Interim Results

RNS Number:2780U
ChoicesUK PLC
03 April 2007

Press Release

IMMEDIATE - Tuesday, 3 April 2007

Interim results for the 36 weeks ended 10 February 2007

Figures in #000s           28 weeks       28 weeks       36 weeks     52 weeks
                         to 10/2/07     to 11/2/06     to 10/2/07    to 3/6/06
                        (unaudited)    (unaudited)    (unaudited)    (audited)
Turnover                     86,148         78,018        102,902      134,206
Operating profit/             1,162            761         (1,323)         802
(loss)
(before exceptional
costs)
Exceptional costs               990          2,729          1,035        4,485
Net interest payable            437            292            501          524
Profit/(Loss) before           (265)        (2,260)        (2,859)      (4,207)
tax
Basic & diluted (loss)
per share (pence)              (1.5)         (12.5)         (15.7)       (18.1)


* Following change in accounting date, the current financial period will end
on 28 July 2007 (last year: 3 June 2006)

* Substantial progress made in restoring profitability and re-shaping the
Company's activities

* Direct to Home business performed strongly during the Period, with a 129
per cent increase in sales to #37.4m (2006 : 16.3m), along with games fulfilment
and distribution activities

* On an annualised basis, overheads have been reduced by #6.9m

* Sales for the 28 weeks ended 10 February 2007, which will become the
comparable period for next year's interim results following the change of
accounting date, were up 10.4per cent to #86.1m (2006 : #78m) on which profit,
before exceptional items and interest, was #1.2 m (2006 : #0.8 m). However, this
improved performance was insufficient to compensate for the loss suffered in the
first eight weeks of the Period which included the negative impact of the World
Cup.

* Disposed of 31 loss-making and non-trading stores and revamped and
re-focused product range

* Cash generation remains a key priority

Outlook

As a result of the successful implementation of management's strategy to
rationalise and re-orientate the business, ChoicesUK is well placed to complete
its recovery plan and, with the financial benefits of reduced costs and
stabilised margins, should achieve positive cashflow for the final 24 weeks of
the financial period.

Contact

Simon Bloomfield, Bankside Consultants (Tel: [phone])




Interim Report 2007

Background

During the 36 week period ended 10 February 2007, the Management of ChoicesUK
made substantial progress in restoring profitability and re-shaping the
Company's activities in response to major changes taking place in the retail and
home entertainment sectors.

As a result, ChoicesUK is a more focused and efficient business which, following
the first two months of the current financial period, when the adverse effect on
financial performance of the World Cup was greater than expected, has returned
to profitability.

We have expanded our Direct to Home business which performed strongly during the
Period, as well as games fulfilment and distribution activities. In addition,
our product range has been revamped and music has been added to our offering,
with a beneficial impact on both our stores and distribution businesses.

Excellent progress has been made with the disposal of loss-making and
non-trading stores, and negotiations and arrangements for further disposals are
well advanced.

Financial Results

This is the first set of results since the Company decided to change its
accounting date so as to align its financial reporting with key trading periods.
The current financial period will end on 28 July 2007 compared to 3 June 2006
last year.

Overall, turnover increased by 7.9 per cent to #102.9 million (2006 : #95.4
million), against a continued background of substantial price deflation in DVDs
and a further decline in rental.

Sell-thru activities grew by 22.6 per cent and now account for 75.9 per cent of
the Group's turnover, whilst rental was down by 21.7 per cent representing 24.1
per cent of Group activities.

Sales for the 28 weeks ended 10 February 2007, which will become the comparable
period for next year's interim results following the change of accounting date,
were up 10.4 per cent to #86.1 million (2006 : #78.0 million) on which profit,
before exceptional items and interest, was #1.2 million (2006 : #0.8 million)
and, after exceptional items and interest, was a loss #0.3 million (2006 : loss
of #2.3 million).

However, this performance was insufficient to compensate for the loss suffered
in the first eight weeks of the Period which included the negative impact of the
World Cup. Overall, the loss for the 36 weeks was cut by 18.8 per cent to #2.9
million (2006 : #3.5 million).

Operational review

Cash generation remains our key priority and significant progress was made in
this area, with further disposals of marginal and loss-making stores, tight
control on capital expenditure and a continued reduction in central overheads.

Central costs have been rationalised and the move of all our central operations
into our new site will be completed by late Autumn 2007. On an annualised basis,
overheads had been reduced by #6.9 million with savings of #4.4 million realised
during the Period.

With year-on-year sales growth of 7.9 per cent, high levels of depreciation,
minimal capital expenditure, and the ongoing effect of reduced overheads, cash
generation is set to continue.

Capital expenditure was #1.284 million (2006 : #3.528 million) and lease
premiums on store disposals yielded #0.85 million (2006 : #0.15 million).

Stores

Turnover for the Period was #50.2 million (2006 : #61.8 million), reflecting the
disposal of loss-making stores.

The restructuring of our retail estate continued during the Period, with the
disposal of 25 loss-making stores and six non-trading units. In terms of cash
generation, we currently operate a further 29 marginal or unprofitable sites,
many of which are in the process of disposal. The remaining 162 stores are cash
generative.

As part of the strategy for our stores we have rationalised the product range,
discontinuing mobile phones, portable electronic goods and a range of impulse
lines. This has enabled a renewed focus on our core ranges where we have
substantially increased our offering of games hardware and software, as well as
revamping our DVD and sell-thru sections to ensure strong value messages
throughout our stores.

In response to the continuing migration of DVD catalogue purchasers to the
Internet, we have moved to a strong value offering with the majority of our
products forming part of promotions such as the current "2 for #10" DVD
offering. In keeping with our branding theme, many of the complexities have been
removed from our store operations, providing our customers with a value
proposition that is "Simply Entertainment".

Local

Turnover for the Period was #15.3 million (2006 : #17.3 million) as a result of
the continuing decline in rental.

Although our convenience store business was adversely affected by the decline in
rental, our distribution and wholesaling activities have increased
significantly. Successes in this area include the addition of 71 Welcome Break
service stations throughout the UK, and the phased implementation of 150 new
rental installations within the One Stop convenience store group. We believe our
Local business is well placed to grow, as entertainment products move into
increasingly diverse channels of distribution.

Direct to Home

Turnover for the Period was #37.4 million (2006 : #16.3 million) with a
substantial boost coming from computer games.

Our Direct to Home distribution business has undergone a period of substantial
growth. This is largely as a result of the integration of the Andromeda games
fulfilment stock acquired in April 2006, and the subsequent fulfilment
opportunities that have arisen. Computer games continue to develop in all
sectors of our business and now account for nearly 40 per cent of total Group
turnover.

Our Internet site, launched in 2006, is currently being upgraded further with a
number of major changes in functionality and this substantial investment is
increasingly producing benefits.

Direct to Home remains one of the Industry's growth areas, and continues to
present numerous opportunities for both our own brand and third party partners.

Board Changes

In April 2006, having reached his normal retirement age and after founding the
Company 22 years ago, Iain Muspratt completed the handover of his
responsibilities as Chief Executive to Anthony Skitt, continuing as
non-executive Chairman. Since then, the Company's recovery has gained momentum
and Iain has decided to step down as Chairman with effect from 19 April 2007. He
will retain a substantial shareholding in the Company and continue as a
non-executive director.

Michael Riding, formerly Managing Director, Corporate Banking, Lloyds TSB, who
has been with the Company as a non-executive director for three years, most
recently in the capacity of Deputy Chairman, has agreed to take over as
non-executive Chairman.

Michael de Kare-Silver joined as a non-executive Director in January 2007, and
we will benefit from his considerable experience in internet trading and
electronic commerce

Outlook

As a result of the successful implementation of management's strategy to
rationalise and re-orientate the business, ChoicesUK is well placed to complete
its recovery plan.

The move to extend the games offering is benefiting the business greatly, and we
are encouraged to have achieved a 6.5 per cent market share of the recent
Playstation 3 launch. We expect the DVD and CD music markets to remain
difficult. However, with our broad spread of businesses within these sectors,
the Company is well placed to look for further consolidation opportunities.

Retailing in this sector remains extremely challenging. However, the development
of our distribution businesses (Local and Direct) has enabled us to continue to
achieve sales growth. This, together with the financial benefits of reduced
costs and stabilised margins, should result in positive cashflow for the final
24 weeks of the financial period.


group profit & loss account

for the 36 week period ended 10 February 2007

                          Note  36 weeks ended     As restated     As restated
                                      10.02.07  28 weeks ended  52 weeks ended
                                   (unaudited)        17.12.05        03.06.06
                                          #000     (unaudited)       (audited)
                                                          #000            #000

TURNOVER                     2         102,902          74,175         134,206
Operating (loss) / profit
before exceptional costs                (1,323)            (86)            802

Exceptional costs - Stock
mark downs                                (799)         (1,771)         (2,483)
Re-organisation costs                     (236)           (234)           (646)
ChoicesUK TV                                 -            (833)         (1,356)
                                        (1,035)         (2,838)         (4,485)

OPERATING loss                          (2,358)         (2,924)         (3,683)
Net interest payable                      (501)           (213)           (524)
LOSS ON ORDINARY
ACTIVITIES BEFORE TAXATION              (2,859)         (3,137)         (4,207)
Taxation                     3              23             883             950
LOSS RETAINED FOR THE
PERIOD                                  (2,836)         (2,254)         (3,257)

(LOSS) / EARNINGS PER
SHARE:
Adjusted basic (loss) /
earnings per share                       (10.0p)           3.2p            6.8p
(excluding exceptional
items)
Basic & diluted loss per
share                        5           (15.7p)         (12.5p)         (18.1p)
Dividends paid per
ordinary share                               -             4.5p            4.5p


Group statement of total recognised gains and losses

for the 36 week period ended 10 February 2007

                                  36 weeks         28 weeks         52 weeks
                            ended 10.02.07   ended 17.12.05   ended 03.06.06
                               (unaudited)      (unaudited)        (audited)
                                      #000             #000             #000

Loss for the financial year
as previously stated                (2,836)          (2,248)          (3,243)
Prior year adjustment -
Share-based payments                     -               (6)             (14)
Loss for the year as
restated                            (2,836)          (2,254)          (3,257)



group balance sheet

as at 10 February 2007

                                          10.02.07    As restated  As restated
                                        (unaudited)      17.12.05     03.06.06
                                              #000     (unaudited)    (audited)
                                                             #000         #000

FIXED ASSETS
Tangible assets                             12,277         16,460       15,032

CURRENT ASSETS
Stocks                                      17,114         23,638       18,949
Debtors                                     13,561         16,088       11,532
Cash                                             -            104            -
                                            30,675         39,830       30,481
CREDITORS Amounts falling due within
one year                                   (29,181)       (38,735)     (28,946)
NET CURRENT ASSETS                           1,494          1,095        1,535
TOTAL ASSETS LESS CURRENT LIABILITIES       13,771         17,555       16,567
DEFERRED TAXATION                              (54)          (135)         (54)
NET ASSETS EXCLUDING PENSION SURPLUS        13,717         17,420       16,513
Pension surplus                                  -             90            -
NET ASSETS                                  13,717         17,510       16,513

CAPITAL AND RESERVES
Called up share capital                        902            902          902
Share premium account                          997            997          997
Capital redemption reserve                   1,063          1,063        1,063
Revaluation reserve                            761            777          761
Profit and loss account                      9,994         13,771       12,790
EQUITY SHAREHOLDERS' FUNDS                  13,717         17,510       16,513



group cash flow statement

for the 36 week period ended 10 February 2007

                          Note  36 weeks ended  28 weeks ended  52 weeks ended
                                      10.02.07        17.12.05        03.06.06
                                    (unaudited)     (unaudited)       (audited)
                                          #000            #000            #000

NET CASH OUTFLOW
FROM OPERATING
ACTIVITIES                   6          (1,845)         (6,852)         (2,613)

RETURNS ON INVESTMENTS &
SERVICING OF FINANCE
Interest paid                             (501)           (213)           (524)
NET CASH OUTFLOW
FROM RETURNS ON
INVESTMENTS AND
SERVICING OF FINANCE                      (501)           (213)           (524)

TAXATION
Corporation tax
received / (paid)                          874            (836)           (848)

CAPITAL EXPENDITURE
Payments to acquire
tangible fixed
assets                                  (1,284)         (2,844)         (3,979)

EQUITY DIVIDENDS
PAID                                         -            (813)           (813)
NET CASH OUTFLOW
BEFORE FINANCING                        (2,756)        (11,558)         (8,777)
FINANCING
Redemption of
ordinary shares                              -             (43)            (41)
DECREASE IN CASH AT
BANK                                    (2,756)        (11,601)         (8,818)



notes to the accounts
for the 36 week period ended 10 February 2007


1. Basis of preparation

These interim statements, which were approved by the Board on 2 April 2007, do
not constitute statutory accounts within the meaning of Section 240(5) of the
Companies Act 1985. The financial information for the 52 weeks ended 3 June 2006
has been extracted from the statutory accounts of ChoicesUK plc for that period,
which have been delivered to the Registrar of Companies. The auditors' report on
those accounts was unqualified and did not contain any statement under Sections
237(2) or (3) of the Companies Act 1985.

The results for the 36 weeks ended 10 February 2007 and 28 weeks ended 17
December 2005 have not been audited by the Group's auditors.

These interim statements have been prepared on a basis consistent with the
financial statements for the 52 weeks ended 3 June 2006 except for the adoption
of FRS 20 noted below.

The 2006/2007 financial period is the first period in which the Group has
adopted FRS 20 (IFRS) - 'Share-based payment'. In accordance with this standard,
the cost of share options awarded to employees under the Group's share option
schemes is measured by reference to their fair value at the date of grant. This
cost is recognised over the vesting period of the options based on the number of
options which in the opinion of the directors will ultimately vest. The impact
for the interim statements is a charge of #40,000. The charge for the 52 weeks
ended 3 June 2006 was #14,000 and the charge for the 28 weeks ended 17 December
2005 was #6,000.

The Group has taken advantage of transitional provisions contained in FRS 20 and
has applied FRS 20 only to share options granted after 7 November 2002 which had
not vested at 1 January 2006.


2. Turnover
                            36 weeks ended   28 weeks ended   52 weeks ended
                                  10.02.07         17.12.05         03.06.06
                                (unaudited)      (unaudited)        (audited)                                         
                                      #000             #000             #000

Rental - DVD and VHS                24,024           23,722           43,329
Sales and Rental - games            41,130           13,269           27,074
Sales - DVD, mobile phones
and other related products          37,748           37,184           63,803
                                   102,902           74,175          134,206

Group turnover comprised income from the rental of pre-recorded digital
versatile discs, video cassettes and computer games and sale of pre-recorded
digital versatile discs, video cassettes, computer games, books, mobile
telephones and 'top-ups' and other related products.10


3. Taxation
                            36 weeks ended   28 weeks ended   52 weeks ended
                                  10.02.07         17.12.05         03.06.06
                                (unaudited)      (unaudited)        (audited)
                                      #000             #000             #000

The Tax Credit represents:
UK corporation tax credit                -              859              858
Adjustments in respect of
prior periods                           23               24               11
                                        23              883              869
Total deferred tax                       -                -               81
TAX CREDIT ON ORDINARY
ACTIVITIES                              23              883              950



4. Dividends
                    36 weeks ended        28 weeks ended        52 weeks ended
                          10.02.07              17.12.05              03.06.06
                        (unaudited)           (unaudited)             (audited)
                              #000                  #000                  #000

Interim dividend                 -                     -                     -
Final dividend                   -                   813                   813
                                 -                   813                   813



5. Loss per share

The loss and number of shares in issue or to be issued used in calculating the
loss per share were as follows:
                              36 weeks ended        As restated      As restated
                                    10.02.07     28 weeks ended   52 weeks ended
                                  (unaudited)          17.12.05         03.06.06
                                                     (unaudited)        (audited)
                             Basic & Diluted    Basic & Diluted  Basic & Diluted

Loss (as restated)               (#2,836,138)       (#2,254,137)     (#3,257,339)
Weighted average number
of shares                         18,034,747         18,036,413       18,069,747
Loss per share                        (15.7p)            (12.5p)          (18.1p)
Adjusted (loss) /
earnings per share                    (10.0p)              3.2p             6.8p
Calculation of numbers of
shares:
At 3 June 2006                    18,034,747         18,069,747       18,069,747
Shares cancelled                           -            (35,000)         (35,000)
                                  18,034,747         18,034,747       18,034,747


Adjusted earnings per share excludes the effects of exceptional costs of
#1,035,000, (2005 interim : #2,838,000 and 2006 : #4,485,000) and is presented
in order to show the underlying performance of the Company.


6. Reconciliation of operating profits to net cash flow from operating
activities
                                36 weeks ended     As restated     As restated
                                      10.02.07  28 weeks ended  52 weeks ended
                                    (unaudited)       17.12.05        03.06.06
                                          #000      (unaudited)       (audited)
                                                          #000            #000

Operating (loss) / profit before
exceptional costs                       (1,323)            (86)            802
Exceptional costs - stock mark
downs                                     (799)         (1,771)         (2,483)
Re-organisation costs                     (236)           (234)           (646)
ChoicesUK TV                                 -            (833)         (1,356)
OPERATING LOSS                          (2,358)         (2,924)         (3,683)
Depreciation                             4,040           3,134           5,676
Loss on disposal of fixed assets             -               -              19
Decrease / (Increase) in pension
surplus                                      -               -              90
Decrease / (Increase) in stocks          1,835          (7,005)         (2,316)
Increase in debtors                     (2,880)         (7,074)         (2,520)
(Decrease) / Increase in
creditors                               (2,522)          7,011             107
Share-based payments                        40               6              14
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES                              (1,845)         (6,852)         (2,613)


7. Reconciliation of Shareholders' Funds and Movements on Reserves
               Group
                  Share    Share     Capital  Revaluation  Profit & Loss   Total
                Capital  Premium  Redemption      Reserve        Account   #'000
                  #'000  Account     Reserve        #'000          #'000
                           #'000       #'000
At 4 June 2005    904      997       1,061          777         16,871    20,610
Loss for the
period (as
restated)           -        -           -            -         (3,257)   (3,257)
Redemption of
shares             (2)       -           2            -            (41)      (41)
Transfer            -        -           -          (16)            16         0
Dividends           -        -           -            -           (813)     (813)
Prior Year
Adjustment -
Share-based
payments            -        -           -            -             14        14
At 3 June 2006    902      997       1,063          761         12,790    16,513
Loss for the
period              -        -           -            -         (2,836)   (2,836)
Share-based
payments            -        -           -            -             40        40
At 10 February
2007              902      997       1,063          761          9,994    13,717


Copies of interim report


Copies of the interim report are available free of charge on any week day from
the date of this announcement and for a period of one month thereafter from the
registered office of the Company (Southgate House, Southgate Way, Orton
Southgate, Peterborough, PE2 6YG) or the offices of the Company's Nominated
Advisers, Teather & Greenwood Limited (Beaufort House, 15 St Botolph Street,
London, EC3A 7QR), and at all times from our corporate website -
www.choicesukplc.com



trading divisions



ChoicesUK Local

Provides a service throughout the United Kingdom and Republic of Ireland to
convenience stores and other established retailers, enabling them to add DVD
sales and rental, computer games software sales, books and music sales to the
range of products offered to their customers.


www.ChoicesUKLocal.com

www.ChoicesIE.com


ChoicesUK

Operated through 191 (December 2005 - 220) company owned retail outlets in
England and Wales, offering DVDs, computer games rental and sales, games
consoles for sale, the sales of mobile phone 'top-ups' (including 'E-top-ups')
and ice cream and confectionery.


www.ChoicesUK.com


ChoicesUK Direct

ChoicesUK Direct offers DVDs, computer games and talking tapes released in the
United Kingdom for sale through mail order. Customers can access the Choices
Direct service by mail, by telephone or over the Internet via ChoicesUK Direct's
website at


www.ChoicesUK.com


ChoicesUK Direct also manages and fulfils DVD and computer games for many of the
large mail order catalogue companies in the United Kingdom, including, Freemans,
Littlewoods SDG and Book Club Associates. The service offered is comprehensive,
ranging from title selection advice and compilation, through to fulfilment of
customers' orders.


independent review report to ChoicesUK plc


We have been instructed by the Company to review the financial information for
the 36 weeks ended 10 February 2007 which comprises the Group Profit and Loss
Account, Group Statement of Total Recognised Gains and Losses, Group Balance
Sheet, Group Cash Flow Statement and the related notes 1 to 7. We have read the
other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.

This report is made solely to the Company having regard to guidance contained in
Bulletin 1999/4 'Review of interim financial information' issued by the Auditing
Practices Board. To the fullest extent permitted by the law, we do not accept or
assume responsibility to anyone other than the Company, for our work, for this
report, or for the conclusions we have formed.


Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report as required by the AIM Rules
issued by the London Stock Exchange.


Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of group management and applying analytical procedures to the financial
information and underlying financial data, and based thereon, assessing whether
the accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Standards on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.


Review conclusion

On the basis of our review we are not aware of any material modifications that
should be
made to the financial information as presented for the 36 weeks ended 10
February 2007.



Ernst & Young LLP

Cambridge

2 April 2007



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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IR UUUMACUPMGRP