TIDMUCG
RNS Number : 1650N
United Carpets Group plc
24 July 2014
UNITED CARPETS GROUP plc
Preliminary Results for the year ended 31 March 2014
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
preliminary results for the year ended 31 March 2014.
Highlights
-- Network sales were GBP55.7m (6 months ended 31 March 2013*: GBP29.0m)
-- Like for like sales increased by 2.2%**
-- Revenue for the year ended 31 March 2014 was GBP21.1m (6
months ended 31 March 2013: GBP11.3m)
-- Profit before tax was GBP0.94m (6 months ended 31 March 2013: GBP0.25m)
-- As a result of increased profit before tax and a prior period
tax credit, earnings per share were 1.39p (6 months ended 31 March
2013: 0.19p)
-- Further closures of underperforming stores mean store numbers decreased by 5 to 59
-- Cash and cash equivalents increased to GBP1.68m (31 March 2013: GBP0.93m)
*As a result of the change in the year end to 31 March, prior
period comparatives are for the 6 months ended 31 March 2013
**Network sales and like for like sales are defined under
Financial Review
Paul Eyre, Chief Executive, said:
"We are pleased to be announcing a good uplift in profitability,
helped by an increase in like for like sales as consumer confidence
increases slightly and the housing market also improves.
This trading performance also reflects the benefits of the
management actions taken two years ago to reduce significantly the
size of the store portfolio, removing the majority of
underperforming stores, re-focusing the business on a core network
of stores and giving the Company a stronger financial base from
which to operate."
Enquiries:
United Carpets Group plc
Paul Eyre, Chief Executive
Ian Bowness, Finance Director
01709 732 666
Novella Communications Ltd
Tim Robertson
Ben Heath 020 3151 7008
Cantor Fitzgerald Europe
Mark Percy/Catherine Leftley (Corporate Finance)
David Banks/Paul Jewell (Corporate Broking) 020 7894 7000
Chairman's statement
I am pleased to present these results which show a significant
improvement in Group profitability reflecting the fact that the
Company's restructuring has largely been successfully completed and
it is no longer held back by a significant tail of weaker stores
which historically have impacted heavily on profit margins and
demanded a disproportionate amount of management time.
Today, the network of stores totals 57, down from over 80 stores
two years ago, of which 46 are franchised and 11 are run as
corporate stores. The Group recorded a 2.2% increase in like for
like sales performance for the year which was, in our view, a
satisfactory performance.
The UK market has been better and continues to show signs that
it is recovering although we believe the market remains fragile
with a number of hurdles still to come such as increases in
interest rates which are expected in the not too distant future. We
are therefore looking to continue to develop the business whilst
endeavouring to ensure that it does not become over extended.
This report covers the year to 31 March 2014, however, the prior
reporting period was for the 6 months to 31 March 2013.
Financial review
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), were
GBP55.7m. Revenue, which as in previous years includes marketing
and rental costs incurred by the Group and recharged to
franchisees, was GBP21.1m.
Like for like sales across the whole of the network (based on
stores that have traded throughout both the period under review and
the corresponding period in the prior year and thus excluding
stores that closed during either period) were up 2.2%. This was a
good indicator that sentiment improved slightly during the year and
that the Group's customer proposition remains attractive.
Gross margin has reduced from 62.7% to 61.7% during the year.
The conversion to the new Beds sales process was largely completed
during the second half of the year, and whilst this results in a
reduction in Beds gross margin this is offset, to some extent, by
reduced commission payments to franchisees within distribution
costs. The impact on gross margin has also been partially offset by
the increased proportion of franchise related income to total
revenue as corporate store turnover and Beds sales accounted for a
smaller proportion of revenue during the year, due to the reduction
in the average number of corporate stores and the change in the
Beds sales process.
Distribution costs and administrative expenses include rent,
rates and staff costs at the corporate stores. Distribution costs
and administrative expenses excluding exceptional items have
reduced from 63.9% of revenue to 58.1% reflecting the reduction in
the scale of the business and realignment of central costs to
support a more streamlined business.
Profit before tax and exceptional items was GBP0.94m. As a
result of increased profit before tax and the deferred tax asset
arising in connection with the acquisition of the trade from United
Carpets (Northern) Ltd in October 2012, basic earnings per share
improved to 1.39p (6 months ended 31 March 2013: 0.19p).
The balance sheet included net funds of GBP1.68m at 31 March
2014 (31 March 2013: GBP0.93m).
Dividend
The Board is not recommending a dividend due to the lack of
available distributable reserves. The Board is proposing to
undertake a formal capital reduction which will convert some of the
existing share capital and the share premium reserve into
distributable reserves enabling dividend payments to be
reconsidered later in the calendar year. I will be writing to
shareholders shortly, giving full details of the capital reduction
process and notice of the general meeting that will be held to
consider the Board's proposals.
Chairman's statement (continued)
Operations review
At the start of the period under review the Group operated 64
stores of which 52 were franchised and 12 were corporate stores. At
31 March 2014, there were 59 stores of which 48 were franchised and
11 were corporate stores. Since then one franchised store and one
corporate store have closed, one has been taken back as a corporate
store and franchisees have changed in two other stores, so that
today the Group operates 57 stores.
The Company expects, over the course of the current financial
year, to close a small number of further stores which are either
underperforming or where the Company has been unable to negotiate a
satisfactory new lease agreement with landlords. Of the 57 stores
currently trading, leases are either in place or agreed in
principle pending legal completion for 52 with the remaining stores
being occupied under short term tenancies. There has been a
material improvement to the Group and its franchisees in
renegotiated lease agreements, either through rent reductions,
improved break clauses or the elimination of significant,
potential, historic dilapidation commitments or from a combination
of all of these factors.
With the restructuring largely completed, the management team
has been able to focus again on developing the business, refining
the customer offer and driving sales and is exploring limited
trials of smaller store formats.
Refining the customer offer remains a constant focus for the
operational team. A key point of differentiation for the Group is
the ability to offer customers a very broad range of good quality
flooring at highly attractive price points. Independent operators
find it difficult to match the range or prices offered by the Group
and we believe our pricing compares very favourably with our larger
peer group too. We continue to advertise the United Carpets brand
across a range of outlets from TV to radio, adapting the shape of
the advertising programme in line with the geographic changes in
our portfolio of stores. Within our target markets, the United
Carpets brand is well known and well respected for delivering great
value for money.
Franchising and Retail
Floor coverings are the Group's primary driver of sales
(predominantly carpet, laminate and vinyl flooring) through both
franchised stores and the Group's own corporate stores. As
demonstrated by the trading performance, the market environment has
improved albeit from a low base. Employment levels have increased
ahead of expectations and so has the housing market, with
transaction levels up on the previous year. That said, the market
remains fragile with consumers still cautious and events on the
horizon, such as interest rate rises, yet to make an impact.
On a like for like basis, sales of Flooring have eased a little
to 2.2% down for the 16 weeks since the period end to 17 July 2014.
Sales of Beds were 3.6% down on a like for like basis over the same
period.
Warehousing
Our in-house cutting operation continues to support the whole
network and a small number of third parties, providing a quick,
efficient cutting and delivery service enabling attractive retail
price points with good margins.
Property
The property division leases properties from third parties and
sublets those properties to the store network.
People
The Board believes the Company is fortunate to have such a
strong team working within the Company and would like to express
its gratitude to all employees and stakeholders who continue to
support the business, for their hard work and continued commitment
to the Company.
Chairman's statement (continued)
Outlook
Our base is stronger. We have removed the majority of the weaker
stores from our portfolio, we have no debt and an improving balance
sheet. Consumer demand has shown some signs of improving although
the second quarter of the calendar year appears to have softened a
little compared to the first quarter as shown by our sales in the
first 16 weeks of the current year which, in total, are 2.3% down
on a like for like basis. Trading has been a little patchy but we
believe the overall picture is generally moving forward,
underpinned by higher levels of employment and a more active
housing market.
Peter Cowgill
Chairman
Preliminary announcement of results for the year ended 31 March
2014
Consolidated statement of profit or loss and other comprehensive
income
6 month
Year period
ended ended
31 March 31 March
Note 2014 2013
GBP'000 GBP'000
Revenue 21,059 11,302
Cost of sales (8,073) (4,213)
Gross profit 12,986 7,089
Distribution costs (546) (327)
Administrative expenses (11,634) (6,573)
Other operating income 128 59
Operating profit 2 934 248
Financial income 13 2
Financial expenses (10) -
Profit before tax 937 250
Tax credit/(expense) 4 195 (93)
Profit for the period 1,132 157
Profit and other comprehensive income attributable
to equity holders of the parent 1,132 157
Earnings per share 5
- Basic (pence per share) 1.39p 0.19p
- Diluted (pence per share) 1.39p 0.19p
Preliminary announcement of results for the year ended 31 March
2014
Consolidated statement of financial position
At 31
At 31 March March
2014 2013
GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 567 348
Deferred tax assets 396 27
963 375
Current assets
Inventories 1,100 1,426
Trade and other receivables 2,628 2,575
Cash and cash equivalents 1,678 930
5,406 4,931
Total assets 6,369 5,306
Capital and reserves
Issued capital 4,070 4,070
Share premium 1,106 1,106
Share-based payment
reserve 598 598
Retained earnings (2,816) (3,948)
Total equity attributable
to equity holders of
the parent 2,958 1,826
Non-current liabilities
Trade and other payables 476 229
476 229
Current liabilities
Financial liabilities
- borrowings - 21
Trade and other payables 2,799 3,056
Current tax liabilities 136 174
2,935 3,251
Total liabilities 3,411 3,480
Total equity and liabilities 6,369 5,306
Preliminary announcement of results for the year ended 31 March
2014
Consolidated statement of changes in equity
Total equity
attributable
to equity
Issued Share-based Retained holders
capital Share premium payment reserve earnings of the parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 5 October 2012 4,070 1,106 598 (4,105) 1,669
Profit for the period - - - 157 157
At 31 March 2013 4,070 1,106 598 (3,948) 1,826
Profit for the period - - - 1,132 1,132
At 31 March 2014 4,070 1,106 598 (2,816) 2,958
---------- -------------- ----------------- ----------- ---------------
Preliminary announcement of results for the year ended 31 March
2014
Consolidated statement of cash flows
6 month
Year period
ended ended
31 March 31 March
Note 2014 2013
GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 6 1,338 628
Interest paid (10) -
Income tax paid (212) -
Net cash flows from operating activities 1,116 628
Cash flows from investing activities
Acquisition of trade and assets - (475)
Proceeds from sale of property,
plant and equipment 2 -
Acquisition of property, plant and
equipment (362) (3)
Interest received 13 2
Net cash flows from investing activities (347) (476)
Increase in cash and cash equivalents
in the year 769 152
Cash and cash equivalents at the
start of the year 909 757
Cash and cash equivalents at the
end of the year 7 1,678 909
Preliminary announcement of results for the year ended 31 March
2014
Notes to the preliminary announcement
1. Basis of preparation
The financial information contained in this unaudited
preliminary announcement does not constitute accounts as defined by
section 434 of the Companies Act 2006. The financial information
for the 6 month period ended 31 March 2013 is derived from the
statutory accounts for that period which have been delivered to the
Registrar of Companies. The auditors reported on those accounts;
their report was unqualified and did not contain a statement under
either section 498(2) or section 498(3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2014 will be
finalised based on the information in this unaudited preliminary
announcement and will be delivered to the Registrar of Companies in
due course. The Group has prepared its consolidated financial
statements for the year ended 31 March 2014 in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union.
2. Operating profit
Operating profit is arrived at after charging/(crediting):
6 month
period
Year ended ended
31 March 31 March
2014 2013
GBP'000 GBP'000
Costs of reducing the number of operational
stores 117 66
Net gains arising in the current period
relating to the Group reorganisation (73) (385)
Other exceptional income (97) -
.
Other exceptional income was compensation received as a result
of the compulsory purchase of one of the properties operated by the
Group.
Preliminary announcement of results for the year ended 31 March
2014
Notes to the preliminary announcement (continued)
3. Segment reporting
Segment information is presented 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.
Franchising Warehousing Property Consolidated
and Retail
6 month
Year period
ended ended
31 March 31 March
2014 2013 2014 2013 2014 2013 2014 2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Segment revenue 10,397 6,148 8,250 3,865 2,412 1,289 21,059 11,302
____ ____ ____ ____ ____ ____ ____ ____
593 (85) (3) 118 164 135
Segment results ____ ____ ____ ____ ____ ____ 754 168
Unallocated income 52 21
Other operating 128 59
income ____ ____
Operating profit 934 248
Financial income 13 2
Financial expenses (10) -
Tax credit/(expense) 195 (93)
____ ____
Profit for the 1,132 157
period _____ _____
Warehousing was previously described as Warehousing and Beds.
The directors consider that, following the change in the way that
Beds are sold through the network giving more ownership of Beds
sales to franchisees, the revised description better fits the
nature of this business.
Preliminary announcement of results for the year ended 31 March
2014
Notes to the preliminary announcement (continued)
4. Tax credit/(expense)
Analysis of charge for the period:
6 month
period
Year ended ended
31 March 31 March
2014 2013
GBP'000 GBP'000
Current tax:
UK corporation tax in respect
of the current period 131 78
UK corporation tax in respect
of prior periods 43 (6)
----------- ----------
174 72
Deferred tax:
In respect of the current
period 118 14
In respect of prior periods (487) 7
----------- ----------
Total income tax (credit)/expense
recognised in the current
period (195) 93
=========== ==========
The tax charge for the year differs to the standard rate of
corporation tax in the UK of 23% (2013: 24%). The differences are
explained below:
6 month
Year period
ended ended
31 March 31 March
2014 2013
GBP'000 GBP'000
Profit before tax 937 250
Profit before tax multiplied by the rate
of corporation tax in the UK of 23% (2013:
24%) 216 60
Effect of:
Expenses not deductible for tax purposes 12 13
Change in tax rate 21 -
Other timing differences - 19
Prior year adjustments (444) 1
Total tax (195) 93
================ ===========
The acquisition of the trade from a connected company (United
Carpets (Northern) Ltd) gives rise to a deferred tax asset in
United Carpets (Franchisor) Ltd. The prior year adjustments
principally reflects an estimate of that deferred tax asset
following the submission of tax computations for the period to 5
October 2012 by UNCN Realisations 2012 Ltd (formerly United Carpets
(Northern) Ltd).
Preliminary announcement of results for the year ended 31 March
2014
Notes to the preliminary announcement (continued)
5. Earnings per share
Basic earnings per share
The calculation of basic earnings per share for the period ended
31 March 2014 was based on the profit attributable to ordinary
shareholders of GBP1,132,000 (2013: GBP157,000) and a weighted
average number of ordinary shares outstanding during the period
ended 31 March 2014 of 81,400,000 (2013: 81,400,000).
Diluted earnings per share
Diluted earnings per share for the periods ended 31 March 2014
and 31 March 2013 was the same as basic earnings per share as the
share options in issue were non-dilutive in the period.
6. Reconciliation of profit before tax to cash flows from operating activities
6 month
period
Year ended ended
31 March 31 March
2014 2013
GBP'000 GBP'000
Profit before tax 937 250
Depreciation of property, plant and equipment 70 19
Loss on disposal of fixed assets 71 36
Decrease in inventories 326 796
Decrease in trade and other receivables (53) (1,148)
(Decrease)/increase in trade and other payables (10) 677
Financial income (13) (2)
Financial expenses 10 -
----------- -----------
1,338 628
=========== ===========
7. Reconciliation of cash and cash equivalents
Cash and cash equivalents are solely bank balances.
This information is provided by RNS
The company news service from the London Stock Exchange
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