RNS Number:5421O
Kleeneze PLC
06 July 2005
For Immediate Release 6 July 2005
Kleeneze plc
Preliminary Results for the year ended 28th April 2005
Kleeneze plc ("Kleeneze" or the "Group"), the leading European home retail
group, announces preliminary results for the period ended 28th April 2005.
* Turnover from continuing operations up 10.7% to #175.9 million (2004:
#158.9 million)
* Profit before tax of #5.9 million (2004: Loss #2.0 million)
* Basic earnings per share of 10.21 pence (2004: Loss 5.76 pence) and
normalised basic earnings per share of 10.17 pence (2004: 12.85 pence)
* Final dividend up 11.5% to 2.23 pence (2004: 2.0 pence); total for the
year up 10% to 3.30 pence (2004: 3.0 pence)
* Net debt at 28th April 2005 of #27.0 million (2004: #11.2 million) after
cash outflows of #13.1 million relating to acquisitions
* Operating profit from existing operations before goodwill amortisation and
exceptional items of #7.7 million (2004: #7.9 million);
* Strong performance from Kleeneze Europe and launch in the Netherlands
* Acquisitions of the leading internet businesses I Want One of Those.com
and Kitbag.com
* Launch of eeZee tv, our Joint Venture television shopping channel
* Re-naming of Kleeneze plc to European Home Retail plc
William Rollason, Chief Executive of Kleeneze plc, said:
"This has been an exciting year where we have laid the foundations for the
future.
Against a very weak retailing environment in the UK we have returned Kleeneze
Europe to growth. Furthermore, the acquisitions of IWOOT and Kitbag, the launch
of eeZee tv and the successful start to Kleeneze's continental European
expansion are major steps in creating a specialist European home shopping group,
which is why we have decided to change the name of the Group to "European Home
Retail plc".
The combination of our three retailing platforms of Catalogue Home Shopping,
Internet Retailing and Television Shopping with our core skills of consumer
marketing, product sourcing and fulfilment, puts the Group in a strong position
to accelerate growth."
Contacts:
Kleeneze plc
William Rollason Today only 020 7466 5000
Chris Hulland thereafter 01793 606004
Buchanan Communications
Richard Oldworth/Suzanne Brocks 020 7466 5000
Overview
During the year ended 28th April, 2005 we have significantly re-shaped the Group
to become a home shopping specialist, distributing across three principal
channels: Catalogue Home Shopping, Internet Retailing and Television Shopping,
using our core skills of consumer marketing, product sourcing and next day
delivery. We have achieved this through the launch of Kleeneze Europe in the
Netherlands, the acquisitions of I Want One of Those.com Limited ("IWOOT") and
Kitbag Sports Limited ("Kitbag"), and the launch of eeZee tv LLP ("eeZee tv"),
our joint venture television shopping channel broadcasting on Sky Channel 659.
To reflect the re-shaping of the Group into a home shopping specialist, we are
recommending to shareholders that Kleeneze plc be re-named European Home Retail
plc effective from the AGM on 28th September, 2005.
The first step in the creation of the newly focused Group was the September 2004
launch of Kleeneze Europe in the Netherlands. This is our first operation in
continental Europe and trading has begun well with 2,000 distributors at the end
of April. The growth in distributor numbers in The Netherlands was accompanied
by an increase in distributor numbers in the UK and Ireland where the downward
trend over the last 18 months was reversed in the second half of the year such
that the number of active distributors at the end of April was 13,524 (2004:
13,397).
On 26th October, 2004 we acquired IWOOT for #6.0 million in cash to be paid over
a three year period plus performance related deferred consideration of up to
#4.65 million, payable over three years. IWOOT is the number one visited site
in its sector (source: Hitwise) selling gifts, gadgets and lifestyle accessories
on its award winning website www.iwantoneofthose.com.
We commenced live broadcasting of eeZee tv (Sky Channel 659) on 1st March, 2005.
This is an important step in the development of the Group as eeZee tv will not
only provide us with an entry into the fast-growing television shopping market
but is also an excellent way in which to source and develop new products for the
Kleeneze network.
On 1st April, 2005 we acquired our second internet business, Kitbag, for #7.2
million in cash plus 1.3 million shares in Kleeneze plc. Kitbag is a leading
internet retailer of sports and fitness merchandise through www.kitbag.com.
Kitbag also has long term contracts with a number of leading football clubs for
the provision of their online and mail order sales in the UK and certain other
territories. The contracts include Manchester United, Chelsea and Barcelona.
These acquisitions will enable us to develop a range of products that can be
sold across all of our distribution channels; catalogues, internet and
television shopping. This completes the virtuous circle of a product's life
beginning on the internet, migrating to television shopping, then retailed
through Kleeneze's catalogues. This virtuous circle should benefit each
business unit.
Against the background of a significant fall in hamper volumes at Farepak we
took the decision to close production of hampers in Swindon and agreed a three
year outsourcing contract. We have been working hard to reduce the fixed cost
base of Farepak for the last two years. This action marks a major step forward
in this process and significantly de-risks the business freeing management to
focus on the marketing of both the savings club business and our nascent third
party contract voucher business.
Results
Turnover from continuing operations for the year was up 10.7% to #175.9 million
(2004: #158.9 million) including #5.3 million from acquisitions during the
year. Excluding acquisitions, turnover was up 7.3%.
Operating profit from existing operations before goodwill amortisation and
exceptional items was #7.7 million (2004: #7.9 million). Although the overall
margin fell to 4.5% (2004: 5.0%), Kleeneze Europe's margin increased to 8.3%
(2004: 8.0%), reflecting the first full year of the efficiency benefits from our
new distribution centre.
Profit before tax from continuing operations before goodwill amortisation and
exceptional items fell to #7.0 million (2004: #8.2 million) principally due to
the start up losses from our new joint venture television shopping business
eeZee tv which recorded losses of #0.8 million (2004: nil) in the six months
trading.
Profit after tax was #4.8 million (2004: Loss #2.7 million). This figure is
reported after exceptional and non-operating items. Profits of #1.4 million were
generated on the disposal of properties and shares in Premier Direct Group plc.
These were offset by #0.5 million incurred in closing production at Farepak,
#0.3 million of goodwill amortisation, #0.8 million of start up costs in The
Netherlands and Kleeneze TV, #0.3 million of restructuring costs across the
Group following the acquisitions made during the year and other costs of #0.5
million. There was also a tax credit of #1.0 million.
Basic earnings per share were 10.21 pence (2004: Loss 5.76 pence).
The Group generated cash from continuing operations of #3.2 million (2004: #6.2
million), after the cash flow relating to exceptional costs. Following
expenditure of #13.1 million on acquisitions during the year, including the
Group's investment in eeZee tv, the Group had a cash outflow before financing of
#9.3 million (2004: Inflow #4.8 million). Net debt at 28th April, 2005 rose to
#27.0 million (2004: #11.2 million) including #5.7 million of discounted loan
notes issued to the vendors of IWOOT.
At 28th April, 2005 the Group's net liabilities decreased to #7.5 million (2004:
#12.8 million).
Dividend
The Board is recommending a final dividend of 2.23 pence per share (2004: 2.0
pence), which together with the interim dividend of 1.07 pence per share (2004:
1.0 pence) will result in a dividend of 3.30 pence per share for the year as a
whole (2004: 3.0 pence), an increase of 10%.
The dividend is payable on 3rd October, 2005 to shareholders on the register on
15th July, 2005.
Prospects
The return to growth at Kleeneze Europe has been driven by a combination of
increased distributor numbers and a further increase in average sales per
retailing distributor. The acquisitions of IWOOT and Kitbag together with the
launch of eeZee tv will improve our ability to source a wider range of new
products for our catalogues. This should help to drive further increases in
Kleeneze Europe's turnover. We will also build on our successful launch in the
Netherlands with further expansion later this year.
The decision to outsource production of hampers at Farepak will further reduce
our fixed cost base, thereby significantly de-risking the business in the future
and enabling us to focus more clearly on strengthening our voucher business.
Both IWOOT and Kitbag should benefit from the growth in internet shopping and we
are in a strong position in both companies to take advantage of the growth in
this sector.
Sales at eeZee tv continue to grow and we are focusing on a strong offering of
daily specials, the "Big eeZee", to increase the number of viewers.
We believe that the new shape of the Group will enable us to grow more quickly
and take advantage of the increase in the internet retailing and television
shopping markets. Our priority in the period ahead is to realise the potential
of the acquisitions made last year and to build on the good start to this new
financial year.
Divisional Breakdown
Catalogue Home Shopping
Kleeneze Europe
Kleeneze Europe provides good value, everyday products through a range of
catalogues delivered direct to the home by self-employed distributors covering
the UK, Ireland and the Netherlands.
Turnover at Kleeneze Europe grew 7.6% to #88.9 million (2004: #82.6 million) and
the UK and Ireland grew by 6.4% to #87.9 million. Operating profit before
exceptional items was up 12.1% to #7.4 million (2004: #6.6 million).
The number of distributors at the year end in the UK and Ireland rose slightly
to 13,524 (2004: 13,397) as we reversed the downward trend seen over the last 18
months. The effort that we have put into improving the retention rates of
distributors has started to have a positive effect on the distributor base.
These efforts are continuing into the new year as we are providing more training
and support.
In October 2004 we successfully launched Kleeneze Europe in the Netherlands and
at the year end we had 2,000 distributors. The catalogues and range of products
have been well received by the Dutch consumers and we are already on our third
catalogue, with two more planned for the remainder of this year. Before the
exceptional charge of #0.5 million reflecting the write off of the start up
costs, the Dutch business was profitable. This is an excellent start to our new
continental European business and we are on track to expand our operations
further later this year.
In September 2004 we acquired the assets and trade marks of Cabouchon for #0.4
million in cash. We have re-launched the brand with a new catalogue updating
the product range. This should re-stimulate interest in the brand and drive
recruitment of consultants, which had slowed down at the end of last year.
Although the brand and the network remain separate, we have integrated the
operations with those of Kleeneze Europe.
We have improved the operating margin at Kleeneze Europe to 8.3% (2004: 8.0%),
primarily due to the first full year of efficiencies from the new distribution
centre. This improvement in margin was achieved despite significant increases
in distribution costs, which prevented a larger improvement. The efficiencies
should continue to increase and we expect to see further improvements in margin
in the current year.
Kleeneze Europe continues to be a dynamic business, which has grown year on year
despite poor retailing conditions in the UK. We have launched successfully in
continental Europe and the potential of the European market is enormous. We
have the capacity to increase our turnover significantly in the UK and intend to
distribute from continental Europe in the near future.
Farepak
Farepak sells Christmas hampers, gifts and shopping vouchers on a monthly
instalment basis through catalogues distributed by independent agents across the
UK. Farepak operates two brands, Farepak and Home Farm, which is 60% owned by
Findel plc.
Turnover at Farepak grew by 7.1% to #81.7 million (2004: #76.3 million) but
operating profit before goodwill amortisation and exceptional items fell to #0.2
million (2004: #1.2 million).
The year was very difficult for Farepak as agent numbers fell 6% to 55,931
(2004: 59,429) and, more importantly, the number of hampers sold, as opposed to
shopping vouchers, fell by 16%.
As a result of this decline, which has accelerated in the current year, we have
closed the production of hampers at Farepak and agreed a three year contract
with FHSC Limited, another Christmas hamper company, under which they will
produce all of our Christmas savings market hampers. This will reduce our fixed
costs significantly and allow us to react more flexibly to further declines in
hamper volumes. We had to make 34 people redundant and these redundancies,
together with other one off costs, have resulted in the exceptional charges of
#0.5 million. We continue to examine the way in which we operate to react to
the changes in the market place.
The ongoing decline in hamper volumes has resulted in shopping vouchers now
representing 80% (2004: 76%) of total turnover. This is a trend that has been
seen over the last five years and will continue in the future. To take
advantage of this trend we launched a new voucher-only offering, Freedom, which
has the widest range of shopping vouchers in the market place and is aimed at a
younger market than our traditional Farepak customers. Although it is early
days, we are pleased with the response rate in the first year. We have also
started a third party voucher operation providing vouchers for businesses and
charities.
As we have said before, the Christmas hamper market is in decline as customers
are changing the way in which they shop for Christmas. Savings clubs are,
however, still popular as people become more concerned about their own levels of
personal debt, but any future growth in the market as a whole will only come
from low margin shopping voucher sales. The closure of hamper production will
significantly de-risk the business in the future and allow us to focus more on
growing our shopping voucher operation.
Internet Retailing
IWOOT
IWOOT is the market leading internet business selling a wide range of gifts and
gadgets from its award winning website www.iwantoneofthose.com.
Turnover for the six months post acquisition was #4.7 million with an operating
loss of #0.1 million.
We acquired IWOOT on 26th October, 2004. Since acquisition we have increased
the product range on the website from 409 to 515 products at the end of April.
As a result IWOOT had its most successful Christmas in its history and during
the busiest week the website handled 324,000 unique visitors with a conversion
rate of 5.8%. We are building on that success and turnover in the last quarter
of the year was up 80% on the previous year, although the conversion rate has
fallen from the seasonal peak.
We are improving the ways in which we communicate with our customers and as a
result we have increased our customer database by 30%. A key contributor to the
increased database is our high levels of service with guaranteed next day
delivery if products are ordered before 5pm.
We have started the process of integrating IWOOT into the Group and are
increasing the number of products sourced from the Far East using Kleeneze
Europe's expertise. We are also using Kleeneze Europe's upgraded call centre to
handle IWOOT's out of hours and overload calls. There will be further
integration of back office services during the remainder of this year.
The cross-fertilisation of products has already started and we have sold various
IWOOT products both on eeZee tv, in a dedicated IWOOT hour, and through Kleeneze
Europe's network. In June this year we launched our first Gifts and Gadgets
flyer for the Kleeneze Europe network and the initial reaction was positive. We
are planning another Gifts and Gadgets catalogue for Christmas. We have also
introduced various cross promotional activities with Kitbag.
IWOOT is one of the leading internet retailers in the fastest growing area of
the UK's retail sector. We will continue to invest in IWOOT to drive the
business forward more quickly and ensure that we can develop more products for
use across the Group.
Kitbag
Kitbag is the leading internet sports and leisure wear retailer. As well as
selling all major branded products and its own branded product on its website
www.kitbag.com, Kitbag also runs online and catalogue retailing for major
football clubs.
Turnover for the one month post acquisition was #0.5 million and Kitbag broke
even.
We acquired Kitbag on 1st April, 2005. We have already made progress with the
integration of the back office services and the call centre is now being managed
and run by Kleeneze Europe. As well as reducing costs this will also enhance
Kitbag's offering as the Kleeneze Europe service centre is open 24 hours a day,
seven days a week. This should help increase Kitbag's sales both in the UK and,
more importantly, in the USA where we already have a small presence.
We are working closely with our major football club partners, Manchester United,
Chelsea and Barcelona, in preparation for new kit launches later this year. We
expect to see the 2005/06 season kit launches perform well. Chelsea have a new
Home kit launch in their Centenary year as Premiership champions, Barcelona new
Home and Away shirts as La Liga winners and Manchester United have a new Away
shirt.
We have recently won an 18 month contract with Nike to manage their football
website, www.nikefootball.com, across Europe.
We have run several successful hours on eeZee tv selling a variety of football
kits and memorabilia and are planning a catalogue for the Kleeneze Europe
network in September this year.
As with IWOOT, high levels of service are very important to Kitbag and we also
offer a guaranteed next day delivery service for all products ordered before
3pm. We enhance the quality of the service by offering unique bespoke services
such as shirt naming and numbering and embroidering of football boots.
Kitbag is a well respected internet retailer operating in a growing part of the
sports apparel market. The win of the pan-European Nike football website gives
us a presence in continental Europe which opens up a new market. We will
continue to bid for major football club contracts and work with the leading
brands to build the business across Europe.
Television Shopping
eeZee tv
eeZee tv is a joint venture broadcasting live for 14 hours per day on the Sky
platform channel 659 as well as streamed live over the internet on
www.eezeetv.com. eeZee tv sells a wide range of products across six major
product ranges at a discount to High Street prices.
In the seven months since we launched the joint venture our share of turnover
was #0.3 million and our share of the operating losses was #0.8 million.
Additionally we have incurred #0.3 million of start-up costs.
We founded the 50/50 joint venture with John Mills Limited ("JML") on 29th
September, 2004 and started live broadcasting on 1st March, 2005. We formed the
joint venture with JML to combine their product sourcing and broadcasting
expertise with our operational expertise and all of the products are despatched
from Kleeneze Europe's distribution centre.
eeZee tv will become a key part of our product sourcing over the next few years
as we will be using television to test new products for our catalogues. A
product that sells well on television will be migrated into our Kleeneze Europe
catalogues. As we have already stated, we are also selling other Group products
on television.
We are using JML's presence in major retailers to promote eeZee tv through their
video promotion units as well as promoting it in our Kleeneze Europe catalogues.
These cross promotions should drive viewers to our station in a very targeted
and cost effective manner. Daily sales have been increasing since launch and we
are pleased with the initial indications.
We have also launched a Kleeneze Show on eeZee tv at 8am on Saturday mornings.
This is designed to enhance the profile and reputation of Kleeneze and bring it
to the attention of a wider audience. We are planning to broadcast these shows
throughout the year.
eeZee tv is a very exciting opportunity for the Group to develop a presence in
the fast growing area of television shopping. It will also enable us to extend
our product development and sourcing which will benefit the rest of the Group.
We are very excited by its long-term prospects.
Consolidated Profit and Loss Account
For the year ended 28th April 2005
2005 2004
Continuing Continuing Discontinued
operations operations operations
before before before
goodwill Goodwill goodwill goodwill Goodwill
Notes amortisation amortisation amortisation amortisation amortisation
and and and and and
exceptional exceptional exceptional exceptional exceptional
items items Total items items items Total
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Turnover
Turnover including share of 176,191 - 176,191 158,924 3,313 - 162,237
joint venture turnover
Less: share of joint venture (317) - (317) - - - -
turnover
175,874 - 175,874 158,924 3,313 - 162,237
Group turnover
Existing operations 170,595 - 170,595 158,924 3,313 - 162,237
Acquisitions 5,279 - 5,279 - - - -
1 175,874 - 175,874 158,924 3,313 - 162,237
Operating profit/(loss)
Existing operations 7,656 (2,160) 5,496 7,904 (2,581) (2,088) 3,235
Acquisitions (256) (341) (597) - - - -
1 7,400 (2,501) 4,899 7,904 (2,581) (2,088) 3,235
Share of loss of joint 2 (766) - (766) - - - -
venture
Share of profit of associate 2 467 - 467 659 - - 659
(299) - (299) 659 - - 659
Non operating exceptional
items
Profit on disposal of fixed 3 - 522 522 - - 1,243 1,243
assets (continuing)
Profit/(loss) on disposal and
closure of discontinued (6,846)
operations 3 - 884 884 - - (6,846)
- 1,406 1,406 - - (5,603) (5,603)
Profit/(loss) before interest 7,101 (1,095) 6,006 8,563 (2,581) (7,691) (1,709)
and tax
Net interest payable (290) - (290) (593) - - (593)
Unwind of discount (167) - (167) - - - -
Share of interest of joint (25) - (25) - - - -
venture
Share of interest of 341 - 341 281 - - 281
associate
(141) - (141) (312) - - (312)
Profit/(loss) on ordinary 6,960 (1,095) 5,865 8,251 (2,581) (7,691) (2,021)
activities before tax
Tax on profit/(loss) on 4 (2,133) 1,113 (1,020) (2,182) 612 934 (636)
ordinary activities
Profit/(loss) on ordinary 4,827 18 4,845 6,069 (1,969) (6,757) (2,657)
activities after tax
Dividends (including non 5 (1,623) - (1,623) (1,452) - - (1,452)
equity dividends)
Retained profit/(loss) 3,204 18 3,222 4,617 (1,969) (6,757) (4,109)
Earnings/(loss) per ordinary 6 10.21p (5.76)p
share - basic
Earnings per ordinary share -
normalised basic
6 10.17p 12.85p
Earnings/(loss) per 10.11p (5.76)p
ordinary share - diluted
6
Earnings per ordinary
share - normalised diluted 6 10.07p 12.73p
Consolidated Balance Sheet
At 28th April 2005
2005 2004
Notes #'000 #'000 #'000 #'000
Fixed assets:
Intangible assets 7 22,779 420
Tangible assets 12,110 12,042
Investment in joint venture:
Share of assets 2,124 -
Share of liabilities (1,665) -
Goodwill on investment 404 -
Loan 1,313 -
2,176 -
Investment in associate 395 411
Other fixed asset investments - 334
Total investments 2,571 745
37,460 13,207
Current assets:
Stocks 10,986 6,861
Debtors 8 9,087 11,087
Cash at bank and in hand 581 1,019
20,654 18,967
Creditors: Amounts falling due within one year 9 (57,425) (44,280)
Net current liabilities (36,771) (25,313)
Total assets less current liabilities 689 (12,106)
Creditors: amounts falling due after more than one year (3,698) (209)
Provision for liabilities and charges:
Deferred consideration (4,230) -
Deferred taxation (272) (513)
(7,511) (12,828)
Capital and reserves:
Called up share capital:
Ordinary 2,410 2,344
Preference 500 500
2,910 2,844
Share premium account 1,154 1,143
Revaluation reserve 411 411
Profit and loss account (11,986) (17,226)
(7,511) (12,828)
Shareholders' funds:
Equity (8,011) (13,328)
Non-equity 500 500
(7,511) (12,828)
Consolidated Cash Flow Statement
For the year ended 28th April 2005
2005 2004
Notes #'000 #'000 #'000 #'000
Net cash inflow from operating activities 10 2,931 4,166
Dividends received from associated company 1,266 318
Returns on investments and servicing of finance
Interest received 1,850 459
Interest paid (2,261) (925)
Preference dividends paid (34) (45)
Net cash outflow from returns on investments and
servicing of finance
(445) (511)
Taxation
UK corporation tax received 68 495
Capital expenditure and financial investment
Purchase of tangible assets (1,993) (3,799)
Proceeds from sale of tangible assets 2,150 3,723
Loans advanced to joint venture (1,313) -
Proceeds from the sale of fixed asset investments 1,218 -
Net cash inflow/(outflow) from investing activities 62 (76)
Acquisitions and disposals
Net proceeds from sale of business - 1,167
Investment in joint venture (1,654) -
Purchase of subsidiary undertakings (8,190) (252)
Overdrafts acquired with subsidiary undertakings (1,935) -
Net cash (outflow)/inflow from acquisitions and (11,779) 915
disposals
Equity dividends paid (1,440) (469)
Net cash (outflow)/inflow before use of liquid resources
and financing
(9,337) 4,838
Financing
Issue of new shares 12 4
Repayment of loans (681) (96)
Repayment of loan notes - (416)
Repayment of capital element of finance leases (28) -
(Decrease)/increase in cash (10,034) 4,330
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 28th April 2005
2005 2004
#'000 #'000
Profit/(loss) for year excluding share of profits/losses of joint venture and 5,070 (3,317)
associate
Share of joint venture's loss for the year (791) -
Share of associate's profit for the year 566 660
Profit/(loss) for the year attributable to shareholders 4,845 (2,657)
Exchange difference on re-translation of net assets of subsidiary company (13) (52)
Total gains and losses relating to the year 4,832 (2,709)
Reconciliation of Movement on Shareholders' Funds
For the year ended 28th April 2005
2005 2004
#'000 #'000
Opening shareholders' funds (12,828) (8,671)
Total recognised gains and losses 4,832 (2,709)
New shares issued 66 -
Share premium on new shares issued 11 4
Merger reserve arising on new shares issued 2,031 -
Dividends (1,623) (1,452)
Closing shareholders' funds (7,511) (12,828)
Notes to the Preliminary Results
1. Segmental Analysis
(a) Group turnover:
2005 2004
Continuing Continuing
operations operations Continuing Discontinued
- existing -acquisitions Total operations operations Total
#'000 #'000 #'000 #'000 #'000 #'000
Group turnover 170,595 5,279 175,874 158,924 3,313 162,237
Cost of sales (137,424) (3,400) (140,824) (125,720) (3,472) (129,192)
Gross profit/(loss) 33,171 1,879 35,050 33,204 (159) 33,045
Selling and distribution (8,880) (23) (8,903) (8,203) (199) (8,402)
expenses
Administrative expenses (9,842) (1,064) (10,906) (10,190) (1,346) (11,536)
Other operating expenses (8,931) (1,048) (9,979) (8,973) (877) (9,850)
Goodwill amortisation (22) (341) (363) (22) - (22)
Total administrative expenses (18,795) (2,453) (21,248) (19,185) (2,223) (21,408)
Operating profit/(loss) 5,496 (597) 4,899 5,816 (2,581) 3,235
Other operating expenses include marketing expenditure, conference costs,
property costs and depreciation.
2005 2004
#'000 #000
Catalogue shopping:
Kleeneze Europe 88,929 82,633
Farepak 81,666 76,291
Cabouchon 51 -
Internet retailing:
IWOOT 4,697 -
Kitbag 531 -
Continuing operations 175,874 158,924
Discontinued operations (DMG) - 3,313
175,874 162,237
(b) Operating profit:
2005 2004
Operating Operating Operating
profit Operating profit profit
before profit after before after
goodwill Goodwill goodwill goodwill Goodwill goodwill
amortisation amortisation amortisation amortisation amortisation amortisation
and and and and and and
exceptional exceptional exceptional exceptional exceptional exceptional
items items items items items items
#'000 #'000 #'000 #'000 #'000 #'000
Catalogue shopping:
Kleeneze Europe (i) (v) 7,418 (1,011) 6,407 6,639 (1,166) 5,473
Farepak (ii) 238 (500) (262) 1,265 (22) 1,243
Cabouchon (81) (14) (95) - - -
Internet retailing:
IWOOT (126) (285) (411) - - -
Kitbag (49) (42) (91) - - -
Television shopping:
Kleeneze TV (iv) - (340) (340) - - -
Group (iii) (vi) - (309) (309) - (900) (900)
Continuing operations 7,400 (2,501) 4,899 7,904 (2,088) 5,816
Discontinued operations (DMG) - - - (2,581) - (2,581)
7,400 (2,501) 4,899 5,323 (2,088) 3,235
Notes to the Preliminary Results
(i) Included within the segmental results for Kleeneze Europe in 2005
within administrative expenses are exceptional charges of #1.0million
comprising:
* #0.3million of costs relating to the management restructure programme;
* #0.5million start-up costs in relation to Kleeneze Europe's entry into
the Netherlands; and
* #0.2million costs relating to costs written off as a result of an
anticipated change in VAT legislation.
(ii) Farepak results in 2005 include within administrative expenses are
exceptional charges of #0.5million in respect of redundancy and associated
costs resulting from the closure of Farepak's hamper production facilities
in Swindon.
(iii) The 2005 Group results reflect within administrative expenses exceptional
charges of #0.3million arising on abortive acquisitions.
(iv) The Kleeneze TV results in 2005 include within administrative expenses
charges of #0.3 million relating to set up costs of eeZee tv.
(v) Included within the segmental results for Kleeneze Europe in 2004 is an
exceptional charge of #1.1million. During the year, Kleeneze Europe
transferred the existing warehouse and fulfilment operations to a new site
in Bristol. A number of incremental expenses were incurred as part of
this re-location which included a review of operations and internal
restructuring. These costs are analysed below:
* #0.3million restructuring costs primarily associated with the
reorganisation of administrative services and training following the
introduction of new technology in the warehouse;
* #0.5million operating costs incurred as a result of the requirement to
run operations from two sites during the period of transfer; and
* #0.3million in other expenses including the additional storage costs
incurred prior to completion of the new location.
#0.5million of the total exceptional charge is included within cost
of sales and #0.6million is included within other operating expenses.
(vi) The exceptional operating expense of #0.9million recorded within the Group
in 2004 reflects the costs associated with the early termination of
George Pollock's employment contract on 17th December 2003. This charge
incorporates the contractual employment costs from 1st May 2003 to 17th
December 2003 as well as the costs associated with the early termination
of his contract. The exceptional expense of #0.9million has been included
within other operating expenses.
(c) Segmental analysis of joint venture and associate
2005
Operating 2004
profit/ Net Operating Net
Turnover (loss) assets Turnover profit/(loss) assets
#'000 #'000 #'000 #'000 #'000 #'000
Catalogue shopping:
Home Farm* 14,084 467 395 14,966 659 411
Television shopping:
eeZee tv 317 (766) 459 - - -
* Group share after re-stating to bring in line with Group accounting policies
Notes to the Preliminary Results
2. Share of Profit/(Loss) of Joint Venture and Associate
(a) Joint venture - eeZee tv
On 1st October 2004, the Group and John Mills Limited set up eeZee tv as a 50/50
joint venture, to which each partner subscribed #1,000,000 (and subsequently a
further #250,000) by way of capital. eeZee tv operates a television shopping
channel broadcasting on Sky Channel 659.
2005
#'000
Turnover 317
Operating loss (766)
Interest payable (25)
Loss on ordinary activities before taxation (791)
Tax on profit on ordinary activities -
Loss for the year attributable to the Group (791)
Total assets 2,124
Total liabilities (1,665)
Net assets 459
(b) Associate - Home Farm
2005 2004
#'000 #'000
Turnover 14,084 14,966
Operating profit 467 659
Interest receivable 341 281
Profit on ordinary activities before taxation 808 940
Tax on profit on ordinary activities (242) (280)
Profit for the year attributable to the Group 566 660
Total assets 4,559 5,351
Total liabilities (4,164) (4,940)
Net assets 395 411
The results of Home Farm have been restated to bring them into line with the
Group's accounting policies.
Notes to the Preliminary Results
3. Non-Operating Exceptional Items
2005 2004
#'000 #'000
Profit on disposal of fixed assets - continuing 522 1,243
Profit/(loss) on disposal and closure of discontinued operations 884 (6,846)
1,406 (5,603)
On 11th August 2004, freehold premises were disposed of for cash proceeds of
#2.1m. The net book value of fixed assets disposed of was #1.5million and the
costs of disposal were #0.1million, giving a profit on disposal of #0.5million.
On 22nd July 2004, following the disposal of DMG (see below), 190,673 Ordinary
shares in Premier Direct Group plc were sold for #1.2million. The net book
value of this investment was #0.3million, giving rise to a profit on disposal of
#0.9million.
On 30th April 2004, the Group disposed of freehold premises for cash proceeds of
#4.0million. The net book value of fixed assets disposed of was #2.5million and
the costs of disposal were #0.3million, giving rise to a profit of #1.2million.
On 24th July 2003, the Group announced the disposal of the business and assets
of DMG to Premier Direct Group plc for cash and share proceeds of #4.0million.
The net book value of the assets disposed of was #8.1million and the costs of
disposal were #2.7million, giving a loss on disposal of #6.8million.
4. Tax on Profit/(Loss) on Ordinary Activities
2005 2004
#'000 #'000
UK corporation tax at 30% 1,556 1,206
Under/(over) provision in prior years 309 (65)
Over provision in prior years - exceptional (423) -
Exceptional tax credit (420) (934)
Group current tax 1,022 207
Share of associated company's tax charge 242 280
Total current tax 1,264 487
Transfer from deferred tax account - origination and reversal of timing differences 26 149
Transfer from deferred tax account - exceptional (270) -
1,020 636
Current year tax charge 2,133 1,570
Exceptional tax credit (1,113) (934)
1,020 636
Notes to the Preliminary Results
5. Dividends
2005 2004
#'000 #'000
Non-equity dividends:
Cumulative preference shares 45 45
Equity dividends:
Ordinary shares of 5p each:
Interim paid (2005: 1.07 pence per share; 2004: 1.00 pence per share) 502 469
Final proposed (2005: 2.23 pence per share; 2004: 2.00 pence per share) 1,076 938
1,623 1,452
6. Earnings/(Loss) per Ordinary Share
Basic earnings per share
Basic earnings per share has been calculated on the weighted average number of
Ordinary shares in issue during the financial year of 47,004,110 (2004:
46,886,157) and using a profit after taxation and preference dividends of
#4,800,000 (2004: #2,702,000 loss).
Diluted earnings per share
Diluted earnings per share has been calculated using an average number of shares
of 47,474,061 (2004: 46,886,157) and using a profit after tax and preference
dividends of #4,800,000 (2004: #2,702,000 loss). The average number of shares
has been adjusted for the dilutive impact of shares under the two Kleeneze plc
share option schemes totalling 469,951 shares (2004: no adjustment).
Normalised basic earnings per share
Normalised basic earnings per share has been calculated using the profit after
taxation and preference dividends on continuing operations, before goodwill
amortisation and exceptional items, of #4,782,000 (2004: #6,024,000). Taxation
of #2,133,000 has been charged against the profit arising on continuing
operations before goodwill amortisation and exceptional items in the year
(2004: #2,182,000). The weighted average number of Ordinary shares in issue
used in the calculation of normalised basic earnings per share is 47,004,110
(2004: 46,886,157).
2005 2004
#'000 #'000
Profit/(loss) after tax and preference dividends 4,800 (2,702)
Add back: discontinued operations after tax - 1,969
(Deduct)/add back: exceptional items after tax (381) 6,735
Add back: goodwill amortisation 363 22
Normalised earnings 4,782 6,024
Normalised diluted earnings per share
Normalised diluted earnings per share has been calculated using the profit after
taxation and preference dividends on continuing operations, before goodwill
amortisation and exceptional items, of #4,782,000 (2004: #6,024,000). Taxation
of #2,133,000 has been charged against the profit arising on continuing
operations before goodwill amortisation and exceptional items in the year (2004:
#2,182,000). The weighted average number of Ordinary shares in issue used in
the calculation of normalised diluted earnings per share is 47,474,061 (2004:
47,314,680). The average number of shares has been adjusted for the dilutive
impact of shares under Kleeneze plc share option schemes totalling 469,951
shares (2004: 428,523).
Normalised earnings per share are included in order to provide a better
understanding of the underlying trading performance of the Group.
Notes to the Preliminary Results
7. Intangible fixed assets
2005
Group #'000
Cost
At 1st May 2004 442
Acquisitions 22,722
At 28th April 2005 23,164
Amortisation
At 1st May 2004 (22)
Charge in the year (363)
At 28th April 2005 (385)
Netbook value
At 28th April 2005 22,779
At 30th April 2004 420
Goodwill arising on acquisitions in the year comprises:
Fair value
of net
assets
Consideration acquired Goodwill
#'000 #'000 #'000
Cabouchon 471 40 431
IWOOT 10,133 (1,133) 11,266
Kitbag 9,866 (1,159) 11,025
20,470 (2,252) 22,722
Goodwill in respect of Goodway Hampers Limited, Cabouchon, IWOOT and Kitbag is
being amortised in each case over a period of 20 years, being the directors'
assessment of its useful life.
8. Debtors
2005 2004
#'000 #'000
Trade debtors 5,260 5,076
Amounts owed by associate 74 54
Dividend receivable from associate 22 706
Amounts owed by joint venture 118 -
Corporation tax - 530
Other debtors 208 64
Prepayments 3,405 4,657
9,087 11,087
Notes to the Preliminary Results
9. Creditors: Amounts Falling Due Within One Year
2005 2004
#'000 #'000
Current instalments due on loans 194 88
Bank overdraft 21,213 11,617
Current instalments due on loan notes 2,544 294
Obligations under finance leases 66 -
Trade creditors 25,768 27,599
Corporation tax 558 -
Social security and other taxes 759 1,044
Accruals and sundry creditors 5,236 2,700
Dividends payable 1,087 938
57,425 44,280
The overdraft and the loan notes are secured by a mortgage debenture in favour
of Bank of Scotland covering all the Group's fixed property and short-term
assets.
Notes to the Preliminary Results
10. Cash Flow Statement
a) Reconciliation of operating profit to net cash inflow from operating
activities:
2005 2004
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
#'000 #'000 #'000 #'000 #'000 #'000
Operating profit/(loss) 4,899 - 4,899 5,816 (2,581) 3,235
Depreciation 1,063 - 1,063 967 118 1,085
Goodwill amortisation 363 - 363 - - -
(Increase)/decrease in stocks (2,263) - (2,263) (290) 1,068 778
Decrease/(Increase) in operating debtors and 1,735 (18) 1,717 (435) 1,005 570
prepayments
(Decrease)/increase in operating creditors (2,631) (240) (2,871) 265 (1,687) (1,422)
and accruals
Profit/(loss) on sale of tangible fixed 29 (6) 23 (80) - (80)
assets
(1,704) (264) (1,968) 427 504 931
Net cash inflow/(outflow) from operating 3,195 (264) 2,931 6,243 (2,077) 4,166
activities
b) Analysis of net debt:
Non cash
2005 Cash flow movements 2004
#'000 #'000 #'000 #'000
Cash at bank and in hand 581 (438) - 1,019
Bank overdrafts (21,213) (9,596) - (11,617)
Net cash (20,632) (10,034) - (10,598)
Loan notes (6,030) - (5,736) (294)
Loans (306) 681 (690) (297)
Finance leases (66) 28 (94) -
Net debt (27,034) (9,325) (6,520) (11,189)
The non-cash movements represent loan notes issued upon the acquisition of IWOOT
(plus the subsequent unwind of discount thereon) and loans and finance leases
assumed upon the acquisitions of IWOOT and Kitbag.
c) Cash flows relating to operating exceptional items:
Net cash inflow from operating activities in the year ended 28th April 2005
includes:
* a cash outflow of #0.5million in respect of restructuring costs across
the Group
* a cash outflow of #0.1million in respect of abortive acquisition costs
* a cash outflow of #0.5million in respect of Kleeneze Europe's
expansion into The Netherlands
* a cash outflow of #0.2million in respect of costs relating to costs
written off as a result of an anticipated change in VAT legislation
* a cash outflow of #0.3 million in respect of set up costs for eeZee tv
* a cash outflow of #0.4million in respect of a prior year re-location
by Kleeneze Europe
* a cash outflow of #1.0million in respect of VAT and costs relating to
a prior year property disposal
Net cash inflow from operating activities in the year ended 30th April 2004
included a cash outflow of #0.8million arising from the relocation of Kleeneze
Europe's operations and a cash outflow of #0.8million in respect of the early
termination of George Pollock's employment contract.
d) Cash flows relating to non-operating exceptional items:
Net cash outflow from investing activities in the year ended 28th April 2005
includes:
* a cash inflow of #2.1million in respect of the sale of freehold
premises formerly used by Farepak
* a cash inflow of #1.2million in respect of the sale of Premier
Direct Group plc shares
Net cash outflow from investing activities in the year ended 30th April 2004
included a cash inflow of #3.7million in respect of the sale of premises
formerly used by Kleeneze Europe's UK operations. Net cash inflow from
acquisitions and disposals included a cash inflow of #1.2million in respect of
the disposal of the business and assets of DMG.
Notes to the Preliminary Results
11. Statutory Accounts
The above financial information is prepared on the same basis as set out in the
previous year's annual accounts and does not represent the Company's full
statutory accounts. The financial information relating to 2005 is unaudited and
no accounts have been delivered to the Registrar of Companies. Statutory
accounts dealing with 2004 have been delivered to the Registrar of Companies and
the Company's auditors made a report under Section 235 on those accounts which
was unqualified and did not contain a statement under section 237(2) or section
237(3) of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LELLBEDBZBBB
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