Last checked at 19 Jan 2010 07:00
HALF-YEARLY REPORT
Games Workshop Group PLC ("Games Workshop" or the "Group") announces its half-yearly results for the six months to 29 November 2009.
Highlights
| Revenue at £62.5m (2008: £61.2m) | |
| Revenue at constant currency* at £58.5m (2008: £61.2m) | |
| Gross margin at 74.4% (2008: 71.4%) | |
| Operating profit pre-royalties receivable at £6.9m (2008: £3.2m) | |
| Operating profit at £8.1m (2008: £3.7m) | |
| Pre-tax profit at £7.9m (2008: £3.0m) | |
| Earnings per share of 21.5p (2008: 4.8p) | |
| Net funds of £4.3m (2008: net borrowings £11.0m) |
Mark Wells, Chief Executive of Games Workshop, said:
"Although sales have declined in the first half of the year in constant currency terms, profits and cash flow have increased significantly, delivering a positive cash balance of £4.3 million, up £15.3 million over last year. With improved operating margins we continue to open Hobby centres, confident that we can grow Games Workshop profitably in all existing territories."
| For further information, please contact: | ||
| Games Workshop Group PLC | Today only: | 01653 618016 |
| Mark Wells, Chief Executive | Thereafter: | 0115 900 4001 |
| Kevin Rountree, Chief Financial Officer | 0115 900 4001 | |
| Investor relations website | investor.games-workshop.com | |
| General website | www.games-workshop.com | |
| Rawlings Financial PR Limited | Tel: | 01653 618016 |
| Catriona Valentine | ||
*Constant currency is calculated by comparing results in the underlying currencies for 2008 and 2009, both converted at the average exchange rates for the six months ended 30 November 2008.
FIRST HALF HIGHLIGHTS
| Six months to 29 November 2009 | Restated** Six months to 30 November 2008 | |
| Revenue | £62.5m | £61.2m |
| Revenue at constant currency* | £58.5m | £61.2m |
| Operating profit pre-royalties receivable | £6.9m | £3.2m |
| Royalties receivable | £1.2m | £0.5m |
| Operating profit | £8.1m | £3.7m |
| Pre-tax profit | £7.9m | £3.0m |
| Basic earnings per share | 21.5p | 4.8p |
| Net funds/(borrowings) | £4.3m | (£11.0m) |
INTERIM MANAGEMENT REPORT
Results
Although sales have declined in the first half of the year in constant currency terms, profits and cash flow have increased significantly, delivering a positive cash balance of £4.3 million, up £15.3 million over last year. With improved operating margins we continue to open Hobby centres, confident that we can grow Games Workshop profitably in all existing territories.
While we found it hard to match last year's exceptionally strong summer sales activity, there have been some encouraging performances that give us confidence for the future. Of our sales territories Australia continues to deliver good growth and we will be implementing their sales and training programmes in other countries. The new Games Workshop web store has been operating successfully and has shown strong growth this year. Forge World also continues to grow well, emphasising the underlying strength of the Hobby. In the first half we have opened 29 Hobby centres most of which are in the new one man format. This format is designed to be profitable even at modest sales levels.
Work continues on increasing Games Workshop's end-to-end profitability. We have improved our gross margin through productivity gains in the factory and in better purchasing. Overheads have been kept under tight control and we continue our programme of addressing unprofitable stores, reducing staffing and relocating to lower rent locations when appropriate.
Cash management has also been improved with good progress being made on reducing both our retail and warehouse stock through automatic stock replenishment and range management. Our new trade terms and the good discipline exercised by our sales teams have ensured that our exposure to independent retailers is under firm control. Our shop fitting costs continue to fall, principally as a result of co-ordinated purchasing and the sharing of best practice through our property service centre.
As a result of all these initiatives, our net funds as at 29 November 2009 stood at £4.3 million, an improvement of £15.3 million on our net borrowings at November 2008. Our banking facilities were renewed in July 2009, as set out in the 2009 annual report (page 10). We have complied with the conditions of all banking covenants during the period.
Since November 2008, sterling has weakened by 8.4% against the US dollar and by 10.1% against the euro. We have shown below our sales progression in constant currency terms to permit a more meaningful comparison.
Prospects
We said at the last half year announcement that as a niche business we do not usually suffer, or benefit from, macro-economic factors. There is no doubt that the economic climate has been difficult in most of our territories, but in each of these we have Hobby centres delivering good growth. Our challenge is to ensure that all our Hobby centres perform to this standard which should be within our control.
The principal risks and uncertainties for the balance of the year remain as described in our 2009 annual report (page 7). These risks lie in the ability of our sales businesses to establish and maintain sales growth and in our product development and manufacturing operation to maintain gross margin. The Hobby is healthy and our challenge is to stay focused on what needs to be done to service it efficiently and cost effectively.
Games Workshop's core fundamentals remain strong. Our gross margins are improving, our costs are under control, our return on capital is increasing and our cash flow is good. The board remains confident in the future growth and profitability of the Group.
Statement of directors' responsibilities
The directors confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8.
The directors of Games Workshop Group PLC are listed in the annual report for the year to 31 May 2009. A list of the current directors is maintained on the investor relations website at investor.games-workshop.com.
By order of the board
M N Wells
Chief Executive
K D Rountree
Chief Financial Officer
19 January 2010
*Constant currency is calculated by comparing results in the underlying currencies for 2008 and 2009, both converted at the average exchange rates for the six months ended 30 November 2008.
**Prior periods have been restated to reflect the adoption of the amendment to IFRS 2 with effect from 1 June 2008 (see note 6).
| REVENUE BY SALES BUSINESS IN | ||
| CONSTANT CURRENCY | ||
| Continuing operations | Six months to 29 November 2009 £m | Six months to 30 November 2008 £m |
| Northern Europe | 18.9 | 19.0 |
| Continental Europe | 15.3 | 17.8 |
| North America | 13.6 | 13.9 |
| Australia | 4.4 | 4.2 |
| Emerging Markets and Japan | 1.8 | 1.9 |
| Other sales businesses | 4.5 | 4.4 |
CONSOLIDATED INCOME STATEMENT
| | | Six months to 29 November 2009 | Restated* Six months to 30 November 2008 | Restated* Year to 31 May 2009 |
| | Notes | £000 | £000 | £000 |
| | | | | |
| Continuing operations | | | | |
| Revenue | 2 | 62,539 | 61,225 | 125,706 |
| Cost of sales | | (16,014) | (17,532) | (35,919) |
| | | ---------- | ---------- | ---------- |
| Gross profit | | 46,525 | 43,693 | 89,787 |
| | | | | |
| Operating expenses | | (39,635) | (40,496) | (84,325) |
| Other operating income - royalties receivable | | 1,175 | 549 | 3,471 |
| | | ---------- | ---------- | ---------- |
| Operating profit | 2 | 8,065 | 3,746 | 8,933 |
| | | | | |
| Finance income | | 16 | 106 | 333 |
| Finance costs | | (185) | (848) | (1,808) |
| | | ---------- | ---------- | ---------- |
| Profit before taxation | 4 | 7,896 | 3,004 | 7,458 |
| Income tax expense | 5 | (1,189) | (1,524) | (2,107) |
| | | ---------- | ---------- | ---------- |
| Profit for the period from continuing operations | | 6,707 | 1,480 | 5,351 |
| | | | | |
| Discontinued operations | | | | |
| Profit for the period from discontinued operations | | - | - | 118 |
| | | ---------- | ---------- | ---------- |
| Profit attributable to equity shareholders | | 6,707 | 1,480 | 5,469 |
| | | ====== | ====== | ====== |
| | | | | |
| Basic earnings per ordinary share | 7 | 21.5p | 4.8p | 17.6p |
| Diluted earnings per ordinary share | 7 | 21.4p | 4.7p | 17.6p |
| Basic earnings per ordinary share – continuing operations | 7 | 21.5p | 4.8p | 17.2p |
| Diluted earnings per ordinary share – continuing operations | 7 | 21.4p | 4.7p | 17.2p |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| | | Six months to 29 November 2009 | Restated* Six months to 30 November 2008 | Restated* Year to 31 May 2009 |
| | | £000 | £000 | £000 |
| | | | | |
| Profit attributable to equity shareholders | | 6,707 | 1,480 | 5,469 |
| Other comprehensive income | | | | |
| Exchange differences on translation of foreign operations | | 498 | 2,161 | 2,605 |
| Cash flow hedges: | | | | |
| - fair value losses | | - | (246) | (112) |
| - transferred to the income statement | | 112 | 821 | 940 |
| Net investment hedge | | (208) | (276) | (621) |
| Tax on items recognised directly in equity | | 27 | (161) | (58) |
| | | ---------- | ---------- | ---------- |
| Total comprehensive income for the period | | 7,136 | 3,779 | 8,223 |
| | | ====== | ====== | ====== |
The following notes form an integral part of this condensed consolidated interim financial information.
*Prior periods have been restated to reflect the adoption of the amendment to IFRS 2 with effect from 1 June 2008 (see note 6).
CONSOLIDATED STATEMENT OF CHANGES IN TOTAL EQUITY
| Called up share capital | Share premium account | Other reserves | Retained earnings | Total equity | |
| £000 | £000 | £000 | £000 | £000 | |
| At 1 June 2009 | 1,556 | 7,822 | 1,837 | 26,776 | 37,991 |
| Profit for the six months to 29 November 2009 | - | - | - | 6,707 | 6,707 |
| Exchange differences on translation of foreign operations | - | - | 498 | - | 498 |
| Cash flow hedges: - transferred to the income statement (net of tax) |
- | - | - | 81 | 81 |
| Net investment hedge (net of tax) | - | - | (150) | - | (150) |
| ---------- | ---------- | ---------- | ---------- | ---------- | |
| Total comprehensive income for the period | - | - | 348 | 6,788 | 7,136 |
| Transactions with owners: | |||||
| Share-based payments | - | - | - | 68 | 68 |
| Shares issued under employee sharesave scheme | - | 4 | - | - | 4 |
| ---------- | ---------- | ---------- | ---------- | ---------- | |
| At 29 November 2009 | 1,556 | 7,826 | 2,185 | 33,632 | 45,199 |
| ====== | ====== | ====== | ====== | ====== |
| Called up share capital | Share premium account | Other reserves | Retained earnings* | Total equity | |
| £000 | £000 | £000 | £000 | £000 | |
| At 2 June 2008 | 1,556 | 7,822 | (321) | 20,469 | 29,526 |
| Profit for the six months to 30 November 2008 | - | - | - | 1,480 | 1,480 |
| Exchange differences on translation of foreign operations | - | - |
2,161 | - | 2,161 |
| Cash flow hedges: - fair value losses in the period (net of tax) - transferred to the income statement (net of tax) | - - | - - | - - | (177) 591 | (177) 591 |
| Net investment hedge (net of tax) | - | - | (276) | - | (276) |
| ---------- | ---------- | ---------- | ---------- | ---------- | |
| Total comprehensive income for the period | - | - | 1,885 | 1,894 | 3,779 |
| Transactions with owners: | |||||
| Share-based payments | - | - | - | 109 | 109 |
| ---------- | ---------- | ---------- | ---------- | ---------- | |
| At 30 November 2008 | 1,556 | 7,822 | 1,564 | 22,472 | 33,414 |
| ====== | ====== | ====== | ====== | ====== |
| Called up share capital | Share premium account | Other reserves | Retained earnings* | Total equity | |
| £000 | £000 | £000 | £000 | £000 | |
| At 2 June 2008 | 1,556 | 7,822 | (321) | 20,469 | 29,526 |
| Profit for the year to 31 May 2009 | - | - | - | 5,469 | 5,469 |
| Exchange differences on translation of foreign operations | - | - | 2,605 | - | 2,605 |
| Cash flow hedges: - fair value losses in the period (net of tax) - transferred to the income statement (net of tax) | - - | - - | - - | (81) 677 | (81) 677 |
| Net investment hedge (net of tax) | - | - | (447) | - | (447) |
| ---------- | ---------- | ---------- | ---------- | ---------- | |
| Total comprehensive income for the period | - | - | 2,158 | 6,065 | 8,223 |
| Transactions with owners: | |||||
| Share-based payments | - | - | - | 242 | 242 |
| ---------- | ---------- | ---------- | ---------- | ---------- | |
| At 31 May 2009 | 1,556 | 7,822 | 1,837 | 26,776 | 37,991 |
| ====== | ====== | ====== | ====== | ====== |
The following notes form an integral part of this condensed consolidated financial information.
*Prior periods have been restated to reflect the adoption of the amendment to IFRS 2 with effect from 1 June 2008 (see note 6).
CONSOLIDATED BALANCE SHEET
| As at 29 November 2009 | As at 30 November 2008 | As at 31 May 2009 | ||
| Notes | £000 | £000 | £000 | |
| Non-current assets | ||||
| Goodwill | 1,433 | 1,433 | 1,433 | |
| Other intangible assets | 11 | 5,391 | 6,163 | 5,811 |
| Property, plant and equipment | 12 | 24,243 | 26,318 | 25,380 |
| Trade and other receivables | 1,688 | 1,405 | 1,570 | |
| Deferred tax assets | 5,242 | 2,880 | 4,704 | |
| ---------- | ---------- | ---------- | ||
| 37,997 | 38,199 | 38,898 | ||
| ---------- | ---------- | ---------- | ||
| Current assets | ||||
| Inventories | 10,001 | 11,807 | 10,678 | |
| Trade and other receivables | 12,617 | 12,642 | 9,959 | |
| Current tax assets | 35 | 437 | 32 | |
| Financial assets - derivative financial instruments | 61 | 262 | 210 | |
| Cash and cash equivalents | 8,311 | 7,861 | 10,355 | |
| ---------- | ---------- | ---------- | ||
| 31,025 | 33,009 | 31,234 | ||
| ---------- | ---------- | ---------- | ||
| Total assets | 69,022 | 71,208 | 70,132 | |
| ---------- | ---------- | ---------- | ||
| Current liabilities | ||||
| Financial liabilities - borrowings | 10 | - | (1,830) | (2) |
| Financial liabilities - derivative financial instruments | - | (885) | (550) | |
| Trade and other payables | (13,566) | (14,799) | (14,092) | |
| Current tax liabilities | (2,909) | (441) | (2,233) | |
| Provisions | 13 | (1,034) | (615) | (1,046) |
| ---------- | ---------- | ---------- | ||
| (17,509) | (18,570) | (17,923) | ||
| ---------- | ---------- | ---------- | ||
| Net current assets | 13,516 | 14,439 | 13,311 | |
| ---------- | ---------- | ---------- | ||
| Non-current liabilities | ||||
| Financial liabilities - borrowings | 10 | (4,000) | (17,000) | (12,000) |
| Deferred tax liabilities | - | (310) | - | |
| Other non-current liabilities | (562) | (718) | (632) | |
| Provisions | 13 | (1,752) | (1,196) | (1,586) |
| ---------- | ---------- | ---------- | ||
| (6,314) | (19,224) | (14,218) | ||
| ---------- | ---------- | ---------- | ||
| Net assets | 45,199 | 33,414 | 37,991 | |
| ====== | ====== | ====== | ||
| Capital and reserves | ||||
| Called up share capital | 1,556 | 1,556 | 1,556 | |
| Share premium account | 7,826 | 7,822 | 7,822 | |
| Other reserves | 2,185 | 1,564 | 1,837 | |
| Retained earnings | 33,632 | 22,472 | 26,776 | |
| ---------- | ---------- | ---------- | ||
| Total shareholders' equity | 45,199 | 33,414 | 37,991 | |
| ====== | ====== | ====== |
The following notes form an integral part of this condensed consolidated interim financial information.
CONSOLIDATED CASH FLOW STATEMENT
| Six months to 29 November 2009 | Six months to 30 November 2008 | Year to 31 May 2009 | ||
| Notes | £000 | £000 | £000 | |
| Cash flows from operating activities | ||||
| Cash generated from operations | 8 | 10,864 | 3,833 | 18,902 |
| UK corporation tax paid | (386) | (27) | (191) | |
| Overseas tax paid | (652) | (395) | (592) | |
| ---------- | ---------- | ---------- | ||
| Net cash from operating activities | 9,826 | 3,411 | 18,119 | |
| ---------- | ---------- | ---------- | ||
| Cash flows from investing activities | ||||
| Purchases of property, plant and equipment | (2,653) | (3,164) | (6,291) | |
| Proceeds on disposal of property, plant and equipment | - | 9 | 62 | |
| Proceeds on disposal of asset held for sale | - | 500 | 500 | |
| Purchases of other intangible assets | (52) | (720) | (1,315) | |
| Expenditure on product development | (1,170) | (1,210) | (2,249) | |
| Interest received | 27 | 112 | 333 | |
| ---------- | ---------- | ---------- | ||
| Net cash from investing activities | (3,848) | (4,473) | (8,960) | |
| ---------- | ---------- | ---------- | ||
| Cash flows from financing activities | ||||
| Proceeds from issue of ordinary share capital | 4 | - | - | |
| Proceeds from borrowings | - | 2,000 | 2,000 | |
| Repayment of borrowings | (8,000) | - | (5,000) | |
| Repayment of principal under finance leases | (2) | (6) | (13) | |
| Interest paid | (152) | (437) | (1,258) | |
| ---------- | ---------- | ---------- | ||
| Net cash from financing activities | (8,150) | 1,557 | (4,271) | |
| ---------- | ---------- | ---------- | ||
| Effects of foreign exchange rates | 128 | 601 | 523 | |
| ---------- | ---------- | ---------- | ||
| Net (decrease)/increase in cash and cash equivalents | (2,044) | 1,096 | 5,411 | |
| ---------- | ---------- | ---------- | ||
| Opening cash and cash equivalents | 10,355 | 4,944 | 4,944 | |
| ---------- | ---------- | ---------- | ||
| Closing cash and cash equivalents | 9 | 8,311 | 6,040 | 10,355 |
| ====== | ====== | ====== |
The following notes form an integral part of this condensed consolidated interim financial information.
NOTES TO THE FINANCIAL INFORMATION
1. Basis of preparation
The Company is a limited liability company, incorporated and domiciled in the United Kingdom. The address of its registered office is Willow Road, Lenton, Nottingham, NG7 2WS.
The Company has its listing on the London Stock Exchange.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 May 2009 were approved by the board of directors on 27 July 2009 and have been delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under either section 498 (2) or section 498 (3) of the Companies Act 2006.
This condensed consolidated interim financial information has not been audited or reviewed pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information' and does not include all of the information required for full annual financial statements.
This condensed consolidated interim financial information for the six months ended 29 November 2009 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 May 2009 which have been prepared in accordance with IFRSs as adopted by the European Union.
This condensed consolidated interim financial information is available to shareholders and members of the public on the Company's website at investor.games-workshop.com.
Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 May 2009, as described in those financial statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 June 2009:
| - | IAS 1 (revised), 'Presentation of financial statements'. The revised standard requires 'non-owner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement. The Group has elected to present two statements: an income statement and a statement of comprehensive income. The condensed consolidated interim financial information has been prepared under the revised disclosure requirements. |
| - | IFRS 8, 'Operating segments'. This standard requires a 'management approach' under which segment information is reported on the same basis as is used for internal reporting purposes. This has resulted in segments information now being reported via business line rather than geographical split. |
| - | IFRS 2 (amendment), 'Share-based payment'. This amendment requires that all cancellations under the Group's sharesave scheme will require immediate recognition of the remaining future charges in relation to the associated options. The impact of this has been included within the condensed consolidated interim financial information and is explained in note 6. |
The following new standards, amendments to standards and interpretations are mandatory for the first time for the financial year beginning 1 June 2009, but do not have a significant impact on the Group:
| - | IFRIC 12, 'Service concession arrangements' |
| - | IFRIC 13, 'Customer loyalty programmes' |
| - | IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction' |
| - | IFRIC 15, 'Agreements for construction of real estate' |
| - | IFRIC 16, 'Hedges of a net investment in a foreign operation' |
| - | IFRS 3 (revised), 'Business combinations' |
| - | IFRS 7 (amendment), 'Financial instruments: disclosures' |
| - | IAS 1 (amendment), 'Presentation of financial statements' and IAS 32 (amendment), 'Financial instruments: presentation' - in respect of puttable instruments and instruments with obligations arising on liquidation |
| - | IAS 23 (revised), 'Borrowing costs' |
| - | IAS 27 (amendment), 'Consolidated and separate financial statements' |
| - | IAS 39 (amendment), 'Financial instruments: recognition and measurement' |
| - | Amendments to various IFRSs and IASs arising from the May 2008 annual improvements to IFRSs |
2. Segment information
The chief operating decision-maker has been identified as the executive directors. They review the Group's internal reporting in order to assess performance and allocate resources. Management has determined the segments based on these reports.
As Games Workshop is a vertically integrated business, management assess the performance of sales businesses and manufacturing and distribution businesses separately. At 29 November 2009, the Group is organised as follows:
| - | Sales businesses. These businesses sell product to external customers, through the Group's network of Hobby centres, independent retailers and direct via the global web store. The sales businesses have been aggregated into segments where they sell products of a similar nature, have similar production processes, similar customers, similar distribution methods and are affected by similar economic factors. The segments are as follows: | |
| - | Northern Europe. This sales business operates in the UK, Ireland and Northern Europe. | |
| - | North America. This combines the North America and Canada sales businesses. | |
| - | Continental Europe. This combines the France, Germany, Italy and Spain sales businesses. | |
| - | Australia. This is the Australian sales business. | |
| - | Emerging Markets and Japan. This combines the Emerging Markets and Japan sales businesses. | |
| - | Other. This includes the other operating segments reviewed by the chief operating decision-maker which are not individually significant. These are the Forge World business, the Black Library business and Warhammer World. | |
| - | Product development and manufacturing. This includes the design and manufacture of the products and incorporates production facilities in the UK, North America and China. | |
| - | Logistics and stock management. This represents the warehousing and distribution activities needed to supply product to the sales businesses and includes facilities in the UK, North America, China and Australia. | |
| - | Licensing. This is the net income receivable from third party licensees after deducting directly attributable costs. | |
| - | Service centre. The service centre is established in the UK to provide support services (IT, accounting, payroll, HR, production planning, supplier development, legal and property) to activities across the Group. | |
The chief operating decision-maker assesses the performance of each business based on operating profit. This has been reconciled to the Group's total profit before tax below.
Total assets are not reported to the chief operating decision-maker on a segment basis and therefore the segmental asset information has not been disclosed.
| Six months to 29 November 2009 | Six months to 30 November 2008 | Year to 31 May 2009 | |
| £000 | £000 | £000 | |
| External revenue | |||
| Sales businesses | |||
| Northern Europe | 19,124 | 18,958 | 38,263 |
| Continental Europe | 16,882 | 17,768 | 36,317 |
| North America | 14,840 | 13,900 | 29,904 |
| Australia | 5,159 | 4,260 | 9,286 |
| Emerging Markets and Japan | 1,857 | 1,910 | 3,481 |
| All other sales businesses | 4,677 | 4,429 | 8,455 |
| ------------- | ------------- | ------------- | |
| Total external revenue | 62,539 | 61,225 | 125,706 |
| ------------- | ------------- | ------------- | |
| Internal revenue | |||
| Sales businesses | |||
| All other sales businesses | 604 | 583 | 936 |
| Other segments | |||
| Product development and manufacturing | 27,744 | 25,636 | 48,786 |
| ------------- | ------------- | ------------- | |
| Total internal revenue | 28,348 | 26,219 | 49,722 |
| Intra-group sales eliminations | (28,348) | (26,219) | (49,722) |
| ------------- | ------------- | ------------- | |
| Total revenue | 62,539 | 61,225 | 125,706 |
| ======== | ======== | ======== |
| Total segment operating profit is as follows and is reconciled to total profit before taxation below: | |||
| Six months to 29 November 2009 | Six months to 30 November 2008 | Year to 31 May 2009 | |
| £000 | £000 | £000 | |
| Operating profit | |||
| Sales businesses | |||
| Northern Europe | 2,475 | 2,237 | 4,791 |
| Continental Europe | 487 | 1,027 | 415 |
| North America | 1,572 | 440 | 734 |
| Australia | 468 | 279 | 786 |
| Emerging Markets and Japan | 143 | 209 | 54 |
| All other sales businesses | 1,792 | 1,818 | 3,157 |
| Other segments | |||
| Product development and manufacturing | 9,295 | 7,715 | 14,659 |
| ------------- | ------------- | ------------- | |
| Total segment operating profit | 16,232 | 13,725 | 24,596 |
| Logistics and stock management | (3,152) | (3,641) | (7,323) |
| Licensing | 993 | 372 | 3,092 |
| Service centre costs | (3,070) | (2,813) | (5,783) |
| Web costs | (778) | (737) | (1,754) |
| Central costs | (2,092) | (3,051) | (3,653) |
| Share-based payments charge | (68) | (109) | (242) |
| ------------- | ------------- | ------------- | |
| Total group operating profit | 8,065 | 3,746 | 8,933 |
| Finance income | 16 | 106 | 333 |
| Finance costs | (185) | (848) | (1,808) |
| ------------- | ------------- | ------------- | |
| Profit before taxation | 7,896 | 3,004 | 7,458 |
| ======== | ======== | ======== | |
3. Dividends
No dividend was paid in the six months to 29 November 2009. In addition, no interim dividend is proposed for the year ending 30 May 2010 (year ended 31 May 2009: £nil).
4. Profit before taxation
The following costs have been incurred in the reported periods in respect of ongoing redundancies, impairments and loss-making Hobby centres:
| Six months to 29 November 2009 | Six months to 30 November 2008 | Year to 31 May 2009 | |
| £000 | £000 | £000 | |
| Redundancy costs and compensation for loss of office | 175 | 521 | 1,370 |
| Impairment of property, plant and equipment | 106 | - | 167 |
| Charge/(credit) to property provisions for closed or loss-making Hobby centres | 379 | (16) | 807 |
5. Tax
The taxation charge for the six months to 29 November 2009 is based on an estimate of the full year effective rate of 15% (2008: 15%, excluding the charge on abolition of industrial buildings allowances), reflecting a deferred tax credit in respect of a proportion of the US and Canadian losses previously unrecognised.
6. Share-based payments
The adoption of the amendment to IFRS 2 as described in note 1 has resulted in an additional charge of £81,000 in the income statement for the year ended 31 May 2009 and an additional charge of £53,000 for the six months to 30 November 2008. The prior period income statements have been restated accordingly. There is no impact on net assets at 1 June 2008, 30 November 2008 or 31 May 2009.
7. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity shareholders of the Company by the weighted average number of ordinary shares in issue throughout the relevant period.
| Six months to 29 November 2009 | Restated Six months to 30 November 2008 | Restated Year to 31 May 2009 | |
| Profit attributable to equity shareholders (£000): | |||
| Continuing operations | 6,707 | 1,480 | 5,351 |
| Discontinued operations | - | - | 118 |
| ---------- | ---------- | --------- | |
| Total | 6,707 | 1,480 | 5,469 |
| ---------- | ---------- | ---------- | |
| Weighted average number of ordinary shares in issue (thousands) | 31,130 | 31,129 | 31,129 |
| ------------- | ------------- | ------------- | |
| Basic earnings per share - continuing operations (pence per share) | 21.5 | 4.8 | 17.2 |
| Basic earnings per share - discontinued operations (pence per share) | - | - | 0.4 |
| ------------- | ------------- | ------------- | |
| Basic earnings per share (pence per share) | 21.5 | 4.8 | 17.6 |
| ======== | ======== | ======== |
Diluted earnings per share
The calculation of diluted earnings per share has been based on profit attributable to equity shareholders and the weighted average number of shares in issue throughout the period, adjusted for the dilution effect of share options outstanding at the period end.
| Six months to 29 November 2009 | Restated Six months to 30 November 2008 | Restated Year to 31 May 2009 | ||
| Profit attributable to equity shareholders (£000): | ||||
| Continuing operations | 6,707 | 1,480 | 5,351 | |
| Discontinued operations | - | - | 118 | |
| ---------- | ---------- | --------- | ||
| Total | 6,707 | 1,480 | 5,469 | |
| ---------- | ---------- | ---------- | ||
| Weighted average number of ordinary shares in issue (thousands) | 31,130 | 31,129 | 31,129 | |
| Adjustment for share options (thousands) | 165 | 32 | 17 | |
| ------------- | ------------- | ------------- | ||
| Weighted average number of ordinary shares for diluted earnings per share (thousands) | 31,295 | 31,161 | 31,146 | |
| ------------- | ------------- | ------------- | ||
| Diluted earnings per share - continuing operations (pence per share) | 21.4 | 4.7 | 17.2 | |
| Diluted earnings per share - discontinued operations (pence per share) | - | - | 0.4 | |
| ------------- | ------------- | ------------- | ||
| Diluted earnings per share (pence per share) | 21.4 | 4.7 | 17.6 | |
| ======== | ======== | ======== | ||
8. Reconciliation of profit to net cash from operating activities
| Six months to 29 November 2009 | Restated Six months to 30 November 2008 | Restated Year to 31 May 2009 | |
| £000 | £000 | £000 | |
| Operating profit - continuing operations | 8,065 | 3,746 | 8,933 |
| Operating profit - discontinued operations | - | - | 129 |
| Depreciation of property, plant and equipment | 3,567 | 3,264 | 7,055 |
| Net impairment charge on property, plant and equipment | 106 | - | 167 |
| Loss on disposal of property, plant and equipment | 11 | - | - |
| Loss on disposal of intangible assets | 26 | - | 39 |
| Profit on disposal of assets held for sale | - | (36) | (36) |
| Amortisation of capitalised development costs | 1,273 | 1,291 | 2,269 |
| Amortisation of other intangibles | 363 | 592 | 1,281 |
| Net fair value gains on derivative financial instruments | (289) | (171) | (226) |
| Share-based payments | 68 | 109 | 242 |
| Changes in working capital: | |||
| -Decrease/(increase) in inventories | 640 | (550) | 386 |
| -(Increase)/decrease in trade and other receivables | (2,548) | (2,392) | 393 |
| -Decrease in trade and other payables | (497) | (1,270) | (1,713) |
| -Increase/(decrease) in provisions | 79 | (750) | (17) |
| ---------- | ---------- | ---------- | |
| Net cash from operating activities | 10,864 | 3,833 | 18,902 |
| ====== | ====== | ====== |
9. Cash and cash equivalents
Cash, cash equivalents and bank overdrafts include the following for the purposes of the cash flow statement:
| 29 November 2009 | 30 November 2008 | 31 May 2009 | |
| £000 | £000 | £000 | |
| Cash and cash equivalents | 8,311 | 7,861 | 10,355 |
| Bank overdrafts | - | (1,821) | - |
| ---------- | ---------- | ---------- | |
| 8,311 | 6,040 | 10,355 | |
| ====== | ====== | ====== |
10. Financial liabilities - borrowings
| 29 November 2009 | 30 November 2008 | 31 May 2009 | |
| £000 | £000 | £000 | |
| Current | |||
| Bank overdrafts | - | 1,821 | - |
| Obligations under finance leases | - | 9 | 2 |
| ---------- | ---------- | ---------- | |
| - | 1,830 | 2 | |
| ---------- | ---------- | ---------- | |
| Non-current | |||
| Bank loans | 4,000 | 17,000 | 12,000 |
| ---------- | ---------- | ---------- | |
| 4,000 | 17,000 | 12,000 | |
| ---------- | ---------- | ---------- | |
| Total borrowings | 4,000 | 18,830 | 12,002 |
| ====== | ====== | ====== |
At 30 November 2008, the bank overdrafts of the Group of £1,821,000 were denominated in euros and offset euro cash deposits outside of the UK under a pan European pooling agreement. The use of this pooling arrangement was discontinued during the year ended 31 May 2009.
Bank loans represent a medium-term revolving credit facility which can be drawn in both sterling and euros. This facility is secured on UK assets.
11. Other intangible assets
| 29 November 2009 | 30 November 2008 | 31 May 2009 | |
| £000 | £000 | £000 | |
| Net book value at beginning of period | 5,811 | 6,059 | 6,059 |
| Additions | 1,222 | 1,986 | 3,278 |
| Exchange differences | 20 | 1 | 29 |
| Disposals | (26) | - | (39) |
| Amortisation charge | (1,636) | (1,883) | (3,550) |
| Reclassifications | - | - | 34 |
| ---------- | ---------- | ---------- | |
| Net book value at end of period | 5,391 | 6,163 | 5,811 |
| ====== | ====== | ====== |
12. Property, plant and equipment
| 29 November 2009 | 30 November 2008 | 31 May 2009 | |
| £000 | £000 | £000 | |
| Net book value at beginning of period | 25,380 | 26,422 | 26,422 |
| Additions | 2,483 | 2,615 | 5,651 |
| Exchange differences | 64 | 553 | 625 |
| Disposals | (11) | (8) | (62) |
| Charge for the period | (3,567) | (3,264) | (7,055) |
| Impairment | (106) | - | (167) |
| Reclassifications | - | - | (34) |
| ---------- | ---------- | ---------- | |
| Net book value at end of period | 24,243 | 26,318 | 25,380 |
| ====== | ====== | ====== |
13. Provisions
| Redundancy | Employee benefits | Property | Total | |
| £000 | £000 | £000 | £000 | |
| As at 2 June 2008 | 422 | 854 | 1,196 | 2,472 |
| Charged to the income statement | (16) | 17 | (16) | (15) |
| Exchange differences | 7 | 23 | 37 | 67 |
| Utilised | (294) | (16) | (403) | (713) |
| ---------- | ---------- | ---------- | ---------- | |
| As at 30 November 2008 | 119 | 878 | 814 | 1,811 |
| ====== | ====== | ====== | ====== |
| Redundancy | Employee benefits | Property | Total | |
| £000 | £000 | £000 | £000 | |
| As at 2 June 2008 | 422 | 854 | 1,196 | 2,472 |
| (Credited)/charged to the income statement | (30) | 48 | 807 | 825 |
| Exchange differences | 22 | 62 | 93 | 177 |
| Increase in provision - discount unwinding | - | - | 72 | 72 |
| Utilised | (316) | (96) | (502) | (914) |
| ---------- | ---------- | ---------- | ---------- | |
| As at 31 May 2009 and 1 June 2009 | 98 | 868 | 1,666 | 2,632 |
| (Credited)/charged to the income statement | (20) | 7 | 379 | 366 |
| Exchange differences | 3 | 32 | 12 | 47 |
| Increase in provision - discount unwinding | - | - | 28 | 28 |
| Utilised | (7) | (13) | (267) | (287) |
| ---------- | ---------- | ---------- | ---------- | |
| As at 29 November 2009 | 74 | 894 | 1,818 | 2,786 |
| ====== | ====== | ====== | ====== |
14. Seasonality
The Group's monthly sales profile demonstrates an element of seasonality around the Christmas period. This impacts sales in the months of September and December.
15. Related-party transactions
There were no material related-party transactions during the period.