RNS Number:0508N
Hitchens Group PLC
01 February 2008
HITCHENS GROUP PLC ("Hitchens"or the "Company")
Preliminary Results for the Period Ending 30 September 2007
Hitchens announces its preliminary results for the period ending 30 September
2007. The Company (previously 'Azurite Investments plc'), was incorporated on 2
February 2007 and listed on PLUS for the purpose of making acquisitions in the
retail sector. The Company remained dormant until it admitted to AIM on 14
August 2007 and acquired the trading companies Hitchens Limited (through the
acquisition of its parent company Novabrand Limited) and Hot Deals Limited. The
period covered by the announcement therefore covers less than two full trading
months for Hitchens Limited and Hot Deals Limited. Non-statutory income
statements for Hitchens Limited and Hot Deals Limited for the year to 30
September 2007 have been included at the end of the announcement.
Hitchens provides clearance outlets for surplus stocks of clothing, footwear,
electrical and household goods. It also operates online through its web site
www.hitchenshotdeals.co.uk and through its eBay store 'Hitchens-Hot-Deals'.
Chairman's Statement
The overall trading results for the period to 30 September 2007 showed a pre tax
loss of �654,354. Turnover was �952,383 and shareholders' funds were �7,183,843.
Since admission to AIM in August, the Company has applied the net funds raised
to the stated objectives of re-stocking existing stores and opening new stores.
Three new graded electrical goods stores were opened in November and early
December.
The like for like sales comparison for existing stores and e-commerce in the
period September to 31st December show an improvement compared to the like for
like sales comparison during the three months pre-admission as the business
benefited from re-stocking its stores. The reversal of the decline however, from
38% to 14%, was below original expectations due to a number of factors including
the challenging market conditions and the difficulties encountered in sourcing
electrical stock under suitable terms.
In the light of a very difficult retail environment the management focus is
being concentrated on existing store performance.
The company has taken steps to reduce branch and central costs. Head Office is
being re-located into part of its Farnworth premises. Warehouse and distribution
costs are being reduced via changed arrangements with suppliers for direct store
delivery.
The sales forecasts for the current year have been revised based on current
performance and continuing challenging retail conditions. As a result the
achievement of profitability is likely to take longer than initially anticipated
Sales in the period were adversely affected by poor performance in graded
electrical goods. This was a direct result of a shortage of appropriate supply
on suitable terms.
The management is currently in detailed discussions with a private company,
which has beneficial trading terms and product sourcing capability in the graded
goods sector with a view to an acquisition. The current market conditions have
made raising finance for this purpose difficult in the short term and the
Company is exploring alternative ways of raising the additional finance.
I would finally like to thank the management and staff of the Company for their
continued hard work and efforts.
Paul Harris
CEO's Statement
The fragile state of the consumer economy led to a difficult three months in the
run up to Christmas although the level of like for like declines seen prior to
Admission have begun to reverse and the margin has started to improve.
Three new stores opened during November and December increasing the overall
trading space of the Company by over 6%.
Sales performance in the three month period to 31 December varied across the
different stock categories. The most challenging market was electrical where
retail prices are materially below last year. However, demand for the products
is still strong and we have opened new sources of supply for graded stock. In
addition we are in detailed negotiations with one of our graded electrical
suppliers with a view to an acquisition which will secure our source of supply.
In a cost cutting and efficiency drive we are in the process of relocating our
head office to our existing Farnworth premises. This will result in significant
costs savings and we therefore consider the Group to be well positioned for its
continuing turnaround. In addition our e-commerce management is also relocating
allowing us to amalgamate stock levels with the store and thus increase the
number of lines currently on offer and also improve operational efficiencies.
The Company is also exploiting other avenues of income and now offers cheque
cashing and extended warranties to its retail customers and is in the process of
obtaining a consumer credit license which will allow us to offer extended
credit. Other than providing an additional income stream this is also expected
to boost sales of higher ticket products.
We are viewing this coming year with caution and are running the business on the
basis that market conditions will remain difficult. To this end, we are focusing
on working capital, stock management and cash generation, as well as managing
our cost base tightly.
John Taylor
Consolidated Income Statement
Period ended
30 September
2007
�
Revenue 952,383
Cost of sales (701,906)
Gross profit 250,477
Administrative expenses (922,906)
Impairment losses -
Operating loss (672,429)
Finance income 18,075
Finance costs -
Finance income - net 18,075
Loss before tax (654,354)
Taxation 113,727
Loss for the period (540,627)
Attributable to:
Equity holders of the Company (540,627)
Loss per share for the equity holders of
the Company during the period (expressed
in pence per share)
- basic* (0.0780)
- diluted* (0.0571)
Balance Sheet
Group Company
As at 30 As at 30
September September
2007 2007
� �
Assets
Non-current assets
Property, plant and equipment 259,956 -
Intangible assets 8,654,264 -
Investment in subsidiary - 7,181,362
Deferred tax asset 113,727 13,372
9,027,947 7,194,734
Current assets
Inventories 706,867 -
Trade and other receivables 658,082 2,329,149
Cash and cash equivalents 652,334 5,955
2,017,283 2,335,104
Total assets 11,045,230 9,529,478
Capital and reserves attributable
to equity holders of the Company
Ordinary shares 932,500 932,500
Share premium 6,791,970 6,791,970
Retained earnings (540,627) (57,007)
7,183,843 7,667,463
Liabilities
Non-current liabilities
Borrowings 44,505 -
Financial liabilities 1,851,250 1,851,250
1,895,755 1,851,250
Current liabilities
Trade and other payables 1,910,092 10,765
Borrowings 55,540 -
1,965,632 10,765
Total liabilities 3,861,387 1,862,015
Total equity and liabilities 11,045,230 9,529,478
Cash Flow STATEMENT
Group Company
As at 30 As at 30
September September
2007 2007
� �
Cash flows from operating activities
Cash used in operations (1,633,696) (2,401,158)
Net cash used in operating
activities (1,633,696) (2,401,158)
Cash flows from investing
activities
Acquisition of subsidiaries,
net of overdraft acquired (531,017) (405,112)
Purchases of property, plant
and equipment (PPE) (5,000) -
Proceeds from the sale of PPE 4,500 -
Interest received 18,075 12,755
Net cash used in investing
activities (513,442) (392,357)
Cash flows from financing
activities
Net proceeds from issue of
ordinary share capital 3,457,500 3,457,500
Share issue costs paid (658,030) (658,030)
Net cash generated from
financing activities 2,799,470 2,799,470
Net increase in cash and cash
equivalents 652,332 5,955
Cash and cash equivalents at
the end of the period 652,332 5,955
The Notes to the accounts are an integral part of the extracted statements
above.
Extracts From Notes to the Accounts
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. BASIS OF PREPARATION
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the period ended 30 September. The statutory
accounts for the period ended 30 September 2007 will be finalised on the basis
of the financial information presented by the Directors in this preliminary
announcement and will be delivered to the Registrar of Companies following the
company's Annual General Meeting. The financial information set out in this
announcement was approved by the Board of Directors on 31 January 2008. The
financial statements will be sent to the shareholders in due course,
notification of which will be made via a further announcement.
The consolidated financial statements have been prepared on a going concern and
historical cost basis. The carrying values of recognised assets and liabilities
that are hedged items in fair value hedges, and are otherwise carried at cost,
are adjusted to record changes in the fair values attributable to the risks that
are being hedged. The consolidated financial statements are presented in
sterling.
The consolidated financial statements of Hitchens Group plc and all its
subsidiaries have been prepared in accordance with EU Endorsed International
Financial Reporting Standards (IFRS), IFRIC interpretations and the Companies
Act 1985 applicable to companies reporting under IFRS.
b. CONSOLIDATION
Subsidiaries are entities that are directly or indirectly controlled by the
Group. Control exists where the Group has the power to govern the financial and
operating policies of the entity so as to obtain benefits from its activities.
The purchase method of accounting is used to account for the acquisition of
subsidiaries by the Group. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at the fair
values at the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value of the
Group's share of the identifiable net assets acquired is recorded as goodwill.
All intra-group balances, transactions, income and expenses and profits and
losses resulting from intra-group transactions that are recognised in assets,
are eliminated in full. The financial statements of the subsidiaries are
prepared for the same reporting year as the Parent Company, using consistent
accounting policies.
2. SEGMENTAL INFORMATION
a. Primary reporting format - business segments
At 30 September 2007, the Group was organised into the following main business
segments:
* Retail sales
* Internet trading
The segment results for the period ended 30 September 2007 are as follows:
Retail Internet Unallocated Total
sales sales � �
� �
Revenue 874,480 77,903 - 952,383
Operating
profit/(loss)
excluding
impairment
of goodwill (562,967) (26,328) (83,134) (672,429)
Goodwill
impairment - - - -
Operating
profit/(loss) (562,967) (26,328) (83,134) (672,429)
Finance costs -
Finance income 18,075
Finance
income - net
(Note 21) 18,075
Loss before (654,354)
income tax
Income tax 113,727
credit
Loss for the year (540,627)
Segment assets consist primarily of property, plant and equipment, intangible
assets, inventories, trade and other receivables, and cash and cash equivalents.
Unallocated assets comprise deferred taxation and investments in associates.
Segment liabilities comprise operating liabilities.
Capital expenditure comprises additions to property, plant and equipment (note
6), intangible assets (note 7) and investments (note 9), including additions
resulting from acquisitions through business combinations (Note 26).
The segment assets and liabilities at 30 September 2007 and capital expenditure
for the period then ended are as follows:
Business Retail sales Internet
segment � sales Unallocated Group
� � �
Assets 8,161,691 2,761,439 8,373 10,931,503
Liabilities (1,989,871) (9,140) (1,862,376) (3,861,387)
Capital expenditure
(notes 6 and 7) 5,929,818 2,724,446 - 8,654,264
Segment assets and liabilities are reconciled to entity assets and liabilities
as follows:
Assets Liabilities
� �
Segment assets/liabilities 10,931,503 3,861,387
Unallocated:
Deferred tax 113,727 -
Total 11,045,230 3,861,387
b. Secondary reporting format - geographical segments
The Group's revenue arises entirely in the UK.
All the Company's assets are held in the UK and all capital expenditure has
arisen in the UK.
3. SHARE CAPITAL AND PREMIUM
Group and company Number of Ordinary Share
shares shares premium Total
(thousands) � � �
Proceeds from shares 586,667 440,000 3,017,500 3,457,500
issued
Acquisition of 656,667 492,500 4,432,500 4,925,000
subsidiaries (Note 26)
Share issue costs - - (658,030) (658,030)
1,243,334 932,500 6,791,970 7,724,470
The Company was incorporated on 2 February 2007 with an authorised share capital
of �450,000 comprising 600,000,000 ordinary shares of 0.075 pence each of which
two ordinary shares were issued at par for cash on incorporation.
On 12 February 2007 the Company issued 176,666,665 Ordinary Shares of 0.075
pence for cash at par.
On 5 March 2007, the Company issued 100,000,000 Ordinary Shares of 0.075 pence
for cash at a premium of 0.925 pence each. These shares were issued in
connection with the Company's admission to the Plus Market.
On 14 August 2007 the authorised share capital of the Company was increased by
�4,200,000 to �4,650,000, comprising 5,600,000,000 ordinary shares of 0.075
pence each. On the same day, the Company issued 490,445,015 Ordinary Shares at a
premium of 0.675 pence each as part consideration for the acquisition of
Novabrand Limited, and 166,221,692 Ordinary Shares at a premium of 0.675 pence
each as part consideration for the acquisition of Hot Deals Limited. The Company
also issued 310,000,000 Ordinary Shares for cash at a premium of 0.675 pence
each, in relation to the Company's admission to AIM.
As at 30 September 2007 there were unexercised share options amounting to
149,200,005 shares, at an exercise price of 0.75 pence per share. These options
relate to the Company's unapproved share option scheme and were granted to the
directors noted in the table below. These options were granted on 14 August 2007
and are allowed to be exercised between 10 August 2009 and 14 August 2017.
Number of ordinary shares*
S D Fine 49,733,335
P M Harris 49,733,335
J E Taylor 49,733,335
149,200,005
* The number of shares noted have not been adjusted in respect of the capital
reorganisation as disclosed in note 30 to the financial statements.
4, INCOME TAX EXPENSE
30 September
2007
�
Current tax -
Deferred tax credit (Note 17) (113,727)
(113,727)
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to profits of
the consolidated entities as follows:
30 September
2007
�
Loss before tax (654,354)
Tax thereon: (124,327)
Income not subject to tax -
Expenses not deductible for tax purposes 10,590
Tax credit (113,727)
5. EARNINGS PER SHARE
a. Basic
Basic earnings per share is calculated by dividing the profit attributable to
equity holders of the Company by the weighted average number of ordinary shares
in issue during the year.
Period ended
30 September
2007
�
Loss attributable to the equity holders of
the Company (540,627)
Weighted average number of ordinary shares
in issue (thousands) 692,833
Basic loss per share (pence per share) (0.0780)
b. Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. For the Group this represents share options
outstanding as at 30 September 2007.
For these share options, a calculation is performed to determine the number of
shares that could have been acquired at fair value (determined as the average
annual market share price of the Company's shares) based on the monetary value
of the subscription rights attached to the outstanding share options. The number
of shares calculated as above is compared with the number of shares that would
have been issued assuming the exercise of the share options.
Period ended
30 September
2007
�
Loss attributable to the equity holders of
the Company used to determine diluted earnings per share (540,627)
Weighted average number of ordinary shares 692,833
in issue (thousands)
Adjustments for:
- share options (thousands) 254,593
Weighted average number of ordinary shares
for diluted earnings per
share (thousands) 947,426
Diluted loss per share (pence per share) (0.0571)
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
6. BUSINESS COMBINATIONS
Acquisition of the Novabrand Limited
On 30 July 2007, the Group entered an agreement to acquire 100% of the share
capital of the Novabrand Limited which in turn owns Hitchens Limited, a
retailing company operating in the UK.
The acquired businesses contributed revenues of �874,480 and net loss of
�562,967 to the Group from the period from 1 August 2007 to 30 September 2007.
If the acquisition had occurred on 2 February 2007, Group revenue would have
been approximately �3,921,540, and loss allocations would have been
approximately �1,385,793. These amounts have been calculated using the Group's
accounting policies.
Details of net assets acquired and goodwill are as follows:
�
Purchase consideration:
- Cash paid -
- Direct costs relating to the acquisition 302,565
- Fair value of shares issued 3,678,338
- Deferred share consideration 517,213
Total purchase consideration 4,498,116
Fair value of net liabilities acquired 1,431,702
Goodwill 5,929,818
The goodwill is attributable to the retail sales business acquired as referred
to in Note 8.
The fair value of the shares issued was based on the closing mid market price of
an ordinary share on 14 August 2007, the last practicable date prior to the
acquisitions.
The assets and liabilities as of 14 August 2007 arising from the acquisition are
as follows:
Fair value
�
Property, plant and equipment 276,005
Inventories 498,807
Trade and other receivables 296,307
Trade and other payables (2,290,301)
Borrowings (212,520)
Net liabilities acquired (1,431,702)
Purchase consideration settled in cash 302,566
Bank overdraft in subsidiary acquired 127,785
Cash outflow on acquisition 430,351
Acquisition of Hot Deals Limited
On 30 July 2007, the Group entered an agreement to acquire 100% of the share
capital of Hot Deals Limited, a company operating in the UK. The acquired
businesses contributed revenues of �77,903 and net loss of �26,328 to the Group
from the period from 1 August 2007 to 30 September 2007. If the acquisition had
occurred on 2 February 2007, Group revenue would have been approximately
�170,687, and loss allocations would have been approximately �4,895. These
amounts have been calculated using the Group's accounting policies.
Details of net assets acquired and goodwill are as follows:
Purchase consideration: �
- Direct costs relating to the acquisition 102,546
- Fair value of shares issued 1,246,663
- Deferred share consideration 1,334,037
Total purchase consideration 2,683,246
Fair value of net liabilities acquired 41,200
Goodwill 2,724,446
The goodwill is attributable to the internet sales business acquired as referred
to in Note 8.
The fair value of the shares issued was based on the closing mid market price of
an ordinary share on 14 August 2007, the last practicable date prior to the
acquisitions.
The assets and liabilities as of 14 August 2007 arising from the acquisition are
as follows:
Fair value
�
Cash and cash equivalents 1,880
Trade and other receivables 21,855
Trade and other payables (64,935)
Net liabilities acquired (41,200)
Purchase consideration settled in cash 102,546
Cash and cash equivalents in subsidiary acquired (1,880)
Cash outflow on acquisition 100,666
7. RELATED-PARTY TRANSACTIONS
The financial statements include the financial statements of Hitchens Group plc
and the subsidiaries listed in the following table:
Country of % equity
incorporation interest
Name
Novabrand Limited England 100
Hitchens Limited England 100
Hot Deals Limited England 100
Hitchens Group Plc is the ultimate parent entity, the shares of Hitchens Group
Plc are traded publicly on the Alternative Investment Market (AIM).
Terms and conditions of transactions with related parties
The sales to and purchases from related parties are made at normal market
prices. Outstanding balances at the year-end are unsecured, interest free and
settlement occurs in cash.
Details of related party transactions
Littlewoods Shop Direct Home Shopping Limited ("Littlewoods") are considered to
be a related party by virtue of their substantial shareholding in the Company.
During the period, the Group purchased goods from Littlewoods amounting to
�86,992.
BAI International Limited ("BAI") are considered to be a related party by virtue
of their shareholding in the Company and also their controlling party, Martin
Abramson being a substantial shareholder in the Company. During the period, the
Group purchased goods from BAI amounting to �134,388, of which �40,141 remained
outstanding at 30 September 2007.
During the period, the Company incurred expenses amounting to �36,000 from
Dunham Associates Limited, of which P M Harris, a non-executive director, is
also a director and controlling party. The expenses incurred relate to
non-executive director services provided. As at 30 September 2007, the Group
owed �3,525 to Dunham Associates Limited.
Compensation of key management personnel of the Group
2007
�
Short-term employee benefits 130,871
8. EVENTS AFTER THE BALANCE SHEET DATE
On 21 December 2007, the shareholders approved a capital reorganisation of the
Company whereby the Ordinary Shares of 0.075 pence per share were consolidated
into "New Ordinary Shares" of 0.75 pence per share.
RESULTS OF SUBSIDIARY UNDERTAKINGS
The following information does not form part of the statutory accounts of the
company.
The results for Hitchens Limited and Hot Deals Limited for the accounting years
ended 30 September 2007 and 30 September 2006 were as follows.
Hitchens Hitchens Hot Deals Hot Deals
Limited Limited Limited Limited
Year ended Year ended Year ended Period ended
30 Sept 2007 30 Sept 2006 30 Sept 30 Sept
� � 2007 2006
� �
Revenue 6,731,485 10,997,545 632,321 364,030
Cost of sales (4,813,513) (7,211,400) (395,486) (245,109)
Gross profit 1,917,972 3,786,145 236,835 118,921
Distribution and (3,806,005) (4,437,426) (256,316) (167,068)
administrative costs
Operating loss (1,888,033) (651,281) (19,481) (48,147)
Finance income 10,623 9,901 - -
Finance costs (29,032) (35,140) - -
Finance costs (net) (18,409) (25,239) - -
Loss before tax (1,906,442) (676,520) (19,481) (48,147)
Hot Deals Limited commenced trading in December 2005.
Enquiries:
Hitchens Group plc Tel: 0161 487 5850
www.hitchensgroupplc.com
Simon Fine
Daniel Stewart & Company plc Tel: 020 7776 6550
Lindsay Mair/Oliver Rigby
This information is provided by RNS
The company news service from the London Stock Exchange
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