Trading and business update, proposed disposal of the Hot Tuna brand and board changes

14 November 2011

Hot Tuna, a leading surf wear and street wear brand, is today providing a trading and
business update.

Overview

Revenues for the year ended 30 June 2011 will be in line with the Board's expectations. As a result of the Board's continued focus on costs control during the financial year, losses will be below that previously expected by the board.

Sales during the first four months of the current financial year are 65% ahead of the comparable period for last year with an improved gross margin. Overheads are higher than last year as the Company has funded the design and launch of its website, strengthened its management team, increased PR and marketing to stimulate both revenue growth and increase brand awareness.

UK

The winter merchandise was delivered to the UK, in accordance with its specification, from our new supplier in Sri Lanka. The Amazon orders were delivered on time and the range was added to our on-line offering on 20th October 2011. Detailed assessments versus our major competitors confirmed that our merchandise compares favourably in terms of quality, design and price.

Traffic to our website, http://www.hot-tuna.com, (which was launched on 22nd September 2011) is building well having been up 29% in the last week of October (versus the prior week) and a further week on week advance of 23% in the first week of November. However to date, conversion rates are disappointing and we have therefore lowered our forward sales forecasts from this channel.

In light of the ongoing difficult retail conditions in the UK, trade sales to multiple and online retailers for spring/summer 2012 are currently lower than hoped, or late in being confirmed. We are flexing our production planning accordingly.

Europe

Whilst spring/summer 2012 orders from our distributors in Italy, Austria, Germany and Denmark are ahead of last year, they are currently below budget.

Australia and South East Asia

Trade sales to independent retailers continue to show good growth and expectations for November are strong relative to last year. Online interest has been encouraging and we are launching an Australian web store later this month.

As announced in the trading update on 5 October 2011, the Company anticipates that its Australian distributor agreement should be signed this month. Sales projections by our distributor partner are very encouraging.

In conjunction with our prospective new Australian distribution partner, we see a great opportunity for Hot Tuna in South East Asia. Brand IP is being documented country by country prior to negotiating new distributor deals.

USA

The restructuring of our US operation is also close to being concluded with our commercial office and warehouse due to close as soon as all stock is cleared. Distributor discussions in the US are on-going with a view to appointing distribution partners early in 2012.

Online interest in the US has been encouraging with over 6% of visitors to http://www.hot-tuna.com coming from the region. We will activate a price change facility onto our website this month, which will allow USA customers to view all our prices in $US.

Commenting on current trading, Francis Ball, Executive Chairman, said:

"We have made good progress with Hot Tuna. Sales and margins in the first four months of this financial year are well ahead of the same period last year. Our PR campaign is proving exceptionally successful in getting the Hot Tuna brand in front of relevant young people. The launch in of the transactional website in the UK in September and the on-going development of an important trading relationship in Australia and New Zealand are exciting. The growth of sales in Australia indicates good awareness of, and support for, the Hot Tuna brand in its homeland.

The retail environment continues to be challenging in the UK, US and continental Europe which is undoubtedly impacting revenues in the current financial year. Action has already been taken to reduce costs. However there is a need to invest in and promote the Hot Tuna brand, and our rate of growth, whilst encouraging, is slower that previously expected."

Proposed disposal of the Hot Tuna brand

In light of current trading being below budget, and the Board's belief that it would be difficult for the Company to raise new investment from existing shareholders for the development and promotion of the Hot Tuna brand, the Board believes that shareholders interests will best be served by seeking a buyer for the Hot Tuna brand and all the assets and liabilities of the Company.

Board Changes

Francis Ball, Geoff O'Connell and Oscar Verden have indicated that, on completion of the sale of the Hot Tuna brand and the assets and liabilities, they will step down from the Board. Marcus Yeoman will remain on the Board and a new director will be appointed. The Board will, following completion of the sale of the Hot Tuna brand focus on identifying attractive acquisition opportunities for Hot Tuna (International) plc.

Commenting on the proposed sale of the Hot Tuna brand, Francis Ball said: "The Board and management team remains enthusiastic about the future of the Hot Tuna brand, and expects the current rate of sales growth, and improved margin, to be sustained. It is unfortunate that the current equity funding environment makes it very difficult for us to raise further capital and as a result we believe that the future of the business, its customers, distributors, suppliers and employees is best served through a sale of the brand."

AIM Rules for Companies

The Board anticipate that any sale of the Hot Tuna brand will be deemed to result in a fundamental change of business under Rule 15 of the AIM Rules for Companies and therefore will be conditional on consent from the Company's shareholders at a general meeting. Following a sale of the Hot Tuna brand the Company will have disposed of all of its trading businesses and therefore under Rule 15 of the AIM Rules for Companies it will be re-classified as an Investing Company and will be required to adopt an investing policy, which must also be approved by the Company's shareholders.

 

Enquiries:

Hot Tuna (International) PLC
Francis Ball


Tel: 0845 685 2050
Pelham Bell Pottinger
Lucy Frankland/ Dan de Belder


Tel: 020 7861 3885
Seymour Pierce Limited (Nominated Adviser)
Mark Percy / Catherine Leftley


Tel: 020 7107 8000
Allenby Capital Ltd
Nick Naylor

Tel: 020 3328 5656

 

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