Marlwood Plc

April 08, 2010 02:00 ET

Final Results



Marlwood  plc is an investment vehicle set up primarily to invest or acquire businesses or companies within  the
brand or licensing sector in the United Kingdom.

On  behalf  of the Board of Directors of Marlwood plc, I have pleasure in presenting the results of the  company
for the first financial period ended 31 December 2009.

CSX Flotation

The Company floated on the Cayman Islands Stock Exchange (CSX) on 16 September 2009, raising GBP1.179 million by
placing 117,900,000 new shares at 1 pence per share. Due to the efforts of my colleagues on the Board, this  was
achieved without too much disruption to the day to day business operations.

The primary reason for joining CSX was to give the Company a stronger financial base from which to significantly
expand its sales activities and to raise its profile in the brand and licensing sectors.


On  16 September 2009 the Company acquired the entire issued share capital of New BAI International Limited, The
New  Licence  Factory  Limited, The Licence Factory (HK) Limited and IdealDeal Limited via  a  share  for  share

On  11  December 2009 the Company raised a further GBP570,000 by the placing of 57,000,000 new shares at 1 pence
per share.

In  order to comply with International Financial Reporting Standards (IFRSs), this report is presented as if New
BAI  International Limited and The New Licence Factory Limited had acquired Marlwood plc which is the  substance
of  the  transaction  even  though the legal form of the transaction was that  Marlwood  plc  acquired  New  BAI
International Limited, The New Licence Factory Limited, The Licence Factory (HK) Limited and IdealDeal Limited.


The  Group  generated revenues of GBP4,307,537 during the period, earning a gross margin of 37%  (GBP1,598,748),
relating to the sales generated from the acquisition of the subsidiary entities.  The profit before tax for  the
period was GBP43,481, resulting in a profit per share of GBP0.01.

The  results reflect a disappointing performance for the Group as the business struggled to gain momentum  in  a
challenging  retail  environment,  with  the results reporting a GBP7.2  million  sales  shortfall  against  the
forecasts for the period as included within the CSX Admission Document dated 16 September 2009.  The impact of a
stronger dollar, stock shortages arising as a result of the lack of available working capital prior to flotation
on  the  CSX  market,  delayed  customer  orders / licence launches and uncertainties  surrounding  the  delayed
flotation  of  the Group, have all impacted upon trading and profitability during the period ended  31  December

The working capital restrictions prior to the flotation of the Group on the CSX market led to constraints in the
ability  to purchase new stock resulting in stock shortages which have damaged sales, and although this position
is  steadily  improving  with stock for the licensed Spring Ranges being received over  the  recent  weeks,  the
licence  division will not be fully stocked until 1 April 2010 due to the advance purchase nature of the  trade.
Furthermore,  as highlighted above and in our recent trading update, delays caused by shipments of  stock,  non-
performance  of orders by some of our customers, clearance contracts not taken on and deferment of  new  product
and licence launches all had a negative impact on turnover.

The acquisition of clearance stock has traditionally represented the Group's biggest discretionary purchase and,
in order to drive sales and generate cash, the majority of available funding has typically been used to maximise
these sales by capitalising on the significant level of deals available.

However,  as  the  recession  took hold the number of clearance opportunities  reduced  in  line  with  customer
spending,  further impacting upon sales levels.  Licensed goods sales require advance purchasing commitments  of
90  days and it was inevitable that demand would ease off as customers reined in their spending, as a result the
Group  became  cautious  about commitments towards the forward buying of stock, delaying any  unnecessary  stock
purchases until 2010.

As  a result of the pressures and restrictions noted above the Group has responded to the economic downturn  and
the  effect  that this was having on the business by making significant price cuts and implementing  promotions.
While  this has resulted in better value for customers and has been a major factor in retaining loyalty  to  the
Group's brands, it has adversely impacted gross margins.


The Board is not recommending a dividend as all funds are required for the development of the business.

Proposed disposal of clearance business

As  announced  on  18  March 2010 the Group has entered into a conditional agreement to  dispose  of  the  stock
clearance  division  of  New  BAI  International Limited to Brennan Atkinson International  Limited  (a  company
controlled by Mr M A Abramson) for a consideration in respect of certain assets of GBP2,500,000, to be satisfied
by  the  assignment of certain debts; and a further cash consideration for the stock based on  an  agreed  stock

The  clearance division is one of two main trading activities performed by New BAI, which in recent  months  has
become  widely  regarded by the Board as a stagnated sector, due in the main to the changes that  manufacturers,
wholesalers and retailers have implemented as to how they manage their production volumes and inventory  levels,
as well as their changes in buying practices.

In  addition,  due  to  the nature of the 'clearance' sector, the 'clearance' business  does  not  benefit  from
significant  levels  of repeat business and turnover is heavily reliant on the Group's ability  to  continuously
source  one-off 'spot' deals at the right price and with a willing end customer. The deal-driven nature  of  the
business  makes it very reliant on the 'trader instincts' of one or two individuals in the group and also  makes
it  a  difficult  business to grow or develop. Furthermore, due to the necessity to pay for clearance  deals  up
front,  whilst  at  the  same  time having to offer credit to customers, the business  can  be  working  capital
intensive and banks are becoming less inclined to finance this type of trade. This is in contrast to the licence
business,  where  suppliers will often provide credit terms and the banks will fund the majority  of  the  sales
invoices.  Because  of  these  factors, the Board consider it unlikely that the clearance  business  offers  any
significant growth prospects and due its heavy working capital requirements, the clearance business may in  fact
hinder the development of the licence business which is more easily scalable.

In  contrast to this, the 'licence' division has significant growth opportunities and TNLF has already signed  a
number  of  new licence agreements with RAC, Gotcha, Marilyn Monroe and Bang on the Door to expand  its  product
offering.  It also has two new licences (Pineapple and Kangol) in development which have already been circulated
to  a  number  of  key  retailers  such as WH Smith, BHS, Debenhams, Avon and  Tesco,  who  have  all  responded

Further  licences are at development stage and are about to be issued for retail feedback, including  Fila  (for
bags,  accessories  and  men's gifts) and Lipsy (a British celebrity favourite clothing  brand  specialising  in
copying  the hottest catwalk looks at high street prices.  The brand will enable the Group to enter the  fashion
arena and increase the exposure in the 15 - 25 year old category).

Having  considered  the  inherent  limitations to the 'clearance' business  discussed  above,  as  well  as  the
attractive opportunities that exist in the 'licence' business, the Board have decided that it would  be  in  the
interests of the Group to dispose of the 'clearance' division and replace it with a suitable acquisition in  the
Qlicence' sector.

Future outlook

The  impact of the market conditions and other restrictions experienced in 2009 have continued to be felt in  Q1
2010,  with  a  cautious retail mindset and limited stock lines available to be purchased due  to  the  lack  of
funding and imposed buying restrictions in Q4 2009.

The  Group  remains  confident  that the 2010 results will show an improvement in  sales  as  a  result  of  the
recruitment of a number of new sales representatives; the launch of a number of new licence agreements including
Gotcha,  Marilyn  Monroe,  Bang  on  the  Door, RAC; expanded product categories  (including  nightwear,  socks,
slippers,  belts,  small leather goods, handbags) and additional momentum within the management  team  to  drive
increased sales levels.

In  support of this the Group has received strong indications from their retail buyers that 2010 buying  budgets
have been increased over and above those seen in 2009.
In  response  to the continued challenging conditions the Board have acted decisively to meet the challenges  of
the  global economic downturn, taking steps to strengthen the product offering, improve distribution and  manage
costs tightly and respond quickly to the changing needs of our customers.

Although  the retail environment remains challenging, the Group is encouraged by the early signs of  improvement
in like-for-like sales trends and gross margins experienced in February 2010.

With strong brands, the right products and an experienced management team, the Group is now focussing on:

    *       Increasing the pace of change and operational execution in the business;
    *       Building the licence portfolio to grow and expand the customer base; and
    *       Reinvigorating brand marketing and publicity.

The  Directors  have  identified a number of attractive opportunities in the licensing division  to  expand  the
product  and brand portfolio further and enable the Group to enter potential new markets such as the  Children's
fashion,  tween (8 - 12 year olds) and men's gift/grooming sectors.  Negotiations are ongoing with a  number  of
new licensors including Pineapple Kangol, Fila, Lipsy and Ecko, many of which are already at the advanced design
and approval stages.

Management and employees

The Board would like to thank all of the management and employees who have reacted to the challenges of a
difficult economic climate with enthusiasm and energy.

V Bloom

31 March 2010

Consolidated Income Statement
for the period 19 August 2008 to 31 December 2009

                                                                                                 Period 19.08.08
                                                                                    Note             to 31.12.09
Continuing operations                                                                         
Revenue                                                                                                2,016,972
Cost of sales                                                                                         (1,414,957)
Gross profit                                                                                             602,015
Distribution costs                                                                                       (62,492)
Administrative expenses                                                                                 (940,988)
Operating loss                                                                                          (401,465)
Finance costs                                                                                            (32,294)
Finance income                                                                                             2,822
Loss before income tax                                                                                  (430,937)
Income tax                                                                                                 3,637
Loss from continuing operations after income tax                                                        (427,300)
Profit for the year from discontinued operations                                      2                  474,418
Profit attributable to:                                                                                         
Equity holders of the parent                                                                              47,118
Earnings per share expressed in pence per share:                                                                
Basic                                                                                 3                     0.01
Diluted                                                                               3                     0.01

Consolidated Balance Sheet
As at 31 December 2009
                                                                                       Group             Company
                                                                                       As at               As at
                                                                                    31.12.09            31.12.09
                                                                                         GBP                 GBP
Non-current assets                                                                                              
Property, plant and equipment                                                        303,058                   -
Goodwill                                                                           4,877,470                   -
Intangible assets                                                                  1,850,000                   -
Investment in subsidiaries                                                                 -           6,875,310
Deferred income tax assets                                                            39,387              39,387
                                                                                    ________            ________
                                                                                   7,069,915           6,914,697
Current assets                                                                                                  
Inventories                                                                          359,105                   -
Trade and other receivables                                                        2,722,664           1,547,507
Cash and cash equivalents                                                             50,559              25,455
                                                                                    ________            ________
                                                                                   3,132,239           1,572,962
Non-current assets and disposal groups held for sale                                 789,576                   -
                                                                                    ________            ________
Total assets                                                                      10,991,819           8,487,659
                                                                                    ________            ________
Current liabilities                                                                                             
Trade and other payables                                                           2,368,045             555,848
Interest bearing loans and borrowings                                              1,362,879                   -
Current income tax liabilities                                                             -                   -
                                                                                    ________            ________
                                                                                   3,730,924             555,848
Non-current liabilities                                                                                         
Interest bearing loans and borrowings                                              4,069,230                   -
Provisions for other liabilities and charges                                         167,386                   -
Deferred income tax liabilities                                                       35,750                   -
                                                                                    ________            ________
                                                                                   4,272,366                   -
                                                                                    ________            ________
Total liabilities                                                                  8,003,290             555,848
                                                                                    ________            ________
Called up share capital                                                              970,900             970,900
Share premium                                                                      7,143,909           7,143,909
Reverse acquisition reserve                                                       (5,413,008)                  -
Retained earnings                                                                    286,728            (182,998)
                                                                                    ________            ________
Total equity                                                                       2,988,529           7,931,811
                                                                                    ________            ________
Total equity and liabilities                                                      10,991,819           8,487,659
                                                                                    ________            ________

Consolidated cash flow statement
for the period 19 August 2008 to 31 December 2009

                                                                                          Group          Company
                                                                                Period 19.08.08   Period 19.08.08
                                                                                    to 31.12.09      to 31.12.09
                                                                                            GBP              GBP
Cash flows from operating activities                                                                            
Cash (utilised) / generated by operations                                            (2,085,911)         330,641
Interest paid                                                                           (52,557)               -
Tax paid                                                                                      -                -
                                                                                       ________         ________
Net cash (outflow) / inflow from operating activities                                (2,138,468)         330,641
                                                                                       ________         ________
Cash flows from investing activities                                                                            
Acquisition of subsidiary net of cash acquired                                           16,136               (2)
Costs directly attributable to acquisition                                             (944,435)        (945,499)
Loan amounts provided to Group                                                                -       (1,547,507)
Purchase of property, plant and equipment (PPE)                                         (12,350)               -
Proceeds from sale of PPE                                                                 4,295                -
Interest received                                                                         2,822            2,822
                                                                                       ________         ________
Net cash outflow from investing activities                                             (933,532)      (2,490,186)
                                                                                       ________         ________
Cash flows from financing activities                                                                            
Proceeds from issuance of ordinary shares                                             2,185,000        2,185,000
Proceeds from borrowings                                                                405,133                -
Repayment of borrowings                                                                 (23,118)               -
Loan amounts received from related party                                                555,544                -
                                                                                       ________         ________
Net cash inflow from financing activities                                             3,122,559        2,185,000
                                                                                       ________         ________
Increase in cash and cash equivalents                                                    50,559           25,455
Cash and cash equivalents at the beginning of the period                                      -                -
                                                                                       ________         ________
Cash and cash equivalents at the end of the period                                       50,559           25,455
                                                                                       ________         ________


1.   General Information

     Marlwood  Plc was incorporated on 19 August 2008 in the United Kingdom under the Companies Act  2006  with  a
     registration  number of 06676987.  The address of the registered office is Unit 38 Newby Road,  Hazel  Grove,
     Stockport  Cheshire SK7 5AS.   On 16 September 2009 Marlwood plc acquired the entire issued share capital  of
     New  BAI  International Limited, The New Licence Factory Limited, IdealDeal Limited and The  Licence  Factory
     (Hong Kong) Limited.
     Marlwood  plc  ("the  Company")  and  its subsidiaries (together "the Group")  specialise  in  the  sourcing,
     marketing, distribution and licensing of branded goods.  The Group operates from the registered office with a
     sourcing and distribution agency in Hong Kong, and sells mainly in countries within the UK and Europe.
     The  company  is  a  public  limited company which is listed on the Cayman  Islands  Stock  Exchange  and  is
     incorporated and domiciled in the UK.
     The  preliminary results for the year to 31 December 2009 are audited. However the financial information  set
     out  in  the announcement does not constitute the Group's statutory accounts for the period ended 31 December
     2009.  The  statutory  accounts for the period ended 31 December 2009 were finalised  on  the  basis  of  the
     financial  information presented by the Directors in this preliminary announcement and will be  delivered  to
     the  Registrar  of Companies. The auditors' report on these accounts was unqualified and did  not  contain  a
     statement under section 498(2) or (3) of the Companies Act 2006.
     Under  IFRS  3 'Business combinations' the New BAI International Limited and The New Licence Factory  Limited
     share exchanges have been accounted for as a reverse acquisition.
     Although  these  consolidated financial statements have been issued in the name  of  the  legal  parent,  the
     Companies  it  represents  in  substance  are  a continuation of  the  financial  information  of  the  legal
     subsidiaries,  New BAI International Limited and The New Licence Factory Limited, both of  which  were  newly
     incorporated  in  2008 and 2009 respectively and did not begin trading until they purchased their  respective
     businesses  on the date of admission to CSX, 16th September 2009. Therefore the income and expenses  included
     within  these  results relate to the period from 16th September 2009 to 31st December 2009 and there  are  no
     comparative results.
2.   Discontinued operations

     In  November 2009 the management and Board of Directors of Marlwood plc entered into negotiations regarding
     the sale of the clearance division to Brennan Atkinson International Limited.  Detailed negotiations, draft
     head  of  terms and initial legal proceedings were all commenced prior to the year end, although  a  formal
     announcement and conditional agreement was not entered into until 18 March 2010.
     In  accordance  with  IFRS 5 "Non-current assets held-for-sale and discontinued operations"  the  clearance
     division  has  been reclassified as a discontinued operation and its trading results are  included  in  the
     income statement as a single line below profit after taxation from continuing operations.
     The impact of the discontinued operations on the income statement is detailed below:
                                                                   Period 19.08.08 to 31.12.09
                                                         Discontinued           Continued                Total
                                                           operations          operations
                                                                  GBP                 GBP                  GBP
    Revenue                                                 2,290,565           2,016,972            4,307,537
    Cost of sales                                          (1,293,832)         (1,414,957)          (2,708,789)
                                                             ________            ________             ________
    Gross profit                                              996,733             602,015            1,598,748
    Distribution costs                                        (70,831)            (62,492)            (133,323)
    Administrative expenses                                  (418,711)           (940,988)          (1,359,699)
                                                             ________            ________             ________
    Operating profit / (loss)                                 507,191            (401,465)             105,726
    Finance costs                                             (32,773)            (32,294)             (65,067)
    Finance income                                                  -               2,822                2,822
                                                             ________            ________             ________
    Profit / (loss) before income tax                         474,418            (430,937)              43,481
    Income tax                                                      -               3,637                3,637
                                                             ________            ________             ________
    Profit / (loss) after income tax                          474,418            (427,300)              47,118
                                                             ________            ________             ________

     The calculation of basic earnings per share is based upon the profit after taxation of GBP47,118 divided by
     the weighted average number of ordinary shares in issue during the year of 477,976,355.
     There are no dilutions to the earnings per share figure in accordance with IAS 33 "Earnings per share".

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