Financial Review

Results

Total Group sales increased by 9% in the year to £193,767,000. Net turnover grew by 10% to £149,159,000.

Group profit after exceptional items increased by 2% to £16,828,000. The Group profit before exceptional items and tax has increased by £1,682,000 to £18,139,000, an improvement of 10% on the previous year. Basic earnings per share increased by 11% to 11.94p.

The Perfume Shop profits have increased by £1,677,000 or 11%, on sales up 17% and Like for Like sales growth of 6%. Operating margin as a percentage of net sales reduced from 16.3% to 15.5% with increased employment costs and slightly lower margins.

Joplings profits increased by £15,000 or 1%, a very creditable achievement considering the disposal of stores during the year that started in July and continued through the year, and the uncertainty for the staff surrounding the business’ future. Sales in the year reduced by 6% to £50,647,000. Operating margin as a percentage of net sales increased from 6.3% to 6.7% due to the reduction of Head Office costs.

A. de Gruchy profits increased by 1%, a £20,000 improvement on the previous year, on Like for Like sales increase of 3%. Slightly lower gross margins resulted in operating margin as a percentage of net sales reducing from 9.0% to 8.9%.

Costs within central services were £67,000 higher than last year, as a result of higher professional costs in researching Australia.

The long term incentive plan cost for the year of £715,000 has been provided at the 66.7% level of performance and was £42,000 higher than the previous year which benefited from an accrual release.

The goodwill on acquiring A. de Gruchy of £1,702,000 is being amortised over a period of 20 years resulting in a charge of £85,000.

An exceptional loss of £1,311,000 was made on the disposal of Joplings. The gain on the disposal of assets of £7,042,000 was reduced by £3,628,000 of costs associated with the closure of Leamington, Tynedale, the central functions of Joplings and the costs of running down the business, resulting in a gain of £3,414,000. This was reduced by £4,725,000 representing the write-off of goodwill on the acquisition of Joplings in 1987 that had previously been offset directly against reserves.

The interest charge has reduced by £432,000 or 68% on the previous year due to far lower borrowing levels as the result of strong cash generation together with the sale proceeds from the disposal of Joplings during the course of the year.

Cash Flow

The net cash inflow from operating activities of £22,520,000 was an improvement of £3,202,000 on the previous year. Stocks increased by £185,000 with Joplings stock reducing by £5,286,000 whilst The Perfume Shop increased by £5,037,000.

Investment in fixed assets in the year totalled £4,434,000, a reduction of £819,000 on the previous year. Joplings spent £108,000, £844,000 less than last year. £3,429,000 was spent at The Perfume Shop, £211,000 more than the previous year, with 16 new stores, 1 relocation, 4 major refits, increased warehouse security and £1,027,000 spent on the new merchandising and EPOS system. £828,000 was spent at De Gruchy, £255,000 lower than the prior year, with £560,000 spent on the Young Fashion Hall and £158,000 on a new EPOS system.

Net cash receipts of £25,168,000 in respect of the Joplings disposal reflect gross proceeds of £26,650,000 less costs incurred to date of £1,482,000.

The Group has continued with its progressive dividend policy, resulting in the payments made in the year increasing by £1,105,000 or 37%.

The net cash inflow before financing was £33,325,000, an improvement of £27,175,000 on the previous year.

Pension Schemes

The Group has two defined benefit schemes, the Merchant Retail Group Scheme and the A de Gruchy and Company Limited Scheme. The Group currently accounts for the pension scheme liabilities under the transitional arrangements provided by FRS 17. The deficit under FRS 17 at 26 March 2005 stood at £3.3 million (2004: £1.2 million), net of deferred tax. Of this deficit £225,000, relating to the A de Gruchy and Company Limited Scheme, is currently fully provided for in the balance sheet. The balance of the deficit will be provided in future accounting periods upon adoption of IAS 19.

Capital Structure

Cash generated in the year has resulted in the move from net debt of £3,809,000 to a cash position of £30,147,000 at the year end. The cash reserve will be utilised by providing the large working capital facility required by The Perfume Shop in the run-up to Christmas and the expansion of the chain in both the UK and Australia.

Treasury Policy

The Group facilities are provided by way of bank overdrafts and facilities, which have been agreed with our banks for the forthcoming year and are all at floating interest rates.

Foreign currency is bought as required for overseas purchases. Occasionally the currency is bought in anticipation of a specific short term future order.

We continue to take a conservative stance on treasury matters including foreign currency and interest rates. No speculative positions have been taken in foreign currency, interest rates or financial instruments.

Taxation

The effective taxation rate for the year of 22.3% (2004: 28.9%) was low because of the impact of exceptional items. Excluding exceptional items, the effective rate of 28.4% is lower than the expected UK rate due to profits generated by A. de Gruchy being taxed at 20%.

Accounting Policies

During the year the Group has adopted UITF 38 ‘Accounting for ESOP Trusts’. The adoption has required own shares held to be reclassified from current assets to a reduction in shareholders’ funds. This change has been accounted for as a prior year adjustment and previously reported figures have been restated accordingly. There is no impact on the profit and loss account for the financial year under review. There were no other changes in accounting standards or policies in the year.

CHRIS LAMONT
Group Finance Director

Back to top