TIDMCPR
RNS Number : 0234Z
Carpetright PLC
12 December 2017
Carpetright plc
Interim Results Announcement for the 26 weeks ended 28 October
2017
"Significant progress made in core UK flooring business - first
half performance impacted by short term UK beds clearance and
losses in Rest of Europe. Current trade encouraging but taking a
more cautious view of second half prospects"
Financial highlights
Group
* Group revenue increased 2.6% to GBP228.1m (H1 FY17:
GBP222.3m) (note 1)
* Underlying profit before tax of GBP2.1m (H1 FY17:
GBP5.1m) (note 2)
* Net debt of GBP22.8m (H1 FY17: net cash GBP0.4m)
reflecting the continued investment in the store
refurbishment programme. (note 3)
* Statutory profit before tax GBP0.3m (H1 FY17:
GBP4.1m).
* Underlying pre-tax profits for the second half of the
year expected towards the bottom end of the current
range of market expectations. (note 5)
UK
* Like-for-like sales in the first half of the year
increased by 0.7% (H1 FY17: decline of 2.9%), with
solid growth of 1.9% in our core flooring categories
offset in part by reduced bed sales, which were
impacted by clearance of discontinued lines as we
changed the entire range. (note 7)
* Underlying operating profit of GBP3.6m (H1 FY17:
GBP4.9m) reflecting impact of beds clearance and
higher store payroll costs.
Rest of Europe
* Like-for-like sales growth of 6.5% (H1 FY17: decline
of 1.5%).
* Underlying operating loss of GBP0.4m (H1 FY17: profit
of GBP1.1m)
* Gross profit margin down 730bps reflecting impact of
first time inclusion of low margin service income
(520bps) and deeper discounting promotions (210bps),
which is now being addressed.
Current Trading
* Encouraging start to the second half:
o Like-for-like sales in the UK up 1.4% in the six weeks to 9 December
2017 with robust growth of 2.7% in our core flooring categories.
o Rest of Europe has also made a positive start with like-for-like
sales up 9.2% in local currency over the same six week period.
Strategic progress
* Continued investment in store refurbishment programme
with 52% of the UK estate trading under the new brand
identity by period end.
* Hard flooring category in the UK achieving double
digit sales growth as it benefits from increased
customer awareness.
* Focus on improving customer service delivering
stronger satisfaction metrics - 'Trustpilot' score
increased to 8.9.
* Effective response to increased competition - 52
stores have now traded against a new direct local
competitor for more than 12 months, delivering
like-for-like growth of 5.0% on average during the
half.
* Continued progress made in reducing the number of
underperforming stores - ten closures to reduce the
UK estate to 418 stores.
Commenting on the results, Wilf Walsh, Chief Executive,
said:
"The first half has undoubtedly been challenging. Consumer
confidence remains fragile and we continue to manage the impact of
intensified competition. We have made pleasing progress in our core
flooring business in the UK - like-for-like sales are up, more than
half the UK store estate has now been refurbished and our customer
service metrics have been improved significantly. However, as
previously flagged, our first half profits reflect the impact of
the clearance of discontinued lines in our beds business and also
unsuccessful deeper discounting promotions in the Netherlands and
Belgium, which are now being addressed.
"Looking ahead we will be focused on maintaining sales momentum
in UK flooring, capitalising on the much-stronger new range to turn
around our beds performance and improving overall trading in the
Netherlands and Belgium. While trading over the first six weeks of
the new period has been encouraging, with an acceleration in
like-for-like sales growth in both the UK and Rest of Europe, in
light of the consumer outlook we are taking a more cautious view of
the second half and now expect underlying profit before tax for the
full year will be towards the bottom end of the current range of
market expectations."
Group Financial Summary
(Reclassified)
(note 4)
H1 FY18 H1 FY17
GBPm GBPm Change
--------------------------- -------- --------------- -----------
BUSINESS PERFORMANCE
--------------------------- -------- --------------- -----------
Group revenue (note 1) 228.1 222.3 2.6%
--------------------------- -------- --------------- -----------
UK 185.1 186.5 (0.8%)
--------------------------- -------- --------------- -----------
Rest of Europe 43.0 35.8 20.1%
--------------------------- -------- --------------- -----------
Underlying operating
profit (note 2) 3.2 6.0 (46.7%)
--------------------------- -------- --------------- -----------
UK 3.6 4.9 (26.5%)
--------------------------- -------- --------------- -----------
Rest of Europe (0.4) 1.1 (136.4%)
--------------------------- -------- --------------- -----------
Underlying profit before
tax 2.1 5.1 (58.8%)
--------------------------- -------- --------------- -----------
Underlying earnings per
share 2.1p 5.6p (60.7%)
--------------------------- -------- --------------- -----------
Net (debt)/cash (note
3) (22.8) 0.4 (GBP23.2m)
--------------------------- -------- --------------- -----------
STATUTORY REPORTING
--------------------------- -------- --------------- -----------
Separately reported items
(note 4) (1.8) (1.0) (80.0%)
--------------------------- -------- --------------- -----------
Statutory profit before
tax 0.3 4.1 (92.7%)
--------------------------- -------- --------------- -----------
Basic (loss)/earnings
per share (0.4p) 5.8p (106.9%)
--------------------------- -------- --------------- -----------
Notes
1. Revenue represents amounts payable by customers for goods and services
after deducting VAT and other charges.
2. 'Underlying' excludes separately reported items and related tax.
3. Net (debt)/cash is calculated as the total of cash-in-hand, or
at bank, offset by borrowings, finance leases and unamortised fees.
4. Share based payment charge of GBP0.1m, previously reported in underlying
performance, have been reclassified for consistency with the current
period presentation as separately reported items. This has no impact
on the Group's statutory reported profit before tax and earnings per
share.
5. Consensus for the year ending 28 April 2018 is for Group underlying
profit before tax to be GBP15.2m, with a range from GBP13.8m to GBP16.5m.
6. Sales represents amounts payable by customers for goods and services
before deducting VAT and other charges.
7. Like-for-like sales calculated as this year's sales compared to
last year's sales for all stores that are at least 12 months old at
the beginning of our 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.
8. Comparative period is the 26 week period ended 29 October 2016.
Results presentation
Carpetright plc will hold a presentation to analysts and
investors at Citigate Dewe Rogerson, 3 London Wall Buildings,
London Wall, London EC2M 5SY at 09:00 today.
Analysts unable to attend in person may listen to the
presentation live at 09:00 by using the details below:
Telephone number: +44 (0)20 3003 2666
Password: Carpetright
Webcast link: https://edge.media-server.com/m6/p/74vcj3uj
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, Chief Financial Officer
Tel: 01708 802000
Citigate Dewe Rogerson
Kevin Smith
Nick Hayns
Tel: 020 7638 9571
Forthcoming news flow:
Carpetright will release a trading update for the third quarter
on 6 February 2018.
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.
Notes to Editors
Carpetright plc is Europe's leading specialist floor coverings
and beds retailer. Since the first store was opened in 1988 the
business has developed both organically and through acquisition
within the UK and other European countries. The Group is organised
into two geographical regions, the UK and the Rest of Europe
(comprising The Netherlands, Belgium and the Republic of
Ireland).
Chief Executive's Review
Despite the numerous challenges facing all retailers, we have
made substantial progress in driving core UK flooring sales,
underlying operational improvements and KPI's across the business
during the first half. It is clear that our turnaround strategy is
having the right impact.
In the face of intense competition in the UK, it is encouraging
to report like-for-like sales growth of 1.9% in our core flooring
business and that recent trading has also been positive in this
category with growth of 2.7% in the last six weeks.
We are continuing to execute a clear and effective strategy
focused on the four key elements:
-- Who we are - the brand, our stores and our people
-- What we sell - an unrivalled choice of floor coverings
-- How we sell - making the process easy with great service and unbeatable value
-- Where we sell - multi-channel convenience and improving the quality of the store portfolio
We have maintained momentum in the first half across all areas
of strategic focus, specifically:
Who we are
From extensive market research, Carpetright enjoys 87% prompted
brand recognition, when shoppers are asked "Have you ever heard of
this brand?" and scores an equally impressive 63% on spontaneous
recognition when the same group are asked simply to name a carpet
retailer. It is a very strong foundation to build on as we
implement significant changes to the business.
The drive to improve our brand reputation is vital to
Carpetright's future success and we have supported this move with
extensive sponsorship on UKTV and Channel 4 featuring Lucy
Alexander, who is a credible home improvement personality. Customer
research continues to demonstrate that this activity is yielding
positive results on key brand metrics such as awareness, trust and
consideration. This is supported by 'Which? Trusted Trader' status
for our third-party fitting service.
By the end of the first half we had 219 stores in the UK trading
under the new brand identity, which represents 52% of the estate.
This work ranges from introducing new signage in stores that make a
smaller profit, through to full refurbishment of larger, highly
profitable stores, or stores where we are responding to new
competition. In the latter two instances, the introduction of our
new 'graphite' shop fit is proving highly successful in
regenerating sales growth, however, where we are responding to a
new direct competitor the positive impact is partially
mitigated.
As a group, non-anniversary refurbished stores delivered
like-for-like sales growth of 7.0% during the first half, markedly
higher than the un-invested estate, underpinning the confidence in
our strategy to continue with this extensive programme to increase
the appeal of our stores (including stores refurbished expressly to
meet new competition this figure would be 4.0% growth). We remain
on course to refurbish, in some way, the remainder of the UK estate
by end December 2018.
We have a similar programme underway to address the un-invested
estate in the Netherlands and Belgium. As at the end of the first
half, we have now refurbished 26 stores and they have achieved
sales growth well ahead of the un-invested estate.
How we train and talk with our colleagues is key to driving a
more collaborative, informed culture than was the case in the old
days of this business. To this end, our 'Fuse' platform, an
internal training and communications tool, which is built around a
mobile social programme of learning and development, has proved to
be an outstanding success.
Our strategy is supported by clear, uncomplicated values that
are applied consistently throughout the business:
-- We are honest and straightforward
-- We care about customers and colleagues
-- We make it easy
What we sell
While we continue to be Europe's leading retailer of carpet by
some considerable distance, our move over recent years to increase
our share of the hard flooring market is now also well advanced.
The first half of this financial year has seen growth in this
category of 14% in the UK as we expand our hard flooring offer to
address changing consumer tastes.
Carpet is, of course, still an extremely important category -
we're still a cold country in winter and customers getting out of
bed on a February morning want to sink their tootsies into a lush,
thick carpet to kick start their day.
We continue to strengthen our ranges across the board including
exclusives such as 'House Beautiful' and 'Kosset - Stain Free for
Life'. They will be joined in December by a new exclusive range of
luxurious wool carpets under the 'Country Living' brand, in
collaboration with this leading monthly style publication.
Beds account for 8.1% of total sales in the in the UK. To
improve our proposition we took the decisive move to re-range the
entire category in the first half rather than drip feeding the new
product in over a longer period. The scale of this change was
disruptive as we cleared old stock and for a period had a
disjointed offer with discounted clearance beds alongside new full
price product that team colleagues had to familiarise themselves
with. While this has taken longer than we envisaged, by the start
of the important January sale period we will have a much better
range of leading brands, at excellent value, that are familiar to
consumers.
Additionally, we are currently running a test in several stores
with bold, magenta signage promoting the 'Sleepright' brand to
offer a clearer, easier to navigate 'shop-in-shop' beds offer - the
early results are encouraging.
How we sell
We remain focussed on a handful of in-store KPI's to drive
average transaction value, which in our UK flooring business grew
by 9.1% in the first half.
* Interest Free Credit. We have grown interest free
credit participation to 18.5% (H1 FY17: 16.7%) in the
first six months of the financial year.
* Underlay. The effect of transitioning to exclusive
Carpetright branded products has grown underlay
penetration to 51.3% (H1 FY17: 48.1%) of applicable
orders.
* Customer Service. Looking after our customers remains
an absolute imperative to win share and improve our
brand reputation. "Do We Measure Up?" - our service
review process, continues to see encouraging results
as our Net Promoter Score grew to 76%. Our
'Trustpilot' score has been transformed from
embarrassing historic lows of 2.7 in July 2014 to 8.9
today and we are well set to land north of 9.0 by the
end of this calendar year.
Over the next 18 months we are also transforming our mismatch of
dated legacy systems by moving the entire business onto the agile
Microsoft Dynamics 365 platform. The key benefits will be
significant improvements to sales conversion, CRM, margin and stock
management as well as reductions to central costs.
Where we sell
Our store portfolio remains a major challenge. Too many stores
on long leases at punitive rents linked to an outdated and unfair
business rates burden makes for an expensive, unpalatable casserole
of fixed cost. We continue to attack this legacy issue with
vigour.
In the UK, the last six months saw continued progress as we shut
ten stores. We opened two new stores in Old Kent Road (London) and
Tonbridge, the latter being a relocation into a smaller store. They
are both trading well.
Our progress in the last few years on improving the quality of
our UK store estate and reducing overall numbers has been
significant. We are aiming to get down to around 400 stores by the
end of the current financial year. At time of writing, we have
eight deals in final stage negotiations and we are confident of
landing them.
In the Rest of Europe, we ended the period with 136 stores,
closing two stores during the period.
We remain focused on the growing impact of digital on our
business. Examples of activity in the first half include launching
an 'online exclusive' rug range; extending the interactive floor
visualiser to vinyl, laminate and engineered wood; and enabling
customers to pay online for an order placed in store. Encouragingly
sales from our digital channels have recently become our largest
single trading store, with year-on-year growth of 49%.
Summary
We believe our strategy is clear and that it is bearing fruit,
as evidenced by the progress delivered across a broad cross-section
of KPI's during the first half. We remain absolutely committed to
the plan - improving the reputation of our brand, focussing on the
products customers really want, while giving them great value and
customer service whether they shop in one of our much-improved
retail stores or online.
Looking ahead, the current challenges come from a few headwinds,
specifically:
* Consumer confidence. When wage inflation fails to
keep pace with RPI there has, at some stage, to be a
tipping point when customers tighten their belts. As
the Brexit divorce terms remain unclear, the consumer
market has remained volatile and unpredictable, but
whatever happens we believe we can maintain and
indeed grow our share in the core flooring market.
I'd rather be the established market leader in
uncertain times than a new entrant.
* Property. While we have made substantial progress
reducing the size and improving the quality of our
store estate we are also future-proofing our business
by investing in the online experience.
* Competition. Arguably, the customer has never had it
so good and the advent of a national competitor means
that we have had to respond with a raft of offers to
ensure that we remain the most popular choice for
customers. This activity can, of course, impact
margins and partially mitigates the upside of some of
our capital refurbishment but to be crystal clear -
the cost of ignoring the competitive threat and
continuing with an under-invested, unattractive store
offer would be severe. We are managing this threat
effectively, as evidenced by the 52 stores having now
traded against a new direct local competitor for more
than 12 months delivering like-for-like growth of
5.0% on average during the half.
Looking ahead we will be focused on maintaining sales momentum
in UK flooring, capitalising on the much-stronger new range to turn
around our beds performance and improving overall trading in the
Netherlands and Belgium. While trading over the first six weeks of
the second half has been encouraging, with an acceleration in
like-for-like sales growth in both the UK and Rest of Europe, in
light of the consumer outlook we are taking a more cautious view of
the second half and now expect underlying profit before tax for the
full year will be towards the bottom end of the current range of
market expectations.
Current Trading
We have had an encouraging start to the second half of the
financial year. In the six weeks to 9 December 2017 it is pleasing
to see an upturn in the sales performance, with like-for-like sales
in the UK up 1.4% and robust growth of 2.7% in our core flooring
categories. The Rest of Europe has also made a positive start with
like-for-like sales up 9.2% in local currency over the same six
week period. This provides confidence that our strategy is on track
and that we will deliver.
We are Carpetright.
Wilf Walsh
Chief Executive Officer
12 December 2017
Interim Results
A summary of the reported financial results for the 26 weeks
ended 28 October 2017 is set out below:
H1 FY18 H1 FY17
GBPm GBPm Change
----------------------------- -------- ------- ----------
Revenue 228.1 222.3 2.6%
----------------------------- -------- ------- ----------
Underlying operating profit 3.2 6.0 (46.7%)
----------------------------- -------- ------- ----------
Net finance charges (1.1) (0.9) (22.2%)
----------------------------- -------- ------- ----------
Underlying profit before tax 2.1 5.1 (58.8%)
----------------------------- -------- ------- ----------
Separately reported items (1.8) (1.0)
----------------------------- -------- ------- ----------
Statutory profit before tax 0.3 4.1 (92.7%)
----------------------------- -------- ------- ----------
Earnings per share (pence)
----------------------------- -------- ------- ----------
- underlying 2.2p 5.6p (60.7%)
----------------------------- -------- ------- ----------
- basic (0.4p) 5.8p (106.9%)
----------------------------- -------- ------- ----------
Operating cash flow 3.0 5.9 (49.2%)
----------------------------- -------- ------- ----------
Net (debt)/cash (22.8) 0.4 (GBP23.2m)
----------------------------- -------- ------- ----------
Overview
Total Group revenue for the first half increased by 2.6% to
GBP228.1m, consisting of a decline in the UK business of 0.8%
offset by an increase of 20.1% in the Rest of Europe. Our continued
focus on rationalising and repositioning the store portfolio saw
the Group open two stores and close 12 during the half year which
gave a net decrease of ten stores, leaving a total store base of
554. Total store space declined by 1.5% to 5.0 million square feet
during the period.
Group underlying operating profit decreased by 46.7% to GBP3.2m,
driven by the impact of beds clearance and higher store payroll
costs in the UK, along with operating losses sustained in our Rest
of Europe business. Net finance charges were GBP0.2m higher than
prior year at GBP1.1m, a result of marginally higher average net
debt during the period as we invest in modernising the stores
estate and core IT infrastructure. These factors combined to
generate underlying profit before tax of GBP2.1m (H1 FY17:
GBP5.1m).
Separately reported items totalled GBP1.8m (H1 FY17: GBP1.0m), a
combination of cost associated with rationalising the store
portfolio and dual running IT costs.
The statutory measure of profit before tax for the Group was
GBP0.3m (H1 FY17: GBP4.1m).
The Group ended the year with net debt of GBP22.8m (H1 FY17:
cash GBP0.4m), reflecting the continued investment in the store
refurbishment programme.
Financial review
UK
Key financial results for the UK:
H1 FY18 H1 FY17
GBPm GBPm Change
----------------------------- -------- -------- ----------
Revenue 185.1 186.5 (0.8%)
============================= ======== ======== ==========
Like-for-like sales 0.7% (2.9%)
============================= ======== ======== ==========
Gross profit 110.0 111.0 (0.9%)
============================= ======== ======== ==========
Gross profit % 59.4% 59.5% (0.1ppts)
============================= ======== ======== ==========
Costs (106.4) (106.1) (0.3%)
============================= ======== ======== ==========
Cost to sales % 57.5% 56.9% (0.6ppts)
============================= ======== ======== ==========
Underlying operating profit 3.6 4.9 (26.5%)
============================= ======== ======== ==========
Underlying operating margin
% 1.9% 2.6% (0.7ppts)
----------------------------- -------- -------- ----------
The UK store portfolio is now as follows:
Store numbers Gross Sq ft
('000)
-------------
29 Apr 28 Oct 29 Apr 29 Oct
2017 Openings Closures 2017 2017 2017
------------- ------- ----------- ----------- ------- ------- -------
Standalone 414 2 (6) 410 3,669 3,621
============= ======= =========== =========== ======= ======= =======
Concessions 12 0 (4) 8 22 12
============= ======= =========== =========== ======= ======= =======
UK 426 2 (10) 418 3,691 3,633
------------- ------- ----------- ----------- ------- ------- -------
As at 29
Oct 2016 429 3,698
------------- ------- ----------- ----------- ------- ------- -------
Included in standalone stores:
Bed departments 253 0 (4) 249
----------------- ---- ---- ----
As at 29
Oct 2016 248
----------------- ---- ---- ----
In a challenging trading environment with declining consumer
confidence and an increasingly competitive landscape, like-for-like
sales in the first half of the year increased by 0.7% (H1 FY17:
declined 2.9%). Our core flooring categories delivered growth of
1.9%, offset in part by reduced bed sales which were impacted by
sell-through of discontinued lines as we updated the
proposition.
We opened two and closed ten stores during the period, which
translated into net space decline of 58,000 sq ft, a decrease of
1.6%. At the close of the period there were 249 stores trading with
a bed department (H1 FY17: 248). Sales within the beds category
represent 8.1% of the sales mix (H1 FY17: 9.1%).
Gross profit decreased by GBP1.0m to GBP110.0m, representing
59.4% of sales, a decrease of 10 basis points (bps). This decline
in margin rate reflects a combination of:
* an adverse impact of 60 bps from the fall in Sterling
to Euro exchange rate on imported goods for resale,
with the average EUR/GBP rate during the half year
being 8% lower at EUR1.13 (H1 FY17: EUR1.23);
* measures to address intensified competition in
selected stores, an adverse impact of 70 bps;
* the impact of clearance activity in the beds category
led to a decrease of 80 bps;
* a favourable impact of 200 bps from the improvement
in underlying flooring category margin through
improved sourcing, promotional planning, selected
price increases and increased sales of higher margin
service related income.
We are revising our guidance for UK full year margin to a
decline of between 40 and 80 bps (previous guidance: decline of 50
- 100 bps).
Total UK cost base increased by 0.3% compared with the prior
year to GBP106.4m (H1 FY17: GBP106.1m). Costs as a percentage of
sales were 57.5% (H1 FY17: 56.9%). The movement in costs were a
combination of:
* Store payroll costs increased by GBP1.4m to GBP31.0m
(H1 FY17: GBP29.6m) the principal drivers being an
increase in remuneration for key roles to attract and
retain store colleagues, along with the newly
introduced apprenticeship levy. In addition, we are
now obliged to pay average commission for colleagues
whilst they are on holiday. This last factor accounts
for GBP0.5m of the increase, the majority of which
will be mitigated in the second half.
* Store occupancy costs decreased by 1.0% to GBP56.7m
(H1 FY17: GBP57.3m) primarily the impact of net store
closures being offset in part by inflationary
increases in business rates and utilities.
* Marketing and central support costs decreased by 2.6%
to GBP18.7m (H1 FY17: GBP19.2m).
The combination of the above factors resulted in underlying
operating profit decreasing by 26.5% to GBP3.6m (H1 FY17:
GBP4.9m).
Rest of Europe
Key financial results for the Rest of Europe
H1 FY18 H1 FY17 Change Change
GBPm GBPm (Reported) (Local)
---------------------- -------- -------- ------------ ---------
Revenue 43.0 35.8 20.1% 11.4%
====================== ======== ======== ============ =========
Like-for-like sales
(local currency) 6.5% (1.5%)
====================== ======== ======== ============ =========
Gross profit 21.6 20.6 4.9% (2.4%)
====================== ======== ======== ============ =========
Gross profit % 50.2% 57.5% (7.3ppts)
====================== ======== ======== ============ =========
Costs (22.0) (19.5) (12.8%) (4.6%)
====================== ======== ======== ============ =========
Cost to sales % 51.2% 54.5% 3.3ppts
====================== ======== ======== ============ =========
Underlying operating (136.4%
(loss)/profit (0.4) 1.1 ) (130.8%)
====================== ======== ======== ============ =========
Underlying operating
margin % (0.9%) 3.1% (4.0ppts)
---------------------- -------- -------- ------------ ---------
Rest of Europe store portfolio:
Store numbers Gross Sq ft
('000)
-------------
29 Apr 28 Oct 29 Apr 28 Oct
2017 Openings Closures 2017 2017 2017
------------- ------- ----------- ----------- ------- ------- -------
Netherlands 94 0 (2) 94 975 957
============= ======= =========== =========== ======= ======= =======
Belgium 23 0 0 23 228 228
============= ======= =========== =========== ======= ======= =======
Republic
of Ireland 21 0 0 21 157 157
============= ======= =========== =========== ======= ======= =======
Europe 138 0 (2) 136 1,360 1,342
------------- ------- ----------- ----------- ------- ------- -------
As at 29
Oct 2016 137 1,342
------------- ------- ----------- ----------- ------- ------- -------
The 20.1% growth in revenue in the Rest of Europe, has four
component parts:
1. Product - Improved economic conditions in the Republic of
Ireland help fuel consumer demand, where we experienced revenue
growth in local currency of 4.9%. As a component of total segment
performance this contributed growth of 0.5%. In the Netherlands and
Belgium, we changed the pricing strategy away from discounts on
individual products to more basket-lead promotions with the aim of
driving up average transaction values. This failed to resonate with
consumers and resulted in a decline in revenue of 5.0% across the
two markets. As a component of total segment performance this
contributed a decline of 4.5%. These two factors combined to
produce a decline in product revenues of 4.0%.
2. Services - Dutch sales were boosted by the addition of
service related income which added 11.6% to total segment revenue
growth. Previously, the customer paid third-party fitters directly
but, following a change in legislation, this is now invoiced by the
company to the customer at the time of order and the company then
pays in the independent fitter, after deducting an administration
fee.
3. Revenue recognition - There is a growing trend in Belgium and
the Netherlands for products with a longer fitting lead time (eg
LVT, curtains & blinds). In the last financial year, the
important Easter trading period was close to the year end with the
result of a higher order book being carried and the fitting and
consequent revenue recognition falling in the current financial
year. This contributed 3.8% to recognised segmental revenue.
The combination of the above three factors resulted in an
increase in revenue of 11.4% in local currency terms.
4. Currency translation - The effect of movements in exchange
rates added 8.7% to revenue growth on conversion to reported
currency.
The number of stores decreased by two during the period
resulting in trading space reducing by 1.3%.
Gross profit percentage decreased by 730 basis points to 50.2%
(H1 FY17: 57.5%). As shared at our full year results presentation
in June, a legislation change in the Netherlands required us to
include the cost of fitting in our sales for the first time - in
line with existing practice in Belgium. At the time, we estimated
the margin reduction to be in the range of 200-300bps. The actual
result has been a reduction of 520bps. A further 210bps reduction
came from deeper discounting product promotions, as discussed above
- this is being addressed in the second half.
The combination of the revenue growth but rate declines lead to
cash gross profit in local currency terms decreasing by 2.4%. In
the balance of the year, the promotional campaign will revert back
to be similar to previous year's activity and we anticipate the
full year adverse margin movement will be between 400 and 600 bps
(previous guidance: decline of 200 - 300 bps).
Operating costs in local currency increased by 4.6%, a
combination of inflationary impacts on employment and rental costs
and a lower utilisation of previously made onerous lease
provisions. The latter due an improvement in store profitability in
the Republic of Ireland. Costs as a percentage of sales reduced to
51.2% (H1 FY17: 54.5%) as a result of growth in headline revenue.
In reported currency, costs increased by 12.8% to GBP22.0m.
The net result was an operating loss of GBP0.4m (H1 FY17: profit
of GBP1.1m).
Group
Net finance charges and taxation
Net finance charges were GBP0.2m higher than prior year at
GBP1.1m, a result of higher average net debt during the period,
reflecting the investment in modernising the store estate and core
IT infrastructure.
The effective tax rate for the year is projected at 30.5% (FY17:
22.6%), a variance of 11.5% points compared to the UK rate. This
variance is due to the impact of non-deductible items, overseas tax
rates and a one-off credit recognised in the prior year. This
results in a tax charge in the period of GBP0.6m (H1 FY17:
GBP0.2m).
Separately reported items
The Group makes certain adjustments to statutory profit measures
in order to help investors understand the underlying performance of
the business. These adjustments are reported as separately reported
items. The Group recorded a net charge of GBP1.8m (H1 FY17:
GBP1.0m).
H1 FY18 H1 FY17
GBPm GBPm
----------------------------------------------- -------- --------
Underlying profit before tax 2.1 5.1
------------------------------------------------ -------- --------
Property related
Profit/(loss) on disposal (0.4) (0.9)
Strategy
Store refurbishment - asset write (0.5) -
offs
Digital transformation project - (0.5) -
dual running costs
Other
Share based payments (0.3) (0.1)
Legacy defined benefit pension administration (0.1) -
costs
----------------------------------------------- -------- --------
Total separately reported items (1.8) (1.0)
------------------------------------------------ -------- --------
Statutory profit before tax 0.3 4.1
------------------------------------------------ -------- --------
Note - In H1 FY17 the charge reported in the interim statement
was GBP0.9m. For consistency with the current period presentation
we have reclassified GBP0.1m relating to share based payments. This
has no impact on the Group's statutory reported profit before tax.
The reclassified separately reported items for H1 FY17 is therefore
GBP1.0m.
A net loss of GBP0.4m was made on the disposal of six properties
during the year (H1 FY17: GBP0.9m loss), principally a combination
of surrender premiums being paid to exit loss making stores, asset
write offs and associated fees.
The value of assets written off incurred during the strategic
store refurbishment programme amounts to GBP0.5m during the half
year. In keeping with historical treatment, such write offs have
been reported as separately reported items.
The Group has incurred dual running costs as it replaces legacy
IT systems and transitions to a new ERP platform. Historically,
these types of cost would have been capital spend but with the
switch to cloud-based software services, these are classified as
operating expenditure. Due to the quantum and one-off nature of the
project, these costs have been reported as separately reported
items.
In light of the variable nature of employee share based
payments, these have been classified as separately reported items.
This also allows for greater visibility of these charges in the
accounts. A charge of GBP0.3m was incurred during the year (H1
FY17: GBP0.1m).
Earnings per share
Underlying earnings per share were 2.2p (H1 FY17: 5.6p)
reflecting the fall in underlying profitability of the Group. After
accounting for tax the Group generated basic losses per share of
0.4p (H1 FY17: earnings 5.8p).
Dividend
The Board continues to prioritise the use of cash for the
acceleration of the strategy by investing further in the existing
store estate, while also reducing the fixed occupancy costs as
quickly as possible. As a result, it has taken the decision not to
pay an interim dividend (H1 FY17: Nil).
Balance sheet
The Group had net assets of GBP83.3m at the end of the half year
(2017: GBP78.0m), an increase of GBP5.3m since 29 April 2017.
Summary Balance Sheet
28 October 29 April Movement
2017 2017 GBPm
GBPm GBPm
------------------------------ ------------ --------- ---------
Freehold and long leasehold
property 61.0 60.3 0.7
============================== ============ ========= =========
Other non-current assets 127.0 116.6 10.4
============================== ============ ========= =========
Stock 39.8 41.1 (1.3)
============================== ============ ========= =========
Trade & other current assets 31.4 25.8 5.6
============================== ============ ========= =========
Creditors < 1 year (89.5) (85.6) (3.9)
============================== ============ ========= =========
Creditors > 1 year (63.4) (67.2) 3.8
============================== ============ ========= =========
Net Debt (22.8) (9.8) (13.0)
============================== ============ ========= =========
Pension Deficit (0.2) (3.2) 3.0
============================== ============ ========= =========
Net Assets 83.3 78.0 5.3
------------------------------ ------------ --------- ---------
The Group owns a significant property portfolio, most of which
is used for retail purposes. The carrying value are supported by a
combination of value-in-use and independent valuations.
Capital expenditure
Gross capital expenditure was GBP13.1m (H1 FY17: GBP7.9m), with
the majority of this relating to the store refurbishment programme
and replacement of legacy IT systems. There were no proceeds from
freehold property disposals during the half year (FY17: GBP3.4m),
resulting in net capital expenditure of GBP13.1m (H1 FY17:
GBP4.5m).
GBPm H1 FY18 H1 FY17 Movement
------------------------------- -------- -------- ---------
Refurbishments & relocations (7.8) (2.8) (5.0)
=============================== ======== ======== =========
New stores (0.9) (0.1) (0.8)
=============================== ======== ======== =========
IT (2.5) (1.5) (1.0)
=============================== ======== ======== =========
Support offices and warehouse (1.9) (3.5) 1.6
------------------------------- -------- -------- ---------
Gross capital expenditure (13.1) (7.9) (5.2)
------------------------------- -------- -------- ---------
Proceeds from freehold
property disposals 0.0 3.4 (3.4)
------------------------------- -------- -------- ---------
Net capital expenditure (13.1) (4.5) (8.6)
------------------------------- -------- -------- ---------
Net debt and cash flow
The Group's net debt at 28 October 2017 was GBP22.8m, an
increase of GBP13.0m from the year end FY17 net debt of
GBP9.8m.
This increase in debt was a combination of the underlying
operating profit performance and decrease in stock, being offset in
part by the net expenditure of GBP1.0m of exiting property leases;
cash outflow of GBP2.4m from previously made provisions;
contributions of GBP0.4m to closed defined benefit pension schemes
and an increase in working capital of GBP3.7m.
The increase in working capital was primarily attributable to a
combination of:
-- A net amortisation of property incentives of GBP1.5m.
-- A GBP0.9m increase in debtors associated greater mix of orders on interest free credit.
-- A seasonal timing issue related to property rent quarters of
GBP1.0m, which will reverse in the second half.
The resulting net inflow of cash generated by operations of
GBP3.0m was offset by net capital expenditure, net interest paid,
tax paid and other movements (primarily exchange differences)
totalling GBP16.0m, resulting in a movement in net debt of GBP13.0m
outflow (H1 FY17: GBP1.5m inflow).
Summary cash flow
GBPm H1 FY18 H1 FY17
---------------------------------------- -------- --------
Underlying Operating Profit 3.2 6.0
======================================== ======== ========
Separately reported items - cash (0.6) 0.0
======================================== ======== ========
Depreciation and non-cash items 6.3 6.6
======================================== ======== ========
Decrease in stock 1.6 4.1
======================================== ======== ========
(Increase) in working capital (3.7) (7.2)
======================================== ======== ========
Net (expenditure) on exit of operating
leases (1.0) (0.7)
======================================== ======== ========
Contributions to legacy pension
schemes (0.4) (0.5)
======================================== ======== ========
Provisions utilised (2.4) (2.4)
---------------------------------------- -------- --------
Cash generated by operations 3.0 5.9
======================================== ======== ========
Net interest paid (0.9) (0.6)
======================================== ======== ========
Corporation tax paid (2.1) 0.1
======================================== ======== ========
Net capital expenditure (13.1) (4.5)
---------------------------------------- -------- --------
Free cash flow (13.1) 0.9
======================================== ======== ========
Other 0.1 0.6
---------------------------------------- -------- --------
Movement in net debt (13.0) 1.5
======================================== ======== ========
Opening net debt (9.8) (1.1)
---------------------------------------- -------- --------
Closing net (debt)/cash (22.8) 0.4
---------------------------------------- -------- --------
Current liquidity
In April 2015, the Group completed a refinancing arrangement of
its principal facilities, providing GBP58.0m of debt capacity split
between a revolving credit facility (RCF) and multi-option
facilities (principally overdrafts) in a mixture of Sterling and
Euro currencies. In December 2015 the Group elected not to renew
its EUR5.0m multi-option facility in Belgium thereby saving
non-utilisation fees. This action reduced the Group's total
facilities in GBP terms to GBP54.4m, of which the main GBP45.0m RCF
in the UK matures in July 2019.
Gross bank borrowings at the balance sheet date were GBP30.7m
(H1 FY17: GBP11.2m), being a combination drawn down from overdraft
and revolving credit facilities. The Group had further undrawn
facilities of GBP23.7m at the balance sheet date. In addition, the
Group held gross cash balances of GBP9.9m. The combination of which
resulted in net debt, before finance leases, of GBP20.8m providing
total headroom against facilities of GBP33.6m.
The inclusion of GBP2.0m finance leases (H1 FY17: GBP2.2m)
resulted in the Group closing the period on GBP22.8m of net debt,
being GBP13.0m higher than year end 2017.
Neil Page
Chief Financial Officer
12 December 2017
Condensed consolidated income statement
for 26 weeks ended 28 October 2017
26 weeks to
29 October
26 weeks to 2016 52 weeks to
28 October 2017 *Reclassified 29 April 2017
Separately Separately Separately
reported reported reported
Items Items Items
Underlying (note Underlying (note Underlying (note
performance 5) Total performance 5) Total performance 5) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------ ------------ ----------- -------- ------------ ----------- -------- ------------ ----------- --------
Revenue 4 228.1 - 228.1 222.3 - 222.3 457.6 - 457.6
Cost of sales (96.5) - (96.5) (90.7) - (90.7) (188.2) - (188.2)
------------------ ------ ------------ ----------- -------- ------------ ----------- -------- ------------ ----------- --------
Gross profit 131.6 - 131.6 131.6 - 131.6 269.4 - 269.4
Administration
expenses (129.5) (0.9) (130.4) (126.5) (0.1) (126.6) (255.4) (9.3) (264.7)
Other operating
income/(loss) 1.1 (0.9) 0.2 0.9 (0.9) - 2.4 (4.2) (1.8)
------------------ ------ ------------ ----------- -------- ------------ ----------- -------- ------------ ----------- --------
Operating
profit/(loss) 4 3.2 (1.8) 1.4 6.0 (1.0) 5.0 16.4 (13.5) 2.9
Finance costs 6 (1.1) - (1.1) (0.9) - (0.9) (2.0) - (2.0)
------------------ ------ ------------ ----------- -------- ------------ ----------- -------- ------------ ----------- --------
Profit/(loss)
before tax 2.1 (1.8) 0.3 5.1 (1.0) 4.1 14.4 (13.5) 0.9
Tax 7 (0.7) 0.1 (0.6) (1.2) 1.0 (0.2) (3.3) 3.1 (0.2)
------------------ ------ ------------ ----------- -------- ------------ ----------- -------- ------------ ----------- --------
Profit/(loss)
for the
financial
period
attributable
to owners
of the Company 1.4 (1.7) (0.3) 3.9 - 3.9 11.1 (10.4) 0.7
------------------ ------ ------------ ----------- -------- ------------ ----------- -------- ------------ ----------- --------
Basic
(loss)/earnings
per share
(pence) 8 2.2 (0.4) 5.6 5.8 16.4 1.0
Diluted
(loss)earnings
per share
(pence) 8 (0.4) 5.8 1.1
------------------ ------ ------------ ----------- -------- ------------ ----------- -------- ------------ ----------- --------
All items in the income statement arise from continuing
operations.
* Certain prior year amounts, previously reported in underlying
performance, have been reclassified for consistency with the
presentation adopted at year end April 17, as separately reported
items. This has no impact on the Group statutory reported profit
before tax and earnings per share (see note 5).
Condensed consolidated statement of comprehensive income
for 26 weeks ended 28 October 2017
26 weeks 26 weeks 52 weeks
to to to
28 October 29 October 29 April
2017 2016 2017
Notes GBPm GBPm GBPm
------------------------------------------- ----- ----------- ----------- ---------
(Loss)/profit for the financial
period (0.3) 3.9 0.7
------------------------------------------- ----- ----------- ----------- ---------
Items that may not be reclassified
to the income statement:
Re-measurements of defined benefit
plans 14 2.6 (2.0) (1.8)
Tax on items that may not be reclassified
to the income statement (0.5) 0.3 0.1
------------------------------------------- ----- ----------- ----------- ---------
Total items that may not be reclassified
to the income statement 2.1 (1.7) (1.7)
------------------------------------------- ----- ----------- ----------- ---------
Items that may be reclassified
to the income statement:
Exchange gains 3.2 8.2 4.3
Total items that may be reclassified
to the income statement 3.2 8.2 4.3
------------------------------------------- ----- ----------- ----------- ---------
Other comprehensive gains for the
period 5.3 6.5 2.6
------------------------------------------- ----- ----------- ----------- ---------
Total comprehensive income for
the period attributable to owners
of the Company 5.0 10.4 3.3
------------------------------------------- ----- ----------- ----------- ---------
The notes on pages 22 to 29 form an integral part of this
consolidated interim financial information.
Condensed consolidated statement of changes in equity
for 26 weeks ended 28 October 2017
Capital
Share Share Treasury redemption Translation Retained
capital premium shares reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 29 April 2017 0.7 17.8 (1.6) 0.1 7.6 53.4 78.0
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Loss for the period - - - - - (0.3) (0.3)
Other comprehensive income
for the period - - - - 3.2 2.1 5.3
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive income
for the financial period - - - - 3.2 1.8 5.0
Issue of treasury shares
to employees - - 0.2 - - (0.2) -
Share-based payments and
related tax - - - - - 0.3 0.3
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 28 October 2017 0.7 17.8 (1.4) 0.1 10.8 55.3 83.3
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Capital
Share Share Treasury redemption Translation Retained
capital premium shares reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 30 April 2016 0.7 17.8 (1.3) 0.1 3.3 53.4 74.0
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Profit for the period - - - - - 3.9 3.9
Other comprehensive income/(expense)
for the period - - - - 8.2 (1.7) 6.5
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive income
for the financial period - - - - 8.2 2.2 10.4
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Shares purchased by employee
benefit trust - - (0.1) - - - (0.1)
Share-based payments and
related tax - - - - - 0.1 0.1
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 29 October 2016 0.7 17.8 (1.4) 0.1 11.5 55.7 84.4
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
The notes on pages 22 to 29 form an integral part of this
consolidated interim financial information.
Condensed consolidated balance sheet
as at 28 October 2017
28 October 29 October 29 April
2017 2016 2017
Notes GBPm GBPm GBPm
------------------------------------------ ----- ---------- ---------- --------
Assets
Non-current assets
Intangible assets 61.3 60.4 57.3
Property, plant and equipment 108.3 96.2 102.0
Investment property 15.6 14.8 15.3
Deferred tax assets 2.0 2.2 1.9
Trade and other receivables 0.8 0.4 0.4
------------------------------------------ ----- ---------- ---------- --------
Total non-current assets 188.0 174.0 176.9
------------------------------------------ ----- ---------- ---------- --------
Current assets
Inventories 39.8 38.4 41.1
Trade and other receivables 31.4 26.2 25.8
Cash and cash equivalents 10 9.9 13.8 12.5
------------------------------------------ ----- ---------- ---------- --------
Total current assets 81.1 78.4 79.4
------------------------------------------ ----- ---------- ---------- --------
Total assets 269.1 252.4 256.3
------------------------------------------ ----- ---------- ---------- --------
Liabilities
Current liabilities
Trade and other payables (89.5) (86.9) (83.9)
Obligations under finance leases 10 (0.1) (0.1) (0.1)
Borrowings and overdrafts 10 (30.7) (11.2) (20.1)
Current tax liabilities - (3.4) (1.7)
------------------------------------------ ----- ---------- ---------- --------
Total current liabilities (120.3) (101.6) (105.8)
------------------------------------------ ----- ---------- ---------- --------
Non-current liabilities
Trade and other payables (32.4) (35.4) (34.5)
Obligations under finance leases 10 (1.9) (2.1) (2.1)
Provisions for liabilities and charges 11 (14.9) (10.4) (17.5)
Deferred tax liabilities (16.1) (14.8) (15.2)
Retirement benefit obligations 14 (0.2) (3.7) (3.2)
------------------------------------------ ----- ---------- ---------- --------
Total non-current liabilities (65.5) (66.4) (72.5)
------------------------------------------ ----- ---------- ---------- --------
Total liabilities (185.8) (168.0) (178.3)
------------------------------------------ ----- ---------- ---------- --------
Net assets 83.3 84.4 78.0
------------------------------------------ ----- ---------- ---------- --------
Equity
Share capital 0.7 0.7 0.7
Share premium 17.8 17.8 17.8
Treasury shares (1.4) (1.4) (1.6)
Other reserves 66.2 67.3 61.1
Total equity attributable to shareholders
of the company 83.3 84.4 78.0
------------------------------------------ ----- ---------- ---------- --------
The notes on pages 22 to 29 form an integral part of this
consolidated interim financial information.
Condensed consolidated statement of cash flows
for 26 weeks ended 28 October 2017
26 weeks 26 weeks 52 weeks
to to to
28 October 29 October 29 April
2017 2016 2017
Note GBPm GBPm GBPm
------------------------------------------ ---- ----------- ----------- ---------
Cash flows from operating activities
Profit before tax 0.3 4.1 0.9
Adjusted for:
Depreciation and amortisation 6.3 6.6 12.2
Loss on property disposals 0.9 0.9 3.3
Separately reported non-cash items - - 9.2
Share based compensation 0.3 0.1 1.0
Net finance costs 1.1 0.9 2.0
------------------------------------------ ---- ----------- ----------- ---------
Operating cash flows before movements
in working capital 8.9 12.6 28.6
Decrease in inventories 1.6 4.1 1.0
(Increase) in trade and other receivables (5.6) (5.2) (5.4)
Decrease/(increase) in trade and
other payables 1.9 (2.0) (8.2)
Net expenditure on exit of operating
leases (1.0) (0.7) (2.2)
Contributions to pension scheme (0.4) (0.5) (0.9)
Provisions paid (2.4) (2.4) (5.2)
------------------------------------------ ---- ----------- ----------- ---------
Cash generated by operations 3.0 5.9 7.7
Interest paid (0.9) (0.6) (1.3)
Corporation taxes received/(paid) (2.1) 0.1 (0.9)
------------------------------------------ ---- ----------- ----------- ---------
Net cash flows from operating activities - 5.4 5.5
------------------------------------------ ---- ----------- ----------- ---------
Cash flows from investing activities
Purchases of intangible assets (3.0) (1.1) (0.6)
Purchases of property, plant and
equipment and investment property (10.1) (6.8) (16.8)
Proceeds on disposal of property,
plant, equipment & investment property - 3.4 3.4
Net cash used in investing activities (13.1) (4.5) (14.0)
------------------------------------------ ---- ----------- ----------- ---------
Cash flows from financing activities
Purchase of treasury shares by employee
benefit trust - (0.1) (0.3)
Repayment of finance lease obligations 10 (0.3) (0.1) (0.3)
Increase in borrowings 10 17.5 4.0 13.0
------------------------------------------ ---- ----------- ----------- ---------
Net cash used in financing activities 17.2 3.8 12.4
------------------------------------------ ---- ----------- ----------- ---------
Net increase in cash and cash equivalents
in the period 4.1 4.7 3.9
Cash and cash equivalents at the
beginning of the period 5.4 1.2 1.2
Exchange differences 0.2 0.7 0.3
------------------------------------------ ---- ----------- ----------- ---------
Cash and cash equivalents at the
end of the period 9.7 6.6 5.4
------------------------------------------ ---- ----------- ----------- ---------
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 22 to 29 form an integral part of this
consolidated interim financial information.
Notes to the financial statements
1. General information
Carpetright plc ('the company'), its subsidiaries (together 'The
Group') are engaged in the retail of flooring and bed products
through a network of retail stores and other channels located in
the UK and continental Europe.
Carpetright plc is a company listed on the London Stock Exchange
and is incorporated and domiciled in the United Kingdom. The
registered address office is, Purfleet Bypass, Purfleet, Essex RM19
1TT.
The condensed consolidated interim financial statements are
unaudited but have been reviewed by the auditors whose report is
set out on page 31. The financial information presented herein does
not amount to statutory accounts within the meaning of Section 434
of the Companies Act 2006. The annual report and financial
statements 2017 have been filed with the Registrar of Companies.
The independent auditors' report on the annual report and financial
statements 2017 was unqualified and did not contain a statement
under Section 498 of the Companies Act 2006.
The financial period represents the 26 weeks to 28 October 2017
(comparative financial period 26 weeks to 29 October 2016; prior
financial year 52 weeks to 29 April 2017). The financial
information comprises the results of the Company and its
subsidiaries (the 'Group').
These condensed consolidated interim financial statements were
approved for issue by the Board of Directors on 12 December
2017.
2. Basis of preparation
The interim results, comprising the condensed consolidated
interim financial statements and the interim management report have
been prepared in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the Financial Conduct Authority
and with IAS 34, 'Interim Financial Reporting' as adopted by the
European Union. They should be read in conjunction with the annual
report and financial statements for the 52 weeks ended 29 April
2017, which have been prepared in accordance with IFRSs as adopted
by the European Union.
Going concern
The group meets its day-to-day working capital requirements
through its bank facilities. The group's forecasts and projections,
taking account of reasonably possible changes in trading
performance, show that the group should be able to operate within
the level of its current facilities. After making enquiries, the
directors have a reasonable expectation that the group has adequate
resources to continue in operational existence for at least twelve
months from the date of approval of the financial statements.
Having taken account of the Group's principal risks, the directors
considered it appropriate to adopt the going concern basis of
accounting in preparing its condensed interim financial
statements.
Financial assets and liabilities and foreign operations are
translated at the following rates of exchange:
26 weeks 26 weeks 52 weeks
to to to
28 October 29 October 29 April
2017 2016 2017
GBPm GBPm GBPm
------------ ----------- ----------- ---------
Euro
Average 1.13 1.23 1.20
Closing 1.13 1.11 1.19
------------ ----------- ----------- ---------
3. Accounting policies
With the exception of taxes on income described below the
accounting policies adopted are consistent with those of the annual
financial statements for the 52 weeks ended 29 April 2017, as
described in those Annual Report and Financial Statements.
Taxes on income for interim periods are accrued using the tax
rate that would be applicable to expected total annual
earnings.
There are no new standards, amendments to existing standards or
interpretations that are effective for the first time in the
financial year beginning on 30 April 2017 that would be expected to
have a material impact on the Group's result.
In the current financial year there were several new standards
that were issued but not yet effective, adopted by the EU and have
not been applied in the preparation of these interim financial
statements. These include:
* IFRS 9 'Financial Instruments' is a new standard
which enhances the ability of investors and other
users of financial information to understand the
accounting for financial assets and reduces
complexity. This standard is effective for accounting
periods commencing on or after 1 January 2018. The
Directors anticipate that the adoption of IFRS 9 will
not have a material impact on the financial
statements.
* IFRS 15 'Revenue from Contracts with Customers' is a
new standard based on a five-step model framework,
which replaces all existing revenue recognition
standards. This standard is effective for accounting
periods commencing on or after 1 January 2018. The
Directors anticipate that the adoption of IFRS 15
will not have a material year on year impact on the
financial statements.
* IFRS 16 'Leases' is a new standard which sets out the
principles for the recognition, measurement,
presentation and disclosure of leases for both
parties to a contract. The standard eliminates the
classification of leases as either operating leases
or finance leases as required by IAS 17 and, instead,
introduces a single lessee accounting model. A lessee
will be required to recognise assets and liabilities
for all leases with a term of more than 12 months and
depreciate lease assets separately from interest on
lease liabilities in the income statement. This
standard is effective for accounting periods
commencing on or after 1 January 2019. The Directors
anticipate that the adoption of IFRS 16 will have a
material impact on the financial statements and are
currently undertaking an exercise to quantify this
impact and will look to provide guidance in the 2018
annual report and accounts.
Alternative Performance Measures
The Company uses a number of Alternative Performance Measures
(APMs) in addition to those reported in accordance with IFRS. The
Directors believe that these APMs, listed below, are important when
assessing the underlying financial and operating performance of the
Group and its segments. The following APMs do not have standardised
meaning prescribed by IFRS and therefore may not be directly
comparable to similar measures presented by other companies.
Underlying performance
Underlying performance, reported separately on the face of the
Consolidated Income Statement, is from continuing operations and
before separately reported items on the face of the income
statement.
Sales
Sales represents amounts payable by customers for goods and
services before deducting VAT and other charges.
Like-for-like sales (calculated in local currency)
Calculated as this year's sales compared to last year's sales
for all stores that are at least 12 months old at the beginning of
our 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.
Gross profit ratio
Calculated as Gross profit as a percentage of revenue. It is one
of the Group's key performance indicators and is used to assess the
underlying performance of the Group's segments
Separately reported items
Defined below.
Underlying operating profit
Underlying operating profit is defined as operating profit
before separately reported items. It is one of the Group's key
performance indicators and is used to assess the trading
performance of Group businesses.
Underlying profit before tax
Underlying profit before tax is calculated as the net total of
underlying operating profit less total net finance costs associated
with underlying performance. It is one of the Group's key
performance indicators and is used to assess the financial
performance of the Group as a whole. It is also used as one of the
targets against which the annual bonuses of certain employees are
measured.
Underlying earnings per share
Underlying earnings per share is calculated by dividing
underlying profit before tax less associated income tax costs by
the weighted average number of ordinary shares in issue during the
year. It is one of the Group's key performance indicators and is
used to assess the underlying earnings performance of the Group as
a whole.
Net debt
Net debt comprises the net total of current and non-current
interest-bearing borrowings and cash and short-term deposits. Net
debt is a measure of the Group's net indebtedness to banks and
other external financial institutions.
Operating cash flow
This measure is determined by taking underlying operating profit
and adding back non-cash items and any movements in working
capital.
Disclosure of 'separately reported items'
IAS 1 'Presentation of Financial Statements' provides no
definitive guidance as to the format of the income statement but
states key lines which should be disclosed. It also encourages the
disclosure of additional line items and the reordering of items
presented on the face of the income statement when appropriate for
a proper understanding of the entity's financial performance. In
accordance with IAS 1, the Company has adopted a columnar
presentation for its Consolidated income statement, to separately
identify underlying performance results, as the Directors consider
that this gives a better view of the underlying results of the
ongoing business. As part of this presentation format, the Company
has adopted a policy of disclosing separately on the face of its
Consolidated income statement, within the column entitled
'Separately reported items', the effect of any components of
financial performance for which the Directors consider separate
disclosure would assist both in a better understanding of the
financial performance achieved. In its adoption of this policy, the
Company applies a balanced approach to both gains and losses and
aims to be both consistent and clear in its accounting and
disclosure of such items.
Both size and the nature and function of the components of
income and expense are considered in deciding upon such
presentation. Such items may include, inter alia, the financial
effect of separately reported items which occur infrequently, such
as major reorganisation costs, onerous leases, share based payments
and impairments and the taxation impact of the aforementioned
separately reported items.
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 28 October 2017 is as follows:
26 weeks to
26 weeks to 29 October 2016
28 October 2017 *Reclassified
UK Europe Group UK Europe Group
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------- ------ ------- ------- ------ -------
Gross revenue 226.7 49.9 276.6 229.0 42.9 271.9
Inter-segment revenue (1.1) - (1.1) (1.6) - (1.6)
--------------------------------- ------- ------ ------- ------- ------ -------
Gross sales 225.6 49.9 275.5 227.4 42.9 270.3
Less cost of interest free (2.9) - (2.9) (3.2) - (3.2)
Less VAT and other sales taxes (37.6) (6.9) (44.5) (37.7) (7.1) (44.8)
--------------------------------- ------- ------ ------- ------- ------ -------
Revenues from external customers 185.1 43.0 228.1 186.5 35.8 222.3
--------------------------------- ------- ------ ------- ------- ------ -------
Gross profit 110.0 21.6 131.6 111.0 20.6 131.6
--------------------------------- ------- ------ ------- ------- ------ -------
Underlying operating profit 3.6 (0.4) 3.2 4.9 1.1 6.0
Separately reported items (1.8) - (1.8) (0.8) (0.2) (1.0)
--------------------------------- ------- ------ ------- ------- ------ -------
Operating profit 1.8 (0.4) 1.4 4.1 0.9 5.0
Finance costs (1.1) - (1.1) (0.9) - (0.9)
--------------------------------- ------- ------ ------- ------- ------ -------
Profit before tax 0.7 (0.4) 0.3 3.2 0.9 4.1
Tax (0.7) 0.1 (0.6) - (0.2) (0.2)
--------------------------------- ------- ------ ------- ------- ------ -------
Profit for the financial period - (0.3) (0.3) 3.2 0.7 3.9
--------------------------------- ------- ------ ------- ------- ------ -------
Segment assets:
Segment assets 211.7 104.3 316.0 203.0 99.6 302.6
Inter-segment balances (28.7) (18.2) (46.9) (29.4) (20.8) (50.2)
--------------------------------- ------- ------ ------- ------- ------ -------
Balance sheet total assets 183.0 86.1 269.1 173.6 78.8 252.4
--------------------------------- ------- ------ ------- ------- ------ -------
Segment liabilities:
Segment liabilities (179.8) (52.9) (232.7) (169.3) (48.9) (218.2)
Inter-segment balances 18.2 28.7 46.9 20.8 29.4 50.2
--------------------------------- ------- ------ ------- ------- ------ -------
Balance sheet total liabilities (161.6) (24.2) (185.8) (148.5) (19.5) (168.0)
--------------------------------- ------- ------ ------- ------- ------ -------
Other segmental items:
Depreciation and amortisation 5.1 1.2 6.3 5.6 1.0 6.6
Additions to non-current assets 10.2 4.2 14.4 6.6 1.0 7.6
--------------------------------- ------- ------ ------- ------- ------ -------
* Certain prior year amounts, previously reported in underlying
performance, have been reclassified for consistency with the
presentation adopted at year end April 17, as separately reported
items. This has no impact on the Group statutory reported profit
before tax and earnings per share (see note 5).
Carpetright plc is domiciled in the UK. The Group's revenue from
external customers in the UK is GBP185.1m (H1 FY17: GBP186.5m) and
the total revenue from external customers from other countries is
GBP43.0m (H1 FY17: GBP35.8m). The total of non-current assets
(other than financial instruments and deferred tax assets) located
in the UK is GBP148.5m (H1 FY17: GBP142.3m) and the total of those
located in other countries is GBP84.4m (H1 FY17: GBP79.7m).
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. Separately reported items
26 weeks
26 weeks to 52 weeks
to 29 October to
28 October 2016 28 April
2017 Reclassified* 2017
GBPm GBPm GBPm
---------------------------------------------- ----------- -------------- ---------
Underlying profit before tax 2.1 5.1 14.4
Property related
Loss on disposal of properties (0.4) (0.9) (1.9)
Freehold property reversal - - 2.2
Store asset (Impairment) - - (0.4)
Net onerous lease charge - - (11.0)
Strategy
Store refurbishment - asset write
offs (0.5) - (1.4)
Dual running cost (0.5) - -
Other
Share based payments (0.3) (0.1) (1.0)
Legacy defined benefit pension administration
costs (0.1) - -
Separately reported items before
tax (1.8) (1.0) (13.5)
----------------------------------------------- ----------- -------------- ---------
Statutory profit before tax 0.3 4.1 0.9
----------------------------------------------- ----------- -------------- ---------
The Group recorded a net charge of GBP1.8m (H1 FY17: GBP1.0m) in
the half year.
A net loss of GBP0.4m was made on the disposal of six properties
during the year (H1 FY17: GBP0.9m loss), principally a combination
of surrender premiums being paid to exit loss making stores, asset
write offs and associated fees.
The value of assets written off incurred during the strategic
store refurbishment programme amounts to GBP0.5m during the half
year. In keeping with historical treatment such write offs have
been reported as separately reported items.
The Group has incurred dual running costs as it replaces legacy
IT systems and transitions to a new ERP platform. Due to the
quantum and one-off nature of the project, these costs have been
reported as separately reported items.
In light of the variable nature of employee share based
payments, these have been classified as separately reported items.
This also allows for greater visibility of these charges in the
accounts. A charge of GBP0.3m was incurred during the year (H1
FY17: GBP0.1m).
The cash flow impact of separately reported items was GBP1.6m in
the half year.
The tax impact of the separately reported items is a credit of
GBP0.1 (H1 FY17: Credit of GBP1.0m).
6. Finance costs
26 weeks 26 weeks 52 weeks
to to to
28 October 29 October 29 April
2017 2016 2017
GBPm GBPm GBPm
-------------------------------------- ----------- ----------- ---------
Interest on borrowings and overdrafts (0.7) (0.6) (1.2)
Fee amortisation (0.3) (0.2) (0.5)
Net finance expense on pension scheme
obligations - - (0.2)
Interest on finance lease obligations (0.1) (0.1) (0.1)
Finance expense (1.1) (0.9) (2.0)
-------------------------------------- ----------- ----------- ---------
7. Income Tax
26 weeks 26 weeks 52 weeks
to to to
28 October 29 October 29 April
2017 2016 2017
GBPm GBPm GBPm
---------------------- ----------- ----------- ---------
UK Tax expense 0.7 - (1.4)
Overseas Tax expenses (0.1) 0.2 1.6
Total Tax expense 0.6 0.2 0.2
----------------------- ----------- ----------- ---------
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 GBP0.6m (H1
FY17: GBP0.2m). This is based on a full year effective tax rate of
30.5% (FY17: 22.6%). The reduction from FY17 is the result of one-
off credits recognised and not repeated in the current year. The
full year effective tax rate of 30.5% represents an increase of
11.5% compared to the Group's main rate of tax of 19%, as a result
of non-deductibles items, and overseas tax rates.
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 52 weeks
28 October ended 29 October ended 29 April
2017 2016 2017
---------------------- -------------------------------- ----------------------------- -----------------------------
Weighted Weighted Weighted
average Earnings/ average average
number (loss) number Earnings number Earnings
Earnings/ of per of per of per
(expense) shares share Earnings shares share Earnings shares share
GBPm Millions Pence GBPm Millions Pence GBPm Millions Pence
---------------------- ---------- --------- --------- -------- --------- -------- -------- --------- --------
Basic (loss)/earnings
per share (0.3) 67.6 (0.4) 3.9 67.7 5.8 0.7 67.6 1.0
Effect of dilutive
share options - 1.1 - - - - 0.1 1.6 0.1
---------------------- ---------- --------- --------- -------- --------- -------- -------- --------- --------
Diluted
(loss/)earnings
per share (0.3) 68.7 (0.4) 3.9 67.7 5.8 0.8 69.2 1.1
---------------------- ---------- --------- --------- -------- --------- -------- -------- --------- --------
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 separately reported items and
related tax.
26 weeks ended 26 weeks
28 October ended 29 October 52 weeks ended
2017 2016 29 April 2017
---------------------- ------------------------------- ----------------------------- -----------------------------
Weighted Weighted Weighted
average (Loss)/ average average
number Earnings number Earnings number Earnings
(Loss)/ of per of per of per
earnings shares share Earnings shares share Earnings shares share
GBPm Millions Pence GBPm Millions Pence GBPm Millions Pence
---------------------- --------- --------- --------- -------- --------- -------- -------- --------- --------
Basic (loss)/earnings
per share (0.3) 67.6 (0.4) 3.9 67.7 5.8 0.7 67.6 1.0
Adjusted for the
effect of Separately
reported items:
Separately reported
items 1.8 - 2.8 1.0 - 1.3 13.5 - 20.0
Tax thereon (0.1) - (0.2) (0.4) - (0.6) (2.5) - (3.7)
Separately reported
tax benefit from
tax rate change - - - (0.6) - (0.9) (0.6) - (0.9)
Underlying earnings
per share 1.4 67.6 2.2 3.9 67.7 5.6 11.1 67.6 16.4
---------------------- --------- --------- --------- -------- --------- -------- -------- --------- --------
9. Financial risk management and financial instruments
The group's activities expose it to a variety of financial
risks, including but not limited to: currency risk, interest rate
risk, credit risk and liquidity risk.
The condensed consolidated 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 29 April 2017. 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 cost, 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
29
April 28 October
2017 2017
------------------------------------ ------ ------ ------------ ------ ----------
Other
Cash Exchange non
Total flow differences cash Total
GBPm GBPm GBPm GBPm GBPm
Cash and cash equivalents in
the balance sheet 12.5 (2.6) - - 9.9
Bank overdrafts (7.1) 6.7 0.2 - (0.2)
------------------------------------ ------ ------ ------------ ------ ----------
Cash and cash equivalents in
the cash flow statement 5.4 4.1 0.2 - 9.7
------------------------------------ ------ ------ ------------ ------ ----------
Borrowings
Current borrowings (13.0) (17.5) - - (30.5)
Non-current borrowings - - - - -
------------------------------------ ------ ------ ------------ ------ ----------
(13.0) (17.5) - - (30.5)
------------------------------------ ------ ------ ------------ ------ ----------
Obligations under finance leases
Current obligations under finance
leases (0.1) - - - (0.1)
Non-current obligations under
finance leases (2.1) 0.3 - (0.1) (1.9)
------------------------------------ ------ ------ ------------ ------ ----------
(2.2) 0.3 - (0.1) (2.0)
------------------------------------ ------ ------ ------------ ------ ----------
Net (debt)/cash (9.8) (13.1) 0.2 (0.1) (22.8)
------------------------------------ ------ ------ ------------ ------ ----------
30 April 29 October
2016 2016
------------------------------------ -------- ------ ------------ ------ ----------
Other
Cash Exchange non
Total flow differences cash Total
GBPm GBPm GBPm GBPm GBPm
Cash and cash equivalents in
the balance sheet 8.3 5.5 - - 13.8
Bank overdrafts (7.1) (0.8) 0.7 - (7.2)
------------------------------------ -------- ------ ------------ ------ ----------
Cash and cash equivalents in
the cash flow statement 1.2 4.7 0.7 - 6.6
------------------------------------ -------- ------ ------------ ------ ----------
Borrowings
Current borrowings - - - - -
Non-current borrowings - (4.0) - - (4.0)
------------------------------------ -------- ------ ------------ ------ ----------
- (4.0) - - (4.0)
------------------------------------ -------- ------ ------------ ------ ----------
Obligations under finance leases
Current obligations under finance
leases (0.1) - - - (0.1)
Non-current obligations under
finance leases (2.2) 0.2 - (0.1) (2.1)
------------------------------------ -------- ------ ------------ ------ ----------
(2.3) 0.2 - (0.1) (2.2)
------------------------------------ -------- ------ ------------ ------ ----------
Net (debt)/cash (1.1) 0.9 0.7 (0.1) 0.4
------------------------------------ -------- ------ ------------ ------ ----------
11 Provisions
Onerous
lease Re-organisation
provision provision Total
GBPm GBPm GBPm
--------------------------------------- ---------- --------------- -----
Opening at 29 April 2017 17.5 - 17.5
Utilised during the period (2.9) - (2.9)
Impact of movement in foreign exchange
rates 0.3 - 0.3
Closing balance at 28 October 2017 14.9 - 14.9
---------------------------------------- ---------- --------------- -----
Opening at 30 April 2016 12.5 0.1 12.6
Utilised during the period (2.6) - (2.6)
Impact of movement in foreign exchange
rates 0.4 - 0.4
Closing balance at 29 October 2016 10.3 0.1 10.4
---------------------------------------- ---------- --------------- -----
12. Dividends
No dividends were paid or proposed in the 26 weeks to 28 October
2017 or in the 26 weeks to 29 October 2016
13. Capital expenditure
During the period, cash flow on capital expenditure was GBP2.5m
(H1 FY17: GBP1.1m) on IT infrastructure and GBP10.6m (H1 FY17:
GBP6.5m) on the acquisition and fit out of stores. Net proceeds
from the sale of assets during the period are GBPnil (H1 FY16:
GBP3.4m).
Capital commitments contracted but not provided for at the end
of the period are GBP1.8m (H1 FY17: GBP0.3m) for core IT
infrastructure relating to the ERP project.
14. Retirement benefit obligation
26 weeks 26 weeks 52 weeks
to to to
28 October 29 October 29 April
2017 2016 2017
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- ---------
Deficit in scheme at beginning of period (3.2) (2.2) (2.2)
Net interest expense - - (0.1)
Employer contributions 0.4 0.5 0.9
Actuarial gains/(losses) 2.6 (2.0) (1.8)
-------------------------------------------- ----------- ----------- ---------
Deficit in scheme at end of period (0.2) (3.7) (3.2)
-------------------------------------------- ----------- ----------- ---------
Fair value of pension scheme assets 30.1 30.8 29.5
Present value of pension scheme obligations (30.3) (34.5) (32.7)
-------------------------------------------- ----------- ----------- ---------
Retirement benefit obligations (0.2) (3.7) (3.2)
-------------------------------------------- ----------- ----------- ---------
The key assumptions used, determined in conjunction with
independent qualified actuaries, are:
28 October 29 October 29 April
2017 2016 2017
GBPm GBPm GBPm
-------------- ---------- ---------- --------
RPI inflation 3.4 3.5 3.5
Discount rate 2.6 2.7 2.5
-------------- ---------- ---------- --------
The mortality rates assumptions are taken from the S2NXA CML
2016 (2017 S2NXA CML 2013) with medium cohort improvements, at a
minimum of 1.25% pa.
Notes to the financial statements
The amount of the deficit varies if the main financial
assumptions change, particularly the mortality and discount rate.
The sensitivity of a 0.1% change in these assumptions is shown
below:
26 weeks 52 weeks
to to
28 October 29 April
2017 2017
GBPm GBPm
-------------------- ------------------------------- ----------- ---------
Increase/(decrease)
by 0.1% Discount rate 0.5 0.6
Increase/(decrease)
by 0.1% RPI inflation or CPI inflation 0.3 0.4
Increase/(decrease)
by 1 year Life expectancy 0.8 1.2
-------------------- ------------------------------- ----------- ---------
15. Related party transactions
The Group's significant related parties are disclosed in the
Group's 2017 annual financial statements. There were no material
differences in related parties or related party transactions in the
period compared to the prior period.
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 Board considers that the principal risks and uncertainties
which could have a material impact on the Group's performance in
the remaining six months of the financial year remain the same as
those stated on pages 26-27 of the 2017 Annual Report and Accounts,
which are available on our website www.carpetright.plc.uk.
In summary, the Group is subject to the same general risks as
many other businesses; for example, changes in general economic
conditions, currency and interest rate fluctuations, changes in
taxation legislation, cyber-security breaches, failure of our IT
infrastructure, the cost of our raw materials, the impact of
competition, political instability and the impact of natural
disasters.
The Group uses its risk management process as described on page
24 of the 2017 Annual Report and Accounts to identify, monitor,
evaluate and escalate such issues as they emerge, enabling
management to take appropriate action wherever possible in order to
control them and also enabling the Board to keep risk management
under review.
Additional risks and uncertainties currently unknown, or which
are currently believed immaterial, may also have an adverse effect
on the Group.
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 consolidated 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 consolidated interim 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 29 April 2017, and on the Group's corporate
website www.carpetright.plc.uk.
By order of the Board
Wilf Walsh Neil Page
Chief Chief Financial Officer
Executive
12 December 2017
Independent review report to Carpetright plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Carpetright Plc's condensed consolidated
interim financial statements (the 'interim financial statements')
in the interim results announcement of Carpetright Plc for the 26
week period ended 28 October 2017. Based on our review, nothing has
come to our attention that causes us to believe that the interim
financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the Condensed consolidated balance sheet as at 28 October 2017;
-- the Condensed consolidated income statement and Condensed
consolidated statement of comprehensive income for the period then
ended;
-- the Condensed consolidated statement of cash flows for the period then ended;
-- the Condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results
announcement have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2 to the interim financial statements, 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.
Responsibilities for the condensed consolidated interim
financial statements and the review
Our responsibilities and those of the directors
The interim results announcement, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the interim results announcement in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results announcement 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 Guidance and Transparency Rules sourcebook of
the United Kingdom's 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.
What a review of 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,
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 interim
results announcement and considered whether it contains any
apparent misstatements or material inconsistencies with the
information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
12 December 2017
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 interim 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
IR FFUEFFFWSESE
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