RNS Number:5379V
Carpetright PLC
13 December 2005
13 December 2005
Carpetright plc
Robust performance in a weak market
Carpetright plc, Europe's leading specialist carpet and floor covering retailer
with over 500 stores and concessions across the UK and Europe, today announces
its interim results for the 26 weeks to 29 October 2005.
Highlights
Group
* Profit before tax down 18.9% to #24.9m (2004: #30.7m)
* Underlying* profit before tax down 30.5% to #22.1m (2004 : #31.8m)
* Underlying* profit margin remains strong at 10.2%
* Underlying* earnings per share of 22.4p, down 28.7% on last year
* Basic earnings per share of 25.3p down 15.1% on last year
* Interim dividend maintained at 19.0p
UK and Republic of Ireland
* Underlying* operating profit down 31.0% to #21.6m (2004 : #31.3m)
* Like for like sales decline of 7.1%
* Continued increase in market share and ongoing store expansion
* Acquisition of Mays completed
* Successful implementation of SAP as the Group's core central IT system
Europe
* Underlying* operating profit of #1.4m (2004 : #1.4m)
* Comparable product sales growth of 7.2% following completion of store
re-branding programme
* 4 new stores opened
All figures including comparatives have been reported under IFRS
* 'Underlying' excludes profits / (losses) from the disposal of property, plant
and equipment or termination of businesses
Lord Harris, Chairman and Chief Executive, said:
"Despite weak market conditions the Group has continued to deliver robust
operating profits and cashflows."
"Our UK and Republic of Ireland business has grown market share with strong
offers, attractive product ranges and high levels of customer service. A net 12
new stores have been opened and the business plans to open a further net 10
stores in the second half."
"In Europe sales growth remains strong in both Belgium and The Netherlands. The
store re-branding programme is complete and the Group is now focusing on store
expansion as well as continuing to grow sales in existing stores."
"The Group continues to invest in new stores and its underlying infrastructure,
both in the UK and Europe, and plans to open two stores in Poland in the second
half. The Group is well positioned to grow sales and profits as soon as the
market improves."
For further enquiries please contact:
Carpetright plc
Lord Harris of Peckham, Chairman and Chief Executive
Ian Kenyon, Group Finance Director
Telephone: 020 7282 8000 (until 2pm), 01708 525522 (thereafter)
Citigate Dewe Rogerson
Patrick Toyne Sewell / Sara Batchelor
Telephone: 020 7638 9571
A copy of the interim results can be found on our website www.carpetright.plc.uk
today from 7.00am.
There will be a presentation today at 9.00am to analysts and investors at
Citigate Dewe Rogerson, 26 Finsbury Square, London, EC2A 1DS. A copy of the
slides used for this presentation can be found on our website
www.carpetright.plc.uk from 9.00am.
Further details of the nature of the UK GAAP/IFRS adjustment can be found in the
announcements made on 27 September 2005 and 5 December 2005 which can be found
on the Group's website (www.carpetright.plc.uk).
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.
Review
UK and Republic of Ireland
Results
The market conditions were weak throughout the half with low levels of consumer
confidence and significantly lower levels of housing transactions than last
year. These factors contributed to a 31.0% decline in underlying* operating
profit to #21.6m. This represents an operating margin of 11.4%.
Total sales declined 6.7% to #189.7m against last year (this excludes #5.1m of
non-recurring, third party turnover from the Carpet Express distribution
business included in the 2004 figures) with like-for-like sales declining by
7.1%. Net new Carpetright space increased by 2.8%, but the sales growth from
this space was offset by 1.9% lower sales from the concessions business as our
comparatives continue to be impacted by the Allders concessions that closed in
March 2005.
Gross margin percentage declined by 30 basis points versus last year (this
excludes #4.0m of Carpet Express gross margin included in the 2004 figures).
The Group sought to optimise sales through aggressive promotional activity in
the first half. The effectiveness of these actions has been reviewed and the
business remains confident, following a number of changes, that there will be an
improvement in full year gross margins as previously indicated.
Operating costs, net of other income, as a percentage of sales increased by 4.1
percentage points year-on-year (this excludes #4.8m of Carpet Express costs
included in the 2004 figures). In absolute terms costs have risen by #1.7m
(1.9%) reflecting the impact of rental increases, rates inflation and higher
advertising expenditure. However, staff costs have reduced below last year's
levels following actions taken early in 2005 to reduce central headcount
together with the impact of lower sales on commissions. Other store related
costs have been reduced through a series of initiatives including improved waste
management.
Profits of #2.8m were generated from the closure and surrender of stores in line
with our strategy of moving from A1 retail parks to bulky goods parks.
* 'Underlying' excludes profits / (losses) from the disposal of property, plant
and equipment or termination of businesses
Stores and product
The store portfolio has continued to be developed in line with our target of 450
Carpetright stores and 100 concessions. During the half 26 new stores
(including two concessions) were opened whilst 14 were closed. The business
traded from 415 stores at the period end and had gross space of 3.7 million
square feet.
Included within the 415 stores are 42 small format stores (less than 6,000 sq
ft) and 27 concessions. A net nine small stores were opened and we remain
confident that this format provides a significant opportunity for the Group in
the medium term.
The concessions business is being rebuilt following the closure of the Allders
business in March 2005. There are now 27 concessions which trade under the "In
House Carpets" brand. 11 of the concessions are new departments within
Debenhams, which historically has not had flooring departments, and these
concessions are taking time to build sales. However, we remain confident that,
over time, they will deliver good returns.
Within the Republic of Ireland there are 18 stores trading. During this period
we launched our first TV advertising campaign in the Republic and have also
focused more management attention in the region to exploit all the
opportunities.
The three Mays Carpets stores, acquired in June 2005, have continued to trade
strongly. The three stores have delivered net sales of #1.9m since the
acquisition completed. The Mays business continues to exploit its traditional
strengths whilst benefiting from Carpetright's scale.
The level of investment in stores will increase in the second half with a
further ten net openings planned. There will be further store closures in the
second half as the business continues to exploit opportunities to relocate
stores.
We have continued to offer new carpet ranges at highly competitive prices and
have launched a new range which specifically supports our insurance business.
Additionally, we have continued to introduce new vinyl ranges which provide
customers with an alternative to laminate, which has experienced further sales
decline.
Operations
There have been three key areas of operational focus :
* Distribution - we have continued to develop the new distribution facility
and have worked hard to ensure that it interacts effectively with the
cutting operations. The service levels have been improving steadily and the
peak demand has been managed smoothly with high levels of customer service.
* IT infrastructure - the first phase of the systems investment for the UK
and Republic of Ireland was the introduction of new central systems covering
buying, operations, finance and supporting data warehousing. The core
system is SAP and the business was delighted to be awarded the "SAP Quality
Award 2005" for the implementation, which was completed on time and on
budget and is already delivering cost savings.
The second phase is the introduction of a new store system which will be
piloted during the second half with a full store roll-out planned to
commence in the first half of 2006/07.
* Cost reduction - actions have been taken to reduce costs in stores and
centrally. These have focused on the reduction of store controllable costs,
specifically waste management, and tight headcount control both in stores
and the centre.
Europe
Results
The businesses in Belgium and The Netherlands recorded an operating profit of
#1.4m with comparable product sales, in local currency, increasing by a total of
7.2%.
The strong sales performance reflects the improvements made over the last year
in product ranging, store layouts and advertising coupled with the enthusiasm
and increased professionalism of the sales and support teams. As a result of
all these factors, customers are experiencing an enhanced level of choice, value
and service leading to sales growth in all product categories.
The mix of the business continues to be more widely spread than in the UK with
higher laminate sales. The gross margin on product sales is therefore a little
lower than in the UK but has improved by 1.3% as volume growth delivers higher
rebates.
Costs, net of sub-let income from the 12 sub-lets, have been tightly controlled
and have increased by 1.6%.
Store Base
The business ended the first half with 93 stores, having opened four stores
during the period. The business is trading from 29 stores in Belgium and 64
stores in The Netherlands, with a combined trading space of 1.2 million square
feet.
A further four stores will open in the second half whilst one loss-making store
will be closed. The business continues to work towards a three year target of
110 stores. The store re-branding was completed in 2004 and the business is
focusing on delivering the benefits of this investment.
The strong sales growth achieved is expected to continue despite the challenging
retail environment and the operating margin is expected to improve steadily
towards a three year target of 10%.
Poland
Now that the transformation programme within Belgium and The Netherlands is
largely complete the Group has been reviewing opportunities to expand within
Europe. Following a detailed exploration of a number of different
opportunities, the Group has decided that organic growth within Poland is the
most attractive option. Accordingly the Group will open two stores, in Warsaw
and Gdansk, towards the end of the second half. The stores will offer
rollstock, rugs, vinyl and laminate. The Group believes there is an opportunity
to develop up to 20 stores in Poland over the next three years, with a long term
target of 40 stores.
Group
Results
The Group recorded an underlying profit before tax of #22.1m giving an
underlying profit margin of 10.2%. This is a decrease of #9.7m (30.5%) on last
year caused largely by the decline in sales. The increased interest charge of
#0.9m (2004 : #0.8m) reflects a higher level of net debt following the share
buy-backs and purchase of Mays. The Group delivered exceptional profits,
principally on the disposal of property, plant and equipment of #2.8m (2004:
#1.1m loss) resulting in a profit before tax of #24.9m (2004: #30.7 m).
International Financial Reporting Standards (IFRS)
The results reflect the adoption of accounting policies under International
Financial Reporting Standards ("IFRS"). An announcement explaining the impact
of IFRS was made on 27 September 2005. This document is available from our
website www.carpetright.plc.uk. Since the publication of this guidance some of
the assumptions and presentational matters have been reviewed which has resulted
in minor changes that have been reflected in the comparative figures.
The overall impact of IFRS adjustments in the half-year is a reduction in
underlying profit before tax from continuing operations of #1.1m (2004: #0.8m).
#'m 26 weeks to 26 weeks to
October 2005 October 2004
IFRS
Underlying profit before tax 22.1 31.8
Finance leases and lease incentives 0.8 0.5
Share based payments - 0.1
Other 0.3 0.2
UK GAAP
Underlying profit on ordinary activities before tax 23.2 32.6
Taxation
The underlying taxation rate is 31.4% (2004: 31.0%). This is based on
expectations for the full year. We would expect the underlying rate to be
slightly higher than the combined statutory rate for the Group due to a number
of disallowable items.
Earnings per share
The Group's underlying earnings per share fell by 28.7% to 22.4p (2004 : 31.4p).
Basic earnings per share fell by 15.1% to 25.3p (2004: 29.8p).
The average number of shares in issue has reduced year-on-year by 2.5% following
the share buy-backs completed in 2004/05.
Dividend
The Board has agreed that the interim dividend will be maintained at 19p. The
dividend will be paid on 17 February 2006 to shareholders on the register on 3
February 2006.
Cash-flow and Debt
The Group has delivered strong operating cash-flow of #40.9m (2004 : #41.8m) in
the half. Capital payments, excluding the acquisition of Mays Holdings Limited
for a net #5.2m, totalled #19.6m (2004 : #14.0m). This was offset by proceeds
from the disposal of property, plant and equipment of #7.9m (2004 : #0.7m).
The net cash inflow before financing activities was #16.7m (2004 : #19.5m). The
share buyback completed in April 2005 was settled in the half for #9.3m and the
final dividend for 2004/05 of #19m was paid in September.
At the end of the first half net debt stood at #49.7m, which is an increase of
#11.8m on the year-end and #8.4m higher than the 2004/05 half-year balance.
Calendar
Carpetright will issue its third quarter trading update on 31 January 2006 and
its pre second half close update on 25 April 2006. The preliminary results for
the year to 29 April 2006 will be announced on 27 June 2006.
Summary and Prospects
Despite weak market conditions the Group has continued to deliver robust
operating profits and cash-flows. We believe that whilst the UK floor covering
market remains challenging our wide range, keen prices, good service and strong
store portfolio will enable us to continue to outperform the market.
Additionally we have a clear strategy for growth, both by expanding and further
improving our current formats in the UK, Republic of Ireland, Belgium and The
Netherlands, but also through our exciting plans for Poland. The Group remains
well positioned to grow sales and profits as soon as the market improves.
Carpetright plc
Consolidated Income Statement for 26 weeks to 29th October 2005
Unaudited Unaudited
Unaudited Restated Restated
26 weeks to 26 weeks to 52 weeks to
29th October 30th October 30th April
2005 2004 2005
Notes #'000' #'000' #'000'
Revenue 2 215,518 235,942 462,497
Cost of sales (88,286) (96,136) (189,529)
Gross profit 2 127,232 139,806 272,968
Other operating income 3,635 231 13,260
Administrative expenses (105,030) (108,492) (211,868)
Operating profit 2 25,837 31,545 74,360
Analysed as:
Operating profit before exceptional items 22,980 32,672 63,356
Exceptional items 3 2,857 (1,127) 11,004
Finance expense 2 (974) (1,011) (2,085)
Finance Income 2 82 171 223
Profit before taxation 24,945 30,705 72,498
Income tax expense 2, 4 (7,786) (9,842) (23,236)
Profit for the financial period 2 17,159 20,863 49,262
Attributable to:
Equity shareholders 8 17,159 20,722 49,121
Minority interests - 141 141
17,159 20,863 49,262
Basic earnings per share 6 25.3p 29.8p 71.0p
Fully diluted earnings per share 6 25.3p 29.8p 70.9p
Proposed dividend per share 5 19.0p 19.0p 47.0p
Consolidated Statement of Recognised Income and Expenses for 26 weeks to 29th October 2005
Profit for the financial period 8 17,159 20,863 49,262
Actuarial gains on defined benefit pension scheme 8 - 112 226
Cash flow hedges:
- First time adoption of IAS 39 8 (32) - -
- Fair value gains 8 8 - -
Currency translation difference 8 101 611 (168)
Tax on items taken directly to or transferred from 8 (38) (46) (60)
equity
Total recognised income and expense for the period 17,198 21,540 49,260
Attributable to:
Equity shareholders 17,198 21,399 49,119
Minority interests - 141 141
17,198 21,540 49,260
All material items in the income statement arise from continuing operations.
There are no differences between the Group's historical cost profit and that
recorded in the income statement.
Carpetright plc
Consolidated Balance Sheet as at 29th October 2005
Unaudited Unaudited
Unaudited Restated Restated
as at 29th as at 30th as at 30th
October 2005 October 2004 April 2005
Notes #'000' #'000' #'000'
Assets
Goodwill and intangible assets 32,415 19,158 23,081
Property, plant and equipment 142,753 136,659 133,622
Deferred Income tax asset 1,092 1,439 1,084
Total non-current assets 176,260 157,256 157,787
Inventories 28,773 30,973 29,801
Trade and other receivables 27,079 23,219 25,605
Cash and cash equivalents 7 3,616 5,229 5,222
Total current assets 59,468 59,421 60,628
Total assets 235,728 216,677 218,415
Liabilities
Short term borrowings and overdrafts 7 (24,869) (17,704) (19,732)
Trade and other payables (117,586) (113,327) (110,223)
Current income tax liabilities (4,925) (6,158) (5,378)
Total current liabilities (147,380) (137,189) (135,333)
Interest bearing loans and borrowings 7 (28,451) (28,785) (23,354)
Retirement benefit obligations (2,392) (2,507) (2,392)
Provisions for other liabilities and charges (309) (108) (105)
Deferred Income tax liabilities (17,829) (12,420) (16,173)
Total non-current liabilities (48,981) (43,820) (42,024)
Total liabilities (196,361) (181,009) (177,357)
Net assets 39,367 35,668 41,058
Equity
Share capital 8 678 688 678
Share premium 8 14,146 14,146 14,146
Capital redemption reserve 8 125 115 125
Translation and hedging reserve 8 (71) 611 (168)
Retained earnings 8 24,489 20,108 26,277
Total equity 39,367 35,668 41,058
Carpetright plc
Consolidated Cash Flow Statement for 26 weeks ended 29th October 2005
Unaudited Unaudited
Unaudited Restated Restated
26 weeks to 26 weeks to 52 weeks to
29th October 30th October 30th April
2005 2004 2005
Notes #'000' #'000' #'000'
Cash flows from operating activities
Profit before tax 24,945 30,705 72,498
(Profit)/loss on sale of property, plant and (2,857) 602 (11,529)
equipment
Share based compensation charge 90 67 106
Finance income and expense 892 840 1,862
Depreciation and amortisation 6,416 6,820 12,684
Increase in trade and other receivables (6,353) (4,145) (1,873)
Decrease in inventories 1,896 2,059 3,485
Increase/(decrease) in trade and other 15,859 4,827 (4,445)
payables
Cash from operating activities 40,888 41,775 72,788
Finance cost paid (793) (905) (1,844)
Income taxes paid (6,585) (8,309) (18,559)
Net cash from operating activities 33,510 32,561 52,385
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 7,854 701 17,032
Finance income received 82 158 207
Acquisitions of intangible fixed assets (5,281) (1,621) (5,771)
Purchase of property, plant and equipment (14,329) (12,346) (27,410)
Acquisitions of subsidiary, net of cash 9 (5,156) - -
acquired
Termination of business operations - - (1,506)
Net cash used in investing activities (16,830) (13,108) (17,448)
Net cash inflow before financing activities 16,680 19,453 34,937
Cash flows from financing activities
Repurchase of own shares (9,268) (8,497) (8,521)
Movement in interest bearing loans and borrowings (55) (1,044) (6,505)
Receipt of funds from finance company 3,740 - -
Repayment of finance lease liabilities (357) (21) (42)
Dividends paid 5,8 (18,979) (18,799) (31,876)
Net cash used in financing activities (24,919) (28,361) (46,944)
Net decrease in cash and cash equivalents in period 7 (8,239) (8,908) (12,007)
Cash and cash equivalents at beginning of 7 (4,152) 7,769 7,769
period
Exchange movements on cash (101) (73) 86
Cash and cash equivalents at end of period (12,492) (1,212) (4,152)
0 0 0
For the purposes of the cash flow statement, cash and cash equivalents are
included net of overdrafts repayable on demand. These overdrafts are excluded
from the definition of cash and cash equivalents disclosed on the balance sheet.
1 Accounting policies
a) Basis of preparation
The financial information contained in this interim report does not
constitute accounts as defined by Section 240 of the Companies Act
1985. The interim report has been reviewed but not audited by the
Group's auditors.
The statutory accounts for the year ended 30th April 2005, which were
prepared under UK GAAP, have been delivered to the Registrar of
Companies. The auditors opinion on those accounts was unqualified and
did not contain a statement made under section 237 of the
Companies Act 1985.
Carpetright plc and its subsidiaries ("the Group") has previously
prepared its financial statements under UK Generally Accepted
Accounting Principles ("UK GAAP"). Following a directive issued by the
European Parliament in July 2002, the Group is required to prepare its
2005/06 consolidated financial statements in accordance with
International Financial Reporting Standards ("IFRS").
Accordingly, this interim financial report has been prepared using
accounting policies consistent with those management expects to apply
in the Group's first IFRS Annual Report and Accounts for the 52 weeks
ending 29th April 2006.
The accounting policies followed in this interim financial report are
the same as those published by the Group on 27th September 2005 with
the 2004/05 IFRS restatements, which is available on the Group's
website, www.carpetright.plc.uk, with the exception of IAS 32
'Financial Instruments: Disclosure' and IAS 39'
Financial Instruments: Recognition and Measurement' which apply to the
Group from 1st May 2005. The Group has taken the exemption within
IFRS 1 'First Time Adoption of IFRS' to apply IAS 32 and IAS 39
prospectively only and then not to restate prior period comparatives
retrospectively upon adoption. The Group's accounting policy in
respect of Financial Instruments is included below.
The reconciliations from UK GAAP to IFRS are set out on note 11.
IFRS currently in issue are subject to ongoing review and endorsement
by the European Commission, or possible amendment by the International
Accounting Standards Board ("IASB"). In addition interpretations
are developing and therefore the standards and their interpretation
are subject to possible change, before the 2005/06 financial
statements are published.
b) Comparatives
The comparatives have been derived from the IFRS restatement paper
issued on the 27th September 2005 in the case of annual comparatives
and from the reconciliation's of equity and profit required by IFRS 1
in respect of the interim comparatives disclosed in note 11.
c) Exceptional items
Exceptional items are defined as material items which arise from
events or transactions that fall within the ordinary activities of the
Group and which individually or, if of similar type, in aggregate,
need to be disclosed by virtue of their size or incidence.
d) New accounting policy: Financial Instruments
The Group uses derivative financial instruments to hedge its exposure
to foreign exchange and interest rate risk arising from operational,
financing and investment activities. The Group does not hold or issue
derivative financial instruments for trading purposes.
Derivative financial instruments are initially recognised at cost.
Subsequent to initial recognition, derivative financial instruments
are recognised at fair value. The fair value of derivative financial
instruments is determined by reference to market values of similar
financial instruments, or by discounted cash flows or using option
valuation models.
Where derivatives do not qualify for hedge accounting, any gains or
losses on remeasurement are immediately recognised in the Income
Statement.
Where derivatives do qualify for hedge accounting, gains or losses on
hedges that are regarded as effective are recognised via equity.
Gains or losses on hedges that are regarded as ineffective are
recognised in the income statement.
In order to qualify for hedge accounting, the Group is required to
document hedging relationships between the item being hedged and the
hedging instrument at inception. The Group is also required to assess
and document that each hedging relationship is effective at inception
and periodically throughout the term of the financial instrument.
The Group have the following financial instruments.
Net Investment hedges
Derivative financial instruments are classified as net investment
hedges when they hedge the Group's net investment in an overseas
operation. In the Group's case derivative instruments qualifying for
treatment as net investment hedges are foreign currency loans.
Cash flow hedges
Derivative financial instruments are classified as cash flow hedges
when they hedge the Group's exposure to variability in cash flows that
is either attributable to a particular risk associated with a
recognised asset or liability or a highly probable forecast
transaction. Derivative instruments qualifying for treatment as cash
flow hedging are principally interest rate swaps.
2. Segmental reporting
Unaudited Unaudited
Restated
26 weeks to 29th October 2005 26 weeks to 30th October 2004
UK & ROI Europe Total UK & ROI Europe Total
#'000' #'000' #'000' #'000' #'000' #'000'
Income Statement
Revenue (by origin and destination) 189,690 25,828 215,518 208,445 27,497 235,942
Gross profit 113,034 14,198 127,232 125,826 13,980 139,806
Operating profit (before exceptionals) 21,569 1,411 22,980 31,321 1,351 32,672
Operating profit 24,426 1,411 25,837 30,194 1,351 31,545
Net finance costs (892) (840)
Profit before tax 24,945 30,705
Income tax expense (7,786) (9,842)
Profit for the financial period 17,159 20,863
3. Exceptional items
The following exceptional items, as disclosed in note 1 c), have been
charged in arriving at operating profit:
Restated Restated
26 weeks to 26 weeks to 52 weeks to
29th October 30th October 30th April
2005 2004 2005
#'000' #'000' #'000'
Profit/(loss) on disposal of property, plant and equipment 2,857 (602) 11,529
Goodwill impairment on closure of New Carpet Express - (525) (525)
Total 2,857 (1,127) 11,004
4. Income tax expense
The estimated effective tax rates on the profits
52 weeks to 52 weeks to
29th April 30th April
2006 2005
#'000' #'000'
Underlying tax rate 31.4% 31.0%
Effective tax rate 31.2% 32.0%
The effective tax rate is defined as the actual tax paid as a proportion of
the accounting profit before taxation. The underlying tax rate is defined
as the effective tax rate after adjusting for, when relevant (loss)/profit
on disposal of property, plant and equipment, termination of business and
tax adjustments in respect of one off items and prior periods.
5. Dividends
26 weeks to 26 weeks to 26 weeks to 26 weeks to
29th October 29th October 30th October 30th October
2005 2005 2004 2004
pence/share #'000' pence/share #'000'
Amounts recognised as distributions to equity holders
in the period :
Final dividend for the period ended 30th April 2005 28.0 18,979 27.0 18,799
Proposed interim dividend for the period ended 29th
April 2006 19.0 12,881 19.0 13,077
6. Earnings per share
The calculation of basic and diluted earnings per share for the 26 weeks to
29th October 2005 is based on earnings of #17,159,000 (26 weeks to
30th October 2004 restated: #20,722,000) (52 weeks to 30th April 2005:
#49,121,000).
The weighted average number of shares used in the calculation of basic
earnings per share for the 26 weeks to 29th October 2005 was 67,797,322
(26 weeks to 30th October 2004: 69,527,000) (52 weeks to 30th April 2005:
69,168,000). The weighted average number of shares used in the calculation
of diluted earnings per share was 67,836,920 (26 weeks to 30th October
2004: 69,613,000) (52 weeks to 30th April 2005: 69,254,000).
6. Earnings per share (contd...)
Share options outstanding at less than fair market value represent the
41,000 difference between the basic and diluted weighted average number of
shares (26 weeks to 30th October 2004: 86,000) (52 weeks to 30th April
2005: 86,000).
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, as they believe this provides a more comparable
measure on an ongoing basis.
Underlying earnings is defined as profit after adjusting for, when
relevant, goodwill impairment, (loss)/profit on disposal of property, plant
and equipment, termination of business and other exceptional items and
the related tax effect.
Restated Restated
26 weeks to 26 weeks to 52 weeks to
29th October 30th October 30th April
2005 2004 2005
pence pence pence
Basic earnings per share 25.3 29.8 71.0
Effect of goodwill impairment - 0.8 0.8
Effect of (profit)/loss on disposal and (4.2) 0.9 (16.7)
termination
Effect of taxation on exceptional items 1.3 (0.1) 6.3
Underlying earnings per share 22.4 31.4 61.4
7. Notes to cash flow statement
ii) Reconciliation of Net debt
26 weeks to 29th 26 weeks to 52 weeks to
October 2005 30th October 30th April
2004 2005
#'000'
#'000' #'000'
Net debt at start of period (37,864) (32,236) (32,236)
Net decrease in cash and cash equivalents (8,239) (8,908) (12,007)
(Increase)/decrease in interest bearing loans and (3,328) 1,065 6,547
borrowings
Currency translation differences (273) (1,181) (168)
Net debt at end of period (49,704) (41,260) (37,864)
ii) Components of net debt
Cash and cash equivalents 3,616 5,229 5,222
Bank overdraft (16,108) (6,441) (9,374)
Cash and cash equivalents (12,492) (1,212) (4,152)
Interest bearing loans and borrowings (8,761) (11,263) (10,358)
Interest bearing loans and borrowings (non (28,451) (28,785) (23,354)
current)
Net debt (49,704) (41,260) (37,864)
- - -
iiii) Major non cash transactions
The cash outflow for 29th October 2005 includes a #9.3 million payment for
shares bought back from the market before the 30th April 2005, but not paid
in the year ended 30th April 2005.
8. Statement of changes in equity
Share Share Capital Translation Retained Total
capital premium redemption and hedging earnings #'000'
#'000' #'000' reserve reserve #'000'
#'000' #'000'
Balance at 1st May 2005 678 14,146 125 (168) 26,277 41,058
First Time adoption adjustments in respect of
IAS 391 - - - (10) (22) (32)
Restated balance at 1st May 2005 678 14,146 125 (178) 26,255 41,026
Share based compensation charge - - - - 90 90
Cash flow hedges:
- Fair value gains 8 8
Currency translation differences - - - 101 - 101
Tax on items taken directly to or transferred
from equity - - - (2) (36) (38)
Net income recognised in equity - - - 107 54 161
Profit for the period - - - - 17,159 17,159
Total recognised income and expense for the
period - - - 107 17,213 17,320
Dividends - - - - (18,979) (18,979)
Balance at 29th October 2005 678 14,146 125 (71) 24,489 39,367
8. Statement of changes in equity (contd...)
Share Share Translation Retained Total
capital premium Capital and hedging earnings #'000'
#'000' #'000' redemption reserve #'000'
reserve #'000'
#'000'
Balance at 1st May 2004 696 14,146 107 - 26,549 41,498
Actuarial gains on defined benefit pension
schemes - - - - 112 112
Share based compensation charge - - - - 67 67
Currency translation differences - - - 611 - 611
Tax on items taken directly to or transferred
from equity - - - - (46) (46)
Net income recognised in equity - - - 611 133 744
Profit for the period - - - - 20,722 20,722
Total recognised income and expense for the
period - - - 611 20,855 21,466
Dividends - - - - (18,799) (18,799)
Purchase of own shares (8) - 8 - (8,497) (8,497)
Balance at 30th October 2004 688 14,146 115 611 20,108 35,668
Note 1: Adoption of IAS 32 'Financial Instruments: Disclosure' and IAS 39
'Financial Instruments: Recognition and Measurement'
As disclosed in the Group's IFRS release on the 27th September 2005, the
Group deferred the adoption of IAS 32 and IAS 39 until the 1st May 2005.
The effect of this is that opening reserves have been restated to the fair
value of financial instruments held by the Group as at the 1st May 2005.
9. Acquisition of subsidiary (provisional)
On the 29th June 2005, the Group acquired 100 per cent of the issued share
capital of Mays Carpets Limited for a cash consideration of #6.4m. Mays
Carpets Limited is the parent of a group of companies whose principal
activity is that of selling floor coverings both wholesale and retail. The
transaction has been accounted for by the purchase method of accounting.
From the date of acquisition to 29th October 2005, Mays Carpets Ltd
contributed #0.1m to profit for the financial period.
Fair value and
accounting Provisional
Book policy Fair
value alignment value
#'000' #'000' #'000'
Net assets acquired:
Property, plant and equipment 164 (64) 100
Inventories 906 (100) 806
Trade and other receivables 192 192
Cash and cash equivalents 1,276 1,276
Trade and other payables (151) (151)
Tax liabilities (301) (301)
Deferred tax liabilities (20) (20)
Other provisions (119) (119)
Net Assets 1,947 (164) 1,783
Goodwill - provisional 4,649
Total consideration 6,432
Satisfied by :
Cash 6,432
Total consideration 6,432
Management found that no significant separable intangible assets have been
acquired as part of this acquisition and therefore the difference between
the fair value of the consideration and fair value of the net assets has
been recognised as goodwill.
Net cash outflow arising on acquisition:
Cash consideration 6,432
Cash and cash equivalents acquired (1,276)
Net cash outflow 5,156
If the acquisition of Mays Carpets Limited had been completed on the first
day of the financial year, the contribution to group profit and sales for
the period would have been #0.2m and #2.8m respectively.
10. Foreign Exchange
The principle exchange rates used were as follows:
Euro 26 weeks to 26 weeks to 52 weeks to
29th October 30th October 30th April
2005 2004 2005
Average 1.47 1.49 1.47
Closing 1.47 1.44 1.48
11. Transition to International Financial Reporting Standards
("IFRS")
Carpetright plc and its subsidiaries ("the Group") reported under UK Generally
Accepted Accounting Principles ("UK GAAP") in its previously published financial
statements for the year ended 30th April 2005 and this is the first interim
period that the Group has presented its interim report under IFRS.
The reconciliation's to equity as at 2nd May 2004 (date of transition
to IFRS) and as at 30th April 2005 (date of last UK GAAP financial statements)
and the reconciliation of profit for the 52 weeks ended 30th April 2005, as
required by IFRS 1 First Time Adoption of IFRS, including details of
significant accounting policies, were published on the Group's website,
www.carpetright.plc.uk, on the 27th September 2005.
The reconciliation to equity at 30th October 2004 and the reconciliation of
profit for the 26 weeks ended 30th October 2004 have been included below as
required by IFRS 1 to enable
comparison of the 2004/05 published interim figures. These reconciliations were
published on the Group's website, www.carpetright.plc.uk, on the 5th December
2005.
Reconciliation of profit for the 26 weeks to 30th October 2004
Share- Total
UK GAAP reclass based Pensions Lease Finance Goodwill Taxation Asset Other IFRS IFRS
payments incent- leases impair- adjust-
ives ment ments
#'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000'
Revenue 235,942 - - - - - - - - - - 235,942
Cost of sales (92,307) - - - - - - - - (3,829) (3,829 (96,136)
Gross profit 143,635 - - - - - - - - (3,829) (3,829) 139,806
Other
operating
income 833 (602) - - - - - - - - (602) 231
Administrative
expenses (112,100) - (67) 37 (521) 75 423 - 13 3,648 3,608 (108,492)
Operating
profit 32,368 (602) (67) 37 (521) 75 423 - 13 (181) (823) 31,545
Analysed as:
Underlying
Operating
profit 33,316 - (67) 37 (521) 75 - - 13 (181) (644) 32,672
Exceptional
items (948) (602) - - - - 423 - - - (179) (1,127)
Loss on
disposal of
fixed assets (602) 602) - - - - - - - - 602 -
Profit on
ordinary
activities
before
interest 31,766 - (67) 37 (521) 75 423 - 13 (181) (221) 31,545
Finance
expense (882) - - (35) - (94) - - - - (129) (1,011)
Finance Income 171 - - - - - - - - - - 171
Profit before
taxation 31,055 - (67) 2 (521) (19) 423 - 13 (181) (350) 30,705
Income tax
expense (9,557) - 5 - 213 6 - (559) (4) 54 (285) (9,842)
Profit for the
financial
period 21,498 - (62) 2 (308) (13) 423 (559) 9 (127) (635) 20,863
11. Transition to International Financial Reporting Standards ("IFRS") (contd...)
Reconciliation of equity as at 30th October 2004
UK Share- Total
GAAP based Lease Soft- Asset IFRS
Re- pay- Pens- incen- Finance Good- Tax- Divi- ware impair- Adjust-
stated ments sions tives leases will ation dends reclass ment Other ments IFRS
#'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000' #'000'
Assets
Goodwill and
intangible
assets 15,428 - - - - 423 - - 3,307 - - 3,730 19,158
Property,
plant and
equipment 139,167 - - - 1,617 - - - (3,307) (818) - (2,508) 136,659
Deferred
Income tax
asset 1,439 - - - - - - - 1,439
Total
non-current
assets 156,034 - - - 1,617 423 - - - (818) - 1,222 157,256
Inventories 32,295 - - - - - - - - - (1,322) (1,322) 30,973
Trade and
other
receivables 23,389 - - 442 - - - - - - (612) (170) 23,219
Cash and cash
equivalents 5,229 - - - - - - - - - - - 5,229
Total current
assets 60,913 - - 442 - - - - - - (1,934) (1,492) 59,421
Total assets 216,947 - - 442 1,617 423 - - - (818)(1,934) (270) 216,677
Liabilities
Short term
borrowings
and
overdrafts (17,659) - - - (45) - - - - - - (45) (17,704)
Trade and
other
payables (120,411) - - (5,993) - - - 13,077 - - 7,084 (113,327)
Current
income
tax
liabilities (8,274) - - 1,357 179 - - - - - 580 2,116 (6,158)
Total current
liabilities (146,344) - - (4,636) 134 - - 13,077 - - 580 9,155 (137,189)
Interest
bearing loans
and
borrowings (26,618) - - - (2,167) - - - - - - (2,167) (28,785)
Retirement
benefit
obligations - - (2,507) - - - - - - - - (2,507) (2,507)
Provisions
for
other
liabilities
and charges (108) - - - - - - - - - - - (108)
Deferred
Income tax
liabilities (2,993) 95 752 - - - (10,519) - - 245 - (9,427) (12,420)
Total
non-current
liabilities (29,719) 95 (1,755) - (2,167) - (10,519) - - 245 - (14,101) (43,820)
Total equity
and
liabilities (176,063) 95 (1,755) (4,636) (2,033) - (10,519) 13,077 - 245 580 (4,946) (181,009)
Net Assets 40,884 95 (1,755) (4,194) (416) 423 (10,519) 13,077 - (573)(1,354)(5,216) 35,668
Equity
Share
capital 688 - - - - - - - - - - - 688
Share premium 14,146 - - - - - - - - - - - 14,146
Other reserves 115 - - - - - - - - - - - 115
Translation
and hedging
reserve 611 - - - - - - - - - - - 611
Retained
earnings 25,324 95 (1,755) (4,194) (416) 423 (10,519) 13,077 - (573)(1,354)(5,216) 20,108
Total equity 40,884 95 (1,755) (4,194) (416) 423 (10,519) 13,077 - (573)(1,354)(5,216) 35,668
12 December 2005
Independent review report to Carpetright Plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 29 October 2005 which comprises of the consolidated interim
balance sheet as at 29 October 2005 and the related consolidated interim
statements of income, cash flows for the six months then ended and related
notes. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority.
As disclosed in note 1, the next annual financial statements of the group will
be prepared in accordance with accounting standards adopted for use in the
European Union. This interim report has been prepared in accordance with the
basis set out in Note 1.
The accounting policies are consistent with those that the directors intend to
use in the next annual financial statements. As explained in note 1, there is,
however, a possibility that the directors may determine that some changes are
necessary when preparing the full annual financial statements for the first time
in accordance with accounting standards adopted for use in the European Union.
The IFRS standards and IFRIC interpretations that will be applicable and adopted
for use in the European Union at 30 April 2006 are not known with certainty at
the time of preparing this interim financial information.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the disclosed accounting policies have
been applied. A review excludes audit procedures such as tests of controls and
verification of assets, liabilities and transactions. It is substantially less
in scope than an audit and therefore provides a lower level of assurance.
Accordingly we do not express an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
company for the purpose of the Listing Rules of the Financial Services Authority
and for no other purpose. We do not, in producing this report, accept or assume
responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
The maintenance and integrity of the Carpetright's web site is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the web site.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 29 October 2005.
PricewaterhouseCoopers LLP
Chartered Accountants
London
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR TTBFTMMABBTA
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