John Lewis of Hungerford : Interim report

Microsoft Word - JO532 Interim results 290216 JOHN LEWIS OF HUNGERFORD PLC ("John Lewis of Hungerford" or the "Company") Interim results CHAIRMAN'S STATEMENT

This interim statement covers the six month period to 29th February 2016.

Financial performance and cost reduction exercise

Turnover for the first half year, traditionally our weaker trading period, was marginally ahead of the previous year. This was however lower than our anticipated sales growth for the period, due in part to a number of orders linked to related building works being deferred to the second half. The lower sales growth coupled with costs associated with gearing the business for future growth, has contributed to the loss reported today.

Whilst the Board are mindful of the strong order book generated by the second half deferrals, we also recognise the need to better align the cost base of the business against underlying activity levels. Consequently the Board has undertaken a comprehensive review of the organisational structure with a view to substantially reducing costs and improving productivity. This review has resulted in a number of positions being made redundant or roles being combined. Although this has been a difficult process the Board are determined to return the business to a position of generating positive shareholder returns. These changes will achieve an annualised saving of approximately £300k from the beginning the next financial year. A non-recurring expense of

£38k relating to redundancy costs arising out of the review has been recorded in the first half year.

The operational changes we have made include moving line responsibility for the installations department to the Head of Operations. Consequently the role of Installations Director has been made redundant and as a result, Damian Walters will leave the business at the end of this financial year. Damian has therefore stepped down from the Board with immediate effect. The Board would like to place on record their appreciation for his valuable contribution to the business since his appointment in 2013 and wish him well for the future.

In light of underlying activity levels we had expected to achieve a turnover figure of around £4.0 million in the first half year. Instead turnover was constant at £3.6 million due in part to the second half deferrals referred to above Whilst these orders contribute to a healthy forward order book of commissioning deposits at the period end of £1.9 million (2015: £1.3 million) they did not have a material effect on financial results for the first half. The new staff recruited over the last twelve months are now embedded into the business and have contributed to this forward order book, combined with a positive return on investment from showroom refits completed in the last financial year.

Products	2016	2015
£000	£000
Turnover	3,130	3,104
Cost of sales	(1,436)	(1,307)

Gross margin

1,694

1,797

The results shown above were derived from a comparable showroom estate year-on-year. The reduction in gross margin reflects continued deflationary pricing pressure and management continue to take steps to address this.

Installations	2016	2015
£000	£000
Turnover	483	444
Cost of sales	(359)	(323)
Gross margin	124	121

Our artisan installation service generally trades in line with kitchen volume, however improved conversion in the first half this year saw sales increase by 9% to £483,000. We have been careful to ensure the aforementioned changes in reporting structures within our installations department will not impact on the customer experience as we see our ability to control the installation process as a critical part of protecting our brand.

Investment in the Future

The first half of the year has seen further investment in our existing showroom estate as we focus on rolling out the new contemporary Pure and Urban ranges following successful testing in Fulham and Chiswick. This has led to a comprehensive refit at our Winchester showroom improving the competiveness of the offering and generating fresh interest at this location. We do not anticipate making any material further investment in the remainder of the financial year.

Cash flow

Cash at bank and in hand at the end of the period was £496,000 (2015: £863,000) inclusive of customer deposits and advance payments. Our bank and other loans at the end of the period were

£835k repayable within 10 years. Our overdraft facility of £250k remained unused during the period.

Current trading

We believe the best measure of current trading to be the aggregate of our dispatched sales and the forward order book, being committed orders for which deposits have been taken. At the end of the period the aggregate of these stood at £4.5 million, a 5% increase over the comparable period last year (2015: £4.3 million). However, our statutory revenue recognition policy is to recognise sales only at the point orders are dispatched.

A further update on trading will be provided in June, following completion of the third quarter, ending 31stMay 2016. However, we expect that reported sales for the third quarter will be around 12.5% higher than the previous year at £1.86 million.

Although the second half year is traditionally our stronger trading period we consider it unlikely that the losses in the first half will be recovered in full and therefore expect to report a loss for the

full year.

Chairman

As previously announced Malcolm Hepworth has resigned as a non-executive director due to ill health. The Board wishes Mr Hepworth well with his continued recovery and wishes to express its appreciation of his valuable contribution since his appointment in 2006. The Board intends to appoint a new non-executive Chairman of the Board and the selection process is under way.

Pending this appointment the Board have requested that I fulfil the role of interim Chairman and I have agreed to do so.

John Lewis Interim Chairman

Enquiries: John Lewis of Hungerford plc	01235 774300
Jon Rosby, Managing Director
Smith & Williamson Corporate Finance Limited Martyn Fraser	0117 376 2213

INCOME STATEMENT FOR THE SIX MONTHS ENDED 29 FEBRUARY 2016

Audited

Year

Unaudited 6 months ended ended

29 February 28

February

31 August

2016 2015 2015

Note

£'000 £'000 £'000

Revenue 3,613 3,548 7,799

Cost of sales (1,795) (1,630) (3,744)

Gross profit 1,818 1,918 4,055

Selling and distribution costs (258) (267) (482) Administration expenses:

Share based payments - -43

Other (1,930) (1,825) (3,718)

Total (1,930) (1,825) (3,675)

Other non recurring items - restructuring costs (38)-	-
Loss before share based payments (408) (174)	(145)
Loss from operations (408)(174) Finance income -3 Finance expenses (22)(33) Loss before tax (430) (204) Taxation -- Loss after taxation (430) (204) Loss per share 2 Basic (0.23)p (0.11)p Fully diluted (0.23)p (0.11)p	(102) 2 (54) (154) 15 (139) (0.07)p (0.07)p

STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 29 FEBRUARY 2016

Audited

Year

Unaudited 6 months ended ended

29 February 28

February

31 August

2016 2015 2015

£'000 £'000 £'000

Loss for the period (430) (204)(139)

Total Comprehensive Income (430) (204) (139) BALANCE SHEET AS AT 29 FEBRUARY 2016

Unaudited Unaudited Audited

29 February 28

February

31 August

2016 2015 2015

Non-Current Assets

£'000 £'000 £'000

Intangible assets 86 103 92

Tangible assets2,782 2,629 2,784 Trade and other receivables57 57 57

2,925 2,789 2,933