Tie Rack back from the brink with pounds 5m: 'Year of solid progress' ahead as shareholders collar 1p on fivefold improvement in pre-tax result

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The Independent Online
TIE RACK, the niche retailer that was close to collapse two years ago, delighted investors by tripling earnings in the year to 31 January and lifting sales a healthy 23 per cent to pounds 67m.

The shares were marked up 10p to 126p as Tie Rack announced a fivefold increase in pre-tax profits to pounds 5.1m. The figures were better than expected, in spite of the company's warning in January that the City was underestimating its success.

Profits were boosted by the full-year benefit of the pounds 3.1m rescue rights issue in June 1991, when Tie Rack was forced to offer new shares at 22p in a bid to cut its heavy borrowings.

Earnings per share grew from 1.99p to 6.1p and the dividend, payable on 30 July, has been doubled to 1p.

The sales increase was flattered by a weak year before, when tourist traffic evaporated in the wake of the Gulf war. Stripping out new stores, sales grew 6 per cent.

Although there was a marked slowdown in like-for-like sales growth, from 10 per cent in the first half to 2 per cent in the second, this measure of underlying sales growth has recovered to 5 per cent in the first few weeks of the new financial year.

In the UK, where more than half the 272 shops are located, underlying sales grew 9 per cent. Heavy losses in the US in the previous year were stemmed - from pounds 856,000 down to pounds 53,000. All European operations were profitable, although the Irish Republic and Norway disappointed. The total contribution was pounds 1.55m (pounds 1.08m).

Australia, where four new shops were opened, quadrupled its profits contribution to pounds 396,000.

The devaluation of sterling has squeezed margins in the UK because of higher prices of ties imported from dollar-linked countries like China, Hong Kong and Japan. However, the cost was mainly offset by higher margins in overseas subsidiaries benefiting from strong currencies.

The group is gradually converting its franchised outlets to company-owned stores. Eighty shops have been bought back since Christmas 1990, when Tie Rack was hit by a string of bad debts of franchisees. Only 58 shops are now franchised.

Nigel McGinley, chief executive, said the group was planning 20 to 25 new store openings in the current year. Although net cash at the year end was pounds 7.4m, he did expect the group to become a net borrower ahead of Christmas because of a big tax bill.

Roy Bishko, chairman, said: 'Tie Rack is financially strong and has established a firm base for future growth in many markets. Subject to unforeseen market changes we anticipate a year of solid progress.'

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