TIDMMAE
RNS Number : 8039D
Mallett PLC
02 April 2014
Mallett plc
Preliminary results for the year ended 31 December 2013
Mallett Plc ("Mallett" or the "Company" or the "Group"),
retailer in high quality antique furniture and works of art,
announces its results for the year ended 31 December 2013.
Highlights
-- Turnover increased by 16% to GBP11.8m (2012 - GBP10.2m)
-- Underlying trading performance improved to a break even
profit position (2012 - loss before tax of GBP0.3m)
-- Reported profit before tax GBP0.5m (2012 - loss before tax of GBP0.1m)
-- Successful sale of the Company's freehold property in
Clapham, London for GBP2.65m generating a profit of GBP0.6m.
-- A special dividend recommended of 12.7pence per share
For further information contact:
Giles Hutchinson Smith 020 7499 7411
Chairman's statement
Dear Shareholder
2013 has been a mixed year at the top end of the decorative arts
market, with some encouraging signs of a recovery in the US, but
with the UK and European market remaining stubbornly depressed. Our
strategy of promoting the Mallett brand in the emerging markets of
China and Brazil is proving successful.
Our results for 2013 show another improvement on the previous
year with underlying trading achieving a break-even result compared
to an underlying trading loss before tax in 2012 of GBP0.3m. This
has been achieved through a 16% increase in turnover to GBP11.8m
from GBP10.2m in 2012.
The reported profit before tax of GBP0.5m (2012 - loss before
tax of GBP0.1m) includes GBP0.6m for the profit on sale of our
freehold property in Clapham, London. The property was sold for
GBP2.65m and I am pleased to report that, as a result of this very
successful sale, the Board proposes to return GBP1.75m of the sale
proceeds to shareholders. This equates to 12.7p per share and we
are recommending this as a special dividend for approval at our AGM
on 27(th) May 2014.
After a slow third quarter of the year, Mallett US continued the
surge in sales it saw in the first half of the year, resulting in
full year sales more than double the prior year at GBP6.8m (2012 -
GBP3.1m). Furthermore, this represents the second highest sales
total from the US showroom since it opened in 2003. For this
reason, we have reviewed our planned sub-letting of part of the US
showroom and for the moment are retaining it in its entirety to
maximise the potential in the US market.
Our strategy of targeting new geographical areas has proved
successful with sales in China of over GBP1m in the year (2012 -
GBP0.1m). The recruitment of a local agent in Hong Kong plus
targeted visits by our Chief Executive has proved successful in
promoting the Mallett brand to the right client base in China, and
this is a model we intend to replicate in other emerging markets,
such as Brazil and in the Middle East.
The other exciting development is our new website which we plan
to launch in the Spring. It will be a multi-lingual, high quality
website offering authority, education and energy on our products
and the decorative arts market in general. It will be the key
marketing strategy in promoting our brand around the globe and
supporting our sales team, and it will also be used as a direct
sales tool by enabling client to purchase directly online.
We believe the structure and strategy we now have in place is
targeted at the growth areas of the decorative arts market and will
allow us to grow our sales and profits, and I am pleased to say
Michael Smyth-Osbourne is staying with us as Finance Director to
help with the next phase of our development.
Strategic Report
Our Business Model
Mallett is a global luxury retail brand specialising in the
finest pieces of furniture and works of art, primarily from the
18(th) century and Regency periods.
Mallett is recognised for the quality of pieces that it displays
and for selling only pieces of exceptional quality and a high level
of authenticity.
Mallett sources its pieces from around the globe, buying from
private collections, other dealers or at auction or acting as agent
to sell pieces, generally on behalf of private collectors. The
Mallett brand is underpinned by the outstanding knowledge and
expertise of the Mallett staff, who are able to identify the finest
items and differentiate them from the rest, often being able to add
provenance and research to enhance the quality of the piece.
Pieces will often require restoration to return them to the
quality they had when first made some 200 to 300 years earlier.
Again, the knowledge and expertise of the Mallett team is key to
how the restoration should be undertaken and what the outcome
should be.
Mallett sells its pieces through its two glamorous showrooms in
London and New York, through exhibiting at art and antiques fairs
around the world and through visits by the sales team to clients
around the world.
The showrooms at Ely House in Mayfair, London and at 929 Madison
Avenue, New York allow clients to see the pieces laid out in room
settings. Exhibiting at art and antiques fairs is a very effective
marketing tool as well as a good sales medium, as the prestigious
fairs that Mallett attends attract many clients into one location
for a concentrated period of time.
Our Strategy
In recent times, the decorative arts market, and particularly
the antique furniture market, has had to re-adjust to being less
fashionable than in previous decades. Our strategy has therefore
had to change in order to continue to deliver the business model
that has been successful for over 100 years.
The sales arena is changing. The growth of the internet has
increased access to the market and allowed easier access for the
Far East and other emerging markets. At the top end of the market
where Mallett operates, it is essential to maintain a top quality
showroom environment in which to showcase the pieces in which
Mallett specialises. But we also need to extend our reach to these
new markets and this we are doing by:
-- Developing a new website which will be high quality,
showcasing our pieces with extensive photographs and research,
educational with articles on the decorative arts and individual
aspects of the market, multi-lingual and have the ability to
transact online.
-- Recruiting local agents in the new and traditional markets to
promote the Mallett brand and develop relationships with key
clients in the region.
The success of Mallett is centred around the quality of product
it has to offer and so our strategy must continue to be to source
the finest pieces. The sourcing must be targeted at the areas -
type of material, era, value - that clients are demanding and to
our sales strategy. We will look to offer fantasy/gift objects
which clients would be prepared to buy on-line. We will continue to
pursue a balance between owned stock and consignment pieces in
order to balance margins, return on capital and offering a wide
range of stock where the quality matches the Mallett brand.
Our strategy remains flexible so we can alter it as the market
dictates. Mallett is a 150 year old brand which has been through
many cycles of fashion but it has always remained a strong brand
and our strategy is always to maintain that strength and use it to
best deliver profit growth.
Financial Review
2013 Trading performance
Our results for the year to 31(st) December 2013 show a profit
before tax of GBP0.5m. Included within this result is a one-off
profit of GBP0.6m from the sale of our freehold property in
Clapham, London. Underlying trading performance for 2013,
therefore, produced a break-even profit before tax position (2012 -
underlying loss before tax GBP0.3m).
Overall, Group turnover showed an increase of 16% to GBP11.8m
(2012 - GBP10.2m), and gross profit showed an increase of 13% to
GBP1.3m (2012 - GBP1.2m). These are encouraging increases which are
driven largely by increased sales in US and China.
US turnover more than doubled to GBP6.8m (2012 - GBP3.1m) which
is an excellent result and fully justifies our decision to reverse
our plan to downsize the New York showroom. The increase was driven
in part by the sale of 3 individual pieces of over GBP0.5m each but
it was also underpinned by a far greater volume of sales
highlighting the improved economic climate in US.
UK sales, however, showed a decline to GBP4.4m (2012 - GBP6.6m).
We held a number of events at our flagship London showroom, Ely
House, to promote the brand. These included the Great English
Furniture exhibition which celebrated the skills of some of the
best furniture makers in history and also provided an opportunity
for collectors to buy pieces which have not been on the market for
at least a quarter of a century. We also put on the Age of Elegance
exhibition which was a collaborative exhibition with London's most
prestigious Old Master paintings dealer, Colnaghi, which attracted
great interest, prompted in particular by the media coverage of the
exhibition. However, interest in the decorative arts is still not
strong in the UK and hence we are targeting our sales strategy at
the overseas markets, particularly in the Far East and South
America.
Costs
We continue to maintain a tight control on costs with our two
major expense items, staff costs and property costs remaining at a
similar level to the previous year. We also maintained our
marketing spend at a similar level to prior year at GBP0.6m (2012 -
GBP0.6m), exhibiting at four fairs again in the year and producing
two high quality catalogues.
Giles Hutchinson Smith visited China in November to continue our
marketing in that region with our local agent and continue our
sales drive there. The rest of the sales team made visits to a
number of cities in the US, including Chicago, Atlanta, and Los
Angeles and this will be a continuing theme as we target specific
areas for sales growth from our bases in London and New York.
Subsidiaries and associates
The sale of the business of Ely House Gallery Limited (formerly
James Harvey British Art Limited) (JHBA) and GBP80,000 of stock to
James Harvey was completed in May. During the period JHBA incurred
a trading loss of GBP0.1m (2012 - GBP0.2m) and this confirmed that
JHBA requires funding to be successful which Mallett did not wish
to provide at this time and therefore it was sensible for Mallett
to exit from that business.
Hatfields had another good year with its third party revenue
increasing by 37%, and a small increase in profit. The sale of our
Clapham property has necessitated Hatfields to relocate and they
have found new premises, close to the previous site, in Stockwell,
South London. It has required some refurbishment costing GBP0.1m.
The rent of GBP0.1m is at a similar level to that charged by
Mallett for the Clapham property, although this will be an
additional cost to the group as a whole going forward, as the rent
is now paid to a third party.
Masterpiece London Limited put on its fourth fair at the end of
June at the Royal Hospital, London. It was again regarded as a
successful fair and Mallett's share of the profit was at a similar
level to the prior year. No significant change in the format of the
fair is expected for 2014.
Balance Sheet and Cashflow
Shareholders' equity at 31 December 2013 was GBP14.5m (2012 -
GBP13.8m). The GBP0.7m increase in the year primarily relates to
the GBP0.4m profit for the year and GBP0.4m actuarial profit on the
Group's defined benefit pension scheme. The 2012 balance sheet has
been restated to take account of changes to the accounting for the
defined benefit pension scheme due to revisions to IAS19 -
Employment benefits and also to take account of changes to the
accounting for the lease commitments on the New York premises.
Property, plant and equipment has reduced by GBP2.3m, primarily
as a result of the sale of our freehold property in Clapham. The
sale completed after the year end, on 21(st) February 2014, but
sale contracts were exchanged on an unconditional basis on 21(st)
August 2013 and therefore the sale has been accounted in 2013.
Inventory value reduced to GBP11.4m at 31 December 2013 (2011 -
GBP11.9m). We have undertaken an external independent valuation of
our inventory as at 31 December 2013 which has delivered a value of
our inventory well in excess of the balance sheet value. We
continue to take items on consignment which allows us to exhibit
some exceptional pieces, the total cost of which had reduced to
GBP13.5m at 31 December 2013 (2012 - GBP16m) due to the sale of
several significant consignment pieces towards the end of the
year.
Net debt has increased slightly to GBP0.8m (2012 - GBP0.5m). The
Company is currently reviewing it overdraft facility requirements
with its bankers, Coutts & Co, and the directors are confident
that the Company will have adequate facilities in place to cover
the Group's cashflow requirements for the foreseeable future.
The pension deficit on the Mallett Retirement Benefits Scheme
(the "Scheme") has reduced to GBP1.0m (2012 - GBP1.6m) on an IAS19
basis. The latest tri-annual actuarial valuation of the Scheme as
at 31 May 2013 is in the process of being finalised by the
trustees. The deficit on an actuarial basis has also reduced and
the Company and trustees have agreed in principal that the annual
deficit contributions by the Company can be reduced to GBP190,000
per annum from GBP284,000 per annum.
Dividends
Having taken into account the cash requirements of the Group but
also recognising that we have not been able to make any dividend
distributions to our shareholders in recent times, the Board has
decided to return GBP1.75m to shareholders from the cash proceeds
we received from the sale of the Clapham property, and we intend to
do this by way of a special dividend of 12.7p per share. A
resolution will be proposed at our AGM on 27(th) May 2014 and, if
approved, the dividend will be paid on 13(th) June 2014 to
shareholders on the register on 16(th) May 2014.
Employees
We currently have 31 employees. Employee turnover has been low
for many years and our employees' long experience in the decorative
arts market is important and their contribution to the business
plays a key part in the delivery of our strategy. All employees are
encouraged to undertake training so that their skills are
up-to-date and all employees have an annual personal development
review.
All aspects of diversity, including gender, are considered at
every level of recruitment. All appointments are made on merit,
including those to the Board of Directors. We seek a composition of
staff with the right balance of skills and diversity to meet the
demands of the business and we do not consider that quotas are
appropriate and have therefore chosen not to set targets. The 31
employees are made up of 20 male employees and 11 female employees
of which 8 male and 2 female employees have senior management
roles. The Board is made up of 3 male executive directors and 2
male non-executive directors.
Outlook
We are excited by the launch of our new website with its
multi-lingual platform allowing far greater reach and significantly
increased marketing ability, plus the additional sales platform it
will provide. The decorative arts market remains challenging but we
believe we have a strategy to continue the sales growth we
delivered in 2013 through using the website to market our brand
more clearly in the emerging markets and use local agents to
reinforce this and generate sales.
Principal risks and uncertainties
The Group's operating results and liquidity are significantly
influenced by a number of risk factors, many of which are not
within its control. These factors, which are not ranked in any
particular order, include:
Banking crisis/financial shock to the global system
Loss of confidence in the banking sector by our clients will
make them much less likely to spend on high value luxury items such
as our goods. To manage this risk we monitor our cashflow and costs
closely to ensure security in times of low demand.
The strength of the UK and US economies and financial
markets
The antique and fine art market in which the Group operates is
centred on London and New York and is influenced by the overall
strength of the UK and US economies. Historically, over 70% of the
Group's sales are to UK and US clients. To manage this risk we
monitor our cashflow and costs closely to ensure security in times
of low demand.
The demand for antique furniture and works of art
The demand for antique furniture and works of art is influenced
not only by the economic conditions but also by changing trends in
the art market as to which kinds of property are most sought after
and by the collecting preferences of individual collectors, all of
which can be unpredictable. To manage this risk we focus on strong
client relations to maintain our awareness of changing tastes and
we take this into account when buying stock.
Market transparency
The internet is creating greater price transparency on pieces
sold, particularly at auction, which allows easier comparison of
prices and could potentially depress margins. We focus our
purchasing on items where we can add value by careful restoration
and/or by improved provenance, to create an acceptable margin.
Key personnel
The knowledge and expertise of the Group's buyers in acquiring
pieces of high quality and good value is critical to maintaining
the Company brand and to the success of the Group.
The ability of the Group's sales team to develop and maintain
relationships with potential buyers of antique furniture and works
of art is critical to the success of the Group. Accordingly, the
Group is highly dependent upon attracting and retaining
appropriately qualified personnel. A strongly incentivised bonus
structure is in place to reward success.
Competition
The art market is highly competitive, including competition with
other art dealers and with auctioneers. Strong client relationships
maintain loyalty to Mallett.
Value of artworks
The antique furniture and works of art market is not a highly
liquid trading market, as a result of which the realisable value of
inventory is relatively subjective and often fluctuates over time.
Our team is very aware of market conditions to know the value of an
item at any one time. On a periodic basis we consult with external
parties in our consideration of the carrying value of
inventories.
Availability and access to good buying opportunities
The availability of high quality items for Mallett to purchase
is very important in being able to maintain Mallett's reputation
for exhibiting the best. Our team maintains strong relationships
with collectors and other dealers to ensure awareness of when good
quality items become available.
Foreign currency exchange rate movements
A significant proportion of the Group's sales are in US Dollars
and a number are in Euros. Accordingly, fluctuations in exchange
rates can have a significant impact on the Group's results. US
Dollars are exchanged into GBP Sterling on a regular basis to match
cash received with sales made.
Retirement benefit pension obligations
Future costs and obligations relating to the Group's defined
benefit pension scheme are significantly influenced by changes in
interest rates, investment performance in the debt and equity
markets and acturial assumptions, each of which is unpredictable.
An actuarial valuation is performed every three years with a
recovery plan agreed with the trustees to eliminate any
deficit.
Statement of Directors' Responsibilities
The directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law
and regulations.
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 and have elected to
prepare the Company financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union. Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Group and Company and
of the profit or loss for 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 judgements and accounting estimates that are reasonable
and prudent;
-- state whether they have been prepared in accordance with IFRSs
as adopted by the European Union, 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;
-- prepare a director's report, the strategic report, and director's
remuneration report which comply with the requirements of the
Companies Act 2006.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act 2006
and, as regards the Group financial statements, Article 4 of
the IAS Regulation. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report
and the financial statements are made available on a website.
Financial statements are published on the Company's website in
accordance with legislation in the United Kingdom governing the
preparation and dissemination of financial statements, which
may vary from legislation in other jurisdictions. The maintenance
and integrity of the Company's website is the responsibility
of the directors. The directors' responsibility also extends
to the ongoing integrity of the financial statements contained
therein.
Directors' responsibilities pursuant to DTR4
The directors confirm to the best of their knowledge:
-- the Group financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as
adopted by the European Union and Article 4 of the IAS Regulation
and give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Group.
-- the annual report includes a fair review of the development
and performance of the business and the financial position
of the Group and the Parent Company, together with a description
or the principal risks and uncertainties that they face.
Approved by the board and signed on its behalf on 1 April 2014:
M.A. Smyth-Osbourne A.C.A. (Secretary)
MALLETT PLC
Consolidated Income Statement
Year ended 31 December 2013
restated
2013 2012
Notes GBP'000 GBP'000
Revenue 5 11,776 10,183
Cost of sales (10,433) (8,990)
Gross profit 1,343 1,193
Other operating income 6 594 (4)
Distribution costs (189) (205)
Administrative expenses (1,222) (1,172)
Operating profit/(loss) 7 526 (188)
Net interest 9 (26) (9)
Share of operating profit in associate 32 50
Profit/(loss) before income tax 532 (147)
Income tax (4) (1)
Profit/(loss) for the year 528 (148)
Loss on discountinued operation, net
of tax (120) (222)
408 (370)
---------- ---------
Profit/(loss) attributable to:
Owners of the parent company 457 (325)
Non controlling interest (49) (45)
408 (370)
---------- ---------
Earnings per share attributable to
the ordinary equity holders of the
parent 10
Profit and loss
Basic earnings per share 3.06p (2.78)p
---------- ---------
Diluted earnings per share 2.91p (2.78)p
---------- ---------
Profit and loss from continuing operations
Basic earnings per share 3.96p (1.11)p
---------- ---------
Diluted earnings per share 3.77p (1.11)p
---------- ---------
Consolidated Statement of Comprehensive
Income
Year ended 31 December 2013
2013 2012
GBP'000 GBP'000
Profit/(loss) for the year 408 (370)
Other comprehensive income:
Items that may be reclassified to profit
or loss:
Exchange differences on translation
of foreign operations (65) (162)
Items that will not be reclassified
to profit or loss:
Actuarial profit/(loss) on the defined
benefit pension scheme 431 (291)
Total other comprehensive profit/(loss)
for the year, net of tax 366 (453)
---------- ---------
Total comprehensive income/(loss) for
the year 774 (823)
---------- ---------
Total comprehensive income/(loss) attributable
to:
Owners of the parent company 823 (778)
Non controlling interest (49) (45)
774 (823)
---------- ---------
Consolidated Balance Sheet
at 31 December 2013
restated restated
2013 2012 2011
GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets 26 - -
Property, plant and equipment 2,464 4,741 4,608
Investment in associate 6 - -
Other receivables 398 430 105
2,894 5,171 4,713
-------- --------- ---------
Current assets
Inventories 11,406 11,906 12,304
Trade and other receivables 6,485 2,872 5,095
Cash and cash equivalents 1,435 798 325
19,326 15,576 17,724
Assets in disposal groups
classified as held for sale - 387 -
19,326 15,963 17,724
-------- --------- ---------
Total assets 22,220 21,134 22,437
-------- --------- ---------
Equity
Share capital 690 690 690
Capital redemption reserve 5,168 5,168 5,168
Own shares (473) (438) (513)
Retained profits 9,181 8,474 9,327
14,566 13,894 14,672
Non controlling interest (51) (89) (58)
Total equity 14,515 13,805 14,614
-------- --------- ---------
Current liabilities
Trade and other payables 3,842 3,225 4,009
Bank overdrafts and loans 2,189 1,457 1,446
6,031 4,682 5,455
Liabilities directly associated
with assets in disposal groups
classified as held for sale - 296 -
6,031 4,978 5,455
Non current liabilities
Retirement benefit pension
obligations 980 1,640 1,629
Other payables 694 711 740
1,674 2,351 2,369
-------- --------- ---------
Total liabilities 7,705 7,329 7,824
-------- --------- ---------
Total equity and liabilities 22,220 21,134 22,438
-------- --------- ---------
G.H. Hutchinson Smith Director
M.A. Smyth-Osbourne Director
Company Number 1838233
Statement of Changes
in Equity
at 31 December
2013
Consolidated
Capital Non
Share redemption Own Retained controlling Total
capital reserve shares profits Total interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2012
(restated) 690 5,168 (513) 9,327 14,672 (58) 14,614
Retained loss
for
the year - - - (325) (325) (45) (370)
Total other
comprehensive
loss for the
year - - - (453) (453) - (453)
Total
Comprehensive
loss for year - - - (778) (778) (45) (823)
Disposal of
interest
in subsidiary - - - (14) (14) 14 -
Own shares
exercised - - 149 (61) 88 - 88
Own shares
purchased - - (74) - (74) - (74)
At 31 December
2012
(Restated) 690 5,168 (438) 8,474 13,894 (89) 13,805
Retained loss
for
the year - - - 457 457 (50) 407
Total other
comprehensive
loss for the
year - - - 366 366 - 366
Total
Comprehensive
loss for year - - - 823 823 (50) 773
Acquistion of
interest
in subsidiary - - - (168) (168) 88 (80)
Own shares
exercised - - 35 52 87 - 87
Own shares
purchased - - (70) - (70) - (70)
At 31 December
2013 690 5,168 (473) 9,181 14,566 (51) 14,515
------------- ------------- ------------- ------------- ------------- ------------- -------------
Company
Special Capital
Share capital redemption Own Retained Total
capital reserve reserve shares profits equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2012
(restated) 690 1,761 5,168 (100) 15,554 23,073
Retained loss
for
the year - - - - (8,657) (8,657)
Own shares
exercised - - - 100 (100) -
At 31 December
2012
(Restated) 690 1,761 5,168 - 6,797 14,416
Retained loss
for
the year - - - - (1,723) (1,723)
At 31 December
2013 690 1,761 5,168 - 5,074 12,693
------------- ------------- ------------- ------------- ------------- -------------
The share premium, capital redemption reserve and special capital
reserve are not available for distribution.
Consolidated Cash Flow Statement
Year ended 31 December 2013
restated
2013 2012
Notes GBP'000 GBP'000
Profit/(loss) before income tax 532 (147)
Adjustments for:
Net interest 26 9
Share of operating profit in associate (32) (50)
Operating profit/(loss) 526 (188)
Adjustments for:
Depreciation 274 348
Freehold property impairment - (200)
Profit on the sale of property (558) -
Share-based payments 58 (60)
Defined benefit pension adjustment (229) (280)
Net exchange adjustments 21 (86)
Loss from discontinued operations (120) (222)
Movements in working capital:
Decrease/(increase) in inventories 546 272
(Increase)/decrease in receivables (810) 1,751
Decrease/(increase) in payables 241 (466)
Cash generated by operations (51) 869
Tax paid (4) (1)
Net Cash from Operating Activities (55) 868
-------- ------------
Investing Activities
Purchase of intangibles (26) -
Purchase of property, plant and equipment (27) (357)
Net Cash used in Investing Activities (53) (357)
-------- ------------
Financing Activities
Interest paid (26) (9)
Purchases of own shares (10) 74
Net Cash used in Financing Activities (36) 65
-------- ------------
Net decrease in Cash and Cash Equivalents (144) 576
Cash and Cash Equivalents at beginning
of year (545) (1,121)
Effect of foreign exchange rate changes (65) 0
Cash and Cash Equivalents at end of
year (754) (545)
-------- ------------
Notes to the Accounts
Year ended 31 December
2013
1 GENERAL INFORMATION
Mallett plc ("the Company") is a public limited company incorporated
in the United Kingdom. The address of it's registered office is
Ely House, 37 Dover Street, London W1S 4NJ.
These preliminary results do not comprise statutory accounts within
the meaning of Section 434 of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2012 were approved by the
Board of Directors on 27 March 2013 and delivered to the Registrar
of Companies. The statutory accounts for the year ended 31 December
2013 will be delivered to the Registrar of Companies following the
Company's AGM on 27 May 2014. The Independent Auditors' Report on
the 2012 and 2013 statutory accounts were unqualified and did not
draw attention to any matters by way of emphasis, and did not contain
a statement under 498(2) or 498(3) of the Companies Act 2006.
These preliminary results were approved for issue by the Board on
1 April 2014.
SIGNIFICANT ACCOUNTING
2 POLICIES
a) Basis of accounting and consolidation
The financial information in these preliminary results has been
prepared in accordance with International Financial Reporting Standards
(IFRS) and International Financial Reporting Interpretations Committee
(IFRIC) endorsed by the European Union (EU) and with those parts
of the Companies Act 2006 applicable to companies reporting under
IFRSs. This information does not constitute statutory accounts but
has been extracted from the audited consolidated financial statements
which will be sent to shareholders for their approval at the Company's
AGM on 27th May 2014.
The accounting policies adopted in these preliminary results have
been consistently applied to all the years presented and are consistent
with the policies used in the preparation of the statutory accounts
for the year ended 31 December 2012, other than as indicated below.
The Group accounts are prepared on a going concern basis which the
directors believe to be appropriate. The Group's forecasts and projections,
taking account of reasonably possible changes in trading performance,
show that the Group has sufficient financial resources. The Company
is currently reviewing it overdraft facility requirements with its
bankers, Coutts & Co, and the directors are confident that the Company
will have adequate facilities in place to cover the Group's cashflow
requirements for the foreseeable future. As a consequence the directors
have a reasonable expectation that the Company and Group are well
placed to manage their business risks and to continue in operational
existence for the foreseeable future. Accordingly, the directors
continue to adopt the going concern basis in preparing the consolidated
financial statements.
Prior year restatements
The 2012 Income Statement, Consolidated Balance Sheet and Consolidated
Cashflow have been restated to implement the revisions to IAS19
- Employment Benefits which are required to be applied retrospectively.
The revisions are explained in more detail in Changes in accounting
policies below.
The 2012 consolidated balance sheet has also been restated to reflect
the smoothing of the lease rental payments on two leases for the
Group's New York premises over the life of the leases. This has
led to an accrual being recognised of GBP746,000, with an equal
reduction to equity, in 2012 reflecting the number of years passed
on the leases. The accrual will be released to the income statement
over the remaining periods of the leases. The accrual has been taken
straight to reserves in 2012 and GBP15,000 has been released to
the profit and loss account in 2013.
b) Changes in accounting policies
New standards, interpretations and amendments from the 1 January
2013:
A number of new standards, interpretations and amendments effective
for the first time for periods beginning on or after 1 January 2013
have been adopted in these financial statements. The nature and
effect of each new standard, interpretation and amendment which
effect the Group's annual consolidated financial statements and
which have been adopted by the Group us detailed below.
IAS 1 - Presentation of items of Other Comprehensive Income - Amendment
to IAS1
The amendments require that items of other comprehensive income
must be grouped together into those that will or may be reclassified
into profit or loss and those that will not. As the amendment affects
presentation only, there is no effect on the Group's position or
performance.
IAS 19 - Employment Benefits (Revised)
The main changes as a consequence of the revision of IAS19 include:
- elimination of the "corridor" approach for deferring gains/losses
for defined benefit plans
- actuarial gains/losses on remeasuring the defined benefit plan
obligation/asset to be recognised in other comprehensive income
rather than in profit or loss, and cannot be reclassified in subsequent
periods.
- amendments to the timing of recognition for liabilities for termination
benefits
- Employee benefits expected to be settled (as opposed to "due to
be settled") wholly within twelve months after the end of the reporting
period are short-term benefits and are not discounted.
The revisions are required to be applied retrospectively and so
the effect of the revision is to transfer GBP58,000 from Other Comprehensive
Income to the Income Statement in 2012.
FINANCIAL RISK
3 MANAGEMENT
The Group's activities expose it to a variety of financial risks:
foreign exchange risk, credit risk and liquidity risk. Risk management
is carried out by the Board, who review the exposures of the Group
on an ongoing basis and put in specific procedures to mitigate this
risk where it is felt appropriate to do so.
a) Foreign exchange
risk
The Group operates internationally and is exposed to foreign exchange
risk arising from currency exposures, primarily with respect to
the US Dollar and the Euro. Foreign exchange risk arises from commercial
transactions, recognised assets and liabilities and net investments
in foreign operations.
The Group manages its holding of foreign currency, specifically
US Dollars, to ensure that the impact of currency fluctuations on
the Group are reduced. The use of forward contracts has been considered,
as a further measure to mitigate this risk. However the Group has
not entered into any contracts of this nature during the year.
b) Credit
risk
The Group considers that there is ordinarily low credit risk exposure.
The majority of the Group's sales are made to high net worth individuals
with good credit worthiness. The combination of this factor and
the repeat sales to regular customers limit the amount of credit
exposure of the Group.
c) Liquidity
risk
The Group maintains sufficient cash and availability of funding
through an adequate amount of committed credit facilities to ensure
that resources are available to take advantage of new business opportunities
as they arise.
d) Capital management
risk
The Group policy is to maintain a strong capital base so as to maintain
investor, creditor and market confidence and to sustain future development
of the business.
CRITICAL ACCOUNTING ESTIMATES AND
4 JUDGEMENTS
The Group makes estimates and assumptions concerning the future.
The resulting accounting estimates will, by definition, seldom equal
the related actual result. Estimates and judgements are continually
evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be
reasonable under the circumstances. The estimates and judgements
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the financial
period are discussed below.
a) Retirement benefit
pension obligations
The Group's defined benefit pension scheme liability is based on
key assumptions including return on scheme assets, discount rates,
mortality rates, inflation, future salary and pension costs. The
Group takes advice from independent actuaries as to the appropriateness
of the assumptions, but these assumptions may, individually or collectively,
be different to actual outcomes.
b) Carrying
value of inventory
Inventory is valued at the lower of cost and net realisable value.
The directors regularly review the carrying value of all items in
inventory and where their estimate of the market value of the item,
based on market conditions at the time and trends in customer demand,
is lower than the cost of the item, a provision is made to reduce
the carrying value of the item to the estimated market value.
c) Carrying value
of non-current assets
Non-current assets are recorded at the lower of cost and the estimated
recoverable amount. The estimated recoverable amount is the higher
of fair value less selling costs and the value in use. The value
in use calculation requires an estimate of the present value of
future cash flows expected to arise from the asset, by applying
an appropriate discount rate to the timing and amount of future
cash flows.
The directors are required to make judgements regarding the timing
and amount of future cash flows applicable to the asset, based on
current budgets and forecasts and extrapolated for an appropriate
period taking into account growth rates and expected changes in
prices and costs. The directors estimate the appropriate discount
rate using pre-tax rates that reflect current market assessments
of the time value of money and the risks specific to the individual
asset.
d) Carrying value
of trade recievables
The directors regularly assess the recoverability of trade receivables
and where there is objective evidence to indicate that the Group
will not be able to collect all amounts due according to the orginal
terms of the receivables a provision for impairment is made and
this recognised in the Income Statement within cost of sales.
e) Taxation
The Group is subject to income taxes in the UK and US. At each financial
period end judgement is required in determining the provision for
income taxes. The Group recognises liabilities for anticipated tax
issues based on the best estimates at the Balance Sheet date. Where
the final tax outcome of these matters is different from the amounts
that were initially recorded, such differences will impact the corporation
tax and deferred tax provisions in the period in which such determination
is made.
The amount of the deferred tax asset included in the Balance Sheet
of the Group is recognised only to the extent that it is probable
that future taxable profits will be available against which the
asset can be utilised. In estimating the amount of the deferred
tax asset that may be recognised, the directors make judgements,
based on current budgets and forecasts, about the amount of future
taxable profits and the timings of when these will be realised.
The directors have decided not to carry forward a deferred tax asset
in respect of unused tax losses due to the uncertain nature of the
antique furniture and decorative arts market and the timing of its
recovery.
5 SEGMENTAL ANALYSIS
The Group's operating segments have been determined based on the
management accounts reviewed by the Board of Directors (the Chief
Operating Decision Maker). The Group's activities in the year were
split into two business segments: dealing in antique furniture and
objets d'art through Mallett and providing restoration services
through Hatfields. The operations of Mallett are further split into
two geographical regions, UK and US, reflecting the location of
a Mallett showroom in each of those regions.
During the year the business and certain assets of James Harvey
British Art Limited ("JHBA") were sold. The remaining assets and
liabilities of JHBA were transferred to Mallett & Son (Antiques)
Ltd and JHBA became a dormant company. The results of JHBA for 2013
and 2012 have therefore been shown as discontinued operations.
The Board assesses the performance of the operating segments based
on turnover and EBITDA. Sales are reported by location of sales
outlet. The accounting policies of the reportable segments are the
same as described in note 2. There were no sales to any one client
representing more than 10% of turnover of the Group (2012 - Mallett
UK made sales to one client totalling GBP1.8m).
Transfer pricing between segments are set on an arm's length basis.
Segmental assets and liabilities consist of property, plant and
equipment, trade receivables, payables, cash at bank and inventories.
Segmental analysis
- continuing
operations
2013
Mallett
Dis-countinued
UK USA Hatfields Other Total operations
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income & expenses
information
Total Revenue 6,602 6,808 804 - 14,214 130
Inter segment
revenue (2,290) - (148) - (2,438) -
External revenue
by sales outlet 4,312 6,808 656 - 11,776 130
EBITDA (148) 358 26 6 242 (96)
Depreciation
and amortisation (127) (147) - - (274) -
Profit on sale of
Freehold property 558 - - - 558 -
Operating profit/(loss) 283 211 26 6 526 (96)
Share of operating
profit in associate - - - 32 32 -
Interest
revenue (27) - - - (27) -
Interest
expense 87 (86) - - 1 -
Profit/(loss)
before tax 343 125 26 38 532 (96)
Income tax (2) (2) - - (4) (24)
Profit/(loss)
for the year 341 123 26 38 528 (120)
------------------------ --- -------------- --------------- --------------- --------------- -------------- ---------------
Balance Sheet
information
Non current
Assets 1,055 1,426 9 - 2,490
Capital
expenditure 44 - 9 - 53
Total assets 14,623 7,236 361 - 22,220
Total liabilities,
excluding tax
liabilities 5,892 1,698 115 - 7,705
Investment in
associate 6 - - - 6
------------------------ --- -------------- --------------- --------------- --------------- --------------
2012
Mallett
Dis-countinued
UK USA Hatfields Other Total operations
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income & expenses
information
Total Revenue 7,352 3,123 777 - 11,252 844
Inter segment
revenue (772) - (297) - (1,069) -
External revenue
by sales outlet 6,580 3,123 480 - 10,183 844
EBITDA (157) 4 15 31 (107) (176)
Depreciation
and amortisation (106) (148) - (27) (281) (67)
Freehold property
impairment write back - - - 200 200 -
Operating profit/(loss) (263) (144) 15 204 (188) (243)
Share of operating
profit in associate - - - 50 50 -
Interest
revenue (10) - - - (10) -
Interest
expense 94 (93) - - 1 -
Profit/(loss)
before tax (179) (237) 15 254 (147) (243)
Income tax - (1) - - (1) 20
Profit/(loss)
for the year (179) (238) 15 254 (148) (222)
------------------------ --- -------------- --------------- --------------- --------------- -------------- ---------------
Balance Sheet
information
Non current
Assets 3,147 1,594 - - 4,741
Capital
expenditure 355 2 - - 357
Total assets 11,922 6,922 301 1,989 21,134
Total liabilities,
excluding tax
liabilities 6,099 1,113 117 - 7,329
Investment in
associate - - - - -
----------------------- -------------- --------------- --------------- --------------- --------------
The sales by destination
of goods is as follows:
2013
Mallett Mallett Hatfields Total Dis-countinued
UK US operations
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 1,218 1,036 640 2,894 141
Rest of
Europe 350 - 7 357 -
United States
of America 1,205 5,713 3 6,921 (11)
Far East 1,171 - - 1,171 -
Other 368 59 6 433 -
4,312 6,808 656 11,776 130
--------------- --------------- --------------- -------------- ---------------
2012
Mallett Mallett Hatfields Total Dis-countinued
UK US operations
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
United Kingdom 3,154 60 456 3,670 685
Rest of
Europe 1,203 55 11 1,269 24
United States
of America 1,348 2,846 9 4,203 135
Far East 66 - - 66 -
Other 809 162 4 975 -
6,580 3,123 480 10,183 844
--------------- --------------- --------------- -------------- ---------------
OTHER OPERATING
6 INCOME
2013 2012
GBP'000 GBP'000
Profit on sale of 558 -
freehold property
Other operating
income 36 (4)
594 (4)
--------------- ---------------
On 23 August 2013 the Group exchanged contracts on the sale of its
freehold property at 49 Clapham High Street, London for GBP2,650,000.
The sale completed on 21 February 2014 but the sale was unconditional
when contracts were exchanged on 23 August 2013 and therefore the
sale has been accounted for in 2013.
PROFIT/(LOSS) FROM
7 OPERATIONS
Operating profit/(loss) has been arrived
at after charging/(crediting):
2013 2012
GBP'000 GBP'000
Depreciation of property,
plant and equipment 274 281
Auditors' remuneration
(see below) 64 59
Net foreign
exchange losses (50) 26
Freehold property impairment
write back - 200
Lease payments 994 1,086
Profit on sale of 558 -
freehold property
- Audit
fees
- Fees payable for the audit of
the Company's annual accounts 20 14
- Fees payable for the audit of the Company's
subsidiary annual accounts 41 42
- Total
audit fees 61 56
- Other non-audit
services
- Other assurance
services 2 2
- Other services not
covered above* 1 1
- Total
non-audit
fees 3 3
- Total
fees 64 59
--------------- ---------------
* Other services includes work relating
to general consultancy work.
8 STAFF COSTS
2013 2012
GBP'000 GBP'000
Staff costs
(including Directors)
- wages
and salaries 1,460 1,502
- social
security
costs 118 137
- share based
payments 71 72
- pension scheme costs* 211 108
1,860 1,819
--------------- ---------------
* Includes GBP133,000 (2012 - GBP140,000) in respect of contributions
to defined contribution pension schemes and the Pension Protection
Fund levy for the year.
Number Number
Average number of persons (including directors
and part-time employees) employed by the
company
- restoration 8 8
- selling and
distribution 19 21
- administration 4 4
- non-executive
directors 2 2
33 35
--------------- ---------------
The Group believes that the directors of Mallett plc are the only
key management personnel under the definition of IAS 24 "Related
party disclosures".
9 NET INTEREST
2013 2012
GBP'000 GBP'000
Interest payable on bank loan and overdrafts
within five years not by instalments (26) (9)
(26) (9)
--------------- ---------------
10 BASIC AND DILUTED EARNINGS
PER SHARE
Continuing Dis- continued Total Continuing Dis- Total
operations operations operations continued
operations
2013 2013 2013 2012 2012 2012
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit/(loss) for
the year and earnings
used in basic EPS 528 (120) 408 (148) (222) (370)
Earnings used
in diluted EPS 528 (120) 408 (148) (222) (370)
-------------- --------------- --------------- --------------- -------------- ---------------
'000 '000 '000 '000 '000 '000
Weighted average number
of shares used in
basic EPS 13,334 - 13,334 13,334 - 13,334
Effects
of:
Group share
incentive plan 657 - 657 603 - 603
Weighted average number
of shares used in
diluted EPS 13,991 - 13,991 13,937 - 13,937
-------------- --------------- --------------- --------------- -------------- ---------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR IBMLTMBAMBJI
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