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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Lambert Hwth. | LSE:LMBT | London | Ordinary Share | GB0005017966 | ORD 10P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 18.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
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0 | 0 | N/A | 0 |
CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT Results 2006 has been a very challenging year for the Group. The first half of the year began poorly and trading conditions only began to improve towards the end of the year, a trend which has continued into the current financial year. Sales at £62.7 million were £25.5 million, or 29%, down from last year, largely caused by supply chain decisions taken by certain of the Group's trading partners. Gross profit, excluding goodwill impairment, fell by £12.4 million to £14.0 million from £26.4 million, reflecting lower sales and lower margins - 22% in 2006 compared with 30% in 2005, as a result of efforts to reduce excess inventory particularly in the homeware business, and significant margin pressure from our major customers in a weak and deflationary retail environment. The Group suffered an operating loss during the year of £16.4 million compared with a profit of £2.2 million in 2005, as a result of the lower sales and reduced margins. The figures were also affected significantly by a number of one-off and exceptional items; including - - goodwill impairment £6.2 million (2005: £6.1 million); - restructuring costs £3.1 million (2005: £0.1 million); - other expenses £0.1 million (2005: £3.3 million income). The goodwill impairment relates to the homeware operations in the UK and Spain. The impairment, which eliminates all carrying value for goodwill, for the homeware business has been made in recognition of the challenges faced in this market. The restructuring costs relate principally to the refinancing for the business that was undertaken last year with Barclays and ABN Amro, and subsequently Landsbanki, and redundancy costs. We are pleased to be working with Landsbanki who are proving a very supportive partner to the business. Other expenses and income in 2006 includes £1.2 million of expense, being the effect of cashflow hedges which in 2005 gave rise to a gain of £1.8 million, largely as a result of the adoption of IFRS and profits on the sale of surplus property of £1.1 million in 2006 and £1.4 million in 2005. A lower cost base has been established for the business covering administration expenses and selling and distribution costs. A reduction in the headcount, of 88 over the year, has been achieved and savings secured. However, in 2006 a number of one off costs have been incurred in the consolidation of our warehousing, in interim management resource to assist in a more rapid change process and recruitment fees for the building of the new team. Operations The second half of 2006 was an important period of transition for the Group. As reported in the Interim Report, Mrs Pamela Harper was appointed Chief Executive Officer on 2 June 2006, with a mandate to conduct a thorough review of the Group's business and strategy, which involved not only adapting the Group's responses to an ever- changing market environment, but also improving significantly the Group's systems and business processes. Important steps have been taken and significant progress has been made in these matters. The Group's organisational and strategic restructuring, announced in September 2006 is well underway, as a result of which a number of significant senior executive and operational changes have been announced. Operational changes, which management believes will help to reposition the business, whilst reducing costs through increased efficiencies, include the following: A decision was taken by the Board to outsource its warehousing and logistics and to ensure the best service provision would always be available to its partners going forward. As part of the move in outsourcing our warehouse and distribution, the premises in Burnley were sold, realising £1.1 million before costs of disposal. The successful migration of our warehousing facilities took place between November 2006 and January 2007, for our footwear and accessories business. Integral to the programme of cost reductions, and most importantly to strengthen further the Group's Far Eastern sourcing operations, certain activities are being transferred out of Hong Kong to a new office in Shanghai closer to the sourcing operations and the supply base. Strategic Options Review and Fundraising The Homeware Division, comprising businesses in the UK and Spain, was loss making in 2005 and 2006. Despite efforts to refocus and revitalise its activities, the trading in this financial year has not demonstrated that the division can be turned into profit within a reasonable timeframe, to a large extent caused by the logistics and warehousing problems of our external warehouse supplier. As a result, the Group is actively reviewing the structure of the division. It is likely that this review will involve major changes which may result in certain exceptional restructuring charges being incurred this financial year. The Board believes that this restructuring of the division will allow management's time and the Group's capital to be better deployed in the profitable development of the Group's footwear, accessories and lifestyle products business. As a result of the business performance during 2006 and its planned restructuring the Group requires additional funding. The Group is in discussions with shareholders and potential new investors regarding this fundraising and is confident that terms for such a fundraising will be agreed shortly, although there can be no guarantee of such an outcome. The Group retains the support of its lending bank pending such a fundraising. On this basis the preliminary results have been prepared on a going concern basis. However, in the absence of such a fundraising, the Group may not be able to operate within its existing bank facilities. Further details of the possible implications of this can be seen in note 1. If the fundraising is not forthcoming for whatever reason, the Board would pursue alternative options. Business Strategy We have stated that our strategy is to capitalise on the Group's excellent skills and experience in the design, development, sourcing and distribution of footwear and accessories globally. We will continue to focus on these areas with both our existing and new customers, whilst pursuing new business opportunities. The Group is aware of the need to reduce its dependence on the UK market, and thus growth in international markets is a key strategic goal towards which the business is taking active steps. The Group believes that it is well placed to develop a larger and successful business in the branded arena and early implementation of the strategy is delivering success. We have obtained licences with Radley, for the supply of ladies' footwear and Pringle, for the supply of both men's and ladies' leather accessories. The Group is delighted to be associated with two such strong and successful brands, which represent a significant opportunity for the Group as it develops its brands business. The business is engaged in the development work for the launch of collections for each of these major brands, with a view to the launch of the Radley footwear in Autumn 2007, and the launch of the Pringle collections in Spring 2008. In the area of international development, we have secured an important contract for the supply of ladies' footwear to Tesco's Eastern European stores, and also won a contract with Wehmeyer, the German retailer, for the supply of handbags and soft accessories. Board and Employees In the development of the Board and senior management team, we are pleased to announce a number of new appointments. John Suirdale joins the Board as the Director responsible for the Group Supply Chain. John brings with him considerable experience in supplier management, licensing and the Far East, having held senior positions at Burberry and Alfred Dunhill. Paul Owens joins the Board to take up the position of Group Finance Director, following John Gibson's retirement. Paul has held a number of finance and business roles and joins on 1 May 2007 from Blue Hackle Group. John Gibson leaves the Board at the beginning of May after 10 years with the Group. We thank him for his contribution to the Group over this time. Christian Dieng has joined the Group with responsibility for international sales development and marketing. He will spearhead the development of the Group's business on to an international platform, this being an integral part of our strategy. He joins the Group from Falke, where he led a very successful period of growth. The business has seen significant change over the last year as the strategic review has been undertaken and implemented. It has represented an especially challenging time for our people who have responded well with much dedication and spirit and we thank them on behalf of the Board. Outlook The slow recovery experienced in the second half of 2006 has continued in the first two months of 2007, which are normally quieter trading months for the business. Sales of our core footwear and accessories in March and April have, however, met management's expectations. The order book is healthy, and the Board is confident that this can be converted into profitable sales over coming months. Although there is still much to do to achieve the recovery plan, the Board is cautiously optimistic that the turn around is well underway. For further information: Lambert Howarth Group p.l.c. 020 7258 9988 Alfred Vinton, Chairman Pamela Harper, Chief Executive Officer Lambert Howarth Group plc Consolidated income statement for the year ended 31 December 2006 Unaudited Audited 2006 2005 Note £'000 £'000 Continuing operations Revenue 2 62,686 88,193 Cost of sales before goodwill impairment (48,697) (61,821) Goodwill impairment 5 (6,161) (6,115) Gross profit 7,828 20,257 Selling and distribution expenses (13,604) (14,463) Administration expenses before restructuring costs (7,528) (6,750) Restructuring costs 3 (3,076) (104) Total administration expenses (10,604) (6,854) Other (expense) / income (66) 3,267 Operating (loss ) / profit (16,446) 2,207 Finance expense (460) (151) Finance income 89 327 (Loss) / profit before taxation (16,817) 2,383 Taxation 239 (2,208) (Loss) / profit for the year from continuing operations (16,578) 175 Discontined operations Profit for the year from discontinued operations 147 164 (Loss) / profit for the year (16,431) 339 Earnings per share 4 - Basic (80.7)p 1.4p - Diluted (80.7)p 1.4p Earnings per share from continuing operations - Basic (81.4)p 0.7p - Diluted (81.4)p 0.7p Lambert Howarth Group plc Consolidated statement of recognised income and expense for the year ended 31 December 2006 Unaudited Audited 2006 2005 £'000 £'000 (Loss) / profit for the financial year (16,431) 339 Net exchange adjustments offset in reserves net of tax (50) (93) Pension scheme - actuarial gain / (loss) recognised in pension scheme 1,047 (1,920) - deferred tax on actuarial gain / (loss) (314) 576 Net gains / (losses) not recognised in income statement 683 (1,437) Total recognised loss for the year (15,748) (1,098) Lambert Howarth Group plc Consolidated balance sheet at 31 December 2006 Unaudited Audited 2006 2005 Note £'000 £'000 ASSETS Non-current assets Intangible assets - goodwill 5 8,663 14,824 Property, plant and equipment 5,235 5,574 Investments accounted for using equity method - - Deferred income tax assets 1,676 2,515 15,574 22,913 Current assets Inventories 10,993 14,877 Trade and other receivables 10,853 9,633 Financial assets - Derivative financial instruments - 740 Cash and cash equivalents 4,099 2,808 25,945 28,058 Assets classified as held for sale and included in disposal groups 304 1,433 26,249 29,491 LIABILITIES Current liabilities Financial liabilities - Borrowings 4,846 244 Trade and other payables 9,916 7,682 14,762 7,926 Net current assets 11,487 21,565 Non-current liabilities Retirement benefit obligations 6,837 9,691 Financial liabilities - Borrowings 2,565 - 9,402 9,691 Net assets 17,659 34,787 SHAREHOLDERS' EQUITY Capital and reserves Share capital 2,039 2,029 Share premium account 1,307 1,175 Merger and other reserves 23,346 23,430 (Losses) / retained earnings (9,033) 8,153 Total shareholders' equity 17,659 34,787 Lambert Howarth Group plc Consolidated cash flow statement for the year ended 31 December 2006 Unaudited Audited 2006 2005 Note £'000 £'000 Cash flows from operating activities Cash flows (used in) / from operations 6 (4,389) 3,640 Interest received 89 327 Interest paid (390) (151) Net tax received / (paid) 1,315 (3,089) Net cash (used in) / from operating activities (3,375) 727 Cash flows from investing activities Proceeds from sale of property, plant and equipment 2,529 4,576 Purchase of property, plant and equipment (511) (184) (Repayment)/receipt of grants - (229) Net cash from investing activities 2,018 4,163 Cash flows from / (used in) financing activities Net proceeds from issue of ordinary share capital 142 551 Consideration for the purchase of ordinary share capital including costs - (10,191) Issue of new borrowings 4,391 - Dividends paid to shareholders (1,529) (2,752) Net cash from / (used in) financing activities 3,004 (12,392) Net increase / (decrease) in cash and cash equivalents 1,647 (7,502) Cash and cash equivalents at 1 January 2,564 9,878 Effects of exchange rate changes (450) 188 Cash and cash equivalents at 31 December 3,761 2,564 Cash 4,099 2,808 Overdraft (338) (244) Net cash at 31 December 3,761 2,564 Lambert Howarth Group plc Notes to the financial statements for the year ended 31 December 2006 1. Accounting convention, basis of preparation and going concern The financial information set out herein (which was approved by the Board on 30 April 2007) does not constitute the Company's statutory accounts for the years ended 31 December 2006 and 2005 but is derived from the 2006 statutory accounts. The statutory accounts for the year ended 31 December 2005, which were prepared under International Financial Reporting Standards adopted for use in the EU, have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for the year ended 31 December 2006, prepared under International Financial Reporting Standards adopted for use in the EU, will be finalised on the basis of the unaudited financial information presented in this preliminary announcement. As a result of the trading during 2006 and planned restructuring the Group requires additional funding. The Group is in discussions with shareholders and potential new investors regarding this fundraising and is confident that terms for such a fundraising will be agreed shortly, although there can be no guarantee of such an outcome. The Group retains the support of its lending bank pending such a fundraising. On this basis the preliminary results have been prepared on a going concern basis. However, in the absence of such a fundraising, the Group may not be able to operate within its existing bank facilities. If the funding is not forthcoming, adjustments may have to be made to the balance sheets of the Company and the Group to reduce the balance sheet values of assets to their recoverable amounts, to provide for future liabilities that might arise and to reclassify fixed assets and long term liabilities as current assets and liabilities. The auditors have indicated that, depending on the outcome of the uncertainties described above, they may need to modify their audit opinion with regard to going concern. 2 Segmental reporting Primary reporting format - business segments Unaudited Audited Footwear Footwear And Homeware 2006 And Homeware 2005 Unalloc- Unalloc- Accessories Accessories ated Group Accessories Accessories ated Group £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Continuing operations Revenue 45,563 17,123 - 62,686 65,455 22,738 - 88,193 Segment result (874) (10,393) (5,179) (16,446) 10,259 (8,105) 53 2,207 Interest expense - (47) (413) (460) - - (151) (151) Interest income - - 89 89 - - 327 327 (Loss) / profit before tax (874) (10,440) (5,503) (16,817) 10,259 (8,105) 229 2,383 Income taxes (95) (70) 404 239 (2,984) 928 (152) (2,208) (Loss) / profit for the year from continuing operations (969) (10,510) (5,099) (16,578) 7,275 (7,177) 77 175 Discontinued operations Revenue - - - - 3,529 130 - 3,659 Segment result (51) - - (51) 538 (360) - 178 Profit before tax (51) - - (51) 538 (360) - 178 Income taxes 198 - 198 (126) 112 - (14) Profit for the year from discontinued operations 147 - - 147 412 (248) - 164 Net (loss) / profit attributable to equity shareholders (822) (10,510) (5,099) (16,431) 7,687 (7,425) 77 339 Segment assets 28,252 9,609 2,081 39,942 32,004 17,180 143 49,327 Unallocated assets - Income tax - - 1,881 1,881 - - 3,077 3,077 Total assets 28,252 9,609 3,962 41,823 32,004 17,180 3,220 52,404 Segment liabilities (16,431) (4,514) (3,219) (24,164) (8,302) (2,420) (6,895) (17,617) Unallocated liabilities - Income tax - - - - - - - - Total liabilities (16,431) (4,514) (3,219) (24,164) (8,302) (2,420) (6,895) (17,617) Other segment items Capital expenditure 170 245 96 511 98 86 - 184 Depreciation 272 121 - 393 296 162 - 458 Impairment of goodwill (note 5) - (6,161) - (6,161) - (6,115) - (6,115) Impairment of trade receivables 169 12 - 181 56 (74) - (18) Assets held for sale 304 - - 304 - 1,433 - 1,433 Overdrafts of £nil (2005: £4,886,000) under a right of set off have been included in segment assets 3 Restructuring costs Unaudited Audited 2006 2005 £'000 £'000 Restructuring costs 3,076 104 Restructuring costs comprise the cost of restructuring the business and include the refinancing of the UK Group (£1,843,000) and redundancies (£712,000). 4 Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares during the year. The company has share options which are potentially ordinary shares. However, the impact on the net loss of these potential ordinary shares is anti-dilutive. Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below. Unaudited Audited 2006 2005 Weighted Weighted average average number of Per share number of Per share Earnings shares amount Earnings shares amount £'000 Thousand pence £'000 Thousand pence Basic EPS Earnings attributable to ordinary shareholders (16,431) 20,355 (80.7) 339 24,526 1.4 Effect of dilutive share options - - - - 258 - Diluted eps (16,431) 20,355 (80.7) 339 24,784 1.4 Earnings per share from continuing operations Basic EPS (16,431) 20,355 (80.7) 339 24,526 1.4 Pre tax profits from discontinued operations 51 - 0.3 (178) - (0.7) Tax relating to discontinued operations (198) - (1.0) 14 - - Basic EPS from continuing operations (16,578) 20,355 (81.4) 175 24,526 0.7 Diluted EPS (16,431) 20,355 (80.7) 339 24,784 1.4 Pre tax profits from discontinued operations 51 - 0.3 (178) - (0.7) Tax relating to discontinued operations (198) - (1.0) 14 - - Diluted EPS from continuing operations (16,578) 20,355 (81.4) 175 24,784 0.7 Earnings per share from discontinued operations Basic EPS Pre tax profits from discontinued operations (51) 20,355 (0.3) 178 24,526 0.7 Tax relating to discontinued operations 198 - 1.0 (14) - - Basic EPS from discontinued operations 147 20,355 0.7 164 24,526 0.7 Diluted EPS Pre tax profits from discontinued operations (51) 20,355 (0.3) 178 24,784 0.7 Tax relating to discontinued operations 198 - 1.0 (14) - - Diluted EPS from discontinued operations 147 20,355 0.7 164 24,784 0.7 5 Intangible assets - goodwill Unaudited Audited 2006 2005 £'000 £'000 Cost at 1 January and 31 December 34,282 34,282 Aggregate impairment At 1 January 19,458 13,343 Impairment for the year 6,161 6,115 At 31 December 25,619 19,458 Net book amount at 31 December 8,663 14,824 The carrying amount of goodwill has been reduced to its recoverable amount through the recognition of impairment losses against goodwill. These losses have been included in cost of sales in the income statement. The goodwill impairment arose from the difficult trading conditions which have faced the Homeware Accessories marketplace. The recoverable amount for the cash-generating unit has been measured based on a value in use calculation. A pre-tax discount rate of 14% was used in the value in use calculation. The carrying amounts of goodwill by segment are as follows: 2006 2005 Footwear and Homeware Footwear and Homeware Accessories Accessories Group Accessories Accessories Group £'000 £'000 £'000 £'000 £'000 £'000 UK 8,663 - 8,663 8,663 5,932 14,595 Spain - - - - 229 229 8,663 - 8,663 8,663 6,161 14,824 The key assumptions in the value in use calculations for all business segments were: * * Budgeted profit growth -- an average of 2.25% each year for the next five years. * * The relative risk adjustment (or `beta') applied discount rates to reflect the risk inherent in the companies. In determining the risk adjusted discount rate, management have applied an adjustment for risk of such companies relative to all other sectors on average determined using an average of the beta's of comparable companies listed in the UK. The Beta used is 0.7 (which implies a risk adjusted pre-tax discount rate of 14%). Footwear and Accessories As there has been no impairment in the goodwill relating to the companies the carrying value of goodwill represents the value of goodwill calculated at the time of acquisition less amortisation charged under UK GAAP up to 31 December 2003. Unaudited Audited 2006 2005 6 Reconciliation of net (loss) / profit to cash flow £'000 £'000 from operations Continuing operations Net (loss) / profit (16,578) 175 Tax (239) 2,208 Depreciation 393 409 Profit on disposal of property, plant and equipment (947) (1,442) Impairment of goodwill 6,161 6,115 Share compensation expense 11 (82) Non cash movement on fair value hedges 740 (2,230) Interest income (89) (327) Interest expense 460 151 Effect of exchange rate changes 450 (188) Decrease in Pension obligations (1,853) (997) Changes in working capital (excluding effects of acquisitions and disposal of subsidiaries): Decrease in Inventories 3,884 4,786 Decrease in Trade and other receivables 1,104 2,098 Increase / (decrease) in Trade and other payables 2,118 (6,173) Cash flows from continuing operations (4,385) 4,503 Discontinued operations Net profit 147 164 Tax (198) 14 Depreciation - 49 Profit on disposal of property, plant and equipment - (1,859) Impairment of assets - 31 Deferred income - grants - 48 Changes in working capital Decrease in Inventories - 1,612 Decrease in Trade and other receivables - 170 Decrease in Trade and other payables - (639) Increase / (decrease) in Pension obligations 47 (453) Cash flows from discontinued operations (4) (863) Cash flows from operating activities (4,389) 3,640 7 Companies Act Requirements As the net assets of the Company are half or less of its called up share capital, an Extraordinary General Meeting will be held in due course pursuant to the provisions of Section 142(1) of the Companies Act 1985, to consider whether any, and if so what, steps should be taken to deal with the situation arising by virtue of the fact that the net assets of the Company are half or less of its called up share capital. END
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