2,574 671 4,816 2,388 2,668 712 5,768 3,747 5,012 1,260 10,019
---------------------- -------- -------- -------- -------- ---------- -------- -------- -------- ---------- -------- -------- ---------
Segment operating
profit 5,153 10,303 - 15,456 6,507 6,941 - 13,448 3,432 16,625 - 20,057
Head Office costs (9,158) (9,315) (17,295)
Exceptional items (714) - - (714) (2,443) - (5) (2,448) (3,060) - (5) (3,065)
---------------------- -------- -------- -------- -------- ---------- -------- -------- -------- ---------- -------- -------- ---------
Operating profit 5,584 1,685 (303)
Net finance costs (995) (1,067) (1,911)
---------------------- -------- -------- -------- -------- ---------- -------- -------- -------- ---------- -------- -------- ---------
Profit/(loss)
before taxation 4,589 618 (2,214)
---------------------- -------- -------- -------- -------- ---------- -------- -------- -------- ---------- -------- -------- ---------
Additions to
non-current assets
(other than deferred
tax assets) 634 667 660 1,961 561 1,700 331 2,592 1,300 2,493 827 4,620
---------------------- -------- -------- -------- -------- ---------- -------- -------- -------- ---------- -------- -------- ---------
Total assets 11,496 87,316 25,249 124,061 14,372 84,954 13,556 112,882 10,351 83,628 14,183 108,162
---------------------- -------- -------- -------- -------- ---------- -------- -------- -------- ---------- -------- -------- ---------
6 Exceptional items
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
GBP'000 GBP'000 GBP'000
---------------------------------------------- ----------- ---------- ---------
Impairment and onerous lease charges 714 2,443 3,060
Outsourcing costs - 5 5
Total exceptional items 714 2,448 3,065
---------------------------------------------- ----------- ---------- ---------
Tax credit attributable to exceptional items (43) (392) (470)
---------------------------------------------- ----------- ---------- ---------
Total exceptional items after tax 671 2,056 2,595
---------------------------------------------- ----------- ---------- ---------
Impairment and onerous lease charges
As a result of the performance of Retail Own Stores during the
period, significant impairment and onerous lease charges have been
required. An onerous lease provision is made in respect of stores
for which projected discounted cash flows inclusive of attributable
overheads are insufficient to cover property costs up to the lease
expiry date, held at the level of the projected shortfall.
Additionally where these discounted cash flows fall below the net
book value of store assets, an impairment provision is made.
Outsourcing costs
Transition costs incurred as a result of the Group's decision to
outsource its warehousing and distribution functions.
7 Taxation
During the period, as a result of the change in the UK main
corporation tax rate from 24% to 23% that was substantively enacted
on 3 July 2012 and effective from 1 April 2013, the relevant
deferred tax balances have been re-measured.
The March 2012 Budget proposed a further 1% reduction in the UK
corporation tax rate from 23% to 22% from 1 April 2014. This change
had not been substantively enacted at the balance sheet date and
therefore is not recognised in these financial statements.
The tax charge for the 28 weeks ended 12 January 2013 is based
on a full year overall expected tax rate of 27.8% (full year 2012:
29.1%). The charge for the period is lower than this expected rate
primarily due to the impact of the re-measurement mentioned
above.
The current year rate has been calculated by reference to the
projected charge for the full year ending 29 June 2013 and reflects
the mainstream corporation tax rate of 23.75%. The ordinary tax
charge exceeds the charge based on these statutory rates,
principally due to depreciation on owned assets not qualifying for
capital allowances and other permanently disallowable items.
8 Earnings per share
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period, excluding
those held in the employee share trust which are treated as
cancelled.
For diluted earnings per share the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. Dilutive potential ordinary
shares are those share options granted to employees where the
exercise price is less than the average market price of the
Company's ordinary shares during the period.
Reconciliations of the earnings and weighted average number of
shares used in the calculations are set out below:
Unaudited Unaudited Audited
28 weeks ended 28 weeks ended 53 weeks ended
12 January 2013 7 January 2012 30 June 2012
------------------------------- ---------------------------- ---------------------------
Basic Diluted Basic Diluted Basic Diluted
Earnings earnings earnings Earnings earnings earnings Earnings earnings earnings
GBP'000 per per GBP'000 per per GBP'000 per per
share share share share share share
-------------------- --------- --------- --------- ----------- --------- --------- ----------- --------- ---------
Profit before
exceptional
items 3,981 5.9p 5.8p 2,667 4.0p 4.0p 1,697 2.5p 2.5p
Effect of
exceptional
items (671) (1.0)p (1.0)p (2,056) (3.1)p (3.1)p (2,595) (3.9)p (3.9)p
Profit/(loss)
attributable
to owners
of the parent 3,310 4.9p 4.8p 611 0.9p 0.9p (898) (1.4)p (1.4)p
-------------------- --------- --------- --------- ----------- --------- --------- ----------- --------- ---------
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
--------------------------------------------------- ----------- ----------- -----------
Weighted average number of ordinary shares 66,955,838 66,955,838 66,955,838
Dilutive effect of shares from share options 2,051,270 210,800 1,233,787
--------------------------------------------------- ----------- ----------- -----------
Fully diluted weighted average number of ordinary
shares 69,007,108 67,166,638 68,189,625
--------------------------------------------------- ----------- ----------- -----------
9 Ordinary dividends
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------ ---------- ---------
Final dividend paid for the 53 weeks ended 30
June 2012 of GBPnil
(52 weeks ended 25 June 2011: 0.25p) - 167 167
Amounts recognised as distributions to owners
of the parent - 167 167
----------------------------------------------- ------------ ---------- ---------
No half-year dividend was declared in respect of the 53 weeks
ended 30 June 2012.
10 Intangible assets
Unaudited
computer
software
GBP'000
------------------------------------ ----------
Cost
At 30 June 2012 28,022
Additions at cost 626
Disposals (530)
------------------------------------ ----------
At 12 January 2013 28,118
------------------------------------ ----------
Accumulated amortisation
At 30 June 2012 25,882
Charge for the period 695
Disposals (530)
------------------------------------ ----------
At 12 January 2013 26,047
------------------------------------ ----------
Net book amount at 12 January 2013 2,071
------------------------------------ ----------
Net book amount at 30 June 2012 2,140
------------------------------------ ----------
11 Tangible assets
Unaudited
property,
plant
and
equipment
GBP'000
------------------------------------ ----------
Cost
At 30 June 2012 182,770
Additions at cost 1,335
Disposals (1,442)
------------------------------------ ----------
At 12 January 2013 182,663
------------------------------------ ----------
Accumulated depreciation
At 30 June 2012 135,549
Charge for the period 4,121
Disposals (1,419)
------------------------------------ ----------
At 12 January 2013 138,251
------------------------------------ ----------
Net book amount at 12 January 2013 44,412
------------------------------------ ----------
Net book amount at 30 June 2012 47,221
------------------------------------ ----------
The impairment charge for the period of GBP535,000 (2012:
GBP881,000) has been recognised within the depreciation charge for
the year and has been classified as an exceptional item (see note
6).
12 Retirement benefit obligations
The valuation of the Thorntons' Pension Scheme ("the Scheme") at
30 June 2012 has been updated on an actuarial basis applying
current discount and inflation rate assumptions and incorporating
the valuation of the plan assets at 12 January 2013 and payments
made into the scheme during the period. This has led to a net
increase in the deficit of GBP1.8 million from 30 June 2012.
In August 2012, and as part of the Schedule of Contributions
agreed with the Trustees to the Thorntons' Pension Scheme, it was
agreed that the Company's annual deficit contribution would
increase from 1 June 2012 from GBP2.2 million to GBP2.75 million.
It was also agreed that the Company would make an additional
contribution over each of the next three financial years'
equivalent to the higher of either:
-- a third of any reduction in the net debt excluding VAT
creditors for the years ending June 2013, 2014 and 2015; or
-- the amount of dividends paid to shareholders above the level of GBP1.5 million.
Following consultation with employee members, in December 2012
the Company announced the closure of the Scheme to future benefit
accrual on 5 April 2013. A curtailment gain is being calculated and
will be confirmed in the second half of the financial year.
13 Cash flow from operating activities
a) Cash generated from operations
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
GBP'000 GBP'000 GBP'000
------------------------------------------------------ ----------- ---------- ---------
Continuing operations
Operating profit/(loss) 5,584 1,685 (303)
Adjustments for:
- depreciation and amortisation 4,816 5,768 10,019
- amortisation of Government grants received (10) (11) (21)
- (profit)/loss on disposal of property, plant
and equipment (52) 174 160
- share-based payment charge/(credit) 168 (496) (459)
------------------------------------------------------ ----------- ---------- ---------
Operating cash flow before working capital movements 10,506 7,120 9,396
Changes in working capital
Decrease/(increase) in inventories 8,734 5,871 (1,052)
(Increase)/decrease in trade and other receivables (17,076) (12,055) 22
Increase/(decrease) in trade and other payables 15,166 10,133 (4,520)
(Decrease)/increase in provisions (598) 1,224 1,032
Increase in post-employment benefit obligations (1,734) (695) (3,381)
------------------------------------------------------ ----------- ---------- ---------
Cash generated from operations 14,998 11,598 1,497
------------------------------------------------------ ----------- ---------- ---------
b) Cash and cash equivalents for the statement of cash flows
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------- ---------- ---------
Cash and cash equivalents at end of period 12,660 1,919 2,918
-------------------------------------------- ----------- ---------- ---------
14 Reconciliation of movement in net debt
Unaudited Unaudited Audited
28 weeks 28 weeks 53 weeks
ended ended ended
12 January 7 January 30 June
2013 2012 2012
GBP'000 GBP'000 GBP'000
--------------------------------------------- ----------- ---------- ---------
Increase in cash and cash equivalents 9,742 167 1,166
Cash flows from decrease/(increase) in debt 1,854 8,082 (5,766)
--------------------------------------------- ----------- ---------- ---------
Change in net debt resulting from cash flow 11,596 8,249 (4,600)
Movement in net debt in the period 11,596 8,249 (4,600)
Net debt at beginning of period (29,089) (24,489) (24,489)
--------------------------------------------- ----------- ---------- ---------
Net debt at end of period (17,493) (16,240) (29,089)
--------------------------------------------- ----------- ---------- ---------
15 Operating lease commitments - minimum lease payments
Unaudited Restated Restated
28 weeks 53 weeks 52 weeks
ended ended ended
12 January 30 June 25 June
2013 2012 2011
Group GBP'000 GBP'000 GBP'000
------------------------------------------------------ ----------- --------- ---------
Land and buildings commitments under non-cancellable
operating leases:
Within one year 15,272 16,470 19,811
Later than one year and less than five years 37,821 40,903 46,511
After five years 17,852 20,940 25,576
------------------------------------------------------ ----------- --------- ---------
70,945 78,669 91,968
------------------------------------------------------ ----------- --------- ---------
Land and buildings operating lease commitments as at 30 June
2012 have been corrected to remove the lease commitment associated
with a long leasehold which was already included in the balance
sheet within fixed assets. Half-year 2013 comparatives have been
included for information.
16 Related party transactions
There are no related party transactions requiring disclosure in
these financial statements.
17 Seasonality
Sales are subject to seasonal fluctuations, with peak Christmas
demand in the second quarter of the year. In the 53 weeks ended 30
June 2012, the 28 week period to 7 January 2012 represented 60% of
annual sales.
18 Principal risks and uncertainties
Key risks are reviewed by the Executive Directors and Senior
Management. The assessment of risks on the basis of likelihood and
potential impact, together with the controls and actions to manage
or mitigate them, are reviewed by the Audit Committee and Board.
The key risks and uncertainties facing the business are considered
to be as follows:
-- economic and industry risks;
-- key input prices driven by commodity markets;
-- operational risks; and
-- people risks.
These risks and uncertainties are unchanged from those as at 30
June 2012, and further details on them are set out in our 2012
Annual Report and Accounts. This is available on our website at
investors.thorntons.co.uk.
Statement of Directors' responsibility
The Directors confirm that, to the best of their knowledge,
these financial statements have been prepared in accordance with
IAS 34 as adopted by the EU, and that the half-year management
report herein includes a fair review of the information required by
DTR 4.2.7 and DTR 4.2.8.
The Directors of Thorntons PLC are listed in the Thorntons PLC
Annual Report and Accounts 2012. Martin George was appointed
Non-Executive Director in November 2012 and Paul Wilkinson,
previously Non-Executive Director, succeeded John von Spreckelsen
as Chairman on 1 February 2013.
A list of current Directors is maintained on the Thorntons PLC
web site: www.thorntons.co.uk.
On behalf of the Board
Jonathan Hart Mike Killick
Chief Executive Finance Director
22 February 2013
This document contains certain statements that are
forward-looking statements. They appear in a number of places
throughout this document and include statements regarding our
intentions, beliefs or current expectations and those of our
officers, Directors and employees concerning, amongst other things,
our results of operations, financial condition, liquidity,
prospects, growth, strategies and the business we operate. By their
nature, these statements involve uncertainty since future events
and circumstances can cause results and developments to differ
materially from those anticipated. The forward-looking statements
reflect knowledge and information available at the date of
preparation of this document and, unless otherwise required by
applicable law, the Company undertakes no obligation to update or
revise these forward-looking statements. Nothing in this document
should be construed as a profit forecast. The Company and its
Directors accept no liability to third parties in respect of this
document save as would arise under English law.
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
28 weeks ended 12 January 2013, which comprises the Consolidated
income statement, Consolidated statement of comprehensive income,
Consolidated statement of changes in equity, Consolidated balance
sheet and Consolidated statement of cash flows and related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Services Authority.
The annual financial statements of the Group are prepared in
accordance with IFRs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34 'Interim financial reporting', as adopted by
the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. This report, including the
conclusion, has been prepared for and only for the Company for the
purpose of the Disclosure and Transparency Rules of the Financial
Services Authority and for no other purpose. We do not, in
producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown
or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 28 weeks ended 12
January 2013 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
Leeds
22 February 2013
Notes:
(a) The maintenance and integrity of the Thorntons PLC website
is the responsibility of the Directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation
and dissemination of financial information may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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