Last checked at 13 Sep 2012 07:00
13 September 2012
Dunelm Group plc
Preliminary Results for the 52 weeks to 30 June 2012
Dunelm Group plc, the leading specialist out-of-town homewares retailer, today announces its preliminary results for the 52 weeks to 30 June 2012.
Financial summary
FY12 | FY11 | Change | |
Total revenues | £603.7m | £538.5m | +12.1% |
Like-for-like growth | +3.1% | -0.6% | |
Operating profit | £95.2m | £83.3m | +14.3% |
Profit before tax | £96.2m | £83.6m | +15.1% |
Basic EPS | 35.3p | 29.7p | +18.9% |
Fully diluted EPS | 35.1p | 29.3p | +19.8% |
Dividend | 14.0p | 11.5p | +21.7% |
Financial highlights
·; Revenues up 12.1% to £603.7m; like-for-like growth of 3.1% (2011: like-for-like decline -0.6%) - includes estimated £8m weather benefit in final quarter
·; Gross margin up 30 basis points to 48.3% (2011: 48.0%)
·; Operating profit up 14.3% to £95.2m (2011: £83.3m) - estimated underlying operating profit £92.7m, excluding final quarter weather benefit
·; Profit before taxation up 15.1% to £96.2m (2011: £83.6m)
·; Basic EPS up 18.9% to 35.3p (2011:29.7p); fully diluted EPS up 19.8% to 35.1p (2011: 29.3p)
·; Year-end net cash of £65.2m (2011: £35.1m)
·; Recommended final dividend of 10.0p per share (2011: 8.0p), resulting in full year dividend up 21.7% at 14.0p
(2011: 11.5p )
·; Additional proposed capital return of £65.8m (32.5p per share)
Business highlights
·; Continuing market share gains on a like-for-like basis
·; 14 new superstores opened in the year (including two relocations)
·; Four further units opened since year-end (including one relocation) - now 118 superstores in total
·; Contractually committed to 9 more units (including one relocation)
·; UK portfolio target of c.200 superstores confirmed
·; Continued investment in store refits; 50% of superstores either new or have benefitted from a major refit in
past 3 years
·; Strong growth of multi-channel, contributing 2.5% of revenues across the year (3% in the final quarter)
Nick Wharton, Chief Executive, commented:
"Dunelm has delivered robust trading results in a demanding retail environment, with our strong focus on retailing excellence leading to increased market share on a like for like basis. We have also made good progress with our strategic development, scaling our business through new stores, multi-channel, and strengthened infrastructure, while continuing to improve our specialist customer proposition. I would like to thank all my colleagues for their hard work and commitment in achieving this.
"Our financial position remains extremely strong which, together with the Board's confidence in Dunelm's future growth prospects, enables us to propose an increase in the dividend ahead of earnings, together with a return of excess capital equal to 32.5p per share.
"Looking ahead, we remain cautious of the UK consumer environment and its impact on our trading in the near term. However, with a strong new store pipeline, good momentum in multi-channel and a "Simply Value for Money" proposition that continues to resonate with a wide range of customers, we remain confident in the future growth prospects for the business."
An interim management statement in respect of first quarter trading will be provided on 3rd October 2012.
For further information please contact:
Dunelm Group plc | 0116 2644 356 |
Nick Wharton, Chief Executive | |
David Stead, Finance Director | |
MHP Communications | 020 3128 8100 |
John Olsen / Simon Hockridge / Naomi Lane |
For photography, please contact MHP Communications.
Notes to Editors
Dunelm is the UK's leading specialist homewares retailer, operating in the £11bn homewares market. The Group currently operates 127 stores, branded Dunelm Mill, of which 118 are out-of-town superstores and 9 are located on high streets, and an on-line store, to be found at www.dunelm-mill.com.
Dunelm's "Simply Value for Money" customer proposition offers industry-leading choice of quality products at keen prices, with high levels of availability and supported by friendly service. Core ranges include many exclusive designs and premium brands such as Dorma, and are supported by a frequently changing series of special buys. The superstore format provides an average of 30,000 sq ft of selling space with over 20,000 products across a broad spectrum of categories, extending from the Group's home textiles heritage (bedding, curtains, cushions, quilts and pillows) to a complete homewares offer including kitchenware and dining, lighting, wall art, furniture and rugs. Dunelm is one of the few national retailers to offer an authoritative selection of curtain fabrics on the roll, and owns a specialist UK facility dedicated to producing made to measure curtains.
Dunelm was founded 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 before expanding into broader homewares categories following the opening of the first Dunelm superstore in 1991.
Dunelm has been listed on the London Stock Exchange since October 2006 (DNLM.L) and has a current market capitalisation of approximately £1.2bn.
Chairman's statement
I am delighted once again to introduce Dunelm's annual report by announcing a year of strong business performance. The management team continues to focus on our well-established strategy for developing the business, as well as keeping tight control on day to day operations. As a result, Dunelm has posted good revenue growth in the latest financial year, accompanied by further improvements in profitability and cash generation. More details on this performance are given by Nick Wharton, our Chief Executive, in his report.
As a result of the continuing strong business performance, the Board is able to recommend an increase in the final dividend to 10.0p per share (2011 - 8.0p), bringing the total dividend for the year to 14.0p (2011 - 11.5p). In addition, the Board proposes returning £65.8m of excess capital to shareholders. The mechanism for this is explained by David Stead, our Finance Director, in his report and full details will be provided in a separate circular to shareholders.
The Board has evolved over the last financial year and now includes a new Non-Executive Director, Matt Davies. Matt was appointed in February and is already proving to be an excellent addition to your Board. His recent experience leading a similar sized, and equally young and dynamic multiple retailer has added to our perspectives on a number of operational and strategic issues including customer behaviour, supply chain development and colleague engagement.
Our Executive team is working very well, following an exemplary transition of the Chief Executive role from Will Adderley to Nick Wharton. Nick took on the role of Chief Executive in February 2011, and we are benefiting greatly from his extensive executive experience, and the skill he is deploying in further developing our business. He is succeeding in building on the hungry and dynamic culture in key parts of our business, adding the important professionalism, precision and repeatability needed as we grow into a larger organisation.
As one of the leading retailers of his generation, Will Adderley was an outstanding Chief Executive of Dunelm for 15 years. His desire to move to his current role as Executive Deputy Chairman reflects his determination to continue to drive Dunelm's success by dedicating himself to activities - such as product development and sourcing - which are the hallmark of Dunelm's appeal to shoppers and where he has special expertise. He is clearly relishing his new role and adding enormous value to the business.
Looking ahead, we have a range of exciting development initiatives and continue to see significant potential to expand our store portfolio further within the UK. We remain confident in our 'Simply Value for Money' offer and look forward to further profitable growth.
Geoff Cooper
Chairman
Chief Executive's review
Overview
Against the background of the UK economy which has continued to put pressure on both consumer confidence and expenditure, during the last financial year the business has made further strong strategic progress and delivered a robust trading performance.
We remain focused on close operational management, while investing confidently in the future growth of the business. This investment, consistent with our four strategic priorities, centres on the further strengthening of our market leading customer proposition, while at the same time increasing scale through store and multi-channel expansion.
Our total revenue increased by 12.1% with like-for-like sales (calculated by comparing stores which have traded throughout the last two financial years) growing by 3.1%, considerably above the home textiles market as measured by the British Retail Consortium.
The rest of our revenue growth was delivered through the store development programme which over the course of the year contributed 14 new superstores, including two relocations.
Our strong trading performance combined with disciplined cost and inventory management has delivered a 30 basis points expansion in operating margin year on year. Furthermore, despite continued investment in new stores and the associated infrastructure to support further growth, the business remains highly cash generative allowing the opportunity to return capital of £65.8m to our shareholders in addition to offering a 22% increase in the annual dividend.
Strategy development
We continue to invest in and develop the business with a strong focus on our four strategic priorities.
Priority 1 - develop our specialist proposition
The UK homewares market is estimated by Verdict Research to be worth approximately £11bn. Within this fragmented market, where approximately 30% of sales remain with small independent operators, Dunelm's market leading proposition is built on our core differentiator of widest choice, offering the broadest price spectrum of quality products, supported by strong availability and friendly, knowledgeable service.
Our range and choice advantage has been particularly important over the last financial year with the Dunelm "Simply Value for Money" proposition appealing to a wide cross-section of customers. Our broad price architecture is mirrored across each of our core categories: from our entry price position which competes with products offered by grocers and discount multiples but at higher quality, through a number of mid-market options, up to our highest quality products associated with department stores and higher-end independent retailers but at keener prices.
This positioning of higher quality at comparable entry-level prices, and comparable quality at keener prices for mid-market and premium products, has helped to maintain existing footfall and attract new customers during the past financial year.
The majority of products in our stores carry Dunelm branding. However, proprietary brands such as Fogarty and Brabantia are an important complement to the offer and, reflecting our increased scale within the market, we are frequently able to stock branded products on an exclusive basis. Our owned brand Dorma re-enforces our quality credentials, particularly in bedding and bathroom categories, and we are very pleased with the progress made with our in-house developed Spectrum brand. Spectrum is used as a common brand for our contemporary bright coloured ranges across a number of categories, encouraging customers to broaden their basket as they adopt a specific colour look in a given room. Spectrum is now present over 300 products across the offer.
We continue constantly to re-invigorate our offer to ensure it remains contemporary, fresh and relevant. Through two seasonal refreshes we change approximately 25% of our ranges each year; Special Buys and Miss it Miss Out ('MIMO') promotions emphasise Dunelm's value credentials and provide a seasonal feel to the store.
Increasing awareness of the Dunelm brand remains a clear priority. Having refreshed our advertising during the year to provide a clearer and more consistent image we have continued to move away from local media and increase our presence in the national press. We have also significantly increased our digital marketing and social media activity, the latter being centred on Facebook, Twitter and Pinterest. Much of this increase in marketing activity has been funded by buying efficiencies.
Awareness and recognition of the quality of our customer offer is improving both with customers and specialist media. Specifically during the year we were delighted to be voted "Homewares Retailer of the Year" by the readers of House Beautiful magazine.
Autumn 2012 will see the next phase of our brand awareness activity with the trial of a full catalogue. We believe the 200 page A4 catalogue will clearly illustrate our range breadth, quality and value. The distribution of the planned 700,000 print run will be biased towards the introduction of the Dunelm proposition to new customers.
Re-assigning colleague time in store from non-customer facing tasks to providing customers with knowledgeable, friendly service provides another important point of further differentiation for Dunelm. Our activities in this regard, both in terms of task elimination and re-investment of the freed-up time, are tangible, measurable and targeted. For example, during the year we have extended system based automatic replenishment to over 60% of our products, replacing manual store ordering. The proportion of inventory checked for quantity and quality in the distribution centre has also increased, replacing time consuming in-store processes. We will expand both of these initiatives further during the coming year.
Specific departmental rotas have been created to ensure that high service areas of the store - such as our made to measure curtain service - are always staffed during periods of higher footfall. Product awareness and knowledge amongst our colleagues remains a priority and we continue to invest in training to this end.
Our Dunelm At Home service, through which customers can select bespoke, made to measure curtains and other window treatments via a free home consultation, is now available from an expanded trial of 10 stores and is achieving good levels of customer satisfaction.
Priority 2 - develop the store portfolio
Dunelm trades from two store formats. The bulk of the portfolio is represented by out-of-town superstores, with our average new store footprint now targeted towards 30,000 square feet of retail space. This enables us to offer over 20,000 homewares products with the depth of range and availability that customers expect from a specialist retailer. Our trial of smaller format stores continues in order for us to learn more about customer reaction and profitability at this scale. We also trade profitably from nine smaller high street locations where there are currently no suitable out-of- town alternatives.
In the last financial year we opened over 400,000 square feet of selling space through fourteen new superstores (two being relocations) taking our superstore chain to 115 stores at the year end, providing 3.4 million square feet of selling space in total. Maintaining this strong momentum, since the end of the year we have opened a further four stores with openings in Cambridge, Oxford, and Barnstaple, and one relocation to deliver a full customer offer in Telford. A further 9 new stores are contractually committed.
During the financial year we have updated our catchment analysis to reflect changes in demography and our latest understanding of catchment size from our 34 new store openings over the past three years. This modeling has confirmed that, despite the anticipated growth of our multi-channel sales, our mature UK superstore portfolio will consist of approximately 200 stores, at the top end of our previously indicated range.
We have until now targeted all investment in new store openings to achieve discounted cash flow payback of 36 months. We have consistently beaten this target and indeed the average payback for stores opened in the last three financial years is approximately 31 months. Nevertheless, as our portfolio becomes more mature we recognise that some locations will offer lower returns and going forward, we anticipate that a proportion of new stores will be targeted to achieve 48 months payback. This payback profile will allow for some cannibalisation of revenues from existing stores, whilst still delivering a very attractive return on invested capital.
Our refit programme covered 15 superstores this year of which 4 were 'major' refits. The programme is designed to improve the shopping environment in our existing stores and create a full and consistent customer experience under the Dunelm brand. These refits increase sales by introducing new product ranges such as Dorma sub-shops (now present in 73 stores) and extended kitchen concepts (93 stores), and improves the overall shopping experience, for example through better ranging, space allocation or department layouts.
In addition, our Pausa coffee shops are now in 74 stores and provide an additional reason for customers to visit and increasing their engagement and dwell time.
As a result of this continued investment our portfolio is highly contemporary with 50% of the superstore chain either new or having benefitted from a major refit over the past three years.
Priority 3 - grow multi-channel
UK consumer behaviour continues to evolve and greater on-line confidence, enthusiasm and capability have created a shift in shopping preferences. Consistent with this, Dunelm customers are embracing the convenience and value of multi-channel shopping with two thirds of total shopping visits now involving some element of on-line activity (browsing, research or purchasing) through our websites, www.dunelm-mill.com and www.dorma.co.uk.
In the year we successfully launched a full Reserve and Collect ("R&C") model that links our store stock files to the web in real time, enabling our customers to check availability and order from over 16,000 products. R&C customers, who represent over a third of multi-channel revenues, pay for their reserved products on collection in store. This model lends itself particularly well to our product range which customers will often wish to touch and feel before committing to a purchase, and at the same time creates a clear opportunity for add-on or incremental sales during their visit.
Multi-channel functionality was further enhanced through the launch, in January, of our dedicated mobile friendly site. This development gives the increasing volume of new and existing customers who use a range of android devices better access to our specialist multi-channel offer.
We have continued to invest significantly in both website development and in digital marketing, where returns remain highly attractive. Through these investments the number of visitors to our websites has increased by over 50% during the year whilst enhancements to our offer and customer experience on the web have also led to improvements in conversion.
As a consequence of all the above our multi-channel revenues have continued to grow strongly, representing 2.5% of revenues over the full financial year and approximately 3% in the final quarter.
Despite the progress we have made, there are a number of areas where our multi-channel proposition could be further enhanced and this provides a clear opportunity for further revenue growth. Key within this are improvements to our delivery proposition to provide speed and choice in line with market norms. Achieving this will require technical enhancements to our site and the expansion of our logistics operations. These significant developments are targeted during the current financial year.
Following a successful trial of extended inventory within furniture we are targeting further web exclusive ranges. We are also confident that our e:marketing and promotional capability will be significantly enhanced from a suite of developments scheduled to be in place before our peak trading period.
Priority 4 - develop and exploit our infrastructure
The Group's continued success is reliant upon a resilient, functionally rich and dynamic business infrastructure across IT systems, distribution facilities and people resources. Over the course of the year investment in our IT systems has enabled us to improve stock control, make in-store processes more efficient, and deliver an enhanced customer offer through Reserve and Collect.
The year saw the completion and occupation of our new head office in Syston, Leicestershire, which was opened in September 2011. We have retained our former head office which now operates as our central fabric warehouse, a photo studio, a mock-shop and acts as a key business recovery back-up facility.
The capacity and capability of the Group has been further strengthened by recruitment of experienced retail professionals into the key new roles of Chief Operating Officer and Director of Multi-Channel. These positions allow a greater focus and specialism within an expanded Operating Board.
Finally, we have begun a programme of investment to upgrade our customer facing transactional till systems and our central ERP system.
Summary & Outlook
Dunelm has delivered robust trading results in a demanding retail environment, with our strong focus on retailing excellence leading to increased market share on a like for like basis. We have also made good progress with our strategic development, scaling our business through new stores, multi-channel and strengthened infrastructure, while continuing to improve our specialist customer proposition. I would like to thank all my colleagues for their hard work and commitment in achieving this.
Our financial position remains extremely strong which, together with the Board's confidence in Dunelm's future growth prospects, enables us to propose an increase in the dividend ahead of earnings, together with a return of excess capital equal to 32.5p per share.
Looking ahead, we remain cautious of the UK consumer environment and its impact on our trading in the near term. However, with a strong new store pipeline, good momentum in multi-channel and a "Simply Value for Money" proposition that continues to resonate with a wide range of customers, we remain confident in the future growth prospects for the business.
Nick Wharton
Chief Executive
Finance Director's review
Operating result
Group revenue for the 52 weeks to 30 June 2012 was £603.7m (2011: £538.5m), an increase of 12.1%.
This increase was achieved through growth in like-for-like sales of 3.1% and contribution from net new space amounting to 9.0%. The like-for-like sales performance strengthened through the year with H2 delivering an increase of 5.2% compared with growth of 1.1% in H1.
Trading in the final quarter was exceptionally strong boosted by the unusually wet weather driving strong footfall. As a result like-for-like sales in the final quarter grew 10.4% (2011: +1.9%). We estimate that the benefit to total revenues from the weather conditions was approximately £8m in the quarter.
Gross margin increased by 30 basis points to 48.3% (2011: 48.0%) primarily reflecting benefits from direct sourcing initiatives. We have moved a small number of ranges to direct sourcing where significant margin benefit exists; at the same time we have used our deepened factory relationships to ensure that our UK based full service vendors continue to provide good value.
Operating costs grew by 12.3% compared with last year, with the increase primarily due to expansion of and investment in the store portfolio and supporting central infrastructure. Operating costs in like-for-like stores increased by just 2.1%, including increased investment in multi-channel operations and refits. Non-store costs grew in line with the overall growth of the business, including increased marketing investment and strengthened central teams.
Operating profit for the financial year was £95.2m (2010: £83.3m), an increase of £11.9m (14.3%). Adjusting for the benefit of unusual weather conditions, we believe that underlying operating profit would have been approximately £92.7m.
EBITDA
Earnings before interest, tax, depreciation and amortisation were £113.9m (2011: £97.4m). This has been calculated as operating profit (£95.2m) plus depreciation and amortisation (£18.7m) and represents an increase of 16.9% on the previous year. The EBITDA margin achieved was 18.9% of sales (2011: 18.1%).
Financial items and PBT
The Group generated £1.0m net financial income for the year (2011: £0.4m). Financial items include interest earned on surplus cash deposits of £0.8m (2011: £0.5m) and foreign exchange gains arising from the translation of dollar denominated assets and liabilities at the end of the period, worth £0.2m (2011: loss of £0.1m). As at 30 June 2012 the Group held $1.4m in US dollar cash deposits and additional forward contracts for $22.3m representing approximately 35% of the anticipated US dollar spend over the next 12 months.
After accounting for interest and foreign exchange impacts, profit before tax for the year amounted to £96.2m (2011: £83.6m), an increase of 15.1%.
Tax, PAT and EPS
The tax charge for the year was 26.0% of profit before tax compared with 28.5% in the prior year. This year on year improvement reflects the reduction in the headline rate of corporation tax, as well as an increase in the level of assets qualifying for capital allowances following a review completed in the year.
Profit after tax was £71.2m (2011: 59.8m), an increase of 19.1%.
Basic earnings per share for the year ended 30 June 2012 was 35.3p (2011: 29.7p), an increase of 18.9%. Fully diluted EPS increased by 19.8% to 35.1p (2011: 29.3p).
Capital expenditure
Gross capital expenditure in the financial year was £38.6m compared with £37.2m last year. The most significant investments were made in order to support continued growth and development of the superstore portfolio with the addition of 14 new stores (which included 2 relocations and 2 freeholds) and major refits in 4 further stores. Investment was also made to support our multichannel offer and our infrastructure was bolstered by the completion of our new Head Office in Leicestershire, fully operational since September 2011.
Working capital
Investment in working capital has increased by just £0.3m over the financial year as a result of additional stock to support new store openings partially offset by an increase in deferred rent in the same sites and a growth in VAT liabilities as a consequence of increased trading.
Cash position and dividend
The Group generated £91.9m (2011: £74.0m) net cash from operating activities in the last financial year, an increase of 24.2%. Net cash resources at the end of the year were £65.2m (2011: £35.1m), with average cleared funds across the year of £57.6m (2011: £35.9m)
An interim dividend of 4.0p was paid in April 2012 (2011: 3.5p). It is proposed to pay a final dividend of 10.0p per share (2011: 8.0p). The total dividend of 14.0p represents a 21.7% increase over last year reflecting the Group's strong financial performance and leaves dividend cover of 2.5x, within our target range of 2.5x-3.0x earnings. This dividend will be paid on 21 December 2012 to shareholders on the register at the close of business on 30 November 2012.
The Board reviews the Group's funding position on a regular basis and has concluded that access to external funding is not required in the short term. The Group maintains uncommitted lines of funding with partner banks whilst trading with a positive net cash position.
Return of capital
The Group's policy is to maintain cash resources such that it is able to take advantage of investment opportunities as and when they arise, for example freehold property acquisitions. Periodically the Board will seek to return to shareholders any cash accumulated in excess of likely requirements.
Taking into account the Group's financial strength; its known and anticipated investment plans; the level of cash available as at the date of this report; and allowing for potential further weakness in the UK consumer environment the Board is proposing that surplus capital amounting to £65.8m (32.5 p per share) be returned to shareholders in November 2012. It is proposed that this will be accomplished via a B/C share scheme which allows shareholders the option of receiving the return as capital or income. Full details will be announced in due course and provided in a circular to shareholders accompanying the annual report.
Financial Risk and Treasury Management
The Board has established an overall treasury policy and approves authority levels within which the Group may operate. This policy ensures that risk is managed within the agreed framework.
Key performance indicators
In addition to the traditional financial measures of sales and profits, the Directors review business performance each month using a range of other KPIs. These include:
Sales growth
2012 | +12.1% |
2011 | +9.3% |
2010 | +18.2% |
Like-for-like sales growth
2012 | +3.1% |
2011 | -0.6% |
2010 | +8.0% |
Gross margin change (basis points)
2012 | +30bps |
2011 | +120bps |
2010 | +190bps |
New store openings
2012 | 14 |
2011 | 10 |
2010 | 10 |
Major refits
2012 | 4 |
2011 | 8 |
2010 | 9 |
Operating margin
2012 | 15.8% |
2011 | 15.5% |
2010 | 15.3% |
EBITDA £m
2012 | £113.9m |
2011 | £97.4m |
2010 | £86.9m |
Earnings per share (diluted)
2012 | 35.1p |
2011 | 29.3p |
2010 | 26.9p |
Dividend (per share)
2012 | 14.0p |
2011 | 11.5p |
2010 | 8.0p |
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
Nick Wharton David Stead
Chief Executive Finance Director
Consolidated income statement
For the 52 weeks ended 30 June 2012
Note | 2012£'000 | 2011£'000 | |
Revenue | 1 | 603,729 | 538,474 |
Cost of sales | (311,992) | (280,125) | |
Gross profit | 291,737 | 258,349 | |
Operating costs | 3 | (196,537) | (175,051) |
Operating profit | 2 | 95,200 | 83,298 |
Financial income | 5 | 1,048 | 523 |
Financial expenses | 5 | - | (172) |
Profit before taxation | 96,248 | 83,649 | |
Taxation | 6 | (25,026) | (23,814) |
Profit for the period attributable to equity shareholders of the parent | 71,222 | 59,835 | |
Earnings per ordinary share - basic | 8 | 35.3p | 29.7p |
Earnings per ordinary share - diluted | 8 | 35.1p | 29.3p |
Dividend proposed per ordinary share | 7 | 10.0p | 8.0p |
Dividend paid per ordinary share | 7 | 4.0p | 3.5p |
All activities relate to continuing operations.
Consolidated statement of comprehensive income
For the 52 weeks ended 30 June 2012
2012£'000 | 2011£'000 | |
Profit for the period | 71,222 | 59,835 |
Effective portion of movement in fair value of cash flow hedges | 343 | 147 |
Deferred tax on hedging movements | (90) | (50) |
Total comprehensive income for the period | 71,475 | 59,932 |
Consolidated statement of financial position
As at 30 June 2012
30 June2012 £'000 | 2 July 2011£'000 | ||
Non-current assets | |||
Intangible assets | 3,238 | 4,692 | |
Property, plant and equipment | 146,313 | 125,850 | |
Total non-current assets | 149,551 | 130,542 | |
Current assets | |||
Inventories | 86,221 | 76,455 | |
Trade and other receivables | 17,054 | 14,566 | |
Cash and cash equivalents | 65,190 | 35,139 | |
Total current assets | 168,465 | 126,160 | |
Total assets | 318,016 | 256,702 | |
Current liabilities | |||
Trade and other payables | (97,442) | (85,805) | |
Liability for current tax | (13,195) | (12,636) | |
Financial instruments | (56) | (398) | |
Total current liabilities | (110,693) | (98,839) | |
Non-current liabilities | |||
Deferred tax liability | (297) | (645) | |
Total non-current liabilities | (297) | (645) | |
Total liabilities | (110,990) | (99,484) | |
Net assets | 207,026 | 157,218 | |
Equity | |||
Issued capital | 2,023 | 2,015 | |
Share premium | 1,025 | 681 | |
Capital redemption reserve | 43,155 | 43,155 | |
Hedging reserve | (42) | (295) | |
Retained earnings | 160,865 | 111,662 | |
Total equity attributable to equity holders of the Parent | 207,026 | 157,218 |
Consolidated statement of cash flows
For the 52 weeks ended 30 June 2012
2012£'000 | 2011 £'000 | ||
Profit before taxation | 96,248 | 83,649 | |
Adjustment for net financing costs | (1,048) | (351) | |
Operating profit | 95,200 | 83,298 | |
Depreciation and amortisation | 18,678 | 14,079 | |
(Profit)/loss on disposal of property, plant and equipment | (15) | 703 | |
Operating cash flows before movements in working capital | 113,863 | 98,080 | |
(Increase) in inventories | (9,766) | (13,872) | |
(Increase) in receivables | (2,465) | (4,080) | |
Increase in payables | 11,955 | 13,848 | |
Net movement in working capital | (276) | (4,104) | |
Share-based payments expense | 1,803 | 1,199 | |
Foreign exchange gains/(losses) | 218 | (115) | |
115,608 | 95,060 | ||
Interest paid | - | (29) | |
Interest received | 756 | 507 | |
Tax paid | (24,473) | (21,513) | |
Net cash generated from operating activities | 91,891 | 74,025 | |
Cash flows from investing activities | |||
Proceeds on disposal of property, plant and equipment | 634 | - | |
Acquisition of property, plant and equipment | (37,030) | (36,124) | |
Acquisition of intangible assets | (1,594) | (1,085) | |
Net cash utilised in investing activities | (37,990) | (37,209) | |
Cash flows from financing activities | |||
Proceeds from issue of share capital | 346 | 101 | |
Dividends paid | (24,248) | (17,119) | |
Net cash flows utilised in financing activities | (23,902) | (17,018) | |
Net increase in cash and cash equivalents | 29,999 | 19,798 | |
Foreign exchange revaluations | 52 | (28) | |
Cash and cash equivalents at the beginning of the period | 35,139 | 15,369 | |
Cash and cash equivalents at the end of the period | 65,190 | 35,139 |
Consolidated statement of changes in equity
For the 52 weeks ended 30 June 2012
Issuedshare capital£'000 | Sharepremium £'000 | Capitalredemptionreserve£'000 | Hedgingreserve£'000 | Retainedearnings£'000 | Totalequity£'000 |
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As at 3 July 2010 | 2,010 | 580 | 43,155 | (392) | 67,335 | 112,688 |
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Profit for the financial year | - | - | - | - | 59,835 | 59,835 |
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Movement in fair value of cash flow hedges | - | - | - | 147 | - | 147 |
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Deferred tax on hedging movements | - | - | - | (50) | - | (50) |
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Total comprehensive income for the financial year | - | - | - | 97 | 59,835 | 59,932 |
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Issue of share capital | 5 | 101 | - | - | - | 106 |
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Treasury shares reissued in respect of share option schemes | - | - | - | - | (9) | (9) |
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Share-based payments | - | - | - | - | 1,199 | 1,199 |
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Deferred tax on share-based payments | - | - | - | - | (41) | (41) |
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Current corporation tax on share options exercised | - | - | - | - | 462 | 462 |
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Dividends | - | - | - | - | (17,119) | (17,119) |
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Total transactions with owners, recorded directly in equity | 5 | 101 | - | - | (15,508) | (15,402) |
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As at 2 July 2011 | 2,015 | 681 | 43,155 | (295) | 111,662 | 157,218 |
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Profit for the financial year | - | - | - | - | 71,222 | 71,222 |
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Movement in fair value of cash flow hedges | - | - | - | 343 | - | 343 |
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Deferred tax on hedging movements | - | - | - | (90) | - | (90) |
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Total comprehensive income for the financial year | - | - | - | 253 | 71,222 | 71,475 |
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Issue of share capital | 8 | 344 | - | - | (6) | 346 |
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Share-based payments | - | - | - | - | 1,803 | 1,803 |
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Deferred tax on share-based payments | - | - | - | - | (199) | (199) |
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Current corporation tax on share options exercised | - | - | - | - | 631 | 631 |
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Dividends | - | - | - | - | (24,248) | (24,248) |
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Total transactions with owners, recorded directly in equity | 8 | 344 | - | - | (22,019) | (21,667) | |||||||
As at 30 June 2012 | 2,023 | 1,025 | 43,155 | (42) | 160,865 | 207,026 |
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Notes to the annual financial statements
For the 52 weeks ended 30 June 2012
1 Segmental reporting
The Group has one reportable segment, retail of homewares.
The Chief Operating Decision Maker is Dunelm Group plc Board. Internal management reports are reviewed by them on a monthly basis. Performance of the segment is assessed based on a number of financial and non-financial KPI's as well as on profit before taxation.
Management believe that these measures are the most relevant in evaluating the performance of the segment and for making resource allocation decisions.
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
Operating profit is stated after charging the following items:
2012£'000 | 2011 £'000 | |
Inventories | ||
Cost of inventories included in cost of sales | 310,971 | 280,912 |
Movement on provisions for write down of inventories | 1,021 | (787) |
Amortisation of intangible assets | 2,445 | 1,909 |
Depreciation of owned property, plant and equipment | 16,233 | 12,170 |
Operating lease rentals | ||
Land and buildings | 28,287 | 25,493 |
Plant and machinery | 1,310 | 1,522 |
(Profit)/loss on disposal of property, plant and equipment and intangible assets | (15) | 703 |
The analysis of auditors' remuneration is as follows:
2012£'000 | 2011 £'000 | |
Fees payable to the Company's auditors for the audit of the Parent and consolidated annual accounts | 17 | 16 |
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 | 58 | 56 |
- tax compliance | 28 | 33 |
- other services | 46 | 10 |
Total audit fees amounted to £75,000, fees for non-audit services amounted to £74,000.
3 Operating costs
2012 £'000 | 2011 £'000 | |
Selling and Distribution | 162,097 | 147,392 |
Administrative | 34,455 | 26,956 |
(Profit)/loss on disposal of property, plant and equipment and intangible assets | (15) | 703 |
196,537 | 175,051 |
4 Employee numbers and costs
The average number of people employed by the Group (including Directors) was:
2012 Numberof heads | 2012 Full time equivalents | 2011 Numberof heads | 2011 Full time equivalents | |
Selling | 6,380 | 3,823 | 6,135 | 3,777 |
Distribution | 290 | 283 | 261 | 252 |
Administration | 241 | 235 | 228 | 223 |
6,911 | 4,341 | 6,624 | 4,252 |
The aggregate remuneration of all employees including Directors comprises:
2012£'000 | 2011£'000 | |
Wages and salaries including bonuses and termination benefits | 77,248 | 69,740 |
Social security costs | 5,370 | 4,715 |
Share-based payment expense | 1,803 | 1,199 |
Defined contribution pension costs | 426 | 282 |
84,847 | 75,936 |
5 Financial income and expense
2012£'000 | 2011£'000 | |
Finance income | ||
Interest on bank deposits | 778 | 523 |
Foreign exchange gains | 270 | - |
1,048 | 523 | |
Finance expenses | ||
Interest on bank borrowings and overdraft | - | (29) |
Foreign exchange losses | - | (143) |
- | (172) | |
Net finance income | 1,048 | 351 |
6 Taxation
2012£'000 | 2011 £'000 | |
Current taxation | ||
UK corporation tax charge for the period | 26,342 | 24,610 |
Adjustments in respect of prior periods | (679) | (1,198) |
25,663 | 23,412 | |
Deferred taxation | ||
Origination of temporary differences | (768) | (442) |
Adjustment in respect of prior periods | 131 | 844 |
(637) | 402 | |
Total taxation expense in the income statement | 25,026 | 23,814 |
The tax charge is reconciled with the standard rate of UK corporation tax as follows:
2012£'000 | 2011 £'000 | |
Profit before taxation | 96,248 | 83,649 |
UK corporation tax at standard rate of 25.5% (2011: 27.5%) | 24,543 | 23,002 |
Factors affecting the charge in the period: | ||
Non-deductible expenses | 78 | 179 |
Ineligible depreciation | 1,206 | 1,035 |
Lease incentive deductions | (109) | (120) |
Adjustments to tax charge in respect of prior years | (548) | (354) |
Effect of standard rate of corporation tax change | (63) | (104) |
Loss on disposal of ineligible assets | (81) | 176 |
25,026 | 23,814 |
The taxation charge for the period as a percentage of profit before tax is 26.0% (2011: 28.5%).
7 Dividends
All dividends relate to the 1p Ordinary Shares.
2012£'000 | 2011£'000 | ||
Final for the period ended 3 July 2010 | - paid 5.0p | - | (10,067) |
Interim for the period ended 2 July 2011 | - paid 3.5p | - | (7,052) |
Final for the period ended 2 July 2011 | - paid 8.0p | (16,158) | - |
Interim for the period ended 30 June 2012 | - paid 4.0p | (8,090) | - |
(24,248) | (17,119) |
The Directors are proposing a final dividend of 10.0p per Ordinary Share for the period ended 30 June 2012 which equates to £20.2m. The dividend will be paid on 21 December 2012 to shareholders on the register at the close of business on 30 November 2012.
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 ended30 June 2012 '000 | 52 weeks ended 2 July 2011 '000 | |
Weighted average number of shares in issue during the period | 201,968 | 201,394 |
Impact of share options | 1,008 | 2,506 |
Number of shares for diluted earnings per share | 202,976 | 203,900 |
9 Basis of preparation
The annual report and financial statements for the year ended 30 June 2012 were approved by the Board of Directors on 13 September 2012 along with this preliminary announcement, but have not yet been delivered to the Registrar of Companies.
The financial information contained in this preliminary announcement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006.
The auditor's report on the statutory accounts for the year ended 30 June 2012 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.
The statutory accounts of Dunelm Group plc for the year ended 2 July 2011 have been delivered to the Registrar of Companies. The auditor's report on the statutory accounts for the year ended 2 July 2011 was unqualified and did not contain a statement under section 498 of the Companies Act 2006.