TIDMUCG
RNS Number : 0045S
United Carpets Group plc
16 December 2016
16 December 2016
UNITED CARPETS GROUP PLC
Interim results for the 6 month period ended 30 September
2016
United Carpets Group plc (the "Group" or "Company" or "United
Carpets"), the third 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 2016.
Key points
-- Network sales* were GBP27.5m (2015: GBP27.1m)
-- Revenue was GBP10.2m (2015: GBP10.4m)
-- Like for like sales* increased by 2.1%
-- Operating profit increased 9.1% to GBP636,000 (2015: GBP583,000)
-- Profit before tax increased 8.8% to GBP640,000 (2015: GBP588,000)
-- Earnings per share increased 8.2% to 0.66p (2015: 0.61p)
-- Net funds were GBP1.8m (31 March 2016: GBP1.6m)
-- Interim dividend of 0.13p per share payable on 20 January 2017 (2015: 0.125p)
-- Like for like sales* since the period end continue to be
positive against tough comparatives
* Network sales and like for like sales are defined in the
financial review
Paul Eyre, Chief Executive, said:
"Notwithstanding a fairly challenging backdrop, the good
momentum from last year has continued into the first half of the
current financial year with trading performance proving robust.
From a smaller store base we have largely maintained revenues and
continued to improve Group profitability reflecting the growing
quality of the store portfolio together with the careful management
of costs. Demand for a good value, high quality flooring
proposition remains reasonable and the Group's bed proposition is
increasingly making a good contribution. United Carpets is well
placed to deliver results in line with management expectations for
the year overall."
Enquiries:
United Carpets Group plc
Paul Eyre, Chief Executive 01709 732
Ian Bowness, Finance Director 666
Novella Communications Ltd
Tim Robertson
Toby Andrews 020 3151 7008
Cantor Fitzgerald Europe
Marc Milmo, Catherine Leftley
(Corporate Finance)
David Banks (Sales) 020 7894 7000
Chairman's statement
I am pleased to report on a positive trading performance. During
the period under review, the Group increased its profit before tax
by 8.8% and recorded a 2.1% increase in like for like sales, a
creditable performance in what has been and continues to be a
slightly unsettled market environment. The Board is recommending an
increased interim dividend and believes the business to be well
placed to achieve a satisfactory outcome for the year.
At 30 September 2016, the store network totalled 59 (2015: 62)
of which 51 were franchised (2015: 48) and 8 were corporate stores
(2015: 14).
The political and economic backdrop continues to be uncertain,
regarding Britain's exit from the EU, and while consumer confidence
has fluctuated, it does not seem to have weakened overly for the
Group in the period since the Brexit vote. Demand has varied during
the period, but overall the trading environment has evened out. The
housing market in the UK has continued to move forward supported by
the continuation of low interest rates and the expectation that
this is likely to be the case for some time still.
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
GBP27.5m (2015: GBP27.1m). Revenue, which as in previous years
includes marketing and rental costs incurred by the Group and
recharged to franchisees, was GBP10.2m (2015: GBP10.4m). The
reduction in sales as a result of decreased corporate store numbers
has been largely offset by increased franchise commissions and
marketing contributions (arising from increased franchisee numbers
and improving performance) together with increased warehousing
throughput.
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 2.1%, a
satisfactory performance in the current economic climate.
Gross margin was 61.9% compared to 62.3% in the same period in
2015 reflecting a reduction in the average number of corporate
stores and a significant increase in the proportion of sales from
the warehousing division offset by some improvement in underlying
gross margins. Distribution costs and administrative expenses were
55.8% of revenue, a reduction from 57.1% in the same period last
year. The improvement arose from reduced corporate store numbers,
further savings in the ongoing costs of supporting the franchise
network as a result of improving performance offset by increased
distribution costs reflecting increased throughput. The period
under review saw an increase in the provision for estimated costs
associated with vacating properties. However, this was more than
offset by a reduction in the provision for impairment of trade
receivables and the release of the provision for deferred
consideration that is no longer considered to be required. Further
details are provided in note 3 to the condensed consolidated
interim financial statements.
Operating profit increased by 9.1% to GBP636,000 (2015:
GBP583,000) and profit before tax increased to GBP640,000 (2015:
GBP588,000). As a result of a small increase in the effective tax
rate compared to the same period in 2015, basic earnings per share
improved by 8.2% to 0.66p (2015: 0.61p).
Net funds were GBP1.8m at 30 September 2016 (31 March 2016:
GBP1.6m).
Dividend
As part of the Board's intention to pay a progressive dividend
broadly in line with the growth of the business, the Board is
pleased to recommend an interim dividend of 0.13 pence per share to
be paid on 20 January 2017 to all shareholders on the register at
the close of business on 6 January 2017. The ex-dividend date will
be on 5 January 2017.
Operations review
The management focus on improving the quality of the store
portfolio over the last 4 years underpins the improved
profitability which historically has been held back by
underperforming stores.
At 31 March 2016, there were 61 stores of which 52 were
franchised and 9 were corporate. During the period under review, 3
franchised stores were re-franchised to new franchisees, a
franchised store and a corporate store were closed and 2 franchised
stores were relocated in their respective towns. As a result, at 30
September 2016, there were 59 stores of which 51 were franchised
and 8 were corporate. Since then 2 more stores have closed, one
franchise and one corporate, so that today there are 57 stores in
operation.
Significant benefits from the restructuring programme have been
a reduction in rental costs and greater flexibility across the
portfolio, with generally shorter lease terms and tenant break
clauses. This has meant there has been a degree of movement to new
sites including, on a very selective basis, a handful of stores
moving to slightly more expensive locations where the Company has
started to see some encouraging results.
Chairman's statement (continued)
Operations review (continued)
The Group has continued to enhance its training programme across
the business for all sales staff within the network. The focus
continues to be on customer service and providing value for money.
The customer proposition remains centred on delivering excellent
quality products at highly competitive price points and this
message is supported through the Group's centralised programme of
marketing, pushing awareness of the United Carpets brand and
group-wide 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. In the
period under review, the portfolio performed well generating a
satisfactory 1.7% increase in like for like sales in a less settled
market environment. This reflects the efforts that continue to be
made across the business from increasing our focus on customer
service, developing new targeted marketing campaigns and providing
'on-trend' product ranges that appeal to our customers'
aspirations.
The sale of beds alongside flooring continues to make good
progress across the portfolio as part of the core sales
proposition. Management continues to believe that the combination
of the two is a natural partnership and have worked hard to
encourage all franchisees to adopt the same approach. This has
largely worked and bed sales have continued to be positive, with
like for like bed sales for the period increasing by 6.8%.
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. It is
now 9 years since we brought these services in-house and in that
time we have settled upon an efficient model which is enhancing the
whole back-end support for the business and building upon our
Warehousing division's recent success as "most improved supplier",
as voted by the store network.
Property
The property division leases properties from third parties and
sublets those properties to the store network.
People
The business is performing well and this is due to the
consistent efforts of the franchisees, employees, suppliers and all
stakeholders connected to the Group and on behalf of the Board I
would like to thank them all for their hard work during this
period.
Outlook
Like for like sales for the 10 weeks since the period end to 8
December 2016 have continued to be positive.
Despite the challenging political and economic background, the
outlook for the financial year is positive having completed a
successful first half. Our markets are driven to a large extent by
consumer confidence and while we have ongoing political uncertainty
over Brexit, the underlying base case is satisfactory, supported by
a low interest rate environment combined with a housing market that
continues to function reasonably well. Consequently, this should
mean that our business will continue to perform. We are focused on
maximising the opportunities in front of us and will continue to
seek to improve on specific areas whilst protecting the profitable
core of the business.
Peter Cowgill
Chairman
16 December 2016
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 2016 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 presentation, recognition and measurement criteria of
International Financial Reporting Standards and International
Financial Reporting Interpretations Committee pronouncements, as
adopted by the European Union.
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 2016 is not prepared, in all material respects, in
accordance with the presentation, recognition and measurement
criteria of International Financial Reporting Standards and
International Financial Reporting Interpretations Committee
pronouncements, as adopted by the European Union, and the AIM Rules
of the London Stock Exchange.
RSM UK Audit LLP
Chartered Accountants
Suite A, 7th Floor
City Gate East
Tollhouse Hill
Nottingham
NG1 5FS
16 December 2016
Consolidated statement of comprehensive income
For the 6 month period ended 30 September 2016
6 month 6 month Year
period ended period ended ended
30 September 30 September 31 March
2016 2015 2016
Note Unaudited Unaudited Audited
As restated
GBP'000 GBP'000 GBP'000
Revenue 2 10,201 10,413 21,369
Cost of sales (3,890) (3,926) (7,730)
Gross profit 6,311 6,487 13,639
Distribution costs (177) (139) (299)
Administrative expenses (5,512) (5,805) (11,925)
Other operating income 14 40 63
Operating profit 3 636 583 1,478
Financial income 6 6 12
Financial expenses (2) (1) (3)
Profit before tax 640 588 1,487
Income tax expense 4 (103) (90) (258)
Profit for the period* 2 537 498 1,229
Earnings per share 6
- Basic (pence per
share) 0.66p 0.61p 1.51p
- Diluted (pence per
share) 0.65p 0.61p 1.49p
*All activities relate to continuing operations and are
attributed 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.
Consolidated statement of financial position
As at 30 September 2016
At At At
30 September 30 September 31 March
2016 2015 2016
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 5 2,124 1,315 2,105
Investment property 99 - 100
Deferred tax assets 184 153 208
2,407 1,468 2,413
Current assets
Inventories 1,785 1,332 1,628
Trade and other receivables 2,530 2,391 2,651
Cash and cash equivalents 1,854 2,166 1,671
6,169 5,889 5,950
Total assets 8,576 7,357 8,363
Capital and reserves
Issued capital 814 814 814
Retained earnings 3,682 2,935 3,361
Total equity attributable
to owners of the parent 4,496 3,749 4,175
Non-current liabilities
Borrowings - finance
leases 11 50 24
Trade and other payables 561 441 640
Provisions - 75 -
572 566 664
Current liabilities
Borrowings - finance
leases 39 52 52
Trade and other payables 2,751 2,652 2,984
Provisions 388 193 240
Current tax liabilities 330 145 248
3,508 3,042 3,524
Total liabilities 4,080 3,608 4,188
Total equity and liabilities 8,576 7,357 8,363
Consolidated statement of changes in equity
For the 6 month period ended 30 September 2016
Total equity
attributable
to owners
Retained of the
Note Issued capital earnings parent
GBP'000 GBP'000 GBP'000
At 31 March 2015 814 3,251 4,065
Profit for the period - 498 498
Equity dividends - (814) (814)
At 30 September 2015 814 2,935 3,749
Profit for the period - 731 731
Equity dividends - (305) (305)
At 31 March 2016 814 3,361 4,175
Profit for the period - 537 537
Equity dividends 7 - (216) (216)
At 30 September 2016 814 3,682 4,496
Consolidated statement of cash flows
For the 6 month period ended 30 September 2016
6 month 6 month Year
period period ended
ended ended 31 March
30 September 30 September 2016
2016 2015 Audited
Note Unaudited Unaudited Total
Total Total GBP'000
GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from operations 8 420 378 1,396
Interest paid (2) (1) (3)
Income tax received 3 256 136
Net cash flows from operating
activities 421 633 1,529
Cash flows from investing
activities
Acquisition of property,
plant and equipment (218) (250) (1,216)
Acquisition of investment
property - - (100)
Proceeds from sale of property,
plant and equipment - 5 5
Interest received 6 6 12
Net cash flows from investing
activities (212) (239) (1,299)
Cash flows from financing
activities
Payment of finance lease
liabilities (26) (24) (50)
Equity dividends paid - (814) (1,119)
Net cash flows from financing
activities (26) (838) (1,169)
Increase/(decrease) in cash
and cash equivalents in
the period 183 (444) (939)
Cash and cash equivalents
at the start of the period 1,671 2,610 2,610
Cash and cash equivalents
at the end of the period 1,854 2,166 1,671
------------- ------------- ---------
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
2016 comprise the Company and its subsidiary undertakings (together
referred to as the "Group").
The Group financial statements for the year ended 31 March 2016
were prepared in accordance with International Financial Reporting
Standards and International Financial Reporting Interpretations
Committee pronouncements as adopted by the European Union, approved
by the Board of Directors on 19 August 2016 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 2016 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 2016 and those
that are expected to be adopted in the financial statements for the
year ending 31 March 2017.
The Group is considering the impact of IFRS 16 'Leases' and IFRS
15 'Revenue from Contracts with Customers', which have been issued
but are not yet effective. The Group does not consider that any
other 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 2016.
A number of reclassifications between revenue, cost of sales and
administrative expenses were made in the consolidated statement of
comprehensive income in the year ended 31 March 2016 which are
considered to better reflect the Group's operations. There was no
impact on reported profits. The comparative numbers for the 6 month
period ended 30 September 2015 have been restated to ensure
comparability with an increase in revenue of GBP267,000 and an
increase in cost of sales of GBP267,000.
2. 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.
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
properties 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.
Notes to the condensed consolidated interim financial statements
(continued)
2. Segment reporting (continued)
Franchising Warehousing Property Consolidated
and Retail
6 month
6 month period
period ended
ended 30 September
30 September 2015
2016 2015 2016 2015 2016 2015 2016 As restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gross sales 5,516 6,490 4,348 4,057 1,503 1,534 11,367 12,081
Inter-segment sales - - (854) (1,275) (312) (393) (1,166) (1,668)
Segment revenue 5,516 6,490 3,494 2,782 1,191 1,141 10,201 10,413
Segment results 496 487 106 89 (5) (58) 597 518
Unallocated income 25 25
Other operating
income 14 40
Operating profit 636 583
Financial income 6 6
Financial expenses (2) (1)
Income tax expense (103) (90)
Profit for the
period 537 498
------------- -------------
3. Operating profit
Operating profit is arrived at after charging/(crediting):
6 month 6 month Year
period ended period ended
30 September ended 31 March
2016 30 September 2016
2015
GBP'000 GBP'000 GBP'000
Release of the deferred (148) - -
consideration 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 253 20 84
(Release of provision)/charge
for impairment of trade
receivables (135) (21) 42
The liquidators of 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.
Two stores and a small warehouse have closed since the period
end and two further locations are anticipated to close within the
next 12 months (due to lease expiry) resulting in a charge to the
provision for vacating properties of GBP253,000 in the period.
Progress continues to be made working with franchisees to
recover historic debts and consequently the provision for
impairment of trade receivables has reduced by GBP135,000 in the
period.
Notes to the condensed consolidated interim financial statements
(continued)
4. Income tax expense
The tax charge accrued in these interim results reflects an
estimated effective tax rate of 16.1% (6 month period ended 30
September 2015: 15.3%, year ended 31 March 2016: 17.4%). This
includes a net credit of GBP36,000 (6 month period ended 30
September 2015: GBP38,000 credit, year ended 31 March 2016:
GBP52,000 credit) which relates to adjustments in respect of prior
periods. Excluding those items, the effective tax rate was 21.7% (6
month period ended 30 September 2015: 21.8%, year ended 31 March
2016: 20.8%), slightly higher than the standard rate of corporation
tax of 20% due to expenses not deductible for tax purposes.
5. Property, plant and equipment
Acquisitions and disposals
During the 6 month period ended 30 September 2016 the Group
acquired assets with a cost of GBP218,000 (6 month period ended 30
September 2015: GBP294,000, year ended 31 March 2016:
GBP1,260,000). Assets with a net book value of GBP82,000 were
disposed of during the 6 month period ended 30 September 2016 (6
month period ended 30 September 2015: GBP4,000, year ended 31 March
2016: GBP69,000), resulting in utilisation of the property
provision of GBP82,000 (6 month period ended 30 September 2015:
profit of GBP1,000, year ended 31 March 2016: loss of GBP2,000 and
utilisation of provisions of GBP62,000). No investment property was
acquired during the period (6 month period ended 30 September 2015:
GBPnil, year ended 31 March 2016: GBP100,000).
6. Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the 6 month
period ended 30 September 2016 was based on the profit attributable
to ordinary shareholders of GBP537,000 (6 month period ended 30
September 2015: GBP498,000, year ended 31 March 2016: GBP1,229,000)
and a weighted average number of ordinary shares outstanding of
81,400,000 for each period.
Diluted earnings per share
The calculation of diluted earnings per share for the 6 month
period ended 30 September 2016 was based on the profit attributable
to ordinary shareholders of GBP537,000 (6 month period ended 30
September 2015: GBP498,000, year ended 31 March 2015: GBP1,229,000)
and a weighted average number of ordinary shares outstanding and
potential ordinary shares during the 6 month period ended 30
September 2016 of 81,994,604 (6 month period ended 30 September
2015: 82,095,901, year ended 31 March 2016: 82,286,571).
7. Equity dividends
6 month 6 month Year
period period ended
ended ended 31 March
30 September 30 September 2016
2016 2015
GBP'000 GBP'000 GBP'000
Special dividend paid
during the period on
ordinary shares of 1.0p
per share - 814 814
Final dividend in respect
of 2015/16 approved during
the period on ordinary
shares of 0.265p per
share (year ended 31
March 2016: GBP203,000
paid during the period
on ordinary shares of
0.25p per share) 216 - 203
Interim dividend in respect
of 2015/16 paid during
the period on ordinary
shares of 0.125p - - 102
216 814 1,119
-------------- -------------- ----------
An interim dividend in respect of 2016/17 of GBP106,000 (2015:
GBP102,000) being 0.13p per share (2015: 0.125p per share) has been
declared but not provided in these financial statements.
Notes to the condensed consolidated interim financial statements
(continued)
8. Cash generated from operations
6 month 6 month Year
period period ended
ended ended 31 March
30 September 30 September 2016
2016 2015
GBP'000 GBP'000 GBP'000
Profit before tax 640 588 1,487
Depreciation and other
non-cash items:
Depreciation of property,
plant and equipment 117 97 208
Depreciation of investment
property 1 - 62
(Profit)/loss on disposal
of property, plant and
equipment - (1) 2
Changes in working capital:
(Increase)/decrease
in inventories (158) 42 (254)
Decrease/(increase)
in trade and other
receivables 121 (28) (288)
(Decrease)/increase
in trade and other payables (527) (335) 196
Increase/(decrease)
in provisions 230 20 (8)
Financial income (6) (6) (12)
Financial expenses 2 1 3
Cash generated from operations 420 378 1,396
-------------- -------------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BLBDDBDBBGLU
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