RNS Number:2370E
Hardy Amies PLC
21 September 2007
HARDY AMIES plc
"HARDY AMIES" or "the Company"
Interim Results For the Six Month Period to 30 July 2007
CHAIRMAN'S STATEMENT
I was appointed as Chairman of Hardy Amies on 18 May 2006 and the presentation
of these interim accounts provides a good benchmark of the progress that has
been made in my first year of tenure. I remain convinced of the global potential
of Hardy Amies as a luxury brand. Developing Hardy Amies into a profitable
business was always going to take time, but we have made significant improvement
in the past twelve months. This is reflected in the results for the six months
to 30 June 2007 which are on track with expectations I set last year. Overall
turnover is up by a modest 8.9% from #668,940 to #728,531 but the overall loss
before taxation for the period has declined from #1,249,551 in the first half of
2006 to #372,252 this year. More importantly, the foundations are now in place
which will ensure that we see turnover move forward more markedly in the second
half of 2007 and into 2008. I comment in more detail on this below.
I must give credit to the strong management team and experienced Board I have
put in place for helping to put the business on a more professional footing.
The improvement in the results is a credit to their hard work. As previously, I
set out the progress made on the three aspects of the strategy which we are
working to.
BUILDING A THRIVING UK BUSINESS
Over the past year there has been a re-focusing of our UK business into the core
areas that have the potential to offer sustained growth going forward and that
will position the company as a significant couture and fashion house.
The main area of growth in turnover so far has derived from wholesale sales of
our new menswear range. As a result retail and wholesale turnover in the period
grew from #263,205 in the first half of 2006 to #421,585 this year - an increase
of 60%. Sales will accelerate further in the second half as two menswear stores
are scheduled to open later in 2007, in Edinburgh and Chester. We are also
looking at further store opportunities in 2008. It is difficult to assess how
well the new stores will perform at this stage given the lack of comparative
data from existing stores. Sales will initially take a while to develop from the
retail units, especially in the challenging retail climate that currently
exists.
Sales from the house at 14 Savile Row ("the House") continue to flourish.
Although sales from the House are broadly similar to those in the first half of
last year, there has been a change in product mix. The main thrust of the sales
going forward from 14 Savile Row is intended to be the women's couture and the
intention is to re-establish the prominence of Hardy Amies as the only British
couture house, as will be highlighted in an exhibition entitled "The Golden Age
of Couture" which runs at the Victoria and Albert museum from 22 September 2007
to 6 January 2008. I am therefore pleased to see that women's couture sales
rose by 35% compared to the six months last year and our creative director, Ian
Garlant, is gathering an increasing following and reputation. Balancing the
strong growth in women's couture, there has also been an expected corresponding
decrease in sales of our legacy boutique range. We are likely to see this area
decline further going forward.
Our first ready to wear womenswear collection is close to seeing the light of
day. This has been worked on for the past twelve months and we are planning to
sell this product from the House and a new womenswear store in London.
Going forward we are looking to open three or four retail units a year in the UK
and are already in discussions with a number of property groups concerning
future sites. We are also investing in additional design resource to increase
the size and scope of our womenswear and accessory ranges, although the lead
time before this generates revenue will be at least twelve months.
BUILDING INTERNATIONAL AND LICENSE REVENUES
Hardy Amies will only be able to fully exploit international opportunities to
create a global luxury brand once it has a successful UK operation so our main
focus in this area continues to be ensuring that current licenses are
appropriate for the business in the future. The most significant international
license derives from Japan and is due for renewal on 19 October 2007. We are in
the final stages of long negotiations, but are confident that new arrangements
beyond 19 October 2007 will generate significantly more revenue than the
#452,952 booked in the income statement in the year ended 31 December 2006.
The new arrangements will also have a substantial cash benefit, as all the cash
from the previous license was paid up front in one lump sum in 2002 and the
income in the income statement in the current year so far is merely the release
of this deferred income to revenue. From 19 October 2007 we plan to receive
payment for the license income as it accrues.
The overall decline in license income in the first half of 2007 from #405,735
last year to #306,948 was expected. The figures for 2006 include income from a
menswear license with BMB which was bought in-house in September 2006.
We are now turning our attention to other significant overseas markets and will
update shareholders with more detailed plans in due course.
CAREFUL MANAGEMENT OF COSTS
The most pleasing aspect of the results for the first half of 2007 is the
reduction in the overall loss and this has been driven by more careful
management of costs. The income statement for the half year ended 30 June 2007
shows a reduction of #794,163 in trading expenses against the corresponding
period last year, a decline of 70% on the overall charge in the first half of
2006. Firstly there were #425,534 of exceptional expenses in the first half of
2006 and the control environment that allowed some of these items to occur has
now been significantly improved. The balance of the decline is due to a cost
reduction exercise, but this has been partly offset by the upfront costs in
developing the new menswear and womenswear ranges; from the investment in
design, buying and retail operational expertise. A total of #175,600 is
required to be capitalised as development expenditure under International
Financial Reporting Standards in the first half of 2007 although much of this
additional payroll expense has been charged in the income statement in the first
half of 2007. The corresponding period did not include any such adjustment as
the expenditure on research and development did not meet the criteria for
capitalisation under IAS 38.
Trading expenses in the second half of 2007 will increase as the new stores come
on stream and we incur pre-opening costs, however my policy of careful cost
control will continue.
FUTURE PLANS
Overall, I feel very pleased with progress to date and the funding position of
the business is currently stable. This is due to the loan facility of #2.85
million that was made available to Hardy Amies plc by the largest shareholder,
Arev Brands Limited. This is funding the ongoing trading losses incurred in
developing the new ranges and the initial investment in new stores. Going
forward, the level of cash burn should also reduce once new Japanese licensing
arrangements start from 19 October 2007. Looking into 2008, the Board is
currently considering the longer term funding options for the business with a
mind towards an acceleration of growth beyond 2008. This could include a rights
issue next year, although no final decisions have been made in this area.
AC Manders
Chairman and Chief Executive
20 September 2007
INDEPENDENT REVIEW REPORT TO HARDY AMIES PLC
Introduction
We have been instructed by the company to review the financial information set
out on pages 4 to 17 and we have read the other information in the interim
statement and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of their interim statement and for no other purpose. We
do not, therefore, in producing this report, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.
Directors' responsibilities
The interim statement, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Interim Statement in accordance with the AIM
Market Rules which require that the accounting policies and presentation applied
to the interim figures must be consistent with those that will be adopted in the
company's annual accounts.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom, as if that
Bulletin applied. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and based thereon, assessing whether the disclosed
accounting policies have been consistently applied unless otherwise disclosed.
A review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit and therefore provides a lower level of assurance. Accordingly, we do not
express an audit opinion on the financial information
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
BAKER TILLY UK AUDIT LLP
Chartered Accountants
Festival Way
Stoke-on-Trent
Staffordshire
ST1 5BB
20 September 2007
CONSOLIDATED INTERIM INCOME STATEMENT
For the six month period to 30 June 2007
Unaudited six Unaudited six Unaudited 12
months to 30 June months to 30 months to 31
2007 June 2006 December 2006
(As restated) (As restated)
# # #
REVENUE 728,531 668,940 1,217,996
Trading expenses (1,065,025) (1,859,188) (3,098,229)
Other operating income 16,000 6,000 13,000
Earnings before interest, taxation,
depreciation and amortisation (320,494) (1,184,248) (1,867,233)
Depreciation (42,199) (29,433) (48,990)
Amortisation of other intangibles (8,912) (4,913) (11,158)
Finance revenue 7,211 6,553 19,241
Finance costs (7,858) (37,510) (33,506)
Loss before taxation (372,252) (1,249,551) (1,941,646)
Taxation (23,862) (31,109) (58,024)
Loss for the period (396,114) (1,280,660) (1,999,670)
Basic loss earnings per ordinary share (pence) (0.20) (0.78) (0.53)
Diluted loss earnings per ordinary share (pence) (0.20) (0.78) (0.53)
The earnings before interest, taxation, depreciation and amortisation for each
period arise from the Group's continuing operations.
CONSOLIDATED INTERIM BALANCE SHEET
As at 30 June 2007
Unaudited as at 30 Unaudited as at 30 Unaudited as at 31
June 2007 June 2006 December 2006
(As restated) (As restated)
# # #
ASSETS
Non-current assets
Property, plant and equipment 238,799 273,250 272,099
Intangible assets 1,016,706 616,883 817,018
TOTAL NON-CURRENT ASSETS 1,255,505 890,133 1,089,117
Current assets
Inventories 149,953 96,165 91,322
Trade and other receivables 205,095 324,292 150,088
Cash and cash equivalents 90,587 1,663,915 635,357
TOTAL CURRENT ASSETS 445,635 2,084,372 876,767
TOTAL ASSETS 1,701,140 2,974,505 1,965,884
EQUITY AND LIABILITIES
Equity attributable to equity holders
Issued share capital 2,104,911 2,079,911 2,079,911
Share premium 7,025,388 6,975,388 6,975,388
Retained earnings (9,596,858) (8,481,734) (9,200,744)
Other reserves 1,033,407 1,033,407 1,108,407
TOTAL EQUITY 566,848 1,606,972 962,962
Current liabilities
Trade and other payables 600,771 1,367,533 902,922
Loans 533,521 - 100,000
TOTAL LIABILITIES 1,134,292 1,367,533 1,002,922
TOTAL EQUITY AND LIABILITIES 1,701,140 2,974,505 1,965,884
CONSOLIDATED INTERIM CASH FLOW STATEMENT
For the six month period to 30 June 2007
Unaudited six Unaudited six Unaudited 12
months to 30 June months to 30 June months to 31
2007 2006 December 2006
CASH FLOW FROM OPERATING ACTIVITIES # # #
Loss before taxation (372,252) (1,249,551) (1,941,646)
Adjusted for:
Depreciation of property, plant and
equipment
42,199 29,433 48,990
Amortisation of intangible assets 8,912 4,913 11,158
(Increase)/decrease in inventories (58,631) 100,876 105,719
(Increase)/decrease in trade and other
receivables
(55,007) 56,732 227,719
(Decrease) in trade and other payables (302,151) (542,627) (521,244)
Difference between finance expense and
finance costs paid - (1,116) 28,733
CASH OUTFLOW FROM OPERATING ACTIVITIES (736,930) (1,601,340) (2,040,571)
TAXATION (23,862) (31,109) (11,614)
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditure on intangible assets (211,600) - (131,380)
Purchase of property, plant and equipment (5,899) (25,661) (44,067)
Net cash acquired on purchase of
subsidiary undertakings - - 2,794,375
CASH (OUTFLOW)/INFLOW FROM INVESTING
ACTIVITIES (217,499) (25,661) 2,618,928
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issue of ordinary shares - 2,999,205 229,480
Repayment of convertible loans - - (57,927)
Repayment of bank loans - - (225,759)
New debenture loans (net of repayments) 433,521 300,000 100,000
NET CASH INFLOW FROM FINANCING ACTIVITIES 433,521 3,299,205 45,794
NET (DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS (544,770) 1,641,095 612,537
Cash and cash equivalents at the
beginning of the period 635,357 22,820 22,820
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD 90,587 1,663,915 635,357
NOTES TO THE INTERIM ACCOUNTS
For the six months period to 30 June 2007
IMPACT OF THE FIRST TIME ADOPTION OF IFRS/IAS
Application of IFRS 1
The Group's financial statements for the year ended 31 December 2007 will be the
first annual financial statements that comply with IFRS. These interim
financial statements have been prepared on the basis set out in the accounting
policies.
The Group's transition date is 1 January 2006. The Group prepared its opening
balance sheet at that date. The reporting date of these interim financial
statements is 30 June 2007.
The main changes from preparing the results under IFRS rather than UK GAAP that
affect the Group loss and net asset position are:
a) Research and development expenditure was previously expensed as incurred
under UK GAAP.
Under IFRS, development expenditure that results in new or substantially
improved products or processes, where it is deemed probable that recovery will
take place, are capitalised and amortised on a straight line basis over the
products expected useful economic life.
No adjustment was made to the balance sheet or income statement as at 1 January
2006 or 30 June 2006 as the expenditure on research and development did not meet
the criteria for capitalisation under IAS 38.
b) Goodwill was previously, under UK GAAP, amortised evenly over 20 years, the
directors estimate of the useful economic life of the goodwill.
Under IFRS, goodwill is not amortised but is reviewed annually for impairment
and is carried at cost less accumulated impairment.
An adjustment has been made to the balance sheet and income statement for the
period to 30 June 2006 and 31 December 2006 to reflect amortisation charged in
respect of goodwill under UK GAAP, which has been written back to the income
statement under IFRS.
No adjustment was made to the transitional balance sheet as at 1 January 2006 as
the group has elected not to apply IFRS 3 'Business Combinations'
retrospectively to business combinations that took place before 1 January 2006.
The reconciliations below provide an explanation of the effect of IFRS on the
reported results for the six month period to 30 June 2006 and the year ended 31
December 2006.
The adoption of IFRS does not impact the amount of cash previously disclosed
under UK GAAP in any of the periods of account in the interim results.
Hardy Amies Group plc will continue to produce its company-only accounts for
filing purposes under UK GAAP and therefore none of the IFRS adjustments impacts
on its balance sheet or reserves.
IFRS RECONCILIATION OF PRIOR PERIOD COMPARATIVES - INCOME STATEMENT
For the six months to 30 June 2006
UK GAAP IFRS adjustment IFRS
# # #
REVENUE 668,940 - 668,940
Trading expenses (1,859,188) - (1,859,188)
Other operating income 6,000 - 6,000
EBITDA (1,184,248) - (1,184,248)
Depreciation (29,433) - (29,433)
Amortisation (21,667) 16,754 (4,913)
Finance revenue 6,553 - 6,553
Finance costs (37,510) - (37,510)
Loss before taxation (1,266,305) 16,754 (1,249,551)
Taxation (31,109) - (31,109)
Loss for the period (1,297,414) 16,754 (1,280,660)
Basic loss per ordinary share (pence) (0.78) - (0.78)
Diluted loss per ordinary share (pence) (0.78) - (0.78)
IFRS adjustment
(A) Goodwill amortisation previously charged under UK GAAP has been reversed
as, under IFRS, goodwill is not subject to amortisation.
IFRS RECONCILIATION OF PRIOR PERIOD COMPARATIVES - BALANCE SHEET
At 30 June 2006
UK GAAP IFRS adjustments IFRS
# # #
ASSETS
Non-current assets
Property, plant and equipment 273,250 - 273,250
Intangible assets 600,129 16,754 616,883
TOTAL NON-CURRENT ASSETS 873,379 16,754 890,133
Current assets
Inventories 96,165 - 96,165
Trade and other receivables 324,292 - 324,292
Cash and cash equivalents 1,663,915 - 1,663,915
TOTAL CURRENT ASSETS 2,084,372 - 2,084,372
TOTAL ASSETS 2,957,751 16,754 2,974,505
EQUITY AND LIABILITIES
Equity attributable to equity holders
Issued share capital 2,079,911 - 2,079,911
Share premium 6,975,388 - 6,975,388
Retained earnings (8,498,488) 16,754 (8,481,734)
Other reserves 1,033,407 - 1,033,407
TOTAL EQUITY 1,590,218 16,754 1,606,972
Non-current liabilities
Trade and other payables 579,663 - 579,663
TOTAL NON-CURRENT LIABILITIES
579,663 - 579,663
Current liabilities
Trade and other payables 787,870 - 787,870
TOTAL CURRENT LIABILITIES 787,870 - 787,870
TOTAL LIABILITIES 1,367,533 - 1,367,533
TOTAL EQUITY AND LIABILITIES 2,957,751 16,754 2,974,505
IFRS RECONCILIATION OF PRIOR PERIOD COMPARATIVES - INCOME STATEMENT
For the year to 31 December 2006
UK GAAP IFRS adjustment IFRS 3 IFRS
IAS 38
# # # #
REVENUE 1,217,996 - - 1,217,996
Trading expenses (3,129,609) 31,380 - (3,098,229)
Other operating income 13,000 - - 13,000
EBITDA (1,898,613) 31,380 - (1,867,233)
Depreciation (48,990) - - (48,990)
Amortisation (44,667) - 33,509 (11,158)
Finance revenue 19,241 - - 19,241
Finance costs (33,506) - - (33,506)
Loss before taxation (2,006,535) 31,380 33,509 (1,941,646)
Taxation (58,024) - - (58,024)
Loss for the period (2,064,559) 31,380 33,509 (1,999,670)
Basic loss per ordinary share (pence) (0.53) - 0.02 (0.51)
Diluted loss per ordinary share (pence) (0.53) - 0.02 (0.51)
IFRS adjustments
(A) Development expenses previously written off as incurred under UK GAAP have
been capitalised under IAS 38.
(B) Goodwill amortisation previously charged under UK GAAP has been reserved as,
under IFRS, goodwill is not subject to amortisation.
IFRS RECONCILIATION OF PRIOR PERIOD COMPARATIVES - BALANCE SHEET
As at 31 December 2006
UK GAAP IFRS adjustments IFRS
# # #
ASSETS
Non-current assets
Property, plant and equipment 272,099 - 272,099
Intangible assets 752,129 64,889 817,018
TOTAL NON-CURRENT ASSETS 1,024,228 64,889 1,089,117
Current assets
Inventories 91,322 - 91,322
Trade and other receivables 150,088 - 150,088
Cash and cash equivalents 635,357 - 635,357
TOTAL CURRENT ASSETS 876,767 - 876,767
TOTAL ASSETS 1,900,995 64,889 1,965,884
EQUITY AND LIABILITIES
Equity attributable to equity holders
Issued share capital 2,079,911 - 2,079,911
Share premium 6,975,388 - 6,975,388
Retained earnings (9,265,633) 64,889 (9,200,744)
Other reserves 1,108,407 - 1,108,407
TOTAL EQUITY 898,073 64,889 962,962
Current liabilities
Trade and other payables 902,922 - 902,922
Loans 100,000 - 100,000
TOTAL LIABILITIES 1,002,922 - 1,002,922
TOTAL EQUITY AND LIABILITIES 1,900,995 64,889 1,965,884
TRADING EXPENSES
The Group incurred the following exceptional costs included within trading
expenses in the periods noted below:
Unaudited 30 June Unaudited 31
2006 December 2006
# #
Settlement of Winterman claim 200,000 200,000
Underprovision of PAYE/NI in earlier years 80,000 80,000
Misappropriation of funds 145,534 185,021
_______ _______
425,534 465,021
_______ _______
These items have been fully allowable for tax purposes with the exception of the
#200,000 Winterman claim.
The management team of the business changed in May 2006 and a review was
undertaken to ensure appropriate controls were in place.
Controls were increased as a consequence of this process and this led to the
discovery of a theft from the business. Full details are disclosed in the group
financial statements for the year ended 31 December 2006.
The above note in the comparative interim financial statements for the six
months to 30 June 2006 has been restated to reflect this item as an exceptional
item.
Full copies of the 2007 Interim Accounts can be obtained from 14 Savile Row,
London, W1S 3JN. Please contact Nigel Brunning, Chief Operating Officer, on 020
7734 2436 for further information.
This information is provided by RNS
The company news service from the London Stock Exchange
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