CPR.L Regulatory News (CPR)

11 Dec 2007 07:01

Carpetright PLC11 December 2007 Carpetright plc Interim Results Announcement for the 26 weeks ended 27 October 2007 Carpetright plc, Europe's leading specialist carpet and floor covering retailertrading within the UK, Republic of Ireland, Belgium, The Netherlands and Poland,today announces its interim results for the 26 weeks to 27 October 2007. Highlights Group • Underlying* profit before tax increased 4.6% to £27.2m (2006: £26.0m) • Profit before tax increased 1.4% to £28.1m (2006: £27.7m) • Underlying* earnings per share increased 8.4% to 28.4p (2006: 26.2p) • Basic earnings per share increased 5.4% to 29.5p (2006: 28.0p) • Store base increased to 658 UK and Republic of Ireland • Underlying* operating profit increased 1.2% to £25.5m (2006: £25.2m) • Total sales increased by 9.2% • Like for like sales reduced by 3.4% due to weak October trading • Store base, including Storeys, increased to 546 Rest of Europe • Underlying* operating profit increased by 41.2% to £2.4m (2006: £1.7m) • Total sales increased by 14.7% with like for like sales up by 7.6% • Store base increased to 112 * 'Underlying' excludes profits on property disposals and non-recurring itemstogether with associated tax Lord Harris, Chairman and Chief Executive, said: "We have made good progress across the Group in the first half. The acquisitionof Storeys at the start of May and commencement of construction of our newdistribution centre are important strategic developments and both projects areprogressing to plan. They will contribute fully to the Group's performance in2008/09." "Our trading performance in Europe has been strong but market conditions in theUK in October have adversely affected the results for the first half althoughthe second half has started strongly. We expect the rest of the year will bechallenging. We continue to ensure we focus on profitable growth and anticipatethat net debt will have reduced significantly by the year end." Possible offer and interim dividend The consortium headed by Lord Harris and other members of the senior Carpetrightmanagement team (the "Consortium") is in the process of completing its duediligence exercise. The discussions between the Consortium and the IndependentCommittee of the Board of Carpetright regarding the proposal are at an advancedstage and remain on the same terms as outlined in the announcement of 9 October2007. Consequently the Board has not declared an interim dividend at this stage but,in the absence of a formal recommended offer being made by the Consortium, woulddeclare an interim dividend of 20.0 pence per share (2006: 20.0 pence) inrespect of the 26 weeks to 27 October 2007. It is intended that any interimdividend, if declared, would be paid on 22 February 2008 to shareholders on theregister on 8 February 2008. There can be no certainty that a firm offer will be forthcoming and a furtherannouncement will be made as and when appropriate. For further enquiries please contact: Carpetright plcLord Harris of Peckham, Chairman and Chief ExecutiveIan Kenyon, Group Finance DirectorTelephone 020 7638 9571 (until 2pm), 01708 525522 (thereafter) Citigate Dewe Rogerson Kevin Smith / Fiona MulcahyTelephone 020 7638 9571 A copy of the interim results can be found on our website www.carpetright.plc.uktoday from 7.00am. There will be a presentation today at 9.00am to analysts and investors atDeutsche Bank AG London, Winchester House, 1 Great Winchester Street, London,EC2N 2DB. A copy of the slides used for this presentation can be found on ourwebsite www.carpetright.plc.uk from 9.00am. Certain statements in this half year report are forward looking. Although theGroup believes that the expectations reflected in these forward lookingstatements are reasonable, we can give no assurance that these expectations willprove to have been correct. Because these statements contain risks anduncertainties, actual results may differ materially from those expressed orimplied by these forward looking statements. We undertake no obligation toupdate any forward looking statements whether as a result of new information,future events or otherwise. Overview Carpetright has enjoyed a successful first half despite difficult marketconditions within the UK. Since the year-end there have been two importantstrategic developments: • The acquisition of Storey Carpets Ltd ("Storeys")• The commencement of construction of our new cutting and distribution centre The acquisition of Storeys was completed on 1 May 2007. This added 30 stores tothe Group, mainly based in North-East England, and has extended our presence inan area where we were not well represented. Storeys is well known in the regionand the brand has been retained. Construction of our new cutting and distribution centre, which will also becomeour new head office, is progressing to plan and it will be operational in theearly part of 2008. This is a major development for Carpetright and willprovide the necessary capacity to support further growth for the Group. The key financial results for the 26 weeks ended 27 October 2007 are set outbelow : 2007 2006 %Key financial results £m £m Change Group sales 251.0 228.4 9.9%Underlying operating profit*- UK and RoI 25.5 25.2 1.2%- Rest of Europe 2.4 1.7 41.2%- Total 27.9 26.9 3.7%Profit on property disposals and 0.9 1.7 (47.1%)non-recurring itemsOperating profit 28.8 28.6 0.7%Interest (0.7) (0.9) 22.2%Profit before taxation 28.1 27.7 1.4%Underlying pre tax profit* 27.2 26.0 4.6%Underlying earnings* per share (pence) 28.4 26.2 8.4%Basic earnings per share (pence) 29.5 28.0 5.4%Interim dividend per share (pence) - 20.0 n/a * "Underlying" excludes profits on property disposals and non-recurring itemstogether with associated tax. Group sales increased by 9.9% to £251.0 million (2006 : £228.4 million)including a contribution of £14.7 million from Storeys. Underlying profitbefore tax increased by 4.6% to £27.2 million (2006 : £26.0 million). Profitbefore tax increased by 1.4% to £28.1 million (2006 : £27.7 million) withproperty profits and non-recurring items, comprising post acquisitionreorganisation costs in Storeys and pre-opening costs of the new depot,totalling a net £0.9 million. Underlying earnings per share increased by 8.4% to 28.4p whilst basic earningsper share increased by 5.4% to 29.5p. UK and Republic of Ireland Financial results 2007 2006 %UK & RoI - Key financial results £m £m Change Sales 219.0 200.5 9.2%Gross profit 136.6 124.2 10.0%Gross margin % 62.4% 61.9% 0.5ppUnderlying operating profit 25.5 25.2 1.2%Underlying operating margin 11.6% 12.6% (1.0)pp Sales across the UK & RoI increased by 9.2% with underlying operating profitincreasing by 1.2% to £25.5 million. This growth was achieved in a market thatwas, we believe, flat overall and so represents a further increase in marketshare. The market was unusually varied across the first six months. Sales grewstrongly in June and July with the poor weather increasing customer footfall,but October was particularly disappointing, both for Carpetright and theindustry. Like for like sales declined by 3.4% due to the weak October trading.Storeys performed in line with our expectations delivering sales of £14.7million. The gross profit margin increased by another 50bps to 62.4%. This increasecomprises a 100bp improvement in Carpetright's margin, due to improved supplierrebates, offset by the lower initial margin in Storeys. The Storeys margincontinues to improve and should be running close to the Carpetright margin bythe year-end. Operating costs increased by 12.2% to £111.1 million. Excluding Storeys, thecosts increased by 4.3% to £103.3 million. As expected the major increases havebeen in rent and rates, reflecting the space growth year on year; in advertisingspend to support stronger promotions; and in depreciation as the new storesystem ("Navision") is rolled out. Staff costs in store reduced in the period under review due to a lowerheadcount. Since a peak in February 2007 headcount in Carpetright has reduced,mostly through natural wastage, by over 150 people with efficiencies achieved inthe stores and the central office. The roll-out of Navision has continued with over 300 stores now operating thenew software. Roll-out is expected to be completed during the second half of2008. This software is allowing us to reduce staff numbers as planned. Rent inflation is being mitigated to some extent by the introduction ofSleepright, a bed concession, into a number of our stores. These units eachoccupy around 1,000 sq ft of space. At the half-year over 50 stores included aSleepright concession and we anticipate the format will be rolled out to around100 stores by the year-end. These concession units help to reduce operatingcosts and also provide additional footfall. In response to the tougher market conditions the pace of new store openings wasslowed down during the period, with only 21 new stores opened. At the same timewe closed 17 stores, either as part of our ongoing programme to move from highcost to lower cost locations, or as the stores did not contribute to our overallprofitability. A number of the closures were concession units. At the end of the period there were 546 stores trading, of which 66 stores areconcession units and 35 are Storeys stores. We expect a limited number of newopenings in the second half as we focus on our existing stores and become moreselective in the locations we are prepared to accept. Since the Group acquired Storeys a large number of changes have been made whichimprove the underlying business. Staff numbers have been reduced by over 100and the store layouts and product ranges have been improved. These changeshave, at times, caused some disruption but leave the business well positioned todrive sales and margin in the second half. Rest of Europe Financial Results 2007 2006 %Rest of Europe - Key financial results £m £m Change Sales- Belgium and The Netherlands 31.1 27.5 13.1%- Poland 0.9 0.4 125% 32.0 27.9 14.7%Underlying operating profit- Belgium and The Netherlands 3.1 2.0 55.0%- Poland (0.7) (0.3) - 2.4 1.7 41.2%Underlying operating margin %- Belgium and The Netherlands 10.0% 7.3% +2.7pp- Poland - - - 7.5% 6.1% +1.4pp The Rest of Europe business increased its underlying operating profit by 41.2%to £2.4 million with total sales growing by 14.7%. Belgium / The Netherlands Business in both countries has been strong, building on the good performance weachieved last year. Our brand awareness continues to grow and this, coupledwith strong promotions, is resulting in increased customer visits and improvedcustomer conversion. Total sales have increased by 13.1% with like for like sales increasing by 7.5%.The remainder of the growth is due to the new stores opened last year withonly one additional store being added since the year-end. At the end of theperiod there were 76 stores trading in The Netherlands and 28 in Belgium. Sales growth has been achieved across all categories with laminate and vinylshowing slightly better growth. These categories are more important in Europethan they are in the UK and the larger store size allows more product to bedisplayed. As volumes have grown there has been an increase in the level of supplierrebates and this has allowed us to increase the gross margin by over 1%.Coupled with tight cost control this has resulted in management achieving anoperating margin increase to our previously stated target of 10%. Poland Progress in Poland continues to be steady. Two new stores were opened in theperiod taking the store base to eight. Total sales grew to £0.9 million withlike for like growth of 10.7%. During the period we have reviewed the store layout and staffing levels for eachstore. We have subsequently reduced the number of people employed in each storeand have reorganised the stores to ensure clear category segmentation. Whilst the business delivered a loss of £0.7 million in the period, asanticipated, we continue to see signs that it will be successful and we intendto open a further three stores in the second half. The Group is now seeking to expand its European operation into Germany and hasentered into a joint venture agreement with a long-established German retailerto develop this opportunity with the first stores planned to open around Berlin. Profit on property disposals and non-recurring items There are three elements to the property profits and non-recurring items : 2007 2006 £m £m Profit on property disposals 2.9 1.7Pre-opening costs relating to the new depot (1.5) -Post acquisition reorganisation of the Storeys business (0.5) - 0.9 1.7 Property profits arise from the surrender of trading leases together withfreehold disposals. The profits disclosed primarily relate to three leaseholdstores which were surrendered. We still anticipate full year property profitsof around £7.5 million. The reorganisation costs in Storeys cover redundancy costs and asset write-offs. Pre-opening costs relating to the new depot comprises rent, rates and utilitycosts for the site during the fit-out. These will continue to be disclosedseparately until the depot is commissioned. We estimate that the fullreorganisation costs in Storeys and pre-opening costs in the new depot will allbe incurred this financial year and will amount to between £7 million and £10million. Cashflow and interest The Group remains highly cash generative and continues to invest in its futuregrowth. In the first half net debt has increased to £41.2 million due to thesignificant level of investment in the new depot (£12.2 million) the acquisitionof Storeys (£17.1 million) and the acquisition of four freehold / long leaseholdproperties (£7.1 million). The Group's strong underlying cashflow will deliver a significant reduction innet debt over the second half. Possible offer and interim dividend The consortium headed by Lord Harris and other members of the senior Carpetrightmanagement team (the "Consortium") is in the process of completing its duediligence. The discussions between the Consortium and the Independent Committeeof the Board of Carpetright regarding the proposal are at an advanced stage andremain on the same terms as outlined in the announcement of 9 October 2007. Consequently the Board has not declared an interim dividend at this stage but,in the absence of a formal recommended offer being made by the Consortium, woulddeclare an interim dividend of 20.0 pence per share (2006: 20.0 pence) inrespect of the 26 weeks to 27 October 2007. It is intended that any interimdividend, if declared, would be paid on 22 February 2008 to shareholders on theregister on 8 February 2008. There can be no certainty that a firm offer will be forthcoming and a furtherannouncement will be made as and when appropriate. Outlook The most significant risk for the second half is the economic conditions in theUK and we expect the rest of the year will be challenging although the secondhalf has started strongly. Now that the necessary changes within Storeys have been completed we will targetgrowth in sales, margin and profit. At the same time the actions we are takingin Carpetright's UK stores, specifically in relation to the reduction in storesize, will continue and we will target stores that are not contributingsatisfactorily. Our European operations continue to develop and we are confident that we willsee further growth in sales and profits in the second half. Lord Harris of Peckham10 December 2007 Carpetright plcCondensed consolidated income statement for the 26 weeks ended 27 October 2007 26 weeks 26 weeks 52 weeks ended 27 ended 28 ended 28 October October April 2007 2006 2007 unaudited unaudited audited Notes £m £m £m Revenue 4 251.0 228.4 475.9Cost of sales (96.4) (89.1) (185.1)Gross profit 4 154.6 139.3 290.8Other operating income 5.0 2.5 12.3Administrative expenses (130.8) (113.2) (234.3)Operating profit 4 28.8 28.6 68.8 Operating profit before profit on property disposals 27.9 26.9 59.5and non-recurring items Profit on property disposals and non-recurring items 5 0.9 1.7 9.3Interest payable (0.9) (1.0) (2.6)Interest receivable 0.2 0.1 0.8Profit before tax 28.1 27.7 67.0Tax 6 (8.1) (8.7) (20.7)Profit for the financial period attributable to equity 20.0 19.0 46.3 holders of the Company Basic earnings per share 8 29.5 28.0 68.2Diluted earnings per share 8 29.4 28.0 68.2 All material items in the income statement arise from continuing operations. Condensed consolidated statement of recognised income and expense for the 26weeks ended 27 October 2007 26 weeks 26 weeks 52 weeks ended 27 ended 28 ended 28 October October April 2007 2006 2007 unaudited unaudited audited Notes £m £m £m Profit for the financial period 20.0 19.0 46.3Actuarial loss on defined benefit pension scheme - - (0.3)Fair value losses in respect of cash flow hedges (0.1) - -Exchange gains/(losses) in respect of hedged equity 0.8 (1.0) (0.3)investmentsTaxation on items taken directly to or transferred from equity - - 0.1Net gains/(losses) recognised directly in equity 0.7 (1.0) (0.5) Total recognised income and expense for the financial 20.7 18.0 45.8period, attributable to equity holders of the Company The notes on pages 11 to 17 form an integral part of this consolidated interimfinancial information. Carpetright plc Condensed consolidated balance sheet at 27 October 2007 At 27 October At 28 October At 28 April 2007 2006 2007 unaudited unaudited audited Notes £m £m £mAssetsNon-current assetsIntangible assets 55.9 36.7 38.9Property, plant and equipment 149.8 125.4 123.8Investment property 19.8 20.4 19.5Deferred tax assets 0.9 0.9 1.0Derivative financial instruments 10 - 0.1 0.1Trade and other receivables 1.4 1.6 1.6Total non-current assets 227.8 185.1 184.9Current assetsInventories 37.4 34.2 35.9Trade and other receivables 34.7 28.9 26.7Cash and cash equivalents 10 5.1 9.5 20.7Total current assets 77.2 72.6 83.3Total assets 305.0 257.7 268.2LiabilitiesCurrent liabilitiesTrade and other payables (126.1) (126.6) (120.1)Obligations under finance leases 10 (0.8) (0.7) (0.8)Borrowings and overdrafts 10 (22.4) (15.1) (12.2)Current tax liabilities (9.1) (9.1) (9.7)Total current liabilities (158.4) (151.5) (142.8)Non-current liabilitiesTrade and other payables (26.7) (13.9) (17.6)Obligations under finance leases 10 (3.3) (4.1) (3.7)Borrowings 10 (19.8) (12.6) (11.0)Provisions (0.7) (0.1) -Deferred tax liabilities (25.4) (20.6) (23.3)Retirement benefit obligations 11 (1.8) (1.5) (1.8)Total non-current liabilities (77.7) (52.8) (57.4)Total liabilities (236.1) (204.3) (200.2)Net assets 68.9 53.4 68.0EquityShare capital 12 0.7 0.7 0.7Share premium 12 15.3 14.8 14.8Treasury shares 12 (0.5) (0.5) (0.5)Other reserves 12 53.4 38.4 53.0Total equity attributable to equity 68.9 53.4 68.0 holders of the Company The notes on pages 11 to 17 form an integral part of this consolidated interimfinancial information. Carpetright plc Condensed consolidated cash flow statement for the 26 weeks ended 27 October2007 26 weeks 26 weeks 52 weeks ended 27 ended 28 ended 28 October October April 2007 2006 2007 unaudited unaudited audited Notes £m £m £mCash flows from operating activitiesProfit before tax 28.1 27.7 67.0Adjusted for:Depreciation and amortisation 8.1 6.6 13.1Share-based payments 0.1 0.2 0.5Profit on property disposals 5 (2.9) (1.7) (9.3)Net interest payable 0.7 0.9 1.8Operating cash flows before movements in working capital 34.1 33.7 73.1(Increase)/decrease in inventories 1.7 (1.8) (3.3)Increase in trade and other receivables (5.1) (4.0) (3.0)Increase in trade and other payables 4.9 18.1 15.0Cash generated by operations 35.6 46.0 81.8Interest paid (1.1) (1.0) (1.9)Interest received 0.2 0.1 0.3Corporation taxes paid (7.4) (7.5) (15.9)Net cash generated from operating activities 27.3 37.6 64.3Cash flows from investing activitiesProceeds on disposal of property, plant and equipment 9 3.0 3.7 24.8 and investment propertyPurchases of intangible assets 9 (1.9) (3.3) (5.8)Purchases of property, plant and equipment and 9 (24.6) (12.0) (27.4) investment propertyAcquisition of shares in subsidiary net of cash acquired 13 (17.1) - -Net cash used in investing activities (40.6) (11.6) (8.4)Cash flows from financing activitiesPurchase of own shares - (0.4) (0.4)Repayment of borrowings (6.2) (4.9) (8.8)New loans advanced 13.5 - -Repayment of obligation under finance leases (0.4) (0.4) (0.7)Dividends paid to Group shareholders 7 (20.4) (20.4) (33.9)Net cash used in financing activities (13.5) (26.1) (43.8)Net increase/(decrease) in cash and cash equivalents 10 (26.8) (0.1) 12.1 in periodCash and cash equivalents at the beginning of the period 19.2 6.8 6.8Exchange differences 0.3 - 0.3Cash and cash equivalents at the end of the period 10 (7.3) 6.7 19.2 For the purposes of the cash flow statement, cash and cash equivalents arereported net of overdrafts repayable on demand. Overdrafts are excluded fromthe definition of cash and cash equivalents disclosed in the balance sheet. The notes on pages 11 to 17 form an integral part of this consolidated interimfinancial information. Carpetright plc Notes to the condensed consolidated financial information for the 26 weeks ended 27 October 2007 1. General information The Company is a limited liability company incorporated and domiciled in the UK.The address of its registered office is Amberley House, New Road, Rainham, EssexRM13 8QN. The Company is listed on the London Stock Exchange. This condensed consolidated half-yearly financial information was approved forissue on 10 December 2007. This interim financial information does not comprise statutory accounts withinthe meaning of Section 240 of the Companies Act 1985. It has been reviewed butnot audited by the Group's auditors. The statutory accounts for the year ended28 April 2007 were approved by the Board of Directors on 25 June 2007 anddelivered to the Register of Companies. The report of the auditors on thoseaccounts was unqualified, did not contain an emphasis of matter paragraph anddid not contain any statement made under section 237 of the Companies Act 1985. The auditors independent review report on the consolidated interim financialinformation is included in the interim report which will be made available toshareholders. 2. Basis of preparation This condensed consolidated half-yearly financial information for the 26 weeksended 27 October 2007 has been prepared in accordance with the Disclosure andTransparency Rules of the Financial Services Authority and with IAS 34, 'Interimfinancial reporting' as adopted by the European Union. The half-yearly condensedconsolidated financial information should be read in conjunction with the annualfinancial statements for the 52 weeks ended 28 April 2007, which have beenprepared in accordance with IFRSs as adopted by the European Union. 3. Accounting policies The accounting policies adopted are consistent with those of the annualfinancial statements for the 52 weeks ended 28 April 2007, as described in thoseannual financial statements except in relation to the capitalisation ofinterest. During the period the Group has changed its accounting policy to capitaliseinterest on qualifying tangible fixed assets. Interest of £0.3m has beencapitalised during the period of which £0.1m related to the prior year. As theadjustment is immaterial the comparatives for the prior year have not beenrestated. The following new standards and amendments to standards are mandatory for thefirst time for the 53 weeks ending 3 May 2008: • IFRS 7 'Financial Instruments Disclosures', (effective for annualaccounting periods beginning on or after 1 January 2007) and the complementaryamendment to IAS 1, 'Presentation of financial statements - capitaldisclosures'. IFRS 7 introduces new disclosures relating to financialinstruments. As this interim financial information contains only condensedfinancial statements, and as there are no material financial instruments relatedtransactions in the period, full IFRS 7 disclosures are not required at thisstage. The full IFRS 7 disclosures, including the sensitivity analysis to marketrisk and capital disclosures required by the amendment of IAS 1, will be givenin the annual financial statements. The following new interpretations are mandatory for the first time for the 53weeks ending 3 May 2008 but have had no effect on the interim financialinformation. • IFRIC 8 'Scope of IFRS 2', effective from annual periods beginning on or after 1 May 2006). • IFRIC 9 'Reassessment of embedded derivatives', (effective for annual periods beginning on or after 1 June 2006). • IFRIC 10 'Interim financial reporting and impairments', (effective from annual periods beginning on or after 1 November 2006). • IFRIC 11 'IFRS 2 - Group and treasury share transactions', (effective from annual periods beginning on or after 1 March 2007). Carpetright plc Notes to the condensed consolidated financial information for the 26 weeks ended 27 October 2007 4. Segment information The Group's primary reporting segment is geographic, as this is the basis onwhich the Group is organised and managed. The Group does not report a secondarysegment on the basis of business operations because business operationsthroughout the Group are the same. The geographical sectors are: United Kingdom& Republic of Ireland ("UK & RoI"), and Poland, Belgium and The Netherlands("Rest of Europe"). Central costs are incurred principally in the UK and areimmaterial. As such these costs are included within the UK & RoI segment.Segment revenue and result include transfers between geographical segments.Such transfers are priced at arm's length and are eliminated on consolidation. Analysis by geography: 26 weeks ended 27 October 26 weeks ended 28 October 2007 2006 UK & RoI Rest of Total UK & RoI Rest of Total £m Europe £m £m Europe £m £m £m Gross Revenue 220.4 32.0 252.4 201.8 27.9 229.7Inter-segment revenue (1.4) - (1.4) (1.3) - (1.3)Segment Revenue (by origin and destination) 219.0 32.0 251.0 200.5 27.9 228.4Gross profit 136.6 18.0 154.6 124.2 15.1 139.3Operating profit before profits on property 25.5 2.4 27.9 25.2 1.7 26.9disposalsand non-recurring itemsSegment result: operating profit after profits on 26.4 2.4 28.8 26.8 1.8 28.6property disposals and non-recurring itemsNet interest payable (0.7) (0.9)Profit before taxation 28.1 27.7Tax (8.1) (8.7)Profit for the financial period 20.0 19.0 On 1 May 2007 the Group acquired Storey Carpets Ltd, included above in 'UK &RoI'. Details of the acquisition are contained in note 13. Carpetright's trade has historically shown no distinct pattern of seasonalitywith trade cycles more closely following economic indicators such as interestrates and consumer confidence. 5. Profit on property disposals and non-recurring items 26 weeks 26 weeks 52 weeks ended 27 ended 28 ended 28 October October April 2007 2006 2007 £m £m £mDisclosed in the income statement:Profit on property disposals 2.9 1.7 9.3Pre-opening costs relating to the new depot (1.5) - -Post acquisition reorganisation of the Storey's business (0.5) - - 0.9 1.7 9.3 Carpetright plc Notes to the condensed consolidated financial information for the 26 weeks ended27 October 2007 6. Taxation 26 weeks 26 weeks 52 weeks ended 27 ended 28 ended 28 October October April 2007 2006 2007 £m £m £mCurrent 6.8 7.7 16.9Deferred 1.3 1.0 3.8 8.1 8.7 20.7 The estimated tax rates on the profits of the Group are as follows: 53 weeks 52 weeks ended 3 Ended 28 May 2008 April 2007 % %Weighted average annual underlying tax rate 27.6 31.4Weighted average annual effective tax rate 28.6 30.8 The effective tax rate is defined as the tax charged or credited as a percentageof the accounting profit before tax. The underlying tax rate is defined as theeffective tax rate after adjusting for, when relevant, profit on propertydisposals and non-recurring items and tax adjustments in respect of such items. 7. Dividends 26 weeks ended 27 October 2007 26 weeks ended 28 October 2006 Pence/share £m Pence/share £m Final prior year dividend paid 30.0 20.4 30.0 20.4Proposed current year interim dividend - - 20.0 13.6 The consortium headed by Lord Harris and other members of the senior Carpetrightmanagement team (the "Consortium") is in the process of completing its duediligence. The discussions between the Consortium and the Independent Committeeof the Board of Carpetright regarding the proposal are at an advanced stage andremain on the same terms as outlined in the announcement of 9 October 2007. Consequently the Board has not declared an interim dividend at this stage but,in the absence of a formal recommended offer being made by the Consortium, woulddeclare an interim dividend of 20.0 pence per share(2006: 20.0 pence) in respect of the 26 weeks to 27 October 2007. It isintended that any interim dividend, if declared, would be paid on 22 February2008 to shareholders on the register on 8 February 2008. 8. Earnings per share 26 weeks ended 27 October 2007 26 weeks ended 28 October 52 weeks ended 28 April 2007 2006 Earnings Weighted Earnings Earnings Weighted Earnings Earnings Weighted Earnings £m average per share £m average Per £m average per share number of Pence number share number Pence shares of Pence of Millions shares shares Millions Millions Basic 20.0 67.9 29.5 19.0 67.9 28.0 46.3 67.9 68.2earnings pershareEffect of - 0.1 (0.1) - - - 0.1 0.1 -dilutiveshareoptionsDiluted 20.0 68.0 29.4 19.0 67.9 28.0 46.4 68.0 68.2earnings pershare Carpetright plc Notes to the condensed consolidated financial information for the 26 weeks ended27 October 2007 8. Earnings per share (continued) The Directors have presented an additional measure of earnings per share basedon underlying earnings as they believe this provides a more comparable measureon an ongoing basis. Underlying earnings is defined as profit after adjustingfor post tax profits on property disposals and non-recurring items. 26 weeks 26 weeks 52 weeks ended 27 ended 28 ended 28 October October April 2007 2006 2007 Pence Pence Pence Basic earnings per share 29.5 28.0 68.2Adjusted for the effect of profit on property disposals and non-recurringitems: Profit on property disposals (4.3) (2.5) (13.7) Pre-opening costs relating to the new depot 2.2 - - Post acquisition reorganisation of the Storey's business 0.7 - -Tax 0.3 0.7 3.8Underlying earnings per share 28.4 26.2 58.3 9. Capital expenditure During the period, the Group spent approximately £1.9m (2006 - £3.3m) onintangible assets in respect of the final stage of the new stores system, £12.4m(2006 - £12.0m) on the acquisition and fit out of new stores and £12.2m onfitting out the new depot. A number of properties were vacated during the period giving rise to netproceeds of £3.0m (2006 - £3.7m). 10. Borrowings During the period the Group agreed a new 5 year bank loan of €20.0m. Aninterest rate swap was entered into to fix the interest rate on 75% of theoutstanding balance on this loan. During the period loans of £6.2m were repaid under the terms of the loanagreements. 28 April 27 October 2007 2007 Cash flow Exchange Revaluation £m Movement £m £m £m £m Cash and cash equivalents per the balance sheet 20.7 (15.8) 0.2 - 5.1Bank overdrafts (1.5) (11.0) 0.1 - (12.4)Cash and cash equivalents per the cash flow 19.2 (26.8) 0.3 - (7.3)statementBorrowings Borrowings (10.7) 0.7 - - (10.0) Borrowings (non-current) (11.0) (8.0) (0.8) - (19.8)Obligation under finance leases Obligation under finance leases (0.8) - - - (0.8) Obligation under finance leases (non-current) (3.7) 0.4 - - (3.3)Derivative financial instruments 0.1 - - (0.1) -Net debt (6.9) (33.7) (0.5) (0.1) (41.2) Carpetright plc Notes to the condensed consolidated financial information for the 26 weeks ended27 October 2007 10. Borrowings (continued) 29 April 28 October 2006 2006 Cash Exchange Revaluation £m Flow Movement £m £m £m £m Cash and cash equivalents per the balance sheet 9.3 0.2 - - 9.5Bank overdrafts (2.5) (0.3) - - (2.8)Cash and cash equivalents per the cash flow 6.8 (0.1) - - 6.7statementBorrowings Borrowings (10.8) (1.5) - - (12.3) Borrowings (non-current) (20.0) 6.4 1.0 - (12.6)Obligation under finance leases Obligation under finance leases (0.8) 0.1 - - (0.7) Obligation under finance leases (non-current) (4.4) 0.3 - - (4.1)Derivative financial instruments 0.1 - - - 0.1Net debt (29.1) 5.2 1.0 - (22.9) 11. Retirement benefit obligation The assets and liabilities of the Group's UK defined benefit pension scheme werevalued on an IAS 19 basis at 28 April 2007 by a qualified actuary. The amountrecognised in the income statement in the year ended 28 April 2007 of £0.5mforms the basis of the estimated cost for the 26 weeks to 27 October 2007. Thechange in the valuation is considered to be immaterial so no actuarial gain orloss has been recognised in the period. The Group assumed responsibility for the Storey Carpets pension scheme when itacquired Storeys. This scheme was valued using FRS 17 at the date of acquisitionand there was no surplus or deficit. The change in the valuation is consideredto be immaterial so no actuarial gain or loss has been recognised in the period.A valuation under IAS 19 will be carried out at the end of the financial year. 12. Statement of changes in shareholders' equity Share Share Treasury Other Total Capital Premium Shares Reserves £m £m £m £m £m At 28 April 2007 0.7 14.8 (0.5) 53.0 68.0 Issue of ordinary shares on the acquisition of Storey Carpets - 0.5 - 0.5LtdChange in fair value of cash flow hedges - - - (0.1) (0.1)Exchange difference in respect of hedged equity investments - - - 0.8 0.8Profit for the financial period - - - 20.0 20.0Total recognised income and expense for the financial period - 0.5 - 20.7 21.2Share-based payments net of tax - - - 0.1 0.1Dividend paid to Group shareholders - - - (20.4) (20.4)At 27 October 2007 0.7 15.3 (0.5) 53.4 68.9 Share Share Treasury Other Total Capital premium Shares Reserves £m £m £m £m £m At 29 April 2006 0.7 14.8 (0.1) 40.6 56.0 Purchase of own shares by employee share trust - - (0.4) (0.4)Exchange difference in respect of hedged equity investments - - - (1.0) (1.0)Profit for the financial period - - - 19.0 19.0Total recognised income and expense for the financial period - - (0.4) 18.0 17.6Share-based payments net of tax - - - 0.2 0.2Dividend paid to Group shareholders - - - (20.4) (20.4)At 28 October 2006 0.7 14.8 (0.5) 38.4 53.4 Carpetright plc Notes to the condensed consolidated financial information for the 26 weeks ended27 October 2007 13. Acquisition of subsidiary On 1 May 2007, the Group acquired 100% of the issued share capital of StoreyCarpets Ltd. The initial consideration paid comprised £18.0m cash and £0.5m ofshares in Carpetright plc. There is up to a further £1.0m conditionalconsideration payable, the conditions for which must be satisfied within 12months of 1 May 2007. Storey Carpets Ltd's principal activity is the retailingof carpet and other floor covering. The transaction has been accounted for inaccordance with IFRS 3 Business Combinations. Brand values were assessed as part of the acquisition fair value but wereimmaterial. No brand value has been recognised in the cost of the investment. From the date of acquisition to 27 October 2007, the acquisition contributed£14.7m to turnover, £0.3m to profit and £0.4m to net operating cash flow. Thereis no material difference between the amounts included in these accounts and theamount that would have been recognised had the acquisition been made at thestart of the financial year. Details of net assets acquired and goodwill are as follows: £mPurchase consideration: Cash paid 18.0 Deferred consideration 1.0 Value of shares issued 0.5 Direct costs relating to the acquisition 0.5Total purchase consideration 20.0 Fair value of net identifiable assets acquired (4.5)Goodwill 15.5 The goodwill is attributable to the significant synergies expected to ariseafter acquisition by the Group. Part of the consideration for the acquisition comprised 47,529 shares inCarpetright plc with a value of £0.5m. The number of shares issued wasdetermined using the market price of the shares on the date the acquisition wasconcluded. The Group will finalise the amount of the fair value of the net identifiableassets acquired once the value of the deferred consideration is fixed. Theassets and liabilities arising from the acquisition together with theprovisional fair values are as follows: Acquiree's Accounting Fair value Fair carrying policy adjustments Value amount alignment £m £m before £m business combination £mNet assets acquired:Intangible assetsProperty, plant and equipment 3.0 3.6 6.6Inventories 3.3 (0.4) 2.9Trade and other receivables 2.9 (0.6) (0.1) 2.2Cash and cash equivalents 1.4 1.4Trade and other payables (6.8) (0.4) (7.2)Retirement benefit obligations - -Tax asset 0.2 0.2Deferred tax liabilities (0.7) (0.7)Other provisions (0.9) (0.9)Net identifiable assets acquired 4.0 (0.6) 1.1 4.5 Outflow of cash to acquire business, net of cash acquired Cash consideration 18.5 Cash and cash equivalents acquired (1.4)Cash flow on acquisition of shares in subsidiary net of cash 17.1acquired Carpetright plc Notes to the condensed consolidated financial information for the 26 weeks ended27 October 2007 14. Capital and other commitments Capital commitments of £16.5m at 27 October 2007 for which no provision has beenmade in the accounts relate to the acquisition of tangible and intangible assets(26 weeks to 28 October 2006: £12.7m; 52 weeks to 28 April 2007 £13.6m). 15. Related party transactions Details of transactions during the period with Companies of which Lord Harrisand/or M J Harris is a director and/or in which Lord Harris holds a materialinterest are set out below. Lease and concession Lease and concession Supply of agreement payments agreement payments goods/services made received payments made 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks ended 27 ended 28 ended 27 ended 28 ended 27 ended 28 October October October October October October 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000Bridgewater Retail LLP - 17Edinburgh Retail LLP 281 176 450Glenrothes Retail LLP 58 58 400Greenock Retail Ltd 108 80 865Harris Ventures Ltd 130 129 4 4Hull Unit Trust 105 105Islandview Properties Ltd 136 61Neath Retail LLP 75 300Wick Retail LLP 27 As at 27 October 2007 the Group owed related parties £nil (2006 - £nil). 16. Foreign exchange The principal exchange rates used were as follows: 26 weeks 26 weeks 52 weeks ended 27 ended 28 ended 28 October October April 2007 2006 2007Euro Average 1.46 1.47 1.48 Closing 1.43 1.49 1.47Zloty Average 5.57 5.77 5.77 Closing 5.23 5.78 5.54 Store Portfolio 2007 2006Store Base - Numbers 27 October Openings Closures Other 28 April 28 October 29 April 2007 2007 2006 2006UK & RoI Carpetright 445 12 (6) - 439 431 400 Storeys 35 5 - 30 - - - Concessions 66 4 (11) - 73 63 40 546 21 (17) 30 512 494 440Rest of Europe Belgium 28 - - - 28 28 28 The Netherlands 76 2 (1) - 75 70 68 Poland 8 2 - - 6 3 2 112 4 (1) - 109 101 98Group Total 658 26 (19) 30 621 595 538 2007 2006Store Space 27 October Openings Closures Other 28 April 28 October 29 April(Sq ft'000) 2007 2007 2006 2006UK & RoI Carpetright 3,888 76 (52) (66) 3,930 3,911 3,716 Storeys 370 46 - 324 - - -Concessions 139 11 (24) (2) 154 146 105 4,397 133 (76) 256 4,084 4,057 3,821Rest of Europe Belgium 337 - - (10) 347 347 347 The Netherlands 888 18 (13) (20) 903 854 836 Poland 83 20 - - 63 35 23 1,308 38 (13) - 1,313 1,236 1,206Group Total 5,705 171 (89) 226 5,397 5,293 5,027 2007 2006Average Store Size (sq 27 October Openings Closures Other 28 April 28 October 29 Aprilft) 2007 2007 2006 2006UK & RoI Carpetright 8,737 - - - 8,952 9,074 9,290 Storeys 10,570 - - - - - - Concessions 2,106 - - - 2,110 2,317 2,625 8,050 - - - 7,977 8,213 8,684Rest of Europe Belgium 12,036 - - - 12,393 12,393 12,393 The Netherlands 11,684 - - - 12,040 12,200 12,294 Poland 10,375 - - - 10,500 11,667 11,500 11,679 - - - 12,046 12,238 12,306Group Total 8,670 - - - 8,691 8,897 9,344 This information is provided by RNS The company news service from the London Stock Exchange