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Blacks to concentrate on outdoor market with new formats
Jan '10
Blacks Leisure Group plc is publishing its interim management statement for the period from the financial half year end of 29 August 2009 to 7 January 2010.

Trading Update
In the fourth quarter of 2009, the Company closed 87 of its loss-making stores and put its subsidiary, Sandcity Limited (which operated the O'Neill retail business), into administration. The Company and its principal trading subsidiary, The Outdoor Group Limited, also proposed Company Voluntary Arrangements (the "CVAs") to compromise the claims of a number of landlords, which arrangements became effective on 22 December 2009.

The Group now trades from an ongoing estate of 313 stores in two markets. The core Outdoor Division comprises 208 Millets stores and 92 Blacks stores. The Boardwear Division now comprises just 13 stores trading under the Freespirit fascia and represents only 5% of sales from ongoing stores.

Notwithstanding the significant restructuring which the Group implemented during the period under review, trading in the ongoing stores (i.e. excluding closed stores) during this period was very healthy with like-for-like sales increasing by 12.0%. Within this figure, the core Outdoor Division performed particularly strongly, with like-for-like sales increasing by 13.1%. The Boardwear Division recorded a like-for-like decrease of 4.4%.

Total Group sales in the period were £98.9m, compared to £102.0m in the prior period. This reduction is largely as a result of the store closures and the administration of Sandcity Limited. Gross margin for the ongoing stores in the period under review remained broadly in line with that reported for the whole business in the first half of the financial year.

The Group delivered a very strong performance over the Christmas peak trading period; in the six weeks ended 7 January 2010 like-for-like sales from the ongoing stores increased by 15.2% over last year. Although the Group benefited from the particularly cold weather conditions in the later part of the period under review, like-for-like sales have been ahead of last year for each month since the restructuring plan began to be implemented in September 2009 during more clement weather.

Potential Equity Fundraising
The consistently strong trading results achieved by the core Outdoor Division, the continued success of the new Outdoor store formats developed over the last 18 months and the positive impact of the CVAs and associated restructuring measures, have placed the Group on a much stronger footing and significantly enhanced its recovery prospects.

Against this background, the Directors are currently considering their options in relation to a possible equity fundraising to be undertaken in the first quarter of 2010, which is expected to include an element of pre-emptive offering, to raise between £15m and £20m depending on investor demand. The net proceeds of this exercise would be used to refresh the existing store estate, roll out the successful new Outdoor formats and selectively expand the Outdoor Division's store portfolio, principally by re-entering markets vacated following the closure of stores which were over-rented and therefore loss-making even though they consistently achieved high levels of sales. It is the view of the Directors that new leases can be obtained which would create profitable stores in locations such as these where the Group has proven consumer demand. An equity fundraising would also allow for the cancellation of the higher interest seasonal peak bank facility of £7.5m in accordance with the Group's banking arrangements. A further announcement will be made in due course when a final decision on the equity fundraising has been made.

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