Abbeycrest Announcements

RNS Number : 4693G Abbeycrest PLC 23 October 2008  
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ABBEYCREST PLC ("Abbeycrest")
Interim Results for the Six Months ended 31 August 2008
Abbeycrest plc, the UK's leading jewellery manufacturing and distribution business, today announces its interim results for the six months ended 31 August 2008.
Key financial highlights for the six months to 31 August 2008.

2008
2007

Revenue
£23.5m
£25.7m
Down by 9%
Underlying profit/(loss) before financing and exceptionals

£0.04m
£(0.39m)
Moved to profit 
Exceptional operating costs
£1.19m
£0.09m
Cost of restructuring

Net debt
£12.8m
£18.9m
Reduced by 32%
Inventory
£14.2m
£20.9m
Reduced by 32%
Commenting on the results, Executive Chairman Simon Ashton said:

"I am pleased to be reporting to you formally, for the first time since my appointment to Executive Chairman on 1 September 2008, Abbeycrest's interim results which demonstrate the progress Abbeycrest is making in restructuring its business and building for the future.

"This financial year will be a year of significant transition and managed change. The first six months have been dominated by the implementation of the business review and restructuring programme, which we outlined in the Annual Report and Financial Statements 2008."
For further information, please contact:

Simon Ashton
Executive Chairman
Abbeycrest plc
Telephone: 0113 284 5702
Joanne Lake
Evolution Securities Limited
Telephone: 0113 243 1619
Chairman's Interim Statement

I am pleased to be reporting to you formally, for the first time since my appointment to Executive Chairman on 1 September 2008, Abbeycrest's interim results which demonstrate the progress Abbeycrest is making in restructuring its business and building for the future.

This financial year will be a year of significant transition and managed change. The first six months have been dominated by the implementation of the business review and restructuring programme, which we outlined in the Annual Report and Financial Statements 2008.

Business Review and Restructuring Programme
The first phase of this programme, "Straight Edge", involved a number of key strategic projects and was aimed at:-

achieving an immediate improvement in underlying profitability;
implementing step change reductions in working capital and net debt; and
restructuring the business and the management team.

In our Interim Management Statement of 11 August 2008, we informed shareholders that good progress had been achieved in the delivery of "Straight Edge" and for the six months to 31 August 2008, I can now report more specifically as follows:-

i) Improving profitability:
The measure of underlying profit before financing and exceptional costs improved by £430k to £43k (2007: £387k loss). This improvement is in line with our budget and arises from managed reductions in the Group's fixed cost base and the cessation of non-profitable activities.

ii) Step change reductions in working capital and net debt:
The reductions achieved in working capital and net debt have been very pleasing. These have resulted primarily from the delivery of projects associated with identifying and liquidating obsolete stock in the UK and from exiting working capital intensive business streams.

Total net debt, which includes short-term and long-term balances net of cash and is inclusive of leased gold and finance leases, has been managed down by £6.1m, from £18.9m at 31 August 2007, to £12.8m at 31 August 2008. This is a strong performance by the management team, especially considering the significant cash exceptional costs incurred in the last twelve months.

Inventory values have been reduced by £6.7m or 32% from £20.9m in August 2007 to £14.2m in August 2008, despite a 38% increase in the gold price over the same period. On a like-for-like gold price basis, the total value reduction would have been approximately £8.5m.

iii) Restructuring the business and the management team:
In the Annual Report and Financial Statements 2008, we summarised the rationale for restructuring the Group's activities into a small number of strategic business units.

I am pleased to report that the structural changes are progressing well and that the respective management teams are fully engaged and reinvigorated, not only to deliver the current improvements across the Group, but also to address the challenges of repositioning our business for the future.

The above changes have come at a cost. For the six months to 31 August 2008, we incurred exceptional costs of £1.2m (31 August 2007: £0.1m) through redundancies and other restructuring costs. These costs, combined with £2.7m of exceptional costs in the six months to 29 February 2008, whilst substantial, represent an important and necessary investment towards achieving improved core debt levels and a reduced cost base, giving us a financially sound foundation upon which to build confidently for the future.
Building for the Future
We remain committed to our change programme for the future, "Leading Edge", which we also outlined in the Annual Report and Financial Statements 2008.

"Leading Edge" centres on developing and launching fashion-led and market-oriented collections, through focussed marketing groups in key chosen markets around the world. Whilst the full implementation of "Leading Edge" will take some time to effect, we have made many of the necessary important structural changes, and are making good progress in strengthening our marketing and account management skills. Certain market-led collections developed to date have already been selected by some of our existing customers and are also providing us with opportunities to sell to new customers.
Outlook
For the first half of this financial year, sales have out-performed management's expectations and order intake in September has remained buoyant. Whilst this is encouraging, the key selling season for the Group is the period up to Christmas and, as ever, our performance will be dependent upon retail market conditions during this time, both in the UK and overseas.
Simon Ashton
Executive Chairman
Condensed Consolidated Interim Income Statement
For the six months ended 31 August 2008
Note
Six months
to 31 August
2008
Unaudited
£'000

Six months
to 31 August
2007
Unaudited
£'000
Year
to 29 February
2008
Audited
£'000
Revenue
4
23,529 
25,747 
61,936 
Operating costs

(24,676)
------------
(26,224)
------------
(63,081)
------------
Operating loss

(1,147)
=======
(477)
=======
(1,145)
=======
Analysis of operating loss

Operating profit/(loss) before exceptional items
43 
(387)
1,658 
Exceptional items - operating costs
2
(1,190)
------------
(90)
------------
(2,803)
------------
Operating loss

(1,147)
=======
(477)
=======
(1,145)
=======
Finance income

6 
26 
95 
Finance costs

(1,072)

(1,141)
(2,483)
Loss before taxation
(2,213)
------------
(1,592)
------------
(3,533)
------------
Tax (charge)/credit

(43)
------------
654 
------------
(452)
------------
Loss for the period

(2,256)
=======

(938)
=======
(3,985)
=======
Loss per share - basic and diluted
3
(8.3)p
(3.6)p
(15.0)p
Condensed Consolidated Interim Statement of Recognised Income and Expense
For the six months ended 31 August 2008
Note
Six months
to 31 August
2008
Unaudited
£'000

Six months
to 31 August
2007
Unaudited
£'000
Year
to 29 February
2008
Audited
£'000
Movement on fair values of cash flow hedges

(1)
(22)
5 
Exchange movement

9 
------------
(114)
------------
353 
------------
Total income and expense recognised in equity

8 
(136)
358 
Loss for the period

(2,256)
------------
(938)
------------
(3,985)
------------
Total recognised expense relating to the period

(2,248)
=======
(1,074)
=======
(3,627)
=======
Condensed Consolidated Interim Balance Sheet
As at 31 August 2008

Note
31 August
2008
Unaudited
£'000
31 August
2007
Unaudited
£'000
29 February
2008
Audited
£'000
Assets
Non-current assets
Goodwill

1,880 
1,866 
1,880 
Intangible assets

197 
161 
137 
Property, plant and equipment

4,567 
4,760 
4,879 
Deferred tax assets

73 
------------
471 
------------
73 
------------
6,717 
=======
7,258 
=======
6,969 
=======
Current assets
Inventories

14,192 
20,927 
15,446 
Trade and other receivables

11,587 
13,172 
11,037 
Derivative financial instruments

- 
- 
1 
Cash and cash equivalents

603 
------------
298 
------------
1,041 
------------
26,382 
=======
34,397 
=======
27,525 
=======
Liabilities
Current liabilities
Borrowings

(13,214)
(17,039)
(12,478)
Trade and other payables

(6,995)
(5,172)
(7,071)
Corporation tax

- 
- 
(126)
Derivative financial instruments

- 
-------------
(49)
------------
- 
------------
(20,209)
========
(22,260)
=======
(19,675)
=======
Net current assets

6,173 
12,137 
7,850 
Non-current liabilities
Borrowings

(155)
(2,155)
(142)
Deferred tax liabilities

- 
------------
(10)
------------
- 
------------
(155)
------------
(2,165)
------------
(142)
-------------
Net assets

12,735 
=======
17,230 
=======
14,677 
=======
Shareholder's equity
Share capital
7
2,922 
2,662 
2,662 
Share premium account

5,665 
5,619 
5,619 
Merger reserve

199 
199 
199 
Cumulative translation reserves

792 
316 
783 
Hedging reserve

- 
(26)
1 
Retained earnings

3,157 
------------
8,460 
------------
5,413 
------------
Total shareholders' equity

12,735 
=======
17,230 
=======
14,677 
=======
Condensed Consolidated Interim Cash Flow Statement
For the six months ended 31 August 2008
Note
Six months
to 31 August
2008
Unaudited
£'000
Six months
to 31 August
2007
Unaudited
£'000
Year to
29 February
2008
Audited
£'000
Cash flow from operating activities
Loss after tax

(2,256)
(938)
(3,985)
Tax charge/(credit)

43 
(654)
452 
Depreciation and amortisation

464 
489 
972 
Loss on sale of tangible fixed assets

- 
3 
5 
Finance costs

1,072 
1,141 
1,831 
Finance income

(6)
------------
(26)
-------------
(95)
------------
(683)
15 
(820)
Decrease/(increase) in inventories

1,220 
(2,264)
3,351 
(Increase)/decrease in receivables

(517)
35 
2,171 
(Decrease)/increase in payables

(171)
(1,261)
136 
Finance costs paid

(1,072)
-------------
(1,141)
------------
(1,831)
------------
Net cash inflow from operating activities

(1,223)
=======
(4,616)
=======
3,007 
=======
Cash flow from investing activities
Purchase of property, plant and equipment

(276)
(332)
(595)
Finance income received

6 
26 
95 
Purchase of intangible fixed assets

- 
------------
- 
------------
(130)
------------
Net cash generated from/(used in) investing activities
(270)
=======
(306)
=======
(630)
=======
Cash flow from financing activities
Proceeds of borrowings

2,904 
5,924 
309 
Inception of finance leases

- 
18 
- 
Leased gold facility movement

(1,996)
(1,122)
(1,877)
Capital element of finance lease rental payments

(88)
(71)
(187)
Issue of shares

306 
------------
- 
------------
- 
------------
Net cash generated from/(used in) financing activities
1,126 
=======
4,749 
=======
(1,755)
=======
Net (decrease)/increase in cash:

(367)
(173)
622 
Cash and cash equivalents at beginning of period

730 
108 
108 
Cash and cash equivalents at end of period

363 
(65)
730 
Cash and bank overdrafts comprise:
Cash and cash equivalents in the balance sheet

603 
298 
1,041 
Bank overdrafts

(240)
------------
(363)
------------
(311)
------------
363 
=======
(65)
=======
730 
=======
Notes to the Condensed Consolidated Interim Financial Statements
For the six months ended 31 August 2008

1
Basis of preparation

1.1
Reporting entity

The condensed consolidated interim financial statements of Abbeycrest plc (the "Company") as at and for the six months ended 31 August 2008 comprises the Company and its subsidiaries ("the Group").

These primary statements and selected notes comprise the unaudited condensed interim consolidated financial results of Abbeycrest plc for the six months ended 31 August 2008 and 2007.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts for the year ended 29 February 2008 were approved by the Board of Directors on 30 June 2008. The auditors' report on those accounts was unqualified and did not contain a statement under section 237(2)-(3) of the Companies Act 1985.  The auditors report did include reference to the material uncertainty in respect of the current borrowing facilities expiring on 28 February 2009 to which the auditors drew attention by way of emphasis without qualifying their report.

The consolidated financial statements of the Group as at and for the year ended 29 February 2008 are available upon request from the Company's registered office at 11-15 Wilmington Grove, Leeds, LS7 2BQ or via the company website at www.abbeycrest.co.uk.

1.2
Group re-financing

The Group's current UK borrowing facilities excluding amounts due under hire purchase agreements, which are primarily based against inventory and receivables in the UK, reach the end of the facility term on 28 February 2009. Based upon the managed reduction in debt since the existing facilities were made available, the current balance sheet position of the Group, detailed Group forecasts, the restructuring programme which is underway, current refinancing options being explored and on-going relationships with the Group's senior borrowing provider, the Directors are confident that appropriate and sufficient facilities will be in place before 28 February 2009.
1.3
Statement of compliance

The directors confirm that to the best of their knowledge:

the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
the interim management report includes a fair review of the information required by: 
a)
DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and 

b)
DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

These condensed consolidated interim financial statements were approved by the Board of Directors on 22 October 2008.

These condensed consolidated interim financial statements have been neither audited nor reviewed pursuant to guidance issued by the Auditing Practices Board.

1.4
Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 29 February 2008.  The Group does not expect to adopt any new accounting policies for the year ended 28 February 2009.

1.5
Estimates

The preparation of the interim 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 interim 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 as at and for the year ended 29 February 2008.

2
Exceptional items

Six months
to 31 August
2008
Unaudited
£'000
Six months
to 31 August
2007
Unaudited
£'000
Year to
29 February
2008
Audited
£'000

Exceptional items - operating costs
Re-organisation costs
929 
90 
819 

Stock reduction programme
261 
- 
1,934 

Fixed asset impairment
- 
------------
- 
------------
50 
------------

Total exceptional items
1,190 
=======
90 
=======
2,803 
=======

The re-organisation costs relate to redundancy, professional and other costs arising from the fundamental review of the Group's business and structure.

The stock reduction programme is an exercise to achieve additional future cash inflow from significant reductions in slow-moving or end-of-line stock. These reductions arose from the fundamental review of the Group's business.

The fixed asset impairment relates to fixed assets held by Abbeycrest International Limited that are no longer in use subsequent to the down-sizing review.

3
Loss per share
Basic loss per share and diluted earnings per share have been calculated using the weighted average number of shares in issue during the period of 27,083,424 (2007: 26,023,641).

4
Segmental analysis
The single primary business segment of the Group is the manufacture and distribution of fine jewellery.

The Group operates in three main geographical regions: the United Kingdom, the Rest of Europe and the Rest of the World.
Analysis of Revenue
United
Kingdom
Unaudited
£'000

Rest
Of Europe
Unaudited
£'000
Rest
Of World
Unaudited
£'000

Total
Unaudited
£'000

Six months to 31 August 2008
15,682 
3,431 
4,416 
23,529 

Six months to 31 August 2007
18,727 
2,906 
4,114 
25,747 
Revenue is allocated based on the country in which the customer is located.

5
Seasonality of operations
The Group is subject to seasonal fluctuations, particularly the effect of Christmas. As a consequence the first half-year typically results in lower revenues than the second half-year.

The Group attempts to minimise the seasonal impact through the management of inventories to meet demand.

For the six months ended 31 August 2008 the Group had revenue of £23,529,000 (six months to 28 February 2008: £36,189,000), a pre-exceptional loss of £1,023,000 (six months to 29 February 2008 profit: £772,000) and a loss for the period of £2,256,000 (six months to 29 February 2008: £3,047,000).

6
Property plant and equipment
Acquisitions and disposals

During the six months ended 31 August 2008 the Group purchased property, plant and equipment with a cost of £133,000 (six months to 31 August 2007: £258,000).
Capital commitments

At 31 August 2008 the Group had no capital commitments (2007: £123,000).

7
Share Capital
The Company made an allotment of 2.6m ordinary 10p shares at 12p per share. The difference between the total consideration of £312,000 and the total nominal value of £260,000 has been credited to the share premium account.

END
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