TIDMUCG
RNS Number : 5592L
United Carpets Group plc
20 July 2017
20 July 2017
UNITED CARPETS GROUP PLC
Unaudited Preliminary Results for the year ended 31 March
2017
United Carpets Group plc ("the Group" or "the Company" or
"United Carpets"), the third largest chain of specialist retail
carpet and floor covering stores in the UK, today announces its
preliminary results for the year ended 31 March 2017.
Highlights
-- Like for like sales* increased by 1.3%
-- Revenue for the year was GBP21.2m (2016: GBP21.4m)
-- Profit before tax was GBP1.53m (2016: GBP1.49m)
-- Earnings per share were 1.58p (2016: 1.51p)
-- Store numbers reduced from 61 to 57
-- Special dividend of 1.0p per share paid 25 May 2017
-- Recommending a final dividend of 0.275p per share (2016:
0.265p per share) payable on 12 October 2017
-- Net funds were GBP2.60m (2016: GBP1.59m)
*Like for like sales are defined in the Financial Review
Paul Eyre, Chief Executive, said:
"These results show a modest improvement on the prior year
together with a positive like for like performance up 1.3%. This is
a creditable result against a backdrop of increasing economic
uncertainty which has tended to damage consumer confidence. We have
been helped by the resilience of our franchise model together with
the strength of our core customer offering of providing great
quality products at attractive price points."
Enquiries:
United Carpets Group plc
Paul Eyre, Chief Executive
Ian Bowness, Finance Director 01709 732
666
Novella Communications Ltd
Tim Robertson
Toby Andrews 020 3151 7008
Cantor Fitzgerald Europe
Marc Milmo, Catherine Leftley (Corporate
Finance) 020 7894 7000
Chairman's statement
Given the wider environment, this has been a good year for
United Carpets. Political and economic changes have affected
consumer confidence and this has resulted in a more challenging
retail environment so a modest improvement in profit before tax
represents sound progress.
During the year, we reduced the overall size of the store
portfolio to 57, being 4 fewer than at the start of the financial
year, maintaining our focus on stores which meet our performance
criteria. That said, the Group will continue to seek to open new
stores where it believes there is an opportunity to establish a
profitable long-term presence.
It remains difficult to predict the full impact that Brexit and
other political developments might have on the UK, however a
prolonged period of significant uncertainty has meant that the mood
of the UK consumer has fluctuated throughout the past year. It
appears probable that this state of flux is unlikely to stabilise
in the near term as we go through the Brexit process and therefore
we expect the challenging market conditions to remain prevalent
over the coming year.
Despite some recent weakening, the UK housing market continues
to function reasonably positively and this alongside the Group's
debt free, stable financial base and strong market positioning
makes the Group, in the Board's opinion, well positioned going
forward.
Financial review
Revenue, which includes marketing and rental costs incurred by
the Group and recharged to franchisees, was GBP21.2m (2016:
GBP21.4m). This small overall reduction in revenue reflected the
decrease in the average number of corporate stores during the year
compared to the prior year, which was largely offset by increased
activity through the Group's Warehousing division.
Like for like sales across the whole of the network (based on
stores that have traded throughout both the period under review and
the corresponding period in the prior year and thus excluding
stores that closed during either period) were up 1.3%. This was a
pleasing result against strong comparatives in the prior year and
during what is considered to be a tough trading environment.
Gross margin in the period was 61.2% compared to 63.8% in the
prior year. This primarily reflects the change in the mix of
revenue attributable to Franchising and Retail and Warehousing due
to the reduction in the average number of corporate stores year on
year and increasing proportion of total revenue derived from the
Warehousing division which operates on relatively low gross margin.
Underlying gross margin was little changed year on year with a
small improvement in Franchising and Retail gross margin offset by
a reduction in Warehousing gross margin.
Distribution costs and administrative expenses, which include
rent, rates and staff costs at the corporate stores, decreased by
GBP0.8m largely as a result of the reduction in the average number
of corporate stores year on year, improved efficiency in marketing
expenditure and the release of a provision for deferred
consideration of GBP0.15m which is no longer considered necessary.
Distribution costs and administrative expenses decreased from 57.2%
of revenue to 54.1% principally reflecting the reduction in the
proportion of revenue derived from corporate stores.
Profit before tax was GBP1.53m (2016: GBP1.49m) and earnings per
share were 1.58p (2016: 1.51p).
The statement of financial position included net funds of
GBP2.60m at 31 March 2017 (2016: GBP1.59m).
Dividend
On 11 May 2017, the Group announced a special dividend of 1.0
pence per share. This dividend was paid on 25 May 2017 and
demonstrates the continuing, strong cash generation of the Group,
reflecting the improvements made in the business over the last few
years.
Dividend (continued)
Looking ahead, dividend distributions will remain an important
part of the Board's strategy going forwards and when deciding on
future, regular dividend payments, modest reductions in dividend
cover will be considered subject to any overriding requirements of
the business to fund future growth.
The Board is therefore pleased to be recommending a final
dividend of 0.275p per share (2016: 0.265p per share). Subject to
approval at the Annual General Meeting, this dividend will be paid
on 12 October 2017 to all shareholders on the register at the close
of business on 29 September 2017. The ex-dividend date will be
28 September 2017.
Operations review
The store portfolio is increasingly stable with the majority of
stores producing satisfactory or better returns.
At 31 March 2016, there were 61 stores of which 52 were
franchised and 9 were corporate stores. Over the following 12
months, 2 franchised stores and 2 corporate stores were closed and
2 franchised stores and a corporate store were re-located within
the same town. As a result, at the end of the financial year, the
Group had 57 stores of which 50 were franchised and 7 were
corporate.
The streamlining of the store portfolio during the year reflects
the Group's continuing focus on developing stores that meet or
exceed the performance criteria. Of the 4 stores that were closed,
3 were relatively recent openings that were considered unlikely to
be strong long-term contributors. The decision to close them was
taken quickly, ensuring that they did not detract from the main
focus of profitable contribution to the core portfolio.
The Group continues to seek to open new stores where it can
establish a profitable long-term presence. It is anticipated that
future opportunities will involve sites with modestly higher annual
rental charges reflecting the decision to target slightly higher
profile locations. The appointment of a new franchise recruitment
manager in May 2017 is aimed at increasing the Group's pool of high
quality franchisees.
Across the business, the Group continues to develop its
marketing capabilities and during the year it invested in building
a long-term online presence. The Group's website functionality has
now been expanded to include a transactional facility with online
sales being fulfilled via our store network to the benefit of
franchisees. Further ongoing investments are anticipated to
continue the development of the Group's online capabilities.
Alongside this, the Group continues to support the network with a
centralised programme of marketing, underpinning awareness of the
brand and promotional offers on specific products designed to
increase footfall across the store network.
Franchising and Retail
Floor coverings are the Group's primary driver of sales
(predominantly carpet, laminate and vinyl floorings) through both
franchised stores and the Group's own corporate stores. During the
year, the Group delivered a reasonable performance relative to the
wider market, with sales up 0.8% on a like for like basis. The
product mix was extended during the year, with the introduction of
a premium vinyl tile that has added to the overall appeal of the
store offer.
While still contributing less than 10% of the Group's total
revenues, Beds again delivered in the period recording a like for
like sales increase of 7.2% against what are now much tougher
comparatives. During the year, the bed range was significantly
expanded with the introduction of Silent Night, the dominant bed
brand in the UK and this has helped to further establish the
Group's credentials amongst its target customers.
Warehousing
Our in-house cutting operation continues to support the whole
network providing a quick, efficient cutting and delivery service
enabling our franchisees to offer attractive retail price points
with good margins. This division continues to benefit from the
consolidation of the previously separate Flooring and Beds
warehouses into adjacent locations which has led to improved
delivery efficiencies and better customer service.
Property
The Property division leases properties from third parties and
sublets those properties to the store network.
People
The business performed well in a tougher environment during the
year and the Board would like to thank all of its franchisees,
suppliers, employees and other stakeholders connected to the Group
directly and indirectly for their contribution to the business and
looks forward to continuing to work together in the future.
Outlook
Since the year end, the trading environment has remained
challenging. Like for like sales for the 15 weeks since the period
end to 13 July 2017 have continued to be slightly positive, despite
a significant increase in marketing activity.
United Carpets has a well-positioned store portfolio and a debt
free base to operate from. The market environment continues to be
unsettled. The recent general election has done little to change
that and the process of Brexit is likely to create ongoing
fluctuations in consumer confidence. This adds a note of caution to
the Board's outlook for the business but nevertheless, we expect
the Group to continue to develop and pursue expansion opportunities
on a selective basis and retain its core focus on its customer
offering of providing great quality products at attractive price
points.
Peter Cowgill
Chairman
Preliminary announcement of results for the year ended 31 March
2017
Consolidated statement of comprehensive income
Year Year
ended ended
31 March 31
Note 2017 March
2016
GBP'000 GBP'000
Revenue 2 21,192 21,369
Cost of sales (8,231) (7,730)
Gross profit 12,961 13,639
Distribution costs (384) (299)
Administrative expenses (11,085) (11,925)
Other operating income 27 63
Operating profit 3 1,519 1,478
Financial income 11 12
Financial expenses (3) (3)
Profit before tax 1,527 1,487
Income tax expense 4 (243) (258)
Profit for the year* 1,284 1,229
Earnings per share 5
- Basic (pence per share) 1.58p 1.51p
- Diluted (pence per share) 1.57p 1.49p
*All activities relate to continuing operations and are
attributable to the owners of the parent.
There were no items of other comprehensive income and therefore
no separate section of other comprehensive income has been
presented.
Preliminary announcement of results for the year ended 31 March
2017
Consolidated statement of financial position
At
At 31
31 March March
2017 2016
GBP'000 GBP'000
Non-current assets
Property, plant
and equipment 2,017 2,105
Investment property 97 100
Deferred tax assets 184 208
2,298 2,413
Current assets
Inventories 1,721 1,628
Trade and other
receivables 1,836 2,651
Cash and cash
equivalents 2,621 1,671
6,178 5,950
Total assets 8,476 8,363
Capital and reserves
Issued capital 814 814
Retained earnings 4,323 3,361
Total equity attributable
to owners of the
parent 5,137 4,175
Non-current liabilities
Borrowings - finance
leases 3 24
Trade and other
payables 519 640
522 664
Current liabilities
Borrowings - finance
leases 20 52
Trade and other
payables 2,406 2,984
Provisions 156 240
Current tax liabilities 235 248
2,817 3,524
Total liabilities 3,339 4,188
Total equity and
liabilities 8,476 8,363
Preliminary announcement of results for the year ended 31 March
2017
Consolidated statement of changes in equity
Total equity
attributable
to owners
Note Issued Retained of the
capital earnings parent
GBP'000 GBP'000 GBP'000
At 31 March 2015 814 3,251 4,065
Profit for the year - 1,229 1,229
Equity dividends paid 6 - (1,119) (1,119)
At 31 March 2016 814 3,361 4,175
Profit for the year - 1,284 1,284
Equity dividends paid 6 - (322) (322)
At 31 March 2017 814 4,323 5,137
Preliminary announcement of results for the year ended 31 March
2017
Consolidated statement of cash flows
Year Year
ended ended
31 March 31 March
Note 2017 2016
GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from operations 7 1,986 1,396
Interest paid (3) (3)
Income tax (paid)/received (232) 136
Net cash flows from operating
activities 1,751 1,529
Cash flows from investing
activities
Acquisition of property,
plant and equipment (437) (1,216)
Acquisition of investment
property - (100)
Proceeds from sale of property,
plant and equipment - 5
Interest received 11 12
Net cash flows from investing
activities (426) (1,299)
Cash flows from financing
activities
Payment of finance lease
liabilities (53) (50)
Equity dividends paid (322) (1,119)
Net cash flows from financing
activities (375) (1,169)
Increase/(decrease) in
cash and cash equivalents
in the year 950 (939)
Cash and cash equivalents
at the start of the year 1,671 2,610
Cash and cash equivalents
at the end of the year 2,621 1,671
Preliminary announcement of results for the year ended 31 March
2017
Notes to the preliminary announcement
1. Basis of preparation
The financial information contained in this unaudited
preliminary announcement does not constitute accounts as defined by
section 434 of the Companies Act 2006. The financial information
for the year ended 31 March 2016 is derived from the statutory
accounts for that period which have been delivered to the Registrar
of Companies. The auditors reported on those accounts; their report
was unqualified and did not contain a statement under either
section 498(2) or section 498(3) of the Companies Act 2006. The
statutory accounts for the year ended 31 March 2017 will be
finalised based on the information in this unaudited preliminary
announcement and will be delivered to the Registrar of Companies in
due course. The Group has prepared its consolidated financial
statements for the year ended 31 March 2017 in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union. The accounting policies applied are consistent
with those included in the financial statements of the Group for
the year ended 31 March 2016.
2. Segment reporting
Segment information is presented in the financial statements in
respect of the Group's business segments, which are the primary
basis of segment reporting. The business segment reporting format
reflects the Group's management and internal reporting
structure.
Franchising and Retail is the income that the Group receives
from its franchise activities together with the results of its
corporate stores. Warehousing reflects the results of the Group's
in-house cutting operation which services the franchised and
corporate stores and a small number of third parties. The Property
division leases properties from third parties and sublets those to
the store network.
Inter-segment pricing is determined on an arm's length basis.
Segment results include items directly attributable to a segment as
well as those that can be allocated on a reasonable basis.
Unallocated income includes rent receivable from investment
property.
Franchising Warehousing Property Consolidated
and Retail
Year Year
ended ended
31 March 31 March
2017 2016 2017 2016 2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross sales 11,633 13,004 8,823 8,393 2,957 3,076 23,413 24,473
Inter-segment - - (1,710) (2,426) (511) (678) (2,221) (3,104)
sales ____ ____ ____ ____ ____ ____ ____ ____
Segment 11,633 13,004 7,113 5,967 2,446 2,398 21,192 21,369
revenue ____ ____ ____ ____ ____ ____ ____ ____
Segment 1,373 1,005 63 311 (11) 31
results ____ ____ ___ ____ ___ ____ 1,425 1,347
Unallocated
income 67 68
Other operating 27 63
income ____ ____
Operating
profit 1,519 1,478
Financial
income 11 12
Financial
expenses (3) (3)
Income (243) (258)
tax expense ____ ____
Profit 1,284 1,229
for the _____ _____
year
Preliminary announcement of results for the year ended 31 March
2017
Notes to the preliminary announcement (continued)
3. Operating profit
Operating profit is arrived at after charging/(crediting):
Year Year
ended ended
31 March 31 March
2017 2016
GBP'000 GBP'000
Release of the deferred consideration (148) -
creditor relating to the acquisition
of the trade, assets and certain
liabilities of United Carpets (Northern)
Limited
Provision for the estimated costs
associated with vacating properties 206 84
(Release of provision)/charge for
impairment of trade receivables (132) 42
Release of provision for impairment
of inventories - (110)
The liquidators of UNCN Realisations 2012 Limited (formerly
United Carpets (Northern) Limited) have indicated that the
potential dividend owed to United Carpets Group plc is likely to
exceed the remaining deferred consideration of GBP148,000 owed by
United Carpets Group plc. While the final amount of the dividend
has not yet been announced, the Directors consider that the
provision previously held in respect of the deferred consideration
is no longer required.
During the year, 4 stores and a small warehouse/store closed and
3 stores relocated resulting in a charge to the provision for
vacating properties of GBP206,000 in the year.
Progress continues to be made working with franchisees to
recover historic debts resulting in a release of provision for
impairment of trade receivables of GBP132,000 in the year.
In the prior year, the basis for impairing inventories was
reconsidered resulting in a release of provision for impairment of
inventories of GBP110,000.
4. Income tax expense
Analysis of charge for the year:
Year Year
ended ended
31 March 31 March
2017 2016
GBP'000 GBP'000
Current tax:
Current year 265 269
Adjustment in respect of prior
periods (46) (34)
---------- ----------
219 235
Deferred tax:
Current year 38 41
Adjustment in respect of prior
periods (14) (18)
---------- ----------
Total income tax expense recognised
in the current year 243 258
========== ==========
Preliminary announcement of results for the year ended 31 March
2017
Notes to the preliminary announcement (continued)
4. Income tax expense (continued)
The tax charge for the year differs to the standard rate of
corporation tax in the UK of 20% (2016: 20%). The differences are
explained below:
Year Year
ended ended
31 March 31 March
2017 2016
GBP'000 GBP'000
Profit before tax 1,527 1,487
Profit before tax multiplied by
the rate of corporation tax in
the UK of 20% (2016: 20%) 305 297
Effect of:
Expenses not deductible for tax
purposes 13 12
Adjustments to tax charge in respect
of prior periods (60) (52)
Other (15) 1
Total tax 243 258
================ ===========
5. Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the year ended
31 March 2017 was based on the profit attributable to ordinary
shareholders of GBP1,284,000 (2016: GBP1,229,000) and a weighted
average number of ordinary shares outstanding during the year ended
31 March 2017 of 81,400,000 (2016: 81,400,000).
Diluted earnings per share
The calculation of diluted earnings per share for the year ended
31 March 2017 was based on the profit attributable to ordinary
shareholders of GBP1,284,000 (2016: GBP1,229,000) and a weighted
average number of ordinary shares outstanding and potential
ordinary shares due to options during the year ended 31 March 2017
of 81,784,987 (2016: 82,286,571).
Preliminary announcement of results for the year ended 31 March
2017
Notes to the preliminary announcement (continued)
6. Equity dividends
Year Year
ended ended
31 March 31 March
2017 2016
GBP'000 GBP'000
Special dividend paid during 2015/16
on ordinary shares of 1.0p per share - 814
Final dividend in respect of 2014/15
paid during the year on ordinary
shares of 0.25p per share - 203
Interim dividend in respect of 2015/16
paid during the year on ordinary
shares of 0.125p per share - 102
Final dividend in respect of 2015/16 216 -
paid during the year on ordinary
shares of 0.265p per share
Interim dividend in respect of 2016/17 106 -
paid during the year on ordinary
shares of 0.13p per share
------------ -----------
322 1,119
============ ===========
A special dividend of 1.0p per share was paid on 25 May
2017.
A final dividend of 0.275p per share in respect of the year
ended 31 March 2017 has been recommended.
7. Cash generated from operations
Year Year
ended ended
31 March 31 March
2017 2016
GBP'000 GBP'000
Profit before tax 1,527 1,487
Depreciation and other non-cash items:
Depreciation of property, plant
and equipment 221 208
Impairment of property, plant and
equipment 304 62
Loss on disposal of property, plant
and equipment - 2
Depreciation of investment property 3 -
Changes in working capital:
Increase in inventories (93) (254)
Decrease/(increase) in trade and
other receivables 815 (288)
(Decrease)/increase in trade and
other payables (699) 196
Decrease in provisions (84) (8)
Financial income (11) (12)
Financial expenses 3 3
------------ -----------
Cash generated from operations 1,986 1,396
============ ===========
This information is provided by RNS
The company news service from the London Stock Exchange
END
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