TIDMCPR
RNS Number : 4169C
Carpetright PLC
28 June 2016
Full Year Results for the 52 weeks ended 30 April 2016
"Solid growth in Group underlying profit before tax to GBP17.3m,
along with announcement of a range of strategic initiatives to
update and broaden the appeal of the Carpetright brand"
Financial highlights (note 1)
Group
-- Underlying profit before tax up 33.1% to GBP17.3m (2015:
GBP13.0m) in-line with market expectations. (notes 3, 4, 5)
-- Group revenue decreased by 1.3% to GBP456.8m (2015:
GBP462.6m) (note 2), compared to store space reduction of 5.4%
associated with rationalisation of the estate.
-- Underlying earnings per share up 40.9% to 19.3p (2015: 13.7p).
-- Statutory profit before tax of GBP12.8m, an improvement of
GBP6.2m (2015: GBP6.6m 53 week basis).
UK
-- Like-for-like sales increased by 2.8%. (note 6, 7)
-- Underlying operating profit up 17.5% to GBP16.8m (2015: GBP14.3m).
-- Significant progress made in reducing the number of
underperforming stores - net 25 closures to reduce the UK estate to
435 stores.
Rest of Europe
-- Like-for-like sales growth of 4.8%.
-- Underlying profit of GBP2.5m, an improvement of GBP2.2m on the GBP0.3m delivered in 2015.
-- Store base unchanged at 137, after eight openings and eight closures.
Strategic Update
-- Successful trial of new store format and branding completed
in the year. Positive customer reaction with LFL sales growth of
9.1% being achieved, providing proof of concept ahead of wider
roll-out.
-- Range of strategic initiatives to update and broaden the
appeal of the Carpetright brand being announced today,
including:
-- New Carpetright branding/identity being introduced across the business from 1 July 2016.
-- Phased refurbishment of the UK store estate - 100 stores to
be completed within the next 12 months at a
capital cost of GBP10m.
-- Following double digit sales growth in the category, new hard
flooring sections being introduced into UK
stores, featuring established brands including Balterio, Kronospan and Quickstep.
-- New 'Exclusive to Carpetright' ranges and introduction of
'Essential Value' brand to strengthen Carpetright's authority as
the leader in floorcoverings.
-- Focus on improving customer service - stronger satisfaction metrics being achieved.
Current Trading
-- We have had a challenging start to the new financial year,
against strong comparatives in the prior year and in a market which
is increasingly competitive. In the UK, while May was a difficult
month with like-for-like sales down 7.6%, June has been
significantly better, being up 6.3%. These figures combine to give
a decline of 1.0% for the eight weeks to 25 June 2016. In the Rest
of Europe, like-for-like sales up by 1.3%, on a local currency
basis over the same period.
Commenting on the results Wilf Walsh, Chief Executive Officer,
said:
"I am pleased to able to report on another year of significant
progress. The Group has again delivered solid growth in profit,
accompanied by consistent like-for-like sales growth in both the UK
and Rest of Europe, whilst establishing real momentum with its
plans to update and revitalise its business.
"Today we're giving a progress update on the range of strategic
initiatives that will continue to broaden the appeal of the
Carpetright brand and reposition the business, to ensure it is
better able to capitalise on its market leadership position.
Customer reaction to the initiatives trialled in our four concept
stores during the period was overwhelmingly positive and we are
excited about the opportunity of extending these to the wider
estate commencing on 1 July 2016.
"Trading conditions in the early weeks of the new financial year
have been more challenging, against strong comparatives in the
prior year and in a market which is increasingly competitive,
particularly in the UK. The outlook has been further complicated by
the outcome of last week's referendum and we are cautious about the
impact the associated uncertainty will have on consumer
confidence.
"Whilst we have a long journey ahead in transforming
Carpetright, we have a clear direction and are confident that our
plans for repositioning the business will yield positive
results."
Group financial summary
Pro forma
52 week 52 week 53 week
2016 2015 52 week 2015
GBPm GBPm change GBPm
---------------------------- -------- ---------- -------- --------
Group revenue 456.8 462.6 (1.3%) 469.8
---------------------------- -------- ---------- -------- --------
* UK 391.0 396.0 (1.3%) 403.2
---------------------------- -------- ---------- -------- --------
* Rest of Europe 65.8 66.6 (1.2%) 66.6
---------------------------- -------- ---------- -------- --------
Underlying operating
profit 19.3 14.6 32.2% 15.8
---------------------------- -------- ---------- -------- --------
* UK 16.8 14.3 17.5% 15.5
---------------------------- -------- ---------- -------- --------
* Rest of Europe 2.5 0.3 733.3% 0.3
---------------------------- -------- ---------- -------- --------
Underlying profit
before tax 17.3 13.0 33.1% 14.2
---------------------------- -------- ---------- -------- --------
Underlying earnings
per share 19.3p 13.7p 40.9% 15.5p
---------------------------- -------- ---------- -------- --------
Exceptional charges (4.5) (7.6) 40.8% (7.6)
---------------------------- -------- ---------- -------- --------
Profit before tax 12.8 5.4 137.0% 6.6
---------------------------- -------- ---------- -------- --------
Basic earnings per
share 14.9p 5.0p 198.0% 6.7p
---------------------------- -------- ---------- -------- --------
Net cash/(debt) (1.1) - - 0.5
---------------------------- -------- ---------- -------- --------
Notes
1. The 2016 financial year represents the 52 week trading period
to 30 April 2016. The comparative period of financial year 2015
represents the 53 weeks to 2 May 2015. We believe that a comparison
to the pro forma 52 weeks result for 2015 financial year better
reflects the underlying performance of the business. On this basis,
all commentary included in this report is based on the 52 week
period in the prior year to 25 April 2015 unless otherwise
stated.
2. Revenue represents amounts payable by customers for goods and
services after deducting VAT and other charges.
3. 'Underlying' excludes exceptional items and related tax.
4. Exceptional items comprises, net losses on disposal of
properties of GBP3.6m; onerous lease provisions of GBP0.6m and a
net non-cash impairment of other assets of GBP0.3m.
5. Analyst consensus for the year ending 30 April 2016 is for
Group underlying profit before tax of GBP17.3m.
6. Like-for-like sales calculated as this year's sales compared
to last year's sales for all stores that are at least 12 months old
at the beginning of our financial year. Stores closed during the
year are excluded from both years. No account is taken of changes
to store size or introduction of third party concessions.
7. Sales represents amounts payable by customers for goods and
services before deducting VAT and other charges.
Certain statements in this report are forward looking. Although
the Group believes that the expectations reflected in these forward
looking statements are reasonable, it 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.
Results presentation
Carpetright plc will hold a presentation to analysts at Citigate
Dewe Rogerson, 3 London Wall Buildings, London Wall, London EC2M
5SY at 09:00 today.
Analysts unable to attend in person may listen to the
presentation live at 09:00 by using the details below:
Telephone number: 0808 109 0700
Password: Carpetright
Webcast link: http://edge.media-server.com/m/p/mdjhgcbp
A copy of this statement can be found on our website
www.carpetright.plc.uk
For further enquiries please contact:
Carpetright plc
Wilf Walsh, Chief Executive Officer
Neil Page, Chief Financial Officer
Tel: 01708 802000
Citigate Dewe Rogerson
Kevin Smith / Nick Hayns
Tel: 020 7638 9571
Forthcoming news flow:
Carpetright will release its first half trading update on 25
October 2016.
Notes to Editors
Carpetright plc is Europe's leading specialist floor coverings
and beds retailer. Since the first store was opened in 1988 the
business has developed both organically and through acquisition
within the UK and other European countries. The Group is organised
into two geographical regions, the UK and the Rest of Europe
(comprising The Netherlands, Belgium and the Republic of
Ireland).
Full year results
The 2016 financial year represents the 52 week trading period to
30 April 2016. The comparative period of financial year 2015
represents the 53 weeks to 2 May 2015. We believe that a comparison
to the pro forma 52 weeks result for the 2015 financial year better
reflects the underlying performance of the business. On this basis,
all commentary included in this report is based on the 52 week
period in the prior year to 25 April 2015 unless otherwise
stated.
A summary of the reported financial results for the year ended
30 April 2016 is set out below:
52 week Pro forma 52 week 53 week
2016 52 week change 2015
GBPm 2015 GBPm GBPm
-------------------------- -------- ----------- -------- --------
Revenue 456.8 462.6 (1.3%) 469.8
-------------------------- -------- ----------- -------- --------
Underlying operating
profit 19.3 14.6 32.2% 15.8
-------------------------- -------- ----------- -------- --------
Net finance charges (2.0) (1.6) (25.0%) (1.6)
-------------------------- -------- ----------- -------- --------
Underlying profit before
tax 17.3 13.0 33.1% 14.2
-------------------------- -------- ----------- -------- --------
Exceptional items (4.5) (7.6) 40.8% (7.6)
-------------------------- -------- ----------- -------- --------
Profit before tax 12.8 5.4 137.0% 6.6
-------------------------- -------- ----------- -------- --------
Earnings per share
-------------------------- -------- ----------- -------- --------
- underlying 19.3p 13.7p 40.9% 15.5p
-------------------------- -------- ----------- -------- --------
- basic 14.9p 5.0p 198.0% 6.7p
-------------------------- -------- ----------- -------- --------
Net cash/(debt) (1.1) - - 0.5
-------------------------- -------- ----------- -------- --------
Overview of Group Financial Results
Total Group revenue for the year decreased by 1.3% to GBP456.8m,
consisting of a decline in the UK business of 1.3% and a decline of
1.2% in the Rest of Europe. Our continued focus on rationalising
and repositioning the store portfolio saw the Group open 18 stores
and close 43, giving a net decrease of 25 stores and a total store
base of 572. The rate of revenue decline was significantly less
than the fall in total store space, which declined by 5.4% to 5.1
million square feet, reflecting our success in exiting
under-performing locations in the UK.
Group underlying operating profit increased by 32.2% to
GBP19.3m, supported by the substantial reduction in property costs
resulting from the repositioning of the UK store portfolio and a
strengthening performance in our Rest of Europe business.
Underlying net finance charges were GBP0.4m higher at GBP2.0m.
These factors combined to generate an underlying profit before tax
of GBP17.3m, a 33.1% increase on the prior year.
Exceptional charges totalled GBP4.5m (2015: GBP7.6m), primarily
costs associated with exiting under-performing stores.
As a result, Group profit before tax was GBP12.8m (2015:
GBP5.4m). Basic earnings per share were 14.9p (2015: 5.0p).
The Group ended the year with net debt of GBP1.1m, an adverse
movement of GBP1.6m from the GBP0.5m net cash in 2015.
Strategic UPDATE
Our strategic plan identifies clear areas of focus to support
the updating and revitalising of the Carpetright retail
proposition. Our vision is to ensure we connect better with today's
customer, so that future generations will continue to shop with
Carpetright wherever they are in their particular stage of
life.
Whilst we are pleased to report a second year of strong profit
growth and ten consecutive quarters of like-for-like growth - the
past twelve months have not been without their challenges. In
turning the business round we are re-engineering every aspect of
it, specifically:
-- Who we are - The brand, culture, values and corporate
identity
-- What we sell - Broadening our total floorcovering
range to meet consumer demand
-- How we sell it - Embedding product training,
customer service, Interest Free Credit and a
host of other initiatives within the business
-- Where we sell it - Reducing and resizing our
property portfolio
In implementing the plan we will maintain the momentum we have
already generated which is centred on putting the customer at the
heart of everything we do, specifically:
1. Revitalising the Carpetright brand
2. Offering the Best Choice in Floorcoverings
3. Unbeatable Value
4. Making it Easy
5. Expertise
6. Outstanding Customer Service
7. Managing the Store Portfolio
1. Revitalising the Carpetright brand
Customer research has told us quite clearly, that while
Carpetright has a very high prompted brand awareness amongst
consumers, only 50% of those surveyed would actually consider
shopping with us. As we reported last year, we have been testing a
new brand identity. After trialling this across a number of
different store formats and locations, we have developed a new look
which has researched extremely well. This new identity for our
brand, and accompanying tone of voice, is more in tune with the
contemporary retail customer, without taking us away from the
concept of value, which, as market leader, remains vitally
important to our offer.
The new identity will be rolled out progressively across the UK
estate from 1 July 2016, whenever we refresh or refurbish our
stores. The new identity will also feature in all our advertising
and communications from the same date.
We trialled four new concept stores in and around London,
beginning in August 2015. As a group, they have delivered
like-for-like sales growth of 9.1% in the period January-April
2016. The results were encouraging and we are rolling out elements
of the new design across the chain. We plan to focus this
refurbishment on our highest turnover stores, our smaller High
Street stores and those locations where we are most obviously at a
competitive disadvantage, for example where we face competition
from a new local market entrant. Within twelve months, we expect to
have around 100 stores trading under the new brand identity at a
capital cost of around GBP10m. Whilst some of this investment can
be viewed as maintenance capital, our experience from the stores
converted to date gives us confidence that we can achieve a payback
within 18 months.
From 1 September 2016 all UK store staff will be adopting a new
uniform, selected by colleagues themselves. This programme will
give sales colleagues in-store a more contemporary service-oriented
identity to support our strategic initiatives and has been well
received by store teams.
To support the rebrand, in August 2016 we are starting a TV
sponsorship package across UKTV's lifestyle and entertainment
channels (Home, Really, Alibi, Gold and W), sponsoring specific
programmes (examples being Escape to the Country; DIY SOS; Homes
Under the Hammer) to help drive recognition of the new brand, as
well as increased consideration from potential customers.
Whilst the focus has been on the UK, we have begun a similar
journey in the Netherlands. At the beginning of June 2016, we
refurbished a store in Utrecht, which takes much of the learning
from the UK, whilst adapting it for the Dutch consumer. Although it
is too early to draw firm conclusions, we are encouraged by the
initial customer response.
2. Offering the Best Choice in Floorcoverings
Our ability to offer customers a vast range of choice in
floorcoverings is critical to our market leadership position and
for many years we have offered the widest range and selection of
carpet available. We have been repositioning our carpet range and,
just as importantly, substantially extending our offer in the hard
flooring area as consumer tastes adapt and change through the
various life stages.
A number of new initiatives have been developed, in part through
our concept stores and a variety of other trials around the
country:
-- Having achieved 36% growth in hard flooring in concept stores
since January 2016, we are introducing new in store sections with a
new and improved range of laminate, vinyl and engineered wood as
part of the refurbishment programme. We will also roll-out a new
and comprehensive display of Luxury Vinyl Tile stands, all supplier
funded, which is testimony to their belief in our growth potential
in this area. This initiative will include a range from Tarkett
that allows us to compete head-to-head with established brands such
as Amtico and Karndean. The introduction of recognised brands such
as Balterio, Kronospan and Quickstep to our range has delivered
encouraging growth as consumer tastes continue to evolve in this
segment. The roll-out has to be controlled and managed effectively
- we need to ensure that all our staff are adequately trained and
that we have sufficient fitting capacity wherever we introduce the
product extensions. Preparation, ahead of fitting a hard floor, is
key and it is a different process that is also more expensive than
fitting a carpet.
-- We enjoyed double digit percentage growth in underlay sales
in the year as we demonstrated to customers that proper underlay
should not be considered an optional extra but as an essential
ingredient that shapes how a new carpet feels, wears and looks. We
have invested in staff training to promote underlay as well as
rolling out new underlay display stands across the estate.
-- We successfully developed a new range of products with 'House
Beautiful' magazine which launched in Autumn 2015, and we are very
encouraged by the results thus far. We are extending the range from
150 stores into all Carpetright locations from August 2016 and will
be launching some new additions to the 'House Beautiful' range at
the same time. We will also trial a premium range of Luxury Vinyl
Tile products under the brand.
-- We will launch some new brands that will be 'Exclusive at
Carpetright' in time for the Autumn season. These include carpet
under the famous 'Kosset' brand, and some innovative and eye
catching designs, that will only be available from us. Keeping the
range fresh, interesting and exclusive to Carpetright, will give us
a clear edge as seasons change and customers look for home
inspiration.
-- In the Netherlands and Belgium we have re-introduced a range
of curtains and blinds. This category was previously sold by these
businesses prior to their acquisition by Carpetright in 2001.
Comments from customers and our own teams identified it as an
opportunity and it is now ranged in 72 stores and represents 6% of
the total sales mix by the end of financial year.
3. Unbeatable Value
Unbeatable value will always be important to Carpetright - as
market leader we expect to negotiate the very best terms with
suppliers and to pass those benefits on to our customers with the
very best prices in the marketplace.
There are three main anchors to our value proposition:
-- Interest Free Credit (IFC) - Launched successfully
in December 2014, IFC has grown to a sales penetration
level of 16% of all transactions. We increased
the value of the IFC offer at Christmas 2015,
extending the deal to 0% over a four year period.
IFC allows customers to get the product they
love for a reasonable monthly fee, over a prescribed
period, and allows for prudent customer budgeting
and affordability. Our average transaction value
in the past year was GBP331, yet our average
IFC transaction was GBP1,216 and it is a major
value differentiator for us in the floorcoverings
sector.
-- Never Beaten On Price - Our customer promise
is clear; if you provide us with a quote from
an alternative retailer for exactly the same
product, we will match it. Customers want reassurance
that they are getting the best deal available
and this rock solid guarantee differentiates
us from the majority of our competitors.
-- Promotions - Consumer appetite for a deal has
been sharpened by an extended period of austerity
in the UK. Carpetright will always have a good
selection of products on promotion at any one
time and will ensure that it operates ethically,
promoting its products in accordance with the
law.
We have rebranded our entire range of roll stock and remnant
products under the 'Essential Value' brand which covers a wide
range of budget lines that can be taken away immediately for
self-fitting or fitted for the customer within days. With new
carpet available from as little as GBP2.99 a square metre,
'Essential Value' demonstrates to all customers, not just those on
a budget, that Carpetright should be their first choice for
value.
Additionally, we will use our 'Price Checker' on Beds to
highlight our value on comparable lines against specialist bed
retailers.
4. Making it Easy
Giving great service and making the purchase an enjoyable,
hassle free experience is really important on the floorcovering
journey. Unlike other relatively straightforward big ticket sales
such as beds or sofas, ordering new flooring presents a number of
potentially daunting obstacles to the customer - with the need to
get someone round to complete accurate measurements and give an
estimate of what they need and how much it will cost being the most
significant. Once ordered it's then the job of our recommended
fitters to come to the home and complete the task.
Our research tells us that there are a number of pinch points in
the process - from consideration online right through to the "Ta
Da" moment when the fitter presents the beautifully finished
product to the customer - where we could do much better,
specifically:
* Improved communications and a checklist on purchasing
to ensure customers understand exactly what happens
once an order is taken and what happens on fitting
day.
* Regular updates by e-mail and text so that the
customer's mind is always at ease on the progress of
their order.
* We aim to ensure that all fitters are now equipped
with card readers for electronic payment rather than
cash.
* We are pleased to be working with 'Which? Trusted
Traders'. Following their rigorous process of
assessment over the next few months, our recommended
floor and carpet fitting services will be endorsed by
'Which? Trusted Traders' to give potential customers
additional peace of mind when choosing our service.
Creating a contemporary and compelling digital offer is central
to improving customer consideration of Carpetright when they are
researching their new flooring options. The business has focussed
on improving the look and feel of the Carpetright website to ensure
there is inspiration for the customer as well as improved
navigation. While transacting online is not a key consideration for
the vast majority of customers, the opportunity to showcase the
product and the store portfolio online in the research stage of the
customer journey, remains the key opportunity. Initiatives for this
upcoming year include:
* A complete rebrand of the website with the new brand
identity
* "Where's my stuff?" - customer order tracker and "My
Account" section
* Online estimator diary booking
* Improved site search
* Interest Free Credit Online
* Room Visualiser tool
From inspiring customers to shop with Carpetright online through
brand advertising, consultation and advice, ordering, preparing the
room, fitting, tidy up and disposal - our objective is to make a
flooring purchase from Carpetright a seamless, hassle free
experience that will encourage recommendation of the brand.
5. Expertise
Training and Development within Carpetright had previously been
sporadic. Whilst we have a lot of incredibly knowledgeable people
with many years of loyal service and experience within the Group,
we needed a more co-ordinated approach to ensuring our colleagues
are the best in the business when it comes to product authority and
recommendation.
We are developing an online Academy portal for training
Carpetright staff in 2016. This will focus initially on induction
for new starters as well as comprehensively covering all product
areas in depth so that we can continuously add to our colleague
knowledge and build confidence, especially as we reach into new
areas of the floorcoverings market. The portal will also develop
specific skills not only in-store but also in delivering the
managers and leaders of tomorrow. A new team of experienced
training professionals will build the platform this year.
6. Outstanding Customer Service
Putting the customer at the heart of everything we do is central
to our strategy and we have had a busy year making this come to
life in our stores.
Back in July 2014 our score on the independent retail review
website 'Trustpilot' was 1.7 out of 10. While many colleagues were
focusing on providing the best service, the culture of the business
was about taking orders, making sales and earning commission.
Power has transferred from the retailer to the customer in the
last decade. Customers expect whatever they want, whenever they
want with swift, efficient delivery. Customers are all very quick
to tell the world on various social media platforms how it went.
The default position is rapidly becoming excellent service, with
consumers sharing only their bad experiences, which can quickly go
viral severely impacting brand reputation.
We are aware through our research that compared to competitors
our brand scores well on key areas such as 'Value' and 'Range'.
People know they can get a good deal at Carpetright and know that
we have a broad product portfolio. We have tended to under index on
key measures such as 'Trust' and 'Reputation' and we can only
address this by devoting ourselves to changing our service culture
which has to evolve as we improve customer perceptions.
In January 2015, we introduced our internal Customer Service
Programme, 'Do We Measure Up?' This is a scheme where customers are
e-mailed about their experience with Carpetright at three stages in
the Customer Journey - 'Measuring & Estimating'; 'In-store
experience'; and 'Fitting'. Customers are incentivised to complete
the feedback with the opportunity of winning their carpet, or the
value of their order, for free in a monthly draw. The top four
drivers of Highly Satisfied customers are:
1. Colleague friendliness
2. Time spent understanding customer needs
3. Speed of placing the order
4. Colleague product knowledge
Research indicates that customers are more than twice as likely
to recommend when they are 'Highly Satisfied' and customers in this
zone of satisfaction will spend 12% more on average. Since
launching the scheme we have moved the overall satisfaction rating
from 71% to 76% and believe that an 80% plus score is well within
our reach in the next twelve months.
Whilst this is our own internal measure, we are also able to
track a Net Promoter Score, allowing us to benchmark ourselves
against other retailers in similar sectors. This has moved along a
similar trajectory and now stands at 71%. We are confident of
continuing this improvement.
Additionally, we will be adjusting our reward and compensation
packages away from commission payment on order taking and
re-targeting them to successful completion of the job and 'Do We
Measure Up?' ratings.
An identical customer service programme has been launched in the
Netherlands and Belgium in April 2016. We expect to be able to make
similar improvements in these businesses.
For the record, our 'Trustpilot' score in June 2016 was up to
8.7 out of 10 - a significant improvement.
7. Managing the Store Portfolio
Last year, we said we anticipated being able to show positive
results from our accelerated programme of property activity in
2015/16. We have been aggressively targeting that part of our
legacy portfolio which is over-rented and made it our number one
priority outside of our customer facing activity. In parallel, we
are continuing to open new stores on a selective basis, where we
see good opportunities to bring the Carpetright brand closer to
consumers in local markets.
We are managing the estate to reduce square footage, to
eliminate store catchment overlap, improve the quality of our store
base by moving to better locations on realistic rent deals and by
ensuring customers can access a Carpetright store wherever they
live in the UK.
At 30 April 2016 we had 435 stores trading the UK. During the
year we opened six new stores, relocated four and closed 31 giving
a net reduction of 25 stores. We continue to eliminate overlap in
towns where we have more than one unit - this allows us to upgrade
and refurbish the remaining store and to capture the benefit of
sales transferred from the store closure. We have, in addition,
negotiated exits from two locations where we had onerous leases,
removing us from all future liabilities associated with those
properties.
The trial of our small high street concept store in Reigate has
been a huge success and we have opened similar locations in
affluent towns such as Bromley and Gerrards Cross, the latter post
the year end. We believe the lower rent high street format offers
an exciting opportunity especially in and around the M25.
We continue to take a robust view at lease renewal, which
provides the opportunity to secure lower rents for future years.
Within the next five years 40% of the UK estate has a lease renewal
scheduled, providing further opportunity to reduce the fixed store
operating costs or to exit underperforming stores. At period-end,
the average length of lease had fallen to 6.1 years (2015: 7.1
years).
In the Rest of Europe we had 137 stores, opening eight stores
and closing eight during the year. In line with the UK activity,
discussions are being held with landlords in respect of lease
renewals and this process is delivering rental reductions. The
potential to secure reductions is generally dictated by the average
length of lease remaining, with this being 2.6 years (2015: 3.1
years) in the Netherlands and 2.3 years (2015: 1.9 years) in
Belgium. In the Republic of Ireland this period is 9.1 years (2015:
10.1 years) reflecting the agreement of long term deals during the
expansion into this market in the period from 2001 to 2008.
We will close the Storeys brand effective 1 September 2016 with
the exception of one store in Stockton-on-Tees. This largely North
East based chain has struggled for a number of years due to
underinvestment and the fact it has inevitably been competing with
a nearby Carpetright store. Any stores that do not transfer to the
Carpetright brand will become a new sub-brand, 'Carpetright
Clearance', which will provide a budget option that will be
sufficiently differentiated from the main estate. Both formats will
benefit, unlike Storeys, from the Carpetright brand's marketing
spend and digital presence.
This activity is delivering an improvement in profitability.
Over the past two financial years, we have reduced the number of
loss making stores in the UK to 38 locations from 67. While, this
activity incurs a cash cost to exit leases, with net expenditure
totalling GBP2.2m in the year, either by assigning to new tenants
or returning the property landlords, by taking this robust approach
we are confident we are getting an acceptable financial return.
Summary
We are now confident that we have a new store format that is
well suited to taking on the competition and increasing our appeal
to all types of consumers on all sorts of budgets. The
transformation of Carpetright into a modern, sustainable market
leader will not happen overnight, but we are positive that we have
momentum and we are on the right path.
We were lapping our own strong like-for-like sales performance
in the previous year and in addition we had a consumer backdrop
which was not brim full of confidence. We have also faced increased
competition from a new specialist on a number of our UK sites. We
are convinced that we can retain our market share in these
locations by focussing on doing the right things outlined
above.
Through updating our brand identity and making it easy for the
customer we believe that we can increase consideration of
Carpetright and build average transaction values by focussing our
staff on the following initiatives:
-- Introducing Interest Free Credit
-- Understanding customer needs and selling the right product
-- Selling appropriate underlay and high margin accessories
-- Providing a seamless, hassle free experience that will build our trust and reputation
We are embarking on a complete turnaround of the Carpetright
business. We have not rushed into the changes, as we want to carry
the majority of our staff with us and there is much to do. We need
to ensure that we can execute the change successfully within our
resource capacity and that we can carry out the customer promise
effectively so that we become a recommended retailer more
consistently.
Building consistency of performance across the chain will be key
to our success, as those stores that score above 75% on 'Do We
Measure Up?', deliver 15% IFC penetration and 50% underlay
penetration enjoy double the like-for-like sales growth of the rest
of the portfolio.
Current Trading
We have had a challenging start to the new financial year,
against strong comparatives in the prior year and in a market which
is increasingly competitive. In the UK, while May was a difficult
month with like-for-like sales down 7.6%, June has been
significantly better, being up 6.3%. These figures combine to give
a decline of 1.0% for the eight weeks to 25 June 2016. In the Rest
of Europe, like-for-like sales up by 1.3%, on a local currency
basis over the same period.
Outlook
Carpetright retains the fundamentals of a leading retail
business - high brand recognition, critical mass and a market
leadership position. The opportunity to leverage these strengths
and drive a significant improvement in performance remains
significant.
Our strategic initiatives will continue to broaden the appeal of
the Carpetright brand and reposition the business, to ensure it is
better able to capitalise on its market leadership position. We
have progressed the plans previously announced, establishing a real
momentum for change within the business.
Trading conditions in the early weeks of the new financial year
have been more challenging, against strong comparatives in the
prior year and market which is increasingly competitive,
particularly in the UK. The outlook has been further complicated by
the outcome of the EU referendum and we are cautious about the
impact the associated uncertainty will have on consumer
confidence.
Whilst we have a long journey ahead in transforming Carpetright,
we have a clear direction and the positive results we are seeing
from a number of our activities give us confidence that we are on
the right path.
Financial review
UK
The key financial results for the UK were:
Pro forma
52 week 52 week 53 week
2016 2015 52 week 2015
GBPm GBPm Change GBPm
---------------------- -------- ---------- ---------- --------
Revenue 391.0 396.0 (1.3%) 403.2
====================== ======== ========== ========== ========
Like-for-like
sales 2.8% 7.3% - -
====================== ======== ========== ========== ========
Gross profit 237.3 243.4 (2.5%) 247.6
====================== ======== ========== ========== ========
Gross profit % 60.7% 61.4% (0.7ppts) 61.4%
====================== ======== ========== ========== ========
Costs (220.5) (229.1) 3.8% (232.1)
====================== ======== ========== ========== ========
Costs % 56.4% 57.9% 1.5ppts 57.6%
====================== ======== ========== ========== ========
Underlying operating
profit 16.8 14.3 17.5% 15.5
====================== ======== ========== ========== ========
Underlying operating
profit % 4.3% 3.6% 0.7ppts 3.8%
---------------------- -------- ---------- ---------- --------
UK store portfolio:
Store numbers Gross Sq ft
('000)
-------------
2 May 30 April 2 May 30 April
2015 Openings Closures 2016 2015 2016
------------- ------ ----------- ----------- --------- ------ ---------
Standalone 448 5 (33) 420 3,963 3,734
============= ====== =========== =========== ========= ====== =========
Concessions 12 5 (2) 15 16 29
============= ====== =========== =========== ========= ====== =========
Total 460 10 (35) 435 3,979 3,763
------------- ------ ----------- ----------- --------- ------ ---------
In a market characterised by economic uncertainty and volatile
consumer confidence, revenue decreased by 1.3% to GBP391.0m. We
opened 10 stores and closed 35 stores in the year, which translated
into a net space decline of 216,000 sq ft, a decrease of 5.4%.
After taking into account the movement in number of stores,
like-for-like sales grew by 2.8% across the year as a whole, with
the first half performance being stronger at 3.8%, followed by 1.9%
growth in the second half. At the close of the year there were 246
stores trading with a bed department (2015: 265). Sales within the
beds category now represent 9.0% of the sales mix (2015: 8.7%).
Gross profit decreased by GBP6.1m to GBP237.3m, representing
60.7% of sales, a decrease of 70 basis points. The decline in
margin rate was primarily the result of:
* implementing market beating promotions to drive
footfall and top line sales volumes; and
* an increase in product lines which have lower gross
margins such as wood flooring and beds, resulting in
an adverse mix impact.
The total UK cost base decreased by 3.8% compared with the prior
year to GBP220.5m (2015: GBP229.1m). Costs as a percentage of sales
were 56.4%, which compared favourably to 57.9% in the prior year.
The movement in costs was a combination of:
* a 1.3% increase in store payroll costs to GBP61.4m
(2015: GBP60.6m), reflecting commission payments
associated with stronger sales growth;
* a 7.1% reduction in occupancy costs to GBP116.4m
(2015: GBP125.3m). primarily the impact of the net
reduction of 25 stores during the year along with the
full year impact of the net reduction of twelve
stores in the prior year; and
* marketing and central support costs decreased by 1.2%
to GBP42.7m (2015: GBP43.2m), primarily the result of
one-off costs in the prior year associated with brand
repositioning, partially offset by higher advertising
costs.
The culmination of the above factors led to underlying operating
profit increasing by 17.5% to GBP16.8m (2015: GBP14.3m).
Rest of Europe
The key financial results for the Rest of Europe were:
2016 2015 Change Change
GBPm GBPm (Reported (Local
Currency) Currency)
---------------------- -------- -------- ----------- -----------
Revenue 65.8 66.6 (1.2%) 4.9%
====================== ======== ======== =========== ===========
Like-for-like sales
(local currency) 4.8% 0.3%
====================== ======== ======== =========== ===========
Gross profit 36.9 39.6 (6.8%) (0.8%)
====================== ======== ======== =========== ===========
Gross profit % 56.1% 59.5% (3.4ppts)
====================== ======== ======== =========== ===========
Costs (34.4) (39.3) 12.5% 6.5%
====================== ======== ======== =========== ===========
Costs % (52.3%) (59.0%) 6.7ppts
====================== ======== ======== =========== ===========
Underlying operating
profit 2.5 0.3 733.3% 664.1%
====================== ======== ======== =========== ===========
Underlying operating
margin % 3.8% 0.5% 3.3ppts
---------------------- -------- -------- ----------- -----------
Rest of Europe store portfolio:
Store Numbers Sq ft ('000)
------------- ========================================= ===============
2 May 30 Apr 2 May 30 Apr
2015 Openings Closures 2016 2015 2016
------------- ------ ----------- ----------- ------- ------ -------
Netherlands 93 4 (4) 93 1,046 985
============= ====== =========== =========== ======= ====== =======
Belgium 22 4 (3) 23 257 245
============= ====== =========== =========== ======= ====== =======
Republic
of Ireland 22 0 (1) 21 162 157
============= ====== =========== =========== ======= ====== =======
Europe 137 8 (8) 137 1,465 1,387
------------- ------ ----------- ----------- ------- ------ -------
Whilst macroeconomic conditions in Belgium remained fragile, the
Netherlands and Republic of Ireland experienced a recovery, with an
increase in reported consumer confidence and more encouraging
economic data.
In local currency terms, the three businesses combined to
produce a total revenue 4.9% ahead of the prior year, with
like-for-like sales increasing by 4.8%. There has been a sustained
improvement with six successive quarters of like-for-like growth.
After exchange rate movements, total revenue fell by 1.2% in
reported currency.
Our Rest of Europe store portfolio remained level on last year
with 137 stores, having opened eight and closed eight during the
period.
Gross profit percentage decreased by 340 basis points to 56.1%
resulting principally from stronger promotions to drive top line
sales volumes, adverse sales mix variance associated with the
introduction of a new product category (curtains and blinds) and
clearance activity implemented to tackle legacy stock issues and
rationalise the range. The improvement in volume was insufficient
to offset the impact of a lower margin rate, resulting in a
decrease in cash gross profit of 0.8%. After taking into account
exchange rate movements this resulted in a decline of 6.8% in
reported currency.
Operating costs in local currency reduced by 6.5%. The majority
of the savings were driven by a focused cost reduction programme
initiated in the previous financial year and a reduction in
advertising spend. This was reflected in the decline in costs as a
percentage of sales to 52.3%, a reduction on the prior year figure
of 59.0%. In reported currency, this was a reduction in costs of
12.5% to GBP34.4m.
The net result was an underlying operating profit of GBP2.5m, a
GBP2.2m improvement on the GBP0.3m profit generated in the prior
year.
Group financial review
Net finance charges and taxation
Underlying net finance charges were GBP2.0m (2015: GBP1.6m). The
increase was principally driven by a marginally higher level of
average net debt over the period and amortisation of arrangement
fees.
The taxation charge on profit for the year was GBP2.7m (2015:
GBP2.1m). The weighted average annual effective tax rate for the
period is 21.3% (2015: 31.3%). The decrease in the effective tax
rate is the outcome from improved profitability while
non-deductible items have remained stable, along with a deferred
tax credit in the year from the fall in the main UK rate to
18%.
Exceptional items
The Group recorded a net charge of GBP4.5m (2015: GBP7.6m) in
the year.
2016 2015
GBPm GBPm
---------------------------------- ------ ------
Losses on disposal of properties (3.6) (0.4)
---------------------------------- ------ ------
Onerous lease provision (0.6) (7.0)
---------------------------------- ------ ------
Impairment release/(charge):
---------------------------------- ------ ------
Store assets 0.1 (0.2)
---------------------------------- ------ ------
Freehold properties (0.4) -
---------------------------------- ------ ------
Pre-tax exceptional items (4.5) (7.6)
---------------------------------- ------ ------
A net loss of GBP3.6m was made on property disposals in the year
(2015: GBP0.4m loss). This was principally the result of surrender
premiums being paid to exit loss-making stores and associated asset
write-offs.
At 2 May 2015 there were 14 vacant properties in the UK and
three in the Republic of Ireland classed as onerous leases, against
which we carried a provision. During the year we disposed of four
of these stores, relieving us from all future liabilities
associated with these properties. The charge associated with
exiting these stores equalled the provisions carried. There were no
additions or re-openings of onerous stores during the period,
leaving ten onerous stores remaining at the end of the financial
period.
A detailed review of provisions held for unavoidable onerous
lease costs for loss-making stores resulted in a charge of GBP0.6m
(2015: GBP7.0m).
We have reviewed the carrying value of the store assets in our
balance sheet, consistent with the approach in previous years.
These tests have led to a net credit of GBP0.1m (2015: GBP0.2m
charge). The Group has entered into sale agreements for two
freehold properties at below carrying value, offset by impairment
adjustments at other locations, this combination led to a net
charge of GBP0.4m in the period (2015: Nil).
Earnings per share
Underlying earnings per share of 19.3 pence (2015: 13.7 pence),
an increase of 40.9%. Basic earnings per share was 14.9 pence
(2015: 5.0 pence).
Dividend
The Board has decided not to pay a final dividend (2015: nil).
In taking this decision, the Board has considered that whilst there
has been an improvement in profitability during the year, the
priority for the use of cash is to accelerate activity to reduce
the Group's fixed occupancy costs and to invest in the remaining
stores to broaden the appeal of the brand. Based on our current
outlook, we do not expect this position to change in the current
financial year.
Balance sheet
The Group had net assets of GBP74.0m at the end of the year
(2015: GBP59.5m), a year-on-year increase of GBP14.5m.
30 April 2 May 2015 Movement
2016 GBPm GBPm
GBPm
------------------------------ ---------- ----------- ---------
Freehold and long leasehold
property 61.5 64.9 (3.4)
============================== ========== =========== =========
Other non-current assets 107.5 106.5 1.0
============================== ========== =========== =========
Stock 41.6 34.1 7.5
============================== ========== =========== =========
Trade & other current assets 20.0 25.2 (5.2)
============================== ========== =========== =========
Creditors < 1 year (91.1) (97.9) 6.8
============================== ========== =========== =========
Creditors > 1 year (62.2) (69.8) 7.6
============================== ========== =========== =========
Net (debt)/cash (1.1) 0.5 (1.6)
============================== ========== =========== =========
Pension deficit (2.2) (4.0) 1.8
============================== ========== =========== =========
Net assets 74.0 59.5 14.5
------------------------------ ---------- ----------- ---------
During the period, two freehold property disposals were
completed. The Group owns a significant property portfolio, most of
which is used for retail purposes. The carrying values are
supported by a combination of value in use and independent
valuations.
As a consequence of managing the estate to reduce square
footage, eliminate store catchment overlap and improve the quality
of our store base on realistic rent deals, the level of operating
lease liabilities has reduced significantly to GBP599.3m (2015:
GBP679.1m).
Cash flow
Group net debt at 30 April 2016 was GBP1.1m, an adverse movement
of GBP1.6m on the prior year end position of GBP0.5m net cash. The
increase was driven by the improvement in underlying operating
profit being offset by a GBP7.0m increase in stock to reduce order
fulfilment lead times and the listing of higher value ranges, a
GBP5.1m cash outflow related to provisions paid, GBP0.9m
contributions to closed defined benefit pension schemes and a
GBP4.3m increase in working capital. This increase in working
capital was attributable to a combination of amortisation of lease
incentives, the timing impact from the 53(rd) week in the prior
year being partially offset by a negotiated quicker payment cycle
from the third party provider of consumer credit facilities.
The resulting net inflow of cash generated by operations of
GBP13.3m was offset by net capital expenditure, interest and tax
net outflows totalling GBP14.7m.
The Group's average net debt was GBP7.1m over the period (2015:
GBP4.9m).
2016 2015
GBPm GBPm
---------------------------------------- ------ -------
Underlying Operating Profit 19.3 15.8
======================================== ====== =======
Depreciation and non-cash items 13.5 14.0
======================================== ====== =======
(Increase)/Decrease in stock (7.0) (1.0)
======================================== ====== =======
(Increase)/Decrease in working capital (4.3) 0.8
======================================== ====== =======
Net (expenditure)/proceeds on exit
of operating leases (2.2) 1.0
======================================== ====== =======
Contributions to pension schemes (0.9) (0.9)
======================================== ====== =======
Provisions paid (5.1) (4.6)
---------------------------------------- ------ -------
Cash generated by operations 13.3 25.1
======================================== ====== =======
Net interest paid (2.0) (1.6)
======================================== ====== =======
Corporation Tax paid (3.0) (4.4)
======================================== ====== =======
Net capital (expenditure)/proceeds (9.7) (7.6)
---------------------------------------- ------ -------
Free cash flow (1.4) 11.5
======================================== ====== =======
Other (0.2) 0.1
---------------------------------------- ------ -------
Movement in net debt (1.6) 11.6
======================================== ====== =======
Opening net debt 0.5 (11.1)
---------------------------------------- ------ -------
Closing net (debt)/cash (1.1) 0.5
---------------------------------------- ------ -------
Net capital expenditure was GBP9.7m (2015: GBP7.6m). This can be
analysed between the following principal categories:
2016 2015
GBPm GBPm
------------------------------------ ------- ------
Capital expenditure (11.9) (8.8)
==================================== ======= ======
Proceeds from freehold property
disposals 2.2 1.2
------------------------------------ ------- ------
Net capital (expenditure)/proceeds (9.7) (7.6)
------------------------------------ ------- ------
The majority of the capital expenditure was focused on new
stores and refurbishing existing stores, along with investing in
store IT systems in the UK.
Current liquidity
At the year end the Group held cash balances of GBP8.3m (2015:
GBP7.3m), principally a combination of Sterling and Euros. Gross
bank borrowings at the balance sheet date were GBP7.1m (2015:
GBP4.4m), all of which were drawn down from overdraft facilities.
The Group had further undrawn facilities of GBP47.3m at the balance
sheet date.
In April 2015, the Group completed a refinancing arrangement of
its principal facilities, providing approximately GBP58m of debt
capacity split between revolving credit facilities and overdrafts
in a mixture of Sterling and Euro currencies. The revolving credit
facility matures in July 2019. In December 2015 the Group elected
not to renew its EUR5.0m multi-option facility in Belgium due to a
lack of requirement. This action reduced the Group's total
facilities in GBP terms to GBP54.4m. The facilities contain
financial covenants which are believed to be appropriate in the
current economic climate and which are tested on a quarterly basis,
against which the Group monitors compliance.
Pensions
At 30 April 2016 the IAS 19 net retirement benefit deficit was
GBP2.2m (2015: GBP4.0m). This reduction of GBP1.8m reflects a
combination of the movement in financial assumptions and pension
deficit contributions made by the Company. As previously announced,
the Company scheme was closed to future accrual with effect from 1
May 2010. The Company agreed a recovery plan with the Trustees in
2015 and this will be reviewed following the completion of the next
triennial valuation, which will be performed as at 5 April
2017.
Wilf Walsh Neil Page
Chief Executive Chief Financial Officer
Officer
27 June 2016
Consolidated income statement
for 52 weeks ended 30 April 2016
Group 52 weeks
to 30 April Group 53 weeks
2016 to 2 May 2015
---------------------------------- ----------------------------------
Exceptional Exceptional
Before items Before items
exceptional (Note exceptional (Note
items 5) Total items 5) Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------------ ----------- ------- ------------ ----------- -------
Revenue 456.8 - 456.8 469.8 - 469.8
Cost of sales (182.6) - (182.6) (182.6) - (182.6)
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Gross profit 274.2 - 274.2 287.2 - 287.2
Administration expenses (256.8) (0.9) (257.7) (273.5) (7.2) (280.7)
Other operating income/(loss) 1.9 (3.6) (1.7) 2.1 (0.4) 1.7
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Operating profit/(loss) 19.3 (4.5) 14.8 15.8 (7.6) 8.2
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Finance costs (2.0) - (2.0) (1.6) - (1.6)
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Profit/(loss) before
tax 17.3 (4.5) 12.8 14.2 (7.6) 6.6
Tax (4.2) 1.5 (2.7) (3.7) 1.6 (2.1)
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Profit/(loss) for
the financial period
attributable to equity
shareholders of the
Company 13.1 (3.0) 10.1 10.5 (6.0) 4.5
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Basic earnings/(losses)
per share (pence) 19.3 (4.4) 14.9 15.5 (8.8) 6.7
Diluted earnings/(losses)
per share (pence) 14.9 6.7
------------------------------- ------------ ----------- ------- ------------ ----------- -------
Consolidated statement of comprehensive income
for 52 weeks ended 30 April 2016
Group
52 Group
weeks 53
to weeks
30 to
April 2 May
2016 2015
GBPm GBPm
-------------------------------------------- ------ ------
Profit for the financial period 10.1 4.5
--------------------------------------------- ------ ------
Items that may not be reclassified
to the income statement:
Re-measurement of defined benefit plans 1.1 (1.4)
Tax on items that may not be reclassified
to the income statement (0.4) 0.1
--------------------------------------------- ------ ------
Total items that may not be reclassified
to the income statement 0.7 (1.3)
--------------------------------------------- ------ ------
Items that may be reclassified to the
income statement:
Exchange gains/(losses) 3.2 (5.3)
Tax on items that may be reclassified
to the income statement - -
-------------------------------------------- ------ ------
Total items that may be reclassified
to the income statement 3.2 (5.3)
--------------------------------------------- ------ ------
Other comprehensive income/(expense)
for the period 3.9 (6.6)
--------------------------------------------- ------ ------
Total comprehensive income/(expense)
for the period attributable to equity
shareholders
of the Company 14.0 (2.1)
--------------------------------------------- ------ ------
The notes on pages 20 to 28 form an integral part of this
consolidated financial information.
Consolidated statement of changes in equity
for 52 weeks ended 30 April 2016
Capital
Share Share Treasury redemption Translation Retained
capital premium shares reserve reserve earnings Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 26 April 2014 0.7 17.2 (0.3) 0.1 5.4 38.0 61.1
Profit for the period - - - - - 4.5 4.5
Other comprehensive income/(expense)
for the financial period - - - - (5.3) (1.3) (6.6)
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive income/(expense)
for the financial period - - - - (5.3) 3.2 (2.1)
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Issue of new shares - 0.2 - - - - 0.2
Purchase of own shares
by employee benefit trust - - (0.1) - - - (0.1)
Share based payments and
related tax - - - - - 0.4 0.4
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 2 May 2015 0.7 17.4 (0.4) 0.1 0.1 41.6 59.5
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Profit for the period - - - - - 10.1 10.1
Other comprehensive income
for the financial period - - - - 3.2 0.7 3.9
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive income
for the financial period - - - - 3.2 10.8 14.0
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Issue of new shares - 0.4 - - - - 0.4
Purchase of own shares
by employee benefit trust - - (0.9) - - - (0.9)
Share based payments and
related tax - - - - - 1.0 1.0
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 30 April 2016 0.7 17.8 (1.3) 0.1 3.3 53.4 74.0
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Consolidated balance sheet
for as 30 April 2016
Group Group
2016 2015
GBPm GBPm
-------------------------------------- ------- -------
Assets
Non-current assets
Intangible assets 57.1 56.1
Property, plant and equipment 95.0 94.6
Investment property 14.5 17.9
Investment in subsidiary undertakings - -
Deferred tax assets 1.9 2.2
Trade and other receivables 0.5 0.6
--------------------------------------- ------- -------
Total non-current assets 169.0 171.4
--------------------------------------- ------- -------
Current assets
Inventories 41.6 34.1
Trade and other receivables 20.0 25.2
Cash and cash equivalents 8.3 7.3
--------------------------------------- ------- -------
Total current assets 69.9 66.6
--------------------------------------- ------- -------
Total assets 238.9 238.0
--------------------------------------- ------- -------
Liabilities
Current liabilities
Trade and other payables (88.8) (95.6)
Obligations under finance
leases (0.1) (0.1)
Borrowings and overdrafts (7.1) (4.4)
Current tax liabilities (2.3) (2.3)
--------------------------------------- ------- -------
Total current liabilities (98.3) (102.4)
--------------------------------------- ------- -------
Non-current liabilities
Trade and other payables (34.3) (37.7)
Obligations under finance
leases (2.2) (2.3)
Provisions for liabilities
and charges (12.6) (16.9)
Deferred tax liabilities (15.3) (15.2)
Retirement benefit obligations (2.2) (4.0)
--------------------------------------- ------- -------
Total non-current liabilities (66.6) (76.1)
--------------------------------------- ------- -------
Total liabilities (164.9) (178.5)
--------------------------------------- ------- -------
Net assets 74.0 59.5
--------------------------------------- ------- -------
Equity
Share capital 0.7 0.7
Share premium 17.8 17.4
Treasury shares (1.3) (0.4)
Other reserves 56.8 41.8
--------------------------------------- ------- -------
Total equity attributable
to equity shareholders of
the Company 74.0 59.5
--------------------------------------- ------- -------
Consolidated statement of cash flows
for 52 weeks ended 30 April 2016
Group
52 * Group
weeks 53
to weeks
30 to
April 2 May
2016 2015
GBPm GBPm
----------------------------------- ------ -------
Cash flows from operating
activities
Profit before tax 12.8 6.6
Adjusted for:
Depreciation and amortisation 12.5 13.6
Loss/(gain) on property disposals 3.6 0.4
Exceptional non-cash items 0.9 7.2
Share based compensation and
other non-cash items 1.0 0.4
Net finance costs 2.0 1.6
------------------------------------ ------ -------
Operating cash flows before
movements in working capital 32.8 29.8
(Increase)/decrease in inventories (7.0) (1.0)
Decrease/(Increase) in trade
and other receivables 6.2 (5.7)
(Decrease)/increase in trade
and other payables (10.5) 6.5
Net (expenditure)/proceeds
on exit of operating leases (2.2) 1.0
Contributions to pensions
schemes (0.9) (0.9)
Provisions paid (5.1) (4.6)
------------------------------------ ------ -------
Cash generated by operations 13.3 25.1
Interest paid (2.0) (1.6)
Corporation taxes paid (3.0) (4.4)
------------------------------------ ------ -------
Net cash generated from operating
activities 8.3 19.1
------------------------------------ ------ -------
Cash flows from investing
activities
Purchases of intangible assets (1.8) (1.7)
Purchases of property, plant
and equipment and investment
property (10.1) (7.1)
Proceeds on disposal of property,
plant, equipment & investment
property 2.2 1.2
Interest received - -
----------------------------------- ------ -------
Net cash generated used in
investing activities (9.7) (7.6)
------------------------------------ ------ -------
Cash flows from financing
activities
Issue of new shares 0.4 0.2
Purchase of treasury shares
by employee benefit trust (0.8) (0.1)
Repayment of finance lease
obligations (0.3) (0.2)
Movement in borrowings - (4.1)
------------------------------------ ------ -------
Net cash used in financing
activities (0.7) (4.2)
------------------------------------ ------ -------
Net (decrease)/increase in
cash and cash equivalents
in the period (2.1) 7.3
Cash and cash equivalents
at the beginning of the period 2.9 (4.5)
Exchange differences 0.4 0.1
------------------------------------ ------ -------
Cash and cash equivalents
at the end of the period 1.2 2.9
------------------------------------ ------ -------
*Certain prior year amounts have been reclassified for
consistency with the current period presentation. This has no
impact in the Group's reported opening or closing net cash
position.
For the purposes of the cash flow statement, cash and cash
equivalents are reports net of overdrafts repayable on demand.
Overdrafts are excluded from the definition of cash and cash
equivalents disclosed in the balance sheet.
Notes to the accounts
1. Basis of preparation
Carpetright plc ('the Company') and its subsidiaries (together,
'the Group') are retailers of floor coverings and beds. The Company
is listed on the London Stock Exchange and incorporated in England
and Wales and domiciled in the United Kingdom. The address of its
registered office is Carpetright plc, Purfleet Bypass, Purfleet,
Essex, RM19 1TT.
The financial statements of the Group are drawn up to within
seven days of the accounting record date, being 30 April of each
year. The financial period for 2016 represents the 52 weeks ended
30 April 2016. The comparative financial period for 2015 was 53
weeks ended 2 May 2015.
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs) and
International Financial Reporting Interpretations Committee (IFRS
IC) interpretations as adopted by the European Union, together with
those parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
The consolidated financial statements have been prepared on the
historical cost basis except for pension assets and liabilities and
share based payments which are measured at fair value.
The Group meets its day to day working capital requirements
through its bank facilities. The principal banking facility, which
includes a revolving credit facility for GBP45 million, is
committed to the end of July 2019. The Directors have considered
the future cash requirements of the Group and are satisfied that
the facilities are sufficient to meet its liquidity needs. The
facilities are subject to a number of financial covenants, being a
leverage covenant, a fixed charge cover covenant, and a capital
expenditure covenant. The fixed charge cover covenant is the most
sensitive to changes in the Group's profitability.
The Directors have considered the expected performance of the
business over at least the next twelve months and modelled this
performance against the covenants that have been set. In addition,
the Directors have considered the trading performance necessary to
breach the banking covenants as well as mitigating factors that
would be available and actionable in the event that the adverse
trading performance became reality.
The Directors have also considered the net current liability
position of the Group and given the supplier payment terms and the
expected cash generation, the Directors confirm that the Group is
forecast to be able to meet its liabilities as they fall due.
The Directors confirm that, after considering the matters set
out above, they have a reasonable expectation that the Company and
the Group have adequate resources to continue in operational
existence for a minimum of twelve months following the signing of
these accounts. For this reason they continue to adopt the going
concern basis in preparing the financial statements.
The financial information on the following pages is derived from
the full Group Financial Statements for the 52 week period to 30
April 2016 and does not constitute full accounts within the meaning
of section 435 of the Companies Act 2006. The Groups Annual Report
and Financial Statements on which the auditors have given an
unqualified report which does not contain a statement under Section
498 (2) or (3) of the Companies Act 2006, will be delivered to the
Registrar of Companies and posted to shareholders in due
course.
The financial information for the 53 weeks to 2 May 2015 is
delivered from the Annual Report for that year which has been
delivered to the Registrar of Companies. The independent auditors
reported on these accounts, their report was unqualified and did
not contain a statement under either section 498 (2) or (3) of the
Companies Report 2006.
Foreign exchange rates
Financial assets and liabilities and foreign operations are
translated at the following rates of exchange:
Euro Euro Zloty Zloty
2016 2015 2016 2015
------------- ----- ----- ----- -----
Average rate 1.36 1.28 5.77 5.38
Closing rate 1.28 1.36 5.62 5.51
------------- ----- ----- ----- -----
2. Segmental analysis
The Group's operating segments are determined on the basis of
information provided to the Chief Operating Decision maker - the
Board of Directors - to review performance and make decisions. The
reporting segments are:
-- UK; and
-- Rest of Europe (comprising Belgium, the Netherlands and Republic of Ireland).
The reportable operating segments derive their revenue primarily
from the retailing of floor coverings and beds. Central costs of
the Group are incurred principally in the UK. As such, these costs
are included within the UK segment. Sales between segments are
carried out at arm's length.
The segment information provided to the Board of Directors for
the reportable segments for the 52 weeks ended 30 April 2016 is as
follows:
52 weeks to 53 weeks to
30 April 2016 2 May 2015
------------------------ ------------------------
UK Europe Group UK Europe Group
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ------- ------ ------- ------- ------ -------
Gross revenue 396.0 65.8 461.8 409.1 66.6 475.7
Inter-segment revenue (5.0) - (5.0) (5.9) - (5.9)
--------------------------------------- ------- ------ ------- ------- ------ -------
Revenues from external customers 391.0 65.8 456.8 403.2 66.6 469.8
--------------------------------------- ------- ------ ------- ------- ------ -------
Gross profit 237.3 36.9 274.2 247.6 39.6 287.2
--------------------------------------- ------- ------ ------- ------- ------ -------
Underlying operating profit 16.8 2.5 19.3 15.5 0.3 15.8
Exceptional items (4.1) (0.4) (4.5) (4.9) (2.7) (7.6)
--------------------------------------- ------- ------ ------- ------- ------ -------
Operating profit/(loss) 12.7 2.1 14.8 10.6 (2.4) 8.2
Intercompany interest 0.1 (0.1) - (0.1) 0.1 -
Finance costs (2.1) 0.1 (2.0) (1.5) (0.1) (1.6)
--------------------------------------- ------- ------ ------- ------- ------ -------
Profit/(loss) before tax 10.7 2.1 12.8 9.0 (2.4) 6.6
Tax (1.9) (0.8) (2.7) (2.4) 0.3 (2.1)
--------------------------------------- ------- ------ ------- ------- ------ -------
Profit/(loss) for the financial period 8.8 1.3 10.1 6.6 (2.1) 4.5
--------------------------------------- ------- ------ ------- ------- ------ -------
Segment assets:
Segment assets 196.4 87.0 283.4 200.2 80.6 280.8
Inter-segment balances (26.6) (17.9) (44.5) (25.8) (17.0) (42.8)
--------------------------------------- ------- ------ ------- ------- ------ -------
Balance sheet total assets 169.8 69.1 238.9 174.4 63.6 238.0
--------------------------------------- ------- ------ ------- ------- ------ -------
Segment liabilities:
Segment liabilities (163.1) (46.3) (209.4) (175.6) (45.7) (221.3)
Inter-segment balances 17.9 26.6 44.5 17.0 25.8 42.8
--------------------------------------- ------- ------ ------- ------- ------ -------
Balance sheet total liabilities (145.2) (19.7) (164.9) (158.6) (19.9) (178.5)
--------------------------------------- ------- ------ ------- ------- ------ -------
Other segmental items:
Depreciation and amortisation 10.6 1.9 12.5 11.5 2.1 13.6
Additions to non-current assets 10.2 1.9 12.1 7.1 1.4 8.5
--------------------------------------- ------- ------ ------- ------- ------ -------
Carpetright plc is domiciled in the UK. The Group's revenue from
external customers in the UK is GBP391.0m (2015: GBP403.2m) and the
total revenue from external customers from other countries is
GBP65.8m (2015: GBP66.6m). The total of non-current assets (other
than financial instruments and deferred tax assets) located in the
UK is GBP141.7m (2015: GBP147.4m) and the total of those located in
other countries is GBP69.9m (2015: GBP64.6m).
Carpetright's trade has historically shown no distinct pattern
of seasonality, with trade cycles more closely following economic
indicators such as consumer confidence.
3. Exceptional items
Group Group
2016 2015
GBPm GBPm
--------------------------------- ----- -----
Losses on disposal of properties (3.6) (0.4)
Onerous lease provision (0.6) (7.0)
Impairment release/(charge):
Store assets 0.1 (0.2)
Freehold properties (0.4) -
---------------------------------- ----- -----
Pre tax exceptional items (4.5) (7.6)
---------------------------------- ----- -----
A net loss of GBP3.6m was made on property disposals in the year
(2015: GBP0.4m). This was principally the result of surrender
premiums being paid to exit loss-making stores and asset write
offs.
The Group has undertaken a review of the onerous lease
provisions recognised for stores that have ceased to trade and the
unavoidable onerous lease costs for loss-making stores, resulting
in a net charge of GBP0.6m in the period (2015: GBP7.0m
charge).
In accordance with IAS 36, assets are reviewed for impairment
whenever changes in circumstances indicate that the carrying value
may not be recoverable. The Group commissioned an external
valuation of freehold properties in November 2014. These
valuations, along with value in use calculations, have resulted in
an impairment in the current period of GBP0.4m (2015: Nil). In
determining whether impairment triggers existed at the period end,
the Directors treated each store as a separate cash generating
units (CGU) and valued it at the higher of the value in use
calculations or the market value of the properties and their
assets.
The tax impact of exceptional items is a credit of GBP0.2m and
the Group has also recognised an exceptional tax credit of GBP1.3m
for the fall in the UK main rate of tax from 20% to 18%.
4. Tax
Group Group
2016 2015
(i) Analysis of the charge in the period GBPm GBPm
----------------------------------------- ----- -----
UK current tax 3.6 2.1
Adjustment in respect of prior years (0.6) 0.1
Overseas current tax - -
----------------------------------------- ----- -----
Total current tax 3.0 2.2
------------------------------------------ ----- -----
UK deferred tax (1.1) (0.7)
Overseas deferred tax 0.8 0.6
------------------------------------------ ----- -----
Total deferred tax (0.3) (0.1)
------------------------------------------ ----- -----
Total tax charge in the income statement 2.7 2.1
------------------------------------------ ----- -----
A change to the UK corporation tax rate was announced in the
Chancellor's April 2015 Budget which reduced the main rate of
corporation tax from 20% to 19% from 1 April 2017 and to 18% from 1
April 2020. This was substantively enacted on 26 October 2015. The
financial statements include the impact of the reduction of the
main rate of tax to 18% on the Group's deferred tax liability. This
has resulted in an exceptional tax credit of GBP1.3m.
A change to the UK corporation tax rate was further announced in
the Chancellor's Budget on 16 March 2016 this change reduces the
main rate to 17% from 1 April 2020. The reduction had not been
substantively enacted at the balance sheet date and its effects are
not included in these financial statements. The overall effect of
this change, if it had applied to the deferred tax balance at the
balance sheet date, would be to reduce the deferred tax liability
by an additional GBP0.7m and credit the tax expense for the period
by GBP0.7m.
Group Group
2016 2015
(ii) Reconciliation of profit/(loss) before tax to total tax GBPm GBPm
------------------------------------------------------------------ ----- -----
Profit/(loss) before tax 12.8 6.6
------------------------------------------------------------------ ----- -----
Tax charge/(credit) at UK corporation tax rate of 20% (2015: 21%) 2.6 1.4
Adjusted for the effects of:
Overseas tax rates 0.3 0.2
Deferred tax impact of fall in UK tax rates (1.3) -
Non-qualifying depreciation 0.4 0.5
Other permanent differences 0.9 (0.1)
Impact of gains crystallising (0.2) 0.1
------------------------------------------------------------------ ----- -----
Total tax charge/(credit) in the income statement 2.7 2.1
------------------------------------------------------------------ ----- -----
The weighted average annual effective tax rate for the period is
a charge of 21.3% (2015: 31.3%). The decrease in the effective tax
rate is a result of the improved profitability while permanent
differences remained fairly stable, along with a deferred tax
credit in the year from the fall in the main rate to 18%.
Group Group
2016 2015
(iii) Tax on items taken directly to or transferred from equity GBPm GBPm
------------------------------------------------------------------- ----- -----
Deferred tax on actuarial losses recognised in other comprehensive
income (0.4) 0.1
Deferred tax on share based payments - (0.1)
------------------------------------------------------------------- ----- -----
Total tax recognised in equity (0.4) -
------------------------------------------------------------------- ----- -----
5. Dividends
The Directors decided that no final dividend will be paid (2015:
No final dividend paid). This results in no dividend in the period
to 30 April 2016 (2015: No dividend paid).
6. Earnings per share
Basic earnings per share is calculated by dividing earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the period, excluding
those held by Equity Trust (Jersey) Limited (see note 25) which are
treated as cancelled.
In order to compute diluted earnings per share, the weighted
average number of ordinary shares in issue is adjusted to assume
conversion of all potentially dilutive ordinary shares. Those share
options granted to employees and Executive Directors where the
exercise price is less than the average market price of the
Company's ordinary shares during the period represent potentially
dilutive ordinary shares.
52 weeks to 53 weeks to
30 April 2016 2 May 2015
------------------------------ ------------------------------
Weighted Weighted
average Earnings average Earnings
number per number per
Earnings of shares share Earnings of shares share
GBPm Millions Pence GBPm Millions Pence
--------------------------------- -------- ---------- -------- -------- ---------- --------
Basic earnings per share 10.1 67.7 14.9 4.5 67.7 6.7
Effect of dilutive share options - 0.2 - - 0.4 -
--------------------------------- -------- ---------- -------- -------- ---------- --------
Diluted earnings per share 10.1 67.9 14.9 4.5 68.1 6.7
--------------------------------- -------- ---------- -------- -------- ---------- --------
Reconciliation of earnings per share excluding post tax profit
on exceptional items
52 weeks to 53 weeks to
30 April 2016 2 May 2015
------------------------------ ------------------------------
Weighted Weighted
average Earnings average Earnings
number per number per
Earnings of shares share Earnings of shares share
GBPm Millions Pence GBPm Millions Pence
---------------------------------------- -------- ---------- -------- -------- ---------- --------
Basic earnings per share 10.1 67.7 14.9 4.5 67.7 6.7
Adjusted for the effect of exceptional
items:
Exceptional items 4.5 - 6.7 7.6 - 11.1
Tax thereon (0.2) - (0.3) (1.6) - (2.3)
Exceptional tax benefit from tax rate
change (1.3) - (2.0) - - -
---------------------------------------- -------- ---------- -------- -------- ---------- --------
Underlying earnings per share 13.1 67.7 19.3 10.5 67.7 15.5
---------------------------------------- -------- ---------- -------- -------- ---------- --------
The Directors have presented an additional measure of earnings
per share based on underlying earnings. This is in accordance with
the practice adopted by most major retailers. Underlying earnings
is defined as profit excluding exceptional items and related
tax.
7. Movement in net debt
Group Group
2016 2015
GBPm GBPm
--------------------------------- ----- -----
Current assets:
Cash and cash equivalents 8.3 7.3
--------------------------------- ----- -----
8.3 7.3
--------------------------------- ----- -----
Current liabilities:
Bank overdrafts (7.1) (4.4)
Obligations under finance leases (0.1) (0.1)
--------------------------------- ----- -----
(7.2) (4.5)
--------------------------------- ----- -----
Non-current liabilities:
Obligations under finance leases (2.2) (2.3)
--------------------------------- ----- -----
(2.2) (2.3)
--------------------------------- ----- -----
Total net (debt)/cash (1.1) 0.5
--------------------------------- ----- -----
Group Group
2016 2015
GBPm GBPm
----------------------------------------------------- ----- -----
Cash and cash equivalents 8.3 7.3
Bank overdrafts (7.1) (4.4)
----------------------------------------------------- ----- -----
Cash and cash equivalents in the cash flow statement 1.2 2.9
----------------------------------------------------- ----- -----
Reconciliation of movements in the period ended 30 April
2016
Group Group
2016 2015
GBPm GBPm
----------------------------------------------------- ----- -----
Net (decrease)/increase in cash and cash equivalents
in cash flow statement (2.1) 7.3
Exchanges differences 0.4 0.1
----------------------------------------------------- ----- -----
Net (decrease)/increase in cash and cash equivalents (1.7) 7.4
----------------------------------------------------- ----- -----
Borrowings - 4.0
Other non-cash movements 0.1 0.2
----------------------------------------------------- ----- -----
Movement in net (debt)/cash (1.6) 11.6
----------------------------------------------------- ----- -----
This information is provided by RNS
The company news service from the London Stock Exchange
END
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