TIDMINST
Instore plc
Annual Report 2009
Chairman's Statement
The loss reported for the period ended 28th February 2009 reflects a
period of fundamental repositioning and redevelopment of the
Company's business that is crucial to its long term survival and
return to profitability.
In July of last year, Seaham Investments Limited, an indirectly
wholly owned subsidiary of Crown Crest Group Limited, announced the
terms of a cash offer for the entire issued share capital of the
Company. As a result of this offer, which was accepted by Tradegro,
our then majority shareholder, for a part of its shareholding and
which the Independent Directors of the Company did not recommend for
acceptance, Seaham Investments increased its holding from 29.78% to
56.89%, thus becoming the Company's new majority shareholder. It had
been Seaham Investments' clearly stated intention since taking its
initial stake in the business in May 2007 to steer the return of the
business to its heritage of offering excellent value for money, and
it believed the challenges this involved were best addressed from a
position of voting control.
Crown Crest's investment in and commitment to the Company has been,
and will continue to be, of great importance and significant benefit
to the Company and all its shareholders. The relationship allowed the
introduction of an expanded food range across the estate, and
provided access to the significant commercial experience and business
acumen of the Tayub family which created and owns Crown Crest. It has
also, crucially, made available new and additional sources of
financial, managerial and logistical support to the Company.
This financial support from Crown Crest, which takes the form of both
loan and substantial trade credit facilities, is carefully monitored
by your Board's Audit Committee to ensure it is provided always on an
'arm's length' basis and at commercial terms which reflect those
applied to Crown Crest by its own lenders. However, at a time when
traditional sources of finance and trade credit are restricted, the
availability of such support brings very significant and
unquantifiable benefits. For example, during the year the Company was
able to move quickly and make opportunistic purchases of stock from
the administrators of Woolworths.
Following on from the change in voting control, there were also
significant changes to the composition of the Board of Directors. Dr
Christo Wiese stood down as Chairman and Director of the Company in
June 2008, together with fellow Directors Cornus Moore and John
Gnodde. Following Dr Wiese's departure I was asked by my fellow
Directors to assume again the Chairmanship of the Board, and was
delighted to do so. My colleague, John Richards, a highly respected
retail consultant and the other Independent Director, stayed on the
Board. He now chairs the Audit Committee. In August, two further
non-executive Directors, Rashid Tayub, a wise head from the Tayub
family, and Anne Tomlinson with many years experience of 'value'
trading, were appointed, adding further depth of knowledge and
experience to the Board. They are both also members of the Audit
Committee.
At the executive level, Ebrahim Suleman joined the Board as Group
Finance Director in May 2008, having undertaken very effectively the
head of finance role for the Company's principal trading subsidiary,
Poundstretcher Limited, for the previous six months. Finally, in
November, Aziz Tayub moved from being a non-executive Director to be
Chief Executive, replacing Peter Burdon who, having been of great
help during the transition of control from Tradegro, left the Company
to pursue his career elsewhere. We all believe that the knowledge,
drive and enthusiasm of Aziz Tayub and his close involvement in the
day-to-day operations of the business will be pivotal to its
turnaround.
I thank all former Directors who served on the Board during the year
and, in particular, Dr Wiese who gave 14 years of unstinting service
as Chairman. An important part of his legacy is that the Company has
a committed majority shareholder that respects and works with a good
quality Board sharing a vision for the future of the business. A good
return on its investment for Crown Crest will benefit all
shareholders.
A final consequence of the change in control was that the Board
decided that it would be appropriate to appoint the existing auditors
of Crown Crest Group Limited, PKF (UK) LLP, to the audit of Instore
plc. Accordingly, the incumbent auditors, PwC, resigned as such in
August 2008.
Although the changes in ownership and control, and the associated
fundamental changes that have taken place at an operational level,
have yet to bear fruit in terms of bottom line performance, they do
form a solid platform from which to build. This, together with the
very clear and unambiguous strategy of returning the business to its
value heritage and to, once again, being clearly recognised for
consistently low prices and unrivalled deals, gives cause for
cautious optimism.
The present trading environment is extremely challenging. Although
there are indications that the value sector has benefited to some
extent from the current recession, any such trend will inevitably
mean that the sector will become even more competitive. This makes
the current year of exceptional importance in re-establishing further
the credentials of the Poundstretcher brand in order to secure the
longer term future of the business.
I end by paying tribute to all of the Company's employees. They have
consistently risen to both the specific challenges of the Company's
turnaround strategy and those of the general economic climate, with
enthusiasm and showing a remarkable degree of tenacity and
determination. On behalf of the Board, my thanks go to them all.
John Jackson
Chairman
29 June 2009
Operating Review
During the year under review, we have faced continued challenges due
to the urgent need to introduce fundamental change to the Company's
strategy, direction and operations. In addition, we have had to
respond to these challenges against the background of the UK economy
entering recession. As a consequence, the financial results for the
full year, while extremely disappointing, reflect the magnitude of
the challenges encountered in the year.
It is our clearly stated intention to refocus the business and to
return it to its heritage as a value-led retailer and, since my
appointment as Chief Executive in November 2008, I have focused on
four key areas to help deliver this: the control of costs, both in
terms of product buying and central overheads; the continued
development of our product offering; the format and branding of our
stores; and the strengthening of our management team.
Following the initial investment in the business by Seaham
Investments, the first action taken was the introduction of a
footfall generating ambient food and toiletries offer across the
estate. We have continued to refine this offering and, in addition,
now have 15 stores converted to a new style layout which accommodates
a greater proportion of such food and toiletry items. Results from
these stores are encouraging, despite the decline in gross margin
such product mix brings, and we will continue with its orderly
roll-out and analysis of its performance. We have also continued to
develop other product categories, particularly furniture and
textiles, while at the same time seeking to improve availability
across our core everyday lines. Finally, we continue to seek out
one-off purchases in order to increase the frequency and
attractiveness of 'wow' deals in our stores, amongst such purchases
during the year being 248 containers of ex-Woolworths' stock bought
from the administrators for GBP5.2 million.
It has been my long held view that the attempts of previous
management to move the business to a more mid-market position via the
'Instore' brand were fl awed. Not only did this seek to abandon the
historically successful 'Poundstretcher' brand, but it has resulted
in an estate split between the two different fascias and thus
confusion among consumers as to the Company's values. We have
decided, therefore, to begin the process of converting all stores in
the core estate to 'Poundstretcher' outlets. Moreover, we will
distinguish our generally smaller high street stores, which will be
branded simply 'Poundstretcher', from the larger out-of- town stores,
which will be branded 'Poundstretcher Extra'. Although this process
will take some time to complete, it clearly signals a move toward
brand consistency and a re-energising of the 'Poundstretcher' brand.
We have also taken actions in respect of our non-core outlets, which
we acquired in December 2007 from the administrators of Marston Mills
Limited and which had traded under the Ponden Mill brand. However,
despite the closure of 13 loss making stores, with the remaining 20
operating with significantly reduced rents, and the rebranding of the
estate to the more contemporary 'Coloroll' fascia, the performance of
this business remains disappointing. We have recently removed the
former management team and are monitoring the performance of the
business closely, with a view to considering the options for its
future during the second half of the current year. However, despite
disappointments at the retail level, we have recently secured
enhanced rights over the 'Coloroll' brand which will give us signifi
cant opportunities to licence that brand to selected third party
partners.
Although we believe that there remain opportunities to increase the
size of the overall store estate, it is vital to fi rst establish a
robust operating model in order to properly evaluate the suitability
of any such opportunities. The emphasis therefore continues to be on
improving the performance and fabric of the core estate we currently
operate, which at the year end comprised a total of 308 stores.
Nevertheless, we continue to evaluate opportunities for individual
store openings, closures and re-sites, and during the period under
review we opened seven stores and closed four.
Our focus on reducing the cost base of the business continued
throughout the year, with administration costs reducing from 5.1% to
4.6% of sales over the period. Budgets for the current year were
constructed on a bottom up basis and, in addition, every item of
non-discretionary spend requires the pre-approval of senior
management. Wherever possible we have also sought to engage with
suppliers of services and goods not for resale in order to
renegotiate existing contract terms. Perhaps our commitment in this
area is best demonstrated by the fact that we now have a dedicated
Head of Cost Control as part of our senior management team whose
brief is to ensure the delivery of agreed cost reductions across all
departments.
There has been a similarly aggressive stance with regards to the
purchase of goods for resale. I have personally led several buying
trips, including those to China, and as a result of an increase in
direct sourcing, particularly from the Far East, we have seen
significant reductions in cost prices. For the first time we also now
have a dedicated full-time presence in China which I believe will
bring significant benefits in establishing relationships and further
driving down purchase prices.
I have been particularly pleased to have significantly strengthened
the operational management team over the last six months. We have now
secured the services of a number of high quality individuals, in the
most senior management positions, who not only have specific
experience of working in value, variety retailing, but a proven track
record of success. Although this process is largely complete, and a
highly competent management team in place, we will continue to
strengthen the team where necessary.
Finally, I wish to thank all of my colleagues from across the retail
estate, the Distribution Centre and in the central support functions
for all their hard work during the year. I make no apologies for the
pace of change that is taking place in the business as this is vital
to its longer term survival and prosperity. However, I fully
recognise that such change brings its own challenges and I have been
extremely impressed by the levels of commitment and enthusiasm I
continue to see at all levels in the Company.
Risk and Uncertainties
The Group faces a number of risks and uncertainties, and it is our
policy to mitigate these risks to the greatest extent possible.
In common with most retailers, the Group's performance is affected by
the underlying economic climate. The full effects of the current
recession have yet to be seen, but we believe the economic downturn
presents opportunities as well as challenges, given the 'value'
nature of our offer and the possibility of that offer becoming
increasingly attractive to a wider range of customers. Nevertheless,
in such circumstances our sector is likely to become ever more
competitive, and we will have to ensure our sourcing remains robust
if we are to continue to offer our customers best value.
Group performance in every year is also heavily dependent on the key
Christmas trading period, and accordingly management spends a great
deal of time planning for this period and ensuring such plans are
well executed. In addition, sales of our seasonal lines, particularly
our gardening and outdoor living ranges, are to a large extent
dependent on the UK enjoying good, seasonal weather during the spring
and summer months.
As regards sourcing, the Group acquires a significant proportion of
goods for resale from outside the UK, paid for in foreign currency,
and it is our policy to manage the inherent risks from such currency
exposure by entering into forward contracts in respect of payments to
such overseas suppliers.
Finally, the day-to-day operation of the business is hugely dependent
on the efficient and uninterrupted operation of our logistics and IT
systems. Given their centralised nature, we have invested much effort
in establishing a robust business continuity plan, which will
minimise the impact of any major disaster suffered at our head office
location. Nevertheless, these effects cannot be eradicated fully, and
any such disaster would have a significant short-term impact on the
business.
Outlook and current trading
Since the beginning of the new financial year, the trading
environment has continued to be challenging due to underlying
economic factors and a very competitive marketplace. Although recent
trading performance has been to some extent encouraging, and has
supported the view that we are seeing the business beginning to
stabilise, there remains much to do if this stabilisation is to
become a true turnaround. We see the coming months as crucial in this
process. However, we remain fully committed and determined to respond
to the ongoing challenges we face.
Aziz Tayub
Chief Executive
29th June 2009
Finance Review
Revenue
During the 52 week period ended 28th February 2009, Group revenue
decreased by 0.3% to GBP295.8 million (2008: GBP296.8 million).
Like-for-like sales for the 52 weeks decreased by 0.8% (2008:
increase 2.9%).
Gross Profit
The Gross profit margin declined by 0.7% to take the Gross profit
margin to 10.2% pre-exceptionals (post-exceptionals 9.0%) as to
maintain the Group's competitive edge, margins were kept tight.
Operating Expenses
There was a 14.0% increase in distribution costs over the previous
year, mainly due to an increase in transport costs. Distribution
costs now equate to 7.4% of sales (2008: 6.5%).
Administration expenses before exceptional items reduced by 11.1%
year on year and have reduced from 5.1% to 4.6% of sales as a result
of a major staff restructuring and cost reduction which took place
during the period.
Accordingly, total operating costs before exceptional items increased
from 11.6% to 12.0% of sales (after exceptional items they decreased
from 12.5% to 12.4%).
Loss before tax
Group loss before tax and exceptional items was GBP5.8 million (2008:
GBP2.2 million).
After net exceptional charges in the period totalling GBP4.7 million
(2008: GBP5.1 million) the Group loss before taxation was GBP10.5 million
(2008: GBP7.4 million).
Exceptional items
As a result of the provisions under IAS 36 "Impairment of Assets",
the Directors conducted an assessment of the future cash flows of all
trading outlets. An impairment charge of GBP2.1 million (2008: GBP0.7
million) has duly been recognised on those stores where the
anticipated cash flows do not support the carrying value of the
associated assets.
As a consequence of the ongoing business review undertaken during the
period, there was a restructuring of certain departments which
incurred a cost of GBP0.8 million (2008: GBP1.8 million), predominantly
relating to redundancy costs.
The Directors conducted an assessment of the future cash flows of all
trading outlets and, as a result, an onerous lease charge of GBP0.6
million (2008: GBP1.8 million) was recognised on those stores where
anticipated cash flows were not expected to cover the contracted
lease charges.
As a result of the ongoing monitoring of performance of the 33 former
Ponden Mill stores acquired in December 2007, 13 have been disposed
of during the period at a cost of GBP0.4 million (2008: nil).
Costs of GBP0.4 million (2008: nil) were incurred as a result of
exiting a trading contract which was no longer of benefit to the
Company.
Costs of evaluating and advising on the offer from Seaham Investments
Limited for the entire share capital of the Company were GBP0.3 million
(2008: nil).
A charge of GBP0.1 million (2008: GBP0.7 million) has been recognized in
respect of a potential shortfall on loans made to employees for the
purposes of acquiring shares in the Company.
During the period, GBP0.1 million (2008: GBP0.1 million) was charged
against the four stores remaining from the original 11 marketed for
disposal in 2005.
Taxation
The tax charge for the period of GBP0.9 million (2008: charge of GBP0.6
million) arose primarily as a result of the movements in deferred
taxation offset by a release of prior year tax provisions.
Loss per share
The basic and diluted loss per share was 5.24 pence (2008: 3.58
pence).
Group Balance Sheet
Shareholders' equity at 28th February 2009 amounted to GBP15.5 million
(2008: GBP25.9 million). Capital investment in the period was GBP2.5
million (2008: GBP6.9 million), which included the opening of 7 new
stores. An additional GBP0.4 million (2008: GBP1.9 million) was invested
in IT as we continued to update and expand the systems within the
business.
Stock levels increased from GBP35.7 million at 1st March 2008 to GBP45.2
million at 28th February 2009 as a result of FMCG stock, Ponden stock
and an aggressive buying programme to extend our range of products,
together with opportunistic purchases of ex-Woolworths' stock.
Cash Flow
The Group saw cash outflow from operations of GBP3.9 million (2008:
cash outflow of GBP2.5 million). After interest and tax, cash outflow
before financing was GBP4.2 million (2008: outflow of GBP2.6 million).
The purchase of property, plant and equipment accounted for an
outflow of GBP3.0 million (2008: GBP9.7 million). After the effects of an
inflow from financing activities of GBP4.8 million (2008: cash outflow
of GBP0.2 million), cash and cash equivalents decreased by GBP2.4 million
(2008: decrease of GBP12.6 million), giving a closing cash and cash
equivalent position of GBP6.3 million (2008: GBP8.7 million).
Foreign Currency Risk
It is the Group's policy to source a significant proportion of goods
for resale from outside the United Kingdom in foreign currencies. It
is also the Group's policy to manage currency exposure on future
payments by entering into forward contracts in relation to stock
purchase orders.
Treasury policy
The Group has a GBP5 million committed overdraft and GBP12 million trade
finance facility from Lloyds TSB Bank plc. The level of these
facilities, together with the financing available from Crown Crest
(Leicester) plc, is considered appropriate to finance the Group's
working capital requirements to June 2010.
Ebrahim Suleman
Group Finance Director
29th June 2009
Directors' Remuneration
This report will be put to an advisory vote of the Company's
shareholders at the Annual General Meeting to be held on 6th August
2009. Unless otherwise stated, the information and disclosures
contained in this report are unaudited.
The Remuneration Committee
From the start of the period under review until the resignation from
the Board of Dr Wiese on 10th July 2008, the Remuneration Committee
consisted of three non-executive Directors: Dr Wiese (Committee
Chairman), Mr J Richards and Mr J B H Jackson. Following Dr Wiese's
resignation, together with those of fellow non-executive Directors Mr
C Moore and Mr J Gnodde, the Board undertook a thorough review of its
corporate governance activity. Following this review, and as
described in the Corporate Governance Report, the Remuneration
Committee was disbanded on 13th August 2008.
With effect from this date, the determination of the remuneration of
executive Directors became the responsibility of the non-executive
Directors as a whole. The Chief Executive may, by invitation, attend
meetings of the non-executive Directors when such matters are being
discussed but may not be present when his own remuneration is under
discussion. The non-executive Directors do not have any personal
financial interest in the matters so considered by them (other than
as shareholders in either the Company or its largest shareholder),
conflicts of interest arising from cross Directorships (other than Mr
Rashid Tayub being a Director of Crown Crest Group Limited), or
day-to-day involvement in running the business.
In this capacity, the non-executive Directors' aim and responsibility
is to determine the terms and conditions, remuneration, share
incentives and other benefits of the executive Directors of the
Company and its senior management that will motivate an enhanced
return to shareholders.
They have, as the Remuneration Committee had, access to internal and
external professional advice to assist them in executing this
responsibility if required. No such advice has been sought during the
year under review.
During the year, the non-executive Directors considered and set the
remuneration of Mr E Suleman and Mr Aziz Tayub upon their
appointments as executive Directors.
The Board determines the remuneration of the non-executive Directors.
This is conducted in the absence of those non-executive Directors,
other than the Chairman. No Director is ever party to discussions or
decisions on their own remuneration. Non-executive Directors do not
participate in any share option, performance-related or bonus schemes
and are not entitled to receive any benefits in kind.
Policy on executive remuneration
The Company's policy is to provide remuneration packages that are (i)
competitive; (ii) designed to attract, retain and motivate suitably
qualified and experienced Directors and senior management of a
calibre appropriate to the needs of the Group; and (iii) designed to
reward those executives for enhancing value to shareholders.
An objective of the remuneration policy is to ensure a balance
between fixed and performance-related remuneration, the latter being
related to objective measurement of the financial performance of the
Company and also to personal performance.
The remuneration packages for executive Directors and senior
management of the Group comprise four elements:
(i) basic remuneration and benefits in kind (including the provision
of a fully expensed company car);
(ii) annual performance-related bonuses;
(iii) share option and incentive schemes; and
(iv) pension arrangements.
It is believed that the Company can benefit from its executive
Directors holding non-executive appointments and that this can
represent a valuable opportunity for the individual. Executive
Directors are, therefore, allowed to accept non-executive
appointments at the discretion of the Board. During the year no
executive Director held such non-executive appointments. However,
throughout the period, Mr E Suleman was also a partner in a
Yorkshire-based chartered accountancy practice and Mr Aziz Tayub was
also a Director of companies within the Crown Crest Group.
Basic remuneration and benefits in kind
Executive Directors' base salary and benefits in kind are ordinarily
reviewed annually and are determined by reference to the individual's
performance, the prevailing market and the performance of the Company
as a whole.
Annual performance-related bonuses
Executive Directors and senior management are eligible for
participation in annual performance-related bonus schemes. When paid,
bonuses are non-pensionable, paid in cash annually and variously take
into account the achievement of operating profit targets, share price
growth and personal performance. No such bonuses were paid during the
year.
Long-Term Incentive Plans and Share option schemes
The Company does not operate a long-term incentive plan.
The Company has three share option schemes, being the 2000 Inland
Revenue Approved Executive Share Option Scheme adopted in 2000 ("the
Approved Scheme"), the 2000 Non-Inland Revenue Approved Executive
Share Option Scheme adopted in 2000 ("the Unapproved Scheme")
(together "the 2000 Schemes") and the 2004 Share Incentive Scheme
("the 2004 SIS Scheme").
At the beginning and end of the period, there were no unexercised
options over ordinary shares under any of the above schemes in favour
of any executive Director.
The 2000 Schemes
The Approved Scheme has been approved by the Inland Revenue and
provides personal taxation benefits to the option holders and
National Insurance Contribution advantages for the Company.
The legislation on Approved Share Option Schemes contains a limit as
to how many options can be granted to an individual. Under this limit
an individual cannot hold approved options with a value greater than
GBP30,000 (measured at each relevant date of grant). Under the 2000
Schemes options will, where possible, be granted firstly under the
Approved Scheme and secondly, where Approved Scheme individual limits
would be exceeded, the excess will be granted under the Unapproved
Scheme.
Options granted under both of the 2000 Schemes will have their
exercise price set at an amount which will not be less than their
market value at the time of grant. The 2000 Schemes permit
performance criteria to be set such that options granted under the
2000 Schemes only become exercisable if such performance criteria are
met.
Options granted under the Approved Scheme may not be exercised
earlier than three years from the date of grant.
The Company has previously awarded share options under the 2000
Schemes to Senior Managers, Store Managers and key employees on an
individual basis, taking into account their responsibilities and
roles. Awards made are designed to ensure the recruitment, retention
and motivation of key staff and to align the interests of employees
with those of the shareholders through the use of equity
participation.
During the period under review no options have been granted under the
2000 Schemes, and at the end of the period under review there were no
options outstanding under the 2000 Schemes.
2004 Share Incentive Scheme (2004 SIS)
The 2004 SIS is an unapproved scheme, which exists to provide share
options to employees but does not apply to Directors. Options under
the 2004 SIS are granted at the prevailing market price at the date
of grant. Exercise of such options is not dependent on performance
criteria, and operates such that 50% of the allocation is exercisable
following the announcement of the Company's preliminary results two
years following the date of grant, a further 25% at the same time the
following year and the final 25% at the same time the year following
that.
During the period under review no options have been granted under the
2004 SIS, and at the end of the period under review there were no
options outstanding under the 2004 SIS.
Options granted to Mr P Burdon
Mr P Burdon was granted options over 7,500,000 shares by way of a
Share Option Agreement approved by the Board on 26th July 2007. The
Board regarded this arrangement as necessary as the existing share
option schemes did not provide the necessary flexibility to recruit,
retain and incentivise Mr Burdon appropriately. Upon his resignation
from the Board on 12th November 2008 all 7,500,000 options granted to
Mr Burdon lapsed with immediate effect.
Pensions for executive Directors
The Company does not operate either a defined benefit or a money
purchase pension scheme for Directors. Mr Aziz Tayub and Mr Suleman
do not receive, and nor are they eligible to receive, a pension
contribution from the Company to be paid into a personal pension
plan.
Service contracts
Mr Burdon's service contract is dated 1st June 2007 and is a rolling
12-month contract. Notice has been served by the Company under this
contract and it will terminate on 15th July 2009.
Mr Suleman's service contract is dated 1st October 2008 and is
terminable by Mr Suleman or the Company giving six months' notice.
Mr Aziz Tayub does not have a service contract.
None of the non-executive Directors has a service contract. The terms
of their engagement are ordinarily set out in a letter of
appointment, which does not contain notice periods or provision for
termination payments.
Executive Directors' service contracts and the letters of appointment
of non-executive Directors are available for inspection at the
Company's registered office and will be available for inspection at
the Company's Annual General Meeting.
Performance graph
In the opinion of the Directors, the FTSE All Small Index and FTSE
A/S General Retailers Index are the most appropriate indices against
which the total shareholder return of Instore plc should be measured.
These indices compare similar sized companies to Instore plc and/or
companies in the same business sector.
Directors' interests in the shares of the Company (audited)
The Directors in office at 28th February 2009 had the following
interests, as defined by the Companies Act 1985, in the issued share
capital of the Company:
Ordinary Ordinary
shares of shares of
10p each 10p each
28th 1st March
February 2008
2009
Executive Directors
A A Tayub (5) 50,000(1) 50,000(1)
E Suleman (3) - -
Non-executive Directors
J B H Jackson (2) 38,570(1) 38,570(1)
J Richards (2) - -
A R Tayub (2) (4) - -
A J Tomlinson (2) (4) - -
Notes:
(1) Ordinary shares are all beneficially held.
(2) Not appointed for a specific period.
(3) Appointed 1st May 2008.
(4) Appointed 18th August 2008.
(5) Appointed Chief Executive on 12th November 2008 Previously a
non-executive Director.
The market price of the Company's shares at the end of the financial
year was 3.90p and the range of market prices during the year was
between 2.88p and 10.50p.
There have been no other changes in the Directors' interests since
28th February 2009.
Directors' emoluments (audited)
Annual
salary/fee Salary/fee Fees Total
paid emoluments
At 28th earned in to Benefits 52 weeks 53 weeks
Feb third to to
2009 the period Parties in kind 28th Feb 1st Mar
2009 2008
GBP GBP GBP(2) GBP(9) GBP GBP
Executive
Directors
A A Tayub (1) 40,000 13,333 - - 13,333 -
E Suleman (2) 108,000 45,000 52,500 - 97,500 -
P Burdon (3) 300,000 412,500 - 9,973 422,473 269,106
T M Coates (4) - - - - - 462,009
G J Brown (5) - - - - - 217,866
Non-executive
Directors
J B H Jackson 30,000 21,250 - - 21,250 15,000
(Chairman)
J Richards 40,000 28,333 - - 28,333 20,000
A R Tayub (6) 30,000 12,500 - - 12,500 -
A Tomlinson (6) 30,000 12,500 - - 12,500 -
C H Wiese (7) - - - - - 35,000
C Moore (7) - - - - - -
J Gnodde (7) - - - - - -
Sir Geoff (8) - - - - - 12,500
Mulchay
578,000 545,417 52,500 9,973 607,890 1,031,481
Notes:
(1) Appointed Chief Executive on 12th November 2008. Previously a
non-executive Director.
(2) Appointed on 1st May 2008. In addition to the salary stated,
GBP52,500 was paid to Forrest Burlinson, a firm of Chartered
Accountants in which Mr Suleman is a partner, for his services as a
Director. At the year end
Mr Suleman was the highest paid serving Director.
(3) Resigned from the Board on 12th November 2008. In accordance with
Mr Burdon's service contract, he remains employed with the Group
until 16th July 2009; the emoluments include all amounts payable
until that date.
Included within current liabilities are accrued emoluments of
GBP112,500.
(4) Resigned 21st May 2007.
(5) Resigned 28th September 2007.
(6) Appointed on 18th August 2008.
(7) Resigned 10th July 2008. In 2008 GBP35,000 was paid to Tradegro
Limited for the services of these Directors.
(8) Resigned 25th May 2007.
(9) Benefits in kind include fully expensed company car, or cash
equivalent, and private medical insurance.
No Directors (2008: 0) are accruing retirement benefits under money
purchase pension schemes in respect of qualifying service. Mr
Suleman's Service Agreement includes provision for his salary to be
reviewed in April of each year.
Directors' Share Options (audited)
Lasped Date from
At
At 1st Mar Granted during 28th Exercise which first
Feb
2008 during year 2009 price exercisable Expiry
year (p) Date
P 7,500,000 - 7,500,000 - 14.50 May 2010 May
Burdon 2012
(1)
7,500,000 - 7,500,000 -
Notes:
(1) Option over 7,500,000 lapsed on 12th November 2008.
No options have been exercised during the year.
The mid market price of the Company's shares at the end of the
financial year was 3.90p and the range of market prices during the
year was between 2.88p and 10.50p.
No other Directors held share options during the year.
On behalf of the Board
M D Collinson
Company Secretary
29th June 2009
Directors and Advisers
DIRECTORS
John Jackson, non-executive Chairman
Christo Wiese, non-executive Chairman
(resigned 10th July 2008)
Aziz Tayub, Chief Executive Officer
Peter Burdon, Chief Executive Officer
(resigned 12th November 2008)
Ebrahim Suleman, Group Finance Director
(appointed 1st May 2008)
John Richards, non-executive Director
Rashid Tayub, non-executive Director
(appointed 18th August 2008)
Anne Tomlinson, non-executive Director
(appointed 18th August 2008)
John Gnodde, non-executive Director
(resigned 10th July 2008)
Cornus Moore, non-executive Director
(resigned 10th July 2008)
COMPANY SECRETARY
Martin Collinson
REGISTERED OFFICE
Trident Business Park
Leeds Road
Huddersfield
HD2 1UA
REGISTRATION NUMBER
Registered in England and Wales, No. 347453
WEBSITE
www.instoreretail.co.uk
AUDIT COMMITTEE
John Richards, Chairman
Rashid Tayub, Anne Tomlinson
INDEPENDENT AUDITORS
PKF (UK) LLP
Regent House
Clinton Avenue
Nottingham
NG5 1AZ
REGISTRARS
Capita Registrars
Northern House
Woodsome Park
Fenay Bridge
Huddersfield
HD8 0LA
SOLICITORS
DWF LLP
Bridgewater Place
Water Lane
Leeds
LS11 5DY
BANKERS
Lloyds TSB Bank plc
125 Colmore Row
Birmingham
B3 3SF
Alliance & Leicester Commercial Bank plc
44 Merrion Street
Leeds
LS2 8JQ
Bank of Ireland
Blanchardstown
Dublin 15
Republic of Ireland
STOCKBROKERS
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
FINANCIAL ADVISERS
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Corporate Governance
1. The Board is committed to meeting, on an ongoing and proportionate
basis, the standards of good corporate governance as set out in the
Combined Code on Corporate Governance published by the Financial
Reporting Council in June 2006 ("the Code").
This report, together with the Board Report on Directors'
Remuneration, describes how the Board applied the Code during the
period under review.
2. Directors
2.1 The Board of Directors currently comprises a non-executive
Chairman, three non-executive Directors and two executive Directors.
The division of responsibilities between the Chairman and the Chief
Executive is set out in writing and has been agreed by the Board.
2.2 Of the current non-executive Directors, Mr Rashid Tayub is also a
director of Crown Crest (Leicester) plc, a major supplier to the
Company, and is connected to Seaham Investments Limited, the
Company's majority shareholder, and is therefore not regarded as
independent under the provisions of the Code. Mrs Anne Tomlinson was,
until January 2008, Chief Executive of wholesale co-operative, The
Sterling Supergroup Limited, a company of which Mr Rashid Tayub was
and remains a director, and is not deemed independent under the
provisions of the Code. Similarly Mr J B Jackson is not deemed to
be independent under the provisions of the Code having been appointed
to the Board in 1992 and therefore having served on the Board for
more than nine years. However, the Board believes both Mrs Tomlinson
and Mr Jackson to be independent in character and judgement and free
of any relationships or circumstances likely to affect such
independence. Mr J Richards is considered by the Board to be
independent of management and any relationship, business or
otherwise, which could materially interfere with the exercising of
independent judgement.
2.3. Mr Jackson acted as the senior independent non-executive
Director throughout the period under review. Although Mr Jackson is
not deemed to be independent under the provisions of the Code, the
Board believes him to be independent in character and judgement and
free of any relationships or circumstances likely to affect such
independence. The senior independent non-executive Director is
available to shareholders should they have concerns which contact
through the normal channels of Chief Executive or Company Secretary
has failed to resolve or for which such contact is inappropriate.
2.4 The Board ordinarily meets four times per calendar year, with
additional meetings held as required. It has agreed a schedule of
matters specifically reserved for its decision, which ensures it
takes all major strategy, policy and investment decisions affecting
the Company, and includes matters under the categories of financial
reporting, internal control and governance. At each meeting the Board
receives detailed management accounts and executive reports setting
out current trading and major business issues, and annually approves
a budget for the following financial year. Papers are circulated to
all Directors in advance of a Board meeting, allowing sufficient time
for their review and enabling meetings to be constructive and
effective. Mr Aziz Tayub meets formally with senior managers on a
regular basis.
2.5 All Directors have access to the advice and services of the
Company Secretary, who is responsible for ensuring that Board
procedures are complied with. Both the appointment and the removal of
the Company Secretary are matters specifically reserved for the Board
as a whole. The Board has established a procedure whereby any
Director, wishing to do so in furtherance of his duties, may take
independent professional advice at the Company's expense.
2.6 The Company maintains an appropriate level of Directors' and
Officers' insurance in respect of legal action against its Directors.
However, this insurance does not cover any possible dishonest or
fraudulent action undertaken by them.
2.7 All Directors are subject to the retirement and re-election
provisions of the Articles of Association, which require one-third of
the Board to retire and, if they so wish, offer themselves for
re-election at each Annual General Meeting. They are also subject to
the requirements of the Code that directors should be subject to
re-election at intervals of no more than three years, and annually if
they have served on the Board for a period in excess of nine years.
In addition, Directors are obliged to retire and offer themselves for
election at the first Annual General Meeting following their
appointment.
3. Board Committees
3.1 Up until 13th August 2008 there were three established
sub-committees of the Board: the Audit Committee, the Remuneration
Committee and the Nomination Committee. Each Committee had terms of
reference which had been agreed by that Committee and by the Board,
all of which reflected the requirements of the Code and all of which
were published on the corporate website at www.instoreretail.co.uk.
3.2 Remuneration Committee
From the start of the period under review until 10th July 2008, the
Remuneration Committee consisted of three non-executive Directors, Dr
C H Wiese (Committee Chairman), Mr J B H Jackson and Mr J Richards.
Accordingly, throughout this period the Committee did not consist
wholly of independent non-executive Directors as required by the
Code. However, the Board considered its composition appropriate and,
in particular, that Dr Wiese should serve on the Committee as a
representative of the then largest shareholder.
Following Dr Wiese's resignation from the Board on 10th July 2008,
the Board reviewed the operation of the Committee and noted that the
Committee had not met since 2004 and that it had become custom and
practice for the matters reserved for the Committee to be considered
by the Board as a whole, with the overriding principle that no
Director should be involved in the discussion or process for
determining his or her own remuneration. Accordingly, the Board
agreed that this process should be formalised and the Committee
disbanded.
3.3 Nomination Committee
From the start of the period under review until 10th July 2008, the
Nomination Committee consisted of three non-executive Directors, Dr C
H Wiese (Committee Chairman), Mr J B H Jackson and Mr J Richards.
Accordingly, throughout this period, the majority of members of the
Committee were not deemed to be independent under the provisions of
the Code. However, the Board believed Mr Jackson to be independent in
character and judgement and free of any relationships or
circumstances likely to affect such independence.
Following Dr Wiese's resignation from the Board on 10th July 2008,
the Board reviewed the operation of the Committee and noted that the
Committee had not met since 2004 and that it had become custom and
practice, given the size and composition of the Board, for the
matters reserved for the Committee to be considered by the
non-executive Directors as a whole. Accordingly, the Board agreed
that this process should be formalised and the Committee disbanded.
During the period under review, Mr E Suleman was appointed to the
Board on 1st May 2008 and Mr Rashid Tayub and Mrs A Tomlinson were
appointed to the Board on 18th August 2008. These appointments were
considered by the non-executive Directors as a whole. In addition, Mr
P Burdon was removed as Chief Executive and replaced by Mr Aziz
Tayub, who was previously a non-executive Director, on 12th November
2008, such change being considered by the non-executive Directors as
a whole with the exception of Mr Aziz Tayub, who was not present.
New Directors are offered training and advice tailored to their needs
upon appointment to the Board and all Directors have continuing
access to such support as and when it is required.
3.4 Audit Committee
From the start of the period under review until 10th July 2008, the
Audit Committee consisted of three non-executive Directors, Mr C
Moore (Committee Chairman), Mr J Richards and Mr J B H Jackson.
Accordingly, throughout this period, the Committee did not consist
wholly of independent non-executive Directors as required by the
Code. However, the Board considered it appropriate, given his recent
and relevant financial experience, that Mr Moore serve on the
Committee, and also that Mr Jackson was independent in character and
judgement and free of any relationships or circumstances likely to
affect such independence.
With effect from 13th August 2008 until the end of the period under
review, the Audit Committee consisted of three non-executive
Directors, Mr J Richards (Committee Chairman), Mr Rashid Tayub and
Mrs A Tomlinson. Accordingly, throughout this period, the Committee
did not consist wholly of independent non-executive Directors as
required by the Code.
The Committee's meetings are attended, by invitation, by the Chief
Executive, the Group Finance Director and the external auditors as
appropriate. The principal responsibilities of the Committee are to:
* monitor the integrity of all financial statements and formal
announcements relating to the financial performance of the
Company;
* review the Company's internal financial control and risk
management systems;
* consider on an annual basis the necessity for the Company to have
an internal audit function and make recommendations to the Board
as appropriate;
* consider and make recommendations to the Board in relation to the
appointment, reappointment and removal of the external auditors
and to approve their remuneration and terms of engagement;
* review the external auditors' independence, objectivity and
effectiveness;
* develop and implement a policy on the supply of non-audit
services by the external auditors; and
* review arrangements by which employees may, in confidence, raise
concerns about possible wrongdoing in financial reporting and
other matters.
During the period from the start of the financial year to the date of
this report, the business considered and discussed by the Committee
has included:
* the review of the financial disclosures included in the annual
and interim reports to shareholders, together with the associated
announcements;
* proposals from the external auditors regarding their independent
review of the Company's financial statements and their audit
programme;
* the need for an internal audit function, concluding that, due to
arrangements already in place, such as an established system of
stock auditing and third party responsibility for cash handling,
the role was not necessary;
* ongoing monitoring of the nature of any non-audit services
provided by the external auditors and their associated fees
relative to the audit fees;
* a review of the external auditors' objectivity, independence and
effectiveness, resulting in a recommendation to the Board for
their reappointment;
* a review of the appropriateness of existing "whistle-blowing"
arrangements whereby employees may, in confidence, raise concerns
about possible wrongdoing in financial reporting and other
matters, concluding that proportionate arrangements were in place
allowing for independent investigation of any such concerns
raised; and
* ongoing review of internal controls, accounting policies and
practices and risk management procedures.
Following meetings of the Audit Committee, reports of the Committees'
business and activities were provided to the Board.
During the period under review the Directors attended the following
meetings:
Board Audit AGM
Meetings held 5 2 1
Mr J B H 4 0 1
Jackson
Mr A A Tayub 5 - 1
Mr E Suleman 4 - 1
Mr J Richards 5 2 1
Mr A R Tayub 1 1 -
Mrs A J Tomlinson 1 1 -
Dr C H Wiese 2 - -
Mr P Burdon 5 - 1
Mr J Gnodde 2 - -
Mr C Moore 2 1 -
Dr C H Wiese, Mr C Moore and Mr J Gnodde attended both Board meetings
held prior to their resignations from the Board on 10th July 2008. Mr
Moore also attended the one meeting of the Audit Committee held prior
to his resignation. Mr E Suleman attended all four Board meetings
held following his appointment to the Board on 1st May 2008. Mrs A J
Tomlinson and Mr A R Tayub both attended the one meeting of the Board
and the one meeting of the Audit Committee held following their
appointments to the Board on 18th August 2008. Mr Jackson ceased to
be a member of the Audit Committee upon his appointment as Chairman
on 13th August 2008, by which time one meeting of the Audit Committee
had been held.
There were no meetings of either the Remuneration Committee or the
Nomination Committee held prior to both Committees being disbanded on
13th August 2008.
4. Internal control
The Board has overall responsibility for the Company's system of
internal control and for reviewing its effectiveness. The system of
internal control is designed to manage, rather than eliminate, the
risk of failure to achieve business objectives and can provide only
reasonable, and not absolute, assurances against material
misstatement or loss.
The effectiveness of the system of internal controls is reviewed
annually by the Board, including financial, operational, compliance
and risk management controls, with all significant findings or
identified risks considered in detail and confirmation sought that
necessary actions have been, or are being, taken.
Throughout the period ended 28th February 2009 and up to the date of
this report, the internal control systems comply with the Turnbull
guidance for Directors as required by the Code. The principal
elements of the system of internal control include:
* A comprehensive annual budgeting system, integrating both
financial and operational budgets with formal identification and
assessment of business and financial risks inherent in each
operating area. These budgets are subject to approval by the
Board.
* Regular consideration by the Board of actual results compared
with budgets and forecasts, preparation of revised forecasts on a
regular basis, and monitoring of capital expenditure programmes.
* Confirmation to the Board of any changes in business,
operational, compliance or financial risk by management in each
operating area.
* Clearly defined authorisation procedures for capital and other
areas of expenditure, established by the Board.
* A formal schedule of matters specifically reserved to the Board
for decision.
* Authority levels delegated to subsidiary Board Directors and
senior management.
5. Relations with shareholders
The Company organises a series of formal and informal meetings with
institutional shareholders and analysts throughout the year, led by
the Chief Executive and Group Finance Director. Feedback on
shareholders' views is communicated to the Board from these meetings.
Non-executive Directors are offered the opportunity to attend such
meetings and are available to investors upon request.
All shareholders have the opportunity to attend the AGM, at which the
chairmen of the Board's Committees are present, and to question the
Directors on any issue relating to the Company. In accordance with
the provisions of the Code, the notice of the AGM is circulated to
all shareholders at least 20 working days before the AGM. Proxy votes
are made available at the AGM after Shareholders have voted on each
resolution on a show of hands, and subsequently on the Company's
website. Separate resolutions are proposed at the AGM on each
substantially separate issue, and proxy appointment forms provide
shareholders with the option to vote either for or against the
resolution or to withhold their vote.
6. Compliance Statement
Other than as disclosed below, the Company has been in compliance
with Section 1 of the Code throughout the period ended 28th February
2009:
A.1.3 During the period under review, the non-executive Directors
have not met without the Chairman being present. However, the
non-executives have the discretion to do so, if and when they
regard such meetings as necessary.
A.2.2 Upon his appointment as Chairman on 13th August 2008, Mr
Jackson did not meet the independence criteria as set out in
Code provision A.3.1. However, the Board believes Mr Jackson to
be independent in character and judgement and free of any
relationships or circumstances likely to affect such
independence.
A.4.1 The Nomination Committee did not lead the process for the
appointment to the Board of Mr Suleman, Mr Rashid Tayub nor Mrs
Tomlinson. In all cases it was considered more appropriate for
the non-executive Directors as a whole to consider their
respective appointments. In addition, from the start of the
period under review until 10th July 2008, the majority of
members of the Committee were not deemed to be independent
under the provisions of the Code, although the Board believed
Mr Jackson to be independent in character and judgement and
free of any relationships or circumstances likely to affect
such independence. With effect from 13th August 2008, the
Nomination Committee was disbanded, the Board being of the view
that it was more appropriate for matters previously reserved
for the Nomination Committee to be considered by the
non-executive Directors as a whole.
A.4.3 No job specification was prepared prior to the appointment of
Mr Jackson as Chairman as this was not deemed necessary.
However, an assessment of the time commitment expected and of
Mr Jackson's other significant commitments was undertaken.
A.6.1 No formal process is in place for the performance evaluation of
the Board, its Committees, the Chairman or individual
Directors. The Board has previously considered the introduction
of such processes and concluded that formal evaluation would
not enhance the performance or functioning of the Board, its
Committees, the Chairman or individual Directors.
A.7.2 Not all non-executive Directors are appointed for specific
terms. However, all Directors are required to retire and seek
reappointment from shareholders at least every three years in
accordance with the Company's Articles of Association.
B1.1 Performance-related elements of remuneration do not currently
form a significant proportion of executive directors'
remuneration, as the Board does not consider these appropriate
for the current executive directors.
B.2.1 From the start of the period under review until 10th July 2008,
the Remuneration Committee did not consist wholly of
independent non-executive Directors as required by the Code.
However, the Board considered its composition appropriate and,
in particular, that Dr Wiese should serve on the Committee as a
representative of the then largest shareholder. With effect
from 13th August 2008, the Remuneration Committee was
disbanded, the Board being of the view that it was more
appropriate for matters previously reserved for the
Remuneration Committee to be considered by the Board as a
whole.
B.2.2 The Remuneration Committee did not set the remuneration of Mr
Suleman or Mr Aziz Tayub upon their appointment as executive
Directors, as it was considered appropriate for the terms of
their appointments to be considered by the non-executive
Directors as a whole. In addition, the Remuneration Committee
did not make recommendations with regard to the levels and
structure of remuneration of senior management during the year,
as such structure remained unchanged and levels were determined
by, and within, budgets approved by the Board.
C.3.1 Throughout the period under review the Audit Committee did not
consist wholly of independent non-executive Directors. However,
the Board considered it appropriate, given their recent and
relevant financial experience, that Mr Moore serve on the
Committee until his resignation on 10th July 2008, and that Mr
Rashid Tayub serve on the Committee after that date.
By order of the Board
M D Collinson
Company Secretary
29th June 2009
Directors' Report
The Directors submit their report and the audited financial
statements of the Company and the Group for the 52 weeks ended 28th
February 2009.
Principal activities and business review
The activities of the Group comprise value retailing through its
Poundstretcher and Instore retail chains, together with the operation
of certain stores purchased from Marston Mills Limited in December
2007. Further information regarding the Group, including important
events and progress during the year ended 28th February 2009, events
since the end of the period under review and likely future
developments, is contained in the Chairman's Statement, the Operating
Review and the Finance Review. The information that fulfils the
requirements of the Business Review (as required by Section 417 (5)
of the Companies Act 2006), which is incorporated in this Directors'
Report by reference, can be found on the following sections of this
Annual Report:
Development and performance during the financial year: Chairman's
Statement and Operating Review.
Position at the year end including analysis and key performance
indicators: Finance Review.
Other performance, including environmental and employee matters:
Directors Report.
Principal risks and uncertainties facing the business, including
financial risk management policy (including the use of financial
instruments): Operating Review and Finance Review.
Loss for the year and dividends
The loss for the 52 weeks ended 28th February 2009 amounted to GBP11.5
million (loss of GBP7.9 million for the 53 weeks to 1st March 2008).
The Directors do not recommend payment of a dividend for the period
(2008: GBPnil).
Retirement by rotation
Pursuant to articles 79, 80 and 81 and the provisions of the Combined
Code on Corporate Governance, Mr John Richards and Mr John Jackson
shall retire at the Annual General Meeting to be held on 6th August
2009.
Mr Rashid Tayub and Mrs Anne Tomlinson, both of whom were appointed
on 18th August 2008, will both be offering themselves for election at
the Annual General Meeting.
Directors' interests
The Directors' interests and emoluments are shown in the Board Report
on Directors' Remuneration.
Significant contracts
None of the Directors or the principal shareholders had an interest
in any significant contracts in relation to the Group's business at
any time during the year, except as indicated in note 26 to the
financial statements.
Directors
The Directors of the Company who held office during the year and at
the date of this report are listed in the Directors and Advisers
section.
Mr John Jackson (Non-executive Chairman), aged 80, joined the Board
in April 1992, and was appointed Chairman in August 2008. He is also
Chairman of Oxford Technology Venture Capital Trust plc and
non-solicitor Chairman of solicitors Mishcon de Reya.
Mr Aziz Tayub (Chief Executive Officer), aged 53, joined the Board in
July 2007 as a non-executive Director, and was appointed Chief
Executive Officer in November 2008. He is also a Director and
controlling shareholder of Crown Crest Group Limited, which
indirectly holds 59.13% of the issued share capital of Instore plc,
and has a wide experience of the retail sector.
Mr Ebrahim Suleman (Group Finance Director), aged 53, was appointed
to the Board in May 2008 having worked as the Director of finance of
the Group's principal trading subsidiary, Poundstretcher Limited,
since October 2007. He is a qualified Chartered Accountant and is
also a partner in a Yorkshire-based chartered accountancy practice.
Previously he has worked for the Prudential Assurance Company and for
Price Waterhouse.
Mr Rashid Tayub (Non-executive Deputy Chairman), aged 60, was
appointed to the Board in August 2008. He is a Director and
controlling shareholder of Crown Crest Group Limited, which
indirectly holds 59.13% of the issued share capital of Instore plc.
Mr John Richards (Non-executive Director), aged 62, joined the Board
in February 2005, having spent over twenty years as a retail analyst,
including being the number one rated retail sector follower for a
number of years. He currently runs his own retail strategic
consultancy. He is Chairman of the Company's Audit Committee.
Mrs Anne Tomlinson (Non-executive Director), aged 63, was appointed
to the Board in August 2008. She was, until January 2008, Chief
Executive of wholesale co-operative, The Sterling Supergroup Limited.
Substantial shareholdings
As at 28th June 2009 the Company had been notified of the following
interests in its ordinary shares which represent 3% or more of the
issued ordinary shares of the Company.
Number of
Ordinary Shares %
Seaham Investments Limited 135,051,165 59.13
Instore Holdings S.a.r.l. 36,235,252 15.86
Fiske Nominees Limited 13,757,918 6.02
Share Capital
A resolution will be proposed at the Annual General Meeting to
authorise market purchases of up to 10% of the Company's issued share
capital.
A resolution is being proposed at the Annual General Meeting which,
if passed, will give authority for the allotment of relevant
securities up to an aggregate nominal value of GBP7,613,767
representing 33.3% of the Company's issued ordinary share capital. A
resolution disapplying the pre-emption rights which otherwise apply
on an issue of shares for cash, of any amount not exceeding 5% of the
Company's issued ordinary shares, is also being proposed.
Resolutions were passed at the 2008 Annual General Meeting giving
authority for the allotment of relevant securities up to an aggregate
nominal value of GBP7,613,767.
The movements in the Company's authorised and issued share capital
are set out in note 17 to the financial statements.
Takeovers Directive disclosures
The Company's share capital comprises ordinary shares of 10p each and
deferred shares of 0.9p each. The ordinary shares represent 79.53% of
the Company's issued share capital and deferred shares represent
20.47%. Details of the structure of the share capital, and the rights
attaching to the deferred shares, are set out in note 17 of the Notes
to the Financial Statements. The rights attached to the ordinary
shares, in addition to those rights conferred by law, are set out in
the Company's Articles of Association. There are no restrictions on
the transfer of ordinary shares or on the exercise of voting rights
attached to them, except to the extent that the holder may be
precluded from exercising such rights under the FSA's Listing Rules
or the City Code on Takeovers and Mergers.
Rules regarding the appointment and replacement of Directors are set
out in the Articles of Association. Changes to the Articles of
Association can only be made by shareholders passing a special
resolution to that effect. There are no agreements between the
Company and any of its employees or any Director of the Company which
provide for compensation to be paid to the employee or Director for
termination of employment or for loss of office as a consequence of a
takeover of the Company.
Supplier payment policy
It is the Group's policy to agree terms of payment with its suppliers
when agreeing the terms of each business transaction or transactions.
All suppliers are aware of this procedure and the Group endeavours to
abide by the agreed terms of payment. Average creditor days at 28th
February 2009 are 68 (2008: 61) (Instore plc: nil (2008: nil)).
Employees and employment policy
Information concerning employees and their remuneration is given in
note 22 to the financial statements.
The Group continues to recognise the importance of good
communications and relations with all employees and continues to
develop its policy of providing employees with information about the
Group. Announcements relating to the performance and operations of
the Group are provided to employees in a timely manner, either
electronically or via a team briefing process.
Disabled persons continue to receive consideration for employment,
taking account of their particular abilities and the job
requirements. All possible efforts are made to maintain continuity of
employment for existing employees who become disabled.
Land and buildings
In the opinion of the Directors there was no material difference
between the carrying value of land and buildings and their market
value.
Donations
Charitable donations of GBP500 (2008: GBP534) were made during the year.
These donations were made to a number of charities nominated by
employees. No donations were made to political organisations.
The Environment
The Group recognises its obligation to be aware of, and take steps to
control and minimise, its impact on the environment. The Group
actively pursues a policy of containing energy usage, and is fully
committed to maximising the recycling of transit packaging where
practical.
Statement of Directors' responsibilities
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and
regulations. They are also responsible for ensuring that the Annual
Report includes information required by the Listing Rules of the
Financial Services Authority.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the Directors are required to
prepare the Group financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union and have elected to prepare the parent company
financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards and
applicable law). The financial statements are required to give a true
and fair view of the state of affairs of the Company and the Group
and of the profit or loss of the Group for that period. In preparing
these financial statements the Directors are required to:
* select suitable accounting policies and then apply them
consistently;
* make judgments and estimates that are reasonable and prudent;
* state, in the parent company financial statements, whether
applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial
statements;
* prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting records
that disclose with reasonable accuracy at any time the financial
position of the Company and the Group and enable them to ensure that
the financial statements comply with the Companies Act 1985. They are
also responsible for safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The Directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company's
website. Legislation in the United Kingdom governing the preparation
and dissemination of the financial statements and other information
included in annual reports may differ from legislation in other
jurisdictions.
The Directors, whose names and functions are set out above confirm,
to the best of their knowledge:
a) that the financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and profit or loss of
the company and of the group taken as a whole; and
b) the management report included within the Operating Review and
Finance Review includes a fair review of the development and
performance of the business and the position of the company and the
group taken as a whole, together with a description of the principal
risks and uncertainties that they face.
Going Concern
After making appropriate enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
Auditors and disclosure of information to auditors
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as they are each aware, there
is no relevant audit information of which the Company's auditors are
unaware. Each Director has taken all the steps that they ought to
have taken as a Director in order to make themselves aware of any
relevant audit information and to establish that the Company's
auditors are aware of that information.
A resolution to reappoint PKF (UK) LLP as auditors will be proposed
at the Annual General Meeting.
By order of the Board
M D Collinson
Company Secretary
29th June 2009
Independent Auditors' Report to the Members of Instore plc
We have audited the Group financial statements of Instore plc for the
period ended 28th February 2009 which comprise the Consolidated
Income Statement, the Consolidated Statement of Changes in
Shareholders Equity, the Consolidated Balance Sheet, the Consolidated
Cash Flow Statement, and the related notes. These Group financial
statements have been prepared under the accounting policies set out
therein.
We have reported separately on the parent company financial
statements of Instore plc for the period ended 28 February 2009 and
on the information in the Directors' Remuneration Report that is
described as having been audited.
This report is made solely to the Company's members, as a body, in
accordance with section 235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to the Company's members
those matters we are required to state to them in an auditors' report
and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the
Company and the Company's members as a body, for our audit work, for
this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The Directors' responsibilities for preparing the Annual Report and
the Group financial statements in accordance with applicable law and
International Financial Reporting Standards ('IFRSs') as adopted by
the European Union are set out in the Statement of Directors'
Responsibilities.
Our responsibility is to audit the Group financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the Group financial
statements give a true and fair view and have been properly prepared
in accordance with the Companies Act 1985 and whether, in addition,
the Group financial statements have been properly prepared in
accordance with article 4 of the IAS Regulation. We also report to
you whether in our opinion the information given in the Directors'
Report is consistent with the Group financial statements. The
information in the Directors' Report includes that specific
information presented in the Chairman's Statement, the Operating
Review and the Finance Review that is cross referenced from the
business review section of the Directors' Report.
In addition we report to you if, in our opinion, the Company has not
kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if
information specified by law regarding Directors' remuneration and
other transactions is not disclosed.
We review whether the Corporate Governance Statement reflects the
Company's compliance with the nine provisions of the 2003 Combined
Code specified for our review by the Listing Rules of the Financial
Services Authority, and we report if it does not. We are not required
to consider whether the Board's statements on internal control cover
all risks and controls, or form an opinion on the effectiveness of
the Group's corporate governance procedures or its risk and control
procedures.
We read other information contained in the Annual Report and consider
whether it is consistent with the audited Group financial statements.
The other information comprises only the Directors' Report, the
unaudited part of the Board Report on Directors' Remuneration, the
Chairman's Statement, the Operating Review, the Finance Review and
the Corporate Governance Statement. We consider the implications for
our report if we become aware of any apparent misstatements or
material inconsistencies with the financial statements. Our
responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on
Auditing (UK and Ireland) issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant to
the amounts and disclosures in the financial statements and the part
of the Directors' Remuneration Report to be audited. It also includes
an assessment of the significant estimates and judgments made by the
Directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the Group's
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that
the Group financial statements are free from material misstatement,
whether caused by fraud or other irregularity or error. In forming
our opinion we also evaluated the overall adequacy of the
presentation of information in the Group financial statements.
Opinion
In our opinion:
* the Group financial statements give a true and fair view, in
accordance with IFRSs as adopted by the European Union, of the
state of the Group's affairs as at 28 February 2009 and of its
loss for the period then ended;
* the Group financial statements have been properly prepared in
accordance with the Companies Act 1985 and article 4 of the IAS
Regulation; and
* the information given in the Directors' Report is consistent with
the Group financial statements.
PKF (UK) LLP
Registered Auditors
Nottingham, UK
29th June 2009
Consolidated Income Statement for the 52 weeks ended 28th February
2009
52 weeks ended 28th 53 weeks ended 1st March 2008
February 2009
Before Before Exceptional
Exceptional
exceptional items exceptional items
items (note Total items (note 2) Total
2)
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1 295,826 - 295,826 296,824 - 296,824
Cost of sales (265,733) (3,561) (269,294) (264,566) (2,593) (267,159)
Gross profit 30,093 (3,561) 26,532 32,258 (2,593) 29,665
Distribution (22,051) - (22,051) (19,337) - (19,337)
costs
Administrative (13,498) (1,174) (14,672) (15,178) (2,556) (17,734)
expenses
Operating loss (5,456) (4,735) (10,191) (2,257) (5,149) (7,406)
Finance income 3 4 - 4 267 - 267
Finance costs 3 (352) - (352) (229) - (229)
Loss before 4 (5,804) (4,735) (10,539) (2,219) (5,149) (7,368)
taxation
Taxation 5 (947) - (947) (664) 87 (577)
Loss for the
period
attributable to (6,751) (4,735) (11,486) (2,883) (5,062) (7,945)
equity shareholders
Loss per share
(pence)
- Basic and 6 (5.24) (3.58)
diluted
Consolidated Statement of Changes in Shareholders' Equity for the 52
weeks ended 28th February 2009
Share Share Other Retained
capital premium reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 25th February 2007 28,721 97,794 3,310 (95,889) 33,936
Net loss - - - (7,945) (7,945)
Cash flow hedges:
- Fair value gains in - - 6,836 - 6,836
period
- Transfers to net - - (5,747) - (5,747)
profit
Share options:
- Share option credit - - (670) - (670)
Movement in respect of - - - (255) (255)
investment in own shares
At 1st March 2008 as 28,721 97,794 3,729 (104,089) 26,155
previously reported
Prior year adjustment - - (219) - (219)
(note 8)
At 1st March 2008 28,721 97,794 3,510 (104,089) 25,936
restated
Net loss - - - (11,486) (11,486)
Cash flow hedges:
- Fair value gains in - - 5,152 - 5,152
period
- Transfers to net profi - - (3,939) - (3,939)
t
Share options:
- Share option credit - - (30) - (30)
- Transfer of
Share-Based Payment
reserve to
retained earnings (note - - (1,509) 1,509 -
18)
Movement in respect of - - - (148) (148)
investment in own shares
At 28th February 2009 28,721 9 7,794 3,184 (114,214) 15,485
Consolidated Balance Sheet as at 28th February 2009
2009 2008
As restated
Note GBP'000 GBP'000
Assets
Non-current assets
Property, plant and equipment 7 25,222 33,987
Deferred tax 8 - 1,535
Other non-current receivables 9 - 233
25,222 5,755
Current assets
Inventories 10 45,168 35,706
Trade and other receivables 11 6,346 5,148
Derivative financial assets 7,345 1,491
Cash and cash equivalents 12 6,327 8,711
65,186 51,056
Total assets 90,408 86,811
Liabilities
Current liabilities
Trade and other payables 13 (56,432) (44,263)
Derivative fi nancial liabilities (3,316) (894)
Current tax payable - (112)
Provisions 14 (1,091) (690)
(60,839) (45,959)
Net current assets 4,347 5,097
Non-current liabilities
Provisions 14 (10,501) (11,434)
Other non-current payables 15 (3,583) (3,482)
(14,084) (14,916)
Total liabilities (74,923) (60,875)
Net assets 15,485 25,936
Shareholders' equity
Called up share capital 17 28,721 28,721
Share premium 97,794 97,794
Other reserves 18 3,184 3,510
Retained earnings (114,214) (104,089)
Total equity 15,485 25,930
The financial statements were approved by the Board on 29th June
2009, and were signed on its behalf by:
E Suleman J Richards
Director Director
Consolidated Cash Flow Statement 52 weeks ended 28th February 2009
52 weeks 53 weeks
ended ended
28th February 1st March
2009 2008
Note GBP'000 GBP'000
Cash flows from operating activities
Cash absorbed by operations 19 (3,854) (2,466)
Interest received 4 267
Interest paid (352) (229)
Tax paid - (216)
Net cash outflow from operating activities (4,202) (2,644)
Cash flows from investing activities
Purchase of property, plant and equipment (3,034) (5,939)
Acquisition of Ponden Mill stores - (3,813)
Net cash used in investing activities (3,034) (9,752)
Cash flows from financing activities
Short term loan from Crown Crest (Leicester) 5,000 -
plc
Acquisition of own shares (148) (255)
Net cash from fi nancing activities 4,852 (255)
Net decrease in cash, cash equivalents and (2,384) (12,651)
overdrafts
Cash and cash equivalents at beginning of 8,711 21,362
period
Cash, cash equivalents and overdrafts at end 12 6,327 8,711
of period
Notes to the Financial Statements for the 52 weeks ended 28th
February 2009
ACCOUNTING POLICIES
The Company is a public limited company which is listed on the London
Stock Exchange and is incorporated and domiciled in the UK.
Basis of preparation
These consolidated financial statements for the 52 weeks ended 28th
February 2009 have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IFRIC interpretations
adopted by the European Union, issued and effective at 1st March
2008, and with those parts of the Companies Act 1985 applicable to
companies reporting under IFRS.
The financial statements have been prepared on the historical cost
basis, with the exception of financial assets and financial
liabilities (including derivative instruments) which are measured at
fair value through profit or loss and certain derivative financial
instruments that qualify for hedge accounting that are measured at
fair value through reserves. The principal accounting policies
adopted in the preparation of the financial statements are set out
below. These policies have be n consistently applied to all years
presented, unless otherwise stated.
The financial statements are presented in sterling and all values are
rounded to the nearest thousand pounds (GBP'000) except where otherwise
indicated.
Going concern
In view of the Group's continued trading losses, the Directors have
carried out a detailed review to determine whether the preparation of
the financial statements on a going concern basis remains
appropriate.
The Directors' review of the Group takes into consideration budgets
and cash flow forecasts for the period to 30 June 2010.
There has been a fundamental change to the Group's strategy,
direction and operations. This change with the intention of
refocusing the business as a value-led retailer involves four key
areas: the control of costs, both in terms of buying and control of
overheads; the continued development of the product offering; the
format and branding of the stores; and the strengthening of the
management team.
The budgets and cash flow forecasts have been prepared with the
effects of the fundamental changes being recognised on a prudent
basis, and taking into consideration the anticipated continuing
impact of the current economic climate.
To accommodate the potential risk of not achieving forecasts, the
directors have obtained the necessary financial support from Crown
Crest (Leicester) plc for the period to 30 June 2010.
In the consideration of its ability to support the Group, with the
difficulty of forecasting in the current economic environment, Crown
Crest (Leicester) plc has approached its funders to ascertain their
views as to the availability of adequate further funds should they be
required. This was considered necessary in the event that there were
delays in the turnaround of the financial performance of the Group.
The funder's response was positive, and although this would be
subject to formal credit approval the Directors have no reason to
consider that this would not be forthcoming. The Directors are
therefore satisfied that the forecasts are adequately funded with
appropriate provision for potential delays in the turnaround.
Taking the above into consideration, the Directors believe that the
preparation of the accounts on a going concern basis is appropriate.
Basis of consolidation
The consolidated income statement and balance sheet include the
financial statements of the Company and all its subsidiary
undertakings. The results of subsidiary undertakings acquired or
disposed of during the period are accounted for in the income
statement from or up to the date control passes. Inter-company sales
and profits are eliminated on consolidation.
Revenue
Revenue, which is net of value added tax and returns, represents the
value of sales made in the Group's retail outlets and is recognised
in the financial statements when cash has been received or is
receivable.
Exceptional items
The Group has defined exceptional items as those items of financial
significance to be disclosed separately, in order to assist in
understanding the financial performance of the Group. Each of these
items relates to events or circumstances that are nonrecurring in
nature.
Leased assets
Leases are classified as finance leases where the terms of the lease
transfer substantially all the risks and rewards of ownership to the
Group. All other leases are classified as operating leases. The Group
does not hold any assets under finance leases. Rent-free periods,
capital contributions or any other inducements to enter into
operating lease agreements are released to the income statement over
the life of the lease. Any gains or losses arising from early
termination of operating leases are accounted for within
administrative costs.
Rentals paid under operating leases are charged to the income
statement as incurred over the life of the lease.
New store expenditure
Pre-trading expenditure on new stores is charged to the income
statement as incurred.
Property, plant and equipment
The cost of property, plant and equipment is its purchase cost,
together with any incidental costs of acquisition.
Depreciation
Depreciation is provided so as to write down the cost of property,
plant and equipment to their estimated residual values over their
expected useful economic lives on a straight-line basis.
The principal rates used are:
Short leasehold properties (fewer - Over remaining period of lease
than 50 years)
Improvements to freehold and - Up to 31st December 1995: 15%
leasehold properties
- From 1st January 1996: over the
shorter of the remaining
period of the lease or 15 years
Plant and machinery - 15-25%
Fixtures and fi ttings - 10-15%
Motor vehicles - 20-25%
Freehold and long leasehold properties are depreciated so as to write
down the cost over the period from 1st July 1997, or acquisition date
if later, to a date 50 years after the acquisition date of the asset.
Assets' carrying values are reviewed and adjusted if appropriate at
each balance sheet date.
Impairment
To the extent that the carrying amount of property, plant and
equipment in a cash generating unit exceeds the recoverable amount,
that is the higher of net realisable value and value in use, the
property, plant and equipment is written down to its recoverable
amount. The value in use is determined from estimated discounted
future post tax cash flows. In assessing the value in use of impaired
assets, a post-tax discount rate of 8.7% has been used which, in the
opinion of the Directors, reflects the risk inherent in those cash
flows. Management conduct a detailed impairment review of property,
plant and equipment when potential impairment triggers are
identified.
Fixed asset investments
Investment in own shares is taken as a deduction from shareholders'
funds.
Provisions
A provision is recognised when the Group has a legal or constructive
obligation as a result of a past event and it is probable that an
outflow of economic benefits will be required to settle the
obligation. If the effect is material, expected future cash flows are
discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. The expense
relating to any provision is presented in the income statement less
any reimbursement. Provisions include:
(i) Closed store provision
Provision is made for the costs of closing a store once the decision
to close has become irreversible. Provision is also made for onerous
lease commitments and dilapidation payments that have accrued on the
closed store and are recorded in the relevant provisions below. Other
holding costs of the store continue to be charged to the income
statement as incurred until disposal. The provision is not discounted
as the effect would not be significant.
(ii) Dilapidation provision
Provision is made for the Group's obligations to maintain properties
to a standard as required by the various leases. The provision is not
discounted as the timing of cash flows is uncertain.
(iii) Onerous lease provision
Provision is made for cash generating units where the expected post
tax cash flows are not expected to cover the contractual lease
payments. A post tax discount rate of 8.7% has been used which, in
the opinion of the Directors, reflects the risk inherent in those
cash flows. Management conduct a detailed review of leases when
potential triggers are identified.
Pensions
The Group administers a number of defined contribution pension
schemes and in addition makes contributions into the personal pension
plans of certain Directors and executives. These costs are charged to
the income statement as incurred.
Inventories
Inventories, all of which are held for resale, are valued at the
lower of cost and net realisable value less any provision for
obsolete, slow-moving or defective inventories. Cost is based on
weighted average purchase costs. Net realisable value is the price at
which inventories can be sold in the normal course of business after
allowing for the costs of realisation.
Trade and other receivables
Trade receivables are recognised and carried at the lower of their
original invoiced value and the recoverable amount. Where the time
value of money is material, receivables are carried at amortised
cost. Provision is made when there is objective evidence that the
Group will not be able to recover balances in full. Balances are
written off when the probability of recovery is assessed as being
remote.
Monetary assets and liabilities
Monetary assets and liabilities expressed in foreign currencies are
translated into sterling at the rates of exchange ruling at the end
of the financial year.
Deferred taxation
Deferred tax expected to be payable or recoverable on differences at
the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting
purposes is accounted for using the liability method. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Deferred tax is not
recognised if the temporary difference arises from the initial
recognition of assets and liabilities in a transaction other than on
a business consolidation that affects neither the taxable profit nor
the accounting profit. Deferred tax is calculated at the rates of
taxation enacted or substantively enacted at the balance sheet date,
and is not discounted.
Cash and cash equivalents
Cash comprises cash in hand and demand deposits. Cash equivalents are
short-term highly liquid investments with a maturity of less than 90
days that are readily convertible to known amounts of cash and
subject to insignificant risk of changes in value. Bank overdrafts
repayable on demand are shown within borrowings in current
liabilities in the balance sheet, but are included as a component of
cash and cash equivalents in the cash flow statement.
Trade and other payables
Trade and other payables are stated at fair value.
Borrowing costs
Borrowing costs are recognised as an expense in the income statement
as incurred.
Share capital
Ordinary and deferred shares are classifi ed as equity.
Shares are recorded at their nominal value with any surplus received
on their issue taken to share premium account. Incremental costs
directly attributable to the issue of new shares are shown in equity
as a deduction from the proceeds.
Where the Company purchases its own shares, being held by the trustee
of the employee benefit trust in respect of the share option schemes,
the consideration paid, including any directly attributable
incremental costs, is deducted from equity on consolidation. Where
such shares are subsequently sold or reissued, any consideration
received, net of any directly attributable transaction costs, is also
included in equity on consolidation. These transactions are
classified as a deduction against retained earnings.
Derivative financial instruments
The Group uses derivative financial instruments, principally forward
foreign exchange contracts, to reduce exposure to foreign exchange
risk. The Group does not hold or issue derivative financial
instruments for speculative purposes. However, derivatives that do
not qualify for hedge accounting are accounted for as trading
instruments.
Derivative financial instruments are recognised initially at fair
value and are subsequently remeasured at fair value. The gain or loss
on remeasurement to fair value is recognised immediately in the
income statement, unless the derivatives qualify for hedge
accounting.
The fair value of forward exchange contracts is their market price at
the balance sheet date, being the present value of the quoted forward
price.
Where a forward exchange contract is designated as a hedge of the
variability in cash flows of a recognised asset or liability, or of a
highly probable forecast transaction, the effective part of any gain
or loss on the derivative financial instrument is recognised directly
in equity, and the ineffective part is recognised immediately in the
income statement.
When the forecasted transaction subsequently results in the
recognition of non-financial assets, principally inventories for
resale, the associated cumulative gain or loss is removed from equity
and included in the initial cost of the assets.
When a hedging instrument expires or is sold, terminated or
exercised, or the Group revokes designation of the hedge
relationship, but the hedged forecast transaction is still expected
to occur, the cumulative gain or loss at that point remains in equity
and is recognised in accordance with the above policy when the
transaction occurs. If the hedged transaction is no longer expected
to take place, the cumulative unrealised gain or loss recognised in
equity is recognised immediately in the income statement.
Foreign currency translation
Items included in the financial statements of each of the Group's
entities are measured using the currency of the primary economic
environment in which the entity operates ("the functional currency").
The consolidated financial statements are presented in Pounds
sterling, which is the Group's functional and presentational
currency.
Foreign currency transactions (predominantly purchases of
inventories) are translated into sterling using the exchange rate
prevailing at the date of transaction. Foreign exchange gains and
losses resulting from the settlement and from the translation at year
end exchange rates are recognised in the income statement, except
where deferred in equity as qualifying cash flow hedges.
Financial risk management
(a) Financial risk factors: The Group's activities expose it to a
variety of financial risks, market risk (including currency risk,
fair value interest rate risk, cash flow interest rate risk and price
risk), credit risk and liquidity risk. The Group's overall risk
management focuses on the unpredictability of financial markets and
seeks to minimise potential adverse effects on the Group's financial
performance. The Group uses derivative financial instruments to hedge
certain risk exposures.
Risk management is carried out by the treasury department under
policies approved by the Board of Directors. Treasury identifies,
evaluates and hedges financial risks in close co-operation with the
operating units. The Board provides written principles for overall
risk management.
(b) Market risk: The Group operates internationally and is exposed to
foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollar. Foreign exchange risk arises
from future commercial transactions.
At the closing balance sheet date a 5% movement in the Pounds
sterling/US dollar exchange rate would result in a GBP50,000 change in
the value of the Group's unhedged dollar liabilities.
For the 2009 Profit and Loss account a 5% movement in the Pounds
sterling/US dollar exchange rate across the year would have resulted
in a GBP1.1 million change in the Group's operating loss.
The treasury's risk management policy is to hedge between 75% and 90%
of anticipated cash flows (mainly purchase of inventory) in US
dollars for the subsequent 12 months.
(c) Price risk: The Group is not exposed to commodity price risk.
(d) Cash flow and fair value interest rate risk: As the Group has no
significant interest-bearing assets, the Group's income and operating
cash flows are substantially independent of changes in market
interest rates.
(e) Credit risk: arises from cash and cash equivalents and derivative
financial instruments. Management does not expect any losses from
non-performance.
(f) (f) Liquidity risk: Prudent liquidity risk management implies
maintaining sufficient cash and the availability of funding through
an adequate amount of committed credit facility. Due to the dynamic
nature of the underlying business, treasury maintains flexibility in
funding by maintaining availability under committed credit lines.
Management monitors rolling forecasts of the Group's liquidity
reserves, cash and cash equivalents on the basis of expected cash
flow.
The table below analyses the Group's financial liabilities into
relevant maturity groupings based on the remaining period at the
balance sheet to the contractual maturity date. The amounts disclosed
in the table are the contractual undiscounted cash flows. Balances
due within 12 months equal their carrying balances as the impact of
discounting is not significant.
Less than Between 1 2 to 5 Over
1 year and 2 years years 5 years
At 28th February 2009 GBP'000 GBP'000 GBP'000 GBP'000
Trade, other payables and 50,431 - - -
accurals
Loans from Crown Crest 5,000 - - -
(Leicester) plc
55,431 - - -
Less than Between 1 2 to 5 Over
1 year and 2 years years 5 years
At 1st March 2008 GBP'000 GBP'000 GBP'000 GBP'000
Total trade, other payables and 42,318 - - -
accurals
The table below analyses the Group's derivative financial instruments
which will be settled on a gross basis into relevant maturity
groupings based on the remaining period at the balance sheet to the
contractual maturity date. It also analyses the flows between those
accounted for as hedges and those which are entered into as part of
the Group's commercial activities, but do not fall to be accounted as
hedges under IFRS. The amounts disclosed in the table are the
contractual undiscounted cash flows. Balances due within 12 months
equal their carrying balances as the impact of discounting is not
significant.
Cash flow
hedges Non-hedge Total
At 28th February 2009 GBP'000 GBP'000 GBP'000
Less than 1 year
Outfl ow 12,109 25,808 37,917
Inflows 8,793 33,154 41,947
Cash flow
hedges Non-hedge Total
At 1st March 2008 GBP'000 GBP'000 GBP'000
Less than 1 year
Outfl ow 22,725 46,935 69,660
Inflows 23,324 46,730 70,054
Capital risk management
The Group's objectivities when managing capital are to safeguard the
Group's ability to continue as a going concern in order to provide
returns for shareholders and benefits for other shareholders and to
maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
With the exception of the loan from Crown Crest (Leicester) plc for
GBP5 million, the Company had no external net borrowings at the year
end. The Group monitors capital on the basis of total shareholders'
equity less hedge reserve. Total equity as at 28th February 2009 was
GBP13,698 (2008: GBP25,362).
Share-based payments
The fair value of employee share options granted on or after 7th
November 2002 is calculated using either the Black-Scholes or Monte
Carlo model. The resulting cost is charged in the income statement
over the vesting period of the option and is adjusted for the
expected and actual number of options vesting. Any impact of
revisions to original estimates are recognised in the income
statement, with a corresponding adjustment to equity.
The Group elected not to apply IFRS 2 to share awards granted before
7th November 2002, such that no expense has been or is being
recognised for them in the income statement. Consequently, on the
vesting of these awards, the cost of the shares is recognised
directly in retained earnings.
Critical accounting estimates
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. As
explained on above, it also requires management to exercise judgement
in the process of applying the Group's accounting policies. Refer
also to notes 7 and 14.
Adoption of standards
(a) The following interpretation has been applied by the Group from
1st March 2008:
* FRIC 11 (IFRS 2) Group and treasury share transactions
IFRIC 11 addresses share-based payment transactions involving an
entity's own equity instruments and share-based payment transactions
involving equity instruments of a parent company. Instore plc grants
share options to employees of its subsidiary companies. Such
share-based payments are required to be accounted for as
equity-settled in the consolidated financial statements. Application
of this interpretation does not have any effect on these financial
statements as the Group has always accounted for these options as
equity-settled in accordance with IFRS 2.
(b) The following standards, amendments and interpretations were
mandatory for the Group's accounting period, but are not relevant to
the operations of the Group:
* IFRIC 12 Service concession arrangements
* IFRIC 14 (IAS 19) The limit on a defined benefit asset, minimum
funding requirements and their interaction
* IAS 39 and IFRS 7 (Amendment) Reclassification of financial
instruments
(c) The following standard was available for early application and
has been applied by the Group in these financial statements:
* IFRS 8 Operating segments
IFRS 8 - Replaces IAS 14 'Segment Reporting' and requires the Group
to adopt the 'management approach', under which segment information
is presented on the same basis as that used for internal reporting
purposes. The application has not changed the number of reportable
segments; however, there are a number of changes in the manner in
which the segments are reported.
(d) The following standards and amendments were issued and available
for early application but have not yet been applied by the Group in
these financial statements. The Group intends to apply these
standards and interpretations when they become effective:
* IFRS 2 (Amendment) Share-based payment
* IAS 1 (Revised) Presentation of financial statements
IFRS 2 (Amendment) - Clarifies that vesting conditions are service
conditions and performance conditions only. Other features of a
share-based payment are not vesting conditions. It also specifies
that all cancellations, whether by the entity or by other parties,
should receive the same accounting treatment. The amendment will
apply for periods beginning on or after 1st January 2009. It is not
expected that the adoption of this amendment will have any material
impact on the Group financial statements as the Group already applies
these principles when accounting for share-based payments.
IAS 1 (Revised) - The revised standard will change the way the
Group's financial statements are presented. The revision requires
information in financial statements to be aggregated on the basis of
shared characteristics and introduces a 'statement of comprehensive
income'. This will enable readers to analyse changes in a company's
equity resulting from transactions with owners in their capacity as
owners (such as dividends and share repurchases) separately from
'non-owner' changes (such as transactions with third parties). The
revised standard gives an option of presenting items of income and
expense and components of other comprehensive income either in a
single statement of comprehensive income with subtotals, or in two
separate statements. The revisions include changes in the titles of
some of the other financial statements to reflect their function more
clearly (for example, the balance sheet is renamed a 'statement of
financial position'). The new titles will be adopted by the Group,
but are not mandatory. The revised standard will be applicable for
the first time in the year ended 27th February 2010 Group financial
statements.
(e) The following standards, amendments and interpretations are not
yet effective and are not relevant for the Group's operations:
* IFRS 1 and IAS 27 (Amendment) Cost of investment in subsidiary
* IFRS 1 (Amendment) First time adoption of IFRS
* IFRS 3 (Revised) Business combinations
* FRS 7 (Amendment) Financial instruments: Disclosures
* IAS 1 and IAS 32 (Amendment) Puttable financial instruments and
obligations arising on liquidation
* AS 23 (Amendment) Borrowing costs
* AS 27 (Amendment) Consolidated and separate financial statements
* AS 39 (Amendment) Financial instruments: Recognition and
measurement
* IFRIC 13 Customer loyalty programmes
* IFRIC 15 Agreements for the construction of real estate
* IFRIC 16 Hedges of a net investment in a foreign operation
* IFRIC 17 Distributions of non-cash assets to owners
* IFRIC 18 Transfers of assets from customers
1 SEGMENT INFORMATION
Turnover is derived from a single activity, being variety discount
retailing in the UK, and therefore there is only one business segment
operating in one geographical location.
2 EXCEPTIONAL ITEMS
Items that are both material in size and unusual and infrequent in
nature are presented as exceptional items in the income statement.
The Directors are of the opinion that the separate recording of
exceptional items provides helpful information about the Group's
underlying business performance.
2009 2008
GBP'000 GBP'000
Cost of sales:
1) Store provisions adjustments (108) (104)
2) Impairment of property, plant and equipment (note (2,099) (689)
7)
3) Onerous lease provision (589) (1,800)
4) Restructuring costs (385) -
5) Exiting onerous contract (380) -
(3,561) (2,593)
Administration expenses:
6) Restructuring costs (800) (1,840)
7) Cost of share offer (252) -
8) Employee share loan provision (122) (716)
(1,174) (2,556)
(4,735) (5,149)
1. During the financial period ended 28th February 2009 GBP0.1 million
was charged against the stores previously marketed for disposal in
the period ended 25th February 2006. During the period ended 1st
March 2008 this was also GBP0.1 million. Due to the prevailing market
conditions management have made the decision to trade from the
remaining four stores.
2. As a result of the provisions under IAS 36, the Directors have
conducted an assessment of the future cash flows of all trading
outlets. An impairment charge of GBP2.1 million (2008: GBP0.7 million)
has been recognised on those stores where the anticipated cash flows
do not support the carrying value of the associated assets.
3. During the financial period ended 28th February, the Directors
have conducted an assessment of the future cash flows of all trading
outlets and as a result, an onerous lease charge of GBP0.6 million
(2008: GBP1.8 million) was recognised on those stores where the
anticipated cash flows were not expected to cover the contracted
lease charges.
4. During the financial period ended 28th February 2009 the Directors
have continually reviewed the performance of the 33 branches acquired
as part of the Ponden Mill acquisition in December 2007.
Subsequently, 13 branches have been disposed of at a cost of GBP0.4
million (2008: nil).
5. During the period ended 28th February 2009, the Directors made the
decision to exit a trading contract which was no longer beneficial to
the Company. The cost of termination was GBP0.4 million.
6. During the period ended 28th February 2009 restructuring costs of
GBP0.8 million (2008: GBP1.8 million) were incurred, primarily relating
to redundancy costs.
7. During the period ended 28th February 2009 Seaham Investments
Limited made an offer to the minority shareholders of Instore plc to
buy their shares. The cost of evaluating and effecting this offer was
GBP0.3 million.
8. During the period ended 28th February 2009, an impairment charge
of GBP0.1 million (2008: GBP0.7 million) has been recognised in respect
of a potential shortfall on loans made to employees for the purpose
of acquiring shares in the Company.
3 FINANCE INCOME AND FINANCE COSTS
2009 2008
GBP'000 GBP'000
Bank interest income 1 267
Other interest 3 -
Finance income 4 267
Interest payable on bank borrowing (267) (100)
Other int erest paid (85) (129)
Finance cost (352) (229)
Finance (costs)/income - net (348) 38
4 LOSS BEFORE TAXATION
2009 2008
GBP'000 GBP'000
The following items have been included in arriving at
the loss before taxation:
Inventories
- Cost of inventories recognised as an expense in 162,331 167,341
cost of sales
Foreign exchange losses (106) 967
Depreciation of property, plant and equipment:
- Owned assets 8,530 7,816
Impairment of property, plant and equipment 2,099 689
Total net loss on disposal of property, plant and 672 516
equipment
Other operating lease rentals payable:
- Plant and machinery 890 826
- Property 35,581 33,860
Repairs and maintenance expenditure on property, 1,183 1,576
plant and equipment
Share-based payments recognised in the income (30) (670)
statement
Services provided by the Group's auditors
During the period the Group obtained the following services from PKF
(UK) LLP, the Group's auditors.
The services relating to 2008 were obtained from
PricewaterhouseCoopers LLP, the Group's auditors for that period:
2009 2008
GBP'000 GBP'000
Audit services
- Statutory audit of consolidated and Company financial 9 32
statements
- Interim review 13 29
Fees for other services
- Statutory audit of subsidiary financial statements 40 60
- Taxation - 50
- Other services 4 24
66 195
Taxation fees charged by PricewaterhouseCoopers LLP in the period to
28th February 2009 were GBP62,000 (2008: GBP50,000).
5 TAXATION
Analysis of charge in period
2009 2008
GBP'000 GBP'000
Current tax
- Current period - -
- Adjustments in respect of prior period (112) 216
(112) 216
Deferred tax (note 8) 1,059 361
Taxation 947 577
Tax reconciliation
A reconciliation of the loss before taxation to the current year tax
charge is shown below:
2009 2008
GBP'000 GBP'000
Loss before tax (10,539) (7,368)
Loss multiplied by rate of corporation tax in the UK (2,951) (2,210)
of 28% (2008: 30%)
Effects of:
Tax rate change
Permanent differences 1,917 2,210
Tax losses not utilised 1,225 779
Utilisation of capital losses (812) (407)
Interest restriction 98 (11)
Deferred tax not recognised - current year 523 -
- prior year 1,059 -
Adjustments in respect of prior periods (112) 216
Total taxation 947 577
The Group had surplus advance corporation tax carried forward at 28th
February 2009 of GBP2,529,000 (2008: GBP2,529,000).
Factors that may affect future tax charges
The Group has, subject to agreement with HM Revenue & Customs,
capital losses of GBP6.8 million (2008: GBP6 million) and trading losses
of approximately GBP23 million (2008: GBP19 million) available to offset
against future profits chargeable to corporation tax.
6 LOSS PER SHARE
Basic loss per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number
of ordinary shares outstanding during the period, excluding those
held in the employee share trust (note 18), which are treated as
cancelled.
For diluted loss per share, the weighted average number of ordinary
shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. The Group has one class of potentially
dilutive ordinary shares: those share options granted to employees
where the exercise price is less than the average market price of the
Company's ordinary shares during the period.
Reconciliations of the earnings and weighted average number of shares
used in the calculations are set out below.
2009 2008
Weighted Weighted
average average
number of Per number of Per
share share
Earnings shares amount Earnings shares amount
GBP'000 millions pence GBP'000 millions pence
Basic loss per
share:
Earnings
attributable to
ordinary (11,486) 219.4 (5.24) (7,945) 221.8 (3.58)
shareholders
Effect of
dilutive
securities
Options - - - - - -
Diluted loss per (11,486) 219.4 (5.24) (7,945) 221.8 (3.58)
share
The loss per share is the same as the diluted loss per share because
share options have an anti-dilutive effect.
7 PROPERTY, PLANT AND EQUIPMENT
Plant,
improvements Fixtures,
Long to freehold & fittings &
leasehold Short leasehold motor
and leasehold properties vehicles Total
freehold
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 24th February 710 4,087 22,620 48,428 75,845
2007
Additions at cost - 312 167 5,465 5,944
Acquisition of - - - 950 950
Ponden Mill assets
Disposals - (83) (277) (1,277) (1,637)
At 1st March 2008 710 4,316 22,510 53,566 81,102
Accumulated
depreciation
At 24th February 166 2,213 13,699 23,653 39,731
2007
Charge for the 18 137 1,453 6,208 7,816
period
Impairment charge - 36 150 503 689
(note 2)
Disposals - (62) (179) (880) (1,121)
At 1st March 2008 184 2,324 15,123 29,484 47,115
Net book amount at 526 1,992 7,387 24,082 33,987
1st March 2008
Cost
At 1st March 2008 710 4,316 22,510 53,566 81,102
Additions at cost - 98 247 2,191 2,536
Disposals - (130) (1,117) (857) (2,104)
At 28th February 710 4,284 21,640 54,900 81,534
2009
Accumulated
depreciation
At 1st March 2008 184 2,324 15,123 29,484 47,115
Charge for the 14 322 1,309 6,885 8,530
period
Reclassifi cation - (50) 358 (308) -
Impairment charge - 133 440 1,526 2,099
(note 2)
Disposals - (74) (672) (686) (1,432)
At 28th February 198 2,655 16,558 36,901 56,312
2009
Net book amount at 512 1,629 5,082 17,999 25,222
28th February 2009
Due to indications the properties have been reviewed for impairment
at the balance sheet date. The recoverable amount of each property
has been based on estimated value in use calculations. Value in use
calculations have been based on a discount rate of 8.7%. Had the
discount rate used been 2% greater or 1% lower than estimated, then
the impairment loss would have increased by GBP339,000 or decreased by
GBP40,000 respectively.
8 DEFERRED TAX
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 28% (2008: 28%).
The movement on the deferred tax asset is as shown below:
Accelerated Short-term
capital timing
allowances differences Total
GBP'000 GBP'000 GBP'000
At 24th February 2007 (2,242) 4,798 2,556
Profit and loss (charge)/credit:
Current tax credit 405 (559) (154)
Asset impairment (207) - (207)
198 (559) (361)
Taken to equity - hedge reserve - (441) (441)
At 1st March 2008 (2,044) 3,798 1,754
Prior year adjustment - taken to - (219) (219)
equity hedge reserve (see note)
At 1 March 2008 as restated (2,044) 3,579 1,535
Profit and loss (charge)/credit:
Current tax credit 1,125 (14) 1,111
Asset impairment (588) - (588)
Current year deferred tax asset not - (523) (523)
recognised
Prior year deferred tax asset not - (1,059) (1,059)
recognised
537 (1,596) (1,059)
Taken to equity - hedge reserve - (476) (476)
At 28th February 2009 (1,507) 1,507 -
Unrecognised deferred tax
The Group has, subject to agreement with HM Revenue & Customs,
capital losses of GBP6.8 million (2008: GBP6 million) and trading losses
of approximately GBP23 million (2008: GBP19 million) available to offset
against future profits chargeable to corporation tax. There were no
other unrecognised amounts.
In the prior period the deferred tax asset related to amounts
provided in the accounts that have been disallowed for taxation
purposes which have a tax base of GBPnil as they will be allowed for
tax when they are settled in cash. An asset was recognised on the
grounds that the temporary differences were expected to reverse.
At the year end the deferred tax asset has not been recognised due to
the uncertainty over the timing of its use in future periods.
Prior year adjustment - taken to equity hedge reserve
The deferred tax adjustment was not recognised and an adjustment of
GBP219,000 has been made. See also note 18.
9 OTHER RECEIVABLES - NON-CURRENT
2009 2008
GBP'000 GBP'000
Loans to employees - 233
Loans are made to employees for the purpose of acquiring shares in
the Company. Interest at 1.25% above the base rate is receivable in
respect of such loans and the loans are secured by a charge over the
shares they have been used to purchase. The maximum exposure to
credit risk is the carrying amount of the loan. The Group holds the
shares as security.
During the period ended 28th February 2009, an impairment charge of
GBP0.1 million (2008: GBP0.7 million) has been recognised in respect of
loans made to employees for the purpose of acquiring shares in the
Company.
None of the above loans have been made to Directors.
Movements on the Group provision for impairment of loans to employees
are as follows:
GBP'000
At 24th February 2007 949
Receivables written off during the year as (716)
uncollectable
At 1st March 2008 233
Receivables written off during the year as (120)
uncollectable
Amounts received during the year (113)
At 28th February 2009 -
10 INVENTORIES
2009 2008
GBP'000 GBP'000
Goods for resale 45,168 35,706
In 2009 the Group released GBP1.1 million, being part of an inventory
write-down made in prior years that was subsequently not required
(2008: GBP1.0 million write-down).
11 TRADE AND OTHER RECEIVABLES
2009 2008
GBP'000 GBP'000
Current receivables:
Trade receivables 814 156
Other receivables 280 74
Prepayments and accrued income 5,252 4,918
6,346 5,148
The maximum exposure to credit risk at the reporting date is the
carrying value of trade receivables and other receivables. The Group
does not hold any collateral as security.
12 CASH AND CASH EQUIVALENTS
2009 2008
GBP'000 GBP'000
Cash and cash equivalents
Cash at bank and in hand 6,327 8,711
6,327 8,711
13 TRADE AND OTHER PAYABLES - CURRENT
2009 2008
GBP'000 GBP'000
Trade payables 38,090 27,615
Other tax and social security payable 1,001 1,945
Other payables 1,769 1,787
Loan from Crown Crest (Leicester) plc (note 26) 5,000 -
Accruals and deferred income 10,572 12,916
56,432 44,263
14 PROVISIONS
Closed Onerous
Dilapidation store lease
provision provision provision Total
GBP'000 GBP'000 GBP'000 GBP'000
At 24th February 2007 10,352 1,425 - 11,777
Charged to profit and loss 44 104 1,800 1,948
account
Utilised during the period (410) (839) - (1,249)
Released during the period (352) - - (352)
At 1st March 2008 9,634 690 1,800 12,124
Charged to profit and loss 260 134 1,085 1,479
account
Utilised during the period (221) (798) (443) (1,462)
Released during the period (27) (26) (496) (549)
At 28th February 2009 9,646 - 1,946 11,592
Provisions have been analysed between current and non-current as
follows:
2009 2008
GBP'000 GBP'000
Current 1,091 690
Non-current 10,501 11,434
11,592 12,124
The dilapidation, closed store and onerous lease provisions are
described in the accounting policies above. The remaining provisions
are expected to be utilised in the main over 1 to 21 years and 1 to
16 years respectively. Provisions have been calculated based upon
management's best estimate of likely outstanding obligations.
The onerous lease provision has been calculated using a post tax
discount rate of 8.7%. Had the discount rate used been 2% greater or
1% lower than estimated, then the onerous lease provision would have
reduced by GBP35,000 or increased by GBP41,000 respectively.
15 OTHER NON-CURRENT PAYABLES
2009 2008
GBP'000 GBP'000
Other payables 3,583 3,482
Other payables represent capital contributions from landlords, lease
premiums and rent-free periods.
16 FINANCIAL INSTRUMENT BY CATEGORY
The accounting policies for financial instruments have been applied
to the line items below:
Assets at fair
value through Derivatives
Loans and the profit used for
28th February 2009 receivables and loss hedging Total
Assets as per balance
sheet
Derivative financial - 4,029 3,316 7,345
instruments
Trade and other 614 - - 614
receivables
Cash and cash 6,327 - - 6,327
equivalents
Total 6,941 4,029 3,316 14,286
Liabilities at
fair
value through Derivatives
Loans and the profit used for
payables and loss hedging Total
Liabilities as per
balance sheet
Derivative financial - 3,316 - 3,316
instruments
Trade and other 17,348 - - 17,348
payables
Total 17,348 3,316 - 20,664
Assets at fair
value through Derivatives
Loans and the profit used for
1st March 2008 receivables and loss hedging Total
Assets as per balance
sheet
Derivative financial - 591 900 1,491
instruments
Trade and other 373 - - 373
receivables
Cash and cash 8,711 - - 8,711
equivalents
Total 9,084 591 900 10,575
Liabilities at
fair
value through Derivatives
Loans and the profit used for
payables and loss hedging Total
Liabilities as per
balance sheet
Derivative fi nancial - 894 - 894
instruments
Trade and other 19,772 - - 19,772
payables
Total 19,772 894 - 20,666
17 CALLED UP SHARE
CAPITAL
2009 2008
Number Number 2009 2008
000 000 GBP'000 GBP'000
Authorised
Ordinary shares of 321,203 321,203 32,120 32,120
10p each
Deferred shares of 653,301 653,301 5,880 5,880
0.9p each
38,000 38,000
Issued, called up and
fully paid
Ordinary shares of 228,413 228,413 22,841 22,841
10p each
Deferred shares of 653,301 653,301 5,880 5,880
0.9p each
28,721 28,721
On any return of capital, the deferred shares entitle the holder only
to repayment of the amounts paid up on such shares after the
repayment of the capital paid up on the ordinary shares and the
payment of GBP5,000 on each ordinary share. The deferred shares do not
entitle the holder to the payment of any dividend or other
distribution, nor to receive notice of or to attend or vote at any
general meeting of the Company. The deferred shares are redeemable at
the discretion of the Company at any time, for not more than 1p of
all those shares in issue, and without the sanction of the holders of
the shares. In the opinion of the Directors these shares are
classified as equity.
Share options
Options in favour of employees and Directors are as outlined in the
table below. Further detail regarding Directors' interests in shares
of the Company is given in Board Report on Directors' Remuneration.
Number of options
During the 52 weeks ended 28th February
2009
At At Exercise
Date 1st March 28th February price Exercisable
of
Grant 2008 Granted Exercised Lapsed 2009 (pence) From To
Feb 536,453 - - 536,453 - 39.66 Feb 05 Feb
02 12
Nov 417,787 - - 417,787 - 59.72 Nov 05 Nov
02 12
Dec 549,580 - - 549,580 - 64.98 Dec 05 Dec
02 12
Feb 271,889 - - 271,889 - 60.20 Feb 06 Feb
03 13
May 13,228 - - 13,228 - 85.04 May 06 May
03 13
July 85,003 - - 85,003 - 89.34 July 06 July
03 13
July 20,931 - - 20,931 - 109.89 July 06 July
03 13
Nov 168,062 - - 168,062 - 114.19 Nov 06 Nov
03 13
Feb 209,310 - - 209,310 - 82.18 Feb 07 Feb
04 14
Oct 966,474 - - 966,474 - 60.00 Apr 07 Oct
04 14
July 7,500,000 - - 7,500,000 - 14.50 July 07 July
07 12
10,738,717 - - 10,738,717
Summary of outstanding options by exercise price:
Number of options
During the 52 weeks ended 28th February
2009
At At Exercise
1st March 28th February price Exercisable
2008 Granted Exercised Lapsed 2009 (pence) From To
7,500,000 - - 7,500,000 - 14.50 July 07 July
12
536,453 - - 536,453 - 39.66 Feb 05 Feb
12
417,787 - - 417,787 - 59.72 Nov 05 Nov
12
966,474 - - 966,474 - 60.00 Apr 07 Oct
14
271,889 - - 271,889 - 60.20 Feb 06 Feb
13
549,580 - - 549,580 - 64.98 Dec 05 Dec
12
209,310 - - 209,310 - 82.18 Feb 07 Feb
14
13,228 - - 13,228 - 85.04 May 06 May
13
85,003 - - 85,003 - 89.34 July 06 July
13
20,931 - - 20,931 - 109.89 July 06 July
13
168,062 - - 168,062 - 114.19 Nov 06 Nov
13
10,738,717 - - 10,738,717 -
The above options were granted under the following schemes:
1. Brown & Jackson plc 2000 Non-Inland Revenue Approved Executive
Share Option Scheme adopted on 17th November 2000 and amended in
2002.
2. Brown & Jackson plc 2000 Inland Revenue Approved Executive Share
Option Scheme adopted on 17th November 2000 and amended in 2002.
3. Brown & Jackson plc Share Incentive Scheme adopted on 13th October
2004.
Mr Burdon's options were granted under specific option agreements
between Mr Burdon and the Company.
18 OTHER RESERVES
Share-based
Merger payment Hedge
reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
At 25th February 2007 1,397 2,209 (296) 3,310
Cash flow hedges
- Fair value gains in period - - 6,836 6,836
- Transfers to net profit - - (5,747) (5,747)
Share-based payments credit - (670) - (670)
At 1st March 2008 as previously 1,397 1,539 793 3,729
reported
Prior year adjustment (see note 8) - - (219) (219)
At 1st March 2008 as restated 1,397 1,539 574 3,510
Cash flow hedges
- Fair value gains in period - - 5,152 5,152
- Transfers to net profit - - (3,939) (3,939)
Share-based payments credit - (30) - (30)
- Transfer of Share-Based Payment - (1,509) - (1,509)
reserve to retained earnings
At 28th February 2009 1,397 - 1,787 3,184
Share-Based Payment Reserve
This reserve represents the cumulative change for outstanding options
accounted for under IFRS 2 (see Note 21). As a result of the offer
made by Seaham Investments Limited to the minority shareholders of
Instore plc to buy their shares becoming unconditional all
outstanding share option schemes lapsed during the 52 weeks to 28th
February 2009. In accordance with IFRS 2, the outstanding share
options were treated as an acceleration of the vesting period and all
outstanding charges have been charged through the profit and loss
account. The balance of the Share-Based payment reserve has been
released through the retained earnings reserve.
Hedge Reserve
From 27th February 2005, the Group achieved hedge accounting such
that the hedging reserve includes the effective portion of the
cumulative net change in the fair value of cash flow hedging
instruments relating to hedged transactions that have not yet
occurred.
Own Shares Held Reserve
The cost of 9,147,629 of the Company's ordinary 10p shares purchased
by the Instore plc Employee Share Trust is now deducted from retained
earnings. This has resulted in a decrease in shareholders' funds at
28th February 2009 of
GBP2,811,000 (2008: GBP2,663,000).
Number of shares Nominal
held in trust value
At 24th February 2007 5,576,588 GBP557,658
Purchased from a subsidiary company 1,936,177 GBP193,618
director
At 1st March 2008 7,512,765 GBP751,276
Purchased from a subsidiary company 428,822 GBP42,822
director
Purchased from employees 1,206,042 GBP120,604
At 28th February 2009 9,147,629 914,702
The purpose of the trust acquiring shares is to hedge the potential
liability to national insurance contributions on share options
granted to certain senior executives of the Group. The costs of
administering the scheme are charged to the profit and loss account
in the period to which they relate. The trust has waived its right to
receive dividends in the shares it holds. The market value of the
shares at 28th February 2009 was GBP357,000 (2008: GBP770,000).
19 CASH FLOW FROM OPERATING ACTIVITIES
Cash absorbed by operations
28th February 1st March
2009 2008
GBP'000 GBP'000
Loss for the financial period (11,486) (7,945)
Adjustments for:
Taxation 947 577
Finance income (4) (267)
Finance costs 352 229
Depreciation 8,530 7,816
Impairment of fixed assets 2,099 689
Loss on disposal of property, plant and 672 516
equipment
Share-based credit (30) (670)
Fair value movements on derivative financial (1,743) (867)
instruments
Increase in inventories (9,462) (6,349)
(Increase)/decrease in trade and other (965) 3,165
receivables
Increase in payables 7,768 293
(Decrease)/increase in provisions (532) 347
(3,854) (2,466)
20 FINANCIAL INSTRUMENTS
Assets Liabilities
Due within one year GBP'000 GBP'000
At 28th February 2009
Forward foreign currency contracts - cash flow 3,316 -
hedge
Forward foreign currency contracts and options - 4,029 3,316
mark to market
At 1st March 2008
Forward foreign currency contracts - cash flow 900 -
hedge
Forward foreign currency options - mark to market 591 894
In accordance with IAS 39, 'Financial instruments: Recognition and
measurement', the Directors have reviewed all contracts for embedded
derivatives that are required to be separately accounted for if they
do not meet certain requirements set out in the standard. However,
none have been identified that require separate disclosure.
The hedged cash flows are expected to occur within the next 12 months
when the forecast purchases occur at which point the associated gain
or loss is removed from the equity and included is the initial cost
of the asset. There were no derivatives outstanding at the balance
sheet date that were designated as fair value hedges (2008: GBPnil).
The following table shows the impact of the Group's cash fl ow hedges
on the consolidated income statement and equity during the year.
2009 2008
As restated
(note 18)
GBP'000 GBP'000
Amounts included in equity in the period 5,152 6,617
Amounts included in profit and loss (3,939) (5,747)
Amounts included in inventories 994 299
The fair value of derivative financial instruments was calculated by
reference to the rates that could have been obtained for similar
contracts with the same maturity dates taken out at the year end.
There were no material differences between the book and fair values
of other financial assets and liabilities, the main factor being the
short-term nature of the instruments.
The Group had currency contracts and options of net $8.0 million
(2008: $11.6 million) which have not been accounted for as hedging
instruments. These options have maturity dates between March 2009 and
August 2010.
Maturity of financial liabilities
All of the Group's financial liabilities mature within one year
(2008: one year).
Borrowing facilities
At the 28th February 2009 the Group had a committed Trade Finance
borrowing floating rate facility (letters of credit) available of GBP12
million (2008: GBP12 million) and had not utilised GBP0.9 million (2008:
GBP3.4 million). The Group also had an undrawn overdraft facility of GBP8
million (2008: GBP8 million). These facilities were renewed with Lloyds
TSB Bank plc on 4th June 2009 for a further period to 30th June 2010.
In addition to the security arrangements referred to in note 24,
Crown Crest (Leicester) plc has provided a further guarantee in
respect of the renewal of these facilities. The Group now has a GBP5
million committed overdraft (increased to GBP8 million for 40 days each
quarter) and GBP12 million Trade Finance borrowing floating rate
facility which incurs commitment fees at market rates. In addition,
as explained in note 26, the Group received an unsecured short-term
loan of GBP5 million from Crown Crest (Leicester) plc.
21 SHARE-BASED PAYMENTS
In accordance with the terms of the 2000 Inland Revenue Approved
Executive Share Option Scheme, the 2000 Non-Inland Revenue Approved
Executive Share Option Scheme and the 2004 Share Incentive Scheme
share options may be granted to selected employees. The exercise of
an option is ordinarily conditional on the relevant employee
completing a minimum of two years' continual service beyond the date
of grant (in respect of the 2004 Share Incentive Scheme) or three
years' continual service beyond the date of grant (in respect of the
2000 Inland Revenue Approved Executive Share Option Scheme and the
2000 Non-Inland Revenue Approved Executive Share Option Scheme). All
options have a contractual option term of between seven and eight
years, and lapse ten years after the date of grant. However, during
the period under review all outstanding share options lapsed and
accordingly as at 28th February 2009 there were no share options
outstanding.
Movements in the number of share options outstanding and their
related weighted average exercise prices are as follows:
2009 2008
Weighted Weighted
average average
exercise exercise
price in GBP Options price in GBP Options
per share (thousands) per share (thousands)
Outstanding at beginning 0.29 10,739 0.46 28,733
of period:
Granted - - 0.15 7,500
Lapsed 0.29 (10,739) 0.43 (25,494)
Exercised - - - -
Expired - - - -
Outstanding at close of - - 0.29 10,739
period
Exercisable at close of - - 0.63 3,239
period
The total credit for the period relating to employee share-based
payment plans was GBP30,000 (2008: credit GBP670,000), all of which
related to equity-settled share-based payment transactions. After
deferred tax, the total credit was GBP30,000 (2008: credit GBP670,000).
The fair value of the following options previously granted was
determined using the Black-Scholes valuation model. The significant
inputs into the model were as follows: the share price at the grant
date, the exercise price, the number of options granted, the expected
life of the option in years, the annual risk-free interest rate, the
dividend yield and the volatility of share price movements. The
volatility of share price movements, measured as the standard
deviation of expected share price returns, is based on statistical
analysis of daily share prices over the last two years.
Share Life of
price at Exercise Number option Risk-free Fair
value
2009 Grant grant price granted (Years) rate per
date date option
ESOS Feb 2004 80.74 82.18 209,310 5 4.7% GBP0.34
ESOS Jan 2004 71.19 71.67 104,655 5 4.7% GBP0.23
ESOS Nov 2003 113.71 114.19 351,759 5 4.9% GBP0.39
ESOS July 2003 114.67 109.89 167,448 5 4.3% GBP0.37
ESOS July 2003 90.78 89.34 105,843 5 4.1% GBP0.26
ESOS May 2003 86.00 85.04 131,114 5 3.9% GBP0.35
ESOS Feb 2003 60.68 60.20 875,818 5 4.0% GBP0.20
ESOS Dec 2002 64.02 64.98 192,233 5 4.4% GBP0.21
ESOS Nov 2002 63.54 59.72 687,880 5 4.4% GBP0.22
SIS T3 June 2006 29.00 31.00 287,500 5 4.7% GBP0.12
SIS T2 June 2006 29.00 31.00 287,500 4 4.7% GBP0.10
SIS T1 June 2006 29.00 31.00 575,000 3 4.7% GBP0.09
SIS T3 Oct 2004 64.50 60.00 815,751 6 4.6% GBP0.23
SIS T2 Oct 2004 64.50 60.00 815,751 5 4.6% GBP0.21
SIS T1 Oct 2004 64.50 60.00 1,631,502 4 4.6% GBP0.19
SIOS Nov 2003 113.71 114.19 66,277 5 4.9% GBP0.33
SIOS July 2003 114.67 109.89 94,189 5 4.3% GBP0.33
SIOS July 2003 90.78 89.34 119,090 5 4.1% GBP0.26
SIOS Feb 2003 60.68 60.20 246,697 5 4.0% GBP0.17
SIOS Dec 2002 64.02 64.98 915,538 5 4.4% GBP0.18
The dividend yield and share price volatility assumptions for each of
the above options were 0% and 40.5% respectively.
The fair value of following options granted during 2007 was
determined using the Monte Carlo valuation model. The significant
inputs into the model are as follows: the share price at the grant
date, the exercise price, the number of options granted, the expected
life of the option in years, the annual risk-free interest rate, the
dividend yield and the volatility of share price movements. The
volatility of share price movements, measured as the standard
deviation of expected share price returns, was based on statistical
analysis of daily share prices over the last two years.
All of the share options in the table below were granted to Mr P
Burdon. Following the resignation of Mr Burdon and the lapse of share
options previously granted, the share-based payment charges
previously recognised in relation to Mr Burdon have been released to
the profit and loss account in accordance with IFRS 2.
Share Life of
price at Exercise Number option Risk-free Fair
value
2007 Grant grant price granted (Years) rate per
date date option
ESOS July 14.50 14.50 2,500,000 4 5.5% GBP0.06
2007
ESOS July 14.50 14.50 2,500,000 5 5.5% GBP0.07
2007
ESOS July 14.50 14.50 2,500,000 4 5.5% GBP0.07
2007
The dividend yield and share price volatility assumptions for each of
the above options were 0% and 42.5% respectively.
22 EMPLOYEES AND DIRECTORS
2009 2008
Employee benefit expense for the Group during the GBP'000 GBP'000
period
Wages and salaries 41,991 41,440
Social security costs 3,131 3,007
Share options granted to employees (30) (670)
Pension costs 206 267
45,298 44,044
2009 2008
Average monthly number of people (including executive No. No.
Directors) employed
By business group:
Offi ce and management 168 163
Retail outlets 4,676 4,585
Warehousing and distribution 287 247
5,131 4,995
Key management represents Directors. Directors' emoluments are shown
in the Board Report on Directors' Remuneration. Fees paid to third
parties (including related parties - note 26) amounted to GBP52,500
(2008: GBP35,000). Fees paid to third parties are not included in the
above.
Following the resignation of Mr P Burdon and the lapse of share
options previously granted, share-based payment charges previously
recognised in relation to Mr P Burdon have been released to the
profit and loss account in accordance with IFRS 2.
The Group administers a number of defined contribution schemes and
makes contributions to the personal pension plans of certain
Directors and senior personnel. Trustees independently administer the
funds of the schemes. The most significant scheme is a defined
contribution scheme, the Poundstretcher Limited 1997 Group Personal
Plan.
Pension costs for defined contribution schemes are as follows:
2009 2008
GBP'000 GBP'000
Defined contribution schemes 206 267
23 OPERATING LEASE COMMITMENTS - MINIMUM LEASE PAYMENTS
The Group leases various properties under non-cancellable operating
lease agreements. The leases have various terms, escalation clauses
and renewal rights. The Group also leases other equipment under
non-cancellable operating lease agreements.
At 28th February 2009 the Group had total commitments under
non-cancellable operating leases as follows:
2009 2008
Other Other
Property equipment Property equipment
GBP'000 GBP'000 GBP'000 GBP'000
Commitments under
non-cancellable operating
leases payable:
Within one year 29,832 819 28,373 692
Later than one year and less 109,859 708 105,195 824
than fi ve years
After fi ve years 152,184 - 158,559 25
291,875 1,527 292,127 1,541
Included in the commitments is GBPnil (2008: GBP4,185,637) in respect of
leasehold properties which were closed at 28th February 2009 and
GBP17,706,696 (2008: GBP19,124,727) in respect of stores which although
continuing to trade are being marketed.
24 CONTINGENCIES
Liabilities
The Group had guaranteed certain lease obligations of its subsidiary
undertakings, which were disposed of to Tradegro Limited during the
period ended 22nd February 2003. Tradegro Limited has agreed to
indemnify the Company against claims received under the guarantees.
These leases all expire in between 8 and 11 years. The maximum
potential annual liability under these leases is GBP336,000 (2008:
GBP336,000).
As at 28th February 2009 the Group had guarantees in respect of
Customs and Excise duty deferment of GBP500,000 (2008: GBP500,000) and
stand-by letters of credit given to suppliers of GBP630,000 (2008:
GBPnil).
The Group's facilities are secured by a debenture dated 17th August
2007 over the assets of the Group. In addition the facility is also
cross-guaranteed by the Company, Poundstretcher Limited and Modern
Market Retailing Limited.
Assets
In previous years a compulsory purchase order was issued over one of
the Group's stores. Subject to final agreement of the value, the
minimum compensation is expected to be GBP650,000 after costs.
25 CAPITAL AND OTHER FINANCIAL COMMITMENTS
The Group had contracted for capital commitments of GBPnil at 28th
February 2009 (2008: GBPnil) and capital commitments which had been
authorised but not contracted for of GBPnil (2008: GBPnil).
26 RELATED PARTY TRANSACTIONS
Crown Crest (Leicester) plc and Seaham Investments Limited are also
related parties to Instore plc and its subsidiary undertakings. At
28th February 2009 Seaham Investments owned 56.89% of the ordinary
10p shares in Instore plc. AA Tayub is a Director of Crown Crest
(Leicester) plc and Seaham Investments Limited. AA Tayub is also a
Director of Instore plc.
Material transactions between related parties in relation to Crown
Crest (Leicester) plc and Seaham Investments Limited in the period to
28th February 2009 were:
(a) GBP24.5 million (2008: GBP13.5 million) was payable to Crown Crest
(Leicester) plc during the period for purchases of goods for resale
during the ordinary course of business. As at 28th February 2009 an
amount of GBP5.3 million (2008: GBP973,000) was owed to Crown Crest
(Leicester) plc in respect of these purchases.
(b) GBPnil (2008: GBP38,000) was paid to Crown Crest (Leicester) plc
during the period for the purchase of a motor vehicle.
(c) In January 2009, the Group received an unsecured short term loan
of GBP5 million to cover working capital requirements.
Interest is charged at 1.25% above LIBOR until May 2009 when the rate
increases to 2.25% above LIBOR. At the end of the year the amount
outstanding included in current liabilities was GBP5 million.
Sert UK plc is a related party to Instore plc and its subsidiary
undertakings. S Tayub, a Director and shareholder of Sert UK plc, is
related to AA Tayub, a Director of Instore plc.
(a) GBP0.4 million (2008: GBP4.3 million) was payable to Sert UK plc
during the period for purchases of goods for resale and GBP0.15 million
was receivable for the sale of goods to Sert UK plc during the
ordinary course of business. As at 28th February 2009 an amount of
GBPnil (2008: GBP71,000) was owed to Sert UK plc in respect of these
purchases.
M & S Toiletries Ltd is another related party to Instore plc and its
subsidiary undertakings. S Tayub, a director and
shareholder of M & S Toiletries Ltd, is related to AA Tayub, a
Director of Instore plc.
(a) GBP1.1 million (2008: GBP2.0 million) was payable to M & S Toiletries
Ltd during the period for purchases of goods for resale during the
ordinary course of business. As at 28th February 2009 an amount of
GBP21,000 (2008: GBPnil) was owed to M & S Toiletries Ltd in respect of
these purchases.
Tradehold Limited, Tradegro Limited and Tradegro (UK) Limited are
related parties to Instore plc and its subsidiary undertakings. At
28th February 2009 Tradegro Limited owned 15.86% of the ordinary 10p
shares in Instore plc.
Material transactions between related parties in relation to
Tradehold Limited, Tradegro Limited and Tradegro (UK) Limited in the
period to 1st March 2008 were:
(a) GBPnil (2008: GBP35,000) paid to Tradegro during the period for
management services.
(b) GBPnil (2008: GBP30,000) paid to Tradegro for travel costs incurred
during the period.
(c) GBPnil (2008: GBP69,562) was received from Tradegro (UK) in respect
of rental payments reimbursed in connection with the indemnity
arrangements agreed on the disposal of previously held subsidiaries.
(d) GBP35,000 (2008: GBP255,000) was payable to Tradegro (UK) in respect
of the purchase of shares from Directors of a subsidiary company.
Key management represents the current Executive Directors. Full
details of management compensation to these Directors is given in the
Board Report on Directors' Remuneration.
There have been no other material transactions with related parties
in the period.
27 PRINCIPAL SUBSIDIARIES
Principal % equity
activity holding
Modern Market Retailing Limited Intermediate holding 100%
company
Poundstretcher Limited Variety discount retailing 100%
Poundstretcher Properties Limited Property holding company 100%
All the above companies are registered in England and Wales.
The principal area of trading for all the above companies is the
United Kingdom.
In addition to the above, the Company has a number of other
subsidiary companies, particulars of which will be annexed to the
next annual return.
The results of all of the subsidiary companies are included in the
consolidated financial statements.
28 ULTIMATE PARENT COMPANY
On 1st March 2008 Tradegro Limited, a company incorporated in
Guernsey with its registered office in Luxembourg, owned 35.80% of
the ordinary shares of the Company and Seaham Investments Limited, a
company registered in England and Wales, owned 30.77%. At that time
the Directors did not consider there to be an ultimate controlling
party. Following the Offer for the Company from Seaham Investments
Limited, its holding increased during the year and, as at 28th
February 2009, it held 129,954,750 shares, representing 56.89% of the
Company's issued share capital. Seaham Investments Limited is
therefore considered to be the ultimate controlling party.
Independent Auditors' Report to the Members of Instore plc
We have audited the parent company financial statements of Instore
plc for the period ended 28th February 2009 which comprise the
Company Balance Sheet, the Accounting Policies and the related notes.
The parent company financial statements have been prepared under the
accounting policies set out therein. We have also audited the
information in the Board Report on Directors' Remuneration Report
that is described as having been audited.
This report is made solely to the Company's members, as a body, in
accordance with section 235 of the Companies Act 1985. Our audit work
has been undertaken so that we might state to the Company's members
those matters we are required to state to them in an auditors' report
and for no other purpose. To the fullest extent permitted by law, we
do not accept or assume responsibility to anyone other than the
Company and the Company's members as a body, for our audit work, for
this report, or for the opinions we have formed.
We have reported separately on the Group financial statements of
Instore plc for the period ended 28th February 2009.
Respective responsibilities of Directors and auditors
The Directors' responsibilities for preparing the Annual Report, the
Directors' Remuneration Report and the financial statements in
accordance with applicable law and United Kingdom accounting
standards ('United Kingdom Generally Accepted Accounting Practice')
are set out in the statement of Directors' responsibilities.
Our responsibility is to audit the financial statements and the part
of the Directors' Remuneration Report to be audited in accordance
with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements
give a true and fair view and whether the financial statements and
the part of the Directors' Remuneration Report to be audited have
been properly prepared in accordance with the Companies Act 1985. We
also report to you whether in our opinion the information given in
the Directors' Report is consistent with the parent company financial
statements. The information in the Directors' Report includes that
specific information presented in the Chairman's Statement, the
Operating Review and the Finance Review that is cross referenced from
the business review section of the Directors' Report.
In addition we report to you if, in our opinion, the company has not
kept proper accounting records, if we have not received all the
information and explanations we require for our audit, or if
information specified by law regarding Directors' remuneration and
other transactions is not disclosed.
We read other information contained in the Annual Report and consider
whether it is consistent with the audited parent company financial
statements. The other information comprises only the Chairman's
Statement, the Operating Review, the Finance Review, the unaudited
part of the Board Report on Directors' Remuneration, the Corporate
Governance Report and the Directors' Report. We consider the
implications for our report if we become aware of any apparent
misstatements or material inconsistencies with the financial
statements. Our responsibilities do not extend to any other
information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on
Auditing (UK and Ireland) issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant to
the amounts and disclosures in the parent company financial
statements and the part of the Board Report on Directors'
Remuneration Report to be audited. It also includes an assessment of
the significant estimates and judgments made by the Directors in the
preparation of the financial statements, and of whether the
accounting policies are appropriate to the Company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that
the parent company financial statements and the part of the Board
Report on Directors' Remuneration Report to be audited are free from
material misstatement, whether caused by fraud or other irregularity
or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the parent company
financial statements and the part of the Board Report on Directors'
Remuneration Report to be audited.
Opinion
In our opinion:
* the parent company financial statements give a true and fair
view, in accordance with United Kingdom Generally Accepted
Accounting Practice, of the state of the company's affairs as at
28th February 2009;
* the parent company financial statements and the part of the Board
Report on Directors' Remuneration Report to be audited have been
properly prepared in accordance with the Companies Act 1985; and
* the information given in the Directors' Report is consistent with
the parent company financial statements
PKF (UK) LLP
Registered Auditors
Nottingham, UK
29th June 2009
Instore plc Company Balance Sheet at 28th February 2009
2009 2008
(As restated)
Note GBP'000 GBP'000
Fixed assets
Tangible assets 2 46 47
Investments 3 99,953 110,712
99,999 110,759
Current assets
Debtors - amounts falling due within one year 4 48 9,255
Debtors - amounts falling due after one year 4 - 53
Creditors - amounts falling due within one 6 (5,505) (7,363)
year
Net current (liabilities)/assets (5,457) 1,945
Net assets 94,542 112,704
Capital and reserves
Equity share capital 10 28,721 28,721
Share premium 11 97,794 97,794
Merger reserve 11 4,795 4,795
Revaluation reserve 11 25 25
Profit and loss account 11 (36,793) (18,631)
Total shareholders' funds 12 94,542 112,704
The Company has elected to take advantage of the exemption under
section 230 of The Companies Act 1985 to not present the parent
company profit and loss account. The loss for the parent company for
the year was GBP17,109,000 (2008 profit: GBP3,371,000).
The financial statements were approved by the Board of Directors on
29th June 2009 and signed on its behalf by:
E Suleman J Richards
Director Director
Accounting Policies for the 52 weeks ended 28th February 2009
Basis of preparation
The financial statements are prepared on the going concern basis,
under the historical cost convention as modified by the revaluation
of certain assets, and in accordance with the Companies Act 1985 and
applicable accounting standards in the United Kingdom. A summary of
the more important accounting policies is set out below.
The accounting policies have been applied consistently in the
preparation of these financial statements.
Going concern
In view of the Group's continued trading losses, the Directors have
carried out a detailed review to determine whether the preparation of
the financial statements on a going concern basis remains
appropriate.
The Directors review of the Group takes into consideration budgets
and cash flow forecasts for the period to 30 June 2010.
There has been a fundamental change to the Group's strategy,
direction and operations. This change with the intention of
refocusing the business as a value-led retailer involves four key
areas: the control of costs, both in terms of buying and control of
overheads; the continued development of the product offering; the
format and branding of the stores; and the strengthening of the
management team.
The budgets and cash flow forecasts have been prepared with the
effects of the fundamental changes being recognised on a prudent
basis, and taking into consideration the anticipated continuing
impact of the current economic climate.
To accommodate the potential risk of not achieving forecasts, the
Directors have obtained the necessary financial support from Crown
Crest (Leicester) plc for the period to 30 June 2010.
In the consideration of its ability to support the Group, with the
difficulty of forecasting in the current economic environment, Crown
Crest (Leicester) plc has approached its funders to ascertain their
views as to the availability of adequate further funds should they be
required. This was considered necessary in the event that there were
delays in the turnaround of the financial performance of the Group.
The funder's response was positive, and although this would be
subject to formal credit approval the directors have no reason to
consider that this would not be forthcoming. The Directors are
therefore satisfied that the forecasts are adequately funded with
appropriate provision for potential delays in the turnaround.
Taking the above into consideration, the Directors believe that the
preparation of the accounts on a going concern basis is appropriate.
Tangible fixed assets
The cost of tangible fixed assets is their purchase cost, together
with any incidental costs of acquisition. Cost includes the original
purchase price of the asset and the costs attributable to bringing
the asset to its working condition for its intended use. Certain
interests in land and buildings are stated at valuation.
Depreciation
Depreciation is provided so as to write off the cost or valuation of
tangible fixed assets over their expected useful economic lives on a
straight-line basis. The expected useful lives of the assets to the
business are reassessed periodically in the light of experience.
Long leasehold properties are depreciated so as to write down the
cost or revalued amount over the period from 1st July 1997, or
acquisition if later, to a date 50 years after the acquisition date
of the assets.
Fixed asset investments
Fixed asset investments are carried at cost less any provision for
impairment. Investment in own shares is taken as a deduction from
shareholders' funds.
To the extent that the carrying amount of the investments exceeds the
recoverable amount, that is the higher of net realisable value in
use, the investments are written down to their recoverable amount.
The value in use is determined from estimated discounted future post
tax cash flows. In assessing the value in use of impaired assets, a
post tax discount rate of 8.7% has been used which, in the opinion of
Directors, reflects the risk inherent in those cash flows.
Deferred taxation
Deferred tax is provided in full on timing differences that result in
an obligation at the balance sheet to pay more tax, or a right to pay
less tax, at a future date. Deferred tax is not provided on timing
differences arising from the revaluation of fixed assets where there
is no commitment to sell the asset.
A deferred tax asset is recognised as recoverable and therefore is
recognised only when, on the basis of the evidence, it can be
regarded as more likely than not that there will be suitable taxable
profits against which to recover carried forward tax losses and from
which the future reversal of underlying timing differences can be
deducted. Deferred tax assets and liabilities are not discounted.
Deferred tax is measured at the average tax rates that are expected
to apply in the periods in which the timing differences are expected
to reverse, based on tax rates and laws that have been enacted or
substantially enacted at the balance sheet date.
Cash flow statement
The Company has taken the exemption from preparing a cash flow
statement under FRS 1 (revised 1996) "Cash Flow Statements". The
Group cash flow statement is presented within the Group financial
statements.
1 PROFIT AND LOSS ACCOUNT
As permitted by Section 230 of the Companies Act 1985, the parent
company's profit and loss account has not been included in these
financial statements. The loss shown in the financial statements of
the parent company was GBP17,109,000 (2008 profit: GBP3,371,000).
2 TANGIBLE FIXED ASSETS
Long leasehold properties
GBP'000
Cost or Valuation
At 1st March 2008 58
At 28th February 2009 58
Depreciation
At 1st March 2008 11
Charged in the period 1
At 28th February 2009 12
Net book amount
At 1st March 2008 47
At 28th February 2009 46
3 INVESTMENTS
Loans to Shares in
Group Group
undertakings undertakings Total
GBP'000 GBP'000 GBP'000
Cost
At 1st March 2008 as previously 139,615 81,284 220,899
reported
Prior year adjustment - (6,173) (6,173)
At 1st March 2008 as restated 139,615 75,111 214,726
At 28th February 2009 139,615 75,111 214,726
Provision
At 1st March 2008 as previously 51,435 58,752 110,187
reported
Prior year adjustment (22,532) 16,359 (6,173)
At 1st March 2008 as restated 28,903 75,111 104,014
Charged in the period 10,759 - 10,759
At 28th February 2009 39,662 75,111 114,773
Net book amount
At 1st March 2008 - As restated 110,712 - 110,712
At 28th February 2009 99,953 - 99,953
The Directors have reviewed the classification of loans to and shares
in subsidiary undertakings made in prior years and consider that this
did not accurately reflect the analysis in the underlying
investments. The Directors have reclassified these as noted above.
There is no effect on the net assets or reserves in the prior period
arising from this reclassification.
All shares held in Group undertakings are ordinary shares.
At the period end Poundstretcher Limited, which is wholly owned, is
the Company's only trading subsidiary.
Poundstretcher operates in the United Kingdom as a variety discount
retailer and is a subsidiary of Modern Market Retailing, a wholly
owned subsidiary of Instore plc.
In accordance with FRS 11, the Directors have considered the carrying
value of Loans to Group undertakings and have determined that the
opening carrying value can no longer be supported and, accordingly,
it has been impaired.
Details of the Company's subsidiaries are included in note 27 of the
Group financial statements above.
4 DEBTORS
2009 2008
As restated
Amounts falling due within one year GBP'000 GBP'000
Trade debtors - 27
Prepayments 5 18
Amounts owed by fellow subsidiary undertakings - 8,834
Other debtors 43 37
Corporation tax - 339
48 9,255
Amounts falling due after more than one year
Deferred tax (note 5) - 53
Amounts owed by fellow subsidiary undertakings are unsecured,
interest-free and subject to repayment on demand.
Debtors in the prior period have been restated (see note 11).
5 DEFERRED TAX ASSET
Short-term
timing differences
Amounts falling due after more than one year GBP'000
At 1st March 2008 53
Prior year adjustment (53)
At 28th February 2009 -
6 CREDITORS
2009 2008
Amounts falling due within one year GBP'000 GBP'000
Bank overdraft 19 171
Trade creditors - 87
Other creditors 44 69
Accruals and deferred income 191 180
Amounts owed to subsidiary undertakings 5,251 6,856
5,505 7,363
Amounts owed to subsidiary undertakings are unsecured, interest-free
and subject to repayment on demand.
7 CONTINGENT LIABILITY
The Company has guaranteed certain lease obligations of its
subsidiary undertakings which were disposed of to Tradegro Limited
during the period ended 22nd February 2003. Tradegro Limited has
agreed to indemnify the Company against claims received under the
guarantees. These leases all expire in between 8 and 11 years. The
maximum potential annual rent liability under these leases is
GBP336,000 (2008: GBP336,000).
The Company's facilities are secured by a debenture dated 17th August
2007 over the assets of the Group. In addition the facility is also
cross-guaranteed by the Company, Poundstretcher Limited and Modern
Market Retailing Limited.
8 RETIREMENT BENEFITS
The Group administers a number of defined contribution pension
schemes and in addition makes contributions into
the personal pension plans of certain Directors and executives. These
costs are charged to the profit and loss account as incurred.
9 EMPLOYEES AND DIRECTORS
The total cost of remuneration paid by the Company was GBP149,000
(2008: GBP104,000). Directors' emoluments are shown in the Board Report
on Directors' Remuneration.
The average number of people employed by the Company was 4 (2008: 3).
10 SHARE CAPITAL AND OTHER RESERVES
2009 2008
GBP GBP
Authorised
Equity share capital:
Ordinary shares of 10p each (2008 and 2009: 32,120,289 32,120,289
321,202,887)
Non-equity share capital:
Deferred shares of 0.9p each (2008 and 2009: 5,879,711 5,879,711
653,301,212)
38,000,000 38,000,000
Issued and fully paid
Equity share capital:
Ordinary shares of 10p each (2008 and 2009: 22,841,303 22,841,303
228,413,032)
Non-equity share capital:
Deferred shares of 0.9p each (2008 and 2009: 5,879,711 5,879,711
653,301,212)
28,721,014 28,721,014
Details of the rights attaching to the deferred shares and to the
Company's share option scheme are given in note 17 to the Group
financial statements.
11 RESERVES
Movement in period
Share
premium Merger Revaluation Profit and
account reserve reserve Loss
GBP'000 GBP'000 GBP'000 GBP'000
At 1st March 2008 as 97,794 4,795 25 (15,976)
previously reported
Prior year adjustment - own - - - (2,655)
shares held
At 1st March 2008 as restated 97,794 4,795 25 (18,631)
Movement in respect of - - - (1,053)
investment in own shares
Loss for the financial period - - - (17,109)
At 28th February 2009 97,794 4,795 25 (36,793)
As required by UITF 38, interests in own shares should be presented
as a deduction from shareholders' funds. In previous years the amount
of own shares held was included in debtors under the heading Amounts
owed by fellow subsidiary undertakings.
The comparatives have been restated resulting in a reduction in
debtors and shareholders' funds by GBP2,655,000.
12 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
2009 2008
As restated
GBP'000 GBP'000
(Loss)/profi t for the fi nancial period (17,109) 3,371
Net (deduction)/addition to shareholders' funds (17,109) 3,371
Movement in respect of investment in own shares (1,053) (255)
Opening shareholders' funds as restated 112,704 109,588
(Previously GBP115,359)
At 28th February 2009 94,542 112,704
The restatement of opening shareholders funds is explained in note
11.
13 RELATED PARTY TRANSACTIONS
Instore plc is the parent company that includes the entities listed
in note 27 to the Group accounts that have been consolidated. Instore
plc is permitted by FRS8 not to disclose intra-group transactions.
Related party transactions in respect of Crown Crest (Leicester) plc,
Sert UK plc, Tradehold Limited, Tradegro Limited and Tradegro (UK)
are disclosed in the Group accounts note 26.
14 ULTIMATE PARENT COMPANY
On 1st March 2008 Tradegro Limited, a company incorporated in
Guernsey with its registered office in Luxembourg, owned 35.80% of
the ordinary shares of the Company and Seaham Investments Limited, a
company registered in England and Wales, owned 30.77%. At that time
the Directors did not consider there to be an ultimate controlling
party. Following the Offer for the Company from Seaham Investments
Limited, its holding increased during the year and, as at 28th
February 2009, it held 129,954,750 shares, representing 56.89% of the
Company's issued share capital. Seaman Investments Limited is
therefore considered to be the ultimate controlling party.
=--END OF MESSAGE---
This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.
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