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Blacks warns of uncertainty as losses increase

Losses before tax at Blacks Leisure surged by more than 50% to £14.4 million for the year to February 28, as the group said there were “material uncertainties” about its future.

Sales at the outdoor and boardsports group fell 9% to £267.6m over the period. The loss before tax included £7.57m of charges relating to exceptional items including onerous lease and restructuring costs.

For the first 12 weeks of the new financial year to May 23, like-for-like sales at the outdoor division were up 1.2, with the boardsports division showing a 10.1% drop.

The group’s heavy losses last year stemmed from the poor performance of the boardwear division, including the Freespirit chain and the O’Neill stores and wholesale business, which made a loss before tax of £13.3m over the year. However, the group’s Blacks and Millets chains made a profit before tax of £4.2m. Blacks Leisure has agreed to transfer the operation of its O’Neill wholesale business in the UK to O’Neill Europe after summer 09 and and is continuing to convert boardwear stores to outdoor formats.

Blacks Leisure said that it was in talks with Lloyds Banking Group to provide a financial structure to speed up the the exit from the loss making boardwear business and develop the outdoorwear portfolio. Blacks recently renewed a £35m bank facility until August 31 while it attempted to secure a long-term financing structure.

Blacks Leisure chief executive Neil Gillis said: “Having reviewed the current cash flow projections, and having made reasonable enquiries in making the underlying key assumptions on sales growth, the directors have a reasonable expectation that the Group will be able to meet its liabilities as they fall due for the foreseeable
future. It is on this basis that the directors consider it appropriate to prepare the group’s consolidated financial statements on the going concern basis.

He added: “However, the directors recognise that there is a material uncertainty, of the bank facility not being extended beyond August 31 2009, that may cast significant doubt on the Group’s ability to continue as a going concern, and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business.”

Despite reporting heavy losses, the group said that it was making good progress in turning around its core business. Operational costs have been cut by £6.6m during the year. Gross margin increased from 54.3% to 53.7%. Blacks said that it planned to roll out its new outdoor retail format for the Blacks and Millets chain after trial stores were successful.

Chairman David Bernstein said: “The group has experienced a difficult year in a particularly challenging trading environment. Our core outdoor division maintained a sound performance, however, our boardwear division continued to under perform. Against this background we are continuing a programme of radical change and this is now beginning to produce the expected benefits.”



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