Laura Ashley Holdings plc (LON:ALY) posted a sharp fall in annual profits as sales declined and the homewares and fashion retailer took an exceptional charge related to the disposal of its Singapore commercial property.
The statutory profit before tax plunged to £0.1mln in the year to June 20 from £6.3mln last year, largely due to a £4.7mln impairment on the value of the Singapore property.
READ: Laura Ashley blames weak pound and tough UK retail market for slump in full-year profit
The company sold the property to SB Investment for SGD$54.5mln in cash to focus on its core UK retail business, which includes 160 stores.
"Whereas international business continues to be important for the group, and now accounts for approximately 7% of total group revenue, the group's primary market continues to be the UK," Laura Ashely said.
The property in Singapore was purchased in 2015 with a view to setting up the company’s Asian headquarters and expanding in the region.
Laura Ashely said expansion in the Asian market continues to be part of its strategy but the retail environment has changed both domestically and internationally so it is the "appropriate time" to dispose of the Singapore property.
Sales fall amid tough UK retail market
Excluding exceptional charges, pre-tax profit dropped to £5.6mln from £8.4mln as total sales fell to £257.2mln from £277.0mln with like-for-like sales down 0.4%.
In the UK, retail sales fell to £236.0mln from £252.0mln as the group closed eight stores as weaker consumer confidence and online competition weighed on the market.
Online revenue, which now accounts for 25% of retail revenue, increased to £59.7mln from £57.3mln, underlining the growing consumer shift towards e-commerce.
Sales in the home accessories, furniture and decorating divisions fell 3.6%, 8.2% and 13.9% respectively, offsetting a 7.2% increase in fashion sales.
"As set out at the time of the interim results, the trading environment for the first half of the year was challenging and the board expected these difficult trading conditions to continue into the second half of the year," said chairman Tan Sri Dr Khoo Kay Peng.
"This proved to be the case and, given the softer trading environment for the year ended 30 June 2018, we are disappointed to report a fall in profits. Continued margin pressure and the impact of a changing retail landscape have contributed to the overall reduction in profit before tax."
Outlook
In the first seven weeks of the new financial year, the company said trading has been in line with management expectations.
Shares rose 13.6% to 4.9p.