RNS Number:6609O
United Carpets Group plc
28 December 2006
For immediate release
28 December 2006
UNITED CARPETS GROUP plc
Interim announcement of results for the period ended 30 September 2006
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 interim results for the period ended 30 September 2006.
Highlights
* Turnover increased by 17.4% to #8.97m (2005: #7.64m)
* Like for like sales up 11.6% against the prior year
* Adjusted operating profit up 30.3% to #0.5m*
* Profit before tax up 6.8% to #0.4m
* Earnings per share up 13.3% to 0.34p
* Increase in marketing activities and appointment of a new Retail
Operations Director
* 60 stores in Northern and Central England
* Like for like sales since the period end up 13.0%
* Adjusted operating profit is stated before amortisation and FRS20 share-based
payment charges
Paul Eyre, Chief Executive, said:
"The Group has performed well during this trading period. We have introduced a
number of new franchisees into the business, which together with a slightly
improved trading environment has lifted the Group's overall performance."
Enquiries:
United Carpets Group plc
Paul Eyre, Chief Executive
Ian Bowness, Finance Director 01709 579 450
Cardew Group
Tim Robertson 020 7930 0777/
William Scott-Gall 07900 927 650
Chairman's statement
I am pleased to announce United Carpets Group's interim results for the period
ended 30 September 2006. This has been a good trading period for the Group and
our decision to slow down the new store opening programme and focus instead on
maximising revenues from our existing stores has proved to be the right
strategy. We began the financial year with 60 stores and, whilst the total
number now trading is unchanged, we have addressed the poorer performing stores
by either changing the existing franchisee or closing the store. In addition we
have opened three new stores. The net effect of these actions has been to
significantly improve the overall trading performance of the Group shown by the
17.4% improvement in turnover and the 11.6% increase in like for like sales.
The Group will continue to roll out its franchise concept in the second half of
the year on a measured basis. We believe the business now has a much firmer
foundation on which to grow and we are increasing our focus on strengthening the
retail offering and expanding the marketing programme, while continuing to
address trading issues in a small number of stores.
Financial review
Total revenues increased by 17.4% to #8.97m (2005: #7.64m) reflecting the
improved trading performance of the store portfolio, the full period impact of
the nine new stores opened during the previous financial year and the increase
in the number of corporate stores in comparison to the previous year. Network
sales across the Group increased to #25.1m, which includes the value of retail
sales by our franchisees on which we base our like for like comparisons.
Like for like sales were up 11.6% compared to the previous period. Given the
Company's franchise structure, like for like sales are not the best measure of
the Group's financial performance, however, they do provide a good steer on the
overall trading performance. Within the like for like sales performance the core
floor coverings business achieved a 12.9% increase and like for like sales for
beds increased by 0.8%. The trading environment appears to have improved a
little supported by continued strength in the housing market, however, this has
been offset to some extent by a more challenging environment in the wider retail
market.
Our margin has improved slightly from 65.8% to 66.2%. The increase in
distribution costs principally reflects the additional salary and marketing
costs associated with the increased number of corporate stores in comparison to
the previous year. The increase in administrative expenses principally reflects
the increase in rental costs and marketing as the network grows in comparison to
the same period last year and increased investment in marketing. These costs are
recharged to franchisees in turnover. Consequently adjusted operating profit
before amortisation and FRS20 share-based payment charges increased by 30.3% to
#508k (2005: #390k).
Profit on ordinary activities before taxation increased by 6.8% to #406k (2005:
#380k). Earnings per share were 0.34p (2005: 0.30p). The Board recommends an
interim dividend of 0.25p per share (2005: 0.25p). The interim dividend will be
paid on 31 January 2007 to those shareholders whose names are on the register on
12 January 2007.
Operations review
The Group operates 60 branded stores across Northern and Central England. With
the exception of 12 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 continues to expand so its economics will improve, in
particular, from more cost effective advertising, as well as the ability to
leverage the other benefits of increased scale.
We have made significant progress during 2006, creating a solid platform on
which to enter 2007. The reassignment of a number of stores to new franchisees
and the closure of other non-performing stores has lifted the overall trading
performance and created a much stronger portfolio. As a result, management is
now increasingly focused on improving the retail offer and expanding the
marketing programme to support the current growth in sales.
The Group has recently appointed Ray Tricker as Retail Operations Director, with
effect from 1 January 2007. Ray joins the Group from Topps Tiles plc with
extensive experience of managing successful retail chains throughout the
country. He will be focused on developing the retail proposition across the
store portfolio from individual store presentation to improved customer service.
The Group's co-ordinated marketing programme, which includes television, print
and radio advertising campaigns has been key to the increased sales performance.
In the first half of this financial year we increased our advertising spend and
have benefited both in terms of sales and brand awareness. We will continue to
run campaigns throughout the year targeting our specific areas of operation.
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. This has been a good trading period for floor
coverings, the active housing market together with improved store presentation
and increased advertising has led to a 12.9% improvement in like for like sales.
Beds
Beds are sold through the majority of the store network with franchisees earning
a commission on sales. Although the like for like sales performance of this
division showed a 0.8% increase against the same period last year, this part of
the business is not performing to its potential. The management team are working
closely with franchisees to better integrate the sales of beds with floor
coverings, reviewing the sales space allocated to beds and training sales staff.
Store opening programme
At the end of the period, we had 58 stores of which 12 were corporate stores and
46 were franchisees. The decision to slow down the store opening programme and
focus on maximising revenues from existing stores meant that no new stores were
opened during this period. Instead we reassigned five stores to new franchisees
and closed a further two stores. These changes have had a positive effect on
Group trading.
Since the half-year end, we have successfully opened three new stores in Ripley,
Stockport and Coventry. We have also reassigned a further four stores to new
franchisees and closed one store. As a result, the total portfolio is now 60
strong with 12 corporate stores and 48 franchisees. Of the 12 corporate stores,
six are considered to be core corporate stores to be retained to enable ongoing
training and product development, two are likely to be closed and four will be
assigned to suitable franchisees.
We expect to continue to open new sites on a measured basis and although further
changes to existing franchised stores may occur, the bulk of these changes have
now been completed.
People
The Company has performed well during the period and much of this achievement is
due to the hard work of the people employed by the Company. The Board would
therefore like to thank all employees for their dedication and commitment and
looks forward to building on this during 2007.
Outlook
Since the half-year end trading has continued to be positive with like for like
sales for the 12 weeks to 21 December 2006 up by 13.0%. The Board has been
encouraged by this start to the second half, together with the success of the
actions that have been taken to underpin the foundations of the business and
believes the Group is well positioned to meet its' expectations. A key focus
during 2007 will be to improve the retail expertise within each store, open new
stores on a measured basis and where appropriate continue to ensure we have the
right franchisees in the right stores.
Peter Cowgill
Chairman
Independent review report to United Carpets Group plc
Introduction
We have been instructed by the Company to review the financial information which
comprises the unaudited consolidated profit and loss account, unaudited
consolidated statement of recognised gains and losses, unaudited consolidated
balance sheet, unaudited consolidated cash flow statement and notes to the
interim report and 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.
This report, including the conclusion has been prepared for and only for the
Company for the purpose of the AIM Rules of the London Stock Exchange and for no
other purpose. Our 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
work, for this report, or for the conclusions we have formed.
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 in accordance with the AIM Rules of
the London Stock Exchange which require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
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 International Standards on Auditing (U.K. and Ireland) 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 6 months ended
30 September 2006.
Tenon Audit Limited
Registered Auditor
Nottingham
Note:
Legislation in the United Kingdom governing the preparation and dissemination of
financial information may differ from legislation in other jurisdictions.
Unaudited consolidated profit and loss account for the 6 month period ended
30 September 2006
6 months 6 months
ended 30 ended 30 Year ended
September September 31 March
2006 2005 2006
Unaudited Unaudited Audited
Restated Restated
Note #'000 #'000 #'000
Turnover 8,978 7,647 17,649
Cost of sales (3,036) (2,612) (5,894)
______ ______ ______
Gross profit 5,942 5,035 11,755
Distribution costs (975) (859) (1,678)
Administrative expenses (4,577) (3,893) (9,269)
Other operating income 55 42 207
______ ______ ______
Adjusted operating profit* 508 390 1,146
Amortisation (28) (28) (56)
Share based payment (35) (37) (75)
______ ______ ______
Operating profit 445 325 1,015
Loss on disposal of fixed assets (74) - (121)
______ ______ ______
Profit on ordinary
activities before interest 371 325 894
Interest receivable 35 55 106
Interest payable - - (18)
______ ______ ______
Profit on ordinary
activities before taxation 406 380 982
Taxation (132) (135) (443)
______ ______ ______
Profit on ordinary
activities after taxation 4 274 245 539
______ ______ ______
Earnings per share
- Basic 0.34p 0.30p 0.66p
______ ______ ______
- Diluted 0.33p 0.30p 0.66p
______ ______ ______
All amounts relate to continuing activities. The notes on pages 10 to 15 form
part of these financial statements.
* Adjusted operating profit is stated before amortisation and FRS20 share-based
payment charges.
Unaudited consolidated statement of total recognised gains and losses as at
30 September 2006
6 months 6 months Year
ended ended ended
30 30 31
September September March
2006 2005 2006
Unaudited Unaudited Audited
Restated Restated
#'000 #'000 #'000
Profit for the period 274 245 539
______ ______ ______
Total recognised gains and losses 274 245 539
relating to the period
______ ______
Prior year adjustment (41)
______
Total gains and losses recognised 233
since last annual financial statements
Unaudited consolidated balance sheet as at 30 September 2006
At 30 September At 30 September At 31 March
2006 2005 2006
Unaudited Unaudited Audited
Restated Restated
Note #'000 #'000 #'000 #'000 #'000 #'000
Fixed assets
Intangible assets 248 305 277
Tangible assets 3,385 3,016 3,570
______ ______ ______
3,633 3,321 3,847
Current assets
Stocks 1,446 1,450 1,345
Debtors 3,154 3,876 3,622
Cash at bank and in hand 1,671 2,195 1,625
______ ______ ______
6,271 7,521 6,592
Creditors: amounts falling (3,264) (4,797) (3,861)
due within one year
______ ______ _____
Net current assets 3,007 2,724 2,731
______ ______ _____
Total assets less current 6,640 6,045 6,578
assets
Creditors: amounts (2,285) (2,043) (2,125)
falling due after
more than one year
Provisions for liabilities and (119) - (119)
charges
______ ______
Net assets 4,236 4,002 4,334
______ ______ _____
Capital and reserves - equity
Called up share capital 4,070 4,070 4,070
Share premium account 1,106 1,106 1,106
Profit and loss account 4 2,060 1,899 2,193
Other reserves 5 (3,000) (3,073) (3,035)
______ ______ ______
Shareholders' funds 6 4,236 4,002 4,334
______ ______
Unaudited cashflow statement for the 6 month period ended 30 September 2006
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2006 2006 2006
Unaudited Unaudited Audited
Note #'000 #'000 #'000 #'000 #'000 #'000
Net cash inflow from
operating activities 3 259 60 1,820
Returns on investments and
servicing of finance
Interest received 35 55 106
Interest paid - - (18)
_______ _______ _______
Net cash inflow from
returns on investments and
servicing of finance 35 55 88
Taxation
Corporation tax (payment)/
receipt (2) 23 (908)
Capital expenditure
Purchase of tangible fixed
assets (174) (537) (1,519)
Sale of tangible fixed - - 51
assets
_______ _______ _______
Net cash outflow from
capital expenditure (174) (537) (1,468)
_______ _______ _______
Net cash inflow/(outflow)
before financing 118 (399) (468)
Equity dividends paid - - (204)
Financing
Capital element of hire
purchase repayments (72) (62) (85)
_______ _______ _______
Net cash outflow from
financing (72) (62) (85)
_______ _______ _______
Increase/(decrease) in 3 46 (461) (757)
cash
_______ _______ _______
Notes to the interim report
1. Results and accounting policies
The interim report has been prepared under the historical cost convention and in
accordance with the Group's accounting policies as set out in the financial
statements for the year ended 31 March 2006. The interim results were approved
by the Board on 27 December 2006 and are unaudited.
Changes of accounting policy
As disclosed in the Annual Report at 31 March 2006, there has been a change of
accounting policy for income recognition in respect of the initial fee paid by
new franchises at the outset of a franchise agreement. Previously the policy was
to recognise the initial franchise fee income in full upon commencing a
franchise arrangement. This policy has changed to spread this initial fee over
ten years, the term of the franchise arrangement. The change in accounting
policy has reduced the profit before tax for the period ended 30 September 2005
by #51,000 (#36,000 after tax) and net assets by #1,713,000.
The group is required to adopt FRS20 "Share-based Payment (IFRS2)" in respect of
the financial statements for the year ended 31 March 2007. Accordingly, these
accounts have been prepared in accordance with this standard. The effect of
adopting this standard has been to decrease reported profit for the periods
ended 30 September 2006, 31 March 2006 and 30 September 2005 by #35,000, #37,000
and #75,000 for amounts charged in respect of share based payments.
The charge in the period ended 31 March 2006 was reduced by #34,000 as a result
of the removal of amounts previously provided within creditors in respect of
UITF17 which has now been superseded by FRS20. The net prior year adjustment to
the results previously reported for the period ended 31 March 2006 was #41,000
and net assets were increased by #34,000. There was no adjustment to net assets
at 30 September 2006 or 30 September 2005 following the change.
There is no impact on taxation as a result of the implementation of FRS20. The
table below shows the overall impact of the FRS20 adjustments made.
30 30
September September 31 March
2006 2005 2006
#'000 #'000 #'000
Change in net assets - - (34)
Change in reported profit (38) (37) (41)
2. Taxation
The tax charge accrued in these interim results reflects an estimated tax rate
of 32.5% for the period to 30 September 2006.
3. Notes to cash flow statement
(a) Reconciliation of operating profit to net cash inflow from operating
activities:
6 months 6 months Year
ended ended ended
30 30 31 March
September September
2006 2005 2006
Restated Restated
#'000 #'000 #'000
Operating profit as previously reported 480 362 1,056
Prior year adjustment (35) (37) (41)
______ _______ _______
Operating profit 445 325 1,015
Depreciation 285 223 479
Amortisation of goodwill and intangibles 28 28 56
Share based payment 35 37 75
Increase in stock (101) (218) (113)
Decrease in debtors 468 686 756
Decrease in creditors (901) (1,021) (448)
____ _______ _______
259 60 1,820
________ _______ _________
(b) Reconciliation of net cash flow to movements in net funds
Net funds at start of period 1,528 2,200 2,200
Increase/(decrease) in 46 (461) (757)
cash in the period
Repayment of hire 72 62 85
purchase contract
_______ _______ _______
Net funds at end of period 1,646 1,801 1,528
(c) Analysis of changes in net funds
At At
1 April 30
September
2006 Cashflows 2006
#'000 #'000 #'000
Bank and cash 1,625 46 1,671
Hire purchase (97) 72 (25)
contracts
_________ ________ ________
Net funds 1,528 118 1,646
_________ ________ ________
4. Movement on profit and loss account reserves
At 30 At 30 At
September September
31 March
2006 2005 2006
Restated Restated
#'000 #'000 #'000
Profit and loss account 2,234 1,858 1,858
brought forward
Prior year adjustment (41) - -
______ ______ ______
As restated 2,193 1,858 1,858
Profit on ordinary
activities
after taxation 274 245 539
Dividends (407) (204) (204)
______ ______ ______
Profit and loss account
carried forward 2,060 1,899 2,193
______ ______ ______
5. Movement on other reserves
Merger Share - Total
reserve based
payment
reserve
Restated*
#'000 #'000 #'000
At 1 April 2005 (3,110) - (3,110)
Charge for the period - 37 37
______ ______ ______
At 30 September 2005 (3,110) 37 (3,073)
Charge for the period - 38 38
______ ______ ______
At 31 March 2006 (3,110) 75 (3,035)
Charge for the period - 35 35
______ ______ ______
At 30 September 2006 (3,110) 110 (3,000)
______ ______ ______
*Prior to the restatement of the results for 2005 and 2006 as required by FRS20
there was no share-based payment reserve.
6. Reconciliation of movement in shareholders funds
At At At
30 30 31 March
September September
2006 2005 2006
Restated Restated
#'000 #'000 #'000
Profit for the period 274 245 580
Dividend paid and (407) (204) (204)
proposed
Share based payment 35 37 75
adjustment
______ ______ ______
Net (decrease)/increase
in shareholders' funds (98) 78 451
______ ______ ______
Opening shareholders'
funds
as previously stated 4,334 3,924 3,924
Prior year adjustment - - (41)
______ ______ ______
Opening shareholders'
funds
as restated 4,334 3,924 3,883
______ ______ ______
Closing shareholders' 4,236 4,002 4,334
funds
______ ______ ______
7. Earnings per share
Basic earnings per share is calculated on a weighted average of the shares in
issue for the periods. In each period this is 81,400,000 shares.
Diluted earnings per share is calculated on a weighted average of the shares in
issue for the period, adjusted to take into account the potential ordinary
shares. In the period ended 30 September 2006, this is 81,900,326 shares. In the
periods ended 30 September 2005 and 31 March 2006 this is 81,400,000 shares.
8. Interim financial information
Copies of this interim report are being sent to all shareholders and will be
available to the public from the Company's registered office.
The interim financial information for the periods ended 30 September 2006 and 30
September 2005 is unaudited and does not constitute statutory accounts within
the meaning of Section 240 of the Companies Act 1985.
The financial information for the twelve months ended 31 March 2006 is derived
from the statutory accounts.
Full accounts were delivered to the Registrar of Companies. The report of the
auditors was unqualified and did not contain any statement under s237(2) or (3)
of the Companies Act 1985.
This information is provided by RNS
The company news service from the London Stock Exchange
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