RNS Number:1206O
Carpetright PLC
28 June 2005
28 June 2005
Carpetright plc
Robust full year pre tax profits
Carpetright plc, Europe's leading specialist carpet and floor coverings retailer
trading within the UK, Republic of Ireland, Belgium and The Netherlands, today
makes its preliminary announcement of its audited results for the 52 weeks ended
30 April 2005.
Highlights
Group
* Pre tax profit #72.5m up 8.0% compared to last year
* Underlying pre tax profit * #62.3m a reduction of 4.1% compared to last year
* Basic earnings per share 75.3p up 9.4% compared to last year
* Underlying earnings * per share 62.0p a reduction of 1.3% against last year
* Strong cash generation with operating cash flow of #72.6m
* Recommended final dividend of 28.0p giving a total of 47.0p, up 6.8%
UK and Republic of Ireland
* Underlying operating margin * of 15.1% despite tough trading conditions
* Store expansion plans on track, target to achieve 450 stores within three
years
* Good profits and cash flow from the development of property portfolio
Belgium and Netherlands
* Underlying operating profit * #3.0m, up 65.0% compared to last year
* Store re-branding and modernisation programme completed
* Store expansion plans on track, target 20% extra space within three years
* 'Underlying' excludes goodwill amortisation and profits / (losses) from the
disposal of property assets or termination of businesses. It also excludes any
one off and prior period tax adjustments.
Lord Harris, Chairman and Chief Executive, said:
"I am pleased to report a solid profit performance for the Group as well as
continued strong cash flows and an increased dividend of 6.8%."
"Our UK and Republic of Ireland business has continued to grow market share and
has improved its gross margin. Underlying operating profits are slightly down as
a consequence of the tougher market conditions in the second half as well as
cost pressures from increased rent and the dual running costs of our new
distribution operations. However our business expansion plans are well on track
and we continue to produce good cash flow and profits from the development of
our property portfolio."
"Our Belgium and Netherlands business has grown market share, sales and profits
in a market that remains subdued. We have achieved good gross margin improvement
as well as tight control of costs. Our investment programme in our existing
stores is now complete and we have started to implement our expansion plans in
both countries.
"There is no doubt that the UK floor coverings market has become more difficult
since the start of 2005 in line with several other DIY and housing related
sectors as well as retail in general. However the Carpetright business is well
placed, with its strong competitive position, to continue to grow market share.
This, alongside our clear UK and European expansion plans, continued drive for
margin growth, ongoing profits from property and strong cash generation should
enable the business to continue to deliver good returns for shareholders going
forward."
For further enquiries please contact:
Carpetright plc
Lord Harris of Peckham, Chairman and Chief Executive
Darren Shapland, Group Finance Director
Telephone 020 7282 8000 (until 2pm), 01708 525522 (thereafter)
Citigate Dewe Rogerson
Patrick Toyne Sewell / Sara Batchelor
Telephone 020 7638 9571
There will be a presentation to analysts and investors at 8.30am today at the
office of Citigate Dewe Rogerson, 26 Finsbury Square, London, EC2A 1DS.
A copy of the preliminary results and presentation to analysts can be found on
our website www.carpetright.plc.uk today at 7.00am and 8.30am, respectively.
Certain statements made in this announcement are forward looking. Such
statements are based on current expectations and are subject to a number of
risks and uncertainties that could cause the actual results to differ
materially.
Operating Review
Overview of Group Financial Performance
2005 2004 % change
#'m #'m
Underlying operating profit *
- UK and Republic of Ireland 60.9 64.8 - 6.0
- Belgium and Netherlands 3.0 1.8 + 65.0
- Total 63.9 66.6 - 4.1
Interest - 1.6 - 1.7 + 3.0
Underlying pre tax profit * 62.3 65.0 - 4.1
Non operating Profits / (Losses)
- Profit on disposal of assets 13.0 3.0 + 337.6
- Loss on Carpet Express termination - 1.5 - -
- Total 11.5 3.0 + 287.0
Goodwill amortisation - 1.4 - 0.9 - 59.2
Pre tax profit 72.5 67.1 + 8.0
Underlying earnings * per share (pence) 62.0 62.8 - 1.3
Basic earnings per share (pence) 75.3 68.8 + 9.4
* 'Underlying' excludes goodwill amortisation and profits / (losses) from the
disposal of property assets or termination of businesses. It also excludes any
one off and prior period tax adjustments.
The Group recorded an underlying operating profit * of #63.9m, a reduction of
4.1% on last year, reflecting improved results in Belgium and The Netherlands
offset by a reduction in profits for the UK and Republic of Ireland. The
interest charge of #1.6m was #0.1m lower than last year. The underlying pre tax
profit * was #62.3m, a reduction of 4.1% on last year.
The Group recorded a profit on the disposal of fixed assets and disposal and
termination of businesses of #11.5m (2004: #3.0m), which included the disposal
of the freehold property in Croydon which produced a profit #7.6m. It also
included #1.5m for the termination and disposal of the Carpet Express business.
The goodwill charge for the year was #1.4m (2004: #0.9m), which included the
#0.5m impairment of the goodwill in the Carpet Express business.
The Group profit on ordinary activities before taxation increased by 8.0% to
#72.5m.
Note - Where the following text has reference to underlying operating profit /
earnings and tax, these relate to operating profits / earnings before goodwill
amortisation and profits / (losses) on disposal of assets or the termination of
businesses. Additionally in the calculation of the underlying tax rate this
would also exclude any one off and prior period adjustments which would distort
the taxation charge on current year earnings. Carpetright excludes goodwill
amortisation from its review of its operations as it considers this to be a non
operating item whilst any profits / (losses) on disposal of assets or the
termination of businesses are discussed separately from the underlying
performance because of their one off nature.
UK and Republic of Ireland
Financial results
The business achieved an underlying operating profit of #60.9m, a reduction of
6.0% compared to last year. The business made a further #11.5m (2004: #3.0m)
from the disposal of fixed assets offset by the termination of the Carpet
Express operation.
Sales for the year were #409.2m, which included #5.1m of third party turnover
from the Carpet Express distribution business which was closed during the year.
In the following comparisons and ratios we have excluded the third party Carpet
Express turnover impact as it is non-retail and not part of the ongoing
business. Sales, therefore, were #404.1m, an increase of 2.1% compared to last
year, reflecting a like for like sales decline of 1.3% mitigated by sales from
additional Carpetright space of 2.0% with the balance of 1.4% from concessions
in department stores.
The like for like sales performance was again very different across the two
halves. The first half saw an increase in like for like sales of 3.0% with an
especially good performance coming from the months of May to August, helped by
favourable weather conditions compared to the previous year as well as a strong
promotional programme. Second half like for like sales were down by 5.4%
reflecting the tougher trading environment, particularly since the start of the
2005 calendar year. Despite this slowdown the business continued to gain market
share as well as grow gross margin and we remain confident that the combination
of a wide range, best prices and our investment in service will enable us to
continue to outperform the market in the future.
Gross margin increased by 0.9 percentage points with equal growth coming from
each half. The increase reflected further buying scale improvements as well as a
reduction in stock losses and damage through better management of the
distribution network and improvements in the stores. We expect these factors
will enable us to continue to improve gross margin during the coming year.
Costs net of other income as a percentage of sales increased by 2.1 percentage
points reflecting; higher underlying costs for rent, rates and energy; dual
running costs for the close down of Carpet Express and our new distribution
operations; as well as the reduced like for like sales performance. Whilst the
distribution costs will reduce during the coming year, as we are now only
running one operation, we expect that the underlying pressure on rents, rates
and energy costs will continue to drive our overall costs up. This will be
partially mitigated by a further variable cost reduction programme which we
implemented during April and May 2005 in reaction to the tougher trading
environment as well as the continuing benefit of our move from A1 parks to bulky
goods parks.
Underlying operating margin was 15.1% (2004: 16.3%). Whilst the operating margin
has reduced for the year it is still a good performance for the business in what
has been a difficult trading environment and given the level of external cost
pressures that are being seen across the retail market.
Store portfolio development
We continue to develop our store portfolio and ended the year with 376 stores
trading from 3,556k sq ft, including stockroom space. The net gain of 12 stores
during the year was a result of 28 openings offset by 16 closures as we continue
to develop the quality of our locations, as well as move from the more expensive
A1 parks on to the bulky goods parks as opportunities become available.
We now trade from 31 of our new small store format with eight opening during the
year. This new format, which we began rolling out in the last financial year,
enables us to enter markets where we had not previously been represented and
which up to now were dominated by the independents. We have a three year target
to trade 100 stores of this type and have established a good pipeline during
this and the next financial year.
Republic of Ireland expansion
Our expansion programme across the Republic of Ireland continues to make good
progress. Following our initial openings around Dublin in 2001 we started to
move into some of the other major towns and cities across the country during the
second half of 2004. Our decision to expand was a result of the strong sales
growth we were achieving in our existing stores as well as the detailed
assessment we had completed on the market place.
At the end of the year we are trading from a total of 17 stores in the Republic
of Ireland with a further four due to open in the current financial year. We
believe the potential for this market is between 25 to 30 stores and as we grow
brand recognition and advertising presence we expect that the Republic of
Ireland will continue to show good like for like sales growth.
Concessions
It has been a mixed year for our concessions business. We achieved growth
following our entry into the Debenhams stores but this was offset by the
contraction of the Allders operations when they went into administration in
early 2005 and subsequently closed or sold the majority of their stores.
Our "In House Carpets" brand had been trading well within Allders and, having
completed its first peak season through autumn and the January sale, was
achieving both sales and profits growth. We generated good net cash returns from
our Allders operation over the time we traded and we have successfully proven
the concept of the business trading within department stores. We continue to
trade in one Allders store as well as eight of the stores which were sold to BHS
in March.
Our business in Debenhams continues to make good progress following our first
openings in November 2004. We now trade from 16 stores which include seven ex
Allders stores and have a further three stores agreed to open during the coming
months. Whilst it is still early in this area of business development, it is
apparent that the strong Debenhams brand and the customer footfall this creates
should enable the Group to build a good trading operation in a sector of the
market where until now we had not been represented.
Following the lessons from Allders and the encouraging start at Debenhams we
have started our concession expansion plans into regional department stores
across the country. We opened two of these concessions in Liverpool and
Sunderland towards the end of the financial year and have a number of others in
negotiation. We believe that there is potential for at least 100 concessions in
department stores in the medium term.
Profits from property
As we have outlined previously there is a significant opportunity for us to
generate cash, make profits, improve trading adjacencies and reduce our ongoing
rent bill by moving from A1 retail parks to bulky goods parks. During the year
we negotiated to relocate from nine A1 parks. Additionally we took the
opportunity to dispose of our freehold interest in our Croydon store which we
had acquired in 1999. This disposal achieved a net profit of #7.6m.
Our portfolio is now broadly split 50/50 in relation to occupancy on A1 or bulky
goods parks. Our intention is to continue this strategy of moving wherever
possible to bulky goods parks, as we believe that we will not only generate a
steady stream of property profits but also gradually reduce our underlying
rental payments over time.
Carpetright at home
Our Carpetright at home business which services both retail and insurance
customers continues to make good progress. During the year we won a further four
insurance contracts as well as seeing the take up of our retail business via the
internet and call centre achieve high double digit growth. We have again
increased our van fleet and now have a total of 50 vans in service. Whilst this
business currently makes up a small part of our overall turnover and profits,
the growth rate and potential is significant and we expect to see further growth
in the coming year.
Product
Our product offer has continued to develop with vinyl flooring being the star
performer, its strong growth being driven by new product development. The carpet
market share has now stabilised and carpet continues to take the majority share
of the market with brown and chocolate shades being on trend, replacing some of
the creams and ivories of recent years. Laminate has, as expected, slowed from
the growth rates seen in recent years and we have adjusted our ranges
accordingly.
The take away roll stock offer continues to be our most consistent performer,
once again reflecting the desire to update and improve a room at a very
affordable average cost of under #95.
Service investment
During the year we completed our programme to assess our third party floor
covering fitters run in association with the Flooring Industry Training
Association ("FITA"). All of the 1,500 plus fitters to whom we sub contract have
now been assessed and the majority are now up to our standard. We are already
seeing the benefit of this programme with reduced customer complaints and less
damage and replacements helping to underpin our better overall service offering
which continues to make this a source of competitive advantage.
Distribution investment
We completed our review of distribution operations during the year. We opened
our new stand alone distribution operation at Huntingdon in January 2005 and our
new fleet of 90 Carpetright liveried trailers and "linked-pod" vehicles arrived
towards the end of the financial year. This new operation is managed by Exel
Logistics and enables us to provide a quicker service to our stores as well as
better product tracking, helping us to reduce loss and damage.
The existing Carpet Express operation was closed during the year and the one off
termination and disposal costs of #1.5m have been reflected in the results. With
the closure complete and our new operation up and running we expect to see our
distribution costs reduce over time as we become more efficient and benefit from
having control of our own dedicated operations.
Systems investment
We also commenced our systems investment programme for the UK and Republic of
Ireland operations during the year. The first phase of our investment went live
over Easter 2005 with a new central database and a data warehouse reporting
system being implemented. This will be followed with new integrated central
systems for buying, operations and finance during the first half of the current
financial year. Once the central systems have been bedded down the store
programme will commence and we intend to pilot in a number of stores towards the
end of the current financial year.
Our intention is to create an improved systems platform for our UK and Republic
of Ireland operations which can then be rolled out across the other countries in
which we trade so keeping operations clear, simple and consistent.
Summary and prospects
The business has made significant progress during the year with expansion in the
Republic of Ireland and growth of the new smaller stores as well as the
development of the concession operation. The growth plans are very much on track
and these are supported by our ongoing investment in service, distribution and
systems. Whilst the floor coverings market is expected to remain challenging in
the short term, the business is well placed to continue its growth plans and
increase market share.
Acquisition of Mays Carpets
We are pleased to announce that today we have agreed to purchase Mays Holdings
Limited, which trades as Mays Carpets from three stores at Abingdon, Cheltenham
and Swindon. The purchase price is #6.5m for a business which currently makes
#1.4m pre tax profit from sales of #7.6m. The business which has been trading
for over 45 years operates from the best retail sites in the three towns in
which it trades and will significantly improve our representation in these
areas. Carpetright will re-brand the stores and reorganise or close its existing
stores in these areas releasing cash benefits and improving the overall
profitability of our representation. The transaction will be completed by the
end of July and will be earnings enhancing in the current financial year.
Belgium and Netherlands
Financial results
The business in Belgium and The Netherlands recorded an underlying operating
profit of #3.0m, an increase of 65.0% on last year. This was a good performance
in a market place which continues to contract and represents significant gains
in market share as well as improvements to margins and costs.
Sales in both Belgium and The Netherlands have shown growth on the year with
product sales in local currency increasing by a total of 1.3%. The business
traded from an average of 89 stores during the year compared to last year's 88.
The average space for the year was up 6k sq ft, net of sublets, a total growth
of 0.5%. In both Belgium and The Netherlands the offer has been improved with
better ranges, new products and further investments in the market leading price
position.
In September 2004 we changed the business process in the Dutch stores so that
the cost of fitting is now paid direct to the third party contracted fitter by
the customer. This is a more
efficient operation and is in line with the UK process. The impact of this
change is that the turnover for the fitting services in The Netherlands is now
no longer recognised in the sales number. Hence whilst total sales for the year
have fallen compared to last year, this is as a direct result of the fitting
turnover being removed.
The gross product margin for the period has increased by 1.8 percentage points
due to a combination of buying scale, efficiency and reduced losses and damage.
We expect the gross product margin to continue to grow during this financial
year as a result of a continuation of these factors.
Costs net of other income remain tightly controlled, with the benefit of actions
taken in the previous financial year feeding through. Additional initiatives
including subletting of excess space and the variable cost reduction programme
have also provided benefits. Costs net of other income as a percentage of
product sales reduced by 0.5 percentage points across the year; despite the
additional investment in advertising as well as the extra depreciation due to
the re-branding and modernisation programme.
Underlying operating margin as a percentage of product sales has improved to
6.2% (2004: 3.9%). The underlying operating margin is measured as a percentage
of product sales to remove the distortion of the fitting service income as noted
above and also to enable comparison to the UK and Republic of Ireland which is
completed on the same basis.
The improvement in the underlying operating margin reflects the benefits of the
sales growth, improved gross margin, and cost control coming through and this
improvement is a significant step towards achieving our medium term targets.
Store portfolio development
The business closed the year with 89 stores having opened one store during the
year. The business is trading from 28 stores in Belgium and 61 stores in The
Netherlands with a combined trading space of 1,143k sq ft net of sublet space.
We have commenced our expansion plans and since the year end we have opened a
further two stores with a further five due to open later in the year. These new
stores are in areas where the business is not currently represented and is a
result of 18 months development work. We are working towards a target of 110
stores across Belgium and The Netherlands in total within a three year time
frame.
We continue to assess the sublet opportunities for the business where we have
excess space. We had completed ten such sublets by the year end with a further
ten opportunities still available within both our one and two floor outlets.
Whilst the timing of these can not be definite, as much depends on planning and
permits, this remains a potential source of revenue over the coming years.
Re-branding and modernisation
We completed the re-branding and modernisation of the remaining stores in The
Netherlands towards the end of the first half. All the stores are now furnished
in the latest format with new signage, branding and layout. This concludes the
process we commenced when we purchased the business just over two years ago. The
business will now follow a refurbishment cycle similar to the UK and Republic of
Ireland which requires a minimal amount of ongoing capital investment unless
there is a significant development of an individual site.
Summary and prospects
The business continues to benefit from the wide range of floor covering products
sold and the focus of the business as a floor covering specialist. This wide
range, alongside the best prices underpinned by good service and product
knowledge has enabled the business to achieve strong profit and cash flow growth
despite the contracting market. With the modernisation programme complete and
the store expansion plans underway the business is well placed to continue to
grow market share.
Financial review
Taxation
The underlying taxation rate is 31.2% (2004: 31.1%). We have restated the
underlying rate last year to remove any one off and prior period adjustments
which would distort the taxation charge on current year earnings. The effective
taxation rate is 28.0% (2004: 27.1%) which has once again benefited from the
rollover relief on the profits on disposal of fixed assets. We would expect the
ongoing underlying rate to be slightly higher than the combined statutory rate
for the Group due to a number of disallowable items in relation to the Group's
freehold properties in Belgium and The Netherlands.
Earnings per share
The Group's underlying earnings per share has reduced by 1.3% to 62.0p. This
represented a reduction in underlying post tax earnings of 4.3% offset by a
reduction in the average number of shares of 3.1%. The average number of shares
in issue for the year was 69.2m and at the year end the Group had 67.8m shares
in issue.
The Group's basic earnings per share have increased by 9.4% to 75.3p. This
increase reflects the small reduction in underlying earnings per share offset by
the continued strong profit stream from trading the property portfolio and the
related rollover tax effect.
The Group purchased 1.8m of its own shares at an average price of 970.3p during
the year as part of its share buy back programme. The total consideration for
the shares was #17.8m including fees and taxes. The impact of the buy back
programme over the last two years has been to increase the underlying earnings
per share by 3.8%. Of the consideration for shares purchased during the year
some #9.3m remained unpaid at the year end and was paid in the first week of the
new financial year.
Dividend
The Board is recommending that the final dividend be increased by 3.7% to 28.0p,
which together with the interim dividend of 19.0p takes the total dividend for
the year to 47.0p per share, an increase of 6.8% on the prior year. Dividend
cover based on basic earnings per share excluding goodwill is 1.64 times (2004:
1.59 times). The final dividend will be paid on 23 September 2005 to
shareholders on the register on 9 September 2005. With strong operating cash
flows and limited capital expenditure requirements the Group intends to maintain
its current dividend policy of approximately 1.5 times dividend cover for the
immediate future.
Cash flow and net debt
The Group continues to be highly cash generative and achieved an operating cash
flow of #72.6m (2004: #91.5m) during the year. The reduction from last year is
due to some large cash inflows which have fallen just after the year end, a
reduction in creditors due to some timing differences, as well as last year
benefiting from an improvement in trade creditors' terms. After interest and tax
as well as net capital expenditure and acquisitions and disposals the free cash
flow for the Group is #34.9m (2004: #70.8m).
The gross capital expenditure included #13.6m of freehold property purchases,
#6.5m of stores expenditure and #13.1m on systems, distribution and other items.
The net capital expenditure of #16.1m (2004: #0.9m) is after receipts of #17.1m
from the disposal of assets. The free cash flow was utilised on the payment of
dividends of #31.9m as well as the payment of #8.5m for the purchase of shares.
Net debt at the year end was #35.7m an increase of #5.7m compared to last year.
International Financial Reporting Standards (IFRS)
It will be mandatory for the consolidated financial statements of all European
Union listed companies to be reported in accordance with IFRS for periods
commencing on or after 1 January 2005. The first full accounting period for
which IFRS will apply to Carpetright will be the 52 weeks ending 29 April 2006.
Therefore the interim results for the 26 weeks ending 29 October 2005 will be
the first results to be affected.
The move to IFRS will not change how the Group is managed and will have no
impact on cash flows. It will, though, potentially lead to some greater
volatility in the profit and loss account as well as the balance sheet. The
presentation of the key financial statements and accompanying ratios will also
be affected.
Carpetright has prepared for the introduction of IFRS over the last 24 months.
The greatest impact from the adoption of IFRS is likely to come from changes to
the accounting treatment of goodwill, taxation, leases and employee benefits.
Carpetright will issue an unaudited statement covering its results for the 52
weeks to 30 April 2005 under IFRS on 27 September 2005. This is about one month
later than originally planned to allow the new Group Finance Director who joins
on 30 August 2005 sufficient time to review the restated results.
Calendar
Carpetright will issue its next trading announcement at the Annual General
Meeting on 16 August 2005; this will cover the first 15 weeks of the financial
year. The pre first half closing announcement will be made on 25 October 2005
and this will cover the first 25 weeks of the financial year. The first half
closes on 29 October 2005.
Board
Executive Directors
As announced on 23 May 2005 Ian Kenyon will join the Board on 30 August 2005 as
Group Finance Director. Ian will replace Darren Shapland who is leaving the
Group on 29 July 2005 to become Chief Financial Officer of J Sainsbury plc. We
would like to thank Darren for his contribution since joining the Board in 2002.
We have also realigned the responsibilities of the other executive directors as
follows:
John Kitching, previously Group Managing Director, has become Europe Chief
Executive and has taken direct responsibility for the growth of our business in
Belgium and The Netherlands as well as our potential development further into
mainland Europe.
Christian Sollesse, previously Group Sales Director, has become UK and Republic
of Ireland Managing Director and has taken responsibility for the UK trading
operation.
Martin Harris remains as Group Commercial Director and has taken on additional
responsibility for the warehouse, distribution and property.
Lord Harris remains as Chairman and Chief Executive of the Group working with
the other executive directors in the development towards the Group's medium term
targets.
Non Executive Directors
As announced on 2 February 2005 Guy Weston joined the company as a non-executive
director. Sir Harry Djanogly retired from the Board on 24 March 2005. We would
like to thank Sir Harry for his hard work and efforts since joining the Board at
flotation in 1993.
Carpetright plc - Preliminary Announcement - 28 JUNE 2005
Consolidated profit and loss account
for the year to 30 April 2005
52 weeks to 52 weeks to
Note 30 April 2005 1 May 2004
#'000 #'000
Turnover 3 462,497 452,721
Cost of sales (179,713) (182,841)
Gross profit 3 282,784 269,880
Net operating expenses (221,986) (205,483)
Other operating income 1,731 1,379
Operating profit before goodwill amortisation 3 63,911 66,644
Goodwill amortisation 4 (1,382) (868)
Operating profit 3 62,529 65,776
Profit on disposal and termination 5 11,529 2,979
Profit on ordinary activities before interest 74,058 68,755
Net interest payable 3 (1,605) (1,654)
Profit on ordinary activities before taxation 3 72,453 67,101
Tax on profit on ordinary activities 6 (20,263) (18,164)
Profit on ordinary activities after taxation 52,190 48,937
Minority interest (141) 201
Profit for the financial period 9 52,049 49,138
Dividends 7 (32,060) (30,434)
Retained profit 9 19,989 18,704
Note pence pence
Underlying earnings per share (see note below) 8 62.0 62.8
Basic earnings per share 8 75.3 68.8
Fully diluted earnings per share 8 75.2 68.8
Dividend per ordinary share 7 47.0 44.0
Note:
Underlying earnings per share (EPS) has been redefined as basic EPS after allowing for, when relevant, goodwill
amortisation, profit on disposal and termination and non operating tax adjustments (see note 8). The figures for
2004 have been restated to be comparable.
There are no differences between the Group's historical cost profit and that recorded in the profit and loss
account (2004: #nil). All material items in the profit and loss account arise from continuing operations.
Consolidated statement of total recognised gains and losses for the year to 30 April 2005
52 weeks to 52 weeks to
Note 30 April 2005 1 May 2004
#'000
#'000
Profit for the financial period 52,049 49,138
Exchange rate movement (136) (736)
Exchange rate movement on deferred tax (32) 82
Total exchange rate movement 9 (168) (654)
Total recognised gains relating to the period 51,881 48,484
Exchange rate movement includes an amount of #0.1m arising on the retranslation of foreign currency borrowings
that has been offset against the other foreign exchange movements (2004: #1.1m).
Carpetright plc - Preliminary Announcement - 28 June 2005
Consolidated balance sheet
at 30 April 2005
Note 30 April 30 April 1 May 1 May
2005 2005 2004 2004
#'000 #'000 #'000 #'000
Fixed assets
Intangible assets 14,623 15,743
Tangible assets 140,417 129,938
155,040 145,681
Current assets
Stock 30,887 34,492
Debtors 26,795 20,076
Cash at bank and in hand 5,222 13,341
62,904 67,909
Creditors: amounts falling due within one year (150,067) (141,765)
Net current liabilities (87,163) (73,856)
Total assets less current liabilities 67,877 71,825
Creditors: amounts falling due after more than (21,209) (28,647)
one year
Provisions for liabilities and charges (4,146) (2,889)
Net assets 3 42,522 40,289
Capital and reserves
Called up share capital 678 696
Share premium account 14,146 14,146
Capital redemption reserve 125 107
Profit and loss account 27,573 25,541
Equity shareholders' funds 9 42,522 40,490
Equity minority interest - (201)
42,522 40,289
Carpetright plc - Preliminary Announcement - 28 June 2005
Consolidated cash flow statement
for the year to 30 April 2005
Note 52 weeks to 52 weeks to 52 weeks to 52 weeks to
30 April 30 April 1 May 1 May
2005 2005 2004 2004
#'000 #'000 #'000 #'000
Net cash inflow from operating activities 10 72,559 91,467
Returns on investments and servicing of finance
Interest received 207 113
Interest paid (1,657) (1,267)
Interest on finance leases - (112)
Net cash outflow from investments and (1,450) (1,266)
servicing of finance
Taxation paid (18,559) (18,014)
Payments to acquire intangible fixed assets - (50)
Payments to acquire tangible fixed assets (33,181) (17,322)
Receipts from sales of tangible fixed assets 17,032 16,482
Net cash outflow for capital expenditure (16,149) (890)
Costs associated with the termination of subsidiary (1,506) -
operations
Purchase of subsidiary undertakings - (458)
Acquisitions and disposals (1,506) (458)
Equity dividends paid (31,876) (27,823)
Net cash inflow before financing 3,019 43,016
Financing
Issue of Ordinary shares - 208
Purchase of own shares (see note below) (8,521) (41,126)
Net repayment of loans (6,505) (514)
Capital element of finance lease rental payments - (3,020)
Net cash outflow from financing (15,026) (44,452)
Decrease in cash in the period (12,007) (1,436)
Note - Reconciliation of net cash flow to movement in
net debt
Note 2005 2004
#'000 #'000
Decrease in cash in the period (12,007) (1,436)
Opening net debt (30,003) (33,760)
(42,010) (35,196)
Exchange movement (168) 1,659
Capital element of finance lease rental payments - 3,020
Net repayment of loans 6,505 514
Closing net debt 3 (35,673) (30,003)
Note - Analysis of changes in net debt during the year
2004 Cash flow Exchange 2005
#'000 #'000 movement #'000
#'000
Cash at bank and in hand 13,341 (8,174) 55 5,222
Overdrafts (5,572) (3,833) 31 (9,374)
Loans (37,772) 6,505 (254) (31,521)
Net debt (30,003) (5,502) (168) (35,673)
Note - Purchase of own shares
The parent company, Carpetright plc, repurchased 1,029,000 shares before the end of the year. The total
consideration of #9.3m was not paid until after the year end so does not appear in the cash flow statement.
The 2004 cash outflow includes #9.3m payment for shares bought back from the market at the end of 2003 but
settled during 2004.
Carpetright plc - Preliminary Announcement - 28 June 2005
Note 1: Basis of preparation
The financial information does not constitute the Group's statutory accounts for the years ended 30 April 2005 or 1 May
2004 but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Registrar of
Companies, and those for 2005 will be delivered following the Group's Annual General Meeting. The auditors have
reported on those accounts; their reports were unqualified and did not include statements under section 237(2) or (3)
of the Companies Act 1985.
Note 2: Basis of consolidation
The consolidated accounts include the accounts of the Company, its UK subsidiary undertakings and its Belgium and The
Netherlands subsidiaries made up to 30 April 2005. The acquisition method of accounting has been adopted for
acquisitions made during the period. Under this method, the results of subsidiary undertakings acquired or disposed of
in the period are included in the consolidated profit and loss account from the date of acquisition or up to the date
of disposal. Intra group transactions are fully eliminated on consolidation.
Note 3: Segmental analysis
Analysis by geography:
52 weeks to 30 April 2005 52 weeks to 1 May 2004
UK Belgium & Group UK Belgium & Group
The The
Netherlands Netherlands
#'000 #'000 #'000 #'000 #'000 #'000
Profit and loss account
Turnover (by origin and destination) 409,154 53,343 462,497 397,127 55,594 452,721
Gross profit 254,998 27,786 282,784 243,291 26,589 269,880
Operating profit before goodwill 60,901 3,010 63,911 64,818 1,826 66,644
amortisation
Operating profit 60,376 2,153 62,529 64,815 961 65,776
Profit on disposal and termination 11,529 2,979
Net interest payable (1,605) (1,654)
Profit on ordinary activities before 72,453 67,101
taxation
Balance sheet
Net assets pre debt * 22,349 55,846 78,195 20,127 50,165 70,292
Net debt (35,673) (30,003)
Net assets 42,522 40,289
* Following a restructure within the Group during the current financial year, the net assets pre debt for 2004 have been
re-allocated to be consistent with the 2005 presentation.
Note 4: Goodwill amortisation
Amortisation of goodwill for the 52 weeks to 30 April 2005 includes #0.5m impairment of goodwill resulting from the
disposal and termination of the New Carpet Express distribution business.
Note 5: Profit on disposal and termination
The #11.5m profit for the 52 weeks to 30 April 2005 includes #13.0m profit on disposal of tangible fixed assets net of
#1.5m costs of disposal and termination of the New Carpet Express distribution business. The #3.0m profit for 52 weeks
to 1 May 2004 arose solely from the disposal of tangible fixed assets.
Note 6: Taxation
The estimated effective tax rates on the profits of the Group are as follows:
52 weeks 52 weeks
to to
30 April 1 May
2005 2004
Underlying tax rate (see note below) 31.2% 31.1%
Effective tax rate 28.0% 27.1%
Note: Underlying tax rate is defined as basic effective tax rate after allowing for goodwill amortisation, profit/(loss)
on disposal and termination and tax adjustments in respect of one-off items and prior periods.
Note 7: Dividends
The final ordinary dividend of 28p per share (2004: 27p) will be paid on 23 September 2005 to shareholders registered
at the close of business on 9 September 2005, subject to shareholders' approval at the Annual General Meeting to be
held on 16 August 2005. An interim ordinary dividend of 19p (2004: 17p) per share was paid on 18 February 2005 giving
a total ordinary dividend for the year of 47p per share (2004: 44p).
Copies of the full accounts for the year ended 30 April 2005 will be circulated to shareholders for approval at the
Annual General Meeting. Further copies of the Annual Report will be available from that date from the registered
office of Carpetright plc, Amberley House, New Road, Rainham, Essex, RM13 8QN.
Note 8: Earnings per share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the year, excluding those held in the employee share trust which are
treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all potential dilutive ordinary shares. The group has two classes of potential dilutive ordinary shares:
those share options granted to employees where the exercise price is less than the average market price of the
company's ordinary shares during the year and the contingently issuable shares under the group's long-term incentive
plan.
2005 2004
Earnings Weighted Earnings Earnings Weighted Earnings
average per share average per share
number number of
of shares
shares
#'000 '000 pence #'000 '000 pence
Basic earnings per share 52,049 69,168 75.3 49,138 71,377 68.8
Effect of dilutive share options - 86 (0.1) - 47 -
Fully diluted earnings per share 52,049 69,254 75.2 49,138 71,424 68.8
Reconciliation of earnings per share to exclude profit on disposal and termination, goodwill amortisation and non
operating tax adjustments:
2005 2004
Basic earnings per share 52,049 69,168 75.3 49,138 71,377 68.8
Effect of goodwill amortisation 1,382 - 2.0 868 - 1.3
Effect of profit on disposal and (11,529) - (16.7) (2,979) - (4.2)
termination
Effect of taxation on non operating tax 959 - 1.4 (2,222) - (3.1)
adjustments
Underlying earnings per share 42,861 69,168 62.0 44,805 71,377 62.8
The Directors have presented an additional measure of earnings per share based on underlying earnings. In accordance
with the practice adopted by most major retailers, the Directors have amended the definition of underlying earnings from
that disclosed in the annual report 2004, as they believe this provides a more comparable measure on an ongoing basis.
Underlying earnings is defined as profit after allowing for, when relevant, goodwill amortisation, profit on disposal
and termination and non operating tax adjustments. The figures for 2004 have been restated to be comparable.
Note 9: Reconciliation of movements in equity shareholders' funds
2005 2004
#'000 #'000
Profit for the financial period 52,049 49,138
Dividends (32,060) (30,434)
Retained profit for the period 19,989 18,704
Exchange rate movement (168) (654)
Issue of Ordinary shares - 208
Purchase of own shares by employee share trust (125) -
Credit in respect of employee share schemes 102 -
Purchase of own shares (17,766) (31,861)
Net increase/(decrease) in equity shareholders' funds 2,032 (13,603)
Opening equity shareholders' funds 40,490 54,093
Closing equity shareholders' funds 42,522 40,490
Note 10: Reconciliation of operating profit to net cash inflow from operating activities
2005 2004
#'000 #'000
Operating profit 62,529 65,776
Depreciation 12,135 12,510
Amortisation 1,385 869
Decrease in stocks 3,620 5,688
Increase in debtors (1,447) (1,288)
(Decrease)/increase in creditors (5,663) 7,912
Net cash inflow from operating activities 72,559 91,467
Note 11: Post balance sheet event
Carpetright plc has agreed to purchase Mays Holdings Limited, which trades as Mays Carpets from three stores at
Abingdon, Cheltenham and Swindon. The purchase price is #6.5m for a business which currently makes #1.4m pre tax profit
from sales of #7.6m. The transaction will be completed by the end of July.
Note 12: Foreign Exchange
Euro 52 weeks to 52 weeks to
30 April 2005 1 May 2004
Average rate 1.47 1.45
Closing rate 1.48 1.49
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR PUUMGQUPAGRM
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