Strategic Minerals Regulatory News (SML)

25 Sep 2006 07:01

Smallbone PLC25 September 2006 SMALLBONE plc ("Smallbone" or "the Group") Interim results for the six months ended 30 June 2006 Smallbone plc, the supplier of luxury kitchens and floors is pleased to announceits interim results for the six months ended 30 June 2006. The Group is comprised of Smallbone of Devizes and Mark Wilkinson Furniture, twoof the UK's leading designers of bespoke kitchens, bathrooms and bedroomfurniture; and Paris Ceramics, a supplier of high quality stone primarilyoperating in the US. Financial Highlights • Turnover increased by 85% to £22.9 million (2005: £12.4 million) • Order intake of operating companies up 30% to £31 million (2005: £23.7 million) • EBITDA increased by 108% to £888,000 (2005: £427,000) • Profit before taxation, exceptional costs, goodwill amortisation and FRS 20 share option charges of £14,000 (2005: £48,000) • Operating cash flow up 31% to £2.2 million (2005: £1.68 million) Operational Highlights • Successful re-launch of Smallbone Bedrooms and Bathrooms with 137% order increase • Mark Wilkinson showroom opened in Harrogate and performing ahead of target • Paris Ceramics head office and manufacturing facility successfully relocated to Virginia (USA) Outlook • Record Group order book up 30% to £28.6 million (2005: £22 million) • Smallbone New York flagship showroom opened with encouraging initial trading • Further US expansion planned with Paris Ceramics showroom to open in Florida in October and lease signed for Smallbone showroom in Greenwich, Connecticut for 2007 • UK network continues to expand with 4 further Smallbone showrooms and 6 further Mark Wilkinson showrooms planned by end 2008, including Weybridge opening in November 2006 Charlie Smallbone, Chairman & Chief Executive, commented: "The first half of 2006 has seen strong sales and operating performance withthis momentum continuing into the second half with a record forward order book,up 30%. Our expansion plans are progressing well and we are particularly excited aboutthe roll-out plans for our furniture operations in the US market. By growing thebreadth of our offering, our showroom network and the geographical markets inwhich we operate, we have laid the foundations to deliver substantial earningsgrowth and remain confident about the Group's prospects." 25 September 2006 Enquiries: SMALLBONE plc Tel: +44 (0)1380 729090Charles Smallbone, Chairman & Chief ExecutiveGordon Montgomery, Finance Director COLLEGE HILL Tel: +44 (0)207 457 2020Kate Pope CHARLES STANLEY SECURITIESMark Taylor Tel: +44 (0)207 149 6000 SMALLBONE plc ("Smallbone" or "the Group") Chairman and Chief Executive's Statement I am pleased to report the Group's interim results for the six months ended 30June 2006, which have seen strong sales with the order intake in the first halfincreasing by 30%. Financial Results In the six months ended 30 June 2006, Group turnover increased to £22.9 million(2005: £12.4 million), representing an 85% increase over the same period lastyear. Excluding the effect of the acquisition of Mark Wilkinson Furniture("MWF") in June 2005, turnover still increased a healthy 10% over the comparableperiod. The performance of new showrooms has been ahead of our expectations andwe have seen an extremely strong order intake for the first half with anincrease of 30% to £31 million. Gross margins reduced during the period to 42.3% (2005: 43.4%), with improvedoperational efficiencies being more than offset by an adverse variance in thesales mix between furniture, appliances and installation, primarily in the firstquarter of the year. However, the mix has improved since April, in line with ourexpectations, and we expect this to be maintained during the second half of theyear. EBITDA increased by 108% to £888,000 (2005: £427,000) despite the expected heavystart up costs of £276,000 relating to the Smallbone New York showroom andincreased overheads of £136,000 due to the enlarged size of the Group since theacquisition of MWF. The Group also incurred an exceptional cost of £140,000($255,000) for the re-location of the Paris Ceramics USA operations to Virginiaand expensed £49,000 for the provision for share options under FRS 20, asrequired by new accounting standards. Mainly as a result of our new showroominvestments, additional depreciation of £350,000 was charged and the profitbefore taxation pre-exceptional items, goodwill amortisation and share optioncharges was £14,000 (2005: £48,000 profit) The loss before taxation was £487,000(2005: £168,000). The Group generated strong cash flow with cash generated from operatingactivities increasing by 31% to £2.2 million (2005: £1.68 million), largelyresulting from the increase in order deposits from customers. The Directors are not recommending payment of an interim dividend. Operational review Smallbone of Devizes ("Smallbone") Sales performance in the first half has been extremely strong with order intake31% ahead of the same period last year. Excluding orders taken by the two newshowrooms opened in 2005, we have still seen a 21% increase in order intake. Thenewly refurbished and extended Bedroom and Bathroom showroom in Knightsbridge,which opened in January 2006, has rejuvenated awareness of Smallbone's Bedroomsand Bathrooms offering, leading to a 137% increase in bedroom and bathroom orderintake to £1.9 million (2005: £0.8 million). The success of Smallbone's walnut and silver range, launched in 2005, is nowbeginning to flow through, representing 12% of the first half's furnituredeliveries. The learning curve of manufacturing the new range together with theshift of the sales mix in favour of wood finishes (as opposed to lower costpainted finishes) has reduced Smallbone's margins in the first half. Althoughwood finishes have less installation cost, the benefits of lower installationcosts have not yet fully flowed through to the gross margin due to the lagbetween deliveries and completed installations. We anticipate margins to improvein the second half. Given the success of the walnut and silver range and the Bedrooms and Bathroomscollections, Smallbone is applying its capital expenditure to rolling these outacross its UK showrooms rather than opening a new UK showroom this year.However, the UK network will increase from the existing eleven to fifteen by theend of 2008, with two openings a year planned for 2007 and 2008. Smallbone opened its first flagship showroom in Manhattan, New York in July.With over 4,200 sq.ft. of space, the showroom displays a wide range ofSmallbone's kitchen, bedroom and bathroom designs. Initial trading, even duringa quiet time of the year, has been encouraging. We continue to invest in ourexpansion in the US and have located and leased a prime spot in Greenwich,Connecticut for our next showroom, which is planned to open in Spring 2007. Weare also, in the second half of this year, relocating Paris Ceramics from itsexisting Greenwich showroom to this new site, which we believe will benefit bothbrands and may be the roll-out formula for the rest of the US. Mark Wilkinson Furniture ("MWF") When we acquired MWF in June 2005, we bought a strong brand and management teamthat has proved to be an excellent fit for the Group. Sales performance has beenexceptional, with order intake in the first half 38% up on the same period lastyear and the new showroom in Harrogate, opened in April 2006, performing wellahead of expectations. As planned, we are also seeing a steady improvement inmargins, although this has been slightly impacted by an adverse sales mix ondelivered sales in the first half (in favour of lower margin bought-in elementsto our sales, such as appliances) compared to the typical, long-run, sales mixupon which our expectations had been set. However, we are pleased to see thatthe sales mix in the forward order book is moving back towards historicallevels. We plan to expand MWF's showroom network in the UK from its existing nine tofifteen by the end of 2008, and the next showroom will open in November inWeybridge, Surrey. MWF is also starting to supply granite worktops from ourin-house workshops in Paris Ceramics Limited at Devizes and will be starting tosell our Paris Ceramics flooring from the showroom network in the second half of2006. MWF has generated substantial net cash flow in its first year in the Group, morethan recouping the £2.3m cash element of the consideration paid in 2005. Thereis more historic working capital still to be released over the balance of thisyear, which should go a long way to meeting the vendor loan note repayment of£0.5m due on 31 December 2006. The balance of the consideration for MWF was paidin Smallbone plc shares and refinancing of their existing loans. Paris Ceramics Inc. ("PCI") PCI relocated its total warehouse and head office operations to Farmville,Virginia in the first quarter. It has been a great logistical achievement whilststill maintaining sales deliveries and operational support and I would like tocommend PCI's CEO, David Guthrie, and his team. As anticipated, deliveries wereslightly impacted by the move but we expect the improved efficiencies comingfrom this new and enlarged operation to be demonstrated through improvingmargins. PCI has also completely refurbished its New York showroom, which was finished inMay 2006 and is opening a new showroom in Florida at the beginning of October.The relocation of its Greenwich showroom will also take place in the lastquarter of 2006. Paris Ceramics UK ("PCUK") From 1 January 2006, PCUK contained three divisions - the Paris Ceramics King'sRoad showroom; the granite worktop fabrication and installation operations; and,the stone flooring supply operation to Smallbone and MWF customers. In April2006, a fourth division was added with the £40,000 acquisition of WiltonKingsway, a small veneering business which supplies Smallbone and MWF as well asexternal customers. We are pleased that the stone flooring and veneering divisions are performingahead of expectations. The King's Road showroom had a slow start to the year dueto extended refurbishment but its flooring sales are now back on track. Thegranite division, although profitable, has lacked the volume to deliver thereturns we desire and we have implemented a number of initiatives to addressthis. We believe that, once these initiatives are in place, it will be anattractive profit and cash generator for the Group. Current Trading and Outlook The Group order book at 30 June 2006 was a record £28.6 million, 30% up on 2005.The new showrooms continue to perform well and we anticipate further growth fromthe Smallbone New York showroom, the MWF Harrogate showroom and the PCI USshowrooms in the second half of the year and 2007. Our expansion plans are progressing well and we are particularly excited aboutthe roll-out plans for our furniture operations in the US market. By growing thebreadth of our offering, our showroom distribution network and the geographicalmarkets in which we operate, we have laid the foundations to deliver substantialearnings growth and remain confident about the Group's prospects. Charles Smallbone Chairman and Chief Executive CONSOLIDATED PROFIT AND LOSS ACCOUNT For the 6 months to 30 June 2006 Unaudited Unaudited Audited Six months to Six months to Year to Notes 30 June 30 June 31 December 2006 2005 2005 As restated As restated (see note 1) (see note 1) £'000 £'000 £'000 Turnover 22,921 12,394 35,716 Cost of Sales (13,231) (7,012) (20,523) ---------- --------- ---------Gross Profit 9,690 5,382 15,193 Distribution expenses (6,490) (3,510) (9,584)Administrative expenses (3,493) (2,016) (5,615)Other operating income 13 38 113 ---------- --------- ---------Operating (loss) / profit (280) (106) 107 Interest receivable and similarincome 17 - 15Interest payable and similarcharges (224) (62) (319) ---------- --------- --------- Loss on ordinary activitiesbefore taxation (487) (168) (197) Taxation on loss on ordinaryactivities (9) (12) 421 ---------- --------- ---------Retained (loss) / profit forthe period (496) (180) 224 ---------- --------- --------- (Loss) / Earnings per share 2 Basic (pence per share) (2.22) (0.96) 1.17Diluted (pence per share) (2.22) (0.96) 1.09 CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES For the 6 months to 30 June 2006 Unaudited Unaudited Audited Six months to Six months to Year to Notes 30 June 30 June 31 December 2006 2005 2005 As restated As restated (see note 1) (see note 1) £'000 £'000 £'000 Unaudited Unaudited Audited (Loss) / Profit for the period (496) (180) 224Foreign exchange losses (8) (25) (34) ---------- --------- ---------Total recognised gains andlosses for the period (504) (205) 190 ---------- --------- --------- Prior year adjustment foradoption of FRS 20 (115)(see note 1) ----------Total recognised gains and losses (619) ---------- CONSOLIDATED BALANCE SHEET As at 30 June 2006 Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000Fixed assetsIntangible assets 11,580 11,534 11,864Tangible assets 8,747 5,998 7,023 ---------- ---------- --------- 20,327 17,532 18,887 Current assetsStocks 4,649 5,480 4,418Debtors 3,947 3,041 3,807Cash at bank and in hand 1,691 783 446 ---------- ---------- --------- 10,287 9,304 8,671 Creditors: amounts falling due within oneyear (18,630) (16,633) (16,122) ---------- ---------- ---------Net current liabilities (8,343) (7,329) (7,451) Total assets less current liabilities 11,984 10,203 11,436Creditors: amounts falling due after morethan one Year (6,643) (5,406) (5,640) ---------- ---------- ---------Net assets 5,341 4,797 5,796 ---------- ---------- ---------Capital and reservesCalled up share capital 1,115 1,074 1,115Share premium account 1,818 2,942 1,818Other reserves 3,604 1,958 3,604Profit and loss account (1,196) (1,177) (741) ---------- ---------- ---------Shareholders' funds 5,341 4,797 5,796 ---------- ---------- --------- CONSOLIDATED CASH FLOW STATEMENT For the 6 months to 30 June 2006 Notes Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 1 As restated (see note 1) £'000 £'000 £'000 Net cash inflow from operatingactivities 3(a) 2,215 1,679 2,224 Returns on investments and servicing ofFinanceInterest received 17 12 15Interest paid (189) (71) (262)Interest element of finance leaserental (35) (3) (57) ---------- --------- ---------Net cash outflow from returns oninvestments and servicing of finance (207) (62) (304) TaxationCorporation tax paid (9) - (92) ---------- --------- ---------Tax paid (9) - (92) Capital expenditure and financialinvestmentPayments to acquire intangible fixedassets (28)Payments to acquire tangible fixedassets (2,503) (1,245) (3,351)Proceeds of disposals of tangiblefixed assets 20 75 ---------- --------- ---------Net cash outflow from capitalexpenditure (2,511) (1,245) (3,276) AcquisitionsPurchase of subsidiary undertaking - (3,979) (4,037)Overdraft acquired with subsidiaryundertakings - (712) (712)Further consideration paid on priorperiod Acquisitions (23) - - ---------- --------- ---------Net cash outflow from acquisitions (23) (4,691) (4,749) ---------- --------- --------- Net cash outflow before financing (535) (4,319) (6,197) Share capital issued (net of issuecosts) - - 563New loans 5,500 4,250 4,793Loans repaid (5,429) (138) (707)Net Capital raised on finance leases 814 97 1,073 ---------- --------- ---------Net cash inflow from financing 885 4,209 5,722 ---------- --------- --------- Increase / (decrease) in cash in theperiod 3(b) 350 (110) (475) ---------- --------- --------- NOTES TO THE INTERIM FINANCIAL STATEMENTS 1. Basis of preparation The consolidated interim financial statements have been prepared under thehistorical cost convention and in accordance with applicable accountingstandards. The accounting policies applied are consistent with those set out inthe financial statements of Smallbone plc for the year ended 31 December 2005with exception that the Group has adopted FRS 20 (Share-based payment) in thecurrent year leading to a prior period charge of £115,000 (£42,000 at the 2005half year) and a charge in the current year of £49,000. The interim financialstatements are unaudited and do not constitute accounts within the meaning ofsection 240 of the Companies Act 1985. The financial information for the yearended 31 December 2005 has been extracted from the Group's statutory accountsfor that period, which have been delivered to the Registrar of Companies. Theauditors' report on those accounts was unqualified and did not contain anystatement under section 237 of the Companies Act 1985. The Consolidated Cash Flow Statement for the six months to 30 June 2005 has beenrestated from the figures that appeared in 2005's interim statement. Therestated figures bring them into line with the basis of disclosure used in the2005 year end audited accounts, which differed primarily in respect of thetreatment of the acquisition of Mark Wilkinson Furniture Limited on 15 June2005. 2. Earnings per share Earnings per share ("EPS") have been calculated on the result after tax and onthe weighted average number of shares in issue and under option during theperiod, as set out below: 6 months ended 6 months ended Year ended 30 June 2006 30 June 2005 31 December 2005 Shares used for calculationof basic EPS 22,305,594 18,659,587 20,465,123Exercise of options 1,869,377 547,444 1,539,662 ---------- ---------- ------------Shares used for calculationof diluted EPS 24,174,971 19,207,031 22,004,785 ---------- ---------- ------------ An adjusted earnings per share is also shown below, calculated by reference toearnings before exceptional items, FRS20 provision for the imputed cost of shareoptions and goodwill amortisation. The Directors consider that this gives a moreuseful indication of underlying performance. All figures are stated in pence per share 6 months 6 months Year ended ended ended 30 June 30 June 31 December 2006 2005 2005 Adjusted (loss) / earnings per sharebefore goodwill amortisation, exceptionalcosts & FRS 20Adjusted basic (pence pershare) 0.02 0.19 4.44Adjusted diluted (pence pershare) 0.02 0.19 4.14 ---------- ---------- ------------ The (losses) / earnings used in the adjusted earnings per share calculation areshown below: 6 months ended 6 months ended Year ended 30 June 2006 30 June 2005 31 December 2005 (Loss) / profit for theperiod (496) (180) 224Goodwill amortisation 312 174 486FRS 20 provision forshare-based charges 49 42 83Exceptional items - costs ofPCI move to Virginia 140 - 117 ---------- ---------- ------------(Losses) / Earnings used foradjusted EPS 5 36 910 ---------- ---------- ------------ 3. Notes to the Consolidated Cash Flow Statement for the 6 months ended 30June 2006 (a) Reconciliation of operating profit to operating cash flows Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 As restated As restated (see note 1) (see note 1) £'000 £'000 £'000 Operating (loss) / profit (280) (106) 107FRS 20 provision for share-based charges 49 42 83Goodwill amortisation 312 174 486Foreign exchange translation differenceson opening balances of overseas subsidiaries (8) - (34)Elimination of unrealised exchange losses/(gains) on trading 113 (40)Depreciation charges 667 317 984Profit on disposal of tangible fixed (20) - (65)assetsDecrease in stock (231) 267 1,403Decrease / (increase) in debtors (213) (383) (1,111)Increase in creditors 1,826 1,368 411 ----------- --------- -----------Net cash inflow from operating activities 2,215 1,679 2,224 ----------- --------- ----------- (b) Reconciliation of cash flow to movement in net debt Unaudited Unaudited Audited 30 June 30 June 31 December 2006 2005 2005 £'000 £'000 £'000 Increase / (decrease) in cash in theperiod 350 (110) (475)Cash inflow from debt (885) (4,085) (5,158) ----------- --------- -----------Change in net debt resulting from cashflows (535) (4,195) (5,633)New finance leases - (124) (33) ----------- --------- -----------Opening net debt (7,016) (1,350) (1,350) ----------- --------- -----------Closing net debt (7,551) (5,669) (7,016) ----------- --------- ----------- 4. Availability of interims A copy of this interim statement is being sent to shareholders and copies areavailable from the Company's Registered Office at The Hopton Workshop, Devizes,Wiltshire, SN10 2EU. This information is provided by RNS The company news service from the London Stock Exchange