TIDMUCG
RNS Number : 2389A
United Carpets Group plc
19 December 2014
UNITED CARPETS GROUP plc
Interim results for the 6 month period ended 30 September
2014
United Carpets Group plc ("the Group" or "the Company" or
"United Carpets"), the second largest chain of specialist retail
carpet and floor covering stores in the UK, today announces its
interim results for the 6 month period ended 30 September 2014.
Key points
-- Network sales* were GBP25.6m (2013: GBP28.0m)
-- Revenue was GBP9.1m (2013: GBP10.3m)
-- Like for like sales* increased by 0.3%
-- Operating profit increased 17.5% to GBP531,000 (2013: GBP452,000)
-- Profit before tax increased 18.1% to GBP534,000 (2013: GBP452,000)
-- Earnings per share increased 10.5% to 0.42p (2013: 0.38p)
-- Cash and cash equivalents increased to GBP1.8m (2013: GBP1.4m)
-- Like for like sales* since the period end improving further
* Network sales and like for like sales are defined under
Financial review
Paul Eyre, Chief Executive, said:
"I am pleased to be able to report a good performance by the
Group. We have been helped, to some extent, by an improving housing
market with slightly higher average transaction values which we
believe reflects an improvement in consumer confidence. More recent
like for like sales figures have been more positive and I believe
we are well placed to deliver a good result for the year.
We continue to benefit from our restructuring programme as we
operate from a lower cost base giving the opportunity to invest in
developing the business and providing the basis for the Board's
confidence in the future."
Enquiries:
United Carpets Group plc
Paul Eyre, Chief Executive
Ian Bowness, Finance Director 01709 732 666
Novella Communications Ltd
Tim Robertson
Ben Heath 020 3151 7008
Cantor Fitzgerald Europe
Mark Percy/Catherine Leftley (Corporate Finance)
David Banks/Paul Jewell (Corporate Broking) 020 7894 7000
Chairman's statement
This represents a good performance by the Group with profit
before tax increasing by 18.1% against the comparable 6 month
period last year. The improvement in performance was driven by a
slightly better market environment which has led to an improving
sales trend in the second quarter of our financial year and
beyond.
Just over two years ago the Group undertook an extensive
restructuring of its store network, removing the majority of
underperforming stores and establishing a new structure. Today, the
network of stores totals 60, down from more than 80 stores just
over two years ago, of which 48 are franchised and 12 are run as
corporate stores.
Whilst there appears to have been little increase in the levels
of consumers' disposable income, there does seem to have been a
slight increase in consumer confidence reflected in the increasing
number of transactions in the UK housing market. However, with less
than 6 months until the General Election, the prospect of a rise in
interest rates and a continuation of the uncertainty in the global
economy we remain cautious with regard to the future market
environment. That said, United Carpets is now in a substantially
better position to manage market conditions and continue to pursue
opportunities to grow the business.
Financial review
Network sales across the Group, including the value of retail
sales by our franchisees (to give a measure of the Group's turnover
on a more comparable basis to a conventional retailer), were
GBP25.6m. Revenue, which as in previous years includes marketing
and rental costs incurred by the Group and recharged to
franchisees, was GBP9.1m. The reduction in network sales and
revenue in comparison to the same period last year principally
reflects the change in the Beds sales process and a reduction in
the number of third parties serviced by the warehouse.
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 0.3%.
Gross margin was 65.3% compared to 62.8% in the same period,
primarily reflecting the change in the mix of revenue between
Franchising and Retail and Warehousing. Distribution costs and
administrative expenses, which include rent, rates and staff costs
at the corporate stores, have reduced significantly in comparison
to the same period last year principally as a result of the change
in the Beds sales process and reduced occupancy costs. Distribution
costs and administrative expenses excluding exceptional items were
60.2% of revenue, a marginal increase in comparison to the same
period last year.
Underlying operating profit (excluding the costs of reducing the
number of operational stores, net gains arising in relation to the
Group reorganisation and other exceptional income) increased by
31.3% to GBP507,000 (2013: GBP386,000).
Profit before tax was GBP534,000 (2013: GBP452,000) and basic
earnings per share improved to 0.42p (2013: 0.38p).
The balance sheet included cash and cash equivalents of GBP1.8m
as at 30 September 2014 (2013: GBP1.4m).
Dividend
Following the successful capital restructuring in September, the
Board intends to review dividend policy in the light of the full
year's performance.
Chairman's statement (continued)
Operations review
At the start of the period under review the Group operated 59
stores of which 48 were franchised and 11 were corporate stores.
During the 6 month period ended 30 September 2014, one store closed
and one was relocated to alternative premises resulting in 58
stores of which 47 were franchised and 11 were corporate stores.
Since the half year end, we have opened corporate stores in
Birkenhead and Blackburn and the number of franchised stores
increased by one, taking the total number of stores in operation
today to 60 of which 12 are corporate stores.
The changes to our portfolio of stores have resulted in a
stronger core network which is reflected in the current trading
performance. Through re-negotiating the leases for nearly all of
the stores we have re-balanced the portfolio so that the cost base
is now more in line with the trading potential of the Group.
There may be a small number of store closures in the future but
in practice we are now broadly operating from the store base we
want to trade from and the focus is on optimising the potential of
these stores. We continue to find high calibre franchisees seeking
to join our network and emulate the performance of our successful
franchisees within the Group. Making a strong start is important in
order to gain momentum and confidence. We therefore look to match
the best possible store to the franchisee which may mean that we
decide to place a new franchisee into a corporate store as opposed
to opening a brand new store. Despite the considerable support
offered by the Group to assist any struggling franchisee, we may
also have to take back a franchised store into the corporate
division if the store continues to under perform for a prolonged
period without responding to assistance.
Over the last 12 months or so, we have trialled a smaller store
format which typically occupies more central locations on the high
street, providing customers with samples of the flooring ranges we
offer but without carrying the same stock levels as our traditional
stores. The concept is working well as part of the United Carpets
network and, as a result, we currently have 6 smaller stores in
operation. We anticipate opening a few more of these new stores
during the course of 2015.
50 out of the 58 stores offer Beds alongside flooring ranges.
Last year the Group changed the way Beds were supplied to
franchisees by aligning them with the way flooring is supplied,
improving the potential return to franchisees from bed sales.
Whilst it is early days, bed sales have improved albeit from a low
base and we believe that there is scope for further significant
improvement.
Central to our customer offer is the provision of great quality
products and great value. In the areas where the Group operates,
the business is well known for delivering superior ranges of good
quality products and this is re-enforced by a rolling advertising
programme across print, radio, TV and social networks. Maintaining
our public profile is important and so too is improving the
customer experience. The Group has worked hard to better understand
customer preferences and the benefits of this are reflected in our
gradually improving conversion rates.
Franchising and Retail
Floor coverings are the Group's primary driver of sales
(predominantly carpet, laminate and vinyl flooring) through both
franchised stores and the Group's own corporate stores. The market
has improved slightly but remains volatile with consumers easily
unnerved by negative news. The housing market has seen an increase
in the number of completed transactions and this is a valuable
generator of new business for our sector although this trend
appears to have slowed a little more recently.
Whilst sales for the first quarter of the financial year were a
little patchy, performance improved significantly in the second
quarter with sales improving from 2.3% down on a like for like
basis after the first 16 weeks of the period to 0.3% up on a like
for like basis for the 6 month period in total. Within that total
like for like increase, Flooring was 0.4% up and Beds was 0.1%
up.
Chairman's statement (continued)
Warehousing
Our in-house cutting operation continues to support the whole
network, providing a quick, efficient cutting and delivery service
enabling attractive retail price points with good margins. The
reduction in sales in the period just ended compared to the same
period last year reflects a reduction in the number of third
parties serviced by the warehouse as the demands of our network
have grown.
Property
The property division leases properties from third parties and
sublets those properties to the store network.
People
As always, the Board would like to thank all the franchisees,
suppliers, employees and other stakeholders in United Carpets for
their continued support and hard work. We look forward to working
together towards completing another successful year for the
business.
Outlook
This has been a good start to the new financial year with the
encouraging signs seen in the second quarter improving further
since the period end. In particular, tangible benefits are
beginning to be seen from the improvements made to the Beds range
and the changes in the way that they are supplied to the
network.
Despite tough comparatives ahead in the final quarter of our
financial year and no certainty over weather conditions during that
period, improving like for like sales during our busiest sales
period should mean that the Group is well placed to complete a
successful year. We remain focused on developing the business
through the addition of a successful new store format, improving
the volume of bed sales and continued focus on improving the
customer experience. Supporting these operating objectives and
following our successful capital restructuring during the period,
we have virtually no debt, a healthy balance sheet and a cost base
that better reflects the scale of the business providing scope to
invest in the long term future of the business and generate returns
to shareholders. We therefore look forward with renewed confidence
on delivering increased value to our shareholders.
Peter Cowgill
Chairman
18 December 2014
Independent review report to United Carpets Group plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
6 month period ended 30 September 2014 which comprises the
consolidated statement of comprehensive income, consolidated
statement of financial position, consolidated statement of changes
in equity, consolidated statement of cash flows and the related
explanatory notes. We have read the other information contained in
the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company 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. Our review work has been undertaken so that we might state
to the Company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report, is the responsibility of, and
has been approved by the directors. The directors are responsible
for preparing and presenting the half-yearly financial report in
accordance with the AIM Rules for Companies issued by the London
Stock Exchange.
As disclosed in note 1, the annual financial statements of the
Group are prepared in accordance with International Financial
Reporting Standards and International Financial Reporting
Interpretations Committee pronouncements as adopted by the European
Union. The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
the AIM Rules for Companies issued by the London Stock
Exchange.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the 6 month period ended 30
September 2014 is not prepared, in all material respects, in
accordance with the AIM Rules for Companies issued by the London
Stock Exchange.
Baker Tilly UK Audit LLP
Chartered Accountants
Suite A, 7th Floor
City Gate East
Tollhouse Hill
Nottingham
NG1 5FS
18 December 2014
Consolidated statement of comprehensive income
For the 6 month period ended 30 September 2014
6 month 6 month Year
period ended period ended ended
30 September 30 September 31 March
2014 2013 2014
Note Unaudited Unaudited Audited
Total Total Total
GBP'000 GBP'000 GBP'000
Revenue 3 9,097 10,288 21,059
Cost of sales (3,160) (3,824) (8,073)
Gross profit 5,937 6,464 12,986
Distribution costs (183) (332) (546)
Administrative expenses (5,272) (5,762) (11,634)
Other operating income 49 82 128
Operating profit 2 531 452 934
Financial income 4 - 13
Financial expenses (1) - (10)
Profit before tax 534 452 937
Income tax (expense)/credit 4 (189) (140) 195
Profit for the period (see
below) 3 345 312 1,132
Earnings per share 6
- Basic (pence per share) 0.42p 0.38p 1.39p
- Diluted (pence per share) 0.42p 0.38p 1.39p
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 statement of
other comprehensive income has been presented.
Consolidated statement of financial position
As at 30 September 2014
At At At
30 September 30 September 31 March
2014 2013 2014
Unaudited Unaudited Audited
Note Total Total Total
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 5 884 371 567
Deferred tax assets 298 27 396
1,182 398 963
Current assets
Inventories 1,276 1,409 1,100
Trade and other receivables 2,482 2,981 2,628
Cash and cash equivalents 1,831 1,392 1,678
5,589 5,782 5,406
Total assets 6,771 6,180 6,369
Capital and reserves
Issued capital 814 4,070 4,070
Share premium - 1,106 1,106
Retained earnings* 2,489 (3,038) (2,218)
Total equity attributable
to owners of the parent 3,303 2,138 2,958
Non-current liabilities
Borrowings - finance leases 63 - -
Trade and other payables 372 445 476
435 445 476
Current liabilities
Borrowings - finance leases 38 - -
Trade and other payables 2,773 3,292 2,799
Current tax liabilities 222 305 136
3,033 3,597 2,935
Total liabilities 3,468 4,042 3,411
Total equity and liabilities 6,771 6,180 6,369
* See consolidated statement of changes in equity for details of
presentational changes in the year.
Consolidated statement of changes in equity
For the 6 month period ended 30 September 2014
Total equity attributable
Retained to owners of the
Issued capital Share premium earnings parent
GBP'000 GBP'000 GBP'000 GBP'000
At 31 March 2013 4,070 1,106 (3,350) 1,826
Profit for the period - - 312 312
At 30 September 2013 4,070 1,106 (3,038) 2,138
Profit for the period - - 820 820
At 31 March 2014 4,070 1,106 (2,218) 2,958
Profit for the period - - 345 345
Capital restructuring (3,256) (1,106) 4,362 -
At 30 September 2014 814 - 2,489 3,303
Following approval by shareholders on 20 August 2014 and by the
High Court on 17 September 2014, the nominal value of the Company's
issued share capital was reduced from 5 pence to 1 pence each and
the share premium reserve was cancelled.
The share-based payment reserve of GBP598,000, previously shown
separately, has been combined with retained earnings for
presentational purposes.
Consolidated statement of cash flows
For the 6 month period ended 30 September 2014
6 month 6 month Year
period ended period ended ended
30 September 30 September 31 March
2014 2013 2014
Note Unaudited Unaudited Audited
Total Total Total
GBP'000 GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 7 422 607 1,338
Interest paid (1) - (10)
Income tax paid (5) (9) (212)
Net cash flows from operating activities 416 598 1,116
Cash flows from investing activities
Acquisition of property, plant and
equipment (241) (115) (362)
Proceeds from sale of property, plant
and equipment 10 - 2
Interest received 4 - 13
Net cash flows from investing activities (227) (115) (347)
Cash flows from financing activities
Payment of finance lease liabilities (36) - -
Net cash flows from financing activities (36) - -
Increase in cash and cash equivalents
in the period 153 483 769
Cash and cash equivalents at the
start of the period 1,678 909 909
Cash and cash equivalents at the
end of the period 1,831 1,392 1,678
------------- ------------- ---------
Notes to the condensed consolidated interim financial
statements
1. Basis of preparation
United Carpets Group plc (the "Company") is a company domiciled
in the United Kingdom. The condensed consolidated interim financial
statements of the Company for the 6 month period ended 30 September
2014 comprise the Company and its subsidiary undertakings (together
referred to as the "Group").
The Group financial statements for the year ended 31 March 2014
were prepared in accordance with IFRSs as adopted by the European
Union, approved by the Board of Directors on 4 September 2014 and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under section
498(2) and 498(3) of the Companies Act 2006. These condensed
consolidated interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. These condensed consolidated interim financial statements for
the 6 month period ended 30 September 2014 are unaudited but have
been reviewed by the auditors 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" and their Independent Review Report is included
within these statements.
The accounting policies applied are consistent with those of the
financial statements for the year ended 31 March 2014 and those
that are expected to be adopted in the financial statements for the
year ending 31 March 2015. In particular, consideration has been
given to IFRS 10 'Consolidated Financial Statements' and the Board
has concluded that the operations of the franchisees are not
required to be consolidated as control of the relevant activities
rests with franchisees.
The Group does not consider that any standards or
interpretations issued by the International Accounting Standards
Board (IASB) but not yet applicable will have a significant impact
on the financial statements of the Group when the relevant
standards come into effect for periods commencing on or after 1
April 2015.
2. Operating profit
Operating profit is arrived at after charging/(crediting):
6 month 6 month Year
period ended period ended
30 September ended 31 March
2014 30 September 2014
2013
GBP'000 GBP'000 GBP'000
Costs of reducing the number of operational
stores 27 56 117
Net gains arising in the current period
relating to the Group reorganisation (41) (25) (73)
Other exceptional income (10) (97) (97)
Other exceptional income is a profit on disposal of property,
plant and equipment and in the comparative periods was compensation
received as a result of the compulsory purchase of one of the
properties operated by the Group.
3. Segment reporting
Segment information is presented in the condensed consolidated
interim 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.
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.
Notes to the condensed consolidated interim financial statements
(continued)
3. Segment reporting (continued)
Franchising Warehousing Property Consolidated
and Retail
6 month 6 month
period ended period ended
30 September 30 September
2014 2013 2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 5,508 5,056 2,508 4,001 1,081 1,231 9,097 10,288
Segment results 427 (4) (108) 246 128 108 447 350
Unallocated income 35 20
Other operating income 49 82
Operating profit 531 452
Financial income 4 -
Financial expenses (1) -
Income tax expense (189) (140)
Profit for the period 345 312
------------- -------------
Warehousing was previously described as Warehousing and Beds.
The directors consider that, following the change in the way that
Beds are sold through the network giving more ownership of bed
sales to franchisees, the revised description better fits the
nature of that business.
4. Income tax (expense)/credit
The tax charge accrued in these interim results reflects an
estimated effective tax rate of 35.4% (6 month period ended 30
September 2013: 31.0%, year ended 31 March 2014 tax credit). This
includes a charge of GBP65,000 which relates to adjustments in
respect of prior periods as a result of the change in the tax rate
from 23% to 20% and a re-assessment of the tax written down values
of assets acquired in October 2012. Excluding those items, the
effective tax rate was 23.2%, slightly higher than the standard
rate of corporation tax of 21% due to expenses not deductible for
tax purposes and non-qualifying depreciation.
5. Property, plant and equipment
Acquisitions and disposals
During the 6 month period ended 30 September 2014 the Group
acquired assets with a cost of GBP379,000 (6 month period ended 30
September 2013: GBP115,000, year ended 31 March 2014: GBP362,000).
Assets with a net book value of GBP4,000 were disposed of during
the 6 month period ended 30 September 2014 (6 month period ended 30
September 2013: GBP59,000, year ended 31 March 2014: GBP73,000),
resulting in a profit on disposal of GBP10,000 (6 month period
ended 30 September 2013: loss of GBP59,000, year ended 31 March
2014: loss of GBP71,000).
Capital commitments
There were no capital commitments contracted for but not
provided for at the period end (30 September 2013: GBPNil, 31 March
2014: GBPNil).
6. Basic and diluted earnings per share
Basic earnings per share
The calculation of basic earnings per share for the 6 month
period ended 30 September 2014 was based on the profit attributable
to ordinary shareholders of GBP345,000 (6 month period ended 30
September 2013: GBP312,000, year ended 31 March 2014: GBP1,132,000)
and a weighted average number of ordinary shares outstanding during
the 6 month period ended 30 September 2014 of 81,400,000 (6 month
period ended 30 September 2013: 81,400,000, year ended 31 March
2014: 81,400,000).
Notes to the condensed consolidated interim financial statements
(continued)
6. Basic and diluted earnings per share (continued)
Diluted earnings per share
Diluted earnings per share for the periods ended 30 September
2014, 30 September 2013 and 31 March 2014 was the same as basic
earnings per share as the share options in issue were non-dilutive
in any of those periods.
7. Cash generated from operations
6 month 6 month Year
period ended period ended ended
30 September 30 September 31 March
2014 2013 2014
GBP'000 GBP'000 GBP'000
Profit before tax 534 452 937
Depreciation and other non-cash
items:
Depreciation of property, plant
and equipment 57 33 70
(Profit)/loss on disposal of
property, plant and equipment (10) 59 71
Changes in working capital:
(Increase)/decrease in inventories (176) 17 326
Decrease/(increase) in trade
and other
receivables 146 (406) (53)
(Decrease)/increase in trade
and other payables (126) 452 (10)
Financial income (4) - (13)
Financial expenses 1 - 10
Cash generated from operations 422 607 1,338
-------------- -------------- ----------
8. Contingencies
There have been no material changes to the assessment of any
potential liability arising in connection with Employee Benefit
Trusts since the financial statements for the year ended 31 March
2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR GGGWAPUPCGQR
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