Dunelm Regulatory News (DNLM)

19 Sep 2007 07:02

Dunelm Group plc19 September 2007 19 September 2007 Dunelm Group plc Preliminary Results for the 52 weeks to 30 June 2007 Dunelm Group plc, the leading specialist out-of-town homewares retailer, todayannounces its maiden preliminary results as a listed company, for the 52 weeksto 30 June 2007. Financial highlights • Sales up 12.5% to £354.7m (2006: £315.2m) • Like-for-like sales increase of 6.1% • Gross margin up 0.4% points to 44.0% (2006: 43.6%) • Underlying operating profit up 15.3% to £44.0m* (2006: £38.2m) • Operating profit of £40.8m (2006: £38.2m) • Underlying profit before taxation up 7.8% to £41.0m* (2006: £38.0m) • Profit before taxation of £37.8m (2006: £38.0m) • Underlying EPS (fully diluted) up 5.3% to 13.7p* (2006: 13.0p) • EPS (fully diluted) of 12.2p (2006: 13.0p) • Recommended final dividend of 3.0p per share; resultant total dividend for the period post IPO of 3.8p per share * excludes non-recurring items i.e. profit on sale of former warehouse, costs ofwarehouse transition, IPO costs Business highlights • Like-for-like sales growth of 6.1% exceeded wider retail market, demonstrating strength of Dunelm's retail proposition; • Four new superstores opened in year; two further units opened since year-end; • Contractually committed to 4 new units with strong pipeline of other opportunities; • Successful transition to new Stoke warehouse, increasing central warehousing capacity; • SAP stock management system rolled out to all stores; • Further improvement of product offering with focus on 'Simply Value For Money' proposition; • For 11 weeks to 15 September, like-for-like sales growth of 7.0%, and total growth of 12.5%. Will Adderley, Chief Executive, said: "This has been an excellent year for Dunelm. Having completed our flotationalmost a year ago, we have delivered record sales and profits despite theuncertain market environment. "I firmly believe that Dunelm remains the leading multiple homewares specialistin the UK, and our continued like-for-like sales growth ahead of the widerretail market demonstrates the real strength of our "Simply Value for Money"proposition. "We have invested significantly in our warehousing and IT infrastructure, thepipeline of new store opportunities looks very promising, and we continue tostrengthen our product offering across our categories. All of this isencouraging for the current year. "We are very pleased by the like-for-like sales growth of 7.0% in recent weeks.At the same time, we are naturally cautious about the outlook for the next fewmonths, given the uncertainty over the state of consumer demand. However, thebusiness is in excellent shape and we will be working hard to ensure that ouroffer remains as compelling for customers as ever." For further information please contact: Dunelm Group plc 0116 2644 356 Will Adderley, Chief Executive David Stead, Finance Director Hogarth Partnership 020 7357 9477 John Olsen / Fiona Noblet / Anna Keeble Notes to Editors Dunelm is amongst the top 10 retailers operating in the £12bn UK homewaresmarket. The Group currently operates 84 stores, branded Dunelm Mill, of which 70are out-of-town superstores and 14 are high street shops. The majority of thestores are located in the Midlands or north-west of England. Dunelm employs over5,000 full and part time staff, the vast majority of whom work in the stores. Dunelm was founded in 1979 as a market stall business, selling ready madecurtains. The first shop was opened in Leicester in 1984 and over the followingyears the business developed into a successful chain of high street shops in theMidlands specialising in soft furnishings. The first Dunelm superstore wasopened in 1991, leading to the Group's expansion into the broader homewaresmarket. The superstores provide an average of 28,000 sq ft of selling space and offer anextensive range of around 20,000 products across a broad spectrum of categories,including bedding, curtains, gifts and seasonal items, cushions, bathroomproducts, kitchenware, quilts, pillows and rugs. Dunelm also specialises inoffering a wide range of fabrics, made to measure curtains and a frequentlychanging series of special buys. The directors are passionate about ensuringthat all ranges live up to Dunelm's philosophy of offering customers "SimplyValue for Money". Last year Dunelm also introduced an on-line store, to be found atwww.dunelm-mill.com. Currently over 7,500 products are available through thewebsite. Dunelm listed on the London Stock Exchange in October 2006 (DNLM.L) and has acurrent market capitalisation of over £350 million. Dunelm Group plc Preliminary Results for the 52 weeks to 30 June 2007 Chairman's Statement This has been a momentous year in Dunelm's development which has included thesuccessful IPO last October. At the same time, the business has delivered recordsales and profits. I believe this is a real tribute both to the strength of theDunelm proposition and particularly to the focus and determination of itsmanagement team. Within the strong all-round financial performance, the like-for-like salesincrease of 6.1% deserves particular comment. This performance demonstrates thecontinuing appeal of the Dunelm proposition to a wide range of customers.Dunelm's philosophy is 'simply value for money', focused on giving all ourcustomers a great deal, whatever price point they are looking to buy at. Thechoice and value we offer our customers across the board in homewares is secondto none in the UK. The transition to becoming a publicly listed company was eased by the Company'spolicy, adopted some five years ago, of applying much of the rigour andprocesses required when answerable to public shareholders. However, one of thefew ways in which we have changed is to bring the membership of our Board moreinto line with the requirements of the Combined Code. We have addressed thisthrough the appointment of Simon Emeny as a Non-Executive Director and I amdelighted to welcome Simon to the Board. He has an excellent track record ofachievement as Managing Director of the major operating businesses withinFuller, Smith and Turner P.L.C and I am sure that his experience and drive willbe of great benefit to us. I would like to take this opportunity to pay public tribute to the founders ofDunelm, Bill and Jean Adderley. They have laid the foundations for the long-termprosperity of the Group not only by driving its growth and development untilrelatively recently, but equally importantly by having the strength to standback from the Group and let others take it forward, both in terms of managementand ownership. Of course, Bill and Jean remain major shareholders and Bill isstill an active and challenging Non-Executive Director. His son, Will, hasalready demonstrated immense capability as Chief Executive of the business and Iam certain that he and the rest of the senior team will continue to push itforward to even greater success, to the benefit of all shareholders. Chief Executive's Review Trading I am delighted to report continued successful growth of the Group during thelast financial year. Our overall sales increased by 12.5%, including growth of6.1% in like-for-like sales. This like-for-like sales growth was particularlystrong in the final quarter, at 10.1%. Our growth in the year exceeded the widerretail market and will almost certainly give us a further increase in our marketshare within homewares. The market environment was uncertain for much of the year. Consumer demand heldup better than might have been expected given the series of base rate increasesfrom mid-2006, and in our view the homewares market experienced steady butunspectacular growth. The intensity of competition also increased during theperiod, with the supermarkets continuing to give additional space to homewaresalong with other multiple retailers. Nevertheless, I firmly believe that Dunelmremains the leading multiple homewares specialist in the UK, a position weintend to hold onto by continuing to pursue the four strategic priorities whichwe outlined at the time of our flotation. Priority 1 - Growing the store portfolio We opened four new superstores in the year, at Stevenage, Colchester, Perth andBradford. All have received strongly positive customer reaction and all aretrading in line with our expectations. In addition we relocated our Swanseasuperstore to an adjacent, larger unit and have seen a very strong increase intrading as a result. Altogether the chain of 68 superstores as at the year-end provided over 1.9msquare feet of selling space. It remains our firm intention to grow the superstore portfolio as rapidly as wecan, without compromising our long-term financial returns. We have opened twofurther units since the year-end, in Aberdeen and Shoreham. We are contractuallycommitted to 4 more units which are due to open this financial year or earlynext and we have numerous further opportunities under negotiation. We believethat the demand for retail space has cooled over the past couple of years and weare therefore optimistic that we will be able to achieve a good number ofadditions to our estate in the coming year, on attractive terms. Whilst expanding our superstore chain, we have taken the opportunity to closethree high street stores. In all three cases there is already a superstoreserving the same catchment area and the total space exited is less than oneaverage superstore. This leaves us with 14 high street stores at present and wewill continue to look for opportunities to relocate to superstores in thesetowns. Priority 2 - Developing the customer offer We know that it is essential for us to continue improving our retailproposition. We are as passionate as ever about giving 'simply value for money'to all our customers - a combination of great prices, unrivalled choice,excellent quality, great product availability and friendly service. We respectour competitors and know that they will keep improving; we know that we alwayshave to get better too if we want to keep satisfying our customers. A good example of the way we operate is our decision to cease selling beds. Thiswas a range we experimented with but where we found we were unable to outdo theestablished specialists in the field. Accordingly we have made a rapid butlow-cost withdrawal, giving the space released back to mainstream categories,particularly bedding. The extra space has allowed us to introduce an additionalrange of plain-dye linen, and also to showcase new designs from Dorma which areexclusive to Dunelm. The result has been a significant increase in bedding salesand further reinforcement of our position as the specialist in this area. Looking ahead we see opportunities to improve our product offering in severalcategories and to provide even better customer service through our friendlystaff. We look forward to giving our customers an even more enjoyable shoppingexperience as a result. Priority 3 - Exploiting our infrastructure The last financial year saw some important milestones achieved in ourinfrastructure development. First, the transition from our Burton warehouse to anew facility at Stoke was fully completed and this now gives us a much largercentral warehousing capacity - approximately four times as many pallet locationsas were previously available. With around 80% of merchandise still beingsupplied direct to stores, we believe that the current Stoke warehouse will beable to support the central distribution requirement for a chain of over 100superstores and we will continue to drive efficiency in the warehouse operationto ensure this is the case. The second major achievement was the roll-out of SAP stock management to all ofour stores. For the first time, this gives us full visibility of all stockthroughout the chain and enables us to control stock levels more tightly. Priority 4 - Longer term growth We aim to develop a number of initiatives to increase the potential for longerterm growth. Our webstore opened in early 2006 and now contains over 7,500products - to which we are adding all the time. Whilst this channel remainssmall relative to the business as a whole, sales are growing and we believe thatwe are well positioned to benefit from any significant migration of customerpurchasing to the internet. Outlook In the early weeks of our new financial year, we have continued to benefit fromrelatively soft comparatives driven by last year's very hot summer together withthe climax of the football World Cup. For the 11 weeks to 15 September, totalsales growth has been 12.5% and like-for-like growth has been 7.0%. We are very pleased with these figures. At the same time, we are naturallycautious about the outlook for the next few months. Not only do we start to seemore challenging comparatives, but the state of consumer demand remainsuncertain. We do not take continued strong growth for granted, but I can assureall shareholders that we will be working hard to ensure that our offer remainsas compelling for customers as ever. Finance Director's Review Underlying operating result Sales in the financial year were £354.7m, an increase of 12.5%. On ourconservative definition of like-for-like (i.e. including only stores whichtraded throughout the financial year in question and all of the precedingfinancial year), the like-for-like growth was 6.1%. We continued to benefit from our increased scale and buying power as well asweakness of the US dollar, allowing us to achieve a 0.4% point increase in grossmargin. Operating costs remained well controlled, with an overall 3.7% increase in costsin like-for-like stores. However, as we have explained previously, the non-storecost base now includes a rent charge on the new Stoke distribution centre andamortisation of the new SAP software and associated hardware. In the previousfinancial year there was no rent charge for the distribution centre and only apart year amortisation charge for SAP. The overall effect is an increase in ournon-store cost base due to these items of £2.1m. Operating profit on an underlying basis (i.e. after charging the new costsdescribed above, but before non-recurring items) was £44.0m, an increase of15.3%. Non-recurring items In our definition of underlying operating profit we exclude the following itemswhich we consider to be outside the normal running of the business: • IPO costs - the Group bore £3.0m of costs in relation to the IPO in October 2006. • Warehouse transition - costs of £1.3m arose during the year in respect of the transfer of operations from the former distribution centre at Burton to the new facility at Stoke, including redundancy, other closure costs and the incremental cost of parallel running the two sites for a period during the year. • Warehouse disposal - a gain of £1.1m was realised on disposal of the Burton freehold property. After including all of the above items, the operating result for the year was aprofit of £40.8m, an increase of 7.0%. EBITDA Earnings before interest, tax, depreciation and amortisation were £53.5m,excluding non-recurring items. This has been calculated as underlying operatingprofit (£44.0m) plus depreciation and amortisation (£9.5m) and represented a15.2% increase on the previous year. The EBITDA margin achieved, at 15.1% ofsales, demonstrates the strength of Dunelm's business model. Financial items and PBT In October 2006, immediately prior to IPO, the Group assumed bank debt of £50min order to fund a special dividend. Historically the Group has held a cashsurplus. Accordingly, there was a shift from net interest receivable of £0.7m inthe prior year to net interest payable of £1.6m in the latest financial year. Additionally, the Group suffered foreign exchange losses in respect of US dollarholdings which amounted to £1.4m, based on a year-end exchange rate of $2.00.The equivalent net loss last year was £0.8m, with a closing exchange rate of$1.84. The Group has no further forward exchange contracts outstanding and thedollars held in cash will be utilised to fund purchases of stocks over thecoming year. Going forward, it is our intention to purchase foreign currency atspot rates as and when required for actual foreign currency payments. After accounting for interest and foreign exchange impacts, underlying profitbefore tax for the year amounted to £41.0m, an increase of 7.8%. Statutory PBT,after non-recurring items, was £37.8m. TAX, PAT and EPS The headline tax charge for the year was 34.9% of statutory PBT. However, theeffective tax rate was impacted by the IPO costs which are not deductible forcorporation tax purposes. It also includes the impact of recalculating deferredtax based on the new corporation tax rate of 28%. Excluding these factors, theeffective tax rate for the year was 31.8% of pre-tax profit. Underlying EPS (i.e. excluding non-recurring items) on a fully diluted basisshows a rise of 5.3% to 13.7p. Our reported earnings per share are 12.2p on afully diluted basis, 6.5% below last year. Implementation of IFRS IFRS has been fully implemented by Dunelm and the three year record shown at thetime of our IPO was on a consistent IFRS basis. The major impact of this changein accounting principles is that lease incentives are spread over the life ofthe lease rather than up to the first rent review (as under UK GAAP). Capital expenditure The business has undertaken significant capital expenditure in recent years,including major investments in systems and technology infrastructure and thefit-out of the new distribution centre. The major part of these investments wasalready incurred by June 2006, so gross capital expenditure in the most recentfinancial year was reduced to £15.1m (previously £25.4m). This included onesignificant freehold store acquisition as well as the fit-out costs for theother new stores opened in the year. Working capital Stocks increased by £4.3m during the financial year mainly as a result of newstore openings. Net working capital was slightly reduced compared with the startof the year. Cash position The Group's profile of strong cash generation continued in the last financialyear. Net cash generated from operations, after interest and tax, was £34.7m (anincrease of 44.0%) and net debt at the year-end was £22.6m. Dividend In addition to the special pre-IPO dividend of 25p per share, an interimdividend of 0.8p was paid in April 2007. It is proposed to pay a final dividendof 3.0p per share. Consolidated income statement For the 52 weeks ended 30 June 2007 2007 2006 Note £'000 £'000---------------------------------- ------- --------- --------- Revenue 354,721 315,187Cost of sales (297,481) (264,599)---------------------------------- ------- --------- --------- Gross profit 57,240 50,588---------------------------------- ------- --------- ---------Administrative expenses ongoing 2 (13,247) (12,438)Administrative expenses non-recurring 2 (3,178) ----------------------------------- ------- --------- ---------Total administrative expenses (16,425) (12,438) Operating profit 40,815 38,150---------------------------------- ------- --------- ---------Analysed as:Operating profit before non-recurring items 43,993 38,150Non-recurring items (3,178) ----------------------------------- ------- --------- --------- Financial income 4 503 983Financial expenses 4 (3,492) (1,094)---------------------------------- ------- --------- --------- Profit before taxation 37,826 38,039 Taxation 5 (13,198) (11,839)---------------------------------- ------- --------- --------- Profit for the period 24,628 26,200---------------------------------- ------- --------- --------- Earnings per ordinary share - basic 7 12.3p 13.1pEarnings per ordinary share - diluted 12.2p 13.0p Dividend proposed per ordinary share 6 3.0p -Dividend paid per ordinary share 6 25.8p 3.7p All activities relate to continuing operations. All profit is attributable toequity shareholders. There were no gains or losses for the current or comparative periods other thanthose reported above. Consolidated balance sheet As at 30 June 2007 30 June 1 July 2007 2006 Note £'000 £'000---------------------------------- ------- --------- ---------Non-current assetsIntangible assets 3,668 3,665Property, plant and equipment 67,064 61,490Deferred tax asset 3,276 2,272---------------------------------- ------- --------- ---------Total non-current assets 74,008 67,427---------------------------------- ------- --------- --------- Current assetsInventories 60,657 56,345Trade and other receivables 8,996 10,024Cash and cash equivalents 17,368 2,964Assets held-for-sale - 5,998---------------------------------- ------- --------- ---------Total current assets 87,021 75,331---------------------------------- ------- --------- --------- Total assets 161,029 142,758---------------------------------- ------- --------- --------- Current liabilitiesTrade and other payables (51,464) (47,271)Liability for current tax (6,310) (6,213)Interest-bearing loans and borrowings (21) (150)Provisions - (58)---------------------------------- ------- --------- ---------Total current liabilities (57,795) (53,692)---------------------------------- ------- --------- --------- Non-current liabilitiesInterest-bearing loans and borrowings (40,000) ----------------------------------- ------- --------- ---------Total non-current liabilities (40,000) ----------------------------------- ------- --------- --------- Total liabilities (97,795) (53,692)---------------------------------- ------- --------- --------- Net assets 63,234 89,066---------------------------------- ------- --------- --------- EquityIssued capital 2,006 2,000Share premium 267 -Retained earnings 60,961 87,066---------------------------------- ------- --------- ---------Total equity attributable to equity holders of the 63,234 89,066parent ------- --------- ------------------------------------------- Consolidated cash flow statement For the 52 weeks ended 30 June 2007 30 June 1 July 2007 2006 Note £'000 £'000---------------------------------- ------- --------- ---------Cash flows from operating activities 8 49,300 35,118 Interest paid (1,536) (57)Interest received 451 983Tax paid (13,468) (11,910)---------------------------------- ------- --------- ---------Net cash generated from operating activities 34,747 24,134---------------------------------- ------- --------- ---------Cash flows from investing activitiesProceeds on disposal of property, plant and 7,200 1equipmentAcquisition of property, plant and equipment (14,130) (21,256)Acquisition of intangible assets (996) (4,176)---------------------------------- ------- --------- ---------Net cash utilised in investing activities (7,926) (25,431) ---------------------------------- ------- --------- ---------Cash flows from financing activitiesProceeds from issue of share capital 273 -Net funds raised from bank loan 40,000 -Repayment of finance lease liability (150) (392)Dividends paid (51,605) (7,400)---------------------------------- ------- --------- ---------Net cash flows utilised in financing activities (11,482) (7,792) Net increase/(decrease) in cash and cash 15,339 (9,089)equivalents Foreign exchange revaluations (956) -Cash and cash equivalents at the beginning of the 2,964 12,053period ------- --------- -------------------------------------------Cash and cash equivalents at the end of the period 9 17,347 2,964---------------------------------- ------- --------- --------- Statement of changes in equity Issued Share Share Retained Total capital premium earnings Equity £'000 £'000 £'000 £'000---------------------------- --------- ------- --------- -------As at 3 July 2005 2,000 - 68,235 70,235Total recognised income and expense - - 26,200 26,200Share based payments - - 31 31Dividends - - (7,400) (7,400)---------------------------- --------- ------- --------- -------As at 1 July 2006 2,000 - 87,066 89,066---------------------------- --------- ------- --------- ------- Issued Share Share Retained Total capital premium earnings Equity £'000 £'000 £'000 £'000---------------------------- --------- ------- --------- -------As at 2 July 2006 2,000 - 87,066 89,066Total recognised income and expense - - 24,628 24,628Issue of share capital 6 267 - 273Share based payments - - 234 234Deferred tax on share based payments - - 327 327 Corporation tax on share options - - 311 311exercisedDividends - - (51,605) (51,605)---------------------------- --------- ------- --------- -------As at 30 June 2007 2,006 267 60,961 63,234---------------------------- --------- ------- --------- ------- Notes to the annual financial statements Basis of preparation The Group financial statements consolidate those of the Company and itssubsidiaries (together referred to as the 'Group'). The Group financial statements have been prepared and approved by the Directorsin accordance with International Financial Reporting Standards as adopted by theEU ('Adopted IFRSs'). The accounting policies have been applied consistently to all periods presentedin these Group financial statements and in preparing an opening IFRS balancesheet at 1 July 2006 for the purposes of the transition to Adopted IFRSs. Dunelm Group plc ('the Company') and its subsidiary companies have previouslyprepared consolidated financial statements in accordance with UK GenerallyAccepted Accounting Practice ('UK GAAP'). Following admission to the LondonStock Exchange, in common with all companies listed on European Union (EU)regulated markets, the Group is now required to prepare its financial statementsin accordance with International Financial Reporting Standards as adopted by theEU ('Adopted IFRSs'). The Group has adopted IFRS 1 from 3 July 2005 (The Group's date of transition toIFRS). IFRS 1 'First Time adoption of IFRS' establishes the transitionalrequirements for the preparation of financial information in accordance withIFRS for the first time. The general principle is to establish accountingpolicies under IFRS then to apply these retrospectively at the date oftransition to determine the opening balance sheet. IFRS 1 permits a number offirst time adoption exemptions, none of which are relevant to the Group. The annual financial statements are prepared under the historical costconvention. In addition assets classified as held-for-sale are valued at thelower of net book value and fair value less costs to sell. The financialstatements are prepared in pounds sterling, rounded to the nearest thousand. Use of estimates and judgements The presentation of the annual financial statements requires the Directors tomake judgements, estimates and assumptions that affect the application ofpolicies and reported amounts of assets and liabilities, income and expenses.The estimates and associated assumptions are based on historical experience andvarious other factors that are believed to be reasonable under thecircumstances. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisionsto accounting estimates are recognised in the period in which the estimate isrevised and in any future periods affected. The Director's consider that there are no areas of judgement or uses ofestimates which need to be highlighted. 1 OPERATING PROFIT 2007 2006 £'000 £'000--------------------------------------- --------- ---------Operating profit is stated after charging/(crediting) thefollowing items: Inventories:Cost of inventories included in cost of sales 198,537 177,798Write down of inventories 2,228 954 Amortisation of intangible assets 1,742 511 Depreciation of property, plant and equipment:Owned 7,543 7,615Leased 243 182 Operating lease rentals:Land and buildings 16,785 15,947Plant and machinery 1,061 927 Loss/(profit) on disposal of properties (1,130) 3 2 ADMINISTRATIVE EXPENSES 2007 2006 £'000 £'000--------------------------------------- --------- ---------Ongoing 13,247 12,438Non-recurring:IPO 2,997 -Warehouse transition 1,297 -Profit on sale of former warehouse (1,116) ---------------------------------------- --------- --------- 16,425 12,438--------------------------------------- --------- --------- Administrative expenses relate to central support functions and do not includeany selling or distribution expenses. Non-recurring expenses have been specifically identified because of theirnon-recurring nature within the business. The Group believes that thiscategorisation aids the understanding of the underlying results of the business. 3 EMPLOYEE NUMBERS AND COSTS The average number of people employed by the Group (including Directors) was: 2007 2007 2006 2006 Number of Full time Number of Full time heads equivalents heads equivalents--------------------------- -------- -------- -------- --------Selling 4,808 3,198 4,781 3,174Distribution 213 206 120 120Administration 142 139 115 112--------------------------- -------- -------- -------- -------- 5,163 3,543 5,016 3,406--------------------------- -------- -------- -------- -------- The aggregate remuneration of all employees including Directors comprises: 2007 2006 £'000 £'000--------------------------------------- --------- ---------Wages and salaries including bonuses and termination 42,323 37,941benefitsSocial security costs 2,766 2,202Share-based payment expense 234 31Defined contribution pension costs 114 74--------------------------------------- --------- --------- 45,437 40,248--------------------------------------- --------- --------- 4 FINANCIAL INCOME AND EXPENSE 2007 2006 £'000 £'000--------------------------------------- --------- ---------Finance incomeInterest on bank deposits 503 791Realised foreign exchange gains - 192--------------------------------------- --------- --------- 503 983--------------------------------------- --------- --------- Finance expensesBank borrowings and overdraft (2,113) (57)Foreign exchange losses (1,379) (1,037) (3,492) (1,094)--------------------------------------- --------- ---------Net finance expense (2,989) (111)--------------------------------------- --------- --------- 5 TAXATION 2007 2006 £'000 £'000--------------------------------------- --------- ---------Current taxationUK corporation tax charge for the period 12,957 12,306Adjustments in respect of prior periods 918 (75)--------------------------------------- --------- --------- 13,875 12,231--------------------------------------- --------- --------- Deferred taxationOrigination of timing differences 26 (345)Adjustment in respect of prior periods (914) (47)Tax rate differential 211 ---------------------------------------- --------- --------- (677) (392)--------------------------------------- --------- --------- Total taxation expense in the income statement 13,198 11,839--------------------------------------- --------- --------- The tax charge is reconciled with the standard rate of UK corporation tax asfollows: 2007 2006 £'000 £'000--------------------------------------- --------- ---------Profit before tax 37,826 38,039--------------------------------------- --------- --------- UK corporation tax at standard rate of 30% (2006: 30%) 11,348 11,412 Factors affecting the charge in the period:Non-deductible expenses 953 35Ineligible depreciation 845 821Lease incentive deductions (184) (307)Adjustments to tax charge in respect of prior years 4 (122)Profit on disposal in excess of capital gain 21 -Tax rate differential 211 ---------------------------------------- --------- --------- 13,198 11,839--------------------------------------- --------- --------- The taxation charge for the period as a percentage of profit before tax is34.9%. This is affected by the IPO costs, which are non-deductible forcorporation tax purposes; and by the recalculation of the deferred tax asset toreflect the future corporation tax rate of 28%. Excluding these factors, theeffective tax rate would have been 31.8% for the year. 6 DIVIDENDS All dividends relate to the 1p ordinary shares. 2007 2006 £'000 £'000--------------------------------------- --------- ---------Interim for the period ended 30 June 2007 - paid 25p (50,000) -Interim for the period ended 30 June 2007 - paid 0.8p (1,605) -Interim for the period ended 1 July 2006 - paid 3.7p - (7,400)--------------------------------------- --------- --------- (51,605) (7,400)--------------------------------------- --------- --------- The Directors are proposing a final dividend of 3.0p per ordinary share for theperiod ended 30 June 2007 which equates to £6.0 million. The dividend will bepaid on 30 November 2007 to shareholders on the register at the close ofbusiness on 16 November 2007. 7 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit for the periodattributable to equity shareholders by the weighted average number of ordinaryshares in issue during the period. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. These represent share options granted to employees where the exerciseprice is less than the average market price of the Company's ordinary sharesduring the period. Weighted average numbers of shares: 52 weeks 52 weeks ended ended 30 June 1 July 2007 2006 £'000 £'000--------------------------------------- --------- ---------Weighted average number of shares in issue during the period 200,363 200,000Impact of share options 2,324 1,508--------------------------------------- --------- ---------Number of shares for diluted earnings per share 202,687 201,508--------------------------------------- --------- --------- In addition to standard earnings per share, an underlying earnings per sharecalculation is provided below which excludes non-recurring costs and income (netof tax). The earnings used for the standard and underlying calculations,together with the resultant earnings per share are shown below: 52 weeks 52 weeks ended ended 30 June 1 July 2007 2006 £'000 £'000--------------------------------------- --------- ---------Profit for the period 24,628 26,200Non-recurring items (net of tax) 3,109 ---------------------------------------- --------- ---------Profit for the period excluding non-recurring items 27,737 26,200--------------------------------------- --------- --------- Basic earnings per share - standard 12.3p 13.1pBasic earnings per share - underlying 13.8p 13.1pFull diluted earnings per share - standard 12.2p 13.0pFull diluted earnings per share - underlying 13.7p 13.0p 8 CASH FLOWS FROM OPERATING ACTIVITIES 2007 2006 £'000 £'000--------------------------------------- --------- ---------Profit before tax 37,826 38,039Adjusted for:Net financing costs 2,989 111--------------------------------------- --------- ---------Operating profit 40,815 38,150 Depreciation and amortisation 9,529 8,325Loss/(profit) on disposal of property, plant and equipment (1,130) 3--------------------------------------- --------- ---------Operating cash flows before movements in working capital 49,214 46,478--------------------------------------- --------- ---------(Increase) in inventories (4,312) (11,224)(Increase)/decrease in debtors 1,028 (2,636)Increase in creditors 4,480 2,523--------------------------------------- --------- ---------Net movement in working capital 1,196 (11,337) (Decrease) in provisions (58) (54)Share based payments expense 234 31Foreign exchange losses (1,286) ---------------------------------------- --------- ---------Cash flows from operating activities 49,300 35,118--------------------------------------- --------- --------- 9 ANALYSIS OF MOVEMENT IN NET DEBT IAS 7 'Cash Flow Statements' does not require the disclosure of a net debtreconciliation. The Group has shown this reconciliation to assist in theinterpretation of the financial statements. Net debt is defined as cash at bankless loan and overdraft balances. At 2 July Cash Flow Other At 30 June 2006 non cash 2007 changes £'000 £'000 £'000 £'000--------------------------- -------- -------- -------- --------Cash at bank and in hand 2,964 14,404 - 17,368Bank overdrafts - (21) - (21)--------------------------- -------- -------- -------- -------- 2,964 14,383 - 17,347 Debt due within one year (150) 150 - -Debt due after one year - (40,000) - (40,000)--------------------------- -------- -------- -------- -------- Net debt 2,814 (25,467) - (22,653)--------------------------- -------- -------- -------- -------- This information is provided by RNS The company news service from the London Stock Exchange