TIDMCPR
RNS Number : 7094Z
Carpetright PLC
15 December 2014
Carpetright plc
Interim Results Announcement for the 26 weeks ended 25 October
2014
Carpetright plc, Europe's leading specialist carpet and floor
coverings retailer, today announces its interim results for the 26
week trading period ended 25 October 2014.
Group Financial Summary
H1 FY15 H1 FY14 Change
GBPm GBPm
------------------------------------ -------- -------- ---------
Group revenue (Note 1) 227.9 222.2 2.6%
------------------------------------ -------- -------- ---------
* UK 194.2 185.0 5.0%
------------------------------------ -------- -------- ---------
* Rest of Europe 33.7 37.2 (9.4%)
------------------------------------ -------- -------- ---------
Underlying operating profit/(loss)
(Note 2) 7.4 4.1 80.5%
------------------------------------ -------- -------- ---------
* UK 7.3 5.5 32.7%
------------------------------------ -------- -------- ---------
* Rest of Europe 0.1 (1.4) 107.1%
------------------------------------ -------- -------- ---------
Underlying profit before tax (Note
2) 6.7 3.0 123.3%
------------------------------------ -------- -------- ---------
Underlying earnings per share 7.6p 3.2p 137.5%
------------------------------------ -------- -------- ---------
Exceptional items (Note 4) - (1.1)
------------------------------------ -------- -------- ---------
Profit before tax 6.7 1.9 252.6%
------------------------------------ -------- -------- ---------
Basic earnings per share 7.6p 2.8p 171.4%
------------------------------------ -------- -------- ---------
Net cash/(debt) (Note 5) 3.2 (14.3) GBP17.5m
------------------------------------ -------- -------- ---------
Dividend per share Nil Nil
------------------------------------ -------- -------- ---------
Highlights
Group
-- Solid first half with total sales growth of 2.6%
-- Underlying profit before tax of GBP6.7m, up by 123.3%
-- Profit before tax up from GBP1.9m to GBP6.7m, an increase of 252.6%
-- Improved trading performance, tight control on capital
expenditure and robust working capital management moved the Group
into a net cash position of GBP3.2m at period end
-- Strategic review in progress following appointment of new Chief Executive
-- Plans to revitalise the Carpetright brand, while retaining
our well-established value heritage, being finalised, for
implementation in 2015
-- Full year underlying profit before tax now expected to be
towards the upper end of current market expectations (Note 6)
UK
-- Like-for-like revenues increased by 6.5%
-- Gross profit percentage reduced by 140 basis points to 61.7% (H1 FY14: 63.1%)
-- Stores estate reduced by a net nine during the period to 463,
trading from 4.0m sq ft, being 2.2% lower year-on-year
-- 290 stores now modernised, 63% of the estate
Rest of Europe
-- Like-for-like sales down by 3.3% in local currency terms
-- Gross profit percentage increased by 270 basis points to 60.5% (H1 FY14: 57.8%)
-- Improvement in underlying operating profit of GBP1.5m to
GBP0.1m, reversing the losses experienced in the first half of the
prior year
-- The number of stores reduced by a net three during the period
to 139, trading from 1.6m sqft, being 2.8% lower year-on-year
Commenting on the results, Wilf Walsh, Chief Executive,
said:
"I am pleased to report that the Group grew profits during the
first half, with an encouraging increase in UK like-for-like sales,
a return to underlying profit in the Rest of Europe and a net cash
position at the end of the period. Having made a solid start to the
year, we now expect full year underlying pre-tax profits to be
towards the upper end of current market expectations.
"We believe that, with a well researched and well executed
strategy, we can begin to reshape Carpetright to ensure the
business fully capitalises on its market leading position.
"These changes will take time to take full effect but we are
absolutely focused on maintaining the recent improvements in the
performance of the Group, as well as devoting our energies to
revitalising our brand and operations in line with contemporary
customer expectations. As a team we are excited by the potential
that exists and are concentrating hard on execution of this new
strategy as we enter 2015."
Notes
1. All sales figures are quoted after deducting VAT.
2. 'Underlying' excludes exceptional items and related tax.
3. Like-for-like sales calculated as this year's net sales
compared to last year's net sales for all stores that are at least
12 months old at the beginning of our current financial year.
Stores closed during the year are excluded from both years. No
account is taken of changes to store size or introduction of third
party concessions.
4. Exceptional items in H1 FY14 comprised of net losses on disposal of properties of GBP1.1m.
5. Net cash/(debt) is calculated as the total of cash-in-hand,
or at bank, offset by borrowings, finance leases and unamortised
fees.
6. Current range of market expectations for the year ending 2
May 2015 is for Group underlying profit before tax to be GBP8.0m to
GBP11.0m.
7. Comparative period for the year is the 26 week period ended 26 October 2013.
Results presentation
Carpetright plc will hold a presentation to analysts and
investors at Deutsche Bank, Winchester House, 1 Great Winchester
Street, London EC2N 2DB at 09:00 today.
A listen only conference call facility is available on Tel:
+44(0) 1452 580733, conference ID: 50525825
A copy of this interim statement can be found on our website
www.carpetright.plc.uk
For further enquiries please contact:
Carpetright plc
Wilf Walsh, Chief Executive
Neil Page, Group Finance Director
Tel: 01708 802000
Citigate Dewe Rogerson
Kevin Smith
Nick Hayns
Tel: 020 7638 9571
Forthcoming News flow:
Carpetright will release its Interim Management Statement for
the third quarter on
27 January 2015.
Certain statements in this report are forward looking. Although
the Group believes that the expectations reflected in these forward
looking statements are reasonable, it can give no assurance that
these expectations will prove to have been correct. Because these
statements contain risks and uncertainties, actual results may
differ materially from those expressed or implied by these forward
looking statements. We undertake no obligation to update any
forward looking statements whether as a result of new information,
future events or otherwise.
Interim Results
A summary of the reported financial results for the 26 weeks
ended 25 October 2014 is set out below:
H1 FY15 H1 FY14
GBPm GBPm Change
----------------------------- -------- ------- --------
Revenue 227.9 222.2 2.6%
----------------------------- -------- ------- --------
Underlying operating profit 7.4 4.1 80.5%
----------------------------- -------- ------- --------
Net finance charges (0.7) (1.1)
----------------------------- -------- ------- --------
Underlying profit before tax 6.7 3.0 123.3%
----------------------------- -------- ------- --------
Exceptional items - (1.1)
----------------------------- -------- ------- --------
Profit before tax 6.7 1.9 252.6%
----------------------------- -------- ------- --------
Earnings per share (pence)
----------------------------- -------- ------- --------
- underlying 7.6p 3.2p 137.5%
----------------------------- -------- ------- --------
- basic 7.6p 2.8p 171.4%
----------------------------- -------- ------- --------
Dividends per share (pence) Nil Nil
----------------------------- -------- ------- --------
Net cash/(debt) 3.2 (14.3) GBP17.5m
----------------------------- -------- ------- --------
Note - Where this review makes reference to "Underlying" these
relate to profit / earnings before exceptional items.
Overview
Group sales increased by 2.6% to GBP227.9m, with the UK business
up 5.0% and a decline of 9.4% in the Rest of Europe. During the
half year, the Group opened nine stores and closed 21, a net
decrease of twelve stores, to give a total store base of 602. Total
store space declined by 1.7% to 5.6 million square feet.
Whilst the retail environment in the UK continues to be
challenging, improving economic data has begun to feed through into
consumer confidence and this is being reflected in consumer
spending in our categories. Our continued focus on market beating
promotions delivered solid sales growth throughout the period, with
like-for-like growth of 6.5%. This price investment was the primary
factor in a decline in the gross profit percentage, which decreased
by 140 basis points to 61.7%. Although we are continuing to work
with suppliers to mitigate this impact, our revised guidance for
the full year is for a reduction in gross profit percentage in the
range of 100-150 basis points below the prior year.
Trading across our Rest of Europe business has continued to
improve and sales in local currency were broadly flat year-on-year
in the second quarter, arresting the very significant decline seen
over the last 30 months, particularly in our Netherlands business.
Sales in local currency were down 3.7%, with like-for-like sales
down 3.3%. Taking into account the depreciation of Sterling
relative to the Euro, this translates to a total sales decline of
9.4%. A focus on improved sourcing resulted in an increase in the
gross profit percentage of 270 basis points to 60.5% and this,
along with lower operating costs, reversed the reported losses
experienced in the first half of the prior year into an underlying
profit.
Overall, Group underlying operating profit increased by 80.5% to
GBP7.4m. Net finance charges were GBP0.4m lower at GBP0.7m,
primarily the result of a lower level of net debt. These factors
combined to generate a 123.3% improvement in underlying profit
before tax to GBP6.7m (H1 FY14: GBP3.0m).
This improvement in profit was reflected in a 171.4% increase in
basic earnings per share to 7.6p (H1 FY14: 2.8p).
The combination of cash flow from continued underlying
profitability, the tightly controlled level of net capital
expenditure and robust working capital management, enabled the
Group to report a net cash position of GBP3.2m at period end (H1
FY14: net debt of GBP14.3m). The cash flow strength of the Group is
highlighted by the fact that the net debt of GBP97.1m outstanding
as at May 2009, has been eliminated over the past five and half
years.
Chief Executive Review
Following my appointment as Chief Executive in July 2014, I have
focused my time on building a thorough understanding of the
business; maximising the opportunity of the three month hand over
period with Lord Harris, before he retired from the Board at the
end of October; and completing a review of the Group's strategy and
operations towards the end of the period. The review confirmed my
initial assessment of Carpetright as a fundamentally sound business
with a strong operational base and high brand awareness, but also
one that requires some updating and repositioning to capitalise
fully on its market leadership position.
The opportunity to revitalise Carpetright after a period of
sustained economic turbulence is significant and the executive team
is currently finalising a detailed strategic plan for
implementation in 2015, based on the key areas of focus outlined
below. Central to this thinking is an opportunity to broaden the
appeal of the brand by placing a greater emphasis on the unrivalled
breadth and quality of our product range, the expertise of our
colleagues, and the role floor coverings play in transforming our
customers' homes, while retaining our well-established value
heritage. The key areas of focus are:
1. Revitalise the Carpetright brand
2. Unbeatable value
3. Unrivalled choice of floor coverings
4. Providing an outstanding customer experience
5. Multi-channel convenience
6. Managing the store portfolio
1. Revitalise the Carpetright brand
As part of the strategic review we commissioned a market
research survey to evaluate consumer perceptions of the Carpetright
brand. The research confirmed high brand awareness and a strong
reputation for value within our core customer base but also
identified a number of negative perceptions around the brand that
are a deterrent to certain customer segments from shopping with us.
In particular, these potential customers felt that the brand was
too value focused and preferred to shop elsewhere, particularly the
independent sector, which they saw as more in tune with their
aspirations and lifestyle.
Broadening the appeal of the brand, while retaining its
traditional customer base, is at the heart of plans to revitalise
the business. Success in improving our brand perception will both
increase the number of people who would consider shopping with
Carpetright and drive our average transaction values and cash
margins higher. We are currently conducting a comprehensive review
of our brand, sub brands, tone of voice and identity to deliver an
updated brand positioning more suited to the contemporary retail
market.
2. Unbeatable Value
As the market leader in floor coverings, we have the strongest
purchasing power, enabling us to pass on the best value deals to
our customers. Our renewed focus on market leading promotions
stimulated demand and delivered sales growth during the period and
we will continue with this successful approach. However, we are
also keeping discount levels under regular review, as an absolute
focus on price may obscure some of the other important consumer
messages we wish to emphasise.
In addition, we have recently completed a review of our value
messaging. Historically, Carpetright has not offered Interest Free
Credit but the review identified a potential opportunity in this
area and the decision was taken to run a twelve week trial in our
Scottish region. The trial proved to be successful in driving
additional sales and margin, and we now plan to roll-out an
Interest Free Credit offer across our UK store base from Boxing
Day. This new initiative will be supported by our well established
"Price Promise", where we will match competitor deals on the same
product, and our regular promotions and offers.
3. Unrivalled choice of floor coverings
Carpetright offers the broadest range of carpets in the market,
including premium and specialist lines, but our research suggests
that this message could be better communicated to a wider group of
potential customers. To address this, we are at the early stages of
repositioning our ranges and our sales approach. Our objective is
to move away from a simple functional carpet sale to a broader
message which recognises our role in helping to transform our
customers' homes. We are therefore working on a revision of our
ranges to ensure they are optimised across the price and quality
spectrum. Greater design input, with a focus on inspiring our
customers, will be an enduring theme for the rest of the year. We
believe that by focussing our range and marketing messages on our
unbeatable combination of quality, staff expertise, inspiration and
value we can increase our average transaction value.
4. Providing an outstanding customer experience
Customers' expectations of service standards have risen
significantly over the last decade and, while the review identified
a significant improvement in Carpetright's service performance in
recent years, it also identified a need for greater consistency in
this area. In January 2015, we will be introducing a new web based
Customer Service programme entitled "Do We Measure Up?" across the
entire UK store network. This important initiative will reinforce
our commitment to meeting the needs and aspirations of our
customers, driving service standards higher and helping to improve
our online ratings.
We continued the programme of store refurbishments across the UK
store estate, introducing our updated store design, in which it is
easier for customers to shop. A total of 290 stores have now been
completed, representing 63% of the estate.
While the refurbishment programme undertaken over the last 36
months has addressed issues arising from a long period of
under-investment, we believe there is further work that can be done
to develop our stores and broadening the appeal of the brand. As an
initial step, in the second half of the year, we will be trialling
a new High Street, sample only, premium product concept which is in
the very early stages of development.
5. Multi-channel convenience
Physical stores remain crucial in the flooring market, with
customers wanting a sensory experience, where they are able to
touch and view the product, prior to making a purchase. In
addition, stores represent a route to receiving specialist advice
on what is a relatively infrequent purchase. However, the internet
has become a vital research tool for many customers and the rapid
growth of smart phone and tablet use has made an effective and
integrated multi-channel proposition a necessity. With over 400
stores, we see the opportunity to leverage the accessibility of our
estate, combined with the strength of our marketing voice and
supported by an inspirational website, a key advantage when
compared to the competition.
By the end of the first half, on a weekly basis we were
achieving an average of over 92,000 unique visitors to our website,
an 8% increase on the same period last year, and this has produced
a corresponding increase in appointment leads and sample requests.
We have also continued to focus on improving our conversion to
sales ratio, through a call centre and improved follow-up at store
level. Sales from this combination of the call centre and an online
capability have grown significantly during the period and by
October 2014 were the equivalent of one of our top ten stores.
We are continuing to invest in this area, with an updated and
more inspirational website launching in Spring 2015, designed to
drive more customers who have done their research online to our
stores.
6. Managing the store portfolio
At the end of October 2014 the Group had 463 stores trading in
the UK, opening eight stores and closing 17 in the period. This net
reduction is primarily the result of completing the initial phase
of the previously announced plan to eliminate store overlaps, where
having more than one store in a town was not beneficial to profit
or cash flow. We will continue to take advantage of similar
opportunities. In addition, in the past six months we have
negotiated exits from four locations where we had onerous leases,
removing us from all future liabilities associated with those
properties.
We continue to take a robust view at lease renewal, which
provides an opportunity to secure lower rents for future years. In
the period we achieved an average rent reduction at lease renewal
of over 10%. Within the next five years 27% of the estate has a
lease renewal scheduled, providing further opportunity to reduce
the fixed store operating costs. As at October 2014 the average
length of lease had fallen to 7.7 years (H1 FY14: 8.7 years).
In the Rest of Europe we had 139 stores trading as at the end of
October 2014, opening one and closing four in the period. In line
with the UK activity, discussions are being held with landlords in
respect of lease renewals and this process is delivering rental
reductions. The potential to secure reductions is generally
dictated by the average length of lease remaining, with this being
3.7 years in the Netherlands and 2.2 years in Belgium. In the
Republic of Ireland this period is 11.2 years, reflecting the
agreement of long term deals during the expansion into this market
in the period from 2001 to 2008.
Across the Group we continued to take opportunities to reduce
our store size and we now have 98 stores operating as 'sample
only', which delivers lower operating costs without negatively
affecting customer choice. Greater use of this smaller store format
is allowing us to reduce fixed occupancy costs by either
sub-letting or handing back space to the landlord, benefiting
profitability. We see further potential in this programme and are
examining opportunities to accelerate our activity in this
area.
Leadership Team
During my review, we identified a need to strengthen operational
management in a number of key areas. We are therefore pleased to
confirm that Fiona Hilton will join the Group as Commercial
Director on 5 January 2015. In this newly created senior executive
role, Fiona will be responsible for Buying, Marketing and Digital
Operations. Fiona has extensive experience with a number of leading
consumer businesses including Liz Earle, Wolseley, Boots and
Kingfisher. The Group also expects to announce a number of new
appointments within its Creative and Visual Design functions as
part of plans to revitalise our brand image and product offer.
Lord Harris of Peckham retired from the business on 31 October
2014 and we are looking to build on the strong legacy and culture
developed in the business he founded over 26 years ago. We were
pleased to welcome Bob Ivell, who has extensive public company and
consumer sector experience, to the Board as the Group's new
Chairman with effect from 1 November 2014.
Dividend
The Board has decided not to pay an interim dividend (H1 FY14:
nil). In taking this decision, the Board considered that whilst
there has been an improvement in profitability during the first
half there remains a degree of uncertainty in the retail
environment. That said, whether to recommend a final dividend will
be re-visited at the end of our financial year.
Summary and Outlook
The period since the onset of the financial crisis has been a
difficult few years for Carpetright along with other European
'home-focused' retailers, as consumer spending declined
significantly during the extended period of austerity.
It is therefore pleasing to report that the Group grew profits
during the first half, with an encouraging increase in UK
like-for-like sales, a return to profit in the Rest of Europe and a
net cash position at the end of the period. Our full year outcome
is clearly dependent on our second half performance, and, while
there remains significant uncertainty over consumer spending in the
coming months, with a general election and a slowdown in housing
transactions in the UK, and weakening economic conditions in
Continental Europe, we remain confident the Group will continue to
make progress during this time.
We believe that, with a well researched and well executed
strategy, we can begin to reshape Carpetright to ensure the
business better capitalises on its market leading position. These
changes will take time to take full effect but we are absolutely
focused on maintaining the recent improvements in the performance
of the Group, as well as devoting our energies to revitalising our
brand and operations in line with contemporary customer
expectations. As a team we are excited by the potential that exists
and are concentrating hard on execution of this new strategy as we
enter 2015.
Wilf Walsh
Chief Executive
12 December 2014
Financial review
UK
Key financial results for the UK:
H1 FY15 H1 FY14
GBPm GBPm Change
------------------------------- -------- -------- ----------
Revenue 194.2 185.0 5.0%
=============================== ======== ======== ==========
Like-for-like sales 6.5% (0.8%)
=============================== ======== ======== ==========
Gross profit 119.9 116.6 2.8%
=============================== ======== ======== ==========
Gross profit % 61.7% 63.1% (1.4ppts)
=============================== ======== ======== ==========
Costs (112.6) (111.1) (1.4%)
=============================== ======== ======== ==========
Cost to sales % 57.9% 60.1% 2.2ppts
=============================== ======== ======== ==========
Underlying operating profit 7.3 5.5 32.7%
=============================== ======== ======== ==========
Underlying operating margin % 3.8% 3.0% 0.8ppts
------------------------------- -------- -------- ----------
UK store portfolio:
Store numbers Gross Sq ft ('000)
-----------------
26 April 25 Oct 26 April 25 Oct
2014 Openings Closures 2014 2014 2014
----------------- --------- ----------- ----------- ------- ----------- --------
Standalone 457 7 (12) 452 4,039 3,993
================= ========= =========== =========== ======= =========== ========
Concessions 15 1 (5) 11 27 18
================= ========= =========== =========== ======= =========== ========
472 8 (17) 463 4,066 4,011
----------------- --------- ----------- ----------- ------- ----------- --------
As at 26 Oct
2013 474 4,100
----------------- --------- ----------- ----------- ------- ----------- --------
Included in standalone stores:
Bed departments 260 10 (1) 269
----------------- --------- ----------- ----------- -------
As at 26 Oct
2013 263
----------------- --------- ----------- ----------- -------
In an improving, yet volatile, trading environment total revenue
increased 5.0% in the first half to GBP194.2m. We opened eight and
closed 17 stores during the period, which translated into net space
decline of 55,000 sq ft, a decrease of 1.4%. After taking into
account the movement in the number of stores, like-for-like sales
for the half year increased by 6.5%, with the first quarter
increase of 6.1% followed by a marginally stronger second quarter,
being an increase of 7.0%.
Gross profit increased by GBP3.3m to GBP119.9m, representing
61.7% of sales, a decrease of 140 basis points. The decline in
margin rate was a result of:
-- Implementing market beating promotions to drive footfall and top line sales volumes.
-- An increase in bed sales, which have a lower gross margin,
resulting in an adverse mix impact.
The total UK cost base increased by 1.4% compared with the prior
year to GBP112.6m. Costs as a percentage of sales were 57.9%, which
compared favourably to 60.1% in the prior year, reflecting the
operational gearing of the business. The movement in costs was a
combination of:
-- An increase in store payroll costs reflecting commission
payments associated with the stronger sales growth.
-- A reduction in occupancy costs from a reduction in the number
of stores, offset by inflationary increases particularly in rates
and utilities, along with higher depreciation from the
modernisation programme.
The culmination of the above factors lead to underlying
operating profit increasing by 32.7% to GBP7.3m.
Rest of Europe
Key financial results for the Rest of Europe
H1 FY15 H1 FY14 Change Change (Local
GBPm GBPm (Reported) Currency)
------------------------------------ -------- -------- ------------ --------------
Revenue 33.7 37.2 (9.4%) (3.7%)
==================================== ======== ======== ============ ==============
Like-for-like sales (local
currency) (3.3%) (8.6%)
==================================== ======== ======== ============ ==============
Gross profit 20.4 21.5 (5.1%) 0.8%
==================================== ======== ======== ============ ==============
Gross profit % 60.5% 57.8% 2.7ppts
==================================== ======== ======== ============ ==============
Costs (20.3) (22.9) 11.4% 6.3%
==================================== ======== ======== ============ ==============
Cost to sales % 60.2% 61.6% 1.4ppts
==================================== ======== ======== ============ ==============
Underlying operating profit/(loss) 0.1 (1.4) 107.1% 109.0%
==================================== ======== ======== ============ ==============
Underlying operating margin
% 0.3% (3.8%) 4.1ppts
------------------------------------ -------- -------- ------------ --------------
Rest of Europe store portfolio:
Store numbers Gross Sq ft ('000)
---------------------
26 April 25 Oct 26 April 25 Oct
2014 Openings Closures 2014 2014 2014
--------------------- --------- ----------- ----------- ------- ----------- --------
Netherlands 95 1 (2) 94 1,104 1,087
===================== ========= =========== =========== ======= =========== ========
Belgium 25 - (2) 23 298 273
===================== ========= =========== =========== ======= =========== ========
Republic of Ireland 22 - - 22 162 162
===================== ========= =========== =========== ======= =========== ========
142 1 (4) 139 1,564 1,522
--------------------- --------- ----------- ----------- ------- ----------- --------
As at 26 Oct
2013 142 1,566
--------------------- --------- ----------- ----------- ------- ----------- --------
The flooring market in the Netherlands and Belgium remained weak
over the course of the first half, impacted by government austerity
measures restricting customers' disposable income and low consumer
confidence. That said, improvements in a number of recent economic
indicators, such as rising housing transactions in the Netherlands,
give grounds for cautious optimism for the future. Recently, sales
across our Rest of Europe business units have shown signs of
improvement, with a reduction in the rate of decline in local
currency terms from 3.6% in the first quarter to a 0.5% decline in
the second quarter of the financial year.
Our Rest of Europe portfolio reduced by a net three stores
during the first half, a result of exiting three poor performing
sites and relocating one store in the Netherlands. The estate is
now trading from 139 stores.
In local currency terms, the three businesses combined to
produce a total sales decline of 3.7%, with like-for-like sales
decreasing by 3.3%. After exchange rate movements, total sales fell
by 9.4% in reported currency
Gross profit percentage increased 270 basis points to 60.5%
resulting principally from improved sourcing and operational
disciplines curtailing local discounting. The improvement in margin
rate was sufficient to offset the impact of lower sales volumes
resulting in an increase in gross profit of 0.8%. However, after
taking into account exchange rate movements this resulted in a
decline of 5.1% in reported currency.
Operating costs in local currency reduced by 6.3%. The majority
of the savings were driven by the consolidation of our offices in
Europe and a reduction in advertising spend. This was reflected in
the decline in the costs as a percentage of sales to 60.2%, a
reduction on the prior year figure of 61.6%. In reported currency,
this was a reduction in costs of 11.4% to GBP20.3m.
The net result was an improvement in underlying operating profit
of GBP1.5m to GBP0.1m, reversing the losses experienced in the
first half of the prior year.
Group financial review
Net finance charges and taxation
Underlying net finance charges for the period were GBP0.4m lower
at GBP0.7m (H1 FY14: GBP1.1m) primarily as a result of having lower
levels of net debt in the period.
The taxation charge on profit for the half year was GBP1.5m (H1
FY14: GBPnil). This is based on a full year effective tax rate of
22.9% (H1 FY14: 0.5%), which is close to the UK corporation tax
rate of 21.0% as the net effects of non-deductible items, overseas
tax rates and other permanent differences offset one another. The
increase on last year's rate is due to the effects of a one off
credit recognised for deferred tax in the prior year.
Exceptional items
We continued to trade our property portfolio and generated a net
profit of GBP0.1m on the disposal of properties in the UK, this was
offset by a GBP0.1m loss on the disposal of property in our Rest of
Europe business. There were no other exceptional items in the
period. This compared to a GBP1.1m charge in the prior year, all
relating to a net loss on disposal of properties.
(Charge) / Gain
H1 FY15 H1 FY14
GBPm GBPm
-------------------------------- --------- --------
Loss on disposal of properties - (1.1)
================================ ========= ========
Pre-tax exceptional items - (1.1)
-------------------------------- --------- --------
At 26 April 2014 there were 22 vacant properties in the UK and
three in the Republic of Ireland classed as onerous leases, against
which we carried a provision. During the first half, we
successfully disposed of four of these, removing us from all
associated future liabilities associated with these properties.
There were no additions during the half year. The net impact of
these disposals is not significant, resulting in no charge
occurring in the financial statements.
Earnings per share
Basic earnings per share was 7.6 pence (H1 FY14: 2.8 pence).
Underlying earnings per share increased to 7.6 pence (H1 FY14: 3.2
pence).
Dividend
The Board has decided not to pay an interim dividend (H1 FY14:
nil).
Balance sheet
The Group has net assets of GBP64.3m (Year end FY14: GBP61.1m)
an increase of GBP3.2m since 26 April 2014.
Summary Balance sheet
25 Oct 26 April Movement
2014 2014
GBPm GBPm GBPm
-------------------------------------- -------- --------- ---------
Freehold and long leasehold property 68.9 71.0 (2.1)
====================================== ======== ========= =========
Other non current assets 111.4 114.4 (3.0)
====================================== ======== ========= =========
Stock 36.1 33.9 2.2
====================================== ======== ========= =========
Trade & other current assets 22.6 19.8 2.8
====================================== ======== ========= =========
Creditors < 1 year (108.8) (93.5) (15.3)
====================================== ======== ========= =========
Creditors > 1 year (65.8) (70.1) 4.3
====================================== ======== ========= =========
Net cash/(debt) 3.2 (11.1) 14.3
====================================== ======== ========= =========
Pension deficit (3.3) (3.3) -
====================================== ======== ========= =========
Net Assets 64.3 61.1 3.2
-------------------------------------- -------- --------- ---------
The Group owns a significant property portfolio, most of which
is used for retail purposes. The carrying values are supported by a
combination of value in use and independent valuations.
Net debt and cash flow
The Group has net cash at 25 October 2014 of GBP3.2m, an
improvement of GBP14.3m from the year end FY14 net debt position of
GBP11.1m.
This turnaround was driven by an improvement in the underlying
operating profit performance, accompanied by the following other
major movements:
-- A GBP2.7m increase in stock, associated with range changes and higher sales volume;
-- A cash outflow of GBP2.8m related to previously made provisions;
-- Contributions to closed defined benefit pension schemes of GBP0.5m; and
-- A decrease in working capital of GBP9.2m, a consequence of a
favourable movement in trade creditors aligned to increasing sales
volumes and supplier mix.
The resulting net inflow of cash generated by operations of
GBP17.9m (H1 FY14: GBP1.1m) was offset by net capital expenditure,
corporation tax refunds and interest outflows totalling GBP3.8m (H1
FY14: GBP5.3m).
The Group's average cost of funding was 5.4% (H1 FY14: 6.5%)
with an average net debt of GBP10.8m (H1 FY14: GBP19.1m).
Summary cash flow
H1 FY15 H1 FY14
GBPm GBPm
---------------------------------------- -------- --------
Underlying operating profit 7.4 4.1
======================================== ======== ========
Depreciation and non-cash items 7.3 7.1
======================================== ======== ========
Exceptional items - -
======================================== ======== ========
(Increase)/Decrease in stock (2.7) 0.5
======================================== ======== ========
(Increase)/Decrease in working capital 9.2 (8.4)
======================================== ======== ========
Contributions to pension schemes (0.5) (0.4)
======================================== ======== ========
Provisions paid (2.8) (1.8)
---------------------------------------- -------- --------
Cash generated by operations 17.9 1.1
======================================== ======== ========
Net interest paid (0.7) (0.8)
======================================== ======== ========
Corporation Tax paid 0.3 (0.3)
======================================== ======== ========
Net capital expenditure (3.4) (4.2)
---------------------------------------- -------- --------
Free cash flow 14.1 (4.2)
======================================== ======== ========
Dividends paid - -
======================================== ======== ========
Other 0.2 0.1
---------------------------------------- -------- --------
Movement in net debt 14.3 (4.1)
======================================== ======== ========
Opening net cash/(debt) (11.1) (10.2)
---------------------------------------- -------- --------
Closing net cash/(debt) 3.2 (14.3)
---------------------------------------- -------- --------
Gross capital expenditure was GBP4.6m (H1 FY14: GBP4.6m), with
the majority of this spend relating to the store refurbishment
programme. After allowing for proceeds from property disposals, net
capital expenditure was GBP3.4m (H1 FY14: GBP4.2m).
H1 FY15 H1 FY14
GBPm GBPm
------------------------------------ -------- --------
Capital expenditure (4.6) (4.6)
==================================== ======== ========
Proceeds from property disposals 1.2 0.4
------------------------------------ -------- --------
Net capital (expenditure)/receipts (3.4) (4.2)
------------------------------------ -------- --------
Current liquidity
At the half year the Group held cash balances of GBP8.3m (H1
FY14: GBP6.0m), principally a combination of Sterling and
Euros.
Gross bank borrowings (excluding unamortised fees) at the
balance sheet date were GBP2.9m (H1 FY14: GBP18.2m) of which
GBP0.5m was term based, with the balance of GBP2.4m being drawn
down from overdraft facilities. The Group had further undrawn
facilities of GBP58.7m at the balance sheet date. In October 2014
the Group secured an extension to the maturity date of its
principal banking facilities through to July 2016, extended from
July 2015, with terms and covenants relating to the facilities
unchanged. This extension is in anticipation of completing a full
refinancing of the Group's borrowing facilities in 2015. The
facilities contain financial covenants which are believed to be
appropriate in the current economic climate, against which the
Group monitors actual and prospective compliance. The Group has
sufficient headroom to enable it to comply with the covenants on
its existing borrowings.
Pensions
At 25 October 2014 the IAS 19 net retirement benefit deficit was
GBP3.3m (26 April 2014: GBP3.3m). The half year discount rate was
3.9% (26 April 2014: 4.2%), reflecting prevailing corporate bond
rates. The higher market value of plan assets and additional
Company contributions were entirely offset by increases in the
value of scheme liabilities, leading to no net change in the
calculation of the net pension liability for accounting purposes at
25 October 2014. As previously announced, the Company scheme was
closed to future accrual with effect from 1 May 2010.
The Company agreed a recovery plan with the Trustees in 2012 and
this will be reviewed following the completion a triennial
valuation, which is being performed with a valuation date of 5
April 2014.
Neil Page
Group Finance Director
12 December 2014
Condensed consolidated income statement
for 26 weeks ended 25 October 2014
26 weeks to 25 26 weeks to 26 52 weeks to 26
October 2014 October 2013 April 2014
Exceptional Exceptional Exceptional
Before Items Before Items Before Items
Exceptional (note Exceptional (note Exceptional (note
items 5) Total items 5) Total items 5) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
Revenue 4 227.9 - 227.9 222.2 - 222.2 447.7 - 447.7
Cost of sales (87.6) - (87.6) (84.1) - (84.1) (171.8) - (171.8)
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
Gross profit 140.3 - 140.3 138.1 - 138.1 275.9 - 275.9
Administration
expenses (134.0) - (134.0) (134.1) - (134.1) (271.1) (10.2) (281.3)
Other operating
income/(expenses) 1.1 - 1.1 0.1 (1.1) (1.0) 2.1 (1.6) 0.5
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
Operating
profit/(loss) 4 7.4 - 7.4 4.1 (1.1) 3.0 6.9 (11.8) (4.9)
Finance costs 6 (0.7) - (0.7) (1.1) - (1.1) (2.3) - (2.3)
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
Profit/(loss)
before
tax 6.7 - 6.7 3.0 (1.1) 1.9 4.6 (11.8) (7.2)
Tax 7 (1.5) - (1.5) (0.8) 0.8 (1.4) 5.0 3.6
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
Profit/(loss) for
the financial
period
attributable to
owners
of the parent 5.2 - 5.2 2.2 (0.3) 1.9 3.2 (6.8) (3.6)
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
Basic earnings
per
share (pence) 8 7.6 - 7.6 3.2 (0.4) 2.8 4.7 (10.0) (5.3)
Diluted earnings
per share (pence) 8 7.6 2.8 (5.3)
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
All material items in the income statement arise from continuing
operations.
Condensed consolidated statement of comprehensive income
for 26 weeks ended 25 October 2014
26 weeks 26 weeks 52 weeks
to to to
25 October 26 October 26 April
2014 2013 2014
Notes GBPm GBPm GBPm
------------------------------------------------ ----- ----------- ----------- ---------
Profit/(loss) for the financial period 5.2 1.9 (3.6)
------------------------------------------------ ----- ----------- ----------- ---------
Items that will not be reclassified to the
income statement:
Remeasurements of defined benefit plans 14 (0.4) 0.1 1.1
Tax on items that will not be reclassified
to the income statement - 0.1 (0.5)
------------------------------------------------ ----- ----------- ----------- ---------
(0.4) 0.2 0.6
------------------------------------------------ ----- ----------- ----------- ---------
Items that may be reclassified subsequently
to the income statement:
Exchange gain/(loss) in respect of hedged
equity investments (1.8) 0.7 (1.6)
Tax on items may be reclassified subsequently
to the income statement - - -
------------------------------------------------ ----- ----------- ----------- ---------
(1.8) 0.7 (1.6)
------------------------------------------------ ----- ----------- ----------- ---------
Other comprehensive income/(loss) for the
period (2.2) 0.9 (1.0)
------------------------------------------------ ----- ----------- ----------- ---------
Total comprehensive income/(loss) for the
period attributable to owners of the parent 3.0 2.8 (4.6)
------------------------------------------------ ----- ----------- ----------- ---------
The notes on pages 20 to 25 form an integral part of this
consolidated interim financial information.
Condensed consolidated statement of changes in equity
for 26 weeks ended 25 October 2014
Capital
Share Share Treasury redemption Translation Retained
capital premium shares reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 26 April 2014 0.7 17.2 (0.3) 0.1 5.4 38.0 61.1
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Profit for the period 5.2 5.2
Other comprehensive income/(expense)
for the period (1.8) (0.4) (2.2)
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive income for the
financial period - - - - (1.8) 4.8 3.0
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Share-based payments and related
tax - - - - - 0.2 0.2
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 25 October 2014 0.7 17.2 (0.3) 0.1 3.6 43.0 64.3
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Capital
Share Share Treasury redemption Translation Retained
capital premium shares reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 27 April 2013 0.7 16.6 (0.3) 0.1 7.0 41.2 65.3
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Profit for the period 1.9 1.9
Other comprehensive income/(expense)
for the period 0.7 0.2 0.9
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive income for the
financial period - - - - 0.7 2.1 2.8
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Share-based payments and related
tax - - - - - (0.2) (0.2)
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 26 October 2013 0.7 16.6 (0.3) 0.1 7.7 43.1 67.9
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
The notes on pages 20 to 25 form an integral part of this
consolidated interim financial information.
Condensed consolidated balance sheet
as at 25 October 2014
25 October 26 October 26 April
2014 2013 2014
Notes GBPm GBPm GBPm
------------------------------------------- ----- ---------- ---------- --------
Assets
Non-current assets
Intangible assets 13 57.7 60.2 58.6
Property, plant and equipment 13 101.6 107.9 103.6
Investment property 17.7 20.2 19.6
Deferred tax assets 2.6 2.6 2.9
Trade and other receivables 0.7 0.8 0.7
------------------------------------------- ----- ---------- ---------- --------
180.3 191.7 185.4
------------------------------------------- ----- ---------- ---------- --------
Current assets
Inventories 36.1 37.1 33.9
Trade and other receivables 22.6 27.8 19.8
Cash and cash equivalents 10 8.3 6.0 6.3
------------------------------------------- ----- ---------- ---------- --------
67.0 70.9 60.0
------------------------------------------- ----- ---------- ---------- --------
Total assets 247.3 262.6 245.4
------------------------------------------- ----- ---------- ---------- --------
Liabilities
Current liabilities
Trade and other payables (102.8) (97.0) (89.3)
Obligations under finance leases 10 (0.1) (0.1) (0.1)
Borrowings and overdrafts 10 (2.7) (11.7) (11.1)
Current tax liabilities (6.0) (1.7) (4.2)
------------------------------------------- ----- ---------- ---------- --------
(111.6) (110.5) (104.7)
------------------------------------------- ----- ---------- ---------- --------
Non-current liabilities
Trade and other payables (37.5) (39.5) (38.6)
Obligations under finance leases 10 (2.3) (2.4) (2.4)
Borrowings 10 - (6.1) (3.8)
Provisions for liabilities and charges 11 (12.0) (9.5) (14.9)
Deferred tax liabilities (16.3) (22.0) (16.6)
Retirement benefit obligations 14 (3.3) (4.7) (3.3)
------------------------------------------- ----- ---------- ---------- --------
(71.4) (84.2) (79.6)
------------------------------------------- ----- ---------- ---------- --------
Total liabilities (183.0) (194.7) (184.3)
------------------------------------------- ----- ---------- ---------- --------
Net assets 64.3 67.9 61.1
------------------------------------------- ----- ---------- ---------- --------
Equity
Share capital 0.7 0.7 0.7
Share premium 17.2 16.6 17.2
Treasury shares (0.3) (0.3) (0.3)
Other reserves 46.7 50.9 43.5
------------------------------------------- ----- ---------- ---------- --------
Total equity attributable to owners of the
parent 64.3 67.9 61.1
------------------------------------------- ----- ---------- ---------- --------
The notes on pages 20 to 25 form an integral part of this
consolidated interim financial information.
Condensed consolidated statement of cash flows
for 26 weeks ended 25 October 2014
26 weeks 26 weeks 52 weeks
to to to
25 October 26 October 26 April
2014 2013 2014
Note GBPm GBPm GBPm
----------------------------------------------------- ---- ----------- ----------- ---------
Cash flows from operating activities
Profit/(loss) before tax 6.7 1.9 (7.2)
Depreciation and amortisation 6.9 6.8 13.9
Losses on property disposals - 1.1 1.6
Exceptional non-cash items - - 10.1
Other non-cash items 0.4 0.3 0.1
Net finance costs 0.7 1.1 2.3
----------------------------------------------------- ---- ----------- ----------- ---------
Operating cash flows before movements in working
capital 14.7 11.2 20.8
(Increase)/decrease in inventories (2.7) 0.5 3.5
(Increase)/decrease in trade and other receivables (3.0) (8.0) (0.3)
Increase/(decrease) in trade and other payables 11.7 (0.8) (7.8)
Provisions paid (2.8) (1.8) (4.9)
----------------------------------------------------- ---- ----------- ----------- ---------
Cash generated by operations 17.9 1.1 11.3
Interest paid (0.7) (0.8) (1.4)
Corporation taxes received/(paid) 0.3 (0.3) (0.7)
----------------------------------------------------- ---- ----------- ----------- ---------
Net cash flows from operating activities 17.5 - 9.2
----------------------------------------------------- ---- ----------- ----------- ---------
Investing activities
Purchases of intangible assets (1.0) (0.1) (0.2)
Purchases of property, plant and equipment
and investment property (3.6) (4.5) (10.6)
Proceeds on disposal of property, plant and
equipment and investment property 1.2 0.4 0.6
----------------------------------------------------- ---- ----------- ----------- ---------
Net cash flows from investing activities (3.4) (4.2) (10.2)
----------------------------------------------------- ---- ----------- ----------- ---------
Financing activities
Issue of new shares - - 0.6
New loans - 3.5 -
Repayment of borrowings 10 (3.6) (0.8) 0.1
----------------------------------------------------- ---- ----------- ----------- ---------
Net cash flows from financing activities (3.6) 2.7 0.7
----------------------------------------------------- ---- ----------- ----------- ---------
Net increase/(decrease) in cash and cash equivalents
in the period 10 10.5 (1.5) (0.3)
Cash and cash equivalents at the beginning
of the period (4.5) (4.1) (4.1)
Exchange differences (0.1) 0.1 (0.1)
----------------------------------------------------- ---- ----------- ----------- ---------
Cash and cash equivalents at the end of the
period 10 5.9 (5.5) (4.5)
----------------------------------------------------- ---- ----------- ----------- ---------
For the purposes of the cash flow statement, cash and cash
equivalents are reported net of overdrafts repayable on demand.
Overdrafts are excluded from the definition of cash and cash
equivalents disclosed in the balance sheet.
The notes on pages 20 to 25 form an integral part of this
consolidated interim financial information.
Notes to the financial statements
1. General information
This unaudited condensed consolidated half-yearly information
was approved for issue on 12 December 2014.
This interim report does not comprise statutory financial
statements within the meaning of Section 434(3) of the Companies
Act 2006. It has been reviewed but not audited by the Group's
auditors. The unaudited condensed consolidated half-yearly
financial information comprises the results for the 26 weeks ended
25 October 2014 and the 26 weeks ended 26 October 2013, and the
audited consolidated results for the 52 weeks ended 26 April 2014.
The audited information for the 52 weeks ended 26 April 2014 have
been extracted from Carpetright plc's Annual Report and Financial
Statements, which were approved by the Board of Directors on 23
June 2014 and delivered to the Registrar of Companies. The report
of the auditors on those financial statements was unqualified, did
not contain an emphasis of matter paragraph and did not contain any
statement under Section 498 of the Companies Act 2006.
2. Basis of preparation
The unaudited interim financial report for the 26 weeks ended 25
October 2014 has been prepared in accordance with the Disclosure
and Transparency Rules of the Financial Conduct Authority and with
IAS 34, 'Interim Financial Reporting' as adopted by the European
Union. It should be read in conjunction with the annual financial
statements for the 52 weeks ended 26 April 2014, which have been
prepared in accordance with IFRSs as adopted by the European
Union.
The Directors, after reviewing the Group's operating budgets,
forecasts and financing arrangement, consider that the Group has,
at the date of this report, sufficient financing available for the
estimated requirements for the foreseeable future. Accordingly, the
Directors are satisfied that it is appropriate for these financial
statements to be prepared on a going concern basis.
Financial assets and liabilities and foreign operations are
translated at the following rates of exchange:
26 weeks 26 weeks 52 weeks
to to to
25 October 26 October 26 April
2014 2013 2014
GBPm GBPm GBPm
------------ ----------- ----------- ---------
Euro
Average 1.27 1.17 1.18
Closing 1.27 1.17 1.21
Zloty
Average 5.35 4.95 5.00
Closing 5.35 4.92 5.10
------------ ----------- ----------- ---------
3. Accounting policies
The accounting policies adopted are consistent with those of the
annual financial statements for the 52 weeks ended 26 April 2014,
as described in those annual financial statements except where set
out below:
There are no new standards, amendments to existing standards or
interpretations that are effective for the first time in the
financial year beginning on 27 April 2014 that would be expected to
have a material impact on the Group's result.
Taxes on income for interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
The financial statements for the year end April 2014 included a
restatement in the prior period to reflect the reclassification of
contractual rent uplifts from trade and other payables within
current liabilities to non-current liabilities. At the half year,
the October 2013 balance sheet has been restated to reflect a
reclassification of GBP8.3m from trade and other payables within
current liabilities to non-current liabilities.
4. Segmental analysis
The operating segments have been determined based on reports
reviewed by the Board that are used to make strategic
decisions.
The reportable operating segments derive their revenue primarily
from the retail of floor coverings and beds. Central costs are
incurred principally in the UK. As such these costs are included
within the UK segment. Sales between segments are carried out at
arm's length.
The segment information provided to the Board for the reportable
segments for the 26 weeks ended 25 October 2014 is as follows:
26 weeks to 25 October 26 weeks to 26 October
2014 2013
UK Europe Group UK Europe Group
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- -------- ------- ------- -------- ------- -------
Gross revenue 197.2 33.7 230.9 187.1 37.2 224.3
Inter-segment revenue (3.0) - (3.0) (2.1) - (2.1)
--------------------------------------- -------- ------- ------- -------- ------- -------
Revenues from external customers 194.2 33.7 227.9 185.0 37.2 222.2
--------------------------------------- -------- ------- ------- -------- ------- -------
Gross profit 119.9 20.4 140.3 116.6 21.5 138.1
--------------------------------------- -------- ------- ------- -------- ------- -------
Underlying operating profit 7.3 0.1 7.4 5.5 (1.4) 4.1
Exceptional items 0.1 (0.1) - (1.1) - (1.1)
--------------------------------------- -------- ------- ------- -------- ------- -------
Operating profit/(loss) 7.4 - 7.4 4.4 (1.4) 3.0
Intercompany interest - - - (0.1) 0.1 -
Finance costs (0.7) - (0.7) (1.0) (0.1) (1.1)
--------------------------------------- -------- ------- ------- -------- ------- -------
Profit/(loss) before tax 6.7 - 6.7 3.3 (1.4) 1.9
Tax (1.5) - (1.5) (0.1) 0.1 -
--------------------------------------- -------- ------- ------- -------- ------- -------
Profit/(loss) for the financial period 5.2 - 5.2 3.2 (1.3) 1.9
--------------------------------------- -------- ------- ------- -------- ------- -------
Segment assets:
Segment assets 202.9 88.3 291.2 206.7 99.9 306.6
Inter-segment balances (25.6) (18.3) (43.9) (23.7) (20.3) (44.0)
--------------------------------------- -------- ------- ------- -------- ------- -------
Balance sheet total assets 177.3 70.0 247.3 183.0 79.6 262.6
--------------------------------------- -------- ------- ------- -------- ------- -------
Segment liabilities:
Segment liabilities (181.6) (45.3) (226.9) (191.6) (47.1) (238.7)
Inter-segment balances 18.3 25.6 43.9 20.3 23.7 44.0
--------------------------------------- -------- ------- ------- -------- ------- -------
Balance sheet total liabilities (163.3) (19.7) (183.0) (171.3) (23.4) (194.7)
--------------------------------------- -------- ------- ------- -------- ------- -------
Other segmental items:
Depreciation and amortisation 5.8 1.1 6.9 5.6 1.2 6.8
Additions to non-current assets 4.0 0.6 4.6 4.8 0.7 5.5
--------------------------------------- -------- ------- ------- -------- ------- -------
Carpetright plc is domiciled in the UK. The Group's revenue from
external customers in the UK is GBP194.2m (H1 FY14: GBP185.0m) and
the total revenue from external customers from other countries is
GBP33.7m (H1 FY14: GBP37.2m). The total of non-current assets
(other than financial instruments and deferred tax assets) located
in the UK is GBP150.4m (H1 FY14: GBP152.1m) and the total of those
located in other countries is GBP71.2m (H1 FY14: GBP81.1m).
Carpetright's trade has historically shown no distinct pattern
of seasonality with trade cycles more closely following economic
indicators such as consumer confidence and mortgage approvals.
5. Exceptional items
26 weeks 26 weeks 52 weeks
to to to
25 October 26 October 26 April
2014 2013 2014
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- ---------
Loss on property disposals - (1.1) (1.6)
Impairment of property, plant and equipment - - (2.4)
Onerous lease provision - - (6.6)
European office restructuring - - (1.2)
--------------------------------------------- ----------- ----------- ---------
Exceptional items before tax - (1.1) (11.8)
--------------------------------------------- ----------- ----------- ---------
We continued to trade our property portfolio and generated a net
profit of GBP0.1m on the disposal of properties in the UK, this was
offset by a GBP0.1m loss on the disposal of property in our Rest of
Europe business. There were no other exceptional items in the
period. This compared to a GBP1.1m charge in the prior year, all
relating a net loss on disposal of properties.
In accordance with IAS 36 assets are reviewed for impairment
whenever changes in circumstances indicate that the carrying value
may not be recoverable. No impairments were recognised in the 26
weeks to 25 October 2014 and the prior half year.
6. Finance costs
26 weeks 26 weeks 52 weeks
to to to
25 October 26 October 26 April
2014 2013 2014
GBPm GBPm GBPm
-------------------------------------------------- ----------- ----------- ---------
Interest on borrowings and overdrafts (0.3) (0.5) (1.1)
Fee amortisation (0.2) (0.4) (0.7)
Net finance expense on pension scheme obligations (0.1) (0.1) (0.2)
Interest on finance lease obligations (0.1) (0.1) (0.1)
Other interest - - (0.2)
-------------------------------------------------- ----------- ----------- ---------
Finance expense (0.7) (1.1) (2.3)
-------------------------------------------------- ----------- ----------- ---------
7. Income Tax
26 weeks 26 weeks 52 weeks
to to to
25 October 26 October 26 April
2014 2013 2014
GBPm GBPm GBPm
------------------------------- ----------- ----------- ---------
UK Tax expense/(credit) 1.5 0.1 (1.8)
Overseas Tax expenses/(credit) - (0.1) (1.8)
Total Tax expense/(credit) 1.5 - (3.6)
-------------------------------- ----------- ----------- ---------
The Income tax expense is recognised based on management's best
estimate of the full year weighted average annual income tax rate
expected for the full financial year applied to the pre-tax income
of the interim period.
The taxation charge on profit for the half year was GBP1.5m (H1
FY14: GBPnil). This is based on a full year effective tax rate of
22.9% (H1 FY14: 0.5%), which is close to the UK corporation tax
rate of 21.0% as the net effects of non-deductible items, overseas
tax rates and other permanent differences offset one another.
The full year FY14 effective tax rate was a credit of 52.0%
arising from a combination of the impact of a fall in the UK
statutory tax rate and losses incurred overseas, generating a tax
credit during the year.
8. Earnings per share
Basic earnings per share is calculated by dividing earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period, excluding
those held by the Group's LTIP Trust which are treated as
cancelled.
In order to compute diluted earnings per share, the weighted
average number of ordinary shares in issue is adjusted to assume
conversion of all potentially dilutive ordinary shares. Those share
options granted to employees and Executive Directors where the
exercise price is less than the average market price of the
Company's ordinary shares during the period, represent potentially
dilutive ordinary shares.
26 weeks ended 26 weeks ended 52 weeks ended
25 October 2014 26 October 2013 26 April 2014
---------------- -------------------------------- -------------------------------- --------------------------------
Weighted Earnings/ Weighted Earnings/ Weighted Earnings/
average (loss) average (loss) average (loss)
Earnings/ number per Earnings/ number per Earnings/ number per
(loss) of shares share (loss) of shares share (loss) of shares share
GBPm Millions Pence GBPm Millions Pence GBPm Millions Pence
---------------- --------- ---------- --------- --------- ---------- --------- --------- ---------- ---------
Basic earnings
per share 5.2 67.8 7.6 1.9 67.6 2.8 (3.6) 67.6 (5.3)
Effect of
dilutive share
options - 0.5 - - 0.3 - - 0.4 -
---------------- --------- ---------- --------- --------- ---------- --------- --------- ---------- ---------
Diluted earnings
per share 5.2 68.3 7.6 1.9 67.9 2.8 (3.6) 68.0 (5.3)
---------------- --------- ---------- --------- --------- ---------- --------- --------- ---------- ---------
The Directors have presented an additional measure of earnings
per share based on underlying earnings. This is in accordance with
the practice adopted by most major retailers. Underlying earnings
is defined as profit excluding exceptional items and related
tax.
26 weeks ended 26 weeks ended 52 weeks ended
25 October 2014 26 October 2013 26 April 2014
---------------- -------------------------------- -------------------------------- --------------------------------
Weighted Earnings/ Weighted Earnings/ Weighted Earnings/
average (loss) average (loss) average (loss)
Earnings/ number per Earnings/ number per Earnings/ number per
(loss) of shares share (loss) of shares share (loss) of shares share
GBPm Millions Pence GBPm Millions Pence GBPm Millions Pence
---------------- --------- ---------- --------- --------- ---------- --------- --------- ---------- ---------
Basic earnings
per share 5.2 67.8 7.6 1.9 67.6 2.8 (3.6) 67.6 (5.3)
Adjusted for the
effect
of exceptional
items:
Exceptional
items - - - 1.1 - 1.6 11.8 - 17.4
Tax thereon - - (0.1) - (0.1) (2.3) - (3.4)
Exceptional
tax benefit
from tax rate
change - - - (0.7) - (1.1) (2.7) - (4.0)
---------------- --------- ---------- --------- --------- ---------- --------- --------- ---------- ---------
Underlying
earnings per
share 5.2 67.8 7.6 2.2 67.6 3.2 3.2 67.6 4.7
---------------- --------- ---------- --------- --------- ---------- --------- --------- ---------- ---------
9. Financial instruments
The condensed interim financial statements do not include all
the financial risks management information and disclosures required
in the annual financial statements, this should be read in
conjunction with the Group's annual financial statements as at 26
April 2014. There have been no changes in the risk management since
the year end.
The Group has no financial assets or liabilities that are
measured at fair value.
Borrowings are measured at amortised costs, and the Directors
are of the opinion that the carrying value of the borrowings are
approximate to their fair value. The carrying amount of all other
financial assets and liabilities approximate their fair value.
10. Movement in cash and net debt
26 April 25 October
2014 2014
------------------------------------------- -------- ----- ------------ --------- ----------
Cash Exchange Other
Total flow differences non cash Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- -------- ----- ------------ --------- ----------
Cash and cash equivalents in the balance
sheet 6.3 8.3
Bank overdrafts (10.8) (2.4)
-------- ----------
Cash and cash equivalents in the cash
flow statement (4.5) 10.5 (0.1) 5.9
Borrowings
-------- ----------
Current borrowings (0.3) (0.3)
Non-current borrowings (3.8) -
-------- ----------
(4.1) 3.6 0.2 (0.3)
Obligations under finance leases
-------- ----------
Current obligations under finance leases (0.1) (0.1)
Non-current obligations under finance
leases (2.4) (2.3)
-------- ----------
(2.5) 0.1 (2.4)
Net cash/(debt) (11.1) 14.1 (0.1) 0.3 3.2
------------------------------------------- -------- ----- ------------ --------- ----------
27 April 26 October
2013 2013
------------------------------------------- -------- ------ ------------ --------- ----------
Cash Exchange Other
Total flow differences non cash Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- -------- ------ ------------ --------- ----------
Cash and cash equivalents in the balance
sheet 7.9 6.0
Bank overdrafts (12.0) (11.5)
-------- ----------
Cash and cash equivalents in the cash
flow statement (4.1) (1.5) 0.1 (5.5)
Borrowings
-------- ----------
Current borrowings (0.2) (0.2)
Non-current borrowings (3.3) (6.1)
-------- ----------
(3.5) (2.7) (0.1) (6.3)
Obligations under finance leases
-------- ----------
Current obligations under finance leases (0.1) (0.1)
Non-current obligations under finance
leases (2.5) (2.4)
-------- ----------
(2.6) 0.1 (2.5)
Net debt (10.2) (4.2) - 0.1 (14.3)
------------------------------------------- -------- ------ ------------ --------- ----------
11 Provisions
Onerous
lease Re-organisation
provision provision Total
GBPm GBPm GBPm
----------------------------------- ---------- --------------- -----
Opening at 27 April 2014 13.4 1.5 14.9
Additions - - -
Utilised during the period (1.8) (1.1) (2.9)
Closing balance at 25 October 2014 11.6 0.4 12.0
------------------------------------ ---------- --------------- -----
Opening at 28 April 2013 11.1 - 11.1
Additions - 0.5 0.5
Utilised during the period (2.1) - (2.1)
Closing balance at 26 October 2013 9.0 0.5 9.5
------------------------------------ ---------- --------------- -----
12. Dividends
No dividends were paid or proposed in the 26 weeks to 25 October
2014 or in the 26 weeks to 26 October 2013.
13. Capital expenditure
During the period, additions were GBP1.0m (H1 FY14: GBP0.1m) on
intangible assets and GBP3.6m (H1 FY14: GBP5.4m) on the acquisition
and fit out of stores. Net proceeds from the sale of assets during
the period are GBP1.2m (H1 FY14: GBP0.4m).
Capital commitments contracted but not provided for at the end
of the period are GBP0.2m (H1 FY14: GBP2.1m) principally for store
fit outs.
14. Retirement benefit obligation
26 weeks 26 weeks 52 weeks
to to to
25 October 26 October 26 April
2014 2013 2014
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- ---------
Deficit in scheme at beginning of period (3.3) (5.1) (5.1)
Net interest expense (0.1) (0.1) (0.2)
Employer contributions 0.5 0.4 0.9
Actuarial (losses)/gains (0.4) 0.1 1.1
-------------------------------------------- ----------- ----------- ---------
Deficit in scheme at end of period (3.3) (4.7) (3.3)
-------------------------------------------- ----------- ----------- ---------
Fair value of pension scheme assets 24.0 22.7 23.0
Present value of pension scheme obligations (27.3) (27.4) (26.3)
-------------------------------------------- ----------- ----------- ---------
Retirement benefit obligations (3.3) (4.7) (3.3)
-------------------------------------------- ----------- ----------- ---------
The key assumptions used, determined in conjunction with
independent qualified actuaries, are:
26 weeks 26 weeks 52 weeks
to to to
25 October 26 October 26 April
2014 2013 2014
% % %
-------------- ----------- ----------- ---------
RPI inflation 3.2 3.5 3.4
Discount rate 3.9 4.2 4.2
-------------- ----------- ----------- ---------
The mortality rates assumptions are taken from the S1NXA with
medium cohort improvements, at a minimum of 1% pa.
The amount of the deficit varies if the main financial
assumptions change, particularly the discount rate. If the discount
rate increased/decreased by 0.1% the IAS 19 deficit would
decrease/increase by approximately GBP0.4m.
15. Related party transactions
The group related parties are companies of which Lord Harris
and/or M J Harris is a director and/or in which Lord Harris and/or
M J Harris holds a material interest are set out below:
Lease and concession
agreement payments Supply of goods/services Supply of goods/services
made payments made payments received
--------------------- ------------------------ -------------------------- --------------------------
26 weeks 26 weeks 26 weeks
to 25 26 weeks to 25 26 weeks to 25 26 weeks
October to 26 October October to 26 October October to 26 October
2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------------- --------- --------------- --------- ---------------
Edinburgh Retail LLP 150 150 - - - -
Greenock Retail LLP 48 127 - - - -
Harris Ventures Ltd 31 31 - 3 - -
Hull Unit Trust 193 193 - - - -
--------------------- -------- -------------- --------- --------------- --------- ---------------
As at 25 October 2014 the Group owed related parties GBPnil (H1
FY14: GBPnil).
16. Events after the reporting period
There have been no events after the reporting period that
require further disclosure or have a material impact on the interim
financial statements.
Principal risks and uncertainties
The Group operates a structured risk management process which
identifies and evaluates risks and uncertainties and reviews
mitigating activity.
The Board considers that the principal risks and uncertainties
which could have a material impact on the Group's performance in
the remaining 26 weeks of the financial year remain the same as
those stated on pages 15 to 16 of the 2014 Annual Report and
Accounts, which are available on our website
www.carpetright.plc.uk.
Forward looking statements
Certain statements in this half year report are forward looking.
Although the Group believes that the expectations reflected in
these forward looking statements are reasonable, we can give no
assurance that these expectations will prove to have been correct.
Because these statements contain risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward looking statements. We undertake no obligation to
update any forward looking statements whether as a result of new
information, future events or otherwise.
Statement of Directors' responsibilities
The Directors' confirm that these condensed interim financial
statements have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and that the interim management report
includes a fair review of the information required by DTR 4.2.7 and
DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed set of
financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
-- Material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report
The Directors of Carpetright plc are listed in the Carpetright
plc Annual Report for 26 April 2014, with the exception of Wilf
Walsh who was appointed to the Board as the Chief Executive Officer
on 21 July 2014 and Robert Ivell who joined the Board as its
Chairman on 1 November 2014, following Lord Harris stepping down
from the Board on 31 October 2014. Martin Harris, Baroness Noakes
and Alan Dickinson all stepped down from the Board on the 4
September 2014.
The Directors of Carpetright plc are listed on the Group's
corporate website www.carpetright.plc.uk.
By order of the Board
Chief Executive Group Finance Director
Wilf Walsh Neil Page
12 December 2014
Independent review report to Carpetright plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed the condensed consolidated interim financial
statements, defined below, in the half-yearly financial report of
Carpetright Plc for the 26 week period ended 25 October 2014. Based
on our review, nothing has come to our attention that causes us to
believe that the condensed consolidated interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
This conclusion is to be read in the context of what we say in
the remainder of this report.
What we have reviewed
The condensed consolidated interim financial statements, which
are prepared by Carpetright plc, comprise:
-- the Condensed consolidated balance sheet as at 25 October 2014;
-- the Condensed consolidated income statement and Condensed
consolidated statement of comprehensive income for the period then
ended;
-- the Condensed consolidated statement of changes in equity for the period then ended;
-- the Condensed consolidated statement of cash flows for the period then ended; and
-- the explanatory notes to the condensed consolidated interim financial statements.
As disclosed in note 2, the financial reporting framework that
has been applied in the preparation of the full annual financial
statements of the group is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union.
The condensed consolidated interim financial statements included
in the half-yearly financial report have been prepared in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
What a review of condensed interim financial statements
involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated interim financial statements.
Responsibilities for the condensed interim financial statements
and the review
Our responsibilities and those of the directors
The half-yearly financial report, including the condensed
consolidated interim financial statements, is the responsibility
of, and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial report in
accordance with the Disclosure and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express to the company a conclusion on
the condensed consolidated interim financial statements in the
half-yearly financial report based on our review. This report,
including the conclusion, has been prepared for and only for the
company for the purpose of complying with the Disclosure and
Transparency Rules of the Financial Conduct Authority and for no
other purpose. We do not, in giving this conclusion, accept or
assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
12 December 2014
1 Embankment Place, London, WC2N 6RH
Notes:
a. The maintenance and integrity of the Carpetright plc website
is the responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website.
b. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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