RNS Number : 1881K
Carpetright PLC
16 December 2008
Carpetright plc
Interim Results Announcement for the 26 weeks ended 1 November 2008
Carpetright plc, Europe's leading specialist carpet and floor covering retailer trading within the UK, Republic of Ireland, The
Netherlands, Belgium and Poland, today announces its interim results for the 26 weeks to 1 November 2008.
Highlights
Group
* Total Group revenue of �236.8m (2007: �251.0m)
* Underlying* profit before tax of �8.8m (2007: �27.2m)
* Profit before tax of �9.5m (2007: �28.1m)
* Underlying* earnings per share of 9.4p (2007: 28.4p)
* Basic earnings per share of 10.1p (2007: 29.5p)
* Interim dividend of 4.0p (2007: 22.0p)
UK and Republic of Ireland
* Underlying* operating profit decreased 67.1% to �8.4m (2007: �25.5m)
* Total sales decreased by 11.1%, with LFL sales down by 13.0%
* Store base increased to 561
Rest of Europe
* Underlying* operating profit increased by 29.2% to �3.1m (2007: �2.4m)
* Total sales increased by 31.9% with like for like sales up by 23.3% (5.9% in constant currency)
* Store base increased to 128
* 'Underlying' excludes profits on property disposals and non-recurring items together with associated tax
Lord Harris, Chairman and Chief Executive, said:
"As I have previously said, I expected my 51st year of selling carpets to be extremely challenging, and it has proved to be the case.
Market conditions and consumer confidence have declined through the first half, leading to reduced profits year on year due to lower sales.
Our plan is to manage the business through this period of economic downturn by continuing to exert tight control over all costs, capital
expenditure, stock and cashflow. Our expansion into Europe over the past few years has delivered increased profit. This part of the
business continues to show good growth.
Trading during November was below expectations and like all non-food retailers, we expect it will remain very difficult. The Board
anticipates the results for the full year will be significantly below current consensus.
Given the first half performance and degree of uncertainty in the general economic/retail outlook, the Board believes it is appropriate
to reduce the interim dividend to 4.0p.
Notwithstanding the current difficulties faced by consumers, Carpetright has a strong brand and we are confident in our ability to
compete by continuing to improve our operational delivery, focusing on value, choice and service. We are continuing to make profits and take
market share through this downturn and will be in a good position once confidence returns."
For further enquiries please contact:
Carpetright plc
Lord Harris of Peckham, Chairman and Chief Executive
Neil Page, Group Finance Director
Telephone 020 7638 9571 (until 2pm), 01708 802000 (thereafter)
Citigate Dewe Rogerson
Kevin Smith / Angharad Couch
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 8.30am to analysts and investors at Deutsche Bank AG London, Winchester House, 1 Great Winchester
Street, London, EC2N 2DB. A copy of the slides used for this presentation can be found on our website www.carpetright.plc.uk from 8.30am.
Certain statements in this half year report are forward looking. Although the Group believes that the expectations reflected in these
forward looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these
statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward looking
statements. We undertake no obligation to update any forward looking statements whether as a result of new information, future events or
otherwise.
FIRST HALF REVIEW
Group Overview
In a tough operating environment, it has been a challenging six months for Carpetright.
The dramatic deterioration in economic conditions means we are continuing to face an extremely difficult retail environment. However, we
remain confident in our long term growth prospects for both the UK and Europe.
Our key priorities are :
* retain our market leading position in the UK in floor coverings
* drive further growth in our European business
* optimise margins and tightly control costs
* reduce debt
The key financial results for the 26 weeks ended 1 November 2008 are set out below.
2008�m 2007�m % Total Change % LFL
Group Sales
- UK & RoI 194.6 219.0 -11.1% -13.0%
- Europe 42.2 32.0 31.9% 5.9%
236.8 251.0 -5.7% -11.1%
Underlying Operating Profit
- UK & RoI 8.4 25.5 -67.1%
- Europe 3.1 2.4 29.2%
11.5 27.9 -58.8%
Interest (2.7) (0.7)
Underlying PBT 8.8 27.2 -67.6%
Property profits and non-recurring 0.7 0.9
items
Profit before tax 9.5 28.1 -66.2%
Underlying tax rate 29.2% 30.8%
Underlying earnings per share 9.4p 28.4p
Basic earnings per share 10.1p 29.5p
Interim dividend 4.0p 22.0p
* "Underlying" excludes profits on property disposals and non-recurring items together with associated tax.
Group sales decreased by 5.7% to �236.8 million (2007: �251.0 million). Underlying profit before tax was �8.8 million (2007: �27.2
million). Profit before tax was �9.5 million (2007: �28.1 million) with property profits less non-recurring items, comprising
post-acquisition reorganisation costs in Storeys and Ben de Graaff, totalling a net �0.7 million.
Underlying earnings per share were 9.4p (2007: 28.4p) while basic earnings per share were 10.1p (2007: 29.5p).
Capital Expenditure
2008 2007
Capital expenditure for 26 weeks to 1 November 2008 �m �m
New store development 1.1 1.0
Store 1.5 1.6
IT 1.4 4.6
New cutting facility 1.4 12.2
Core capital expenditure 5.4 19.4
Carpet World (0.2) -
Storeys 0.7 17.1
Ben de Graaff 5.8 -
Acquisition of freehold properties 1.6 7.1
Proceeds from asset disposal (2.3) (3.0)
Net capital expenditure 11.0 40.6
Core capital expenditure was reduced to �5.4m (2007: �19.4m), reflecting the completion of the Navision roll-out and of the new cutting
facility at Purfleet.
Cashflow and Net Debt
2008�m 2007�m 53 wks to 3 May 2008�m
Underlying operating profit 11.5 27.9 63.4
Depreciation and other non-cash 10.0 8.2 17.0
items
Non-recurring items - (2.0) (6.6)
Decrease in stock 5.0 1.7 0.8
(Increase) / decrease in working (15.4) (0.2) (1.9)
capital
Cash generated by operations 11.1 35.6 72.7
Net Interest (2.5) (0.9) (2.2)
Corporation Tax (8.2) (7.4) (15.1)
Net capex (11.0) (40.6) (58.9)
Dividends paid (20.2) (20.4) (35.2)
Purchase of own shares - - (6.5)
Other 0.5 (0.6) (5.4)
Movement in Net Debt (30.3) (34.3) (50.6)
Opening Net Debt (57.5) (6.9) (6.9)
Closing Net Debt (87.8) (41.2) (57.5)
In the first half, net debt has increased to �87.8 million primarily due to the acquisition of Ben de Graaff (�5.8 million), the
purchase of three freehold properties (�1.6 million), the payment of the final dividend (�20.2m) and the remaining payments for Corporation
Tax relating to 2008 (�8.2 million). The principal driver behind the increase in working capital is reduction in trade creditors due to the
volume decrease.
As at 1 November 2008, the Group had total available bank facilities of �138m and the average net debt in the first half was �81m.
As set out in Note 2, the majority of the Group's banking facilities are due for renewal in September 2009. The Group will open renewal
negotiations with the bank in due course. However, initial discussions have been held and no matters have been drawn to its attention to
suggest that renewal may not be forthcoming on acceptable terms.
Profit on property disposals and non-recurring items
The details of the property profits and non-recurring items are:
2008 2007
�m �m
Profit on property disposals 1.2 2.9
Pre-opening costs relating to the new depot - (1.5)
Post acquisition reorganisation of UK businesses (0.2) (0.5)
Post acquisition reorganisation of Ben de Graaff (0.3) -
0.7 0.9
Property profits arise from the surrender of trading leases. The post acquisition reorganisation costs cover redundancy costs from
stores and the closure of the Head Offices. The Ben de Graaff reorganisation costs relate to restructuring costs since the acquisition in
July 2008.
Interim dividend
Given the first half performance and degree of uncertainty in the general/economic outlook, the Board believes it is appropriate to
reduce the interim dividend. The interim dividend will be 4.0p (2007: 22.0p).
The dividend for the full year will be reviewed in the light of full year financial results and the trading environment at that time.
UK and Republic of Ireland
Financial results
2008 2007
UK & RoI - Key financial results �m �m % Change
Sales 194.6 219.0 (11.1)%
Gross profit 121.5 136.6 (11.1)%
Gross margin % 62.4% 62.4% Level
Underlying operating profit 8.4 25.5 (67.1)%
Underlying operating margin 4.3% 11.6% (7.3)pp
Total sales across the UK & RoI declined by 11.1% (the LFL was -13.0%) and underlying operating profit decreased by 67.1% to �8.4
million.
The market consistently declined during the first half. Although there are limited statistics available, due to the fragmentation of the
market, suppliers to the UK have indicated to us that their UK sales are down circa 20%.
The gross margin was 62.4%, which was in line with the prior year and operating costs increased by 1.8% to �113.1 million.
Staff costs within the Carpetright format reduced in the period under review due to lower headcount and commissions. Since May 2008,
headcount has reduced, mostly through natural wastage, by over 200 people, with efficiencies achieved in the stores and the central office.
Specific activity has been focused on the Storeys format where the headcount has been reduced by an additional 96 to 176, with improved
store productivity and the closure of the Head Office.
The roll-out of Navision, to all UK & RoI stores, was completed in October 2008 on time and to budget. Efficiencies following this roll
out have enabled us to reduce staff numbers as planned.
Rent inflation has been mitigated to some extent by the introduction of Sleepright, a bed concession, into 93 stores. These units each
occupy around 1,200 sq ft of space. These concession units helped to reduce operating costs and generate additional footfall. We expect to
benefit from the incremental sales and profit opportunities from the bed business.
In response to the tougher market conditions, the pace of new store openings was slowed during the period, with 15 new stores opened. At
the same time, we closed 13 outlets, either as part of our ongoing programme to move from high cost to lower cost locations, or as the
stores did not contribute to our overall profitability.
At the end of the period, there were 561 stores trading, of which 60 stores are concession units and 39 are Storeys stores. We expect a
limited number of new openings in the second half as we focus on our existing outlets and become more selective in the locations we are
prepared to accept.
New cutting facility
The new cutting and distribution centre at Purfleet is now fully operational. This has allowed us to reduce our operational costs, cut
delivery times, improve margin and provides significant future capacity to support growth in all of our markets.
Products and Promotions
Although all product areas have declined, we have also seen movement within the sales mix. The proportion of ordered cut length business
has declined slightly in favour of 'pay and take' roll stock. We believe this reflects the cost conscious retail environment with customers
looking to reduce expenditure at every opportunity. The vinyl business has grown in the mix driven by new product development and our
improved service through the new Purfleet facility.
Our promotional stance remains consistent in offering our customers the very best value. We have been able to maintain sales volume by
offering competitively priced key ranges, where we have been able to source products at reduced costs. This has particularly been the case
in our wool product ranges which are currently exceptional value.
We extended the number of 'Madness' promotions from two to three in the first half, which aided sales volume with a small impact on
margin percentage.
The majority of products are sourced from Europe. The depreciation of sterling relative to the Euro has adversely impacted our cost
prices.
Rest of Europe
Financial Results
2008�m 2007�m % Change
Sales- The Netherlands and Belgium- 40.71.5 31.10.9 30.9%66.7%
Poland
42.2 32.0 31.9%
Underlying operating profit- The 3.7(0.6) 3.1(0.7) 19.4%14.3%
Netherlands and Belgium- Poland
3.1 2.4 29.2%
Underlying operating margin %- The 9.1%- 10.0%-
Netherlands and Belgium- Poland
7.3% 7.5%
The Rest of Europe business continued to make solid progress, increasing its underlying operating profit by 29.2% to �3.1 million with
total sales growing by 31.9%.
The Netherlands and Belgium
Total sales have increased by 30.9% (12.7% in local currency) with like-for-like sales increasing by 23.1% (6.2% in local currency). The
remainder of the growth is due to the new outlets opened last year, the 11 stores acquired within the Ben de Graaff acquisition and one
additional store being added since the year-end. At the end of the period, there were 89 stores trading in The Netherlands and 28 in
Belgium.
Sales growth has been achieved across all categories with laminate and vinyl showing slightly better growth. These categories are more
important in Europe than they are in the UK.
Poland
Progress in Poland continues to be steady. There are now eleven stores trading with six having been open for more than 12 months at the
start of the year. Total sales grew by 66.7% (35.7% in local currency).
During the period, we reviewed the store layout and staffing levels for each store. We have subsequently reduced the number of people
employed in each outlet and have reorganised the stores to improve category segmentation. In addition, we have trialled specific radio
advertising to drive footfall. This has proved successful and we intend to extend it in the second half.
The business made a reduced loss of �0.6 million in the period, as anticipated. We are encouraged by progress to date and intend to open
a further two stores in the second half.
Sleepright
On 5 December 2008, we acquired the Sleepright business. The Sleepright format has been trialled successfully over the past 18 months,
delivering incremental sales within the same floor space. We see significant opportunities to develop the business, which is complementary
to Carpetright, and there are important synergies for us to exploit and enhance returns.
Outlook
The first half witnessed unprecedented turmoil in world financial markets and the banking sector and this has severely affected consumer
confidence. The trading environment continues to be extremely difficult.
Our principal markets of UK & RoI have entered into recession and the likelihood is the housing market will remain weak with
unemployment set to rise. It is likely to be at least 18 months before we see a return to more normal trading conditions.
Our European operations continue to develop and we are confident that it will see further growth in sales and profits in the second
half.
Against this backdrop, the Group continues to make progress. The successful transition to a new warehouse and cutting facility,
completion of the Navision roll-out, acquisition of Sleepright and the continued growth of the European business ensures we are well placed
to trade resiliently through the UK downturn. We remain confident we have a solid business model which will see us through this period, and
which we will be able to build upon once confidence returns.
Lord Harris of Peckham
15 December 2008
Carpetright plcCondensed consolidated income statement for 26 weeks ended 1 November 2008
Notes 26 weeks 26 weeks 53 weeks
ended ended ended
1 November 27 October 3 May
2008 2007 2008
unaudited unaudited audited
�m �m �m
Revenue 4 236.8 251.0 521.5
Cost of sales (91.5) (96.4) (198.4)
Gross profit 4 145.3 154.6 323.1
Other operating income 2.4 5.0 10.1
Administrative expenses (135.5) (130.8) (272.4)
Operating profit 4 12.2 28.8 60.8
Operating profit before profit on property 4 11.5 27.9 63.4
disposals and
non-recurring items
Profit/(loss) on property disposals and non-recurring items 5 0.7 0.9 (2.6)
Finance costs payable (2.9) (0.9) (2.8)
Finance income receivable 0.2 0.2 1.5
Profit before tax 9.5 28.1 59.5
Tax 6 (2.7) (8.1) (16.7)
Profit for the financial period attributable to equityholders of the 6.8 20.0 42.8
Company
Basic earnings per share 8 10.1 29.5 63.2
Diluted earnings per share 8 10.1 29.4 63.2
All items in the income statement arise from continuing operations.
Condensed Consolidated Statement of Recognised Income and Expenses for 26 weeks ended 1 November 2008
Notes 26 weeks 26 weeks 53
weeks
ended ended ended
1 November 27 October 3
May
2008 2007 2008
unaudited unaudited
�m �m audited
�m
Profit for the financial period 6.8 20.0
42.8
Actuarial gain/(loss) on defined benefit pension 11 * *
0.5
scheme
Fair value gains in respect of cash flow hedges 0.5 (0.1)
(0.2)
Exchange gains/(losses) in respect of hedged equityInvestments (1.7) 0.8
4.4
Taxation on items taken directly to or transferred fromEquity (0.1) *
(0.1)
Net gains/(losses) recognised directly in equity (1.3) 0.7
4.6
Total recognised income and expense for the financialperiod, attributable 5.5 20.7
47.4
to equity shareholders of theCompany
The notes on pages 13 to 19 form an integral part of this consolidated interim financial information.
Carpetright plc
Condensed consolidated balance sheet at 1 November 2008
Notes At At 27 October At 3 May
1 November 2007 2008
2008 unaudited unaudited �m audited
�m restated
�m
Assets
Non-current assets
Intangible assets 66.4 55.9 62.7
Property, plant and equipment 164.8 149.8 165.8
Investment property 21.2 19.8 21.0
Investment in joint ventures 0.2 * 0.2
Deferred tax assets 3.2 0.9 3.2
Derivative financial instruments 0.5 * *
Trade and other receivables 1.3 1.4 1.3
Total non-current assets 257.6 227.8 254.2
Current assets
Inventories 37.9 37.4 40.1
Trade and other receivables 32.1 34.7 32.8
Cash and cash equivalents 10 23.3 5.1 8.9
Total current assets 93.3 77.2 81.8
Total assets 350.9 305.0 336.0
Liabilities
Current liabilities
Trade and other payables (111.9) (126.1) (123.8)
Obligations under finance leases 10 (0.8) (0.8) (0.8)
Borrowings and overdrafts 10 (59.9) (22.4) (22.4)
Current tax liabilities (6.0) (9.1) (11.6)
Total current liabilities (178.6) (158.4) (158.6)
Non-current liabilities
Trade and other payables (30.1) (26.7) (28.3)
Obligations under finance leases 10 (3.5) (3.3) (3.9)
Borrowings 10 (47.4) (19.8) (39.3)
Provisions for liabilities and charges (1.2) (0.7) (1.4)
Deferred tax liabilities (29.1) (25.4) (28.9)
Retirement benefit obligations 11 (1.3) (1.8) (1.3)
Total non-current liabilities (112.6) (77.7) (103.1)
Total liabilities (291.2) (236.1) (261.7)
Net assets 59.7 68.9 74.3
Equity
Share capital 12 0.7 0.7 0.7
Share premium 12 15.4 15.3 15.4
Treasury shares 12 (0.2) (0.5) (0.2)
Other reserves 12 43.8 53.4 58.4
Total equity attributable to equity holders ofthe 12 59.7 68.9 74.3
Company
The notes on pages 13 to 19 form an integral part of this consolidated interim financial information.
Carpetright plc
Condensed consolidated cash flow statement for 26 weeks ended 1 November 2008
Notes
26 weeks 26 weeks 53 weeks
ended ended ended
1 November 27 October 3 May
2008
unaudited �m 2007 2008
unaudited audited
�m �m
Cash flows from operating
activities
Profit before tax
9.5 28.1 59.5
Adjusted for:
Depreciation and amortisation
9.9 8.1 17.0
Non-recurring items
0.5 * 3.0
Share-based payments
0.1 0.1 *
Profit on property disposals 5
(1.2) (2.9) (7.0)
Net finance costs
2.7 0.7 1.3
Operating cash flows before movements in working capital
21.5 34.1 73.8
Decrease in inventories
5.0 1.7 0.8
Increase in trade and other
(2.0) (5.1) (1.0)
receivables
Increase/(decrease) in trade and other payables
(13.4) 4.9 (0.9)
Cash generated by operations
11.1 35.6 72.7
Interest paid
(2.7) (1.1) (2.9)
Corporation taxes paid
(8.2) (7.4) (15.1)
Net cash generated from
0.2 27.1 54.7
operating activities
Cash flows from investing
activities
Proceeds on disposal of property, plant and equipment and investment 9
2.3 3.0 20.0
property
Purchases of intangible assets 9
(0.7) (1.9) (2.0)
Purchases of property, plant and equipment and investment property 9
(6.3) (24.6) (44.5)
Acquisition of businesses net of cash acquired 13
(6.3) (17.1) (32.2)
Acquisition of shares in joint
- - (0.2)
ventures
Interest received
0.2 0.2 0.7
Net cash used in investing
(10.8) (40.4) (58.2)
activities
Cash flows from financing
activities
Purchase and cancellation of
* * (6.5)
own shares
Repayment of borrowings 10
(4.6) (6.2) (13.4)
New loans advanced 10
58.0 13.5 38.5
Repayment of obligation under finance leases 10
(0.4) (0.4) (0.8)
Dividends paid to Company 7
(20.2) (20.4) (35.2)
shareholders
Net cash used in financing
32.8 (13.5) (17.4)
activities
Net increase/(decrease) in cash and cash equivalents in period 10
22.2 (26.8) (20.9)
Cash and cash equivalents at the beginning of the period
(2.2) 19.2 19.2
Exchange differences
0.3 0.3 (0.5)
Cash and cash equivalents at the end of the period 10
20.3 (7.3) (2.2)
For the purposes of the cash flow statement, cash and cash equivalents are reported net of overdrafts repayable on demand. Overdrafts are
excluded from the definition of cash and cash equivalents disclosed in the balance
sheet.
The notes on pages 13 to 19 form an integral part of this consolidated interim financial information.
Carpetright plc
Notes to the condensed consolidated financial statements for the 26 weeks ended 1 November 2008
1. General information
The Company is a limited liability company incorporated and domiciled in the UK. The address of its registered office is Harris House,
Purfleet Bypass, Purfleet, Essex RM19 1TT. The Company is listed on the
London Stock Exchange.
This condensed consolidated half-yearly financial information was approved for issue on 15 December 2008.
This interim report does not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. It has been reviewed
but not audited by the Group's auditors. The statutory accounts for
the year ended 3 May 2008 were approved by the Board of Directors on 30 June 2008 and delivered to the Register of Companies. The report of
the auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement made under section 237 of the Companies Act 1985.
2. Basis of preparation
These condensed consolidated half-yearly financial statements for the 26 weeks ended 1 November 2008 have been prepared in accordance with
the Disclosure and Transparency Rules of the Financial Services
Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The half-yearly condensed consolidated financial
report should be read in conjunction with the annual financial
statements for the 53 weeks ended 3 May 2008, which have been prepared in accordance with IFRSs as adopted by the European Union.
The Group meets its day to day working capital requirements principally through revolving credit and overdraft facilities, the majority of
which is due for renewal in September 2009. The current economic
conditions create uncertainty over the level of demand for the Group's products and the availability of bank finance in the foreseeable
future. The Group's forecast which take account of possible changes in
trading performance, show that the Group should be able to operate within its current level of facility. The Group will open renewal
negotiations with the bank in due course. However, initial discussions
have been held and no matters have been drawn to its attention to suggest that renewal may not be forthcoming on acceptable terms.
Consequently, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for
the foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing these condensed consolidated half-yearly financial statements for the 26 weeks ended 1 November 2008.
Balance sheet restatement
The balance sheet at 3 May 2008 has been restated to reflect the adjustments to the provisional values relating to the acquisition of
Melford Commercial Properties Ltd on 31 March 2008. The impact has been to
increase goodwill by �0.5m, reduce fixed assets by �0.2m, increase trade and other receivables by �0.2m, increase trade and other payables
by �0.4m and increase current tax by �0.1m.
3. Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the 53 weeks ended 3 May 2008, as
described in those annual financial statements.
The following new standards and amendments to standards are mandatory for the first time for the 52 weeks ending 2 May 2009:
IFRIC 14 'IAS 19 - The limit on defined benefit assets, minimum funding requirements and their interaction' (effective for periods
beginning on or after 1 January 2008) provides guidance on when refunds or reductions in future contributions should be
regarded as available in calculating the value of a defined benefit asset including the impact of a minimum funding requirement.
The interpretation has had no immediate impact on the Group's financial statements.
The following new interpretations are mandatory for the first time for the 52 weeks ending 2 May 2009 but are not relevant for the Group's
operations:
IFRIC 12 'Service Concession Arrangements', (effective from annual periods beginning on or after 1 January 2008).
Carpetright plc
Notes to the condensed consolidated financial statements for the 26 weeks ended 1 November 2008
4. Segment information
The Group's primary reporting segment is geographic, as this is the basis on which the Group is organised and managed. The Group does not
report a secondary segment on the basis of business operations because business operations throughout the Group are the same. The
geographical sectors are: United Kingdom & Republic of Ireland ("UK & RoI"), and The Netherlands, Belgium and Poland ("Rest of Europe").
Central costs are incurred principally in the UK and are immaterial. As such these costs are included within the UK & RoI segment. Segment
revenue and result include transfers between geographical segments. Such transfers are priced at arm's length and are eliminated on
consolidation.
Analysis by geography:
26 weeks ended 1 November 2008
26 weeks ended 27 October 2007
UK & RoI
�m Rest of Europe �m Total �m
UK & RoI �m Rest of Europe �m Total �m
Gross Revenue 196.1
42.2 238.3
220.4 32.0 252.4
Inter-segment revenue
(1.5) - (1.5)
(1.4) - (1.4)
Segment Revenue (by origin and destination) 194.6
42.2 236.8
219.0 32.0 251.0
Gross profit 121.5
23.8 145.3
136.6 18.0 154.6
Operating profit before profit on property disposals and non-recurring items 8.4
3.1 11.5
25.5 2.4 27.9
Segment result: operating profit after profit on property disposals and non-recurring items 9.4
2.8 12.2
26.4 2.4 28.8
Net interest payable
(2.7)
(0.7)
Profit before tax
9.5
28.1
Tax
(2.7)
(8.1)
Profit for the financial period
6.8
20.0
Carpetright's trade has historically shown no distinct pattern of seasonality with trade cycles more closely following economic indicators
such as interest rates and consumer confidence.
5. Profit on property disposals and non-recurring items
26 weeks ended 1
November 2008 �m 26 weeks ended 27 October 2007 �m 53 weeks ended 3 May 2008 �m
Disclosed in the income statement:
Profit on property disposals
1.2 2.9 7.0
Pre-opening costs relating to the new depot
- (1.5) (7.8)
Post acquisition reorganisation of new businesses
(0.5) (0.5) (1.8)
Total
0.7 0.9 (2.6)
Carpetright plc
Notes to the condensed consolidated financial statements for the 26 weeks ended 1 November 2008
6. Taxation
26 weeks ended 1 November 2008 �m 26
weeks ended 27 October 2007 �m 53 weeks ended 3 May 2008 �m
Current
2.0
6.8 16.3
Deferred
0.7
1.3 0.4
2.7
8.1 16.7
The estimated tax rates on the profits of the Group are as follows:
52
weeks ended 2 May 2009 % 53 weeks ended 3 May 2008 %
Weighted average annual underlying tax rate
29.2 30.8
Weighted average annual effective tax rate
28.9 28.1
The effective tax rate is defined as the tax charged or credited as a percentage of the accounting profit before tax. The underlying tax
rate is defined as the effective tax rate after adjusting for, when relevant, profit on property disposals and non-recurring items and tax
adjustments in respect of such items.
7. Dividends
26 weeks ended 1 November 2008
26 weeks ended 27 October 2007
Pence/share �m
Pence/share �m
Final prior year dividend paid
30.0 20.2
30.0 20.4
Proposed current year interim dividend
4.0 2.7
22.0 14.8
The proposed interim dividend of 4p per share was approved by the Board of Directors on 15 December 2008 but has not been included as a
liability in these financial statements. The proposed dividend will be paid on 20 February 2009 to shareholders who are on the register of
members on 6 February 2009.
8. Earnings per share
26 weeks ended 1 November 2008
26 weeks ended 27 October 2007
53 weeks ended 3 May 2008
Earnings �m Weighted average number of shares Millions Earnings per share Pence
Earnings �m Weighted average number of shares Millions Earnings per share Pence
Earnings �m Weighted average number of shares Earnings per share
Millions Pence
Basic earnings per share 6.8 67.2 10.1
20.0 67.9 29.5
42.8 67.7 63.2
Effect of dilutive share - - -
- 0.1 (0.1)
0.1 0.2 -
options
Diluted earnings per share 6.8 67.2 10.1
20.0 68.0 29.4
42.9 67.9 63.2
Carpetright plc
Notes to the condensed consolidated financial statements for the 26 weeks ended 1 November 2008
8. Earnings per share (continued)
The Directors have presented an additional measure of earnings per share based on underlying earnings as they believe this provides a more
comparable measure on an ongoing basis. Underlying earnings is defined as profit after adjusting for post tax profits on property disposals
and
non-recurring items.
26 weeks ended 1 November 2008 Pence 26 weeks ended 27 October 2007 Pence 53 weeks ended 3 May
2008 Pence
Basic earnings per share
10.1 29.5
63.2
Adjusted for the effect of profit on property disposals and non-recurring items:
Profit on property disposals
(1.8) (4.3)
(10.3)
Non-recurring items
0.7 2.9
14.1
Tax thereon
0.4 0.3
(1.3)
Non recurring tax benefit from the impact of the decrease in the UK Corporation tax
- -
(2.2)
rate on the opening deferred tax position
Underlying earnings per share
9.4 28.4
63.5
9. Capital expenditure
During the period, the Group spent approximately �0.7m (2007 - �1.9m) on intangible assets principally in respect of the final stage of the
new stores system, Navision, �4.9m (2007 - �12.4m) on the acquisition and fit out of stores and �1.4m (2007 - �12.2m) on fitting out the
new
warehouse and transport depot.
A number of properties were vacated during the period giving rise to net proceeds of �2.3m (2007 - �3.0m).
10. Borrowings
During the period the Group agreed a new short term revolving credit facility for �50.0m and reduced the overdraft facility by �20.0m.
During the period loans of �4.6m were repaid under the terms of the loan agreements.
4 May
1
November 2008
2008
Cash flow Exchange Revaluation
�m �m movement �m
�m
�m
Cash and cash equivalents per the balance sheet 8.9
14.4 - -
23.3
Bank overdrafts
(11.1) 7.8 0.3 -
(3.0)
Cash and cash equivalents per the cash flow statement
(2.2) 22.2 0.3 -
20.3
Borrowings
Borrowings
(11.3) (45.6) - -
(56.9)
Borrowings (non-current)
(39.3) (7.8) (0.3) -
(47.4)
Obligation under finance leases
Obligation under finance leases
(0.8) - - -
(0.8)
Obligation under finance leases (non-current)
(3.9) 0.4 - -
(3.5)
Derivative financial instruments -
- - 0.5
0.5
Net debt
(57.5) (30.8) - 0.5
(87.8)
Carpetright plc
Notes to the condensed consolidated financial statements for the 26 weeks ended 1 November 2008
10. Borrowings (continued)
28 April
2007 27 October 2007
Cash flow Exchange Revaluation
�m �m movement �m �m
�m
Cash and cash equivalents per the balance sheet
20.7 (15.8) 0.2 - 5.1
Bank overdrafts
(1.5) (11.0) 0.1 - (12.4)
Cash and cash equivalents per the cash flow statement
19.2 (26.8) 0.3 - (7.3)
Borrowings
Borrowings
(10.7) 0.7 - - (10.0)
Borrowings (non-current)
(11.0) (8.0) (0.8) - (19.8)
Obligation under finance leases
Obligation under finance leases
(0.8) - - - (0.8)
Obligation under finance leases (non-current)
(3.7) 0.4 - - (3.3)
Derivative financial instruments
0.1 - - (0.1) -
Net debt
(6.9) (33.7) (0.5) (0.1) (41.2)
11. Retirement benefit obligation
The assets and liabilities of the Group's UK defined benefit pension schemes were valued on an IAS 19 basis at 1 November 2008 by a
qualified actuary. The assumptions underlying this valuation are consistent with those used
at 3 May 2008. At 1 November 2008 the value of the schemes obligations is �13.1m and the value of the schemes assets is �12.0m, a net
deficit of �1.1m. Given the current economic climate the �0.2m reduction in the value of
the deficit since the prior year end has not been recognised in these accounts.
12. Statement of changes in shareholders' equity
Share capital
�m Share premium �m Treasury shares �m Other reserves �m Total
�m
At 4 May 2008 0.7
15.4 (0.2) 58.4 74.3
Change in fair value of cash flow hedges
- - - 0.5 0.5
Exchange difference in respect of hedged equity investments -
- - (1.7) (1.7)
Tax on items taken directly to or transferred from equity through the
- (0.1) (0.1)
SORIE - -
Profit for the financial period
6.8 6.8
Total recognised income and expense for the -
- - 5.5 5.5
financial period
Share-based payments net of tax
- - - 0.1 0.1
Dividends paid to Group shareholders
- - - (20.2) (20.2)
At 1 November 2008 0.7
15.4 (0.2) 43.8 59.7
Share capital
�m Share premium �m Treasury shares �m Other reserves �m Total
�m
At 28 April 2007 0.7
14.8 (0.5) 53.0 68.0
Issue of ordinary shares on the acquisition of Storey Carpets Ltd -
0.5 - - 0.5
Change in fair value of cash flow hedges -
- - (0.1) (0.1)
Exchange difference in respect of hedged equity investments -
- - 0.8 0.8
Profit for the financial period -
- - 20.0 20.0
Total recognised income and expense for the financial period -
0.5 - 20.7 21.2
Share-based payments net of tax -
- - 0.1 0.1
Dividends paid to Group shareholders -
- - (20.4) (20.4)
At 27 October 2007 0.7
15.3 (0.5) 53.4 68.9
Carpetright plc
Notes to the condensed consolidated financial statements for the 26 weeks ended 1 November 2008
13. Business acquisitions
On 30 June 2008, the Group acquired the trade and assets of Ben de Graaff Tapijt. The consideration paid for the acquisition was �5.7m. The
principal activity of Ben de Graaff Tapijt is the retailing of carpet and other floor covering. The transaction has been
accounted for in accordance with IFRS 3 Business Combinations.
Brand values were assessed as part of the acquisition fair value but were immaterial. No brand value has been recognised in the cost of the
investment.
From the date of acquisition to 1 November 2008, the acquisition contributed �2.6m to turnover, �0.2m to profit and �0.2m to net operating
cash flow. Had the acquisition been accounted for from the beginning of the financial year the contribution to turnover would
have been approximately �3.9m. There is no material difference between the amounts included in these accounts and the amount that would
have been recognised had the acquisition been made at the start of the financial year for profit or operating cash flow.
Details of net assets acquired and goodwill are as follows:
�m
Purchase consideration:
Cash paid
5.7
Direct costs relating to the acquisition
0.1
Total purchase consideration
5.8
Fair value of net identifiable assets acquired
(2.1)
Goodwill
3.7
The goodwill is attributable to the synergies expected to arise after acquisition by the Group.
The assets and liabilities arising from the acquisition together with the provisional fair values are as follows:
Acquiree's carrying
amount before business Accounting policy alignment �m Fair value adjustments �m Fair value �m
combination �m
Net assets acquired:
Inventories
2.6 - - 2.6
Trade and other payables
(0.1) - - (0.1)
Other provisions
- - (0.4) (0.4)
Net identifiable assets acquired
2.5 - (0.4) 2.1
Outflow of cash to acquire business, net of cash acquired
Cash consideration
5.8
Cash flow on acquisition of shares in subsidiary net of cash acquired
5.8
On 31 March 2008, the Group acquired 100% of the issued share capital of Melford Commercial Properties Ltd. During the current period the
purchase consideration and the acquirees book values have been finalised and the fair values have been reviewed. The revised
details of net assets acquired and goodwill are as follows:
�m
Purchase consideration:
Cash paid
6.6
Direct costs relating to the acquisition
0.4
Total purchase consideration
7.0
Fair value of net identifiable liabilities acquired
0.1
Goodwill
7.1
Since the initial estimates were reported the total purchase consideration has been reduced by �0.2m as a result of the finalisation of the
direct costs. The fair value of the assets acquired has been reduced by �0.7m to a net liability acquired of �0.1m, �0.3m as
a result of the review of the book values in the acquired company and �0.4m as a result of the review of the fair value adjustments.
A net �0.2m was received in cash during the period as a result of the finalisation of the working capital adjustment relating to this
acquisition and the payment of direct costs. In addition a further �0.7m of deferred consideration was paid relating to the
acquisition of Storey Carpets Ltd on 1 May 2007.
Carpetright plc
Notes to the condensed consolidated financial statements for the 26 weeks ended 1 November 2008
14. Capital and other commitments
Capital commitments of �5.3m at 1 November 2008 for which no provision has been made in the accounts relate to the acquisition of tangible
and intangible assets (26 weeks to 27 October 2007: �16.5m; 52 weeks to 3 May 2008 �9.1m).
15. Related party transactions
Details of transactions during the period with Companies of which Lord Harris and/or M J Harris is a director and/or in which Lord Harris
holds a material interest are set out below.
Lease and concession agreement payments made Lease and
concession agreement payments received Supply of goods/services payments made
26
weeks ended 1 November 2008 26 weeks ended 27 October 2007 26 weeks ended 1 November 2008
26 weeks ended 27 October 2007 26 weeks ended 1 November 2008 26 weeks ended 27
October 2007
�'000 �'000 �'000
�'000 �'000 �'000
Clacton Property Investments Ltd
40 - -
- - -
Edinburgh Retail LLP
228 281 -
- - -
Glenrothes Retail LLP
94 58 -
400 - -
Greenock Retail Ltd
113 108 -
- - -
Harris Ventures Ltd
102 130 -
- 30 4
Hull Unit Trust
177 105 -
- - -
Islandview Properties Ltd
136 136 -
- - -
Neath Retail LLP
75 75 -
- - -
Wick Retail LLP
27 27 -
- - -
As at 1 November 2008 the Group owed related parties �26,000 (2007 - �nil).
16. Foreign exchange
The principal exchange rates used were as follows:
26 weeks ended 1 November 2008 26 weeks ended 27 October 2007 53 weeks ended 3 May
2008
Euro
Average
1.26 1.46 1.40
Closing
1.26 1.43 1.28
Zloty
Average
4.27 5.57 5.25
Closing
4.61 5.23 4.42
17. Post balance sheet events
On 5 December 2008, Carpetright plc acquired 100% of the share capital of Sleepright UK Ltd. The total potential consideration is �1.8m, of
which �0.8m has been paid. The remaining �1.0m is deferred to 2010 and is dependent on the achievement of specific profit targets for this
business in the year to April 2010. This acquisition has occurred too close to the publication of this
interim statement for full acquisition information to be available. This will be provided in the Group's year end report and accounts
Carpetright plc
Notes to the condensed consolidated financial statements for the 26 weeks ended 1 November 2008
Risks and uncertainties
The Board considers risk assessment, identification of mitigating actions and internal control to be fundamental to achieving Carpetright's
objectives. The Board considers that the principal risks, which
remain principally unchanged from those set out in the 2008 Annual Report are:
* economic and market conditions
* business strategy development and implementation
* employee risk - management and customer service
* entering new markets
* cost inflation
* supply chain and business continuity
* IT systems
The First Half Review on pages 3 to 9 includes consideration of the uncertainties affecting the Group in the remaining six months of the
year.
A copy of the Group's 2008 Annual Report is available on the Group's website www.carpetright.plc.uk
Forward looking statements
Certain statements in this half year report are forward looking. Although the Group believes that the expectations reflected in these
forward looking statements are reasonable, we can give no assurance that
these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ
materially from those expressed or implied by these forward looking
statements. We undertake no obligation to update any forward looking statements whether as a result of new information, future events or
otherwise.
Statement of Directors' responsibilities
The condensed financial statements have been prepared in accordance with IAS 34, as adopted by the European Union, and the interim
management report herein includes a fair review of the information required
by DTR 4.2.7 and DTR 4.2.8. The Directors of Carpetright plc are listed on page 14 of the Group's 2007 Annual Report. Since the date of the
annual report the changes to the composition of the Board are: 14
July 2008 Neil Page appointed Group Finance Director; 10 September 2008 Martin Toogood resigned as a Non-Executive Director.
By order of the Board
Neil Page
Group Finance Director
15 December 2008
Independent review report to Carpetright plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the 26
weeks ended 1 November 2008, which comprises the income statement, balance sheet, statement of recognised income and expense, cash flow
statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European
Union. The condensed set of financial statements included in this half-early financial report has been prepared in accordance with
International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial
report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the
Disclosure and Transparency 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.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim
Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United
Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in an audit. Accordingly we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the
half-yearly financial report for the 26 weeks ended 1 November 2008 is not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom
Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
15 December 2008
London
Notes:
* The maintenance and integrity of the Carpetright plc website 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 financial statements since they were initially presented on the website.
* Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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