RNS Number:2251V
ScS Upholstery PLC
5 December 2000
ScS Upholstery plc
Record Preliminary Results for the Year Ended 30 September 2000
ScS Upholstery plc, the fully listed furniture retailer of fabric and
leather upholstered furniture, is pleased to announce record
preliminary results for the year ended 30 September 2000.
KEY POINTS
- Record profit before tax of #5.4m Up 19%
- Record turnover #46.4 million Up 48%
- Record earnings per share 11.74p Up 21%
- Record ordinary dividend 5.4p per share Up 35%
- Record investment - 11 new stores and
increased selling space Up 61%
- Net cash remains strong at #4m following #4.7 m spend on major
expansion programme
- Total sales order intake up very substantially for first 9 weeks
of this financial year
Tony McCann, Chairman, commenting, said:
"This has been the most exciting and challenging year in the Group's
history. Our dedicated and focused management team has enabled us to
open eleven stores and two distribution centres whilst still
producing record earnings per share at 21% up on last year. Margins
are strong as the Board continues to "manage for profit".
"The Group continues to benefit from the accelerated expansion
programme with total sales order intake for the first nine weeks of
the current financial year very substantially higher than the same
period last year. With our expectation of opening a further six new
stores in this financial year the Board remains confident of
reporting another record year."
For further information please contact:
ScS Upholstery plc
Mike Browne, Chief Executive 020 7466 5000 (Tuesday and Wednesday)
0191 514 6055 thereafter
Buchanan Communications
Richard Oldworth / Isabel Petre 020 7466 5000
CHAIRMAN'S STATEMENT
I am delighted to report another record result for the Group with pre
tax profits up by 19%. The year has also seen considerable expansion
with the opening of eleven new stores, bringing the total to 31 and
increasing selling space by over 60%.
Results
Group pre tax profits were #5.4 million compared to #4.5 million for
1999, an increase of 19%. Earnings per share for the year were 11.74
pence per ordinary share (1999: 9.73p) an increase of 21%.
Final Dividend
Reflecting on these excellent results and our strong cash position
the Board is recommending a final dividend of 4 pence per ordinary
share, which if approved, would make a total dividend for the year of
5.4 pence per ordinary share, an increase of 35%. The Board remains
committed to pursuing a progressive dividend policy.
Turnover
Our turnover increased by 48% to #46.4 million (1999: #31.4 million)
with like for like order intake up 2%. Turnover includes a full
years' sales for the four stores opened in the previous financial year
plus a partial contribution from the eleven stores opened this year
which will not have a major impact on turnover until 2001.
Profitability
The national roll out of our unique store format increased our
presence in the North West, Midlands and Home Counties including our
first store in Southern England in Southampton. As our policy is to
write off all opening costs as they are incurred the impact of such a
major expansion programme has been to reduce operating margins in the
year by approximately 1.5%. Notwithstanding this, our margins
continue to remain strong and are amongst the best in our sector at
11.1% (1999: 13.4%). Gross margin was 47.8% (1999: 49.3%).
Cash Flow
Cash generation was strong with net cash at the year end of #4.0
million even after spending #4.7 million on our major expansion
programme.
People
Increasing the number of stores by over 50% in the space of a year
created significant pressures on all of our staff. The hard work and
dedication of all those concerned is greatly appreciated by the
Board. On behalf of the Board I would like to thank everyone,
including all those who have recently joined our Company, for their
outstanding contribution in helping to achieve a very successful
result.
Outlook
The Group continues to benefit from the accelerated expansion
programme with total sales order intake for the first nine weeks of
the current financial year very substantially higher than the same
period last year with like for like sales order intake up 1%. Our
like for like comparison is a less important statistic given the
rapid expansion in selling space over the last two years. With our
expectation of opening a further six new stores in this financial
year the Board remains confident of reporting another record year.
A J McCann
Chairman
The Preliminary Announcement was approved by
the Board of Directors on 4 December 2000
OPERATING AND FINANCIAL REVIEW
I am pleased to report another record year in terms of both results
and number of new store openings; a year in which we gained market
share and moved into two new key regions: The South East and North
West. During the year we opened eleven new stores, nine of which were
opened in the second half, taking the number of stores from 20 to 31
and increasing selling space by 61%. This has been the most exciting
year in the Group's history and it is part of our continuing proven
business strategy and our stated goal of establishing ScS as a major
national retailer of upholstered furniture.
Gross Profit
Our gross profit margin of 47.8% held up well as we continued to
resist the temptation to chase turnover at the expense of margins and
this, together with the expansion, has resulted in an overall 43.2%
increase in the amount of gross profit generated in the financial
year compared with last year.
Profit Before Tax
The Group's profit on ordinary activities before taxation was #5.4
million, an increase of 19.3% on the previous financial year.
This record profit was achieved after absorbing the significant costs
of opening eleven new stores, two new distribution centres and the
overhead associated with an aggressive expansion programme. This
achievement is made more remarkable considering that nine of these
stores were opened in the second half of the financial year. The new
stores were further affected by our policy of recognising sales when
the goods have been delivered, and with normal lead times from our
suppliers of 6 to 8 weeks, these stores have a considerable period
when overhead is taken but revenue is not. The Group also continues
to apply its accounting policy of writing off all pre-opening and
launch costs as they are incurred and no interest is capitalised on
new store developments. Despite this we have still achieved an
excellent operating margin of 11.1% (1999: 13.4%).
Overhead cost and our business efficiency continue to be tightly
controlled and monitored, with advertising expenditure - a major
variable overhead in our sector - strongly managed to produce
consistently one of the most cost effective advertising spends in the
sector.
Final Dividend
In line with our progressive dividend policy the Board is
recommending an increased final dividend of 4 pence per ordinary
share giving a total of 5.4 pence for the year. This represents an
increase of 35% over the 1999 dividend. Subject to approval at the
Annual General Meeting the final dividend will be paid on 9 February
2001 to shareholders on the register on 12 January 2001.
TURNOVER
Turnover increased by 48% on the previous financial year to
#46.4million (1999: #31.4 million). Throughout the year we
maintained our pricing policy, resisting the temptation to increase
turnover at the expense of margins. Total sales volume achieved in
the year benefited from the previous year's expansion of the branch
network.
Balance Sheet
The Group balance sheet remains very strong with net cash of #4
million (1999: #5 million) after capital expenditure of #4.7 million
in respect of the accelerated expansion programme.
The Board's policy continues to be to maintain a strong balance sheet
in order to give the Group maximum flexibility in implementing its
expansion programme.
Fixed Assets
Additions to fixed assets during the period totalled #4.7 million
(1999: #2.1 million). New store leasehold improvements and fixtures
and fittings amounted to #4 million (1999: #1.43 million) and
computer equipment #731,000 (1999: #634,000).
Store Formats
The Group's expansion programme is based on a format which comprises
a prime retail park location with a unique mezzanine floor layout,
designed to encourage customers to circulate around the store.
Displays are set in attractive, well-lit, open room settings and
attention is paid to creating a relaxing homelike environment. This
format was first introduced at our very successful store at Metro
Retail Park, Metro Centre, Gateshead, which has produced excellent
results over many years. Old format stores are all in the North East
and are located in secondary trading positions. Whilst these stores
do not have mezzanine floors they carry the same merchandise which is
displayed to the same high standard. They can never be converted to
new format due to their varying shapes and locations. However, they
continue to make a valuable contribution to the Group's overall
results.
Product Range
ScS offers its customers a wide range of upholstered furniture
products. Each store typically displays a range of models, of which
approximately 70% are fabric and 30% leather. Although the price per
suite ranges from #800 to #4,000, the average selling price tends to
be in the region of #1,400. All prices are determined centrally with
no regional variations.
Suppliers
ScS does not manufacture any of the products it sells. The Group
purchases from a selection of around 25 to 30 different
manufacturers, of which approximately 90% are based in the UK. Buying
is organised on a Group-wide basis to achieve a consistent and co-
ordinated product range. The Board firmly believes that effective
buying is crucial to the success of a retail business and has worked
at maximising its bargaining position by developing good working
relationships with suppliers. This policy has enabled the Group to
secure good purchase terms and to negotiate regional exclusivity
(within 25 miles of stores) on 85% of current product lines.
Branch Network
Selling space has been expanded by 61% during the year with the
opening of eleven new stores at: Chester, Warrington, West Thurrock,
Romford, Stevenage, Manchester, Wednesbury (Junction 9, M6 motorway),
Oldham, Loughborough, Southampton and Kidderminster. At the end of
the financial year the Group operated thirty one stores, eight stores
located in the North East, thirteen in the Midlands, four in the
North West and six in the Home Counties and South East. Whilst sales
order intake at these new stores has been in line with expectations,
the last three branches were opened between July and September and
have therefore made no material contribution to the Group's turnover
for the year.
Our plan for the current financial year is to continue the expansion
of the Group by opening six additional new stores. Two of these
stores have already been opened in Leeds and Beckton (East London)
and a further store is to commence trading in Guildford (Surrey)
before Boxing Day 2000.
Our strategy is to locate new branches on prime retail parks adjacent
to competitors where returns on our investment are greater due to
increased footfall of customers shopping for furniture and reducing
the need for high advertising spend. We are therefore very selective
about the branches we open.
Distribution
Delivery to customers is made by our own network of localised
distribution centres. Each centre supports several stores in its
locality such that the Group benefits from economies of scale. This
in-house delivery service enables the Group to maintain full control
of each stage in the progress of a customer's order. In particular,
we retain control of final delivery, which is a very important event
for each of our customers.
The Group operated six distribution centres during the year, two in
the Midlands, two in the North East, one in the North West and one in
the South East. Subsequent to the year end a further distribution
centre has been opened in Basingstoke.
Staff
During a period of such rapid expansion, maintaining the recruitment
and development of motivated and effective staff has been fundamental
to the success achieved in the year. It is also key to the success
of the Group's business strategy and long term goal of establishing
ScS as a major national retailer of upholstered furniture. The Group
continues to offer all staff opportunities to advance their careers
by means of training and promotion within the Group to senior
positions.
An important element of the Group's strategy is to employ only well
trained professional sales staff in our branches. This requires a
continuous commitment to sales training and product knowledge
development. In consolidating our approach to training within the
business we have invested in all areas of learning and have now
opened a further two training centres, bringing the total number to
five. This commitment confirms the Group's belief in its staff and
the power of its customer driven and profit oriented culture and
their importance to the long term success of the business.
The results achieved this year are particularly noteworthy given the
additional pressures placed on all of our staff as a result of the
accelerated expansion programme. Such results are only achievable by
a great team effort and a total commitment to professionalism in
every part of the business. I again extend my congratulations to all
of our staff who have striven so hard and who have achieved so much
this year.
Mike Browne
Chief Executive
The Preliminary Announcement was approved by
the Board of Directors on 4 December 2000
GROUP PROFIT AND LOSS ACCOUNT (UNAUDITED)
for the year ended 30 September 2000
2000 1999
Notes #'000 #'000
TURNOVER 46,420 31,445
Cost of sales (24,238)(15,952)
GROSS PROFIT 22,182 15,493
Distribution costs (2,739) (1,581)
Administration expenses (14,277) (9,685)
OPERATING PROFIT 5,166 4,227
Interest receivable and similar income 235 301
5,401 4,528
Interest payable and similar charges - (2)
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 5,401 4,526
Tax on profit on ordinary activities (1,664)(1,431)
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 3,737 3,095
Dividends 2 (1,718) (2,864)
RETAINED PROFIT FOR THE FINANCIAL YEAR 2,019 231
Earnings per ordinary share - basic 3 11.74p 9.73p
- diluted 3 11.60p 9.73p
There were no recognised gains or losses other than the profit on
ordinary activities after taxation for the year.
GROUP BALANCE SHEET (UNAUDITED)
at 30 September 2000
2000 1999
#'000 #'000
FIXED ASSETS
Tangible assets 10,030 6,367
CURRENT ASSETS
Stocks 4,076 2,665
Debtors 3,675 1,863
Cash at bank and on deposit 5,112 4,956
12,863 9,484
CREDITORS: amounts falling due
within one year (14,920)(10,359)
NET CURRENT LIABILITIES (2,057) (875)
TOTAL ASSETS LESS CURRENT LIABILITIES 7,973 5,492
CREDITORS: amounts falling due
after more than one year (660) (244)
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation (151) (105)
NET ASSETS 7,162 5,143
CAPITAL AND RESERVES
Called up share capital 318 318
Capital redemption reserve 195 195
Profit and loss account 6,649 4,630
EQUITY SHAREHOLDERS' FUNDS 7,162 5,143
GROUP STATEMENT OF CASH FLOWS (UNAUDITED)
for the year ended 30 September 2000
Notes 2000 1999
#'000 #'000
NET CASH INFLOW FROM OPERATING ACTIVITIES4a 7,814 3,483
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 244 313
Interest paid - (7)
NET CASH INFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE 244 306
TAXATION
Corporation tax paid (1,419) (1,812)
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (4,671) (1,514)
Receipts from the sale of tangible
fixed assets 2 -
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (4,669) (1,514)
EQUITY DIVIDENDS PAID (2,924) (1,149)
NET CASH OUTFLOW BEFORE USE OF LIQUID
RESOURCES AND FINANCING (954) (686)
MANAGEMENT OF LIQUID RESOURCES
Net (investments in)/withdrawals
from short term deposits (402) 986
FINANCING
Repayment of bank loan - (281)
NET CASH OUTFLOW FROM FINANCING - (281)
(DECREASE)/INCREASE IN CASH IN THE YEAR 4b (1,356) 19
NOTES TO THE ACCOUNTS
1. Annual Accounts
The financial information set out above is unaudited and does not
constitute the Group's statutory accounts for the years ended 30
September 1999 and 30 September 2000. It is prepared on the same
basis as set out in the previous year's annual accounts. The
financial information for the preceding financial year is based upon
the statutory accounts for the year ended 30 September 1999. Those
accounts, upon which the auditors issued an unqualified opinion, have
been delivered to the Registrar of Companies. Statutory accounts for
the year ended 30 September 2000 will be delivered by the end of
December 2000.
2. Dividends
The Directors are recommending a final ordinary dividend of 4p per
ordinary share. Subject to the approval of the Directors'
recommendation at the Annual General Meeting, the dividend will be
paid on 9 February 2001 to shareholders on the register at 12 January
2001.
2000 1999
#'000 #'000
Equity dividends on ordinary shares:
Interim paid 1.4p (1999: 1.21p) 445 385
Final proposed 4p (1999: 2.79p) 1,273 888
Special (1999: 5.00p) - 1,591
1,718 2,864
3. Earnings Per Share
Earnings per ordinary share is based on the profit attributable to
the equity shareholders of the Company in the year of #3,737,000
(1999: #3,095,000) and on 31,818,200 ordinary shares, being the
weighted average number of ordinary shares in issue during the year
(1999: #31,818,200).
Diluted earnings per share is based on 32,225,100 ordinary shares,
the difference from the basic calculation being due to the inclusion
of 406,900 dilutive ordinary shares under share option schemes.
There was no dilutive effect in 1999.
4. Cash Flow
a) Reconciliation of operating profit to net cash inflow from
operating activities
2000 1999
#'000 #'000
Operating Profit 5,166 4,227
Depreciation charge 1,058 701
Loss on sale of fixed assets 1 -
Increase in stocks (1,411) (469)
(Increase)/decrease in debtors (1,813) 74
Increase/(decrease) in creditors 4,813 (1,050)
Net cash inflow from operating activities 7,814 3,483
b) Analysis of changes in net funds
1999 Cash flow 2000
#'000 #'000 #'000
Cash at bank and in hand 249 (246) 3
Bank Overdraft - (1,110) (1,110)
249 (1,356) (1,107)
Bank Deposits 4,707 402 5,109
4,956 (954) 4,002
c) Reconciliation of net cash flows to movement in net funds
2000 1999
#'000 #'000
(Decrease)/increase in cash in the year (246) 19
Increase/(decrease) in bank deposits 402 (986)
Repayment of bank loan - 281
Increase in bank overdraft (1,110) -
Movements in net funds resulting from
cash flows (954) (686)
At 1 October 4,956 5,642
At 30 September 4,002 4,956
5. Annual General Meeting
The Annual General Meeting will be held on 30 January 2001.
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