RNS Number:6302G
Home Entertainment Corporation PLC
27 January 2003
Monday, 27 January 2003
Interim statement for the 28 weeks ended 14 December 2002
Financial highlights (figures in #000s)
28 weeks ended 28 weeks ended 52 weeks ended
14.12.02 15.12.01 1/6/02
(Unaudited) (Unaudited) (Audited)
Turnover 66,222 56,244 + 17.7% 103,038
Operating profit before exceptional costs * 3,914 3,519 + 11.2% 5,411
Pre-tax profit after exceptional costs * 3,905 2,843 + 37.4% 4,727
Earnings per share (pence):
- Adjusted 13.9 12.5 + 11.2% 19.1
- Basic 13.9 7.8 + 78.2% 14.4
Dividend per share (pence) 2.1 1.9 +10.5% 5.7
* Home Entertainment Corporation has continued to
achieve satisfactory organic growth in competitive market conditions.
* Buoyant market for Digital Versatile Discs ("DVDs") with Home
Entertainment Corporation achieving sales growth in games software.
* Choices Video stores rental and total sales in the period showed
like-for-like increases of 8.8% and 12.5% respectively.
* Strong positive cash flow of #1,985,000, after investment in store
openings and central support services, during the period.
"During the four weeks ended 11th January 2003 sales in Choices stores remained
buoyant and overall sales grew by 18% compared with the previous year. Choices
stores achieved like-for-like growth of 8.8%. Subject to favourable weather
conditions in the crucial Easter and Whitsun school holidays, and positive
consumer spending trends, Home Entertainment Corporation is well positioned to
continue its record of consistent growth."
Iain Muspratt (Chairman)
For further information contacts
Simon Bloomfield, Bankside Consultants: 0207 444 4140 (office) or 07771 758517
(mobile)
Full interim statement follows.
Chairman's Statement
I am pleased to report that Home Entertainment Corporation achieved satisfactory
results for the 28 weeks ended 14th December 2002, in competitive market
conditions.
Results
Sales for the period grew by 17.7 per cent to #66.2 million compared to #56.2
million for the same period last year. Sales increased across all our
operations, with a significant part of the growth coming from a buoyant market
for Digital Versatile Discs ("DVDs") net of a reduction in VHS rental and sales
activity. On a like-for-like basis, Choices Video stores increased rental and
total sales in the period by 8.8 per cent and 12.5 per cent respectively.
Profit on ordinary activities before exceptional charges and taxation was #3.90
million (2001: #3.48 million), slightly exceeding our expectations but
reflecting the impact of the World Cup on rental activities early in the period
and the impact on margins of the anticipated further expansion of sell-thru
activities.
Basic earnings per share were 13.9 pence, compared to 7.8 pence for the prior
year period including exceptional costs and 12.5 pence excluding exceptional
costs.
Positive cash flow for the period was just under #2 million, after a 20%
increase in investment in new stores and central support services, to #3.1
million.
Dividend
The Board has declared an interim dividend of 2.1 pence (2001: 1.9 pence) per
share, to be paid on 16th April 2003 to shareholders on the register at 14th
February 2003.
Review of Trading
Sales have grown substantially during the period despite a poor release schedule
in the first twenty weeks. In the last eight weeks of the period Home
Entertainment Corporation benefited from good title releases, including 'A
Beautiful Mind', 'Blade 2', 'Monsters Inc', 'Ocean's 11', 'Star Wars', '
Spiderman' and 'Minority Report', and further benefited from a substantial
increase in sell-thru business. At the same time, the company continued to
experience a real increase in demand for rental.
Choices Video
Choices Video benefited from the growth in demand for DVD rental and sales
resulting from the transition by consumers from VHS to DVD which occurred at a
faster than anticipated rate. Overall, sales of games increased by 12.6%,
reflecting growth in demand for Sony Playstation 2 and X-Box computer games
offsetting a decline in console sales. During the period, twelve new Choices
Video stores were opened and one small store was closed.
VBO
As expected, the transition from VHS to DVD by their customers is taking longer
at Video Box Office outlets where video rentals on a like-for-like basis were
down for the period but this was offset by the expansion of sell-thru.
Choices Direct
Choices Direct experienced profitable sales growth, in mail order and
fulfilment, as a result of strong Christmas demand. Like-for-like sales growth
for the period was 20 per cent.
Mosaic Entertainment
Mosaic Entertainment released fewer titles in the period but will benefit from
increased activity during the second half.
Christmas Trading
During the four weeks ended 11th January 2003 sales in Choices stores remained
buoyant and overall sales grew by 18% compared with the previous year. Choices
stores achieved like-for-like growth of 8.8%.
Outlook
As these results demonstrate, Home Entertainment's broad product offering has
provided a resilient business performance. Historically, we have also benefited
from the consumer's preference to rent when confidence is low.
Demand for DVD sell-thru and rental remains strong, although consumer spending
currently reflects slightly more caution than it did in the early run up to
Christmas.
Key film releases for VHS and DVD in the second half of the year include '
Signs', 'Eight Legged Freaks', 'Road to Perdition', 'My Big Fat Greek Wedding',
'The Guru', 'Red Dragon' and possibly 'Harry Potter and the Chamber of Secrets'.
The transition to DVD is expected to benefit further all our operations well
into the next financial year.
We plan to open eleven new Choices Video stores during the second half and to
invest in further developments of our operating and logistics systems.
Subject to favourable weather conditions in the crucial Easter and Whitsun
school holidays, and positive consumer spending trends, Home Entertainment
Corporation is well positioned to continue its record of consistent growth.
Iain Muspratt
27th January 2003
Profit and Loss Account
for the 28 weeks ended 14th December 2002
Note 28 weeks 28 weeks 52 weeks
ended ended ended
14.12.02 15.12.01 01.06.02
(Unaudited) (Unaudited) (Audited)
#000 #000 #000
Turnover 2 66,222 56,244 103,038
Operating Profit Before Exceptional Costs 3,914 3,519 5,411
Exceptional Costs - Costs of flotation (639) (639)
-
Operating Profit 3,914 2,880 4,772
Net Interest Payable (37) (45)
(9)
Profit on Ordinary Activities Before Tax 3,905 2,843 4,727
Taxation 3 (1,406) (1,446) (2,157)
Profit for the Period 2,499 1,397 2,570
Dividends 4 (378) (408) (1,047)
Profit Transferred to Reserves 2,121 989 1,523
========= ========= =======
Earnings Per Share: 5 13.9p 12.5p 19.1p
Adjusted Basic (excluding Exceptional Costs and
underprovision in respect of Prior Periods Taxation)
Basic 5 13.9p 7.8p 14.4p
Diluted 5 13.3p 7.5p 13.9p
Dividends per Ordinary Share 2.1p 1.9p 5.7p
Balance Sheet
As at 14th December 2002
14.12.02 15.12.01 01.06.02
(Unaudited) (Unaudited) (Audited)
#000 #000 #000
Fixed Assets
Tangible Assets 12,273 10,711 11,521
Current Assets
Stocks 13,285 10,966 9,672
Debtors 13,449 13,248 5,366
Cash 3,252 2,659 1,267
29,986 26,873 16,305
Creditors: (27,259) (25,382) (14,947)
Amounts Falling Due Within One Year
Net Current Assets 2,727 1,491 1,358
Total Assets Less Current Liabilities 15,000 12,202 12,879
Deferred Taxation (166) (109) (166)
Net Assets 14,834 12,093 12,713
========= ========= =======
Capital and Reserves
Called Up Share Capital 901 897 901
Share Premium Account 909 827 909
Other Reserves 1,061 1,061 1,061
Profit and Loss Account 11,963 9,308 9,842
Equity Shareholders' Funds 14,834 12,093 12,713
========= ========= =======
Cash Flow Statement
for the 28 weeks ended 14th December 2002
Note 28 weeks 28 weeks 52 weeks
ended 14.12.02 ended ended 01.06.02
(Unaudited) 15.12.01 (Audited)
#000 (Unaudited) #000
#000
Net Cash Inflow from Operating Activities 6 6,604 6,058 9,335
Returns on Investments and Servicing of Finance
Interest Paid (9) (37) (45)
Non-Equity Dividends Paid - (243) (243)
Net Cash Outflow from Returns on Investments and
Servicing of Finance (9) (280) (288)
Taxation
Corporation Tax Paid (793) (765) (2,394)
Capital Expenditure
Proceeds from Sale of Tangible Fixed Assets - - 18
Payments to Acquire Tangible Fixed Assets (3,133) (2,598) (5,393)
(3,133) (2,598) (5,375)
Equity Dividends Paid (684) (310) (651)
Net Cash Inflow Before Financing 1,985 2,105 627
Financing
Issue of Ordinary Share Capital 30 116
-
Increase in Cash 1,985 2,135 743
========= ========== ========
Notes to the accounts for the 28 weeks ended 14th December 2002
1 Basis of preparation
The interim accounts cover the 28 weeks to 14th December 2002. They have been prepared under the accounting
policies set out in the Company's statutory accounts for the 52 weeks to 1st June 2002, and are unaudited.
The taxation charge is calculated by applying the forecast annual tax rate to the profit for the period,
adjusting for the tax effect of exceptional items.
The financial information does not constitute statutory accounts as defined in Section 240 of the Companies
Act 1985. The financial information for the full preceding 52 weeks is based on statutory accounts for the
52 weeks ended 1st June 2002 which have been delivered to the Registrar of Companies. These statutory accounts
were audited by Ernst & Young LLP and their report thereon was unqualified.
28 weeks 28 weeks 52 weeks
ended ended ended
14.12.02 15.12.01 01.06.02
(Unaudited) (Unaudited) (Audited)
#000 #000 #000
2 Turnover
Rental 29,397 27,129 51,414
Sales - Games 8,780 7,798 16,049
Sales - Other 28,045 21,317
35,575
66,222 56,244 103,038
============ =========== ==========
Turnover comprised income from the rental of pre-recorded video cassettes,
digital versatile discs and computer games and sale of pre-recorded video
cassettes, digital versatile discs, computer games, mobile telephones and "
top-ups" and other related products.
28 weeks 28 weeks 52 weeks
ended ended ended 01.06.02
14.12.02 15.12.01 (Audited)
(Unaudited) (Unaudited) #000
#000 #000
3 Taxation
Current taxation:
Corporation tax before exceptional items 1,406 1,253 1,933
On exceptional items - -
-
Corporation tax 1,406 1,253 1,933
Under-provisions in respect of prior periods - 193 167
1,406 1,446 2,100
Total deferred tax - - 57
Tax on profit on ordinary activities 1,406 1,446 2,157
========= ========= =======
28 weeks 28 weeks 52 weeks
ended 14.12.02 ended ended 01.06.02
(Unaudited) 15.12.01 (Audited)
#000 (Unaudited) #000
#000
4 Dividends
Paid prior to flotation - 67 22
Interim dividend - proposed 378 341 341
Final dividend 684
- -
378 408 1,047
========= ========== ==========
5 Earnings Per Share
The earnings and number of shares in issue or to be issued used in calculating
the earnings and diluted earnings per share were as follows:
28 weeks 28 weeks 52 weeks
ended ended ended
14.12.02 15.12.01 01.06.02
(Unaudited) (Unaudited) (Audited)
Diluted Basic Diluted Basic Diluted Basic
Earnings Earnings Earnings Earnings Earnings Earnings
Earnings #2,498,970 #2,498,970 #1,397,000 #1,397,000 #2,570,438 #2,570,438
Weighted Average Number of 18,751,167 18,015,975 18,361,250 17,861,414 18,451,083 17,890,284
Shares
Earnings per Share 13.3p 13.9p 7.5p 7.8p 13.9p 14.4p
Adjusted Earnings per 13.3p 13.9p 12.1p 12.5p 18.5p 19.1p
Share
========= ========= ========= ========= ========= =========
Calculation of number of
shares:
At 01/06/02 18,015,975 18,015,975 17,791,852 17,791,852 17,791,852 17,791,852
Shares Issued - - 139,123 139,123 224,123 224,123
Dilutive Effect of Share 975,150 713,650 633,900
Option Schemes - - -
18,991,125 18,015,975 18,644,625 17,930,975 18,649,875 18,015,975
========= ========= ========= ========= ========= =========
Adjusted earnings per share for the 28 weeks ended 15th December 2001 and for
the 52 weeks ended 1st June 2002 excluded the effects of exceptional costs of
#639,000 and underprovision in respect of prior periods taxation of #193,000 and
is presented in order to show the true underlying performance of the Company.
6 Reconciliation of Operating Profits to Net Cash Flow from Operating
Activities
28 weeks 28 weeks 52 weeks
ended 14.12.02 ended ended 01.06.02
(Unaudited) 15.12.01 (Audited)
#000 (Unaudited) #000
#000
Operating profit before exceptional costs 3,914 3,519 5,411
Costs of flotation (639) (639)
-
Operating profit 3,914 2,880 4,772
Depreciation 2,380 2,136 4,108
Increase in stocks (3,613) (2,765) (1,471)
Increase in debtors (8,082) (8,179) (297)
Increase in creditors 12,005 11,986 2,223
Net cash inflow from operating activities 6,604 6,058 9,335
=========== ========== ========
The cash outflows during the period relating to the costs of flotation totalled
#nil, compared to #386,000 for the 28 weeks ended 15th December 2001 and
#639,000 for the 52 weeks ended 1st June 2002.
Independent Review Report to Home Entertainment Corporation PLC
We have been instructed by the Company to review the financial information for
the 28 weeks ended 14th December 2002 which comprises the Profit and Loss
Account, Balance Sheet, Cash Flow Statement and the related notes 1 to 6. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies with
the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the Interim Report as required by the AIM Rules
issued by the London Stock Exchange.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making
enquiries of management and applying analytical procedures to the financial
information and underlying financial data and, based thereon, assessing whether
the accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 28 weeks ended
14th December 2002.
Ernst & Young LLP
Cambridge
27th January 2003
Trading Divisions
VBO Video Box Office provides a service throughout the United Kingdom to convenience stores
and other established retailers, enabling them to add video and DVD rental and sales
and computer games software sales to the range of products offered to their customers.
www.vbo.co.uk.
Choices Video Operated through 198 (December 2001 - 179) company owned retail outlets in England and
Wales, offering videos, DVDs and computer games rental and sales, games consoles for
sale, the sales of 'SIM Free' mobile telephones and 'Top-Ups' (including "E-Top-Ups")
and ice cream and confectionery. www.choicesvideo.co.uk.
Choices Direct Choices Direct offers videos, DVDs and talking tapes released in the United Kingdom for
sale through mail order. Customers can access the Choices Direct service by mail, by
telephone or over the Internet via Choices Direct's website at www.choicesdirect.co.uk.
Choices Direct also manages and fulfils video and DVD sales for many of the large mail
order catalogue companies in the United Kingdom, including GUS, Freemans, Littlewoods
and Book Club Associates. The service offered is comprehensive, ranging from title
selection advice and compilation, through to fulfilment of customers' orders.
Mosaic Entertainment Mosaic Entertainment invests in and acquires the rights to a range of feature films and
television programmes and then releases them to the general consumer video, DVD and TV
markets in the United Kingdom and the Republic of Ireland (including arm's length sales
to other divisions of the Company).
www.mosaic-entertainment.co.uk.
Copies of the interim report are available free of charge from:
* our corporate website - www.hecplc.com
* the registered office of the Company (19 - 24
Manasty Road, Orton Southgate, Peterborough,
PE2 6UP) on any week day
* the offices of the Company's Nominated Advisers,
Teather & Greenwood Limited (Beaufort House,
15 St Botolph Street, London, EC3A 7QR)
from the date of this announcement and for a period of 1 month thereafter.
This information is provided by RNS
The company news service from the London Stock Exchange
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