UCG.L Regulatory News (UCG)

UNITED CARPETS GROUP plc

Unaudited Preliminary Results for the year ended 31 March 2015

United Carpets Group plc ("the Group" or "the Company" or "United Carpets"), the second largest chain of specialist retail carpet and floor covering stores in the UK, today announces its preliminary results for the year ended 31 March 2015.

Highlights

· Network sales* were £54.2m (31 March 2014: £55.7m)

· Like for like sales* increased by 2.7%

· Revenue for the year was £19.1m (31 March 2014: £21.1m)

· Profit before tax was £1.21m (31 March 2014: £0.94m)

· Earnings per share were 1.36p (31 March 2014: 1.39p)

· Store numbers increased by 2 to 61

· Cash and cash equivalents increased to £2.61m (31 March 2014: £1.68m)

· Special dividend of 1.0p per share paid on 19 June 2015 and recommending a final dividend of 0.25p per share payable 16 October 2015

*Network sales and like for like sales are defined under Financial Review

Paul Eyre, Chief Executive, said:

"It is very pleasing to report improving results demonstrating the success of the changes we have made and showing that we have created a new base for delivering sustainable growth and returns over the longer-term.

Our like for like sales performance showed a creditable increase, up 2.7%, contributing to an increase in profit before tax of 29%. This, together with a strengthened balance sheet and no material borrowings means the Group is well placed for the future. This is reflected in our decision to re-introduce a final dividend for the year as part of our intention to pay a progressive dividend in line with the future growth of the business."

Enquiries:

Chairman's statement

Trading during the financial year ended 31 March 2015 has been positive, benefitting from an improving consumer environment and the restructuring undertaken in 2012 which has created a more stable platform from which the Group can develop. I am therefore pleased to report that the Group recorded a 29% increase in profit before tax to £1.21m, with like for like sales up 2.7% for the year.

At 31 March 2015, the network of stores totalled 61 (2014: 59), of which 47 are franchised (2014: 48) and 14 are operated as corporate stores (2014: 11).

We believe that confidence amongst our target markets has improved. Activity across the housing market appears to be generally increasing which is an important indicator for our sector and this, together with a more stable political environment for the U.K. than many expected, bodes well for the coming year. While these factors are positive, we remain cautious given the continuing uncertainty within the European economy and the expectation that at some point interest rates will rise again which may well impact on consumer spending.

Financial review

Network sales across the Group, including the value of retail sales by our franchisees (to give a measure of the Group's turnover on a more comparable basis to a conventional retailer), were £54.2m (2014: £55.7m). Revenue, which as in previous years includes marketing and rental costs incurred by the Group and recharged to franchisees, was £19.1m (2014: £21.1m).

Like for like sales across the whole of the network (based on stores that have traded throughout both the period under review and the corresponding period in the prior year and thus excluding stores that closed during either period) were up 2.7%. The combination of a strengthening market and an improving contribution from Bed sales made this a satisfying result. The reduction in network sales and revenue in comparison to the prior year principally reflects the change in the Beds sales process, giving more ownership of Beds sales to franchisees, and a reduction in the number of third parties serviced by the warehouse.

Gross margin was 66.8% compared to 61.7% in the prior year primarily reflecting the change in the mix of revenue between Franchising and Retail and Warehousing.

Distribution costs and administrative expenses, which include rent, rates and staff costs at the corporate stores, reduced by £0.5m due to savings in the ongoing cost of supporting the franchise network as a result of improving performance. Distribution costs and administrative expenses excluding exceptional items increased from 58.1% of revenue to 61.1% principally reflecting the reduction in Warehousing revenue.

Profit before tax was £1.21m (2014: £0.94m) and earnings per share was 1.36p (2014: 1.39p). During the prior year, earnings per share benefitted from a deferred tax asset arising in connection with the acquisition of the trade from United Carpets (Northern) Limited in October 2012.

The balance sheet included net funds of £2.53m at 31 March 2015 (31 March 2014: £1.68m).

Dividend

In May 2015, the Board announced, in recognition of the support shown by shareholders and the improved financial position of the Company, a special dividend of 1.0p per share which was paid on 19 June 2015.

As part of the Board's intention to pay a progressive dividend in line with the future growth of the business, the Board is pleased to be recommending a final dividend of 0.25p per share. Subject to approval at the Annual General Meeting, this dividend will be paid on 16 October 2015 to all shareholders on the register at the close of business on 2 October 2015. The ex-dividend date will be on 1 October 2015.

Operations review

Our store network has remained largely unchanged. At the start of the period under review the Group operated 59 stores of which 48 were franchised and 11 were corporate stores. At 31 March 2015, there were 61 stores of which 47 were franchised and 14 were corporate stores. Since then, a new franchised store has opened, a franchised store has relocated to new premises, a corporate store is in the process of relocating, one franchised store has been taken back as a corporate store and one corporate store has been franchised, so that today the Group operates 63 stores.

While the majority of stores are showing encouraging signs for the future, there remains a handful of stores which are underperforming. We are evaluating ways to address this, which may include a small number of further store closures. At the same time we are employing a small and highly selective store opening policy including the opening of our smaller format store concept which, while still in its infancy, is showing some promising signs.

We continue to advertise the United Carpets brand across a range of outlets from TV to radio, focusing on the Group's key points of differentiation in terms of delivering great products and great value for money.

Franchising and Retail

Floor coverings are the Group's primary driver of sales (predominantly carpet, laminate and vinyl flooring) through both franchised stores and the Group's own corporate stores. As shown by the like for like sales performance up 2.7% this was a good retail performance especially when compared with the overall trading performance of the last few years. The main driver for change has been an improving consumer market with confidence gently coming back into the market.

Alongside this, we believe the introduction last year of the new Beds sales process which we aligned with the sale of Flooring thereby improving the potential return to franchisees, has helped increase sales. Those changes combined with further improvements to the Beds ranges and presentation during the year have meant that, while still only a small proportion of overall sales, volumes have increased significantly.

Warehousing

Our in-house cutting operation continues to support the whole network and a small number of third parties, providing a quick, efficient cutting and delivery service enabling attractive retail price points with good margins. The reduction in sales in the year compared to the prior year reflects a reduction in the number of third parties serviced by the warehouse as the demands of our network have grown.

Property

The property division leases properties from third parties and sublets those properties to the store network.

People

The Board would like to emphasise its gratitude to all franchisees, suppliers, employees and other stakeholders connected to the Group for their continued and ongoing support and looks forward to working closely together during the current financial year.

Outlook

Like for like sales for the 15 weeks since the period end to 16 July 2015 have continued the positive trend.

United Carpets is well positioned for the future. Demand for the Group's products has been consistent and the store network is becoming increasingly well balanced. The balance sheet is strengthened, there are no borrowings other than a small number of immaterial finance leases and the marketplace is improving. Just as importantly, the management team are also now able to focus on developing the business and implement changes such as the new sales process for Beds, introduction of the smaller store format and interest free credit all of which are contributing to an improving performance. While there are still ongoing challenges which will no doubt impact the business, the Board is confident that the Group is once again well positioned and looks forward to delivering sustainable growth and returns for shareholders.

Peter Cowgill

Chairman

Preliminary announcement of results for the year ended 31 March 2015

Consolidated statement of comprehensive income

*All activities relate to continuing operations and are attributable to the owners of the parent. There were no items of other comprehensive income and therefore no separate statement of other comprehensive income has been presented.

Preliminary announcement of results for the year ended 31 March 2015

Consolidated statement of financial position

* See consolidated statement of changes in equity for details of presentational changes in the year.Preliminary announcement of results for the year ended 31 March 2015

Consolidated statement of changes in equity

Following approval by shareholders on 20 August 2014 and by the High Court on 17 September 2014, the nominal value of the Company's issued share capital was reduced from 5 pence to 1 pence each and the share premium reserve was cancelled.

The share-based payment reserve of £598,000, previously shown separately, has been combined with retained earnings for presentational purposes.

Preliminary announcement of results for the year ended 31 March 2015

Consolidated statement of cash flows

Preliminary announcement of results for the year ended 31 March 2015

Notes to the preliminary announcement

1. Basis of preparation

The financial information contained in this unaudited preliminary announcement does not constitute accounts as defined by section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2014 is derived from the statutory accounts for that period which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2015 will be finalised based on the information in this unaudited preliminary announcement and will be delivered to the Registrar of Companies in due course. The Group has prepared its consolidated financial statements for the year ended 31 March 2015 in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The accounting policies applied are consistent with those included in the financial statements of the Group for the year ended 31 March 2014.

2. Operating profit

Operating profit is arrived at after charging/(crediting):

During the year ended 31 March 2015, no items charged/(credited) to operating profit were considered to require separate disclosure as exceptional items either as a result of their nature or size. Other exceptional income in the prior year was compensation received as a result of the compulsory purchase of one of the properties operated by the Group.

3. Segment reporting

Segment information is presented in respect of the Group's business segments, which are the primary basis of segment reporting. The business segment reporting format reflects the Group's management and internal reporting structure.

Inter-segment pricing is determined on an arm's length basis.

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

4. Income tax expense/(credit)

Analysis of charge for the year:

The tax charge for the year differs to the standard rate of corporation tax in the UK of 21% (2014: 23%). The differences are explained below:

The acquisition of the trade from a connected company (United Carpets (Northern) Ltd) gave rise to a deferred tax asset in United Carpets (Franchisor) Ltd. The prior period adjustments in the comparative year principally reflects an estimate of that deferred tax asset following the submission of tax computations for the period to 5 October 2012 by UNCN Realisations 2012 Ltd (formerly United Carpets (Northern) Ltd).

5. Earnings per share

Basic earnings per share

The calculation of basic earnings per share for the year ended 31 March 2015 was based on the profit attributable to ordinary shareholders of £1,107,000 (2014: £1,132,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2015 of 81,400,000 (2014: 81,400,000).

Diluted earnings per share

Diluted earnings per share for the years ended 31 March 2015 and 31 March 2014 was the same as basic earnings per share as the share options in issue were non-dilutive in either year.

6. Dividends

A special dividend of 1.0 pence per share was paid on 19 June 2015.

A final dividend of 0.25 pence per share in respect of the year ended 31 March 2015 has been recommended.

7. Cash generated from operations

8. Contingencies

There have been no material changes to the assessment of any potential liability arising in connection with Employee Benefit Trusts since the financial statements for the year ended 31 March 2014.