Last checked at 16 Sep 2010 07:00
16 September 2010
Dunelm Group plc
Preliminary Results for the 52 weeks to 3 July 2010
Dunelm Group plc, the leading specialist out-of-town homewares retailer, today announces its preliminary results for the 52 weeks to 3 July 2010.
Financial summary
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| FY10 - 52 weeks | FY09 - 53 weeks | FY09 - 52 weeks |
| Total sales | £492.8m | £423.8m | £417.0m |
| Like-for-like sales growth | +8.0% | -0.5% | -0.5% |
| Operating profit | £75.5m | £52.6m | £51.6m |
| Profit before tax | £76.8m | £53.5m | £52.5m |
| EPS (fully diluted) | 26.9p | 18.6p | 18.3p |
Financial highlights
Sales and profit highlights (on a comparable 52-week basis):
·; Sales up 18.2% to £492.8m, including like-for-like increase of 8.0%
·; Gross margin up 190 basis points to 46.8% (2009: 44.9%)
·; Operating profit up 46% to £75.5m
·; Profit before taxation up 46% to £76.8m
·; EPS (fully diluted) up 47% to 26.9p
Other financial highlights:
·; Net cash from operating activities up 6.8% to £72.0m (2009: £67.4m)
·; Excess capital of £43.2m returned to shareholders
·; Year-end net cash of £15.4m (2009: £24.0m)
·; Recommended final dividend of 5.0p per share (2009: 4.0p) giving full year dividend up 33% to 8.0p (2009: 6.0p)
Business highlights
·; Continuing market share gains on a like-for-like basis
·; Ten new superstores opened in the year, giving space growth of 14%
·; Two further units opened since year-end, eight more contractually committed, plus one superstore relocation
·; Potential for 150-200 superstores in the UK
·; Nine major store refits completed in the year
Note: A separate Regulatory News Service announcement has been made at 0700hrs today regarding changes to Dunelm's Board of Directors.
Will Adderley, Chief Executive, said:
"These excellent results confirm the strength of Dunelm's business model and I am delighted to see the efforts of everyone within the Dunelm team bear fruit in this way.
"We remain as committed as ever to pursuing further profitable growth and the pipeline of new store openings for the year ahead is very positive. I am excited by the ways in which our offer keeps developing and the strength of our like for like sales growth over the last financial year demonstrates that our customers are responding very positively to our offer.
"Whilst we are clearly operating in challenging economic conditions, and we expect to see continuing pressure on consumer spending, performance in the early weeks of our new financial year has been pleasing.
"By continuing to invest prudently in important areas of our infrastructure, we will be able to capitalise on the firm foundations already in place and continue to grow the business."
For further information please contact:
| Dunelm Group plc | 0116 2644 356 |
| Will Adderley, Chief Executive |
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| David Stead, Finance Director |
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| Hogarth | 020 7357 9477 |
| John Olsen / Simon Hockridge |
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Notes to Editors
Dunelm is the UK's leading specialist out of town homewares retailer, operating in the £12bn homewares market. The Group currently operates 106 stores, branded Dunelm Mill, of which 96 are out-of-town superstores and 10 are high street shops. Dunelm employs over 6,000 full and part time staff, the vast majority of whom work in the stores.
Dunelm was founded by the Adderley family in 1979 as a market stall business, selling ready-made curtains. The first shop was opened in Leicester in 1984 and over the following years the business developed into a successful chain of high street shops in the Midlands specialising in soft furnishings. The first Dunelm superstore was opened in 1991, leading to the Group's expansion into the broader homewares market.
The superstores provide an average of 30,000 sq ft of selling space and offer an extensive range of around 20,000 products across a broad spectrum of categories, including bedding, ready made curtains, gifts and seasonal items, cushions, bathroom products, kitchenware, quilts, pillows and rugs. Dunelm also specialises in offering a wide range of fabrics, made to measure curtains and a frequently changing series of special buys. The directors are passionate about ensuring that all ranges live up to Dunelm's philosophy of offering customers "Simply Value for Money".
Dunelm also operates an on-line store, to be found at www.dunelm-mill.com.
Dunelm listed on the London Stock Exchange in October 2006 (DNLM.L) and has a current market capitalisation of over £750 million.
CHAIRMAN'S STATEMENT
In my interim report to shareholders, I commented on the excellent performance delivered by Dunelm over the 26 weeks to 2 January 2010. I am delighted to say that business performance has remained very strong in the second half and we have delivered not only impressive sales growth for the full financial year, but also a truly outstanding 43% increase in profit before tax.
The business has continued to generate very strong cash flows. As a result, we were able to return £43.2m of surplus capital to shareholders in the course of the year - in addition to our normal dividends - whilst continuing to invest in the business to support our future growth. The proposed final dividend of 5.0p (2009 - 4.0p) brings the full year dividend to 8.0p (2009 - 6.0p) - an increase of 33%.
Looking ahead, we remain cautious about the outlook for UK consumer spending and in turn the impact on the homewares market. However, we are very confident that Dunelm will continue to grow its share and become an even more significant player over the coming period.
Geoff Cooper
Chairman
CHIEF EXECUTIVE'S REVIEW
Trading
I am delighted to report further outstanding growth during the last financial year. Our overall sales increased by 18.2% compared with the equivalent 52 week period in the prior year. Like-for-like sales were extremely strong in the first half and the momentum carried through to generate a full year increase of 8.0% (again on a 52 week basis) - significantly beating the overall homewares market.
We have delivered these results by retaining a sharp focus on the four priorities which continue to form our growth strategy.
Priority 1 - open more superstores
We opened ten new superstores in the year, adding over 300,000 square feet of selling space. As at the year-end, our superstore chain comprised 94 stores (including two stores previously treated as high street shops) with 2.8 million square feet of selling space.
We have opened two further stores since the year-end, in Milton Keynes and Torquay, and we are contractually committed to nine more units which are due to open in the current financial year, one being a relocation of an existing under-spaced superstore.
Our recent openings have all traded well. Our target is for new stores to pay back their ingoing investment within 36 months on a discounted cash flow basis, but we have consistently beaten this. The actual payback period for the last 30 openings is expected to be around 26 months on average.
Taking confidence from the performance of both new stores and the existing chain, we have increased our target for national coverage in the UK from 150 to 200 superstores.
Priority 2 - further develop specialist position
We know that it is essential for us to keep evolving our retail proposition. We remain as passionate as ever about giving 'Simply Value For Money' to all our customers - a combination of good quality products at great prices, industry-leading choice, deep availability and friendly service.
Recent developments in our offer include the following:
·; Dorma. We continue to roll out dedicated Dorma centres which are now represented in 32 stores. We have extended the range of products sold under the Dorma brand to include bathroom, gift and tableware lines.
·; Window treatments/Dunelm At Home. We developed some time ago a more integrated and space-efficient way of merchandising products relating to windows (curtains, blinds, tracks & poles, fabrics, nets and voiles). This execution of the offer is now present in 26 stores. In addition, we now supplement our in-store offer with a free home consultation service, branded Dunelm At Home, which allows customers to select from our range of window treatments with the help of an adviser in their own homes. This service is currently provided from 30 stores.
·; Furniture. We have completed a full review of our furniture ranges, and have created an extended furniture department in several of our larger stores
·; Kitchen. We have created a radically different version of our traditional kitchen department. The new concept divides the offer between cooking, dining and utility and offers much deeper ranges in each of these areas, supported by new display methods and greater space allocation. This concept has been introduced in 18 stores to date.
·; Miss It Miss Out. We have evolved our use of "Miss It Miss Out" campaigns to signpost great customer deals, and we are increasingly using this mechanism to clear discontinued lines outside of our traditional sale periods. This further adds to the variety and interest of our in-store offer.
We have also continued investing to improve the shopping environment in our older stores. We completed nine major refits in the last financial year (2009 - six). The total cost of a refit, including loss of profit due to sales disruption, is typically around £0.8m per store; this includes any expenditure necessary to maintain the fabric of the building. Sales uplifts in refitted stores have run at approximately 10% ahead of trend. Going forward we plan to continue investing judiciously in major refits whilst also taking opportunities to refresh stores through smaller interventions.
Priority 3 - grow Dunelm Direct
During the last financial year we successfully implemented a new software platform for our on-line business (www.dunelm-mill.com and www.dorma.co.uk ). This has enabled us to offer a much improved experience for on-line visitors as well as giving customers the option of collecting on-line purchases in store.
At launch of the new platform we were able to offer approximately 7,000 lines for sale; this number has now doubled.
We continue to invest in this channel, with regular enhancements to functionality and further expansion and strengthening of the Dunelm Direct team.
As a result of this focus, we continue to see strong growth in on-line sales. Dunelm Direct is now consistently ranked amongst our top 10 stores in sales terms and we are confident that further growth will be achieved.
Priority 4 - develop and exploit our infrastructure
We continue to extract further benefits from our IT systems, enabling us to improve stock control and make in-store processes more efficient.
We have doubled the space available to us at our Stoke warehouse, to 500,000 square feet. Assuming that the proportion of merchandise distributed via Stoke remains broadly constant, this will give us the capacity to support growth in our store estate for the foreseeable future.
To support our continuing growth, we have acquired a plot of freehold land for a new head office near to our existing base in Syston, Leicester. Construction of a new building is under way and we expect to relocate in mid-2011.
Current trading and outlook
We are clearly operating in challenging economic conditions, and we expect to see continuing pressure on consumer spending.
Despite this backdrop, we are confident that Dunelm will demonstrate resilience, benefiting from our focus on continuing to deliver "Simply Value for Money" and our low average transaction values, and that the business will continue to grow and to strengthen its position in the UK homewares market.
Performance in the early weeks of our new financial year has been pleasing. We will provide a full update on sales and gross margin performance for the first quarter on 6 October.
Will Adderley
Chief Executive
FINANCE DIRECTOR'S REVIEW
Operating result
The year ended 3 July 2010 was a 52 week accounting period but the comparative year ended 4 July 2009 was a 53 week accounting period. The additional 53rd week last year represented £6.7m of revenue and approximately £1.0m of operating profit. Unless otherwise stated, references to 2009 or the comparative year relate to this 53 week period.
Group revenue for the 52 weeks to 3 July 2010 was £492.8m (2009: £423.8m), an increase of 16.3% (18.2% on a 52 week basis).
Like-for-like sales (comparing stores which have traded throughout the last two financial years) increased by 8.0% on a 52 week basis and new space contributed a further 10.2%. The like-for-like sales growth was strongest in H1 at +15.4% with H2 recording +0.8%; however the shift in our accounting calendar due to the 53rd week last year meant that more of our winter sale fell in the first half than in previous years. Adjusting for this, the like-for-like performance would have been approximately 2.0% lower in H1 and 2.0% higher in H2.
Gross margin has continued to increase year on year, due primarily in the most recent period to successful product lifecycle management. As a result, gross margin ended the year at 46.8% (2009: 44.9%), a 190 bps improvement. Please note that gross margin is now calculated after taking into account all charges for inventory write-downs, which were previously included in operating costs; the comparative figures for the 53 weeks to 4 July 2009 have been restated onto this new basis.
Operating costs increased by 12.8% compared with last year, with the increase primarily due to investment in the store portfolio and supporting central infrastructure. Operating costs in like-for-like stores increased by only 0.2%, held down by improvements in labour cost ratios, a reduction in energy costs and lower than expected rent and rates settlements. Non-store costs grew by 11.0% to support the growth of the business.
Operating profit for the financial year was £75.5m (2009: £52.6m), an increase of 43.5% (45.4% on a 52 week basis).
EBITDA
Earnings before interest, tax, depreciation and amortisation were £86.9m. This has been calculated as operating profit (£75.5m) plus depreciation and amortisation (£11.4m) and represents a 37.3% increase on the previous year. The EBITDA margin achieved was 17.6% of sales (2009: 14.9%).
Financial items and Profit Before Tax
The Group generated £1.3m net financial income for the year ended 3rd July 2010 (2009: £0.9m). Financial items include foreign exchange gains of £0.8m (2009: £1.0m) arising in respect of US dollar holdings; at the year end, the Group held $1.8m in US dollar cash deposits and had forward contracts covering approximately 35% of the anticipated US dollar spend over the next 12 months. The balance of net financial income, £0.5m (2009: -£0.1m expense), represents interest on surplus cash deposits.
After accounting for financial items, profit before tax for the year amounted to £76.8m (2008: £53.5m), an increase of 43.5%.
Taxation and Earnings Per Share
The tax charge for the year was 29.2% of PBT (2009: 29.7%). Ineligible depreciation was at a similar level to last year and this combined with a very significant increase in PBT, at 28% tax, has resulted in a lower effective rate.
Basic EPS for the year ended 3rd July 2010 was 27.1p (2009: 18.8p), an increase of 44.1%. Fully diluted EPS increased by 44.6% to 26.9p (2009: 18.6p, or 18.3p on a 52 week basis).
Capital expenditure
Gross capital expenditure in the financial year was £24.6m compared with £25.9m in the prior year, although the 2009 spend was boosted by the £5.0m acquisition of the Dorma brand. The major investments in the year were within stores, including fit-out costs for 10 new stores and 9 major refits as well as the acquisition of the freehold interest in one existing leasehold store. In addition, important investment programmes were begun with the acquisition of land for a new head office building and the commencement of fit-out work on our expanded central warehouse facility.
Working capital
The Group reduced working capital in the year by £1.7m (2009: £14.8m reduction). Inventories were £62.6m, an increase of £4.7m compared with the prior year driven by growth in the store portfolio; in like-for-like stores inventories actually reduced by 8.0%. Trade and other payables generated a positive cash movement of £6.1m, largely as a result of an increase in accruals and deferred income.
Cash position
The Group generated £72.0m (2009: £67.4m) net cash from operating activities in the last financial year, an increase of 6.8%. In the second half, the Group returned excess capital to shareholders amounting to £43.2m. As a result, net cash resources at the end of the year were £15.4m (2009: £24.0m). A committed undrawn revolving loan facility of £40.0m remains in place until September 2011.
It is anticipated that the financial year to July 2011 will see an increase in the level of cash reinvested in the business. Continuing expansion of the store portfolio will require a typical investment cost of £1.2m per store, whilst the refit programme brings a typical investment of £0.8m per store. This year will also include completion of fitting out for the central warehouse extension (approximately £1.0m) as well as development of the new head office facility, expected to cost a further £10.0m of capital over the years to July 2011 and July 2012. In addition, freehold store acquisition opportunities have been identified with potential investment of up to £8.0m.
Dividend
An interim dividend of 3.0p was paid in April 2010 (2009: 2.0p). It is proposed to pay a final dividend of 5.0p per share (2009: 4.0p). The total dividend of 8.0p represents a 33% increase over last year and leaves dividend cover a little over the top end of our target range of 2.5x - 3.0x.
Key performance indicators
In addition to the traditional accounting measures of sales and profits, the Directors review business performance each month using a range of other KPIs. These include:
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| FY10 | FY09 |
| Like-for-like sales growth | +8.0% | -0.5% |
| Change in gross margin | +190bps | +180bps |
| Number of new store openings | 10 | 6 |
| Number of refits | 9 | 6 |
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Key risks
The Directors also consider key risks to the business in the areas of strategic, operational and financial risks.
Strategic risks
Increased competition in the homewares market could materially impact returns and limit opportunities for growth. We continue to monitor major competitor threats and activity and seek to modify our proposition if necessary.
Changes in political and economic conditions will continue to put pressure on consumer expenditure and a continued downturn could result, impacting the retail sector as a whole. We mitigate this risk by reacting quickly to changes in customer demand and adjusting our offer in response. Continued focus on a low cost base also enables us to maintain our "Simply Value for Money" proposition.
Dunelm, like many other retailers, could experience upward pressure on input costs particularly in areas such as foreign currencies, freight rates, and raw material costs. These could impact margins. We have protected the business from fluctuating currencies through hedging a greater proportion of our foreign spend. In addition our increased scale and rate of growth provide further protection.
Our growth plans rely heavily on our being able to gain access to additional trading locations. If for any reason the supply of vacant retail warehouse space declines significantly, we may be forced to accept a lower pace of expansion. However, with increasing pressures on retailers and landlords we anticipate continuing availability of space over the next few years.
Operational risks
Information systems and technology operate at the heart of our business. A major incident or interruption to key systems could constitute a significant threat to the business, at least in the short-term. A disaster planning committee oversees the disaster recovery plan designed to ensure business continuity in such an event. In addition, certain key systems are either hosted offsite with full disaster recovery and the remainder are backed up in separate locations.
The business could suffer disruption in the event of a major incident within the supply chain, e.g. loss of our central warehouse or a major supplier. However, our use of a wide supply base, active management of key supplier relationships, high stock service levels and a high proportion of direct-to-store deliveries mitigate this risk.
Dunelm has a number of staff members in specialist positions whose expertise is important to operations and who could not easily be replaced. We have mitigated this risk by incentivising loyalty through deferred share awards as well as continuing to build strength in depth within the operating management team over recent years.
Financial risks
Dunelm has in place a committed bank facility under a revolving loan agreement with Lloyds Banking Group plc of £40m. This facility expires in September 2011. The group also has existing cash resources which together with the banking facility are considered to provide sufficient funding for the Group's operations.
We do not consider our direct exposure to interest rate fluctuations to generate any significant downside risk and we are well placed to take advantage of any interest rate increases.
The group invests surplus funds in overnight deposit accounts, fixed term facilities and in structured deposits. Counterparties are approved by the Board and risk associated with these counterparties is continually monitored. A credit rating of at least an 'A' is required.
David Stead
Finance Director
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
(a) The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
(b) The management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties it faces
Will Adderley David Stead
Chief Executive Finance Director
Consolidated income statement
For the 52 weeks ended 3 July 2010
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| 52 weeks 2010 | restated 53 weeks 2009 |
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| Note | £'000 | £'000 |
| Revenue | 1 | 492,839 | 423,783 |
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| Cost of sales |
| (262,253) | (233,628) |
| Gross profit |
| 230,586 | 190,155 |
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| Operating costs | 3 | (155,126) | (137,560) |
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| Operating profit | 2 | 75,460 | 52,595 |
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| Financial income | 5 | 1,361 | 1,563 |
| Financial expenses | 5 | (65) | (667) |
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| Profit before taxation |
| 76,756 | 53,491 |
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| Taxation | 6 | (22,406) | (15,870) |
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| Profit for the period attributable to equity shareholders of the parent |
| 54,350 | 37,621 |
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| Earnings per ordinary share - basic | 8 | 27.1p | 18.8p |
| Earnings per ordinary share - diluted | 8 | 26.9p | 18.6p |
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| Dividend proposed per ordinary share | 7 | 5.0p | 4.0p |
| Dividend paid per ordinary share | 7 | 3.0p | 2.0p |
All activities relate to continuing operations.
The comparative figures for the 53 weeks ended 4 July 2009 have been restated so that all charges for inventory write-downs are included in cost of sales (previously treated as operating costs).
Consolidated statement of comprehensive income
For the 52 weeks ended 3 July 2010
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| 52 weeks 2010 | restated 53 weeks 2009 |
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| £'000 | £'000 |
| Profit for the period | 54,350 | 37,621 |
| Effective portion of movement in fair value of cash flow hedges | (545) | - |
| Deferred tax on hedging movements | 153 | - |
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| Total comprehensive income for the period | 53,958 | 37,621 |
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Consolidated statement of financial position
As at 3 July 2010
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| 3 July 2010 | 4 July 2009 |
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| £'000 | £'000 |
| Non-current assets |
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| Intangible assets | 5,202 | 5,843 |
| Property, plant and equipment | 102,599 | 88,771 |
| Total non-current assets | 107,801 | 94,614 |
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| Current assets |
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| Inventories | 62,583 | 57,895 |
| Trade and other receivables | 10,470 | 10,739 |
| Cash and cash equivalents | 15,369 | 24,016 |
| Total current assets | 88,422 | 92,650 |
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| Total assets | 196,223 | 187,264 |
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| Current liabilities |
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| Trade and other payables | (71,638) | (65,550) |
| Liability for current tax | (11,200) | (8,797) |
| Financial instruments | (545) | - |
| Interest-bearing loans and borrowings | - | (18) |
| Total current liabilities | (83,383) | (74,365) |
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| Non-current liabilities |
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| Deferred tax liability | (152) | (127) |
| Total non-current liabilities | (152) | (127) |
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| Total liabilities | (83,535) | (74,492) |
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| Net assets | 112,688 | 112,772 |
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| Equity |
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| Issued capital | 2,010 | 2,008 |
| Share premium | 580 | 345 |
| Capital redemption reserve | 43,155 | - |
| Hedging reserve | (392) | - |
| Retained earnings | 67,335 | 110,419 |
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| Total equity attributable to equity holders of the Parent | 112,688 | 112,772 |
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The financial statements were approved by the Board of Directors on 16 September 2010 and were signed on its
behalf by:
Will Adderley
Chief Executive
Consolidated statement of cash flows
For the 52 weeks ended 3 July 2010
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| 52 weeks 2010 | 52 weeks 2009 |
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| £'000 | £'000 |
| Profit before taxation | 76,756 | 53,491 |
| Adjustment for net financing costs | (1,296) | (896) |
| Operating profit | 75,460 | 52,595 |
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| Depreciation and amortisation | 11,370 | 10,555 |
| Loss on disposal of property, plant and equipment | 13 | 26 |
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| Operating cash flows before movements in working capital | 86,843 | 63,176 |
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| (Increase)/decrease in inventories | (4,688) | 2,815 |
| Decrease in receivables | 269 | 897 |
| Increase in payables | 6,094 | 11,132 |
| Net movement in working capital | 1,675 | 14,844 |
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| Share-based payments expense | 1,330 | 599 |
| Foreign exchange losses | 516 | 323 |
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| 90,364 | 78,942 |
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| Interest paid | (71) | (821) |
| Interest received | 557 | 523 |
| Tax paid | (18,899) | (11,200) |
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| Net cash generated from operating activities | 71,951 | 67,444 |
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| Cash flows from investing activities |
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| Proceeds on disposal of property, plant and equipment | 7 | 1 |
| Acquisition of property, plant and equipment | (23,344) | (19,647) |
| Acquisition of intangible assets | (1,233) | (6,295) |
| Net cash utilised in investing activities | (24,570) | (25,941) |
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| Cash flows from financing activities |
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| Proceeds from issue of share capital | 244 | - |
| Purchase of treasury shares | - | (186) |
| Proceeds from issue of treasury shares | 642 | 124 |
| Repayment of bank loan | (10,000) | (10,000) |
| Proceeds from bank loan | 10,000 | - |
| Return of capital to shareholders | (43,155) | - |
| Dividends paid | (14,029) | (10,993) |
| Net cash flows utilised in financing activities | (56,298) | (21,055) |
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| Net (decrease)/increase in cash and cash equivalents | (8,917) | 20,448 |
| Foreign exchange revaluations | 288 | 717 |
| Cash and cash equivalents at the beginning of the period | 23,998 | 2,833 |
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| Cash and cash equivalents at the end of the period | 15,369 | 23,998 |
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Consolidated statement of changes in equity
For the 52 weeks ended 3 July 2010
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| Issued share capital | Share premium | Capital redemption reserve | Hedging reserve | Retained earnings | Total equity |
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| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
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| As at 28 June 2008 | 2,008 | 345 | - | - | 83,036 | 85,389 |
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| Profit for the financial year | - | - | - | - | 37,621 | 37,621 |
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| Total comprehensive income for the financial year | - |
| - | - | 37,621 | 37,621 |
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| Purchase of treasury shares | - | - | - | - | (186) | (186) |
| Treasury shares reissued in respect of share option schemes | - | - | - | - | 123 | 123 |
| Share-based payments | - | - | - | - | 599 | 599 |
| Deferred tax on share-based payments | - | - | - | - | 139 | 139 |
| Current corporation tax on share options exercised | - | - | - | - | 80 | 80 |
| Dividends | - | - | - | - | (10,993) | (10,993) |
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| Total transactions with owners, recorded directly in equity | - | - | - | - | (10,238) | (10,238) |
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| As at 4 July 2009 | 2,008 | 345 | - | - | 110,419 | 112,772 |
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| Profit for the financial year | - | - | - | - | 54,350 | 54,350 |
| Movement in fair value of cash flow hedges | - | - | - | (545) | - | (545) |
| Deferred tax on hedging movements | - | - | - | 153 | - | 153 |
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| Total comprehensive income for the financial year | - | - | - | (392) | 54,350 | 53,958 |
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| Issue of share capital | 2 | 235 | - | - | - | 237 |
| Issue of B shares | 43,155 | - | - | - | (43,155) | - |
| Redemption of B shares | (43,155) | - | 43,155 | - | (43,155) | (43,155) |
| Treasury shares reissued in respect of share option schemes | - | - | - | - | 649 | 649 |
| Share-based payments | - | - | - | - | 1,330 | 1,330 |
| Deferred tax on share-based payments | - | - | - | - | 320 | 320 |
| Current corporation tax on share options exercised | - | - | - | - | 606 | 606 |
| Dividends |
|
|
|
| (14,029) | (14,029) |
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|
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| Total transactions with owners, recorded directly in equity | 2 | 235 | 43,155 | - | (97,434) | (54,042) |
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| As at 3 July 2010 | 2,010 | 580 | 43,155 | (392) | 67,335 | 112,688 |
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2009 financial year was 53 weeks.
Notes to the annual financial statements
1 Segmental reporting
The Group has one reportable segment, retail of homewares. Management believe that these measures are the most relevant in evaluating the performance of the segment and for making resource allocation decisions.
The Chief Operating Decision Maker is the Group's Executive Committee. Internal management reports are reviewed by them on a monthly basis. Performance of the segment is assessed based on profit before interest and taxation.
All material operations of the reportable segment are carried out in the UK. The Group's revenue is driven by the consolidation of individual small value transactions and as a result Group revenue is not reliant on a major customer or group of customers.
2 Operating profit
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Operating profit is stated after charging the following items: |
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|
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|
|
| Inventories |
|
|
| Cost of inventories included in cost of sales | 262,253 | 229,701 |
| Write down of inventories | 1,120 | 2,758 |
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|
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| Amortisation of intangible assets | 1,876 | 2,550 |
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|
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| Depreciation of property, plant and equipment |
|
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| Owned | 9,494 | 8,005 |
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|
|
| Operating lease rentals |
|
|
| Land and buildings |
|
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| Plant and machinery | 22,544 | 21,683 |
|
| 1,351 | 1,151 |
| Loss on disposal of property, plant and equipment and intangible assets | 13 | 26 |
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| The analysis of auditors' remuneration is as follows: |
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|
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Fees payable to the Company's auditors for the audit of the Parent and consolidated annual accounts | 15 | 15 |
| Fees payable to the Company's auditors and their associates for other services to the Group |
|
|
| - audit of the Company's subsidiaries pursuant to legislation | 52 | 52 |
| - tax compliance | 30 | 29 |
| - other tax services | 88 | 8 |
| - all other services | 17 | - |
3 Operating costs
|
| 2010 | Restated 2009 |
|
| £'000 | £'000 |
| Selling and Distribution | 130,606 | 117,933 |
| Administrative | 24,507 | 19,601 |
| Loss on disposal of property, plant and equipment and intangible assets | 13 | 26 |
|
| 155,126 | 137,560 |
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4 Employee numbers and costs
The average number of people employed by the Group (including Directors) was:
|
| 2010 Number of heads | 2010 Full time equivalents | 2009 Number of heads | 2009 Full time equivalents |
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|
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| Selling | 5,608 | 3,493 | 5,003 | 3,302 |
| Distribution | 285 | 274 | 250 | 240 |
| Administration | 198 | 194 | 161 | 158 |
|
| 6,091 | 3,961 | 5,414 | 3,700 |
The aggregate remuneration of all employees including Directors comprises:
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Wages and salaries including bonuses and termination benefits | 62,153 | 52,696 |
| Social security costs | 4,324 | 3,429 |
| Share-based payment expense | 1,330 | 599 |
| Defined contribution pension costs | 196 | 206 |
|
| 68,003 | 56,930 |
5 Financial income and expense
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Finance income |
|
|
| Interest on bank deposits | 557 | 523 |
| Foreign exchange gains | 804 | 1,040 |
|
| 1,361 | 1,563 |
| Finance expenses |
|
|
| Interest on bank borrowings and overdraft | (65) | (667) |
| Net finance income | 1,296 | 896 |
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|
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6 Taxation
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Current taxation |
|
|
| UK corporation tax charge for the period | 22,146 | 16,143 |
| Adjustments in respect of prior periods | (238) | 94 |
|
| 21,908 | 16,237 |
| Deferred taxation |
|
|
| Origination of temporary differences | 324 | (332) |
| Adjustment in respect of prior periods | 174 | (35) |
|
| 498 | (367) |
| Total taxation expense in the income statement | 22,406 | 15,870 |
The tax charge is reconciled with the standard rate of UK corporation tax as follows:
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Profit before tax | 76,756 | 53,491 |
| UK corporation tax at standard rate of 28.0% (2009: 28.0%) | 21,492 | 14,977 |
| Factors affecting the charge in the period: |
|
|
| Non-deductible expenses | 128 | 7 |
| Ineligible depreciation | 972 | 947 |
| Lease incentive deductions | (122) | (125) |
| Adjustments to tax charge in respect of prior years | (64) | 59 |
| Profit on disposal in excess of capital gain | - | 5 |
|
| 22,406 | 15,870 |
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|
|
The taxation charge for the period as a percentage of profit before tax is 29.2% (2009: 29.7%).
7 Dividends
All dividends relate to the 1p ordinary shares.
|
| 2010 | 2009 |
|
| £'000 | £'000 |
| Final for the period ended 28 June 2008 - paid 3.5p | - | (6,994) |
| Interim for the period ended 4 July 2009 - paid 2.0p | - | (3,999) |
| Final for the period ended 4 July 2009 - paid 4.0p | (8,008) | - |
| Interim for the period ended 3 July 2010 - paid 3.0p | (6,021) | - |
|
| (14,029) | (10,993) |
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The Directors are proposing a final dividend of 5.0p per ordinary share for the period ended 3 July 2010 which equates to £10.0m. The dividend will be paid on 10 December 2010 to shareholders on the register at the close of business on 26 November 2010.
8 Earnings per share
Basic earnings per share is calculated by dividing the profit for the period attributable to equity shareholders by the weighted average number of ordinary shares in issue during the period.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period.
Weighted average numbers of shares:
|
| 52 weeks ended 3 July 2010 | 53 weeks ended 4 July 2009 |
|
| '000 | '000 |
| Weighted average number of shares in issue during the period | 200,264 | 199,874 |
| Impact of share options | 2,047 | 2,559 |
| Number of shares for diluted earnings per share | 202,311 | 202,433 |
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