Abbeycrest looks for debt revision again

EMBATTLED jewellery firm Abbeycrest underlined its precarious financial position, saying it needs to revise its debt facilities once again and adding a turnaround will take time to deliver results.

The Leeds-based group has been squeezed by the high gold price, its debt burden, pressure from retailers and weak consumer sentiment.

It slumped to pre-tax losses of £1.3m for the six months to the end of August, versus £461,000 losses a year earlier.

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Revenues dived by a third to £12.6m from £18.8m in 2010, and the company cast doubt over its going concern status.

Abbeycrest has repeatedly sought revisions from its lenders over its debt facilities. It said based on current forecasts, it needs either to extend its current facilities or reduce its working capital needs by £0.2m in November, its peak funding period.

“The company continues to face difficult trading conditions,” it said, adding it is in talks with its senior lenders and certain creditors over relaxing its facilities.

Abbeycrest also revealed it is in talks with HM Revenue and Customs over deferring a further £0.2m tax bill, but said no deal has yet been reached.

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“Our objective this year is to lay the foundations for growth and to provide sufficient time for both ATL (Abbeycrest Thailand Limited) and B&N (Brown & Newirth) to benefit from the sales and marketing initiatives we now have underway,” said executive chairman Simon Ashton in a statement.

“Whilst we are moving forward, difficult trading conditions, coupled with the usual lag between investment and return, mean that it is unlikely that we will see any significant return from these initiatives until the next financial year.”

In May, senior lender Burdale agreed to extend the renewal date of Abbeycrest’s UK bank facility to March 2014 and re-set covenants.

In September, Abbeycrest won another £1m of financing from Siam Commercial Bank.

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Just last month the company said it is not repaying the first £311,400 instalment of a loan, due to Moorgarth Property Investments, after talks on postponing it collapsed. Mr Ashton, who took over in 2008, said Abbeycrest’s current financial year is a “transitional” period. “Trading over the first six months has been difficult and we continue to press on with our programme of reorganisation and reducing central costs,” he said.

Abbeycrest said it incurred exceptional costs of £432,000, including redundancies.

The company added its net debt was cut 13 per cent to £6.1m and its inventory reduced by 23 per cent to £6.6m.

Mr Ashton said: “We are now also introducing initiatives to grow sales in our two main trading subsidiaries.

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“We have a number of ongoing sales development and overhead reduction initiatives being implemented throughout the group, the full benefit of which have yet to be delivered.”

He said its Thai arm is investing in product design, marketing, developing Asia-Pacific sales and regaining market share.

Abbeycrest’s Essentials business, part of this division, saw sales slide 25 per cent to £8.4m during the six months, due in part to consolidating operations. However, it said this was matched with a “relatively small” decline in operating profits: a £0.1m loss versus £0.2m profits a year earlier.

Mr Ashton added its B&N business had a “difficult season”, with turnover sliding to £4.2m from £7.7m and sinking to an operating loss of £0.2m, versus £0.4m profits a year earlier.

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Its B&N engagement ring business is building market share to equal its wedding band share, through new product design, branding and support, he said.

Mr Ashton did not return calls for further comment.

Its shares were unchanged at 0.85p yesterday, valuing the business at just £0.6m.

A supplier of gold

Abbeycrest was established in 1979 by Michael Lever and Peter Rosenberg, and grew rapidly to become the UK’s leading supplier of gold products to the jewellery trade.

In 1985, it joined the Unlisted Securities Market, achieving a full listing in 1988.

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In 1989, Abbeycrest moved into gemset jewellery with acquisition of a Birmingham-based manufacturer, Gallery Jewellers. The company re-structured in 1996, when it consolidated in a purpose-built premises in Leeds.

Abbeycrest then bought Thai manufacturer Essex International and set up a Hong Kong subsidiary.

In early 2001, it bought wedding ring manufacturer Brown & Newirth. The company launched Abbeycrest Thailand in February 2003, opening a £2m factory in Lamphun.

In 2008 the company was forced to restructure again, with Michael Lever resigning and Simon Ashton taking over as chairman. Under a turnaround programme, it simplified into a small number of “strategic business units”.