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Laura Ashley blames weak pound and tough UK retail market for slump in full year profit

Last updated: 08:40 23 Aug 2017 BST, First published: 08:20 23 Aug 2017 BST

Laura Ashley
Laura Ashley reported a decline in full year fashion sales

Laura Ashley Holdings PLC (LON:ALY) blamed challenging trading conditions and the impact of a weaker pound as the homeware retailer reported a slump in full year profits and scraped its final dividend.  

In the year to 30 June, statutory profit before tax was £6.3mln, down from £22.8mln the previous year, including a £2.8mln impairment charge relating to the revaluation of a freehold property owned by the group in Singapore.

The company had warned about the impairment charge earlier this month, saying that pre-tax profit was expected to be “materially below” expectations.    

Excluding exceptional items, profit before tax was £8.4mln, compared to £24.7mln last year.

However, the company’s previous reporting period was over 74 weeks instead of 52 weeks.

Group sales fell to £277mln from £400.9mln, as store closures and declines in decorating, furniture and fashion sales offset an increase in its home accessories arm. On a like-for-like basis, sales dropped 3.1%, though online like-for-like sales grew 5.6%.

Laura Ashley says it will overcome challenges

“We are focused on addressing the challenges which our business has encountered over the past year and are confident that we are well-positioned to overcome them,” said chief executive Tan Sri Dr Khoo Kay Peng.

“A strong and expanding international presence is at the core of our strategy.”

He added that Laura Ashely signed a new license partner in India earlier this year and is opening its first stores in the country next month. It also launched its Chinese website in November, which is “making good progress and enhancing our presence in the territory”, he said.

The UK remains its main market with 33% of sales coming from products manufactured in the nation.

The company's international expansion plans come as the UK retail sector has come under pressure from weakening consumer confidence after the Brexit vote pushed the pound lower and inflation higher, resulting in a squeeze on disposable incomes. 

The board will not pay a full-year dividend after paying a 0.5p dividend at its half-year.

Laura Ashley profits to rebuild in coming years, says Cantor Fitzgerald

“Whilst disappointing, fiscal year 2017 should be the trough in earnings with profitability forecast to rebuild in outer years,” said Cantor Fitzgerald.

Cantor retained its ‘buy’ recommendation but lowered the target price to 12p from 20p to reflect downgrades to its earnings forecasts.

The broker cut its estimates for adjusted 2018 pre-tax profit to £9.0m from the £13.0mlm previously expected, representing year-on-year growth of 7.3%.

For fiscal year 2019, Cantor predicts pre-tax profit of £11.0mln, up 22.1% on the previous year but down from its previous estimate of £15.0mln.

“We remain of the view that the brand has potential for further international expansion, coupled with further online development,” Cantor said. 

Shares rose initially before falling back 0.57% to 8.66p in morning trading. 

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