The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Regulation 11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310 ("MAR"). With the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.

 

  13 December 2022

 

JOHN LEWIS OF HUNGERFORD PLC

FINAL RESULTS

  John Lewis of Hungerford plc ("John Lewis of Hungerford" or the "Company"), the specialist kitchen manufacturer and retailer, announces its final results for the year ended 30 June 2022.

 

 

Chief Executive's Business Review

 

We are pleased to report that John Lewis of Hungerford achieved sales for the year ended 30 June 2022 of £10.3 million (2021: £7.9 million), an increase of 30.9 per cent.  The Company celebrated its 50th Anniversary in the Summer of 2022, and in this milestone year, has achieved sales in excess of £10 million for the first time.  Profit Before Tax and non-recurring costs* was £166k (2021: Profit Before Tax £80k).  Underlying EBITDA* (pre IFRS 16) was £500k (2021:  EBITDA £424k).

 

Sales of £10.3 million do not fully reflect the strength of the trading performance of the Company throughout the reported year. The orders secured by our 12 stores were £12.3 million (FY21: £9.3 million).  The final quarter of the year was impacted by disruption from Covid-19 within the factory in Wantage, with the highest level of interruption to production throughout the pandemic and a total of 81-man days lost. This included periods where sections of the factory had to close completely.  Without this disruption, a still higher proportion of the £12.3 million orders would have been completed before 30 June 2022, and recognised as sales in the year, with the Gross Margin on these sales flowing through to profit.   However, this disruption to the final quarter of FY22 has impacted positively the start of our new financial year to 30 June 2023, with a significantly stronger order book secured, of £5.3 million compared to £3.2 million at the same point last year. 

 

Gross Margin for the year declined by -1.2% points in the year to 45.9%.  The Company experienced some extreme increases in raw material prices in the year, with some increases more than 100%.   The Company took action to pass these cost increases on, by raising the retail prices. However, there is a time lag between quoted business and completing the delivered sale and installation, which on average is 2-3 months later, whereby the impact of the price increases will not fully be seen in the year we report today.   We are now seeing welcome signs of some level of stabilisation for raw material prices.

 

The year finished with a positive gross cash position of £1,473k.  The Company has total loans of £1,116k, largely secured on its freehold properties. Net cash, excluding IFRS 16 lease liabilities, was therefore £357k (2021: net cash £165k).   The Company was grateful for the Government support during the pandemic years FY20/FY21, which allowed for delayed phasing of VAT and PAYE payments.  All of the agreed deferred payments were made promptly during the year ended 30 June 2022 and the Company is fully up to date, with no further outstanding deferred payments.

 

 

The Company owns the freeholds of its factory in Wantage, and its showroom in Hungerford.  These freeholds have been revalued as at 30 June 2022, with the total valuation increased by £584k to £2,431k.  The revaluation is reflected in the Accounts to 30 June 2022 as a movement in the revaluation reserve.  The Company's Net Assets as at 30 June 2022 were £1.4 million (2021: £0.8 million).

 

The costs have been commensurate with the business reporting £10.3 million of turnover, combined with deposits secured against a further £2 million of sales. The Board are confident that developing the infrastructure throughout the FY22 year has secured a strong foundation for continued growth over the forthcoming period, in a structurally improved operating model, which was able to secure £12.3 million of orders within FY22.

 

 

* PBT before one-off, non-recurring costs of £166k /EBITDA of £500k is after adjusting for £152k of one-off non-recurring costs which occurred in the year to June 2022, and which are not expected to be repeated going forward. These non-recurring costs are related to project and one-off restructuring costs. Reported PBT for the year ended 30 June 2022 was £14k.

 

 

 

Marketing

The Company has continued to develop its digital capabilities, working with expert partners in the field. Fueled by compelling new photography from our successfully completed projects, the business has created a convincing portfolio to demonstrate its credentials to our discerning customer.

 

The substantial increase in orders secured has demonstrated the success of being selective in the choices of our marketing channels. From data driven digital campaigns to enhancing our presence in the social media arena, with an emphasis on Instagram, the Company continues to work closely with our PR advisory team, to secure the right traffic to our website, to convert into successful client relationships. With a focused approach on enhancing the customer journey through our website, we are seeing improvements in the level of appointments coming into the business.

 

The marketing of our 50th Birthday commenced in the Summer of 2022 and has seen the launch of our new Brochure, which has been extremely well received. It is a ground-breaking piece of work, providing both inspiration and learning for our customer, to support our dialogue during the sale. This has helped our customers to appreciate the difference in the unique customer experience offered by the John Lewis of Hungerford team. Our 50th Birthday in the summer coincided with the Jubilee celebrations for Her Late Majesty Queen Elizabeth II. We were given the opportunity to feature in the widely distributed official publication for the Platinum Jubilee, celebrating the Best of British Manufacturing. We were delighted have been invited to be a part of this highly respected publication and have seen benefits from the high value clientele it has attracted into the Company.

 

Ensuring we have been able to continue our work with professional intermediaries remains core to our success in attracting larger, multi-room projects. Whole-home renovations with a considerably higher spend are a more frequent occurrence, as our customers look to furnish their home with one, high-end, luxury cabinet maker. Working closely with their architect, developer or interior designer, has given the Company the opportunity to partner with some exciting new professionals in the home renovation space.

 

 

 

 

The finance proposition available to our customers through Novuna (formerly Hitachi) Consumer Finance has provided our customer with options to spread the cost of their new Kitchen. This has attracted new customers to the Company, now able to afford to buy their dream kitchen.

 

The impact of these initiatives has led to a record number of kitchens being sold in the year, with a shift towards more traditional options in cabinetry choices, reflecting a return to classic styles, which truly stand the test of time. Customers continue to use the versatile cabinetry options available through our bedrooms business to adapt their needs around the home.

 

 

Operations

The acquisition of our new storage facility on the Grove Business Park in Wantage has been integral to facilitating the growth we report today. With the increased throughput in our production facility, it has been vital to work with our highly committed and effective workforce to improve the operating model and make efficiency gains, as we plan for continued growth.

 

A review to introduce shift working and additional resource has been undertaken, to allow the Board to support the business in developing the right model, to ensure we continue to deliver a product with a consistently high standard of finish, for which our Brand is recognised. Challenges in the supply chain have led to the ongoing management of delayed product, mostly managed by procuring our white goods months ahead of any planned delivery schedule. As a result, we have been able to continually offer a competitive lead time, which has stood us in good stead over the period and continues to do so.

 

Raw materials have seen significant price increases, some in excess of 100%; as mentioned, we are now seeing signs of some stabilisation in this area, however this has undoubtedly impacted our margin for the year.

 

Work on our MRP system continues, to allow the business the visibility on improved capacity planning and also all key margin drivers within our supply chain. This work has commenced, with the system improvements due to be live later in our current year.

 

With increased demand, small improvements will produce incremental gains in our margin, with our new Production Manager working hard to lead the team in this regard.

 

To ensure our people are able to work as effectively as possible, we continue to put the welfare of our employees at the heart of our business. The introduction of a We Care Policy, which provides exceptional health benefits and support, together with more general advice on wellbeing and mental health services, ensures that our people feel looked after, during these stressful and turbulent economic times.

 

 

Trading Outlook

As stated earlier, we entered the new financial year with a robust order book, inclusive of the deferred orders from FY22. As a result, the level of orders confirmed in the first 23 weeks are ahead of the prior year.  Dispatched sales, forward committed orders and future orders against which a first stage deposit has been taken, stood at £8.6 million (2021: £7.4 million). New business has remained consistent and with improvements driven by the digital marketing strategy, the quality of quoted business is strong and we remain confident of our ability to continue to convert at a high level moving forward. 

 

Each carefully considered building block in our FY23 plan has been evaluated for its impact on our profits for this current year, as we continue to strengthen our capacity and our infrastructure to respond to sustainably higher demand, confident that our operating model can accommodate the growth we anticipate over the coming period. Our business has proved its resilience over the last 2 years and given the inherent expertise within the Company, we are well positioned to maintain our trend of market share gains.

 

Whilst we believe that the demand is in line with our plans for growth in FY23, the uncertainty in the financial markets has created a degree of hesitancy for customers to complete on their orders.  The Board continues to track the economic indicators, together with the supply chain challenges and the ongoing impact on pricing. There are a range of plans prepared to respond appropriately to changing market conditions, based on whether the Board considers the external changes to be for the short or long term.

 

The unprecedented growth experienced in the year that we are reporting today, is a milestone for the Company in its 50th Birthday year. It has been both demanding and exciting, for our teams across the business. We thank them for their hard work and resilience, to ensure that we have been able to capitalise on this demand to the benefit of all of our stakeholders, as we continue to build a Company with increased capacity and capability over the coming period.

 

On behalf of the Board, I would like to thank our Employees, our Shareholders and our Supplier Partners, for their ongoing support and counsel throughout the period.

 

As we move through FY23, we continue to celebrate 50 years of John Lewis of Hungerford, with confidence that the Company can achieve sustained profitability.

 

 

 

 

 

Kiran Noonan

Chief Executive Officer

12 December 2022

 

 

 

 

 

 

 

Enquiries:

John Lewis of Hungerford plc 01235 774300

Kiran Noonan - Chief Executive Officer / Acting Chairman

 

Allenby Capital Limited (Nominated Adviser and Broker)   020 3328 5656

 

David Worlidge / Nick Naylor / George Payne (Corporate Finance)

Matt Butlin (Sales and Corporate Broking)