Laura Ashley set for return to profit

Click to follow
LAURA ASHLEY, the frocks and fabrics retailer that has lost money for three years running, yesterday confirmed a significant improvement in its trading performance which should return it to profit in the full year.

In its first interim reporting period under the management of Jim Maxmin, who joined as chief executive last September, pre-tax profit for the 26 weeks to 25 July leapt by pounds 1.2m to pounds 1.7m.

The profit improvement was achieved although sales fell from pounds 132.2m to pounds 115.9m. Dr Maxmin said the company had decided not to chase sales at the expense of profit margins and had planned a reduction in sales in both Britain and the US.

There was also a sharp reduction in costs to pounds 49.6m from pounds 57.6m. That reflects measures such as reducing US head office staff by more than two-thirds. Future cost-cutting will come from increased efficiency.

In addition the interest charge fell from pounds 1.4m to pounds 512,000 as borrowings fell sharply.

Earnings per share rose to 0.4p from 0.12p. But, like last year, there is no interim dividend.

Paul Deacon, an analyst at Goldman Sachs, said: 'What has impressed me more than anything else is just the speed at which they are doing things.' He is forecasting a pounds 7.5m pre-tax profit in the full year, growing to pounds 17m in 1993.

Garment sales in the UK declined by 14.5 per cent, but gross profit fell less than 3 per cent. In the seven weeks since the end of the half-year UK sales have been 15 per cent ahead of last year.

Dr Maxmin said that part of the improvement was market-driven, but much of it was the result of the management team 'getting to grips with the business'.

The North American business continued to lose money in the first half but is expected to return to profit next year.

In continental Europe profits continued to grow in both home furnishings and garments. Store openings are planned at the rate of about 10 a year for the next five years.

The shares fell 2p to 60p.