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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Instore | LSE:INST | London | Ordinary Share | GB0001469930 | 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% | 4.68 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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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