Beales suffers loss but says group gaining critical mass

PROVINCIAL department store chain Beales insisted it is gaining the critical mass it needs to trade through the tough consumer environment.

The group, which bought 19 department stores from Anglia Regional Co-operative Society last month, yesterday fell to a half-year pre-tax loss as it was hit by the cost of integrating the stores and poor weather.

It reported a loss of £1.2m for the 26 weeks to the end of April, compared with profits of £909,000 a year earlier. Its like-for-like revenues tumbled 9.2 per cent.

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The £7.5m acquisition of the Westgate-branded stores gave the group branches in Harrogate, Skipton and Keighley.

Chairman Mike Killingley said the deal was “essential to the group’s strategy to achieve greater critical mass, to enable Beales to prosper in the modern retail environment and accelerate the restoration of profitability”.

He added the purchase increased the group’s trading floor space by 80 per cent from about 550,000 square feet to more than 1m sq ft, giving it 32 stores.

“There is considerable scope to improve the performance of the new stores to the levels achieved by Beales,” he said.

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“We shall also be able to improve purchasing arrangements, and achieve economies of scale.” The group is headed by Tony Brown, a former southern regional manager at Leeds-based Asda. He became chief executive of Beales in 2008 after joining from BHS, where he was retail director.

The company admitted its results were disappointing and said gross sales of £47.6m, although up 3.3 per cent, were hit by heavy winter snowfall and its decision to focus on margins over volume, as well as the tough consumer climate.

It said “the slow pace of economic recovery, and the pressure on household incomes, remains the principal risk and uncertainty facing the group”.

The group’s net debt increased to £7.9m from £6.7m a year earlier. However, the store deal was funded by ARCS, through a £2.5m unsecured loan and the subscription to £8.5 of redeemable preference shares.

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ARCS is also making a one-off contribution of £2.3m to fund capital expenditure.

The group said completion of the deal injected net funds of £5.8m, which will boost its working capital.

It added integration of the stores is progressing well, with sales above budget for the first four weeks.

Shares in the chain dropped 1.4 per cent, falling 0.5p to 36.25p.

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Analysts at house brokers Shore Capital said the results were hit by December’s heavy snowfall and other circumstances.

“It is important to understand that these results were impacted by a number of one-off circumstances – the widely documented severe weather conditions... the acquisition of the Hexham and Rochdale stores... and costs relating to the acquisition of 19 stores from the Anglia Regional Co-operative Society.

“Results for the second half of 2011 and beyond will see the beneficial impact of bringing together the 13 stores operated by Beale.

“We believe that there is significant opportunity to reduce joint central costs whilst also benefiting from synergies available to a larger group.”

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