RNS Number:0053S
Thorntons PLC
26 February 2002
For Immediate Release 26 February 2002
THORNTONS PLC
ANNOUNCEMENT OF INTERIM RESULTS
FOR 28 WEEKS ENDED 12 JANUARY 2002
(UNAUDITED)
Thorntons, the specialist retailer and manufacturer of high quality chocolate,
toffee and other confectionery, today reports its Interim Results for the 28
weeks ended 12 January 2002.
Financial Highlights Results before property gains/losses*
2002 2001
Turnover £102.4m £99.4m
Operating profit £12.4m £11.9m
Profit before tax £10.3m £ 9.4m
Earnings per share 10.60p 10.61p
Operating cash flows £19.8m £18.9m
Dividend per share 1.95p 1.95p
*Property gains/losses include profit/loss on disposal of fixed assets and
movements on onerous lease provisions.
• Total Turnover up 3.0%
• Own shop like-for-like +4.1% over the 28 weeks
• Gross Margins up to 54.7% from 53.0%
• Underlying profit before tax +9.2%
• Operating Cash Flow +5.1%
• Gearing reduced by strong cash flow
• Sweet special food royalties on stream
• Impulse bar distribution agreed with Tesco
• Valentines Day like-for-like + 4.0%
Results after property gains/losses
2002 2001
Operating profit £12.0m £12.5m
Profit before tax £ 9.9m £10.0m
Earnings per share 10.16p 11.22p
Commenting Peter Burdon, Chief Executive, said:
"We are very pleased to report that our performance in the 28 weeks clearly
demonstrates that the business has been stabilised. Good progress on the organic
growth initiatives is also well underway and we plan to set out more of our
longer term growth plans in September with our preliminary results."
For further information, please contact:
Peter Burdon - Chief Executive, Thorntons PLC 01773 540550
Martin Allen - Finance Director, Thorntons PLC 01773 540550
Charles Ryland / Catherine Miles - Buchanan Communications 020 7466 5000
Business review
We outlined, some 18 months ago, a 3 year strategy to turnaround the company.
The first phase was to stabilise and focus. The second phase was to accelerate
organic growth opportunities and then, finally, to look at developing longer
term growth options.
We are very pleased to report to you that our performance in the 28 weeks to 12
January 2002, as set out below, clearly demonstrates that the business has been
stabilised. Good progress on the organic growth initiatives is also well
underway and we plan to set out more of our longer term growth plans in
September with our preliminary results.
Sales
In the 28 weeks, to 12 January 2002, overall sales increased by 3.0% to £102.4m
but this encouraging improvement understates some of the progress made.
We trimmed back the Own Shop estate, a net reduction of 18 to 394, but still
grew total own shop sales by +2.1%. A more exciting events programme, better
products and good in-store management helped to drive up like-for-like sales in
the 28 weeks by 4.1% (compared with 0.4% in the same period last year).
Christmas was very buoyant with like-for-like sales up 8.0% for the 7 weeks to
29th December (compared with 0.6% last year).
We are pleased to report that the like-for-like performance for the first 5
weeks of the second half is up +2.6% with +4.0% for Valentines Day.
The plan to expand Franchise locations is ahead of our expectations with 33 net
new sites opened over the last 12 months making a total of 181 sites, helping to
contribute to a 30.9% sales increase for our franchise business.
Commercial sales were down by £1.6m to £9.2m, with the majority of this
reduction being sales of non-Thorntons branded, lower margin products. We also
transferred some corporate, branded sales into Mail Order in order to provide a
better, more efficient and more personalised service.
Including these transferred sales, E-commerce/Mail Order, which combines the
traditional Thorntons confectionery offer with a greater gift choice, such as
flowers and wine, doubled sales compared with the same period last year and is
profitable.
Margins
As expected, gross profit margins improved in the 28 weeks from 53.0% to 54.7%.
This improvement was driven by three factors. First, production levels returned
to normal levels in the period compared to last year when the factory was
somewhat under-utilised due to stock reductions. Second, we continued to reduce
the number of events led by discounts and increased the emphasis on value added
product offers. Finally, our work on range reduction contributed towards
improved manufacturing efficiencies and increased sales of higher margin
products.
Selling and distribution costs did rise as a result of increased and well
targeted marketing activity plus normal rent and rate reviews. Good internal
controls kept most other cost rises to a minimum enabling the return on sales,
after these costs, to increase from 18.2% to 19.3% in the 28 weeks.
Cash
Total net debt has decreased by 20.0% over the last 12 months to £30.3m.
Operating cash flows improved by 5.1% to £19.8m and working capital reduced by
£3.0m to again provide strong net cash inflow from operating activities of
£22.8m in the 28 weeks. Capital expenditure remains under tight control and as a
result cash on deposit in the UK rose from £6.5m in January 2001 to £13.9m.
Gearing levels have fallen from 82.0% (restated) to 66.6%.
Profit and Dividend
Underlying operating profit, excluding one-off property gains and losses, rose
from £11.9m to £12.4m. A significant reduction in interest costs helped to lift
profit before tax, on the same basis, from £9.4m to £10.3m, up 9.2%.
The tax rate charged in the 6 months was 32% up from an underlying 30% last
year. After taking account of one-off property related gains and losses, which
do not affect cashflow, profit before tax fell marginally to £9.9m from £10.0m.
As a result of these property charges and the tax rise, basic earnings per share
has fallen from 11.22p (restated) to 10.16p. Excluding the property items,
earnings per share is unchanged.
Your Board has therefore declared an unchanged interim dividend of 1.95 pence
per share. The interim dividend will be paid on 30 April 2002 to shareholders on
the register at close of business on 2 April 2002.
Accounting standard changes
Financial Reporting Standard 19, which requires full provision for deferred
tax, has now been incorporated into the accounts and restatements of prior
periods made, where applicable. The impact for the 28 weeks ended 6 January 2001
is a decrease in basic earnings per share from 11.56p to 11.22p, gearing
increases from 68.3% to 82.0%, whilst net assets per share reduced from 83.30p
to 69.40p.
Strategic Initiatives
In September we set out our vision to be:
'The UK's leading retailer and distributor of sweet special food' and outlined 5
strategic initiatives to set us on our way.
1. New Customer Proposition - 'Signature Stores'
We have now opened all 9 planned stores; 8 of them operating over Christmas. We
will formally evaluate them at the end of this month. We are generally pleased
with the new concept as it is attracting a new and younger customer.
Nevertheless, we have identified a number of additional opportunities to improve
the proposition further. In the coming months, we will open a small number of
additional stores, building in the current learning.
2. Product Range Optimisation
The first stage of this initiative is largely complete. Over the last 6 months,
we have reduced the total product range by around 20% and phased out the deleted
lines without significant customer disappointment or write-off cost. We have now
built a very strict 'one in one out' philosophy into our internal processes for
new product introductions to avoid the over expansion of the product range in
the future. We will continue to look for further range reduction opportunities.
3. Cafe Thorntons
There are now 25 sites operating. These include new cafes into existing stores
at Warrington and North Shields, where we have taken the opportunity to
implement a number of improvements over the previous offer. We plan to refit 2
cafes in the summer as 'Signature Cafes'. These cafes will have a radically
improved proposition, with enhanced service, a better food and drink offer and
different layout to benefit customers and colleagues alike.
4. Licensed Products
This new venture for Thorntons is in its infancy but the initial results confirm
our view that our brand name fits very well onto a broad range of 'sweet
special food'. The initial range of cakes and puddings only started to appear
gradually on shelves from September 2001 but over the 13 weeks royalties
totalled £56,000. We have a current range of 7 core products plus additional
seasonal lines and have listings in most of the key supermarkets. Over the next
few months, there will be new developments in biscuits, desserts and ice cream
all meeting the same high quality standard that we have set in this sector of
the growing premium food market.
5. Impulse Products
We were pleased to announce that we had signed an initial agreement to begin to
distribute a premium range of Thorntons branded chocolate bars through the 700
strong Tesco chain of stores. This marks a major step forwards in strategy, as
it will prove that we can sell profitably the same Thorntons branded products
through other outlets as well as our own stores.
Products such as bars are purchased, largely, for immediate consumption and
therefore availability to purchase is of greater importance than, for example,
boxed chocolates purchased for a gift. Our overall share in this market is less
than 0.5% and we believe there is a significant opportunity for us to increase
this. Unlike the licensed cakes and puddings, these products are manufactured at
Thornton Park helping to balance production capacity, especially outside the key
seasons of Christmas and Easter.
Prospects
We have demonstrated that we have the business well under control with
increasing sales, higher margins and lower borrowings. The organic growth
initiatives are beginning to deliver with the promise of significant upside.
We must leverage and build upon our competencies and assets if we are to realise
our vision of becoming 'The UK's leading retailer and distributor of sweet
special food'. There are many opportunities in front of us but we must carry out
a full evaluation to ensure our future actions maximise shareholder value at a
reasonable level of risk. We are now progressing with this evaluation and look
forward to being able to outline the next phase of our strategy in September.
John Thornton Peter Burdon
Chairman Chief Executive
25 February 2002 25 February 2002
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Unaudited results for 28 weeks ended 12 January 2002
For 53 weeks For 28 weeks ended For 28 weeks ended
ended 12 January 2002 6 January 2001
30 June 2001 Notes (unaudited) (restated)
(restated) £'000 £'000
£'000
159,921 Turnover 2 102,384 99,422
(76,722) Cost of sales (46,419) (46,676)
83,199 Gross profit 55,965 52,746
(62,297) Other selling and distribution costs (36,183) (34,718)
584 Net release of onerous lease provisions 6 511
(61,713) Selling and distribution costs (36,177) (34,207)
(11,427) Other administrative costs (7,572) (6,216)
(73) (Loss)/profit on disposal of fixed assets (420) 70
(11,500) Administrative expenses (7,992) (6,146)
162 Other operating income 3 170 83
10,148 Operating profit 11,966 12,476
369 Interest receivable and similar income 67 189
(4,432) Interest payable and similar charges 4 (2,167) (2,666)
6,085 Profit on ordinary activities before taxation 9,866 9,999
(1,570) Tax on profit on ordinary activities 5 (3,157) (2,583)
4,515 Profit on ordinary activities after taxation 6,709 7,416
(4,490) Dividends 6 (1,288) (1,288)
25 Retained profit for the period 5,421 6,128
Key ratios (restated)
6.84p Basic earnings per ordinary share 7 10.16p 11.22p
6.83p Fully diluted earnings per ordinary share 7 10.12p 11.21p
6.80p Dividend per ordinary share 6 1.95p 1.95p
Key ratios - as originally reported
6.99p Basic earnings per ordinary share n/a 11.56p
6.98p Fully diluted earnings per ordinary share n/a 11.55p
Continuing operations
All amounts above relate solely to continuing operations.
Historical cost results
There was no material difference between the result disclosed above and the
result on an unmodified historical cost basis.
Restatement of comparatives
The adoption of FRS 19 'Deferred Tax', as explained in note 1, has resulted in
changes to prior period reported results.
Consolidated statement of total recognised gains and losses
For 53 weeks ended For 28 weeks ended For 28 weeks ended
30 June 2001 12 January 2002 6 January 2001
£'000 £'000 £'000
4,515 Total recognised gains and losses for the 6,709 7,416
period
- Prior period adjustment - FRS 19 (9,130) -
4,515 Total recognised gains and losses since last (2,421) 7,416
annual report
CONSOLIDATED BALANCE SHEET
As at 30 June 2001 As at 12 January As at 6 January 2001
(restated) 2002 (restated)
£'000 £'000 £'000
Fixed assets
96,457 Tangible assets 91,287 100,368
290 Investments - purchase of own shares 290 290
96,747 91,577 100,658
Current assets
13,220 Stocks 14,662 14,364
9,024 Debtors 11,314 9,401
3,275 Cash at bank and in hand 17,658 9,032
25,519 43,634 32,797
Creditors: amounts falling due within one year
(10,556) Bank loans, overdrafts and finance leases (10,843) (2,297)
(23,686) Other creditors (31,151) (29,382)
(34,242) (41,994) (31,679)
(8,273) Net current assets/(liabilities) 1,640 1,118
88,024 Total assets less current liabilities 93,217 101,776
(37,234) Bank loans and finance leases falling due after (37,133) (44,611)
one year
(813) Other creditors falling due after one year (710) (1,097)
(9,130) Deferred tax provision (9,130) (9,025)
(750) Onerous lease provision (725) (843)
40,097 Net assets 45,519 46,200
Capital and reserves
6,656 Share capital 6,656 6,656
12,399 Share premium 12,400 12,399
505 Revaluation reserves 505 505
20,537 Profit and loss account 25,958 26,640
40,097 Equity shareholders' funds 45,519 46,200
Key ratios (restated)
44,515 Net debt 30,318 37,876
111.0% Gearing 66.6% 82.0%
60.25p Net assets per share 68.40p 69.40p
Key ratios - as originally reported
90.4% Gearing n/a 68.3%
73.95p Net assets per share n/a 83.30p
Movements in shareholders' funds
For 53 weeks ended For 28 weeks ended For 28 weeks ended
30 June 2001 12 January 2002 6 January 2001
(restated) £'000 (restated)
£'000 £'000
4,515 Profit after tax attributable to shareholders 6,709 7,416
(4,490) Dividends (1,288) (1,288)
25 Retained profit attributable to shareholders 5,421 6,128
- New share capital issued 1 -
25 Net increase in shareholders' funds 5,422 6,128
49,097 Opening shareholders' funds - as originally 49,227 49,097
reported
(9,025) Prior period adjustment - FRS 19 (9,130) (9,025)
40,072 Opening shareholders' funds - as restated 40,097 40,072
40,097 Closing shareholders' funds 45,519 46,200
CONSOLIDATED CASH FLOW STATEMENT
Unaudited results for 28 weeks ended 12 January 2002
For 53 For 28 weeks For 28 weeks
weeks ended ended
ended Note 12 January 2002 6 January 2001
30 June £'000 £'000
2001
£'000
21,117 Cash inflow from operating activities 8 22,794 22,050
(4,155) Returns on investments and servicing of finance (2,035) (2,397)
902 Taxation (575) 1,305
(1,587) Capital expenditure and financial investment (1,140) (1,271)
(4,492) Equity dividends paid (3,204) (3,204)
11,785 Cash inflow before use of liquid resources and 15,840 16,483
financing
264 Management of liquid resources (13,871) (6,237)
- Financing - issue of shares 1 -
(10,716) Financing - decrease in debt (1,499) (9,547)
1,333 Increase in cash in the period 471 699
Reconciliation of net cash flow to movement in net debt
For 53 weeks For 28 weeks For 28 weeks
ended ended ended
30 June 12 January 6 January
2001 2002 2001
£'000 £'000 £'000
1,333 Increase in cash in the period 471 699
10,716 Cash outflow from decrease in debt 1,499 9,547
(264) Cash outflow from increase in liquid resources 13,871 6,237
11,785 Change in net debt resulting from cash flows 15,841 16,483
(4,168) Inception of new finance leases (1,685) (2,117)
141 Translation difference 41 31
7,758 Movement in net debt in the period 14,197 14,397
(52,273) Net debt at beginning of period (44,515) (52,273)
(44,515) Net debt at end of period (30,318) (37,876)
Analysis of net debt
Group: for the 28 weeks At 30 June Cash flow Other non-cash Exchange At 12 January
ended 12 January 2002 2001 £'000 changes movement 2002
£'000 £'000 £'000 £'000
Cash at bank and in hand 3,275 471 - 41 3,787
Debt due within one year (7,915) - - - (7,915)
Debt due after one year (31,659) - - - (31,659)
Finance leases (8,216) 1,499 (1,685) - (8,402)
(47,790) 1,499 (1,685) - (47,976)
Cash on deposit - 13,871 - - 13,871
Total net debt (44,515) 15,841 (1,685) 41 (30,318)
Group: for the 28 weeks At 24 June Cash flow Other non-cash Exchange At 6 January
ended 6 January 2001 2000 changes movement 2001
£'000 £'000 £'000 £'000 £'000
Cash at bank and in hand 1,801 699 - 31 2,531
Debt due within one year (8,350) 8,350 - - -
Debt due after one year (39,574) - - - (39,574)
Finance leases (6,414) 1,197 (2,117) - (7,334)
(54,338) 9,547 (2,117) - (46,908)
Cash on deposit 264 6,237 - - 6,501
Total net debt (52,273) 16,483 (2,117) 31 (37,876)
Notes to the interim financial statements
1. Basis of preparation of the interim financial statements
The unaudited interim financial statements, which are abridged, have been
prepared on the basis of accounting policies set out in the Annual Report 2001
after giving effect to the adoption of FRS 19 'Deferred Tax'. The consolidated
balance sheet as at 30 June 2001, the consolidated profit and loss account and
consolidated cash flow statement for the 53 weeks ended 30 June 2001 are
extracts from the Annual Report 2001, which has been delivered to the Registrar
of Companies, as restated for assets and liabilities in respect of provisions
for deferred tax, in accordance with FRS 19. The auditors' report in the Annual
Report 2001 was unqualified and did not contain a statement under Section 237 of
the Companies Act 1985.
In these interim financial statements, FRS 19 'Deferred Tax' has been adopted
for the first time. As a result the opening balances and comparatives for the 28
weeks ended 6 January 2001 and the 53 weeks ended 30 June 2001 have been
restated. This is to provide for full provision of deferred tax arising from
timing differences between the recognition of gains and losses in the financial
statements and their recognition in a tax computation.
2. Segmental analysis
The Group's continuing activities arise from UK operations only.
3. Other operating income
For 53 weeks ended For 28 weeks ended For 28 weeks ended
30 June 2001 12 January 2002 6 January 2001
£'000 £'000
£'000
106 Rents receivable 59 55
56 Franchise license fees 55 28
- Licensing royalties 56 -
162 Other operating income 170 83
4. Interest payable and similar charges
For 53 weeks ended For 28 weeks ended For 28 weeks ended
30 June 2001 12 January 2002 6 January 2001
£'000 £'000 £'000
768 Borrowings wholly repayable within one year 254 736
3,078 Unsecured loan note interest payable 1,600 1,630
13 Exchange differences and other interest - 12
573 Interest on finance lease repayments 313 288
4,432 Interest payable and similar charges 2,167 2,666
5. Tax on profit on ordinary activities
For 53 weeks ended For 28 weeks ended For 28 weeks ended
30 June 2001 12 January 2002 6 January 2001
(restated) (restated)
£'000 £'000 £'000
1,734 UK corporation tax on profits of the period 3,155 2,876
175 Onerous leases taxation 2 153
(444) Adjustments in respect of previous periods - (447)
1,465 Total UK corporation tax 3,157 2,582
- Overseas taxation - 1
1,465 Total current tax 3,157 2,583
105 Total deferred tax - -
1,570 Tax on profit on ordinary activities 3,157 2,583
The tax on profit on ordinary activities, including deferred tax, for the 28
weeks ended 12 January 2002 is based on the estimated effective rate for the
full period.
6. Dividends
The Directors have declared an interim dividend of 1.95 pence per share (2001:
1.95 pence per share), which amounts to approximately £1,288,000 (2001:
£1,288,000). The dividend will be paid on 30 April 2002 to shareholders
registered on 2 April 2002. The shares will be quoted ex-dividend on 27 March
2002.
7. Earnings per share
The calculations of earnings per share are based on the following profits after
taxation and numbers of shares:
2002 2002 2002 2001 2001 2001
Results Basic Fully diluted Results Basic Fully diluted
£'000 earnings Earnings (restated) earnings earnings
per share Per share £'000 per share per share
(restated) (restated)
Profit before onerous leases 6,705 10.15p 10.11p 7,058 10.68p 10.67p
credit
Onerous leases credit 4 0.01p 0.01p 358 0.54p 0.54p
Profit on ordinary activities 6,709 10.16p 10.12p 7,416 11.22p 11.21p
Weighted average number of shares:
2002 2001
Number of Number of
Ordinary Shares Ordinary Shares
Basic weighted average number of ordinary shares 66,057,578 66,056,697
Dilutive effect from share options* 236,919 59,187
Fully diluted weighted average number of ordinary shares 66,294,497 66,115,884
*Average market price of the Group's shares during the period £0.9088 £0.9068
8. Reconciliation of operating profit to operating cash flows
For 53 weeks ended For 28 weeks ended For 28 weeks ended
30 June 2001 12 January 2002 6 January 2001
£'000 £'000 £'000
10,148 Operating profit 11,966 12,476
73 Loss/(profit) on disposal of fixed assets 420 (70)
13,117 Depreciation charges 7,447 6,977
(584) Non-cash movements in provisions (6) (511)
22,754 Operating cash flows before working capital 19,827 18,872
movements
(107) Cash flows relating to previous years provisions (19) (87)
3,781 (Increase)/decrease in stocks (1,442) 2,637
(1,413) Increase in debtors (2,290) (1,790)
(3,898) Increase/(decrease) in creditors 6,718 2,418
21,117 Net cash inflow from operating activities 22,794 22,050
9. Interim Report 2002
The Interim Report 2002 will be sent to all registered shareholders during March
2002. Copies for general release will be available from the Company Secretary,
Thorntons PLC, Thornton Park, Somercotes, Alfreton, Derbyshire, DE55 4XJ.
The Interim Report 2002 will also be available on the company's website
(www.thorntons.co.uk).
- ENDS -
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