TIDMUCG
RNS Number : 2885Z
United Carpets Group plc
14 December 2017
14 December 2017
UNITED CARPETS GROUP PLC
Interim results for the 6 month period ended 30 September
2017
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 2017.
Key points
-- Like for like sales* increased by 2.9%
-- Revenue for the period was GBP9.97m (2016: GBP10.20m)
-- Profit before tax was GBP589,000 (2016: GBP640,000)
-- Earnings per share were 0.57p (2016: 0.66p)
-- Store numbers increased from 57 to 58
-- Average number of corporate stores reduced compared to the same period in the prior year
-- Special dividend of 1.0p per share paid 25 May 2017
-- Interim dividend of 0.135p per share (2016: 0.13p) payable on 19 January 2018
-- Having paid another special dividend of GBP0.8m in May 2017,
net funds were GBP1.64m (2016: GBP1.80m)
-- Like for like sales* since the period end show further
improvement on the first half performance
* Like for like sales are defined in the financial review
Paul Eyre, Chief Executive, said:
"Delivering a good like for like performance is a creditable
result and since the half-year like for like sales have improved
further. Investment to support the Group's online activities and
Beds operation reduced profits slightly in the first half although
this is being offset by operational actions that are already
beginning to bear fruit in the second half. As with other markets
there is fragility to the current retail environment which
undoubtedly reflects the general uncertainty across the economic
and political spectrums. We remain focused on our areas of
expertise which ultimately all lead to delivering excellent quality
and value for money to our customers."
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) 020 7894 7000
Chairman's statement
The unsettled economic and political environment continued
during the 6 month period to 30 September 2017 presenting further
challenges to retailers generally. Trading during the first quarter
was more difficult but improved during the summer months with like
for like sales up 2.9% for the half year. The growth of online and
mobile shopping is widely reported to be impacting on retail
footfall generally; however actions taken to improve customer
service and provide a superior offer have been successful in
driving conversion rates and average transaction values which have
more than offset any reductions in customer visits during the
period.
Our focus on shaping a network of stores which meet or exceed
our performance criteria has largely been completed. A small number
of borderline stores have responded well to actions taken to
improve performance and are showing encouraging promise for the
future with only one or two exceptions. Store numbers have been
very stable during the period under review, with one store opening
which made a good start. Consequently, we ended the period with 58
stores.
The small reduction in operating profit principally reflects
greater investment to support the Group's online activities and
Beds operation.
The increase in interest rates has not had a discernible affect
on the business but taken together with the ongoing debate around
Brexit and domestic political instabilities it is hard to imagine
consumer confidence increasing strongly in the near term. That
said, our business is profitable, generating cash and achieving
creditable like for like sales gains which together with the
Group's virtually debt free, stable financial base and strong
market positioning gives us confidence in the outlook for the
business.
Financial review
Revenue, which as in previous years includes marketing and
rental costs incurred by the Group and recharged to franchisees,
was GBP9.97m (2016: GBP10.20m). The slight reduction in revenue
reflects the small decrease in the average number of corporate
stores during the period compared to the corresponding period in
the prior year.
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 2.9%, a good
performance in the current economic climate.
Gross margin was 62.2% compared to 61.9% in the same period in
2016 reflecting a small reduction in the average number of
corporate stores offset by a slight increase in the proportion of
total sales derived from the Warehousing division and some
improvement in underlying gross margins.
Combined distribution costs and administrative expenses were
slightly lower than in the same period in the prior year as a
result of the small reduction in the average number of corporate
stores. Distribution costs and administrative expenses were 56.4%
of revenue, a small increase from 55.8% in the same period in the
prior year reflecting recruitment in the second half of the prior
year to support the Group's growing online presence and Beds
operations.
Operating profit was GBP588,000 (2016: GBP636,000) and profit
before tax was GBP589,000 (2016: GBP640,000). As a result basic
earnings per share was 0.57p (2016: 0.66p).
Having paid a special dividend of GBP814k on 25 May 2017, net
funds were GBP1.64m at 30 September 2017 (2016: GBP1.80m).
Dividend
The Board is pleased to announce an interim dividend of 0.135
pence per share to be paid on 19 January 2018 to all shareholders
on the register at the close of business on 5 January 2018. The
ex-dividend date will be on 4 January 2018.
Operations review
At 31 March 2017, there were 57 stores of which 50 were
franchised and 7 were corporate stores. During the period under
review, one store changed franchisee and the Group opened a
corporate store. As a result, at the half year the Group had 58
stores of which 50 were franchised and 8 were corporate stores.
While there was only one store opening in the period, the Group
remains focused on achieving a small number of controlled, new
openings. The relatively strong performance of more recent openings
in slightly higher profile locations than has traditionally been
the case encourages the Board to continue to seek to open new
stores in similar locations.
United Carpets is a well known and trusted brand in its core
geographic markets with a reputation for delivering great quality
products in combination with offering excellent value for money.
This core message is consistently re-enforced through the Group's
marketing and advertising campaigns across print, radio and
television. During the period, the Group trialled different
patterns of advertising campaigns and has been monitoring the
impact closely with the aim of further maximising the effectiveness
of the Group's advertising spend.
Chairman's statement (continued)
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 2.9% increase in like for like sales. While our core
flooring offers have remained consistent, emerging trends in deep
pile, luxury soft carpets and premium engineered luxury vinyl
planks and tiles have proven successful for the Group. In
September, we re-launched our laminate flooring section and
anticipate further growth in that area.
Our interest free credit offer provides increased flexibility to
our customers and tends to lead to a significantly higher average
transaction value. Credit risk is managed externally and therefore
there is no material bad debt exposure for the Group. Our focus on
customer service was reinforced with a further round of
comprehensive sales training for our staff during the summer and
the calibre of the franchise and corporate store management teams
continues to grow and develop.
Beds are sold in over 80% of the store network and the
combination of flooring and beds is a natural fit which is firmly
established across the business. After several years of very strong
growth, bed like for like sales in the period under review improved
at a more modest rate of 2.1%. Over recent years, bed sales have
grown as a proportion of total store sales but still only account
for just over 8% of that figure. Further modest investment in the
Beds' departments across the store network is currently underway to
underpin the successes achieved to date and sustain further growth
into the future.
Our United Carpets transactional website supports the store
network, passing the benefit of the sale to the store nearest to
the customer. The volume of sample requests continues to grow and
this augers well for the future of this additional revenue stream.
Our customer service centre supports our online activities and Beds
home delivery service seven days a week with late night week day
availability earning our website its 5 Star Excellent Trustpilot
rating. We continue to seek new ways to develop our ability to
service the growth in online and mobile retailing.
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. This
part of the business was not intended to be a profit centre for the
Group but rather a commercial advantage for the store network,
which it has proved to be. Additional costs to better support the
service to the store network resulted in the Warehousing division
incurring a small loss in the period under review and actions have
already been taken to improve Warehousing margins in the second
half.
Property
The property division leases properties from third parties and
sublets those properties to the store network.
People
Retail is a highly competitive market and a large part of the
success achieved is down to the efforts of those involved. On
behalf of the Board I would like to thank all franchisees,
employees, suppliers and other stakeholders for their hard work and
enthusiasm during this period and I look forward to completing this
year successfully.
Outlook
Trading in October was similar to the first half before
improving strongly in November. Like for like sales for the 10
weeks since the period end to 7 December 2017 show further
improvement on the first half performance.
We have started the lead up to Christmas well, which places the
Group in a good position for the year. The market remains
unpredictable and so our focus will continue to be on protecting
our position through maintaining margins and focusing on our
delivery of quality and value to our customers. We do see
incremental opportunities to expand the business looking ahead into
2018 through the addition of new stores and development of new
trading formats but fundamentally the focus is on good execution
across our existing business.
Peter Cowgill
Chairman
14 December 2017
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 2017 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 2017 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
14 December 2017
Consolidated statement of comprehensive income
For the 6 month period ended 30 September 2017
6 month 6 month Year
period period ended
ended ended 31 March
30 September 30 September 2017
Note 2017 2016 Audited
Unaudited Unaudited GBP'000
GBP'000 GBP'000
Revenue 2 9,972 10,201 21,192
Cost of sales (3,769) (3,890) (8,231)
Gross profit 6,203 6,311 12,961
Distribution costs (193) (177) (384)
Administrative expenses (5,433) (5,512) (11,085)
Other operating income 11 14 27
Operating profit 3 588 636 1,519
Financial income 4 6 11
Financial expenses (3) (2) (3)
Profit before tax 589 640 1,527
Income tax expense 4 (121) (103) (243)
Profit for the period* 2 468 537 1,284
Earnings per share 6
- Basic (pence per share) 0.57p 0.66p 1.58p
- Diluted (pence per share) 0.57p 0.65p 1.57p
*All activities relate to continuing operations and are
attributable to the owners of the parent.
There were no other recognised gains and losses for the current
period other than shown above and therefore no separate section of
other comprehensive income has been presented.
Consolidated statement of financial position
As at 30 September 2017
At At At
30 September 30 September 31 March
2017 2016 2017
Note Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Non-current assets
Intangible assets - software 142 - -
Property, plant and equipment 5 2,178 2,124 2,017
Investment property 96 99 97
Deferred tax assets 128 184 184
2,544 2,407 2,298
Current assets
Inventories 1,965 1,785 1,721
Trade and other receivables 2,293 2,530 1,836
Cash and cash equivalents 1,648 1,854 2,621
5,906 6,169 6,178
Total assets 8,450 8,576 8,476
Capital and reserves
Issued capital 814 814 814
Retained earnings 3,754 3,682 4,323
Total equity attributable
to owners of the parent 4,568 4,496 5,137
Non-current liabilities
Borrowings - finance leases - 11 3
Trade and other payables 467 561 519
467 572 522
Current liabilities
Borrowings - finance leases 10 39 20
Trade and other payables 2,951 2,751 2,406
Provisions 151 388 156
Current tax liabilities 303 330 235
3,415 3,508 2,817
Total liabilities 3,882 4,080 3,339
Total equity and liabilities 8,450 8,576 8,476
Consolidated statement of changes in equity
For the 6 month period ended 30 September 2017
Total equity
attributable
to owners
Issued Retained of the
Note capital earnings parent
GBP'000 GBP'000 GBP'000
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
Profit for the period - 747 747
Equity dividends 7 - (106) (106)
At 31 March 2017 814 4,323 5,137
Profit for the period - 468 468
Equity dividends 7 - (1,037) (1,037)
At 30 September 2017 814 3,754 4,568
Consolidated statement of cash flows
For the 6 month period ended 30 September 2017
6 month 6 month Year
period period ended
ended ended 31 March
30 September 30 September 2017
2017 2016 Audited
Note Unaudited Unaudited GBP'000
GBP'000 GBP'000
Cash flows from operating
activities
Cash generated from operations 8 267 420 1,986
Interest paid (3) (2) (3)
Income tax received/(paid) 3 3 (232)
Net cash flows from operating
activities 267 421 1,751
Cash flows from investing
activities
Acquisition of property,
plant and equipment (275) (218) (437)
Acquisition of intangible
assets (142) - -
Interest received 4 6 11
Net cash flows from investing
activities (413) (212) (426)
Cash flows from financing
activities
Payment of finance lease
liabilities (13) (26) (53)
Equity dividends paid (814) - (322)
Net cash flows from financing
activities (827) (26) (375)
(Decrease)/increase in cash
and cash equivalents in the
period (973) 183 950
Cash and cash equivalents
at the start of the period 2,621 1,671 1,671
Cash and cash equivalents
at the end of the period 1,648 1,854 2,621
------------- ------------- ---------
Notes to the condensed consolidated interim financial
statements
1. Basis of preparation
United Carpets Group plc (the "Company") is a public company
incorporated in England and Wales. The condensed consolidated
interim financial statements of the Company for the 6 month period
ended 30 September 2017 comprise the Company and its subsidiary
undertakings (together referred to as the "Group").
The Group financial statements for the year ended 31 March 2017
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 23 August 2017 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 2017 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 2017 and those
that are expected to be adopted in the financial statements for the
year ending 31 March 2018.
The Group is considering the impact of IFRS 16 'Leases', as this
will have the most significant impact on the Group of the standards
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 2017.
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.
Unallocated income includes rent receivable from investment
property.
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
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 5,348 5,516 4,182 4,348 1,480 1,503 11,010 11,367
Inter-segment sales - - (712) (854) (326) (312) (1,038) (1,166)
Segment revenue 5,348 5,516 3,470 3,494 1,154 1,191 9,972 10,201
Segment results 555 496 (14) 106 8 (5) 549 597
Unallocated income 28 25
Other operating
income 11 14
Operating profit 588 636
Financial income 4 6
Financial expenses (3) (2)
Income tax expense (121) (103)
Profit for the
period 468 537
------------- -------------
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
2017 30 September 2017
2016
GBP'000 GBP'000 GBP'000
Release of the deferred
consideration creditor relating
to the acquisition of the
trade, assets and certain
liabilities of UNCN Realisations
2012 Limited (formerly United
Carpets (Northern) Limited) - (148) (148)
Provision for the estimated
costs associated with vacating
properties - 253 206
Release of provision for
impairment of trade receivables (50) (135) (132)
The Directors considered that the provision previously held in
respect of deferred consideration was no longer required and this
was released in the comparative period.
No stores were vacated during the period and the existing
provision for the estimated costs associated with vacating
properties was considered adequate.
Progress continues to be made working with franchisees to
recover historic debts resulting in a release of provision for
impairment of trade receivables of GBP50,000 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 20.5% (6 month period ended 30
September 2016: 16.1%, year ended 31 March 2017: 15.9%). This
includes a net credit of GBPNil (6 month period ended 30 September
2016: GBP36,000 credit, year ended 31 March 2017: GBP60,000 credit)
which relates to adjustments in respect of prior periods. Excluding
those items, the effective tax rate was 20.5% (6 month period ended
30 September 2016: 21.7%, year ended 31 March 2017: 19.8%),
slightly higher than the standard rate of corporation tax of 19%
due to expenses not deductible for tax purposes.
5. Property, plant and equipment
Acquisitions and disposals
During the 6 month period ended 30 September 2017 the Group
acquired assets with a cost of GBP275,000 (6 month period ended 30
September 2016: GBP218,000, year ended 31 March 2017: GBP437,000).
Assets with a net book value of GBPNil were disposed of during the
6 month period ended 30 September 2017 (6 month period ended 30
September 2016: GBP82,000, year ended 31 March 2017: GBP304,000),
resulting in utilisation of the property provision of GBPNil (6
month period ended 30 September 2016: utilisation of provision of
GBP82,000, year ended 31 March 2017: utilisation of provisions of
GBP304,000).
6. Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the 6 month
period ended 30 September 2017 was based on the profit attributable
to ordinary shareholders of GBP468,000 (6 month period ended 30
September 2016: GBP537,000, year ended 31 March 2017: GBP1,284,000)
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 2017 was based on the profit attributable
to ordinary shareholders of GBP468,000 (6 month period ended 30
September 2016: GBP537,000, year ended 31 March 2017: GBP1,284,000)
and a weighted average number of ordinary shares outstanding and
potential ordinary shares during the 6 month period ended 30
September 2017 of 81,808,784 (6 month period ended 30 September
2016: 81,994,604, year ended 31 March 2017: 81,784,987).
7. Equity dividends
6 month 6 month Year
period period ended
ended ended 31 March
30 September 30 September 2017
2017 2016
GBP'000 GBP'000 GBP'000
Final dividend in respect
of 2015/16 approved/paid
during the period on ordinary
shares of 0.265p per share - 216 216
Interim dividend in respect
of 2016/17 paid during
the period on ordinary
shares of 0.13p - - 106
Special dividend paid during 814 - -
the period on ordinary
shares of 1.0p per share
Final dividend in respect 223 - -
of 2016/17 approved during
the period on ordinary
shares of 0.275p per share,
paid on 12 October 2017
-------------- -------------- ----------
1,037 216 322
-------------- -------------- ----------
An interim dividend in respect of 2017/18 of GBP110,000 (2016:
GBP106,000) being 0.135p per share (2016: 0.13p 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 2017
2017 2016
GBP'000 GBP'000 GBP'000
Profit before tax 589 640 1,527
Depreciation and other
non-cash items:
Depreciation of property,
plant and equipment 114 117 221
Impairment of property,
plant and equipment - - 304
Depreciation of investment
property 1 1 3
Changes in working capital:
Increase in inventories (244) (158) (93)
(Increase)/decrease
in trade and other
receivables (457) 121 815
Increase/(decrease)
in trade and other payables 270 (527) (699)
(Decrease)/increase
in provisions (5) 230 (84)
Financial income (4) (6) (11)
Financial expenses 3 2 3
Cash generated from operations 267 420 1,986
--------------------------- -------------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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