RNS Number:4536K
United Carpets Group plc
21 December 2007
UNITED CARPETS GROUP plc
Interim Results for the period ended 30 September 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 interim results for the period ended 30 September 2007.
Highlights
* Network sales grew by 16.1% to �29.16m (2006: �25.12m)
* Revenue increased by 14.8% to �10.31m (2006: �8.98m)
* Like for like sales up 14.2%
* Profit before tax increased by 73.9% to �706,000 (2006: �406,000)
* Underlying profit before tax* increased by 44.7% to �735,000 (2006:
�508,000)
* 4 further stores have been opened and one closed since the year end
bringing the current total to 62
* Interim dividend increased by 10.0% to 0.275p (2006: 0.25p)
*Before goodwill impairment of �29,000 (2006: �28,000) and losses on disposals
of �Nil (2006: �74,000)
Paul Eyre, Chief Executive, said:
'In a time of challenging trading conditions, our continued focus on customer
service, an increased product range and our innovative sales strategies have
enabled us to deliver solid growth throughout the period under review. We
continue to look to expand the group through the opening of new stores, whilst
ensuring that the same level of high service is maintained in our existing
operations and, as a result, are confident that United Carpets will trade in
line with management expectations.'
Enquiries:
United Carpets Group plc
Paul Eyre, Chief Executive 01709 579 450
Ian Bowness, Finance Director
Cardew Group 020 7930 0777
Tim Robertson
Jamie Milton
Seymour Pierce
Jonathan Wright 020 7107 8000
Chairman's statement
I am pleased to announce the Group's interim results for the six months ended 30
September 2007. These are the Group's first IFRS condensed consolidated interim
financial statements. The Group generated revenue of �10.31m, compared to �8.98m
in the corresponding period in 2006, operating from 61 stores at 30 September
2007 (31 March 2007: 59 stores) located across Northern and Central England. Our
continued revenue growth reflects the success of our strategy of the last 18
months of raising customer service levels and improving product range within our
existing stores, whilst seeking to gradually expand the number of stores
operating under the United Carpets brand.
Financial review
Revenue increased by 14.8% to �10.31m (2006: �8.98m), reflecting the increased
sales from individual stores 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 revenue on a more comparable basis to a
conventional retailer), increased to �29.16m (2006: �25.12m).
Like for like sales were up 14.2% 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 but they do provide a good steer on the
overall trading performance. Within the like for like sales performance the core
flooring business achieved a 15.5% like for like increase on the previous year
whilst bed like for like sales increased by 1.6%. We continue to develop our
beds division through increased product range and sales incentives to staff and
we are focused on generating additional returns from this part of the business
in the future.
Gross margin reduced slightly to 69.6% (2006: 70.1%) due to corporate stores and
wholesale turnover increasing as a proportion of total revenue.
Distribution expenses increased 25.3% broadly in line with the growth in
turnover of corporate stores and administrative expenses increased by 8.5%.
Underlying profit on ordinary activities (being before taxation, goodwill
impairment and losses on disposals) increased by 44.7% to �735,000 (2006:
�508,000). Earnings per share were 0.57p (2006: 0.34p).
Dividend
The Board recommends an interim dividend of 0.275p per share (2006: 0.25p). The
interim dividend will be paid on 31 January 2008 to those shareholders whose
names are on the register on 11 January 2008.
Operations review
The Group ended the period under review with 61 branded stores across Northern
and Central England. With the exception of 12 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.
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. Despite harsh conditions trading has been
strong during the six months, with a particularly good performance in the first
four months (against weaker comparatives due to the World Cup and hot weather in
the previous year) followed by two months of tougher comparatives. The sales
performance has been helped by 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. During the period under review,
there has been a 15.5% 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 2008 in line with the growth of its store portfolio. The Group has
recently introduced an in house cutting service which should enable some margin
enhancement within our floor coverings sales to help offset increasing raw
material costs.
Beds
Beds are sold through the majority of the store network with franchisees earning
a commission on sales. Historically, this part of the business has not performed
to its full potential and like for like sales over the period under review
increased by 1.6%. However, improved product and store layouts, central
warehousing with direct delivery to customers and dedicated staff with a new
incentive scheme were successfully introduced generating significant sales and
margin improvements within our corporate stores and the franchise network will
be encouraged to adopt these new initiatives in order to increase like for like
sales within the beds department over the medium term.
Store opening programme
At the end of the period under review, we operated 61 stores, of which 12 were
corporate stores and 49 were franchised. Our strategy continues to be to limit
the number of store openings and to continue consolidation of our existing
position and improve the quality of individual franchisees/store managers and
customer service across all our stores.
During the period under review, we successfully opened a new franchisee store in
Northenden and two corporate stores in Wetherby and Ilkeston, closing one
corporate store in Manchester.
Since the period end, we opened a new corporate store in Sleaford, took back
stores in Dudley, Ellesmere Port and Huddersfield as corporate stores and
successfully franchised our corporate store in Coventry, bringing the total
number of stores operating under the United Carpets brand to 62, as at 21
December 2007.
Of the current 15 corporate stores, six are to be retained to enable ongoing
training and product development, one is likely to be closed and the remainder
will be matched with suitable franchisees.
People
The Group has performed well during a period of tough trading and our continued
success reflects the commitment of our staff. As a function of driving sales and
improving our financial performance, the Group continues to invest in the
development and training of our workforce. The Board thanks all employees for
their dedication and commitment and looks forward to building on this during
2008.
Outlook
Since the end of the period under review, trading has continued to be positive
with like for like sales between 30 September and 13 December up by 5.0% against
a period of strong comparatives. Whilst the widely reported "credit crunch" has
impacted the broader retail sector, the Group's position at the value end of the
market means the majority of our sales are not linked to the success of the
housing market but by customers wishing to replace or maintain existing floor
coverings. By following our successful strategy of controlled growth and
improved profitability, the Board remains confident that United Carpets is well
positioned to trade successfully during a tougher economic climate and to
continue to expand its market share through enhanced sales from existing outlets
and the addition of new stores.
Peter Cowgill
Chairman
INDEPENDENT REVIEW REPORT TO UNITED CARPETS GROUP PLC
Introduction
We have reviewed the accompanying condensed balance sheet of United Carpets
Group plc as at
30 September 2007 and the related condensed consolidated interim income
statement and interim statement of cash flows for the six month period then
ended. Management is responsible for the preparation and presentation of this
interim financial information in accordance with applicable law and those
International Financial Reporting Standards (IFRSs) adopted for use in the
European Union. Our responsibility is to express a conclusion on this interim
financial information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements 2410 "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity." A review of interim financial information
consists of making inquiries, 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 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 accompanying interim financial information is not prepared, in all
material respects, in accordance with applicable law and those International
Financial Reporting Standards (IFRSs) adopted for use in the European Union.
Tenon Audit Limited
Chartered Accountants
Charnwood House
Gregory Boulevard
Nottingham
NG7 6NX
21 December 2007
Condensed consolidated interim income statement
For the six months ended 30 September 2007
6 months 6 months
Note Ended 30 Ended 30 Year ended
September September 31 March
2007 2006 2007
Unaudited Unaudited Audited
Total Total Total
As
restated
�'000 �'000 �'000
Revenue 2 10,311 8,978 19,546
Cost of sales (3,133) (2,683) (5,667)
_____________________________
Gross profit 7,178 6,295 13,879
Other operating income 38 55 110
Distribution expenses (1,222) (975) (2,006)
Administrative expenses (5,349) (4,930) (10,823)
Loss on disposal - (74) (202)
_____________________________
Operating profit before financing 645 371 958
costs
Financial income 61 35 85
Financial expenses - - (14)
_____________________________
Net financing costs 61 35 71
_____________________________
Profit before tax 706 406 1,029
Income tax expense 3 (240) (132) (449)
_____________________________
Profit for the period 2 466 274 580
_____________________________
Basic earnings per share: 6 0.57p 0.34p 0.71p
_____________________________
Diluted earnings per share: 6 0.57p 0.33p 0.71p
_____________________________
All amounts are attributable to the equity holders of the parent, and all arise
from continuing operations. No amounts were recognised directly in equity, and
therefore no separate statement of recognised income and expense has been
presented.
Condensed consolidated interim balance sheet
As at 30 September 2007
6 months 6 months year
ended 30 ended 30 ended
September September 31 March
2007 2006 2007
Unaudited Unaudited Audited
Total Total Total
�'000 �'000 �'000
Non-current assets
Property, plant and equipment 4 3,932 3,385 3,818
Intangible assets 191 248 220
_____________________________
4,123 3,633 4,038
_____________________________
Current assets
Inventories 2,271 1,446 1,680
Trade and other receivables 2,768 3,154 2,188
Cash and cash equivalents 2,653 1,671 2,034
_____________________________
7,692 6,271 5,902
_____________________________
Total assets 11,815 9,904 9,940
_____________________________
Equity
Issued capital 5 4,070 4,070 4,070
Share premium 5 1,106 1,106 1,106
Reserves 5 (2,855) (3,000) (2,821)
Retained earnings 2,728 2,060 2,162
_____________________________
Total shareholders equity 5,049 4,236 4,517
_____________________________
Non-current liabilities
Trade and other payables 1,965 2,285 1,768
Provisions 93 - 95
Deferred tax liabilities 158 119 157
_____________________________
2,216 2,404 2,020
_____________________________
Current liabilities
Trade and other payables 4,550 3,264 3,403
_____________________________
4,550 3,264 3,403
_____________________________
Total liabilities 6,766 5,668 5,423
_____________________________
Total equity and liabilities 11,815 9,904 9,940
_____________________________
Condensed consolidated interim statement of cash flows
For the six months ended 30 September 2007
6 months 6 months year
ended 30 ended 30 ended
September September 31 March
2007 2006 2007
Unaudited Unaudited Audited
Total Total Total
�'000 �'000 �'000
Cash flows from operating activities
Cash generated from operations 6 259 2,146
Interest paid - - (14)
Income taxes refunded/(paid) 4 (2) 50
_____________________________
Net cash from operating activities 10 257 2,182
_____________________________
Cash flows from investing activities
Proceeds from sale of property, plant and - - 70
equipment
Interest received 61 35 85
Acquisition of property, plant and equipment (445) (174) (1,230)
_____________________________
Net cash from investing activities (384) (139) (1,075)
_____________________________
Cash flows from financing activities
Payment of finance lease liabilities (3) (72) (87)
Dividends paid - - (611)
_____________________________
Net cash from financing activities (3) (72) (698)
_____________________________
Net (decrease)/increase in cash and cash (377) 46 409
equivalents
Cash and cash equivalents at start of period 2,034 1,625 1,625
_____________________________
Cash and cash equivalents 1,657 1,671 2,034
_____________________________
Notes to the condensed consolidated interim financial statements
1. Significant accounting policies
United Carpets Group plc (the "Company") is a company domiciled in the United
Kingdom. The condensed consolidated interim financial statements of the Company
for the six months ended 30 September 2007 comprise the Company and its
subsidiary undertakings (together referred to as the "Group").
The condensed consolidated interim financial statements were authorised for
issuance on 20 December 2007.
(a) Statement of compliance
The condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRSs) for interim
financial statements as adopted for use in the European Union. These are the
Group's first IFRS condensed consolidated interim financial statements for part
of the period covered by the first IFRS annual financial statements and IFRS 1
First-time adoption of International Financial Reporting Standards has been
applied. The condensed consolidated interim financial statements do not include
all of the information required for full annual financial statements.
An explanation of how the transition to IFRSs has affected the reported
financial position, financial performance and cash flows of the Group is
provided in note 10. This note includes reconciliations of equity and profit or
loss for comparative periods reported under United Kingdom GAAP (previous GAAP)
to those reported for those periods under IFRSs.
(b) Basis of preparation
The financial statements are presented in pounds sterling, rounded to the
nearest thousand. They are prepared on the historical cost basis except that
derivative financial instruments are stated at their fair value.
The preparation of interim financial statements in conformity with IAS 34
Interim Financial Reporting requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. Actual results may differ from
these estimates.
These condensed consolidated interim financial statements have been prepared on
the basis of IFRSs in issue that are effective or available for early adoption
at the Group's first IFRS annual reporting date, 31 March 2008. Based on these
IFRSs, the Board of Directors have made assumptions about the accounting
policies expected to be adopted (accounting policies) when the first IFRS annual
financial statements are prepared for the year-ended 31 March 2008.
The condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
The preparation of the condensed consolidated interim financial statements in
accordance with IAS 34 resulted in changes to the accounting policies as
compared with the most recent annual financial statements prepared under
previous GAAP. The accounting policies set out below have been applied
consistently to all periods presented in these condensed consolidated interim
financial statements. They also have been applied in preparing an opening IFRS
balance sheet at 1 April 2006 for the purposes of the transition to IFRSs, as
required by IFRS 1. The impact of the transition from previous GAAP to IFRSs is
explained in note 10.
The accounting policies have been applied consistently throughout the Group for
purposes of these condensed consolidated interim financial statements.
Notes to the condensed consolidated interim financial statements
Significant accounting policies (continued)
(c) Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the
Company has the power, directly or indirectly, to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The financial statements of subsidiaries are included in the condensed
consolidated interim financial statements from the date that control commences
until the date that control ceases.
(ii) Uniting of interests method
The results of the group and all of its subsidiary undertakings are consolidated
using the uniting of interests method of accounting. The investment is recorded
in the company's balance sheet at the nominal value of the shares issued,
together with the fair value of any additional consideration paid.
Merged subsidiary undertakings are treated as if they had always been a member
of the Group, for business combinations which took place before transition to
IFRS.
The corresponding figures for the previous period include its results for that
period, the assets and liabilities at the previous balance sheet date and the
shares issued by the Company as consideration as if they had always been in
issue. Any difference between the nominal value of the shares acquired by the
Company and those issued by the Company to acquire them is taken to reserves.
(iii) Transactions eliminated on consolidation
Intragroup balances, and any unrealised gains and losses or income and expenses
arising from intragroup transactions, are eliminated in preparing the condensed
consolidated interim financial statements. Unrealised gains arising from
transactions with associates and jointly controlled entities are eliminated to
the extent of the Group's interest in the entity. Unrealised losses are
eliminated in the same way as unrealised gains.
(d) Foreign currency
(i) Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are translated to
pounds sterling at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on translation are recognised in profit or loss.
Non-monetary assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate at the date of
the transaction. Non-monetary assets and liabilities denominated in foreign
currencies that are stated at fair value are translated to pounds sterling at
foreign exchange rates ruling at the dates the fair value was determined.
(e) Property, plant and equipment
(i) Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less
accumulated depreciation (see below) and impairment losses (see accounting
policy j).
When parts of an item of property, plant and equipment have different useful
lives, those components are accounted for as separate items of property, plant
and equipment.
(ii) Leased assets
Lease items of which the Group assumes substantially all of the risks and
rewards of ownership are classified as finance leases. Lease payments are
accounted for as described in accounting policy o.
Notes to the condensed consolidated interim financial statements
Significant accounting policies (continued)
(e) Property, plant and equipment (continued)
(iii) Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and
equipment the cost of replacing part of such an item when that cost is incurred
if it is probable that the future economic benefits embodied within the item
will flow to the Group and the cost of the item can be measured reliably. On the
capitalisation of subsequent costs, original cost and any related accumulated
depreciation are de-recognised. All other costs are recognised in profit or loss
as an expense as incurred
(iv) Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the
estimated useful lives of each part of an item of property, plant and equipment.
Land is not depreciated. The estimated useful lives are as follows:
* Leasehold properties over the term of the lease
* Office and computer equipment 25% straight line
* Fixtures and fittings 10% straight line
* Motor vehicles 25% straight line
The residual value is reassessed annually.
(f) Intangible assets
(i) Other intangible assets
Intangible assets, being purchased goodwill, is stated at cost less impairment
losses (see accounting policy j). Cost is the fair value of the consideration
paid.
(ii) Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only when
it increases the future economic benefits embodied in the specific asset to
which it relates. All other expenditure is expensed as incurred.
(g) Trade and other receivables
Trade and other receivables are stated at their estimated recoverable amount
after allowance for impairment losses (see accounting policy j).
(h) Inventories
Stocks are valued at the lower of cost and net realisable value, after making
due allowances for obsolete and slow moving items.
Cost is based on the cost of purchase on a first in, first out basis. Net
realisable value is based on estimated selling price less additional costs to
completion and disposal.
(i) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with an
original maturity of three months or less. Bank overdrafts that are repayable on
demand and form an integral part of the Group's cash management are included as
a component of cash and cash equivalents for the purpose of the statement of
cash flows.
Notes to the condensed consolidated interim financial statements
Significant accounting policies (continued)
(j) Impairment
The carrying amounts of the Group's assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment. If any such
indication exists, the asset's recoverable amount is estimated (see below).
For intangible assets that have an indefinite useful life and intangible assets
that are not yet available for use, the recoverable amount is estimated at each
annual balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its
cash-generating unit exceeds its recoverable amount. Impairment losses are
recognised in profit or loss unless the asset is recorded at a revalued amount
in which case it is treated as a revaluation decrease.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to the
cash-generating unit (group of units) and then, to reduce the carrying amount of
the other assets in the unit (group of units) on a pro rata basis.
Indefinite-lived intangible assets were tested for impairment at 1 April 2006,
the date of transition to IFRSs, even though no indication of impairment
existed.
An impairment loss is reversed if there has been a change in the estimates used
to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined, net
of depreciation or amortisation, if no impairment loss had been recognised.
(k) Employee benefits
(i) Defined contribution plans
Obligations for contributions to defined contribution pension plans are
recognised as an expense in profit or loss as incurred.
(ii) Share-based payment transactions
The share option programme allows Group employees to acquire shares of the
Company. The fair value of options granted is recognised as an employee expense
with a corresponding increase in equity. The fair value is measured at grant
date and spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted
is measured using a Black-Scholes model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest
except where forfeiture is only due to share prices not achieving the threshold
for vesting.
(l) Provisions
A provision is recognised in the balance sheet when the Group has a present
legal or constructive obligation as a result of a past event, and it is probable
that an outflow of economic benefits will be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments of
the time value of money and, when appropriate, the risks specific to the
liability.
Notes to the condensed consolidated interim financial statements
Significant accounting policies (continued)
(l) Provisions (continued)
A provision for restructuring is recognised when the Group has approved a
detailed and formal restructuring plan, and the restructuring either has
commenced or has been announced publicly. Future operating costs are not
provided for.
A provision for onerous contracts is recognised when the expected benefits to be
derived by the Group from a contract are lower than the unavoidable cost of
meeting its obligations under the contract.
(m) Trade and other payables
Trade and other payables are stated at fair value.
(n) Revenue
Franchise commission is recognised on the provision of services to franchises in
the period in which the services are provided. The initial franchise fee is
recognised over the 10 year term of the franchise agreement.
Other turnover and operating income represents amounts receivable for goods and
services provided in the United Kingdom net of VAT. Turnover on retail products
is recognised when products have been delivered and payment becomes due.
Turnover on trade products is recognised when products have been delivered.
(o) Expenses
(i) Operating lease payments
Payments made under operating leases are recognised in profit or loss on a
straight-line basis over the term of the lease. Lease incentives received are
recognised in profit or loss as an integral part of the total lease expense.
(ii) Net financing costs
Net financing costs comprise interest payable on borrowings calculated using the
effective interest rate method, interest receivable on funds invested and
foreign exchange gains and losses.
Interest income is recognised in profit or loss as it accrues, using the
effective interest method.
(p) Income tax
Income tax on the profit or loss for the periods presented comprises current and
deferred tax. Income tax is recognised in profit or loss except to the extent
that it relates to items recognised directly in equity, in which case it is
recognised in equity.
Current tax is the expected tax payable on the taxable income for the year,
using tax rates enacted or substantially enacted at the balance sheet date, and
any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. The
following timing differences are not provided for: goodwill not deductible for
tax purposes, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit, and differences relating to investments
in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance
sheet date.
Notes to the condensed consolidated interim financial statements
(p) Income tax (continued)
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised. Deferred tax assets are reduced to the extent that it is no longer
probable that the related tax benefit will be realised.
Information as to the calculation of income tax on the profit or loss for the
interim periods presented is included in note 3.
(q) Segment reporting
A segment is a distinguishable component of the Group that is engaged either in
providing products or services (business segment), or in providing products or
services within a particular economic environment (geographical segment), which
is subject to risks and rewards that are different from those of other segments.
(r) Employee benefit trust
The Group has established trusts for the benefit of employees, former employees
and certain of their dependants. Monies held in these trusts are held by
independent trustees and managed at their discretion.
Where the Group retains future economic benefit from, and has de facto control
of the assets and liabilities of the trust, they are accounted for as assets and
liabilities of the Group until the earlier of the date that an allocation of
trust funds to employees in respect of past services is declared and the date
that assets of the trust vest in identified individuals.
Where monies held in a trust are determined by the Group on the basis of
employees' past services to the business and the Group can obtain no future
economic benefit from those monies, such monies, whether in the trust or accrued
for by the Group are charged to the profit and loss account in the period to
which they relate.
Notes to the condensed consolidated interim financial statements
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.
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.
Business segments
The Group is comprised of the following main business segments:
* Flooring
* Beds
* Wholesaling
* Franchising
Business segments
For the six months ended 30 September 2007
Flooring Beds Wholesaling Franchising Consolidated
2007 2006 2007 2006 2007 2006 2007 2006 2007 2006
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Segment revenue 3,377 2,877 1,729 1,504 759 490 4,446 4,107 10,311 8,978
_____________________________________________________________
Segment result (55) (39) 150 47 72 62 1,009 682 1,176 752
______________________________________________
Unallocated (531) (381)
expenses ____________
Operating profit 645 371
Net financing costs 61 35
Income tax expense (240) (132)
____________
Profit for the 466 274
period ____________
3. Income taxes
Current tax
Current tax expense for the interim periods presented is the expected tax
payable on the taxable income for the period, calculated as the estimated
average annual effective income tax rate applied to the pre-tax income of the
interim period.
Current tax for current and prior periods is classified as a current liability
to the extent that it is unpaid. Amounts paid in excess of amounts owed are
classified as a current asset.
Deferred tax
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities,
using the estimated average annual effective income tax rate for the interim
periods presented.
The primary components of the entity's deferred tax liabilities include
temporary differences related to property, plant and equipment.
Notes to the condensed consolidated interim financial statements
3. Income taxes (continued)
Deferred tax (continued)
Deferred tax expense arises from the origination and reversal of temporary
differences, the effects of changes in tax rates and the benefit of tax losses
recognised. The primary component of deferred tax expense for the six months
ended 30 September 2007 is related to an increase in deferred tax liabilities,
relating primarily to property, plant and equipment, intangible assets and other
investments.
Reconciliation of effective tax rate
The current tax expense for the six months ended 30 September 2007 was
calculated based on the estimated average annual effective income tax rate of
34.0 percent (six months ended 30 September 2006: 32.5 percent), as compared to
the tax rates expected to be enacted or substantively enacted at the annual
balance sheet date of 30.0 percent (six months ended 30 September 2006:
30.0 percent). Differences between the estimated average annual effective income
tax rate and statutory rate include but are not limited to the effect of tax
rates in foreign jurisdictions, non-deductible expenses, tax incentives not
recognised in profit or loss, the effect of tax losses utilised and under/(over)
provisions in previous years.
4. Property, plant and equipment
Acquisitions and disposals
During the six months ended 30 September 2007, the Group acquired assets with a
cost of �445,000 (six months ended 30 September 2006: �174,000). Assets with a
net book value of �Nil were disposed of during the six months ended 30 September
2007 (six months ended 30 September 2006: �74,000), resulting in a gain on
disposal of �Nil (six months ended 30 September 2006: loss of �74,000).
Capital commitments
During the six months ended 30 September 2007, the Group entered into a contract
to purchase property, plant and equipment for �Nil (six months ended 30
September 2006: �Nil).
Notes to the condensed consolidated interim financial statements
5. Capital and reserves
Share capital and share premium
The Group recorded the following amounts within shareholder's equity as a result
of the issuance of ordinary shares.
Share capital
At 30 At 30 At 31 Mar
Sept Sept
2007 2006 2007
�'000 �'000 �'000
_____________________________
81,400,000 ordinary shares of 5 pence each 4,070 4,070 4,070
Share premium
At 30 At 30 At 31 Mar
Sept Sept
2007 2006 2007
�'000 �'000 �'000
1,106 1,106 1,106
_____________________________
Reserves
Share-based
Merger payment
reserve reserve
As restated Total
�'000 �'000 �'000
At 1 April 2006 (3,110) 75 (3,035)
Charge for the period - 35 35
_____________________________
At 30 September 2006 (3,110) 110 (3,000)
Charge for the period - 179 179
_____________________________
At 31 March 2007 (3,110) 289 (2,821)
Charge for the period - 66 66
Transfer to retained earnings - (100) (100)
_____________________________
At 30 September 2007 (3,110) 255 (2,855)
_____________________________
Notes to the condensed consolidated interim financial statements
6. Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the six months ended 30
September 2007 was based on the profit attributable to ordinary shareholders of
�466,000 (six months ended 30 September 2006: �274,000, 31 March 2007: �580,000)
and a weighted average number of ordinary shares outstanding during the six
months ended 30 September 2007 of 81,400,000 (six months ended 30 September
2006: 81,400,000, 31 March 2007: 81,400,000).
Diluted earnings per share
The calculation of diluted earnings per share for the six months ended 30
September 2007 was based on profit attributable to ordinary shareholders of �
466,000 (six months ended 30 September 2006: �274,000, 31 March 2007 �580,000)
and a weighted average number of ordinary shares outstanding during the six
months ended 30 September 2007 of 81,682,344 (six months ended 30 September
2006: 81,900,326, 31 March 2007: 81,609,991), calculated as follows:
Weighted average number of ordinary shares (diluted)
For the six months ended 30 September 2007
At 30 At 30 At 31
Sept Sept March
2007 2006 2007
Weighted average number of ordinary shares at 81,400,000 81,400,000 81,400,000
30 September
Effect of share options in issue 282,344 500,326 209,991
________________________________
Weighted average number of ordinary shares 81,682,344 81,900,326 81,609,991
(diluted) at 30 September ________________________________
7. Employee benefits
Pension plans
The Group provides employee benefits under defined contribution pension plans,
the details of which are disclosed in the most recent annual financial
statements.
Expense recognised in the consolidated interim income statement
The expense recognised in the consolidated interim income statement consists
contributions made to the defined contribution scheme. For the six months ended
30 September 2007, the Group recognised expense of �46,000 (six months ended 30
September 2006: �33,000, year ended 31 March 2007: �77,000).
Share-based payments
At 10 February 2005, the Group established a share option programme that
entitles key management personnel and senior employees to purchase shares in the
entity. The terms and conditions of the share option programme and grants made
during the year ended 31 March 2007 are disclosed in the most recent annual
financial statements. At 20 July 2007, a further grant on similar terms has been
made to these employee groups. In accordance with these programmes options are
exercisable at the market price of the shares at the date of grant.
Notes to the condensed consolidated interim financial statements
7. Employee benefits (continued)
Share-based payments (continued)
The terms and conditions of the grants made during the six months ended 30
September 2007 are as follows; all option exercises are settled by physical
delivery of shares:
Number of Contractual
Grant date / employees entitled instruments life of
options
Option grant to senior employees at 20 July 2007 1,052,631 10 years
The fair values of services received in return for share options granted to
employees is measured by reference to the fair value of share options granted.
The estimate of the fair value of the services received is measured based on a
Black-Scholes model. The contractual life of the option (10 years) is used as an
input into this model. Expectations of early exercise are incorporated into the
Black-Scholes.
Fair value of share options and assumptions
For the six months ended 30 September 2007
At 30 September At 31
March
2007 2006 2007
Fair value at measurement date 4.9p 2.4p 2.4p
Share price 14.25p 8.75p 8.75p
Exercise price 14.25p 8.75p 8.75p
Expected volatility (expressed as weighted average
volatility used in the modelling under binomial 55% 55% 55%
lattice model)
Option life (expressed as weighted average life
used in the modelling under binomial lattice 4 years
model) 4 years 4 years
Expected dividends 5.25% 8.0% 8.0%
Risk-free interest rate (based on national 5.6% 4.7% 4.7%
government bonds)
The expected volatility is based on the historic volatility (calculated based on
the weighted average remaining life of the share options), adjusted for any
expected changes to future volatility due to publicly available information.
The options are exercisable not earlier than 10 February 2008 upon achievement
of performance targets determined by the Remuneration Committee.
8. Financial instruments
Interest-bearing loans and borrowings
In the opinion of the directors there is no significant difference between the
fair value of hire purchase contracts and the carrying value in the financial
statements.
Trade and other receivables/payables
The carrying value is deemed to reflect the fair value for all trade and other
receivables/payables.
Notes to the condensed consolidated interim financial statements
9. Related parties
Transactions with key management personnel
Loans to directors for the six months ended 30 September 2007 amounted to �Nil
(six months ended 30 September 2006: �Nil), 31 March 2007: �Nil).
Key management personnel receive compensation in the form of short-term employee
benefits, post-employment benefits and equity compensation benefits. Key
management personnel received total compensation of �313,000 for the six months
ended 30 September 2007 (six months ended 30 September 2006: �262,000), 31 March
2007: �727,000).
10. Explanation of transition to IFRSs
As stated in note 1(a), these are the Group's first condensed consolidated
interim financial statements for part of the period covered by the first IFRS
annual consolidated financial statements prepared in accordance with IFRSs.
The accounting policies in note 1 have been applied in preparing the condensed
consolidated interim financial statements for the six months ended 30 September
2007, the comparative information for the six months ended 30 September 2006,
the financial statements for the year ended 31 March 2007 and the preparation of
an opening IFRS balance sheet at 1 April 2006 (the Group's date of transition).
In preparing its opening IFRS balance sheet no adjustments were required to
amounts reported in financial statements prepared in accordance with previous
GAAP.
An explanation of how the transition from previous GAAP to IFRSs has affected
the Group's financial position, financial performance and cash flows is set out
below
Reconciliation of equity
There are no material differences between the amounts presented in equity under
the previous GAAP with the amounts presented under IFRS.
Reconciliation of profit for prior periods
In preparing the IFRS statement of income and expense no adjustments are
required to amounts reported in financial statements prepared in accordance with
previous GAAP.
Explanation of material adjustments to the cash flow statement
There are no material differences between the cash flow statement presented
under IFRSs and the cash flow statement presented under previous GAAP.
11. Prior year adjustment
At 31 March 2007, the directors reviewed the classification of costs in the
profit and loss account and considered that certain costs previously included in
cost of sales were more appropriately classified as administrative expenses.
Accordingly, a prior year adjustment has been made to transfer �353,000 for the
six months ended 30 September 2006 (�702,000 for the year ended 31 March 2007)
from cost of sales to administrative expenses. This adjustment has no impact on
operating profit or net assets in either period. This adjustment increases gross
profit for the six months ended 30 September 2006 by �353,000 (�702,000 for the
year ended 31 March 2007).
This information is provided by RNS
The company news service from the London Stock Exchange
END
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