Last checked at 13 Jan 2010 07:00
13 January 2010
Flying Brands Limited ('Flying Brands' or the 'Group')
Trading update for the three months to 1 January 2010
Flying Brands, the Jersey-based home shopping group, is today issuing a trading update for the final quarter of the Company's 2009 financial year (the 13 weeks to 1 January 2010). This trading update follows the Company's Interim Management Statement, which was released on 19 October 2009.
Sales for Flying Flowers in the peak Christmas trading period were in line with management and market expectations and increased operational efficiencies mean that the Group should exceed the market's profit expectations for the year.
Results for the 52 weeks to 1 January 2010 will be released on 11 March 2010.
Actions
We announced in October that we would be moving the despatch of our postal flowers business to the UK. This move was completed successfully and is key to enabling us to improve significantly the quality and range of the products and delivery options at Flying Flowers with significant medium and longer term enhancements to the growth and profitability of this brand. As we announced at the time, the loss of the benefit of Low Value Consignment Relief (LVCR) will have a significant short term impact on sales and margins as we have not yet sought to recoup VAT in our pricing structures.
We also took the decision to run more focused mailing campaigns and eliminate unprofitable recruitment activity. This was particularly important for our 2009 Flying Flowers Christmas campaign as in the previous year the sales levels were maintained but at the expense of significantly reduced margins, which led to a substantial reduction in Group profits in 2008.
Trading
Flying Flowers' sales were £3.58m (2008: £5.29m), in line with market expectations and reflecting the impact of the loss of LVCR and the decision to focus on more profitable customers. Our focus on profitable customers and the reduction of risk from the change in operational structure of the business should result in divisional profits being ahead of expectations.
Early Christmas sales were impacted by the Royal Mail workers industrial action, as one of our three Christmas mailings landed between the two national strikes and the main Christmas despatch window coincided with some of the worst weather in the run-up to Christmas. Despite this, the success of our new dispatch and purchasing arrangements meant that the level of refunds and replacements was below our expectations and that we all but eliminated the problem of flower wastage.
Sales in the Garden Division for the three months were £1.51m compared to £1.85m last year.
Sales in the core Gardening Direct business were £0.62m (2008:£0.70m). As was highlighted in the Q3 IMS when we reported like-for-like sales growth in this division of 30% there were significant timing differences in the dispatch of products between 2009 and 2008. Sales for the second half were 19% ahead of 2008 making a total of £2.94m (2008: £2.47m). The number of active customers at the end of the Autumn season was 313,000, 53,000 higher than at the start of the year and the total number of new customers recruited during the year in Gardening Direct was 77,000 (2008:47,000).
Garden Bird Supplies' sales at £0.89m (2008: £1.15m) were 23% down on 2008 a rate of decline that is in line with what we know of activity elsewhere in the bird food sector. Sales of bird food generally were affected by the mild autumn weather which resulted in plentiful supplies of natural foods for wild birds. The recent spell of cold weather has seen a significant upturn in sales of bird food and this brand has had a strong start to 2010.
The Entertainment Division's sales declined by £0.28m to £1.51m. Listen2 sales continue to decline in line with its reduced customer base, although sales did beat internal expectations as a result of more targeted marketing campaigns. Benham sales were 15% down on 2008 and we are looking at ways to reduce the cost base of Benham to increase profitability in 2010.
Sales for the three months from continuing operations were £6.60m (2008:£9.05m) but the benefits of the more targeted marketing approach and the cost reductions undertaken earlier in the year should result in the Group exceeding the market's profit expectations for the year.
Overall, Group revenue for the period, including sales from Greetings Direct of £0.19m (2008: £1.79m), which continues to generate sales following the decision to close it in 2008, was £6.79m (2008:£10.8m).
Balance Sheet
Our gross cash balance at the year-end was £4.2m (2008: £2.2m) with bank loans of £2.3m (2008: £5.2m). We therefore had net cash at the end of 2009 of £1.9m compared to net debt at the end of 2008 of £3.0m, an improvement in net cash of £4.9m.
Stephen Cook, Chief Executive, commented:
"We are very pleased that Flying Flowers was able to meet expectations in one of its peak trading periods for the first time in several years. The operational changes we have made have substantially reduced the risk profile of the business and we hope to be able to build on this good start to Flying Flowers' repositioning in 2010.
The results of both of our key campaigns (Gardening Direct Autumn and Flying Flowers Christmas) in the second half exceeded our expectations both in terms of sales and profitability and the benefits of this will be seen when we announce our full year results in March. Our cost base has been realigned with the current size of the Group and we will focus efforts on growing revenue, customer numbers and profits in our core brands in 2010."
For further information, please contact:
Flying Brands Limited 01245 228300
Stephen Cook, Chief Executive
Anthony Gee, Finance Director
Smithfield Consultants 020 7360 4900
John Kiely
Notes to editors
Jersey based Flying Brands Limited (LSE: FBDU) is a multi brand home shopping group. Founded in 1981, it was admitted to the Official List of the London Stock Exchange in 1993. The Group operates the following divisions:
* Gifts (Flying Flowers, the UK's largest flowers by post brand, despatching over 500,000 bouquets a year)
* Garden (Gardening Direct, one of the UK's largest mail order bedding plants and gardening products operations; Garden Bird Supplies, a leading provider of food and accessories for birds and other wildlife)
* Entertainment (Listen2, mail order audio books, music and DVD retailer; Benham, the first day cover, stamps and coins collectables specialist)
More information can be found at: www.flyingbrands.com