TIDMUCG
RNS Number : 0462Y
United Carpets Group plc
16 December 2010
UNITED CARPETS GROUP plc
Interim results for the period ended 30 September 2010
United Carpets Group plc ("the Group" or "the Company" or
"United Carpets"), the second largest chain of specialist retail
carpet and floor covering stores in the UK, today announces its
interim results for the period ended 30 September 2010.
Headlines
-- Significant progress in successfully franchising corporate
stores with the average number of corporate stores reducing to 11
from 20 and total stores up from 82 to 83
-- Network sales broadly maintained at GBP34.2m (2009:
GBP34.5m)
-- Revenue decreased by 5.0% to GBP13.36m (2009: GBP14.06m)
principally as a result of the successful franchising of corporate
stores
-- Like for like sales decreased 5.3%
-- Adjusted operating profit* decreased by 18.0% to GBP534,000
(2009: GBP651,000)
-- Profit before tax decreased by 14.0% to GBP604,000 (2009:
GBP702,000)
-- Cash and cash equivalents of GBP1.85m (2009: GBP1.38m)
-- Interim dividend maintained at 0.25p per share (2009:
0.25p)
* Adjusted operating profit excludes impairment of property,
plant and equipment and movements in the provision against onerous
leases
Paul Eyre, Chief Executive, said:
"This was a solid performance in a very challenging trading
environment. Consumers remain cautious over spending, following
uncertainty in the job market and the lack of any clear signs of
economic recovery. However United Carpets' focus on offering
exceptional value combined with the benefits of our franchise model
has ensured we have maintained our market position and continued to
attract new franchisees. We continue to expand the business and
have the financial flexibility to take advantage of any
opportunities that come about as a result of the current slowdown
and remain well placed to benefit as and when growth returns to the
economy."
Enquiries:
Paul Eyre, Chief Executive
Ian Bowness, Finance Director
United Carpets Group plc 01709 732 666
Tim Robertson
Jamie Milton
Cardew Group 020 7930 0777
Jonathan Wright
Seymour Pierce 020 7107 8000
Chairman's statement
The Group's interim results for the six months ended 30
September 2010 reflect the Company's ability to continue to deliver
a satisfactory performance within these tough market conditions.
Revenues were 5.0% lower for the period, which principally reflects
the successful franchising of a significant number of corporate
stores, replacing gross sales with franchised income which is lower
but does not have the same associated running costs. Total store
numbers increased slightly from 82 to 83 and have increased further
since the period end to 86. As ever, the Group is committed to
offering exceptional value to all its customers, providing
extensive ranges at very competitive prices. The business is well
funded and has a strong reputation within the regions in which it
operates.
Financial review
Despite the market conditions 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), was broadly maintained at GBP34.2m (2009:
GBP34.5m). Revenue, which as in previous years includes marketing
and rental costs incurred by the Group and recharged to
franchisees, was GBP13.36m (2009: GBP14.06m) principally reflecting
the reduction in the average number of corporate stores during the
period in comparison to the same period in the prior year.
Like for like sales across the whole of the network were 5.3%
lower compared to the previous period. Given United Carpets'
franchise structure, like for like sales are not necessarily 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 was
3.1% lower on a like for like basis compared to the previous year
whilst bed like for like sales were down by 24.2%.
Gross margin of 66.3% compares to 65.1% in the same period last
year and 66.2% for the full year to 31 March 2010 reflecting the
increased proportion of franchise related income to total revenue
as Retail, Beds and Warehouse sales accounted for a smaller
proportion of revenue as more corporate stores were franchised.
Distribution costs include staff costs at the corporate stores
and the reduction in comparison to the same period in the prior
year principally arises from the reduction in the average number of
corporate stores. Administrative expenses increased by 3.0% as a
result of increased marketing support for the franchise
network.
Profit before tax was GBP604,000 (2009: GBP702,000) and earnings
per share were 0.48p (2009: 0.56p).
The balance sheet continues to be robust with no borrowings,
other than a small number of minor hire purchase contracts, and
cash and cash equivalents were GBP1.85m (2009: GBP1.38m) despite an
increase in trade and other receivables as a result of the
increased number of corporate stores franchised during the
period.
Dividend
The Board is pleased to announce a maintained interim dividend
of 0.25p per share, reflecting our confidence in the long term
strength and prospects of the business. The dividend will be paid
on 27 January 2011 to those shareholders whose names are on the
register on 7 January 2011.
Operations review
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. The
Group ended the period under review with 83 branded stores across
Northern and Central England. With the exception of 10 corporate
stores, these were all franchises operating under United Carpets'
bespoke franchise model.
While like for like sales were lower than the previous year, the
relatively modest decline in profitability emphasises the natural
advantages of the United Carpets franchise model over the more
traditional retailer. During a more challenging environment, with
weakened consumer confidence and continued uncertainty over jobs
and further economic measures to support the economy, our
franchised stores, run by owner-managers, are naturally more
incentivised to perform but at the same time they can exploit the
benefits of being a part of the wider branded Group. In this market
environment, our customers are looking for value and will search
harder to find the best available deals if they are going to
replace existing flooring, the primary driver of our business. We
pride ourselves on delivering value for money and on our
franchisees providing excellent customer service and through these
factors the business has been able to deliver a stable
performance.
Advertising is a key part of the Group's marketing strategy,
aimed at increasing brand awareness and promoting individual offers
that underline our value for money ranges. In the period under
review, we continued to carry out television advertising in
targeted areas where we have sufficient critical mass of stores for
this to generate economic returns. We also use radio, print and
direct advertising strategies to increase brand awareness and drive
sales across the Group. Advertising strategies operate at multiple
levels, and are tailored for individual stores, geographic regions
and across the whole network of stores.
Chairman's statement
Franchising
We began the year with 70 franchised stores. During the period 3
new franchised stores have opened and 1 store has closed,
temporarily, due to a fire. We have taken back 4 stores into the
corporate arm and 5 corporate stores have been franchised. As a
result, at the end of the period, the Group had 73 franchised
stores.
Since the period end we have franchised a further 5 corporate
stores, opened a new franchised store in Coventry and made 5
franchised stores into corporate stores. The net result of these
actions is that the number of franchised stores increased to 74
currently.
It is a positive reflection on the Group, that new franchisees
continue to be attracted to join United Carpets and the level of
interest from potential new franchisees remains healthy.
Retail
We started the period with 12 corporate stores, 4 stores were
taken back into the corporate arm, 5 were successfully franchised
during the half and one corporate store closed (due to lease
expiry) to give 10 corporate stores at the period end. Since then,
2 new corporate stores opened in Manchester and Birmingham, 5
stores became corporate stores and 5 corporate stores have been
franchised so that we are currently operating 12 corporate stores.
We aim to retain only two corporate stores as core stores, to
enable training and product development, although in practice we
expect to always have a handful of stores which are in the process
of being franchised.
Flooring sales had been improving since the period end, however,
the recent spell of atrocious weather (which was centered around
our Northern heartland) had a significant impact on two of our
busiest trading weeks and consequently like for like sales in the
10 weeks since the period end were a little lower, down 3.4%. We
continue to believe that our network of stores are delivering a
competitive performance in a tough market.
Beds
Against tough comparatives, following a significant improvement
in Beds sales in the first half of the prior year, the performance
in the period under review was disappointing, in part reflecting
the more challenging environment and that the average sales price
for beds is significantly more than with flooring. Since the period
end, Beds sales have improved a little but continued to be
substantially below last year, with like for like sales down 16.9%.
Within the portfolio, however, there are many stores which are
selling beds in high volumes, we are therefore confident the
combination of beds and flooring is compatible and we are focused
on improving the performance from this division.
Warehouse
The Group's in-house cutting operation for flooring continues to
improve in efficiency and service benefiting in particular from the
introduction of 7 day a week coverage. During the period, sales to
the franchised network increased by 19.8%.
People
This was a challenging period and it has been rewarding to the
see the whole team at United Carpets respond positively.
Consequently, the Board would like to take this opportunity to
thank all staff, franchisees and supplier partners for their
commitment and contribution in the period under review and looks
forward to working together towards a successful year.
Outlook
Whilst the market environment has remained tough in the 10 weeks
since the period end, overall like for like sales have improved a
little to 4.6% down on last year with improvements in the
performance of the Beds division more than offsetting the adverse
impact from the heavy snow falls. Whilst there is little evidence
of any significant improvement in the market in the short term,
United Carpets is well positioned to work through this period and
capitalize on any opportunities that arise. Smaller, independent
operators are likely to come under increasing pressure which may
lead to opportunities to recruit experienced potential franchisees
looking for the support of a larger network and/or new sites to
acquire. With a strong brand, a healthy balance sheet and a clear
strategy for developing the business, we are confident of
continuing to meet our objective of generating shareholder
value.
Peter Cowgill
Chairman
Independent review report to United Carpets Group plc
Introduction
We have reviewed the accompanying condensed consolidated interim
balance sheet of United Carpets Group plc as at 30 September 2010
and the related condensed consolidated interim income statement,
condensed consolidated statement of changes in equity and condensed
consolidated interim statement of cash flows for the six month
period then ended. Management is responsible for the preparation
and fair presentation of this interim financial information in
accordance with applicable law. 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.
RSM Tenon Audit Limited
Statutory Auditor
Nottingham
16 December 2010
Condensed consolidated interim income statement
For the six months ended 30 September 2010
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2010 2009 2010
Unaudited Unaudited Audited
Total Total Total
Note GBP'000 GBP'000 GBP'000
Revenue 2 13,365 14,062 27,475
Cost of sales (4,502) (4,913) (9,295)
-------------- -------------- ----------
Gross profit 8,863 9,149 18,180
Distribution costs (1,261) (1,669) (2,976)
Administrative expenses (7,047) (6,841) (14,223)
Other operating income 48 61 111
Profit on disposal of
property, plant and
equipment - - 2
-------------- -------------- ----------
Adjusted operating profit* 534 651 1,459
Impairment of property,
plant and equipment - (138)
Decrease/(increase) in
provision against onerous
leases 69 49 (227)
-------------- ----------
Operating profit before
financing costs 603 700 1,094
Financial income 4 4 10
Financial expenses (3) (2) (6)
Profit before tax 604 702 1,098
Income tax expense 3 (212) (246) (415)
-------------- -------------- ----------
Profit for the period 2 392 456 683
-------------- -------------- ----------
Basic earnings per share 5 0.48p 0.56p 0.84p
-------------- -------------- ----------
Diluted earnings per share 5 0.48p 0.56p 0.84p
-------------- -------------- ----------
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 other comprehensive income has been presented.
* Adjusted operating profit excludes impairment of property,
plant and equipment and movements in the provision against onerous
leases
Condensed consolidated interim balance sheet
As at 30 September 2010
30 30
September September 31 March
2010 2009 2010
Unaudited Unaudited Audited
Total Total Total
Note GBP'000 GBP'000 GBP'000
Non-current
assets
Property, plant and equipment 4 5,446 5,393 5,148
---------- ----------- --------
Current assets
Inventories 2,314 2,659 2,670
Trade and other receivables 4,460 4,057 3,184
Cash and cash equivalents 1,847 1,380 2,201
----------
8,621 8,096 8,055
---------- ----------- --------
Total assets 14,067 13,489 13,203
---------- ----------- --------
Equity
Issued capital 4,070 4,070 4,070
Share premium 1,106 1,106 1,106
Reserves (2,578) (2,660) (2,617)
Retained earnings 2,810 2,802 2,418
---------- ----------- --------
Total shareholders' equity 5,408 5,318 4,977
---------- ----------- --------
Non-current
liabilities
Financial liabilities - borrowings 35 81 76
Trade and other payables 2,520 2,054 2,349
Provisions 651 542 743
Deferred tax liabilities 106 126 106
---------- ----------- --------
3,312 2,803 3,274
---------- ----------- --------
Current liabilities
Financial liabilities - borrowings 69 48 57
Trade and other payables 4,992 4,863 4,416
Current tax liabilities 286 457 479
5,347 5,368 4,952
---------- ----------- --------
Total liabilities 8,659 8,171 8,226
---------- ----------- --------
Total equity and liabilities 14,067 13,489 13,203
---------- ----------- --------
Condensed consolidated statement of changes in equity
For the six months ended 30 September 2010
Share-based
Share Share Retained Merger payment
capital premium earnings reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April
2009 4,070 1,106 2,446 (3,110) 411
Profit for
the period - - 456 - -
Share-based
payments - - (100) - 39
At 30
September
2009 4,070 1,106 2,802 (3,110) 450
----------- ----------- ---------- ----------- ------------
At 1 April
2010 4,070 1,106 2,418 (3,110) 493
Profit for
the period - - 392 - -
Share-based
payments - - - - 39
At 30
September
2010 4,070 1,106 2,810 (3,110) 532
----------- ----------- ---------- ----------- ------------
Condensed consolidated interim statement of cash flows
For the six months ended 30 September 2010
6 months 6 months
ended 30 ended 30 Year ended
September September 31 March
2010 2009 2010
Unaudited Unaudited Audited
Total Total Total
Note GBP'000 GBP'000 GBP'000
Cash flows
from
operating
activities
Cash generated from operations 8 866 (66) 1,879
Interest paid (3) (2) (6)
Income taxes paid (405) (29) (196)
---------- ---------- ----------
Net cash from operating activities 458 (97) 1,677
---------- ---------- ----------
Cash flows
from
investing
activities
Proceeds from sale of property,
plant and equipment - 18 20
Acquisition of property, plant and
equipment (787) (373) (695)
Interest received 4 4 10
Net cash flow from investing
activities (783) (351) (665)
---------- ---------- ----------
Cash flows
from
financing
activities
Payment of finance lease liabilities (29) (20) (48)
Dividends paid - - (611)
---------- ---------- ----------
Net cash flow from financing
activities (29) (20) (659)
---------- ---------- ----------
Net (decrease)/increase in cash and
cash equivalents (354) (468) 353
Cash and cash equivalents at the
start of the period 2,201 1,848 1,848
Cash and cash equivalents at the
end of the period 1,847 1,380 2,201
---------- ---------- ----------
Notes to the condensed consolidated interim financial
statements
1. Basis of preparation
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
2010 comprise the Company and its subsidiary undertakings (together
referred to as the "Group").
The Group financial statements for the year ended 31 March 2010
were approved by the Board of Directors on 7 September 2010 and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under section
498(2) and 498(3) of the Companies Act 2006. These condensed
consolidated interim financial statements do not comprise statutory
accounts within the meaning of section 435 of the Companies Act
2006. These condensed consolidated interim financial statements for
the period ended 30 September 2010 are unaudited but have been
reviewed by the auditors and their Independent Review Report is
included with these statements.
The accounting policies applied are consistent with those of the
annual financial statements for the year ended 31 March 2010.
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:
-- Franchising
-- Retail
-- Beds
-- Warehouse
For the six months ended 30 September 2010
Franchising Retail Beds Warehouse Consolidated
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment
revenue 5,745 5,329 3,647 4,571 2,045 2,553 1,928 1,609 13,365 14,062
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Segment
results 872 1,161 140 (198) 95 171 (40) 16 1,067 1,150
------- ------- ------- ------- ------- ------- ------- -------
Unallocated
expenses (464) (450)
------- -------
Operating
profit
before
financing
costs 603 700
Net
financing
income 1 2
Income tax
expense (212) (246)
------- -------
Profit for
the period 392 456
------- -------
Retail was previously described as Flooring and Warehouse was
previously described as Trade sales however the directors
consider that the revised descriptions better fit the nature of
those segments.
Notes to the condensed consolidated interim financial
statements
3. Income tax expense
The tax charge accrued in these interim results reflects an
estimated effective tax rate of 35% (30 September 2009: 35%) as a
result of expenses not deductible for tax purposes and
non-qualifying depreciation.
4. Property, plant and equipment
Acquisitions and disposals
During the six months ended 30 September 2010 the Group acquired
assets with a cost of GBP787,000 (six months ended 30 September
2009: GBP407 000). Assets with a net book value of GBP13,000 were
disposed of during the six months ended 30 September 2010 (six
months ended 30 September 2009: GBP18,000), resulting in a gain on
disposal of GBPNil (six months ended 30 September 2009:
GBPNil).
Capital commitments
There were no capital commitments contracted for but not
provided for at the period end (30 September 2009: GBPNil).
5. Basic and diluted earnings per share
Basic earnings per share
The calculation of basic earnings per share for the six months
ended 30 September 2010 was based on the profit attributable to
ordinary shareholders of GBP392,000 (six months ended 30 September
2009: GBP456 000, year ended 31 March 2010: GBP683,000) and a
weighted average number of ordinary shares outstanding during the
six months ended 30 September 2010 of 81,400,000 (six months ended
30 September 2009: 81,400,000, year ended 31 March 2010:
81,400,000).
Diluted earnings per share
There are 2,155,171 share options which give rise to a dilution
at 30 September 2010 (30 September 2009: Nil, 31 March 2010:
2,155,171).
The calculation of diluted earnings per share for the six months
ended 30 September 2010 was based on profit attributable to
ordinary shareholders of GBP392,000 (six months ended 30 September
2009: GBP456 000, year ended 31 March 2010 GBP683,000) and a
weighted average number of ordinary shares outstanding during the
six months ended 30 September 2010 of 81,535,942 (six months ended
30 September 2009: 81,400,000, year ended 31 March 2010:
81,480,759), calculated as follows:
At 30 September At 31 March
2010 2009 2010
Weighted average number of ordinary
shares at period end 81,400,000 81,400,000 81,400,000
Effect of share options in issue
(dilutive) 135,942 - 80,759
---------- ---------- -----------
Weighted average number of ordinary
shares (diluted) 81,535,942 81,400,000 81,480,759
---------- ---------- -----------
6. 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
Theexpense recognised in the consolidated interim income
statement consists of contributions made to the defined
contribution scheme. For the six months ended 30 September 2010,
the Group recognised expense of GBP48,000 (six months ended 30
September 2009: GBP42,000, year ended 31 March 2010:
GBP88,000).
Notes to the condensed consolidated interim financial
statements
7. 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.
8. Cash generated from operations
6 months ended 6 months ended Year ended
30 September 30 September 31 March
2010 2009 2010
GBP000 GBP000 GBP000
Profit before tax 604 702 1,098
Depreciation of property,
plant and equipment 476 451 912
Impairment of property, plant
and equipment - - 138
Profit on disposal of
property, plant and
equipment - - (2)
Share-based payments 39 (61) (18)
Decrease in inventories 356 104 93
Increase in trade and other
receivables (1,263) (1,291) (418)
(Decrease)/increase in
provision against onerous
leases (92) (49) 152
Increase/(decrease) in trade
and other payables 747 80 (72)
Financial income (4) (4) (10)
Financial expenses 3 2 6
866 (66) 1,879
--------------- --------------- -----------
This information is provided by RNS
The company news service from the London Stock Exchange
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