TIDMCPR
RNS Number : 2173J
Carpetright PLC
27 June 2017
Full Year results for the 52 weeks ended 29 April 2017
"Year of significant strategic progress - positive trading
momentum re-established in second half, encouraging start to new
financial year"
Financial Highlights
Group
* Group revenue increased to GBP457.6m (2016: GBP456.8m).
* Underlying profit before tax of GBP14.4m (2016:
GBP18.3m), in line with market expectations.
* Year-end net debt position of GBP9.8m (2016: GBP1.1m)
reflects investment in the accelerated store
refurbishment programme.
* Separately reported items of GBP13.5m (2016: GBP5.5m),
primarily related to increased onerous lease cost
provisions on loss making-stores.
* Statutory profit before tax of GBP0.9m (2016: GBP12.8m).
UK
* Significant improvement in performance in the second
half - re-establishing trading momentum after a
difficult first six months.
* Like-for-like sales in the second half increased by
1.8% partially mitigating the decline of 2.8%
experienced in the first half, to give a full year
decline of 0.5% (2016: 2.8% growth).
* Underlying operating profit of GBP10.7m (2016:
GBP17.8m) with reduction reflecting sterling
depreciation impact and margin effect of measures to
address increased competition.
Rest of Europe
* Like-for-like sales growth of 2.5% (2016: 4.8%).
* Improvement in underlying operating profit to GBP5.7m
(2016: GBP2.5m).
Strategic progress
* Year of significant operational change and investment
- strategic plan on track.
* Accelerated store refurbishment programme with 47% of
the UK estate trading under the new brand identity by
period end. On track to complete remainder of UK
estate by end of 2018.
* Post-investment performance of refurbished estate
continues to be encouraging with like-for-like sales
up by 6.8% on average. (note 8)
* Hard flooring category achieving double digit sales
growth as it benefits from greater strategic focus.
* Focus on improving customer service delivering
stronger satisfaction metrics.
* Further progress made in reducing number of
underperforming stores:
o Net nine closures in the UK, reducing the estate to 426 stores, a space
reduction of 1.9%.
o In Rest of Europe, store base increased by a net one but trading space
was reduced by 2.8%.
* Rest of Europe refurbishment programme has been
extended to a further nine stores following a
successful trial.
Current Trading
* Encouraging start made to the new financial year
despite continued economic uncertainty.
* UK like-for-like sales grew by 2.0% for the seven
weeks to 17 June 2017 - with the refurbished stores
continuing to outperform the un-invested estate.
* Rest of Europe, like-for-like sales down 1.2%, on a
local currency basis over the same period, reflecting
the calendar shift of public holidays and a
disruption effect of refurbishing stores.
Commenting on the results Wilf Walsh, Chief Executive, said:
"I am pleased to report on a year of significant strategic
progress, as we implemented a wide-ranging programme of investment
and operational change, to refresh and update the Carpetright
brand. Our strategy is on track and the positive response we have
received from these initiatives has encouraged us to press ahead
with plans to complete the refurbishment of the UK store estate by
the end of 2018 and to extend the programme in the Rest of
Europe.
"We have made an encouraging start to the new financial year,
underpinned by the improving performance of our refurbished UK
estate. While a challenging consumer environment and competitive
landscape remain headwinds, we are confident the additional
potential in our self-help initiatives will support an increase in
market share."
Group financial summary
Reclassified
(note 4)
2017 2016
GBPm GBPm Change
---------------------------- ------- ------------- --------
BUSINESS PERFORMANCE
---------------------------- ------- ------------- --------
Group revenue (note 1) 457.6 456.8 0.2%
---------------------------- ------- ------------- --------
* UK 381.0 391.0 (2.6%)
---------------------------- ------- ------------- --------
* Rest of Europe 76.6 65.8 16.4%
---------------------------- ------- ------------- --------
Underlying operating
profit (note 2) 16.4 20.3 (19.2%)
---------------------------- ------- ------------- --------
* UK 10.7 17.8 (39.9%)
---------------------------- ------- ------------- --------
* Rest of Europe 5.7 2.5 128.0%
---------------------------- ------- ------------- --------
Underlying profit before
tax 14.4 18.3 (21.3%)
---------------------------- ------- ------------- --------
Underlying earnings per
share 16.4p 20.8p (21.2%)
---------------------------- ------- ------------- --------
Net debt (note 3) (9.8) (1.1) (8.7)
---------------------------- ------- ------------- --------
STATUTORY REPORTING
---------------------------- ------- ------------- --------
Separately reported items
(note 4) (13.5) (5.5)
---------------------------- ------- ------------- --------
Statutory profit before
tax 0.9 12.8 (93.0%)
---------------------------- ------- ------------- --------
Basic earnings per share 1.0p 14.9p (93.3%)
---------------------------- ------- ------------- --------
Notes
1. Revenue represents amounts payable by customers for goods and
services after deducting VAT and other charges.
2. 'Underlying' excludes separately reported items and related
tax.
3. Net debt is calculated as the total of cash-in-hand, or at
bank, offset by borrowings, finance leases and unamortised fees.
4. Certain prior year amounts, previously reported in underlying
performance, have been reclassified for consistency with the current
period presentation as separately reported items. This has no
impact on the Group's statutory reported profit before tax and
earnings per share. (see note 4 to the financial statements)
5. Sales represents amounts payable by customers for goods and
services before deducting VAT and other charges.
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. The 2017 accounting period represents trading for the 52 weeks
to 29 April 2017 (the year). The comparative period 2016 represents
trading for the 52 weeks to 30 April 2016 (the prior year).
8. Excludes stores refurbished in response to new local
competitors. Including competition affected stores, like-for-like
sales
increased by 5.0% on average post-investment.
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 08:45 today.
Analysts unable to attend in person may listen to the
presentation live at 08:45 by using the details below:
Telephone number: +44 (0) 20 3003 2666
Password: Carpetright
Webcast link: http://edge.media-server.com/m/p/i5pwwrbv
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 24
October 2017.
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).
STRATEGIC UPDATE
As we move into the third year of our transformation of Carpetright, we
are maintaining the consistency of our strategic direction which has been
to focus exclusively on:
* Who we are - our stores, the brand and our people
* What we sell - an unrivalled choice of floorcoverings
* How we sell - making the process easy with unbeatable value
* Where we sell - multi-channel convenience and
improving the quality of the store portfolio
This proven strategy is supported by clear, uncomplicated principles that
are applied consistently throughout the business, specifically:
* We are honest and straightforward
* We care about customers and colleagues
* We make it easy
We review the progress made across the year in each area of strategic
focus in the following sections:
Who we are
Our principles are the essence of our Group-wide 'We are
Carpetright' initiative, which is driving cultural change
throughout the business with the aim of updating customers'
perceptions of the brand. This work is central to our success, as
we modernise the store estate and the way we do things around
here.
Refurbishment of the store estate and introduction of our new
branding and store-fit was a major focus during the year. By the
end of April 2017, we had 199 stores in the UK trading under the
new brand identity, some 47% of the estate, completing 160
refurbishments during the year, more than our original target
having accelerated the programme twice in the course of the period.
This work ranged from introducing new signage and a sample area for
carpet in stores that make a smaller profit, through to full
refurbishment of larger, highly profitable stores, or stores where
we are tackling new competition. In these latter two cases, the
introduction of our new 'Graphite' store-fit is proving highly
successful in regenerating sales growth. As a group, refurbished
stores delivered like-for-like sales growth of 6.8% in the final
quarter of the year, markedly higher than the un-invested estate
(including stores refurbished expressly to meet new competition
this figure would be 5.0% growth). This gives us confidence to
press ahead with the investment programme. We are aiming to have
completed the remainder of the UK estate with some form of
additional investment (at a minimum, re-branding with the new
identity) by December 2018.
We have a similar programme underway to address the un-invested
estate in the Netherlands and Belgium. As at the end of April 2017,
we had refurbished an initial nine stores and they have achieved
excellent sales growth post-refurbishment. We see this as a
significant opportunity to increase share and profitability and are
in the process of refurbishing a further twelve stores by the end
of July 2017. If we can achieve similar levels of sales growth, we
will look to accelerate the programme across the remaining stores
in the Netherlands and Belgium during the coming months.
Further improving our reputation and being readily identified as
a brand that customers can trust is vital to Carpetright's future
success. Our recruitment of Lucy Alexander, previously a presenter
on BBC TV's cult home improvement programme 'Homes under the
Hammer', as Carpetright Brand Ambassador in the summer of 2016 has
been a key initiative in this area. We have supported this move
with extensive brand sponsorship on UKTV featuring Lucy, who is a
credible home improvement personality. Customer research shows this
activity is yielding positive results on brand metrics such as
awareness, trust and consideration.
Equally, Carpetright achieving 'Which? Trusted Trader' status
for our recommended fitting service is another important element to
improving brand perception and 'Making it Easy'. This standard
gives potential customers the comfort that the final and most
important part of the customer journey, the fitting, and that "ta
da" moment, is going to be carried out by carefully selected and
properly assessed trades people. 'Who we are' also incorporates our
new colleague uniform which was successfully rolled out last year
to give teams a comfortable, contemporary identity.
It also covers our culture and the way we train and talk with
our colleagues. To this end we have introduced 'Fuse', which is a
brand new internal training and communications tool, built around a
single platform for mobile, social and programme learning and
development as well as internal communications. The training
element covers everything from "the basics", through product
knowledge, as well as customer service and selling skills. It is
also a tool to encourage ongoing management development and Fuse
will be at the heart of our launch of a Carpetright Managers'
Academy in 2017.
Video based communication offers a much more dynamic live update
for store colleagues. The 'Staff Room' element on Fuse allows for
open feedback from staff that will help us improve, by being honest
and straightforward with each other and accepting of constructive
criticism.
What we sell
The floorcoverings market does not stand still. Through market
research we know consumer tastes are changing and they tell us what
they want to buy for their home. The UK market is currently split
60/40 on carpets versus hard flooring, while Carpetright, because
of its heritage, has a split of 90/10 in favour of carpet.
Our move over recent years to increase our share of the hard
flooring market is already well documented. We have enjoyed
particularly good growth in hard flooring as we have introduced
ranges into all of our stores, with a clear product and price
architecture, for customers from budget spend right through to
GBP100 per square metre and over, with sufficient cross-over
between categories to allow customers to trade up if they
choose:
- Vinyl - from roll stock, for the take away and DIY market, to
premium quality sample vinyl which is specifically ordered for
professional fitting;
- Laminate - again in the budget, DIY take away form or in a new
range of sampled product for third party fitting;
- Luxury Vinyl Tile (LVT) has now been introduced across the
estate, becoming our fastest growing category (albeit from a low
base), offering customers the natural look of wood or stone but
with the features and benefits of easy to maintain vinyl; and
- Engineered Wood - a superior and more stable product than
traditional solid wood, supplied to us by Kahrs, the leading
Swedish supplier of environmentally friendly and sustainable
flooring products
In carpet, we continue to strengthen our range authority as
market leader, with a focus on all budgets, from GBP2.99 per square
metre roll stock in our 'Essentials' range through to outstanding
quality wool carpets from British manufacturers such as Westex,
Brintons and Ulster.
We have identified an opportunity to create exclusives that
allow for differentiation of Carpetright versus the independent
sector and our national competitors. In this space the 'House
Beautiful Collection' has been an outstanding success with the
recent addition of a new velvet-style polyamide twist. Exclusive
ranges accounted for 3.2% of sales in the final quarter of the
year, up from 1.9% in the comparable prior year period.
We will be launching a new collection of products under the
popular and well recognised 'Country Living' brand before the end
of 2017 in collaboration with this leading lifestyle magazine.
Our buying team has also begun to take a more creative and
proactive approach to anticipating interiors fashion trends, with
the introduction of more design-led products that customers
currently favour, including more bright colour options alongside
blue, blush tones and dusty pastels.
In the UK, we began selling beds in 2009 and the business has
grown to represent 9.2% of total sales, with beds being
merchandised in 253 of our stores. Whilst we have delivered sales
growth in the year, we believe a significant opportunity exists to
grow this category faster. Through a programme of significant
re-ranging and merchandising, supported by additional training, we
are confident of delivering a step change in the sales contribution
from the bed category, starting in the current financial year.
In the Netherlands and Belgium, we have re-introduced a range of
curtains and blinds. This range is now available in 88 stores and
represented 4.7% of the total sales mix by the end of the financial
year.
How we sell
As part of our plan to keep it simple, the performance of our
store colleagues is measured on a small number of straightforward
KPIs designed to increase the quality of the sale, both in terms of
customer service and value. The success of this programme is
demonstrated by our average transaction values, which grew by 11%
in the year.
As a simple guide, where a store team delivers 15% or more
interest free credit participation, 50% plus underlay penetration
and 75% or more "highly satisfied" responses under 'Do We Measure
Up?' surveys, they can, on average, expect to deliver like-for-like
sales growth 3% ahead of the total UK estate.
As always, our biggest challenge is achieving consistency and
narrowing variance between the very best performing stores and
under-performing units. Customer service is central to this effort,
to ensure we deliver an enviable reputation for service in what is,
potentially, a lengthy customer journey with lots of moving parts.
Our Net Promoter score has improved significantly to 75% from 71%
across the year. As it stands, 96% of our customers are at least
"satisfied", as are 91% who experience our Home Flooring Surveyors
and 85% of those who deal with recommended fitters. We remain
focused on driving these metrics higher, particularly those in the
latter area where we should be getting higher scores.
In simple terms, "highly satisfied" customers spend 3.4 times
more on average and are significantly more likely to recommend.
Across the Group, customer needs and technology changes are
continuing to drive the need to deliver a fully integrated
omnichannel shopping experience. We plan to invest in technology
that enables our customers to interact with us throughout their
buying journey on any device or physical outlet; uses information
to make decisions easy for the customer; delivers a simple
environment for our colleagues with the right tools; and
establishes robust data security and controls. In 2016, we invested
in upgrading our store hardware and networks in the UK and are now
extending this to the Netherlands and Belgium. We will also be
implementing an integrated customer relationship management system
in the UK within the next twelve months.
Where we sell
In Carpetright we have too many stores on too many unsustainable
long leases that severely impact our overall profitability. We
continue to address this challenge with vigour.
In the UK, the last twelve months was another year of progress
as we opened eight stores, closed 17, including three relocations,
to leave a total of 426 stores (2016: 435 stores). The new stores,
opened in areas where we have long been under-represented,
including Bath, Leeds and Liverpool, and have all delivered
encouraging initial performances. As a result, we now trade from
3,691,000 sq ft of retail space in the UK (2016: 3,763,000 sq ft),
a 1.9% reduction year-on-year.
Our progress in the last five years on improving the quality of
our UK store estate and reducing overall store numbers has been
significant and we aim to have reduced the total to below 400
stores by this time next year. Where we close or downsize stores,
we are almost always able to redeploy existing staff locally.
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 48% of the UK estate has a lease renewal
scheduled, providing further opportunity to reduce the fixed store
operating costs or to exit underperforming stores. As at April
2017, the average length of lease had fallen to 5.5 years (2016:
6.3 years).
In the Rest of Europe, we opened six stores and closed five,
including four relocations during the year, to leave a total of 138
stores (2016: 137 stores). Consequently, we now trade from
1,360,000 sq ft of retail space (2016: 1,387,000 sq ft), a 2.0%
reduction year-on-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 2.8 years (2016: 2.6 years) in the
Netherlands and 1.8 years (2016: 2.3 years) in Belgium. In the
Republic of Ireland this period is 8.1 years (2016: 9.1 years),
reflecting the agreement of long-term deals during the expansion
into this market in the period from 2001 to 2008.
Our progress in this area is delivering an improvement in
profitability. Whilst this activity can incur a cash cost to exit
leases, either by assigning to new tenants or returning the
property to landlords, by taking this robust approach we are
confident we are getting an acceptable financial return.
We are also acutely aware of the growing impact of digital on
our business, both now and in the medium term. Sales, where the
customer journey originated online, increased by 13.4% during the
year, along with sample and appointment requests up around 20%.
Over the past twelve months we have seen visits to the website
increase by 14%, a reduction in our bounce rate due to improvements
in the design, and pure online sales increase by 74%. Website
revenue is now the equivalent of a top turnover store.
Initiatives delivered during the year include:
- introducing the Carpetright 'Visualiser', giving the customer
the opportunity to upload photos of their rooms and see how their
choice of new floorcovering will enhance them by trying different
product across our extensive ranges;
- blogs designed to enhance consumer knowledge including
decorating tips and trends with Diana Civil, a leading interior
stylist;
- practical videos on how to choose products, measure a room,
stain removal and other tips to enhance our authority as market
leaders in the sector;
- online guide with Lucy Alexander as to how we make it "easy with every step";
- ability to book a visit with our Home Flooring Surveyors online; and
- ability to pay for products online using interest free credit
Competition
The floorcoverings market in the UK has long been a highly
competitive environment, with the Group facing competition from a
vibrant independent sector and from a number of national and
regional floorcoverings retailers. However, competition intensified
significantly during the year when a new national competitor rolled
out an aggressive store opening programme and a number of smaller
players also began competing more actively at a local level.
Our strategy in response to competitor activity is simple and it
applies in a variety of locations, specifically:
- we refurbish our store with our new 'Graphite' shop fit,
effectively minimising the potential of any negative store
environment factor;
- we ensure the team are appropriately resourced for taking on
the challenge of a new competitor; and
- we introduce enhanced local promotions
While this impacted our profit performance, we firmly believe
that the cost to the business of failing to meet the competitive
challenge would be considerably greater.
Significantly, while a new competitor inevitably steals some
sales in the first year of operation, once we anniversary their
store opening we are seeing like-for-like sales growth well ahead
of the main estate. We believe that this encouraging performance
demonstrates that the action we are taking is working.
Current Trading
We have made an encouraging start to the new financial year,
underpinned by the improving contribution from our own
initiatives.
In the UK like-for-like sales grew 2.0% for the seven weeks to
17 June 2017 - with the refurbished stores continuing to outperform
the un-invested estate.
In the Rest of Europe, like-for-like sales were down 1.2%, on a
local currency basis over the same period, reflecting the calendar
shift of public holidays and a disruption effect of refurbishing
twelve stores.
Summary
Our primary external challenges over the past year were
two-fold. First, the UK's decision to exit the European Union on 23
June 2016, saw Sterling depreciate dramatically against the Euro.
Along with our competitors, this eventually made it necessary to
raise some prices and we were able to mitigate this unexpected
development in the second half of the year.
Second, as discussed above, a new entrant came to the market
with an aggressive store opening programme, to which we are
responding robustly.
Against this backdrop, we will not be diverted from our plan to
transform the Carpetright business. The four main planks of our
strategy remain valid and cover all elements of the customer
journey as well as tackling our legacy property issues. Responding
to intensified competition has sharpened us up and we are relishing
the challenge in what may well become a more difficult trading
environment, with ongoing uncertainty over consumer spending and
inflationary pressures. We are confident that whatever the external
environment we can increase our market share.
After a testing twelve months not lacking in excitement, I am
grateful to the Board for their support and counsel and my thanks
of course go to everyone in the store support offices in both
Purfleet and Utrecht as well as our Regional and Divisional
Managers across Europe.
My admiration for our store managers and sales colleagues who
serve the customer day in, day out knows no bounds. Everyone in the
store support offices does an 'in-store day' once a year, normally
during the relatively quiet December period when we can cause least
havoc. Whether our sales colleagues are in Edinburgh, Salford,
Exeter, Rotterdam, Bruges or Cork, they are all doing a demanding
job and I am grateful for their hard work and dedication.
Our ongoing change of culture is still very much in the early
stages but the way we train, communicate and reward our frontline
staff remains a key priority in making sure we are the first choice
for the floorcoverings consumer, every time.
We are Carpetright.
Wilf Walsh
Chief Executive Officer
26 June 2017
FINANCIAL REVIEW
A summary of the reported financial results for the year ended
29 April 2017 is set out below:
2017 2016 Change
GBPm GBPm
----------------------------- ------ ----- -------
Revenue 457.6 456.8 0.2%
Underlying operating profit 16.4 20.3 (19.2%)
Net finance charges (2.0) (2.0) 0.0%
Underlying profit before tax 14.4 18.3 (21.3%)
Separately reported items (13.5) (5.5)
Profit before tax 0.9 12.8 (93.0%)
Earnings per share (pence)
- underlying 16.4p 20.8p (21.2%)
- basic 1.0p 14.9p (93.3%)
Operating cash flow 7.7 13.3 (42.1%)
Net debt (9.8) (1.1) (8.7)
----------------------------- ------ ----- -------
Overview
Total Group revenue for the year increased by 0.2% to GBP457.6m,
consisting a decline in the UK business of 2.6% offset by an
increase of 16.4% in the Rest of Europe, with the latter impacted
by foreign exchange rate movements. Our continued focus on
rationalising and repositioning the store portfolio saw the Group
open 14 stores and close 22 during the year, which gave a net
decrease of eight stores, including seven relocations. The total
store base numbered 564 at year end (2016: 572), with total store
space declining by 1.9% to 5.1 million square feet during the
period.
Group underlying operating profit decreased by 19.2% to GBP16.4m
(2016: GBP20.3m), reflecting the impact of the significant
depreciation of sterling during the first half of the year and the
costs of measures to address intensified competition. This impacted
sales and margin rate in the UK, but was partially offset by the
benefit from closing underperforming stores, and a strengthening
performance in our Rest of Europe business. Net finance charges
were level with the prior year at GBP2.0m. These factors combined
to generate underlying profit before tax of GBP14.4m (2016:
GBP18.3m), a 21.3% decrease on the prior year.
Separately reported items totalled GBP13.5m (2016: GBP5.5m),
primarily costs associated with rationalising the store estate and
a re-assessment of provisions held for onerous lease costs for
loss-making stores following a strategic review of the
portfolio.
When separately reported items are included, the statutory
measure of profit before tax for the Group was GBP0.9m (2016:
GBP12.8m) and basic earnings per share of 1.0p (2016: 14.9p).
The Group ended the year with net debt of GBP9.8m (2016:
GBP1.1m), reflecting an acceleration of the store refurbishment
programme and the cash costs of rationalising the store
portfolio.
UK financial review
The key financial results for the UK were:
2017 2016 Change
GBPm GBPm
---------------------------- ------- ------- ---------
Revenue 381.0 391.0 (2.6%)
Like-for-like sales (0.5%) 2.8%
Gross profit 225.6 237.3 (4.9%)
Gross profit % 59.2% 60.7% (1.5ppts)
Costs (214.9) (219.5) 2.1%
Costs % 56.4% 56.1% (0.3ppts)
Underlying operating profit 10.7 17.8 (39.9%)
Underlying operating profit
% 2.8% 4.6% (1.8ppts)
---------------------------- ------- ------- ---------
The UK portfolio is now as follows:
Store numbers Gross Sq ft
('000)
------------- ------------------------------------------ --------------------
30 April Openings Closures 29 April 30 April 29 April
2016 2017 2016 2017
------------- --------- --------- --------- --------- --------- ---------
Standalone 420 8 (14) 414 3,734 3,669
Concessions 15 0 (3) 12 29 22
------------- --------- --------- --------- --------- --------- ---------
Total 435 8 (17) 426 3,763 3,691
------------- --------- --------- --------- --------- --------- ---------
In tough trading conditions, like-for-like sales in the second
half of the year increased by 1.8% partially mitigating the decline
of 2.9% experienced in the first half, to give a full year decline
of 0.5%.
We opened eight stores and closed 17 stores during the period,
including three relocations. This translated into a net space
decline of 72,000 sq ft, a decrease of 1.9%. At period end there
were 253 stores trading with a bed department (2016: 246). Sales
within the beds category now represent 9.2% of the sales mix (2016:
9.0%).
Gross profit decreased by GBP11.7m to GBP225.6m, representing
59.2% of sales, a decrease of 150 basis points. This decline in
margin rate reflects a combination of:
- adverse impact of 210 bps from the fall in Sterling to Euro
exchange rate on imported goods for resale. The average EUR/GBP
rate in 2017 was 12% lower at EUR1.20 (2016: EUR1.36);
- measures to address intensified competition including a 'free
fitting' offer in selected stores, an adverse impact of 60bps;
- a dilutive impact of 30bps from product categories which
attract lower average gross margins; and
- a favourable impact of 150bps from the improvement in
underlying floorcovering margin through improved sourcing,
promotional planning and selected price increases.
The total UK cost base decreased by 2.1% compared with the prior
year to GBP214.9m (2016: GBP219.5m). Costs as a percentage of sales
were 56.4%, a marginal uplift from 56.1% in the prior year,
reflecting the operational gearing of the business. The movement in
costs was a combination of:
- store payroll costs decreased by GBP1.7m to GBP59.7m (2016:
GBP61.4m) owing to a reduction in headcount from store closures,
combined with a decline in sales commission and bonus costs from
the fall in sales;
- store occupancy costs (rent, rates, other & depreciation)
decreased by 1.0% to GBP115.2m (2016: GBP116.4m), primarily the
impact of the store closures, offset in part by an increase in
depreciation from the refurbishment programme; and
- marketing and central support costs decreased by 4.1% to
GBP40.0m (2016: GBP41.7m), primarily the result of lower
performance related cost, partially offset by higher advertising
costs.
The combination of the above factors resulted in underlying
operating profit decreasing by 39.9% to GBP10.7m.
Rest of Europe financial review
The key financial results for the Rest of Europe were:
2017 2016 Change Change
GBPm GBPm (Reported (Local
currency) currency)
--------------------- ------ ------ ---------- ----------
Revenue 76.6 65.8 16.4% 2.0%
Like-for-like sales 2.5% 4.8%
Gross profit 43.8 36.9 18.7% 3.9%
Gross profit % 57.2% 56.1% 1.1ppts
Costs (38.1) (34.4) (10.8%) 2.8%
Costs % 49.7% 52.3% 2.5ppts
Underlying operating
profit 5.7 2.5 128.0% 98.5%
Underlying operating
profit % 7.4% 3.8% 3.6ppts
--------------------- ------ ------ ---------- ----------
The Rest of Europe portfolio is now as follows:
Store numbers Gross Sq ft
('000)
------------- ------------------------------------------ --------------------
30 April Openings Closures 29 April 30 April 29 April
2016 2017 2016 2017
------------- --------- --------- --------- --------- --------- ---------
Netherlands 93 5 (4) 94 985 975
Belgium 23 1 (1) 23 245 228
Republic
of Ireland 21 0 0 21 157 157
------------- --------- --------- --------- --------- --------- ---------
Total 137 6 (5) 138 1,387 1,360
------------- --------- --------- --------- --------- --------- ---------
Macroeconomic indicators for our markets in Belgium and the
Republic of Ireland remained fragile throughout the year, however,
the Netherlands experienced a recovery in market conditions with an
increase in reported consumer confidence and encouraging economic
indicators, such as the number of housing transactions, fuelling
demand.
In local currency terms, the three businesses combined to
produce an increase in revenue of 2.0% on the prior year. The
combined like-for-like sales increased by 2.5%. A contributor to
growth has been the re-introduction of a curtains & blinds
offer into the Netherlands and Belgium. After exchange rate
movements, total revenue increased by 16.4% in reported
currency.
The number of stores increased by one during the year, having
opened six and closed five during the period, including four
relocations. The associated trading space reduced by 2.0%.
Gross profit percentage increased 110 basis points to 57.2%,
resulting principally from improved supplier terms and
non-recurring clearance activity in the prior year, offset in part
by investment in promotions to drive top line sales volumes and the
impact of growth in lower margin product categories. The
combination of volume and rate improvements led to cash gross
profit in local currency terms increasing by 3.9%. After taking
into account exchange rate movements this resulted in an increase
of 18.7% in reported currency.
Operating costs in local currency reduced by 2.8%, primarily the
result of reduced occupancy costs related to the downsizing and
relocating stores. This was reflected in the decline in the costs
as a percentage of sales to 49.7%, a reduction on the prior year
figure of 52.3%. In reported currency, costs increased by 10.8% to
GBP38.1m.
The net result was a year-on-year improvement in underlying
operating profit of 98.5% in local currency, which translated to an
increase of 128.0% in reported currency of GBP3.2m to GBP5.7m
(2016: GBP2.5m).
Group financial review
Net finance costs and taxation
Net finance charges for the period were unchanged at GBP2.0m
(2016: GBP2.0m).
The effective tax rate for the year was 24.3% (2016: 21.3%), a
variance of 4.3% compared to the UK corporation tax rate of 20.0%
due to the effects of non-deductible items, overseas tax rates and
other permanent differences. The 3.0% increase from last year's
rate is predominantly due to lower profitability in the UK with
non-deductible items remaining unchanged, along with improved
profitability in Europe being taxed at higher rates.
Separately reported items
The Group makes certain adjustments to statutory profit measures
in order to help investors understand the underlying performance of
the business. These adjustments are reported as separately reported
items. The Group recorded a net charge of GBP13.5m (2016:
GBP5.5m).
Reclassified*
2017 2016
GBPm GBPm
---------------------------------------- ------ -------------
Underlying profit before tax 14.4 18.3
Property related
Loss on disposal of properties (1.9) (3.6)
Freehold property reversal/(impairment) 2.2 (0.4)
Store asset (impairment)/reversal (0.4) 0.1
Net onerous lease charge (11.0) (0.6)
Strategy
Store refurbishment - asset write-offs (1.4) -
Other
Share based payments (1.0) (1.0)
Total separately reported items (13.5) (5.5)
---------------------------------------- ------ -------------
Statutory profit before tax 0.9 12.8
---------------------------------------- ------ -------------
* The charge reported in the 2016 annual report and accounts was
GBP4.5m. For consistency with the current period presentation we
have reclassified GBP1.0m relating to share based payments. This
has no impact on the Group's statutory reported profit before tax
and earnings per share. The reclassified separately reported charge
for 2016 is therefore GBP5.5m.
A net loss of GBP1.9m was made on the disposal of 25 (22 trading
and 3 onerous) properties during the year (2016: GBP3.6m loss),
principally a combination of surrender premiums being paid to exit
loss-making stores and asset write-offs.
A number of investment properties that have previously been
impaired are in receipt of rental income from independent third
party tenants. As a result, GBP2.2m of impairment against these
locations is no longer required and has been reversed (2016:
GBP0.4m charge).
Leasehold store impairment testing during the year has
identified a number of stores where the anticipated future
performance does not support the carrying value of the assets. As a
result, a charge of GBP0.4m has been incurred in respect of the
impairment of assets associated with these stores (2016: GBP0.1m
credit).
At 30 April 2016 there were eleven vacant properties in the UK
and two in the Republic of Ireland classed as onerous leases
against which we carried a provision. During the year we disposed
of three of these locations. This was offset by three trading
stores being closed and added to this group. Following a strategic
review of the store portfolio in February 2017, we have made a
revised assessment of the onerous lease costs for loss-making
stores. The net impact of these judgments is a charge of GBP11.0m
(2016: GBP0.6m credit).
The value of assets written off during the store refurbishment
programme amounts to GBP1.4m during the year. Given the quantum,
and in keeping with historical treatment, such write-offs have been
reported as separately reported items.
In light of the variable and non-cash nature of employee share
based payments, these have been classified as separately reported
items. This also allows for greater visibility of these charges in
the accounts. A charge of GBP1.0m was incurred during the year
(2016: GBP1.0m).
The cash flow impact of separately reported items was GBP4.0m
outflow in the year.
Earnings per share
Underlying earnings per share were 16.4p (2016: 20.8p),
reflecting the fall in underlying profitability of the Group.
Basic earnings per share were 1.0p (2016: 14.9p). The reduction
in basic earnings per share is less in percentage terms than the
reduction in underlying earnings per share, a result of a deferred
tax credit of GBP0.6m associated with the fall in the UK
corporation tax rate to 17% being taken as a separately reported
tax credit.
Dividend
The Board continues to prioritise the use of cash for the
acceleration of the strategy by investing further in the existing
store estate, while also reducing the fixed occupancy costs as
quickly as possible. As a result, it has taken the decision not to
pay a final dividend (2016: nil). 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 GBP78.0m at the end of the period
(2016: GBP74.0m), a year-on-year increase of GBP4.0m.
29 April 30 April
2017 2016
----------------------------------- -------- --------
Freehold & long leasehold property 60.3 61.5
Other non-current assets 116.6 107.5
Stock 41.1 41.6
Trade & other current assets 25.8 20.0
Creditors < 1 year (85.6) (91.1)
Creditors > 1 year (67.2) (62.2)
Net (debt)/cash (9.8) (1.1)
Pension deficit (3.2) (2.2)
Net assets 78.0 74.0
----------------------------------- -------- --------
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 rental deals, the operating lease
liabilities have reduced significantly to GBP531.9m (2016:
GBP599.3m).
Cash flow
The Group's net debt at 29 April 2017 was GBP9.8m, an adverse
movement of GBP8.7m (2016: GBP1.1m debt).
This increase in debt was driven by a combination of the decline
in the underlying operating profit performance; net expenditure of
GBP2.2m on exiting operating leases; cash outflow of GBP5.2m
related to previously made provisions; contributions of GBP0.9m to
closed defined benefit pension schemes; and an increase of GBP13.6m
in working capital, partially offset by a decrease in stock of
GBP1.0m.
The increase in working capital was attributable to a
combination of an increase in debtors (driven by the seasonal
impact of a later Easter and the longer lead times on newly
introduced product categories); a decrease in creditors associated
with a combination of lower activity levels and a reduction in
performance based costs (the result of lower level of
profitability); increase in prepayments due to timing differences;
and amortisation of deferred income relating to property
incentives.
The resulting net inflow of cash generated by operations of
GBP7.7m was offset by net capital expenditure, net interest paid,
tax paid and other movements (primarily exchange differences)
totalling GBP16.2m, resulting in free cash outflow of GBP8.5m
(2016: GBP1.4m outflow).
The Group's average net debt was GBP10.2m over the period (2016:
GBP7.1m).
2017 2016
GBPm GBPm
------------------------------------- ------ -----
Underlying operating profit 16.4 20.3
Depreciation & other non-cash items 12.2 12.5
Decrease/(Increase) in stock 1.0 (7.0)
(Increase) in working capital (13.6) (4.3)
Net expenditure on exit of operating
leases (2.2) (2.2)
Contributions to pension schemes (0.9) (0.9)
Provisions paid (5.2) (5.1)
------------------------------------- ------ -----
Operating cash flows 7.7 13.3
Net interest paid (1.3) (2.0)
Corporation tax paid (0.9) (3.0)
Net capital expenditure (14.0) (9.7)
------------------------------------- ------ -----
Free cash flows (8.5) (1.4)
Other (0.2) (0.2)
------------------------------------- ------ -----
Movement in net debt (8.7) (1.6)
Opening (net debt)/cash (1.1) 0.5
------------------------------------- ------ -----
Closing net debt (9.8) (1.1)
------------------------------------- ------ -----
Gross capital expenditure was GBP17.4m (2016: GBP11.9m), with
the majority of this relating to the store refurbishment programme
and opening new stores. After allowing for proceeds from freehold
property disposals, net capital expenditure was GBP14.0m (2016:
GBP9.7m).
2017 2016
GBPm GBPm
------------------------------------------ ------ ------
Refurbishment & relocations (12.7) (5.9)
New stores (1.6) (0.6)
IT (1.7) (4.0)
Support offices & warehouse (1.4) (1.4)
------------------------------------------ ------ ------
Gross capital expenditure (17.4) (11.9)
Proceeds from freehold property disposals 3.4 2.2
------------------------------------------ ------ ------
Net capital expenditure (14.0) (9.7)
------------------------------------------ ------ ------
Current liquidity
In April 2015, the Group completed a refinancing arrangement of
its principal facilities, providing GBP58.0m of debt capacity split
between a revolving credit facility (RCF) and multi-option
facilities (principally overdrafts) in a mixture of Sterling and
Euro currencies. In December 2015, the Group elected not to renew
its EUR5.0m multi-option facility in Belgium thereby saving
non-utilisation fees. This action reduced the Group's total
facilities in GBP terms to GBP54.7m, of which the main GBP45.0m RCF
in the UK matures in July 2019. The facilities contain financial
covenants which are believed to be appropriate in the current
economic climate and tested on a quarterly basis, against which the
Group monitors compliance.
Gross bank borrowings at the balance sheet date were GBP20.1m
(FY16: GBP7.1m), being a combination drawn down from overdraft and
revolving credit facilities. The Group had further undrawn
facilities of GBP34.4m at the balance sheet date. In addition, the
Group held gross cash balances of GBP12.5m. The combination of
these resulted in net debt, before finance leases, of GBP7.6m,
providing total headroom against facilities of GBP46.9m. With the
addition of GBP2.2m of finance leases (2016: GBP2.3m), the Group
closed the period on GBP9.8m of net debt, being GBP8.7m higher than
year end 2016.
Pensions
At 29 April 2017, the IAS 19 net retirement benefit deficit was
GBP3.2m (2016: GBP2.2m). The discount rate was 2.5% (2016: 3.5%),
reflecting prevailing corporate bond rates. This lower discount
rate resulted in an increase in the schemes' liabilities and more
than offset the increase in market value of the plan's assets and
additional company contributions.
The 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 triennial
valuation, which will be performed as at 5 April 2017.
Neil Page
Chief Financial Officer
26 June 2017
Consolidated income statement
for 52 weeks ended 29 April 2017
Group 52 weeks
to 30 April
Group 52 weeks 2016
to 29 April 2017 Reclassified*
--------------------------------- ---------------------------------
Separately Separately
Underlying reported Underlying reported
performance items Total performance items Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------ ------------ ---------- ------- ------------ ---------- -------
Revenue 457.6 - 457.6 456.8 - 456.8
Cost of sales (188.2) - (188.2) (182.6) - (182.6)
------------------------------- ------------ ---------- ------- ------------ ---------- -------
Gross profit 269.4 - 269.4 274.2 - 274.2
Administration expenses (255.4) (9.3) (264.7) (255.8) (1.9) (257.7)
Other operating income/(loss) 2.4 (4.2) (1.8) 1.9 (3.6) (1.7)
------------------------------- ------------ ---------- ------- ------------ ---------- -------
Operating profit/(loss) 16.4 (13.5) 2.9 20.3 (5.5) 14.8
------------------------------- ------------ ---------- ------- ------------ ---------- -------
Finance costs (2.0) - (2.0) (2.0) - (2.0)
------------------------------- ------------ ---------- ------- ------------ ---------- -------
Profit/(loss) before
tax 14.4 (13.5) 0.9 18.3 (5.5) 12.8
Tax (3.3) 3.1 (0.2) (4.2) 1.5 (2.7)
------------------------------- ------------ ---------- ------- ------------ ---------- -------
Profit/(loss) for
the financial period
attributable to equity
shareholders of the
Company 11.1 (10.4) 0.7 14.1 (4.0) 10.1
------------------------------- ------------ ---------- ------- ------------ ---------- -------
Basic earnings per
share (pence) 16.4 1.0 20.8 14.9
Diluted earnings per
share (pence) 1.1 14.9
------------------------------- ------------ ---------- ------- ------------ ---------- -------
* Certain prior year amounts, previously reported in underlying
performance, have been reclassified for consistency with the
current period presentation as separately reported items. This has
no impact on the Group statutory reported profit before tax and
earnings per share (see note 4).
Consolidated statement of comprehensive income
for 52 weeks ended 29 April 2017
Group Group
52 52
weeks weeks
to to
29 30
April April
2017 2016
GBPm GBPm
-------------------------------------------- ------ ------
Profit for the financial period 0.7 10.1
--------------------------------------------- ------ ------
Items that may not be reclassified
to the income statement:
Re-measurement of defined benefit plans (1.8) 1.1
Tax on items that may not be reclassified
to the income statement 0.1 (0.4)
--------------------------------------------- ------ ------
Total items that may not be reclassified
to the income statement (1.7) 0.7
--------------------------------------------- ------ ------
Items that may be reclassified to the
income statement:
Exchange gains 4.3 3.2
--------------------------------------------- ------ ------
Total items that may be reclassified
to the income statement 4.3 3.2
--------------------------------------------- ------ ------
Other comprehensive income for the
period 2.6 3.9
--------------------------------------------- ------ ------
Total comprehensive income for the
period attributable to equity shareholders
of the Company 3.3 14.0
--------------------------------------------- ------ ------
The notes on pages 24 to 30 form an integral part of this
consolidated financial information.
Consolidated statement of changes in equity
for 52 weeks ended 29 April 2017
Capital
Share Share Treasury redemption Translation Retained
capital premium shares reserve reserve earnings Total
Group GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- -------- -------- -------- ----------- ----------- --------- -----
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
-------------------------- -------- -------- -------- ----------- ----------- --------- -----
Profit for the period - - - - - 0.7 0.7
Other comprehensive
income for the financial
period - - - - 4.3 (1.7) 2.6
-------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive
income for the financial
period - - - - 4.3 (1.0) 3.3
-------------------------- -------- -------- -------- ----------- ----------- --------- -----
Purchase of own shares
by employee benefit
trust - - (0.3) - - - (0.3)
Share based payments
and related tax - - - - - 1.0 1.0
-------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 29 April 2017 0.7 17.8 (1.6) 0.1 7.6 53.4 78.0
-------------------------- -------- -------- -------- ----------- ----------- --------- -----
Consolidated balance sheet
for as 32 April 2017
Group Group
2017 2016
GBPm GBPm
-------------------------------------- ------- -------
Assets
Non-current assets
Intangible assets 57.3 57.1
Property, plant and equipment 102.0 95.0
Investment property 15.3 14.5
Investment in subsidiary undertakings - -
Deferred tax assets 1.9 1.9
Trade and other receivables 0.4 0.5
--------------------------------------- ------- -------
Total non-current assets 176.9 169.0
--------------------------------------- ------- -------
Current assets
Inventories 41.1 41.6
Trade and other receivables 25.8 20.0
Cash and cash equivalents 12.5 8.3
--------------------------------------- ------- -------
Total current assets 79.4 69.9
--------------------------------------- ------- -------
Total assets 256.3 238.9
--------------------------------------- ------- -------
Liabilities
Current liabilities
Trade and other payables (83.9) (88.8)
Obligations under finance
leases (0.1) (0.1)
Borrowings and overdrafts (20.1) (7.1)
Current tax liabilities (1.7) (2.3)
--------------------------------------- ------- -------
Total current liabilities (105.8) (98.3)
--------------------------------------- ------- -------
Non-current liabilities
Trade and other payables (34.5) (34.3)
Obligations under finance
leases (2.1) (2.2)
Provisions for liabilities
and charges (17.5) (12.6)
Deferred tax liabilities (15.2) (15.3)
Retirement benefit obligations (3.2) (2.2)
--------------------------------------- ------- -------
Total non-current liabilities (72.5) (66.6)
--------------------------------------- ------- -------
Total liabilities (178.3) (164.9)
--------------------------------------- ------- -------
Net assets 78.0 74.0
--------------------------------------- ------- -------
Equity
Share capital 0.7 0.7
Share premium 17.8 17.8
Treasury shares (1.6) (1.3)
Other reserves 61.1 56.8
--------------------------------------- ------- -------
Total equity attributable
to equity shareholders of
the Company 78.0 74.0
--------------------------------------- ------- -------
Consolidated statement of cash flows
for 52 weeks ended 29 April 2017
Group Group
52 52
weeks weeks
to to
29 30
April April
2017 2016
GBPm GBPm
----------------------------------- ------ ------
Cash flows from operating
activities
Profit /(loss)before tax 0.9 12.8
Adjusted for:
Depreciation and amortisation 12.2 12.5
Loss on property disposals 3.3 3.6
Separately reported non-cash
items 9.2 0.9
Share based payments 1.0 1.0
Net finance costs 2.0 2.0
------------------------------------ ------ ------
Operating cash flows before
movements in working capital 28.6 32.8
Decrease/(Increase) in inventories 1.0 (7.0)
(Increase)/decrease in trade
and other receivables (5.4) 6.2
(Decrease)/increase in trade
and other payables (8.2) (10.5)
Net expenditure on exit of
operating leases (2.2) (2.2)
Contributions to pension schemes (0.9) (0.9)
Provisions paid (5.2) (5.1)
------------------------------------ ------ ------
Cash generated by operations 7.7 13.3
Interest paid (1.3) (2.0)
Corporation taxes paid (0.9) (3.0)
------------------------------------ ------ ------
Net cash generated from operating
activities 5.5 8.3
------------------------------------ ------ ------
Cash flows from investing
activities
Purchases of intangible assets (0.6) (1.8)
Purchases of property, plant
and equipment and investment
property (16.8) (10.1)
Proceeds on disposal of property,
plant, equipment & investment
property 3.4 2.2
Interest received - -
----------------------------------- ------ ------
Net cash generated used in
investing activities (14.0) (9.7)
------------------------------------ ------ ------
Cash flows from financing
activities
Issue of new shares - 0.4
Purchase of treasury shares
by employee benefit trust (0.3) (0.9)
Repayment of finance lease
obligations (0.3) (0.2)
Movement in borrowings 13.0 -
------------------------------------ ------ ------
Net cash used in financing
activities 12.4 (0.7)
------------------------------------ ------ ------
Net increase/(decrease) in
cash and cash equivalents
in the period 3.9 (2.1)
Cash and cash equivalents
at the beginning of the period 1.2 2.9
Exchange differences 0.3 0.4
------------------------------------ ------ ------
Cash and cash equivalents
at the end of the period 5.4 1.2
------------------------------------ ------ ------
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 and are included in
borrowings and overdrafts under current liabilities.
Notes to the financial statements
1. General information
Carpetright plc ('the Company') and its subsidiaries (together,
'the Group') are retailers of floorcoverings 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 information on the following pages is derived from
the full Group Financial Statements for the 52 week period to 29
April 2017 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 52 weeks to 30 April 2016 is
derived 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.
2. Principal accounting policies (abridged)
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the periods
presented unless otherwise stated.
Basis of preparation
The consolidated financial statements of the Group and the
Company are drawn up to within seven days of the accounting record
date, being 30 April of each year. The financial period for 2017
represents the 52 weeks ended 29 April 2017. The comparative
financial period for 2016 was 52 weeks ended 30 April 2016.
The consolidated 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.
Going concern
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, which
remain unchanged, being a leverage covenant, a fixed charge cover
covenant, a clear down covenant and a capital expenditure covenant.
The fixed charge cover covenant is the most sensitive to changes in
the Group's profitability. The Group was compliant with all
covenants as at the year end.
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
result in a breach of the banking covenants as well as mitigating
factors that would be available and actionable in the event that
the adverse 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.
Foreign exchange rates
Financial assets and liabilities and foreign operations are
translated at the following rates of exchange:
Euro Euro Zloty Zloty
2017 2016 2017 2016
------------- ----- ----- ----- -----
Average rate 1.20 1.36 5.21 5.77
Closing rate 1.19 1.28 5.01 5.62
------------- ----- ----- ----- -----
3. 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 floorcoverings 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 29 April 2017 is as
follows:
52 weeks to
52 weeks to 30 April 2016
29 April 2017 *Reclassified
------------------------ ------------------------
UK Europe Group UK Europe Group
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ------- ------ ------- ------- ------ -------
Gross revenue 468.0 91.8 559.8 480.2 78.8 559.0
Inter-segment revenue (2.9) - (2.9) (5.0) - (5.0)
Gross Sales 465.1 91.8 556.9 475.2 78.8 554.0
Less cost of interest free credit (6.8) - (6.8) (5.1) - (5.1)
Less VAT and other sales tax (77.3) (15.2) (92.5) (79.1) (13.0) (92.1)
--------------------------------------- ------- ------ ------- ------- ------ -------
Revenues from external customers 381.0 76.6 457.6 391.0 65.8 456.8
--------------------------------------- ------- ------ ------- ------- ------ -------
Gross profit 225.6 43.8 269.4 237.3 36.9 274.2
--------------------------------------- ------- ------ ------- ------- ------ -------
Underlying operating profit 10.7 5.7 16.4 17.8 2.5 20.3
Separately reported items (11.9) (1.6) (13.5) (5.1) (0.4) (5.5)
--------------------------------------- ------- ------ ------- ------- ------ -------
Operating profit/(loss) (1.2) 4.1 2.9 12.7 2.1 14.8
Intercompany interest - - - 0.1 (0.1) -
Finance costs (2.0) - (2.0) (2.1) 0.1 (2.0)
--------------------------------------- ------- ------ ------- ------- ------ -------
Profit/(loss) before tax (3.2) 4.1 0.9 10.7 2.1 12.8
Tax 0.5 (0.7) (0.2) (1.9) (0.8) (2.7)
--------------------------------------- ------- ------ ------- ------- ------ -------
Profit/(loss) for the financial period (2.7) 3.4 0.7 8.8 1.3 10.1
--------------------------------------- ------- ------ ------- ------- ------ -------
Segment assets:
Segment assets 204.3 100.6 304.9 196.4 87.0 283.4
Inter-segment balances (28.7) (19.9) (48.6) (26.6) (17.9) (44.5)
--------------------------------------- ------- ------ ------- ------- ------ -------
Balance sheet total assets 175.6 80.7 256.3 169.8 69.1 238.9
--------------------------------------- ------- ------ ------- ------- ------ -------
Segment liabilities:
Segment liabilities (174.4) (52.5) (226.9) (163.1) (46.3) (209.4)
Inter-segment balances 19.9 28.7 48.6 17.9 26.6 44.5
--------------------------------------- ------- ------ ------- ------- ------ -------
Balance sheet total liabilities (154.5) (23.8) (178.3) (145.2) (19.7) (164.9)
--------------------------------------- ------- ------ ------- ------- ------ -------
Other segmental items:
Depreciation and amortisation 10.2 2.0 12.2 10.6 1.9 12.5
Additions to non-current assets 15.0 4.9 19.9 10.2 1.9 12.1
--------------------------------------- ------- ------ ------- ------- ------ -------
* Certain prior year amounts, previously reported in underlying
performance, have been reclassified for consistency with the
current period presentation as separately reported items. This has
no impact on the Group statutory reported profit before tax and
earnings per share (see note 4).
Carpetright plc is domiciled in the UK. The Group's revenue from
external customers in the UK is GBP381.0m (2016: GBP391.0m) and the
total revenue from external customers from other countries is
GBP76.6m (2016: GBP65.8m). The total of non-current assets (other
than financial instruments and deferred tax assets) located in the
UK is GBP143.6m (2016: GBP141.7m) and the total of those located in
other countries is GBP80.2m (2016: GBP69.9m).
Carpetright's trade has historically shown no distinct pattern
of seasonality, with trade cycles more closely following
macro-economic indicators.
4. Separately reported items
In order to provide shareholders with additional insight into
the underlying performance of the business, items recognised in
reported profit or loss before tax which, by virtue of their size
and, or nature, do not reflect the Group's underlying performance,
have been excluded from the Group's underlying results.
Group
Group 2016
2017 GBPm
GBPm Reclassified*
----------------------------------------- ------ --------------
Underlying profit before tax 14.4 18.3
Property related
Loss on disposal of properties (1.9) (3.6)
Freehold property reversal/(impairment) 2.2 (0.4)
Store asset (impairment)/reversal (0.4) 0.1
Net onerous lease charge (11.0) (0.6)
Strategy
Store refurbishment - asset write-offs (1.4) -
Other
Share based payments (1.0) (1.0)
Total (13.5) (5.5)
------------------------------------------ ------ --------------
Statutory profit before tax 0.9 12.8
------------------------------------------ ------ --------------
* In 2016 the charge reported in the annual report and accounts
was GBP4.5m. For consistency with the current period presentation
we have reclassified GBP1.0m relating to share based payments. This
has no impact on the Group's statutory reported profit before tax
and earnings per share. The reclassified separately reported items
for 2016 is therefore GBP5.5m.
A net loss of GBP1.9m was made on the disposal of 25 (22 trading
and three onerous) properties during the year (2016: GBP3.6m loss),
principally a combination of surrender premiums being paid to exit
loss-making stores and asset write-offs.
A number of investment properties that have previously been
impaired are in receipt of rental income from independent third
party tenants. As a result GBP2.2m of impairment against these
locations is no longer required and has been reversed (2016:
GBP0.4m charge).
Leasehold store impairment testing during the year has
identified a number of stores where the anticipated future
performance does not support the carrying value of the assets. As a
result, a charge of GBP0.4m has been incurred in respect of the
impairment of assets associated with these stores (2016: GBP0.1m
credit).
At 30 April 2016 there were eleven vacant properties in the UK
and two in the Republic of Ireland classed as onerous leases
against which we carried a provision. During the year we disposed
of three of these locations. This was offset with three trading
stores being closed and added to this group. Following a strategic
review of the store portfolio in February 2017, we have made a
revised assessment of the onerous lease costs for loss-making
stores. The net impact of these judgments is a net charge of
GBP11.0m (2016: GBP0.6m).
The value of assets written off incurred during the strategic
store refurbishment programme amounts to GBP1.4m during the year.
In light of the quantum, and in keeping with historical treatment,
such write-offs have been reported as separately reported
items.
In light of the variable and non-cash nature of employee share
based payments, these have been classified as separately reported
items. This also allows for greater visibility of these charges in
the accounts. A charge of GBP1.0m was incurred during the year
(2016: GBP1.0m).
The cash flow impact of separately reported items was GBP4.0m
outflow in the year.
The tax impact of separately reported items is a credit of
GBP2.5m. The Group also recognised a GBP0.6m tax credit for the
fall in the UK main rate of tax to 17%, which has also been
included in separately reported items.
5. Tax
Group Group
2017 2016
(i) Analysis of the charge in the period GBPm GBPm
-------------------------------------------- ----- -----
UK current tax (0.2) 3.6
Adjustment in respect of prior years - (0.6)
Overseas current tax 0.1 -
--------------------------------------------- ----- -----
Total current tax (0.1) 3.0
--------------------------------------------- ----- -----
UK deferred tax (1.0) (1.1)
UK deferred tax prior year adjustment (0.2) -
Overseas deferred tax 2.2 0.8
Overseas deferred tax prior year adjustment (0.7) -
--------------------------------------------- ----- -----
Total deferred tax 0.3 (0.3)
--------------------------------------------- ----- -----
Total tax charge in the income statement 0.2 2.7
--------------------------------------------- ----- -----
Group Group
2017 2016
(ii) Reconciliation of profit before tax to total tax GBPm GBPm
--------------------------------------------------------- ----- -----
Profit before tax 0.9 12.8
--------------------------------------------------------- ----- -----
Tax charge at UK corporation tax rate of 20% (2016: 20%) 0.2 2.6
Adjusted for the effects of:
Overseas tax rates 0.5 0.3
Deferred tax impact of fall in UK tax rates (0.6) (1.3)
Non-qualifying depreciation 0.4 0.4
Other permanent differences 0.6 0.9
Prior year adjustments (0.9) -
Impact of gains crystallising - (0.2)
--------------------------------------------------------- ----- -----
Total tax charge in the income statement 0.2 2.7
--------------------------------------------------------- ----- -----
The weighted average annual effective tax rate for the period is
a charge of 24.3% (2016: 21.3%).
The March 2016 Budget announced a fall in UK corporation tax
rate to 17% from 1 April 2020 and was substantively enacted in
September 2016 and the effects of which are included in these
financial statements. The reduction resulted in a deferred tax
credit of GBP0.6m in the year.
Group Group
2017 2016
(iii) Tax on items taken directly to or transferred from equity GBPm GBPm
------------------------------------------------------------------- ----- -----
Deferred tax on actuarial losses recognised in other comprehensive
income (0.1) (0.4)
Deferred tax on share based payments - -
------------------------------------------------------------------- ----- -----
Total tax recognised in equity (0.1) (0.4)
------------------------------------------------------------------- ----- -----
6. Dividends
The Directors decided that no final dividend will be paid (2016:
No final dividend paid). This results in no dividend in the period
to 29 April 2017 (2016: No dividend paid).
7. 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 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 52 weeks to
29 April 2017 30 April 2016
------------------------------ ------------------------------
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 0.7 67.6 1.0 10.1 67.7 14.9
Effect of dilutive share options 0.1 1.6 0.1 - 0.2 -
--------------------------------- -------- ---------- -------- -------- ---------- --------
Diluted earnings per share 0.8 69.2 1.1 10.1 67.9 14.9
--------------------------------- -------- ---------- -------- -------- ---------- --------
The Directors have presented an additional measure of earnings
per share based on underlying earnings. This is in accordance with
the practice adopted by many major retailers. Underlying earnings
is defined as profit excluding separately reported items and
related tax.
Reconciliation of earnings per share excluding post tax profit
on separately reported items
52 weeks to 52 weeks to
29 April 2017 30 April 2016
------------------------------ ------------------------------
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 0.7 67.6 1.0 10.1 67.7 14.9
Adjusted for the effect of separately
reported items:
Separately reported items 13.5 - 20.0 5.5 - 8.1
Tax thereon (2.5) - (3.7) (0.2) - (0.3)
Separately reported tax benefit from
tax rate change (0.6) - (0.9) (1.3) - (1.9)
--------------------------------------- -------- ---------- -------- -------- ---------- --------
Underlying earnings per share 11.1 67.6 16.4 14.1 67.7 20.8
--------------------------------------- -------- ---------- -------- -------- ---------- --------
The prior year underlying earnings per share has been amended to
take account of the reclassification of GBP1.0m shared based
payment charge as a separately reported item (note 4). Basic
earnings per share is unchanged.
8. Movement in net debt
Total Cash Exchange Other Total
Group GBPm 2016 flow differences non-cash 2017
--------------------------------- ----- ------ ------------ --------- ------
Current assets:
Cash and cash equivalents
in the balance sheet 8.3 12.5
Bank overdraft (7.1) (7.1)
--------------------------------- ----- ------ ------------ --------- ------
Cash and cash equivalents
in the cash flow statement 1.2 3.9 0.3 - 5.4
--------------------------------- ----- ------ ------------ --------- ------
Current liabilities:
Current borrowing - (13.0) - - (13.0)
Non - Current borrowing - - - - -
--------------------------------- ----- ------ ------------ --------- ------
- (13.0) - - (13.0)
--------------------------------- ----- ------ ------------ --------- ------
Obligations under finance
leases:
Current obligations under
finance leases (0.1) (0.1)
Non-current obligations under
finance leases (2.2) 0.3 - (0.2) (2.1)
--------------------------------- ----- ------ ------------ --------- ------
(2.3) 0.3 - (0.2) (2.2)
--------------------------------- ----- ------ ------------ --------- ------
Derivative financial instruments
--------------------------------- ----- ------ ------------ --------- ------
Total Net (debt)/cash (1.1) (8.8) 0.3 (0.2) (9.8)
--------------------------------- ----- ------ ------------ --------- ------
Total Cash Exchange Other Total
Group GBPm 2015 flow differences non-cash 2016
--------------------------------- ----- ----- ------------ --------- -----
Current assets:
Cash and cash equivalents
in the balance sheet 7.3 8.3
Bank overdraft (4.4) (7.1)
--------------------------------- ----- ----- ------------ --------- -----
Cash and cash equivalents
in the cash flow statement 2.9 (2.1) 0.4 - 1.2
--------------------------------- ----- ----- ------------ --------- -----
Current liabilities:
Current borrowing -
Non - Current borrowing -
--------------------------------- ----- ----- ------------ --------- -----
- - - - -
--------------------------------- ----- ----- ------------ --------- -----
Obligations under finance
leases:
Current obligations under
finance leases (0.1) - - - (0.1)
Non-current obligations under
finance leases (2.3) 0.2 - (0.1) (2.2)
--------------------------------- ----- ----- ------------ --------- -----
(2.4) 0.2 - (0.1) (2.3)
--------------------------------- ----- ----- ------------ --------- -----
Derivative financial instruments
--------------------------------- ----- ----- ------------ --------- -----
Total Net (debt)/cash 0.5 (1.9) 0.4 (0.1) (1.1)
--------------------------------- ----- ----- ------------ --------- -----
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKADBFBKDCAB
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June 27, 2017 02:00 ET (06:00 GMT)
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