BAE.L Regulatory News (BAE)

Beale PLC, the specialist department store operator, announces Interim Results for the 26 weeks ended 28 April 2012.

•

The ARCS stores continue to be integrated into the Group with all stores now trading as Beales.

•

Gross sales, which include concession sales and VAT, up 49%* as a result of the ARCS acquisition.

•

Like for like gross sales which include concession sales and VAT declined by 6.7%, an improvement on the trend reported on 16 March 2012.

•

Revenue at £39.7 million (2011: £27.3 million) increased by 46%.

•

Loss before tax of £0.9 million (2011: £1.2 million). The previous year's loss included £1.3 million of exceptional costs in connection with the acquisition of 19 department stores from ARCS.

Post Balance Sheet

•

Successful renegotiation of the HSBC banking facility for a further three years.

•

Beales loyalty scheme launched with in excess of 75,000 members.

•

Maidstone opened on 1st June as Beales first outlet store.

Notes

26 weeks to

28 April

2012

£000

26 weeks to

30 April

2011

£000

Audited

52 weeks to

29 October 2011

£000

Gross sales*

2

70,846

47,599

110,027

Revenue - continuing operations

2

39,717

27,273

61,969

Cost of sales

(19,179)

(12,923)

(30,158)

Gross profit

20,538

14,350

31,811

Administrative expenses

Exceptional administrative (expenses)/income

3

(21,142)

-

(14,133)

(1,298)

(35,643)

4,800

Operating (loss)/profit - continuing operations

(604)

(1,081)

968

Finance expense

(358)

(134)

(426)

Finance income

1

1

1

(Loss)/profit on ordinary activities before tax

(961)

(1,214)

543

Taxation credit on (loss)/profit

5

24

-

58

(Loss)/profit for the period from continuing operations attributable to equity members of the parent

(937)

(1,214)

601

Basic (loss)/earning per share

6

(4.56)p

(5.91)p

2.93p

Diluted (loss)/earning per share

6

(4.56)p

(5.91)p

2.80p

*

Gross sales reflect revenue inclusive of concession sales and VAT, all from continuing operations.

Notes

28 April

 2012

£000

30 April

 2011

£000

Audited

29 October

 2011

£000

Non-current assets

Goodwill

7

892

892

892

Property, plant and equipment

27,024

23,933

26,586

Financial assets

16

16

16

Derivative asset

8

1,405

-

1,233

29,337

24,841

28,727

Current assets

Inventories

15,759

8,838

16,462

Trade and other receivables

5,961

4,822

5,676

Cash and cash equivalents

847

113

738

22,567

13,773

22,876

Total assets

51,904

38,614

51,603

Current liabilities

Trade and other payables

(13,494)

(8,952)

(15,797)

Tax liabilities

(35)

(35)

(35)

Borrowings, bank loan & overdrafts

(6,500)

(183)

(3,850)

(20,029)

(9,170)

(19,682)

Net current assets

2,538

4,603

3,194

Non-current liabilities

Preference shares

9

(6,368)

-

(6,147)

Borrowings

(1,750)

(7,800)

(1,750)

Retirement benefit obligations

11

(203)

(2,482)

(203)

Lease incentives

(3,409)

(2,166)

(2,736)

Deferred tax liabilities

(3,158)

(2,639)

(3,248)

Obligations under finance leases

(979)

(979)

(979)

Total liabilities

(15,867)

(35,896)

(16,066)

(25,236)

(15,063)

(34,745)

Net assets

16,008

13,378

16,858

Equity

Share capital

1,026

1,026

1,026

Share premium account

440

440

440

Revaluation reserve

9,042

8,177

9,010

Capital redemption reserve

54

242

54

ESOP reserve

(22)

(23)

(22)

Retained earnings

5,468

3,516

6,350

Total equity

16,008

13,378

16,858

26 weeks to

28 April

2012

£000

26 weeks to

30 April

2011

£000

Audited

52 weeks to

29 October 2011

£000

Actuarial gain on pension scheme

-

-

743

Revaluation

-

-

1,046

Tax on revaluation reserve

87

-

(163)

Tax on items taken directly to equity

-

-

39

Net income recognised directly in equity

87

-

1,665

(Loss)/profit for the period

(937)

(1,214)

601

Total comprehensive (loss)/income for the period

(850)

(1,214)

2,266

26 weeks to

28 April

2012

£000

26 weeks to

30 April

2011

£000

52 weeks to

29 October 2011

£000

Opening equity

16,858

14,592

14,592

Total comprehensive (loss)/profit for the period

(850)

(1,214)

2,266

Total movements in equity for the period

(850)

(1,214)

2,266

Closing equity

16,008

13,378

16,858

Share

 Capital

£000

Share

 premium account

£000

Revaluation

reserve

£000

Capital redemption reserve

£000

ESOP

reserve

£000

Retained

earnings

£000

At 1 November 2010

1,026

440

8,226

242

(27)

4,685

Profit for period

-

-

-

-

-

(1,214)

EPOS reserve loss for the period

-

-

-

-

4

(4)

Transfer from revaluation reserve

-

-

(49)

-

-

49

30 April 2011

1,026

440

8,177

242

(23)

3,516

Loss for the period

-

-

-

-

-

1,815

Revaluation increase in land & building

-

-

1,046

-

-

-

Tax Comprehensive income

-

-

-

-

-

39

Deferred tax charge on revaluation reserve

-

-

(163)

-

-

-

EPOS reserve loss for the period

-

-

-

-

1

(1)

Transfer from capital redemption reserve

-

-

-

(188)

-

188

Transfer from revaluation reserve

-

-

(50)

-

-

50

Net actuarial gain

-

-

-

-

-

743

29 October 2011

1,026

440

9,010

54

(22)

6,350

Loss for the period

-

-

-

-

-

(937)

Deferred tax on revaluation reserve

-

-

87

-

-

-

Transfer from revaluation reserve

-

-

(55)

-

-

55

28 April 2012

1,026

440

9,042

54

(22)

5,468

Note

26 weeks to

28 April

2012

£000

26 weeks to

30 April

2011

£000

Audited

52 weeks to

29 October 2011

£000

Cash (outflow)/inflow from operating activities before interest and tax

10

(1,152)

1,094

1,688

Interest paid

(149)

(143)

(260)

Interest received

1

1

1

Net cash (used in)/generated from operating activities

(1,300)

952

1,429

Cash (outflow)/inflow from investing activities

Purchase of property, plant and equipment

(1,241)

(688)

(2,267)

Purchase of new business

-

-

(4,390)

Net cash used in investing activities

(1,241)

(688)

(6,657)

Cash inflow/(outflow) from financing activities

Preference shares issued

-

-

8,500

Increase/(decrease) in bank loans

2,900

(800)

(5,500)

(Repayment)/increase in ARCS loan

(250)

-

2,500

Net cash generated from/(used in) financing activities

2,650

(800)

5,500

Net Increase/(decrease) in cash and cash equivalents in the period

109

(536)

272

Cash and cash equivalents at beginning of period

738

466

466

Cash and cash equivalents at end of period

847

(70)

738

26 weeks to

28 April

2012

£000

26 weeks to

30 April

2011

£000

52 weeks to

29 October

2011

£000

Cash at bank

Bank overdrafts

847

-

113

(183)

738

-

Cash and cash equivalents (including overdrafts)

847

(70)

738

Borrowings:

Debt due within one year - Bank loan

- ARCS loan

(6,000)

(500)

-

-

(3,100)

(750)

(6,500)

(3,850)

Debt due after one year

Preference shares

(6,368)

-

(6,147)

ARCS loan

(1,750)

-

(1,750)

Bank loan

-

(7,800)

-

(8,118)

(7,800)

(7,897)

Total borrowings

(14,618)

(7,800)

(11,747)

Net debt

(13,771)

(7,870)

(11,009)

1.

Accounting Policies

Basis of preparation

The Interim Financial Statements for the 26 weeks ended 28 April 2012 have been prepared on the basis of the accounting policies set out in the Group's financial statements for the 52 weeks ended 29 October 2011.

Going Concern

The Group and Company have met their day-to-day working capital requirements through the use of one principal bank loan facility of £9 million which was repayable on 28 February 2013 and an overdraft facility of £112,000 which was repayable on demand. Since the 28th April 2012, the business has renegotiated its principal banking facilities. The business now has a £8.5m facility and any outstanding balance is repayable on 31 October 2015 and an overdraft facility of £112,000 which is repayable on demand.

The bank facilities are secured on the freehold properties of the Group. These properties were independently re-valued to £12.6 million as at 29 October 2011.

The bank facilities include a number of financial covenants which require testing at specific dates determined by the bank. The major covenants are the earnings before interest, taxation, depreciation and amortisation and the loan to value covenant. The covenants will initially be tested for the three-month period ending 3 November 2012 and then on a rolling twelve month basis every six months thereafter. A breach of one or more of the covenants could result in the Group's debt becoming repayable. Some of the covenants simply allow an independent third party to be instructed to carry out an independent business review of the Group and provide a report on such matters relating to the Borrower and the Group as the lender considers necessary or desirable. Should a covenant breach become likely, there are certain mitigating actions that the Group could take to avoid being in breach; these include implementing cost reductions, stimulating trade by promotions and seeking to materialise value from various assets held on the Group balance sheet.

The Group is subject to a number of risks and uncertainties which arise as a result of the current economic environment. In determining that the Group is a going concern, these risks, the most significant of which are the impact on consumer behaviour and in turn the impact on the level of the Group's sales, have been considered by the Directors.

The Directors have prepared forecast information for the 2011/12 year and a three year corporate plan. Based on these forecasts, forward covenant tests after applying financial sensitivities based on likely scenarios and mitigating actions, show that none of the covenants are forecast to be breached in the foreseeable future. The forecast and corporate plan are based on market data and past experience and the Directors have formed a judgement that at the time of approving these interim statements, based on those forecasts and projections, there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus the going concern basis is adopted in preparing these interim statements.

2.

Revenue

All the Group's revenue is derived from retail sales made in the UK. Revenue excludes VAT and the non-commission element of sales made by concession outlets.

26 weeks to

28 April

2012

£000

26 weeks to

30 April

2011

£000

52 weeks to

29 October

2011

£000

Gross sales

70,846

47,599

110,027

VAT

(11,615)

(7,389)

(17,579)

Gross sales (excluding VAT)

Agency sales less commission

59,231

(19,514)

40,210

(12,937)

92,448

(30,479)

Revenue

39,717

27,273

61,969

Seasonality of sales

The Group sales are more heavily weighted towards the first half of the calendar year on a like for like basis, with 54.44% (2010: 54.9%) of gross annual sales of the previous year being made in the first half on a like for like basis (this excludes the 19 stores acquired from ARCS on 22 May 2011). 

3.

Exceptional administrative expenses

The Group had an exceptional item of nil (30 April £1,298,000) and (29 October £4,800,000). The £1,298,000 exceptional item incurred in the period to April 2011 was acquisition fees arising from the process of acquisition of 19 stores from ARCS. The £4,800,000 arising in the period to October 2011 relates to negative goodwill of £6,626,000 credited to income statement less £1,826,000 of exceptional acquisition and integration costs relating to the acquisition of 19 stores from ARCS.

4.

Segment information

The Board have reviewed the requirements of IFRS 8. The individual department stores have similar economic characteristics, products and services, class of customer, method of service provision and regulatory environment. Consequently the directors consider the individual stores can be aggregated into one segment.

5.

Tax

A tax credit has arisen of £24,000 (2011: nil) as a result of the deferred tax rate falling from 25% to 24%. The total tax credit for the 52 weeks ended 29 October 2011 was calculated at 10.68%.

Tax for the six month period is credited at 2.5% (26 weeks ended 30 April 2011: 0%; 52 weeks ended 29 October 2011: 10.68%)

6.

 (Loss)/earnings per share

26 weeks to

28 April

2012

26 weeks to

30 April

2011

52 weeks to

29 October

2011

Weighted average number of shares in issue for the purpose of basic earnings per share

20,524,797

20,524,797

20,524,797

Dilution - share reward schemes

949,874

-

949,874

21,474,671

20,524,797

21,474,671

£000

£000

£000

 (Loss)/profit for basic and diluted earnings per share

(937)

(1,214)

601

Pence

Pence

Pence

Basic (loss)/earnings per share

(4.56)

(5.91)

2.93

Basic (loss)/earnings per share before exceptional item

(4.56)

0.41

(20.46)

Diluted (loss)/earnings per share

(4.56)

(5.91)

2.80

7.

Goodwill

As at 28 April 2012 the directors carried out an impairment review. The Board concluded the goodwill had not suffered any impairment. A review at the half year is undertaken to ensure there are no indicators of impairment.

8.

 Derivative asset

28 April

2012

£000

30 April

2011

£000

29 October

2011

£000

Embedded Derivative

1,405

-

1,233

The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, as with the 8.5m preference shares, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives.

No dividend accrues on the preference shares until five years from the date of issue. Thereafter a preferential dividend of 8 percent per annum will be payable on each of the preference shares for 4 years, increasing to 9% thereafter. The preference shares can be repaid at any time at no penalty.

An embedded derivative in relation to the prepayment option arising on the 8,500,000 preference shares was valued at inception on 22 May 2011 to be £1,078,000. As at 28 April 2012 the derivative was valued at £1,405,000 (30 April 2011: nil; 29 October 2011: £1,233,000). It has been assumed the Group can borrow at 4% over LIBOR without security in determining the credit spread required to value this instrument. The valuations were supplied by an independent third party.

9.

 Preference Shares

28 April

2012

£000

30 April

2011

£000

29 October

2011

£000

Preference Shares

6,368

-

6,147

At the EGM on 17 May 2011 the shareholders approved the issue of 8,500,000 new redeemable preference shares of £1 each in capital of the Company to ARCS.

The preference shares have been recorded at their estimated initial fair value of £5.97m on 22 May 2011. The initial value was established by an independent third party valuer, based on assumptions provided by management including an estimate of the Group's credit spread and based on the interest and cashflows arising in relation to the preference shares and the fact that no dividend will accrue on the preference shares until five years from their date of issue. The preference shares carrying value is stated above on an amortised cost basis. The effective rate of interest arising on the shares is 7.11%. Furthermore the preference shares can be repaid at any time without penalty. The terms of the preference shares are such that an embedded derivative is recognised, details of which are included in note 8.

10.

Reconciliation of operating (loss)/profit to cash generated from operating activities

26 weeks to

28 April

2012

£000

26 weeks to

30 April

2011

£000

52 weeks to

29 October

2011

£000

Operating (loss)/profit

(604)

(1,081)

968

Adjustments for:

Cash disbursements of pension obligations (net of charge included within the income statement)

-

-

(1,536)

Negative Goodwill

-

-

(6,626)

Depreciation

803

851

1,819

Fair value movement of derivative

(172)

-

(155)

Decrease/(increase) in inventories

703

657

(169)

Increase in trade and other receivables

(285)

(420)

(1,224)

(Decrease)/increase in trade and other payables

(1,597)

1,087

8,611

Cash (outflow)/inflow from operations

(1,152)

 1,094

1,688

11.

Retirement benefit obligations

The defined benefit obligations at 28 April 2012 has not been changed from the figures recorded at 29 October 2011. As in the directors' opinion, movements in significant assumptions, asset values and contributions paid when considered together would not have significantly altered the pension deficit.

12.

Post balance sheet event

On 1st June 2012 the Group opened a department store in Maidstone which trades as a Beales Outlet Store as referred to in the Interim Management Report. The lease has been taken on a short term basis.

The Group successfully re-negotiated a refinancing of its revolving credit facility with HSBC as referred to in note 1.

13.

Business Combination

The directors have reviewed the provisional fair values attributed to the assets and liabilities of the 19 department stores acquired from ARCS on 22 May 2011 and have concluded based on current information no change is required to any of these fair values.

14.

Related Party Transactions

On 24 February 2012 Panther Securities PLC who own 29.72% of Beale PLC purchased 3 freeholds from ARCS for £2,250,000, of which £300,000 is deferred until February 2015.

15.

Basis of financial information

The condensed set of financial statements included in this interim financial report, approved by the Board of directors on 22 June 2012, does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. This condensed set of financial statements has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union. This Interim Report and Accounts will be sent to shareholders. Further copies may be obtained from the Company Secretary, Beale PLC, The Granville Chambers, 21 Richmond Hill, Bournemouth BH2 6BJ or directly from the Company website www.beales.co.uk.

The information included in this Interim Financial Statement for the 52 weeks ended 29 October 2011 does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The statutory accounts for the 52 weeks ended 29 October 2011, which were prepared under International Financial Reporting Standards, have been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement made under Section 498(2) or (3) of the Companies Act 2006.

The financial year ending 3 November 2012 is a 53 week year.