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New Look profits jump after successful turnaround plan

Earnings at fast fashion retailer New Look jumped 29% over the last year as the chain reaped the rewards of a successful “three-point turnaround plan”.

In the 53 weeks to March 30 group sales rose 2.5% to £1.48bn as online sales soared by 50.1%. EBITDA rose 29% to £189.2m as operating profit increased 84.2% to £115.5m.

New Look grew profit before tax to £3.1m, a major improvement from the £54.5m loss the year before.

Gross margins increased by two percentage points, driven by tighter stock controls and lower markdowns.

Like-for-like sales across the group dropped 0.7% with the decline weighted towards the first half.

In the UK, like-for-like sales fell 0.5%, with the retailer suffering a 3.1% decline in the first half, while the last six months of the year saw a 2% increase.

The retailer’s European arm posted a 3.2% rise in like-for-like sales.

Chairman Alistair McGeorge said: “I am delighted to report that our three-point turnaround plan of cost savings, margin improvement and revenue growth enabled us to deliver strong results and continue to re-invest in our business. The strength of our financial turnaround has also enabled us to address our capital structure, with the successful refinancing of our debt, extending maturities to 2018.”

In April the retailer announced it was attempting to reduce its debt burden through an £800m bond issue.

New Look has been plagued by £1.1bn-worth of debts, including £750m of payment-in-kind (PIK) debt, which carries a high level of interest payable when it matures.

If successful the round of fundraising New Look is now embarking on will wipe out half of this senior debt and allow the business to push back the point at which the debt must be paid from 2015 to 2018.

McGeorge said: “This gives the business a five year runway for [chief executive] Anders [Kristiansen] and his team to continue to improve performance, drive forward our international expansion and develop further our online and store development. Our long term goal remains the same: to de-lever the business through profit growth and strong cashflow.”

Kristiansen said: “I applaud the achievements of the past financial year - not only the containment of costs, but also an impressive improvement in underlying profitability. I believe New Look is now well positioned to explore exciting development opportunities of new markets in Eastern Europe and south-east Asia – specifically Russia and China.”

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