RNS Number:1213P
United Carpets Group plc
21 July 2005
For immediate release
UNITED CARPETS GROUP plc
Preliminary announcement of results for the year ended 31 March 2005
United Carpets Group plc ("the Group" or "the Company" or "United Carpets"), the
third largest chain of specialist retail carpet and floor covering stores in the
UK, today announces its preliminary results for the year ended 31 March 2005.
Highlights
*Turnover increased by 26% to #15.72m (2004: #12.44m)
*Operating profit before goodwill amortisation increased by 43% to #2.57m
(2004: #1.80m before directors' emoluments of #1.61m)
*Profit before tax pre-exceptional costs rose to #2.76m
*12 new stores added during the year plus 3 since the year end creating a
total of 56 stores
*Strong pipeline of new sites and potential franchisees
*Earnings per share increased to 2.4p (2004: 0.1p)
Paul Eyre, United Carpet's, Chief Executive said:
"These results represent a good trading performance during a time when the
retail environment became increasingly difficult. Following our admission to the
AIM market in February, the Company now has an excellent base from which to meet
its store opening target of 100 stores by March 2008. While the current retail
environment is challenging, we remain wholly confident in the longevity of our
franchise model which continues to attract new franchisees based on the strength
of our brand in northern and central England."
Enquires:
United Carpets Group plc
Paul Eyre, Chief Executive 01709 579 450
Ian Bowness, Finance Director
Seymour Pierce 020 7107 8000
Jonathan Wright
Cardew Group
Tim Robertson 020 7930 0777
Alex Pettifer
Chairman's statement
It gives me great pleasure to announce the first set of results since our
admission to AIM in February 2005. The Company has generated a 26% increase in
turnover and driven operating profits by 43% compared to the previous year
(before exceptional directors' emoluments of #1.61m in 2004). Underpinning the
Company's current and future financial growth is the store opening programme,
and during the period under review 12 new stores were added. While this
programme remains on track, the retail environment has been challenging,
particularly in the early months of 2005 and we along with many other retailers
have been affected by the downturn in discretionary household expenditure.
However, the business fundamentals remain strong and the group remains well
positioned to roll-out its franchise concept.
Financial Review
Total revenue increased by 26% to #15.72m (2004: #12.44m), reflecting the growth
in store numbers during the year. Network sales across the Group increased to
#42.23m (2004: #36.75m).
Like for like sales were down 3% compared to the previous year reflecting the
challenging market particularly towards the end of the financial year. Since
then trading has improved a little despite the tough retail environment with
like for like sales down 1.8% against last year for the 15 weeks since the year
end. Within the like for like sales performance the core floorcoverings business
has achieved a very small like for like increase whilst bed sales have declined
on a like for like basis.
Gross margin has improved from 63.2% to 65.2% which largely reflects the
increased proportion of franchise income to total revenue as the store network
increases. Total overhead costs before goodwill amortisation were #7.89m for the
year, an increase of 27% in comparison to the previous year (before director's
emoluments in 2004) and broadly in line with the growth in store numbers and
turnover. Profit on ordinary activities before taxation, goodwill amortisation
and exceptional item was #2.76m an increase of 54% on the previous year (before
directors' emoluments in 2004).
As reported in our trading statement on 12 April 2005, following the integration
of the various companies which were amalgamated in forming the Group in February
2005, the Board identified some historic issues, principally relating to late
payments by franchisees. Ordinarily this would have resulted in an exceptional
operating expense of #273,000 to provide for doubtful debts. However, reflecting
the historic nature of these issues Mr. P. Eyre and Mrs. D. Grayson have agreed
to underwrite the relevant debtors, thus removing the need for the exceptional
item. The Board is also now confident that all of these historic issues have
been resolved.
The Company successfully raised #1.67m net of expenses at the time of its
admission to the AIM market. As a result the Group's cash position is strong,
with #2.65 million of cash as at 31 March 2005.
Earnings per share increased to 2.4p (2004: 0.1p). As previously indicated the
Board is not recommending the payment of a dividend at this stage in the
Company's development.
Operations Review
The Group operates 56 branded stores across northern and central England. Our
target is to open a further 44 stores over the next three years. With the
exception of 10 corporate stores, the remainder are all franchises operating
under United Carpets' bespoke franchise model, which aims to combine the
advantages of a multiple retailer with the entrepreneurial drive of an
independent. As the Group expands so its economics improve, in particular, from
more cost effective advertising, as well as the ability to leverage the other
benefits of increased scale.
Floor coverings
The majority of Group revenues are derived from the sale of floor coverings,
predominantly carpet, laminate and vinyl flooring through franchised stores and
the Group's own corporate stores. A typical store size is between 5000 and 8000
square feet in a secondary out of town location, often close to a retail park.
The average store holds enough stock to carpet the equivalent of 1250 rooms (or
four football pitches) and has a further 1100 samples to choose from. Our
product offering appeals to the fashion conscious customer who wants to update
and modernise individual rooms at relatively low cost. The broad range of
product offerings includes roll stock, roll-ends, extensive sample area and a
fully stocked laminate department. Each store offers a cash and carry option or
the full estimating, delivery and fitting service.
Carpets remain the Group's primary product with demand for different styles and
colours changing all the time. The rapid growth in demand for laminate flooring
appears to be reversing and our product range has been adjusted in line with our
customers changing requirements.
The Group carries out significant advertising in targeted areas where it has
sufficient critical mass. Selective television advertising in particular has
been very effective for the Group combined with print and radio.
Beds
Beds are sold through the majority of the store network with franchisees earning
a commission on sales. Whilst bed income accounts for approximately 20% of the
Group's turnover, bed sales account for around 11% of total retail sales. The
effect of the general downturn in consumer spending has been more noticeable on
beds due to the higher average purchase price of #250-#300 compared to flooring
of #120.
Store Opening Programme
The Group is progressing well with its store opening programme. Currently, we
have 56 stores clustered around our target areas of northern and central
England, with a further 4 stores primed to open in the coming months. Before
extending the Company beyond its existing parameters we want to ensure that we
have completed the current opportunities to infill where we have gaps in our
current markets. For example we believe there is capacity within our core
Yorkshire market to add at least a further 12 stores, thereby enabling us to
maximise our economies of scale, in particular from television advertising.
In the year ended 31 March 2005, 12 new stores were opened in the following
locations: Fenton, Chester, Leicester, Wolverhampton, Bradford, Urmston,
Liverpool, Batley, Nelson, Warrington, Macclesfield and Northfield (Birmingham).
Three stores have opened in the new financial year in Southport, Huddersfield
and Dudley.
Currently we have a further 10 sites under consideration and 9 potential
franchisees positioned to take on stores. In most instances, the Group matches
sites to franchisees, but we are also able to take on sites without franchisees,
and to run them as corporate stores before selecting suitable franchisees.
People
The Board joins me in thanking all our employees for their hard work during the
year and looks forward to working together in the future.
Outlook
Although the short-term outlook for the flooring market remains challenging, the
Board firmly believes that the Group's robust franchise model will continue to
generate solid returns. Awareness amongst target customers of the United Carpets
brand continues to grow, driven by the store expansion programme and our
increased advertising programme utilising television, radio and the print media.
This not only underpins future sales but also helps us to attract future
franchisees to match with our pipeline of new sites. The opportunity to build a
significant flooring business in our chosen markets remains eminently
achievable.
The Company is in a strong financial position to achieve its objectives
following its listing on AIM in February. Since the year end like for like sales
have held up reasonably in what is acknowledged as a particularly tough trading
environment. Overall the Company is in a good position to expand the United
Carpets concept across northern and central England.
Peter Cowgill
Chairman
Preliminary announcement of results for the year ended 31 March 2005
Consolidated profit and loss account
Results
before
goodwill Goodwill
amortisation amortisation Results
and and before
exceptional exceptional goodwill Goodwill
Note item item 2005 amortisation amortisation 2004
#'000 #'000 #'000 #000 #000 #'000
Turnover 2 15,716 - 15,716 12,440 - 12,440
Cost of (5,466) - (5,466) (4,576) - (4,576)
sales
------- ------- ------- ------- ------- -------
Gross profit 10,250 - 10,250 7,864 - 7,864
Distribution
costs (1,433) - (1,433) (1,921) - (1,921)
Administrative
expenses (6,460) (58) (6,518) (5,904) (24) (5,928)
Other
operating
income 210 - 210 141 - 141
------- ------- ------- ------- ------- -------
Operating
profit 2,567 (58) 2,509 180 (24) 156
Merger
expenses 3 - (61) (61) - - -
Profit on
disposal of
fixed assets 168 - 168 10 - 10
------- ------- ------- ------- ------- -------
Profit on
ordinary
activities
before
interest 2,735 (119) 2,616 190 (24) 166
Interest
receivable 52 - 52 37 - 37
Interest
payable (28) - (28) (54) - (54)
------- ------- ------- ------- ------- -------
Profit on
ordinary
activities
before
taxation 2,759 (119) 2,640 173 (24) 149
Taxation 4 (818) (81)
======= =======
Profit on
ordinary
activities
after
taxation
transferred to
reserves 6 1,822 68
------- -------
Earnings per
share 5
- Basic and
diluted 2.4p 0.1p
======= =======
All amounts relate to continuing activities.
There are no recognised gains or losses other than the profit for both years as
shown above.
The notes on pages 8 to 12 form part of these financial statements.
Preliminary announcement of results for the year ended 31 March 2005
Consolidated balance sheet
Note 2005 2004
#'000 #'000 #'000 #'000
Fixed assets
Intangible assets 333 391
Tangible assets 2,702 1,705
------- -------
3,035 2,096
Current assets
Stocks 1,232 1,025
Debtors 3,925 2,027
Cash at bank and in hand 2,654 1,564
------- -------
7,811 4,616
Creditors: amounts falling
due within one year (5,063) (4,391)
------- -------
Net current assets 2,748 225
------- -------
Total assets less current 5,783 2,321
assets
Creditors: amounts falling due
after more than one year (108) (259)
Provisions for liabilities (74) -
and charges
------- -------
Net assets 5,601 2,062
======= =======
Capital and reserves -
equity
Called up share capital 4,070 3,520
Share premium account 6 1,106 -
Profit and loss account 6 3,535 1,652
Merger reserve 6 (3,110) (3,110)
------- -------
Shareholders' funds 7 5,601 2,062
======= =======
The notes on pages 8 to 12 form part of these financial statements.
Preliminary announcement of results for the year ended 31 March 2005
Consolidated cash flow statement
2005 2004
Note #'000 #'000 #'000 #'000
Net cash inflow from
operating activities 8 1,146 724
Returns on investments
and
servicing of finance
Interest received 52 37
Interest paid (28) (54)
------- -------
Net cash inflow/
(outflow) from
returns
on investments and
servicing of finance 24 (17)
Taxation
Corporation tax
payment (170) (120)
------- -------
(170) (120)
Capital expenditure
Purchase of tangible
fixed assets (1,618) (735)
Sale of tangible fixed
assets 522 23
------- -------
Net cash outflow
from capital expenditure (1,096) (712)
Acquisitions
Purchase of new
subsidiary - (316)
Cash acquired with new
subsidiary - 26
------- -------
- (290)
------- -------
Net cash outflow
before financing (96) (415)
Financing
Capital element of
hire purchase
repayments (137) (38)
Bank loans (635) 30
Shares issued
including premium 1,717 -
------- -------
Net cash inflow/
(outflow) from
financing 945 (8)
------- -------
Increase/(decrease) in
cash 10 849 (423)
======= =======
The notes on pages 8 to 12 form part of these financial statements.
Preliminary announcement of results for the year ended 31 March 2005
Notes to the preliminary announcement
1. Results and accounting policies
The preliminary results have been prepared under the historical cost convention,
in accordance with applicable Accounting Standards in the United Kingdom and
with the group's accounting policies as will be set out in the financial
statements for the year ended 31 March 2005. The preliminary results were
approved by an authorised committee of the Board on 20 July 2005 and are
unaudited.
The financial information contained in this unaudited preliminary announcement
does not constitute statutory accounts as defined by Section 240 of the
Companies Act 1985.
United Carpets Group Plc ("the Company") was incorporated on 1 December 2004
with an authorised share capital of #10 million divided into 100,000,000
ordinary shares of 10p each; of which 500,000 subscriber shares were issued. On
3 February 2005 the shares were subdivided into 5p shares. On 7 February 2005,
70,400,000 ordinary shares were issued by the Company in exchange for the entire
issued share capital of United Carpets (Franchisor) Limited, United Carpets
(Central) Limited, Debrik Investments Limited, Weavers Carpets Limited and
Nottingham Carpet Warehouse Limited. The group reconstruction has been accounted
for in accordance with the principles of merger accounting as set out in
Financial Reporting Standard 6 "Acquisitions and Mergers".
Accordingly, the financial information for the group has been presented as if
United Carpets (Franchisor) Limited, United Carpets (Central) Limited, Debrik
Investments Limited, Weavers Carpets Limited and Nottingham Carpet Warehouse
Limited ("the merged entities") had been owned by United Carpets plc throughout
the current and prior periods. Accordingly, the consolidated financial
statements include the whole of the results of the merged entities for the year
ended 31 March 2005.
The corresponding figures for the previous year include the results of the
merged entities, the assets and liabilities at the previous balance sheet date
and the shares issued by United Carpets Group plc as consideration as if they
had always been in issue. The difference between the nominal value of shares and
the share premium accounts of the merged entities and the nominal value of
shares issued by the Company to acquire the merged entities is taken to
reserves.
Financial information for the year ended 31 March 2004 is derived from the
individual company statutory accounts for that year which have been delivered to
the Registrar of Companies. The auditors reported on those accounts; their
reports were unqualified and did not contain a statement under either Section
237 (2) or Section 237 (3) of the Companies Act 1985. The statutory accounts for
the year ended 31 March 2005 and the auditors' report thereon will be finalised
based on the information in this preliminary announcement and will be delivered
to the Registrar of Companies following the Company's Annual General Meeting.
Preliminary announcement of results for the year ended 31 March 2005
Notes to the preliminary announcement (continued)
2. Segmental analysis
Turnover is wholly attributable to the principal activities of the group and
originates in the United Kingdom. The directors consider it would be
commercially prejudicial to disclose the analysis of turnover of different
classes of business.
3. Exceptional item
2005 2004
#'000 #'000
Merger expenses 61 -
========== =========
4. Taxation on ordinary activities
Analysis of charge in the period
2005 2004
#'000 #'000
Corporation tax
Current year 776 123
Over provision in prior years (58) -
========== =========
718 123
Deferred tax:
Origination and reversal
of timing differences 100 (42)
---------- ---------
Tax on profit on ordinary
activities 818 81
========== =========
5. Basic and diluted earnings per share
The earnings per share has been calculated in accordance with FRS14 'Earnings
per share'. The calculation of the earnings per ordinary share is based on
profits of #1,822,000 (2004: #68,000) and on a weighted average of 74,893,151
(2004: 70,400,000) ordinary shares in issue during the year. The weighted
average share capital for earnings per share calculated on a dilutive basis is
75,222,055 (2004: 70,400,000).
Preliminary announcement of results for the year ended 31 March 2005
Notes to the preliminary announcement (continued)
6. Reserves
Share Profit
premium and loss Merger
account account reserve
#'000 #'000 #'000
At 1 April 2004 - 1,652 (3,110)
Profit for the year - 1,822 -
Issue of shares in the year (net of expenses) 1,167 - -
Transfer of merger expenses (61) 61 -
------- ------- -------
At 31 March 2005 1,106 3,535 (3,110)
======= ======= =======
The merger reserve is the difference between the nominal value of shares issued
in order to acquire the merged entities and the share capital and share premium
account of the merged entities.
7. Reconciliation of movements in equity shareholders' funds
2005 2004
#'000 #'000
Profit for the year 1,822 68
Shares issued at nominal value 550 3,520
Share premium arising on issue (net of expenses) 1,167 -
------- -------
Net increase in shareholders' funds 3,539 3,588
Opening shareholders' funds 2,062 (1,526)
------- -------
Closing shareholders' funds 5,601 2,062
======= =======
Preliminary announcement of results for the year ended 31 March 2005
Notes to the preliminary announcement (continued)
8. Reconciliation of operating profit to net cash inflow from operating
activities
2005 2004
#'000 #'000
Operating profit 2,509 156
Depreciation 335 305
Amortisation 58 24
Merger expenses (61) -
(Increase)/decrease in stock (207) 408
(Increase)/decrease in debtors (1,542) 56
Increase/(decrease) in creditors 54 (225)
------- -------
1,146 724
======= =======
9. Analysis of changes in net funds
Other non
cash
2004 Cashflow changes 2005
#'000 #'000 #'000 #'000
Debt due within one year
Bank and cash 1,564 1,090 - 2,654
Bank overdraft - (241) - (241)
------- ------- ------- -------
1,564 849 - 2,413
Debt due in more than one year
Bank loans (583) 552 - (31)
Hire purchase contracts (76) 76 (74) (74)
Debt due after one year - - - -
Bank loans (83) 83 - -
Obligations under hire purchase
contracts (176) 61 6 (109)
------- ------- ------- -------
646 1,621 (68) 2,199
======= ======= ======= =======
Preliminary announcement of results for the year ended 31 March 2005
Notes to the preliminary announcement (continued)
10. Reconciliation of net cash flow to movement in net debt
2005 2004
#'000 #'000
Increase/(decrease) in cash in the year 849 (423)
Cash outflow from hire purchase financing 137 38
Cash outflow/(inflow) from bank loans 635 (30)
------- -------
Change in net debt resulting from cashflows 1,621 (415)
New hire purchase contracts (68) (236)
------- -------
Movement in net funds/(debt) in the year 1,553 (651)
Net funds at start of year 646 1,297
------- -------
Net funds at end of year 2,199 646
======= =======
This information is provided by RNS
The company news service from the London Stock Exchange
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