RNS Number:4307A
United Carpets Group plc
18 July 2007
UNITED CARPETS GROUP plc
Preliminary Results for the year ended 31 March 2007
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 2007.
Highlights
* Network sales grew by 11.7% to #54.27m (2006: #48.58m)
* Turnover increased by 10.7% to #19.55m (2006: #17.65m)
* Positive like for like sales up 11.7% against prior year
* Profit before tax increased by 23.6% to #1.433m* (2006: #1.159m*)
despite the closure of four stores, reflecting an increase in individual
store profitability
* At 31 March 2007, 59 stores carried the United Carpets brand. Since the
year end, a further two stores have opened
* Like for like sales for the 15 weeks since the period end were up 20.9%
* Final dividend of 0.5p per share which, together with the interim
dividend of 0.25p per share paid in January makes a total ordinary dividend
of 0.75p per share for the year (2006: 0.75p).
* Before goodwill amortisation and exceptional items.
Paul Eyre, Chief Executive, said:
'This year has been a period of consolidation, during which we have focused on
consistent, improved quality of customer service, an increase in our product
range, innovative new sales strategies and the introduction of a number of new
franchisees to the existing and new stores. This has enabled us to deliver solid
growth in 2007. We are now looking to expand the Group through the opening of
new stores within the coming year, whilst maintaining the same high level of
service in our existing operations.'
Enquiries:
United Carpets Group plc 01709 579 450
Paul Eyre, Chief Executive
Ian Bowness, Finance Director
Cardew Group 020 7930 0777
Tim Robertson
Jamie Milton
Seymour Pierce 020 7107 8000
Jonathan Wright
Chairman's statement
I am pleased to announce the Group's preliminary results for the year ended 31
March 2007. The Group generated revenues of #19.55m, compared to #17.65m in
2006, operating from 59 stores at 31 March 2007 (2006: 60 stores) located across
Northern and Central England. This increase in revenue, despite a small decrease
in store numbers, is a further vindication of our strategy of switching Group
focus from new store openings to maximising profitability from existing stores.
We are now reaching the end of this consolidation process, which has seen the
closure of some of our poorer performing stores and the introduction of new
franchisees to others. During the year, three new stores have been opened in
Ripley, Stockport and Coventry and the recent recruitment of a dedicated
Franchisee Recruitment Manager is expected to facilitate the sourcing of new
franchisees in the coming year.
The Group will now look to build on this solid foundation by continuing to roll
out corporate stores and its franchise concept into new markets across Northern
and Central England.
Financial review
Revenue increased by 10.7% to #19.55m (2006: #17.65m), reflecting the increased
sales from individual stores during the year generated by improved marketing,
closure of poorer performing stores and the recruitment of high quality new
franchisees. 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), increased to #54.27m (2006:
#48.58m).
Like for like sales were up 11.7% compared to the previous year. Given United
Carpets' 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 13.5% like for like increase on the previous
year whilst bed like for like sales decreased by 2.8%. However, a new product
range within the beds department, combined with a restructuring of the incentive
scheme for staff on sales of beds has seen significant improvement in bed sales
in the first three months of the new year. For the 15 weeks since the year end,
total like for like sales have increased by 20.9%, although this is against weak
comparatives in the same period last year and we have yet to enter our key sales
period during October and November.
Following a Group reorganisation, certain costs previously included within cost
of sales have been reclassified as administrative expenses. Cost of sales for
the prior year have been reduced by #702,000 and administrative expenses
increased by the same amount. Consequently, on a comparable basis, gross margin
has increased slightly from 70.6% to 71.0% with the benefits from improved
product margins and better stock control being offset to some extent by a
reduction in the proportion of franchise related income to total revenue as
corporate stores have accounted for a greater proportion of turnover.
Distribution costs increased in line with the increase in turnover from
corporate stores and administrative expenses increased by 8.5% reflecting
increases in rental costs and marketing as the network grew in the first half of
the year in comparison to the same period in the previous year and further
strengthening of the management team to support future growth.
Profit on ordinary activities before taxation, goodwill amortisation and
exceptional items increased by 23.6% to #1.433m (2006: #1.159m). During the
period the company incurred exceptional costs and a loss on disposal of fixed
assets totaling #347,000 relating to the closure of four stores and one
relocation and a further #57,000 as a result of goodwill amortisation. As a
result, profit before tax was #1.03m.
Earnings per share were 0.71p (2006: 0.66p). The Board recommends a final
dividend of 0.5p per share (2006: 0.5p) which together with the interim dividend
of 0.25p per share (2006: 0.25p) paid in January makes a total ordinary dividend
of 0.75p per share for the year (2006: 0.75p). Subject to approval at the Annual
General Meeting, the final dividend will be paid on 7 December 2007 to those
shareholders whose names are on the register on 2 November 2007.
Operations review
The Group ended the financial year with 59 branded stores across Northern and
Central England. With the exception of 11 corporate stores, the remainder were
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.
Last year was one of consolidation in which we sought to maximize revenues from
individual stores to provide a solid foundation for expansion of the franchise
in 2007. Poorer performing branches have been closed and 12 new franchisees have
been appointed over the year in addition to the opening of three new branches in
Ripley, Coventry and Stockport. The appointment of a Franchisee Recruitment
Manager will help us to recruit the quality individuals the Group will need in
order to drive our next phase of expansion.
As part of a drive to improve returns from the existing store portfolio the
company has implemented a series of measures aimed at improving customer service
and retail techniques. A central part of this strategy has been the appointment
of Ray Tricker as Retail Operations Director in January 2007. Ray has focused on
increasing the quality of customer service through a series of training days, in
store visits and increased sales incentives for store staff which, in turn, has
driven our growth in sales and the level of upselling on popular items.
The Group is currently in the process of reviewing its sourcing and distribution
systems in order to ensure greater efficiency in supplying the right stores with
the right products, cutting costs associated with large individual store
inventories and increasing understanding of trends in customer tastes. A
centralised depot has already been set up in order to handle deliveries of beds
and customers choose from a wide selection of examples within individual stores
after which they receive their delivery from the central depot within a forty
eight hour period. Any future expansion in store numbers is expected to generate
further efficiencies through greater central control of product sourcing and
distribution.
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. Trading has been strong throughout the year,
helped by an active housing market, increased advertising, improved store layout
and a greater emphasis on customer service, backed by regular training days to
ensure best practice is shared across the Group. Over the course of the year,
there has been a 13.5% improvement in like for like sales.
The Group continues to carry out significant advertising in targeted areas where
it has sufficient critical mass and will look to increase its area of network
coverage in 2007 in line with the growth of its store portfolio.
Beds
Beds are sold through the majority of the store network with franchisees earning
a commission on sales. Recently, this part of the business has not performed to
its full potential and like for like sales over 2006 showed a 2.8% decrease.
However, restructuring of the incentive scheme for salespersons, the sourcing of
a new product range with higher margins and greater opportunity for upselling
and innovative use of store layout has seen an 11.6% improvement in like for
like sales in the first 15 weeks of the new financial year. By combining these
in store improvements with the centralised depot for bed distribution, which
removes the necessity for individual stores to carry large stocks of beds, the
Group aims to build its market share of these products, alongside its core
brands of floor coverings.
Store opening programme
At the end of the year, we operated 59 stores, of which 11 were corporate stores
and 48 were franchised. Our strategy throughout this year has been to reduce the
number of store openings and to increase focus on consolidation of our existing
position and improving the quality of individual franchisees/store managers and
customer service across all our stores.
During 2006, we successfully opened three new stores in Ripley, Stockport and
Coventry, reassigned 12 stores to new franchisees, closed four stores and
relocated one store. Of the 11 corporate stores, six are considered to be core
corporate stores to be retained to enable ongoing training and product
development, one is likely to be closed and four will be assigned to suitable
franchisees.
In the three months since the end of the financial year, we have successfully
opened a corporate store in Wetherby and a franchised store in Northenden with
Ilkeston due to open shortly and we aim to pursue a policy of steady growth in
the number of outlets throughout 2007.
People
The Company has performed well during the period and much of this achievement is
due to the hard work of the people employed throughout the Group. Staff training
and development has been one of the key drivers in the improved financial
performance of the Group in 2006 and we will continue to invest in this area
going forward. The Board thanks all employees for their dedication and
commitment and looks forward to building on this during 2007.
Outlook
Since the year end, trading has continued to be positive with total like for
like sales for the 15 weeks to 12 July 2007 up by 20.9%, albeit against weaker
comparables due to the World Cup and exceptionally hot weather in the previous
year. The Group has also been affected by the extensive flooding in Northern
England, which caused the Rotherham store to close for 12 days. However, in
general, the Board has been encouraged by this start to the first half of 2007
and believes that it shows the Group has adopted the correct strategy to support
future growth. A key focus during 2007 will be to ensure that new stores and
franchisees maintain and build on the level of store quality and customer care
that has been achieved during the consolidation period of 2006.
Peter Cowgill
Chairman
Preliminary announcement of results for the year ended 31 March 2007
Consolidated profit and loss account
Note Results before Goodwill 2007 Results before Goodwill 2006
goodwill amortization goodwill amortization
amortization and exceptional amortization and exceptional
and items and exceptional items
exceptional items
items
As restated As restated As restated
#'000 #'000 #'000 #'000 #'000 #'000
Turnover 19,546 - 19,546 17,649 - 17,649
Cost of sales (5,667) - (5,667) (5,192) - (5,192)
______ ______ ______ ______ ______ ______
Gross profit 13,879 - 13,879 12,457 - 12,457
Distribution
costs (2,006) - (2,006) (1,678) - (1,678)
Administrative
expenses 2 (10,621) (202) (10,823) (9,915) (56) (9,971)
Other
operating
income 110 - 110 207 - 207
______ ______ ______ ______ ______ ______
Operating
profit 1,362 (202) 1,160 1,071 (56) 1,015
Loss on
disposal of
fixed assets 2 - (202) (202) - (121) (121)
______ ______ ______ ______ ______ ______
Profit on
ordinary
activities
before
interest 1,362 (404) 958 1,071 (177) 894
Interest
receivable 85 - 85 106 - 106
Interest
payable (14) - (14) (18) - (18)
______ ______ ______ ______ ______ ______
Profit on
ordinary 1,433 (404) 1,029 1,159 (177) 982
activities
before
taxation
Taxation 3 (449) (443)
______ ______
Profit on
ordinary
activities
after taxation
transferred to
reserves 6 580 539
Earnings per
share 4 ______ ______
- Basic 0.71p 0.66p
- Diluted 0.71p 0.66p
______ ______
All amounts relate to continuing activities.
The notes on pages 8 to 11 form part of these financial statements.
Preliminary announcement of results for the year ended 31 March 2007
Statement of total recognised gains and losses and reconciliation of movements
in shareholders' funds
Statement of total recognised gains and losses
2007 2006
As restated
#'000 #'000
Profit for the financial year 580 539
______ ______
Total recognised gains and losses relating to the year 580 539
_____
Prior year adjustment (note 7) (41)
______
Total gains and losses recognised since last annual
financial statements 539
______
Reconciliation of movements in equity shareholders' funds
2007 2006
As restated
#'000 #'000
Profit for the year as previously stated 580 580
Prior year adjustment (note 7) - (41)
______ ______
Profit for the year as restated 580 539
Share-based payment reserve movement 214 75
Dividends paid (611) (204)
______ ______
Net increase in shareholders' funds 183 410
Opening shareholders' funds 4,334 3,924
______ ______
Closing shareholders' funds 4,517 4,334
______ ______
The notes on pages 8 to 11 form part of these financial statements.
Preliminary announcement of results for the year ended 31 March 2007
Consolidated balance sheet
Note 2007 2006
As restated
#'000 #'000 #'000 #'000
Fixed assets
Intangible assets 220 277
Tangible assets 3,818 3,570
______ ______
4,038 3,847
Current assets
Stocks 1,680 1,345
Debtors 2,188 3,622
Cash at bank and in hand 2,034 1,625
______ ______
5,902 6,592
Creditors: amounts falling due
after more
than one year (3,403) (3,861)
______ ______
Net current assets 2,499 2,731
_____ _____
Total assets less current assets 6,537 6,578
Creditors: amounts falling due
after more
than one year (1,768) (2,125)
Provisions for liabilities (252) (119)
______ ______
Net assets 4,517 4,334
______ ______
Capital and reserves
Called up share capital 4,070 4,070
Share premium account 6 1,106 1,106
Profit and loss account 6 2,162 2,193
Merger reserve 6 (3,110) (3,110)
Share-based payment reserve 6 289 75
______ ______
Shareholders' funds 4,517 4,334
______ ______
The notes on pages 8 to 11 form part of these financial statements.
Preliminary announcement of results for the year ended 31 March 2007
Consolidated cash flow statement
2007 2006
Note #'000 #'000 #'000 #'000
Net cash inflow from operating
activities 8 2,146 1,820
Returns on investments and
servicing of finance
Interest received 85 106
Interest paid (14) (18)
______ ______
Net cash inflow from returns on
investments and servicing of
finance 71 88
Taxation 50 (908)
______ ______
50 (908)
Capital expenditure
Purchase of tangible fixed assets (1,230) (1,519)
Sale of tangible fixed assets 70 51
______ ______
Net cash outflow from
capital expenditure (1,160) (1,468)
Equity dividends paid (611) (204)
______ ______
Net cash inflow/(outflow) before
financing 496 (672)
Financing
Capital element of hire purchase
repayments (87) (85)
______ ______
Net cash outflow from financing (87) (85)
______ ______
Increase/decrease in cash 10 409 (757)
______ ______
The notes on pages 8 to 11 form part of these financial statements.
Preliminary announcement of results for the year ended 31 March 2007
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 2007. The preliminary results were
approved by an authorised committee of the Board on 17 July 2007 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.
There have been no changes in accounting policy in the year, other than as
disclosed in note 7.
2. Goodwill amortisation and exceptional items
Included in administrative expenses are exceptional store closure costs of
#145,000 (2006: #Nil) and #57,000 (2006: #56,000) which relates to the
amortisation of goodwill.
The loss on disposal of fixed assets principally reflects the write off of
assets on the closure of the Warrington, Bradford and Leeds stores following
lease terminations.
3. Taxation on ordinary activities
Analysis of charge in the year:
2007 2006
As restated
#'000 #'000
Corporation tax:
Current year 359 -
Over provision in prior years 52 (330)
______ ______
411 (330)
Deferred tax:
Origination and reversal of timing differences 38 773
______ ______
449 443
______ ______
Preliminary announcement of results for the year ended 31 March 2007
Notes to the preliminary announcement (continued)
4. Basic and diluted earnings per share
The profit per share has been calculated in accordance with FRS22 'Earnings per
share'. The calculation of the profit per ordinary share is based on profits of
#580,000 (2006: #539,000) and on a weighted average of 81,400,000 (2006:
81,400,000) ordinary shares in issue during the year. The weighted average share
capital for earnings per share calculated on a dilutive basis is 81,609,991
(2006: 81,400,000).
5. Dividends
Dividends on equity shares
2007 2006
#'000 #'000
Dividends paid during the year on ordinary shares 611 204
______ ______
6. Reserves
Share premium Profit and loss Merger Share based
account account reserve payment reserve
#'000 #'000 #'000 #'000
At 1 April
2006 as
previously
stated 1,106 2,234 (3,110) -
Prior year
adjustment - (41) - 75
______ ______ ______ ______
At 1 April
2006 as
restated 1,106 2,193 (3,110) 75
Profit for the
year - 580 - -
Dividends paid - (611) - -
Share-based
payments - - - 214
______ ______ ______ ______
At 31 March
2007 1,106 2,162 (3,110) 289
______ ______ ______ ______
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.
Preliminary announcement of results for the year ended 31 March 2007
Notes to the preliminary announcement (continued)
7. Prior year adjustments
The group is required to adopt FRS20 "Share-based payment (IFRS2)" in respect of
the financial statements for the year ended 31 March 2007.
The effect of adopting this standard has been to decrease reported profit for
the year ended 31 March 2006 by #75,000 for amounts charged in respect of
share-based payments which has been credited to a separate share- based payment
reserve. The charge in the year 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 year
ended 31 March 2006 was a #41,000 decrease and net assets were increased by
#34,000.
In addition to this, the directors have reviewed the classification of costs in
the profit and loss account and consider that certain costs previously included
in cost of sales are more appropriately classified as administrative expenses.
Accordingly, a prior year adjustment has been made to transfer #702,000 from
cost of sales to administrative expenses. This adjustment has no impact on
operating profit or net assets in either year. This adjustment increases gross
profit for the year ended 31 March 2006 by #702,000.
8. Reconciliation of operating profit to net cash inflow from operating
activities
2007 2006
As restated
#'000 #'000
Operating profit 1,160 1,015
Depreciation 589 479
Amortisation of goodwill and intangibles 57 56
Share-based payments 214 75
Decrease in fixed assets due to transfer to stock 121 -
Increase in stock (335) (113)
Decrease in debtors 981 756
Decrease in creditors (736) (448)
Increase in provisions 95 -
______ ______
2,146 1,820
______ ______
Preliminary announcement of results for the year ended 31 March 2007
Notes to the preliminary announcement (continued)
9. Analysis of changes in net funds
2006 Cashflow Non cash 2007
movements
#'000 #'000 #'000 #'000
Bank and cash 1,625 409 - 2,034
Bank overdraft - - - -
______ ______ ______ ______
1,625 409 - 2,034
Hire purchase contracts:
Due within one year (58) 58 (7) (7)
Due after more than one year (39) 29 7 (3)
______ ______ ______ ______
Net funds 1,528 496 - 2,024
______ ______ ______ ______
10. Reconciliation of net cash flow to movement in net funds
2007 2006
#'000 #'000
Increase/(decrease) in cash in the year 409 (757)
Cash outflow from hire purchase financing 87 85
______ ______
Change in net funding from cashflows 496 (672)
Net funds at start of year 1,528 2,200
______ ______
Net funds at end of year 2,024 1,528
______ ______
This information is provided by RNS
The company news service from the London Stock Exchange
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