UCG.L Regulatory News (UCG)

18 Jul 2007 07:01

United Carpets Group plc18 July 2007 UNITED CARPETS GROUP plc Preliminary Results for the year ended 31 March 2007 United Carpets Group plc ("the Group" or "the Company" or "United Carpets"), thethird largest chain of specialist retail carpet and floor covering stores in theUK, today announces its preliminary results for the year ended 31 March 2007. Highlights • Network sales grew by 11.7% to £54.27m (2006: £48.58m) • Turnover increased by 10.7% to £19.55m (2006: £17.65m) • Positive like for like sales up 11.7% against prior year • Profit before tax increased by 23.6% to £1.433m* (2006: £1.159m*) despite the closure of four stores, reflecting an increase in individual store profitability • At 31 March 2007, 59 stores carried the United Carpets brand. Since the year end, a further two stores have opened • Like for like sales for the 15 weeks since the period end were up 20.9% • Final dividend of 0.5p per share which, together with the interim dividend of 0.25p per share paid in January makes a total ordinary dividend of 0.75p per share for the year (2006: 0.75p). * Before goodwill amortisation and exceptional items. Paul Eyre, Chief Executive, said: 'This year has been a period of consolidation, during which we have focused onconsistent, improved quality of customer service, an increase in our productrange, innovative new sales strategies and the introduction of a number of newfranchisees to the existing and new stores. This has enabled us to deliver solidgrowth in 2007. We are now looking to expand the Group through the opening ofnew stores within the coming year, whilst maintaining the same high level ofservice in our existing operations.' Enquiries: United Carpets Group plc 01709 579 450Paul Eyre, Chief Executive Ian Bowness, Finance Director Cardew Group 020 7930 0777Tim RobertsonJamie Milton Seymour Pierce 020 7107 8000Jonathan Wright Chairman's statement I am pleased to announce the Group's preliminary results for the year ended 31March 2007. The Group generated revenues of £19.55m, compared to £17.65m in2006, operating from 59 stores at 31 March 2007 (2006: 60 stores) located acrossNorthern and Central England. This increase in revenue, despite a small decreasein store numbers, is a further vindication of our strategy of switching Groupfocus from new store openings to maximising profitability from existing stores.We are now reaching the end of this consolidation process, which has seen theclosure of some of our poorer performing stores and the introduction of newfranchisees to others. During the year, three new stores have been opened inRipley, Stockport and Coventry and the recent recruitment of a dedicatedFranchisee Recruitment Manager is expected to facilitate the sourcing of newfranchisees in the coming year. The Group will now look to build on this solid foundation by continuing to rollout corporate stores and its franchise concept into new markets across Northernand Central England. Financial review Revenue increased by 10.7% to £19.55m (2006: £17.65m), reflecting the increasedsales from individual stores during the year generated by improved marketing,closure of poorer performing stores and the recruitment of high quality newfranchisees. Network sales across the Group, including the value of retail salesby our franchisees (to give a measure of the Group's turnover on a morecomparable basis to a conventional retailer), increased to £54.27m (2006:£48.58m). Like for like sales were up 11.7% compared to the previous year. Given UnitedCarpets' franchise structure, like for like sales are not the best measure ofthe Group's financial performance, however, they do provide a good steer on theoverall trading performance. Within the like for like sales performance the corefloor coverings business achieved a 13.5% like for like increase on the previousyear whilst bed like for like sales decreased by 2.8%. However, a new productrange within the beds department, combined with a restructuring of the incentivescheme for staff on sales of beds has seen significant improvement in bed salesin the first three months of the new year. For the 15 weeks since the year end,total like for like sales have increased by 20.9%, although this is against weakcomparatives in the same period last year and we have yet to enter our key salesperiod during October and November. Following a Group reorganisation, certain costs previously included within costof sales have been reclassified as administrative expenses. Cost of sales forthe prior year have been reduced by £702,000 and administrative expensesincreased by the same amount. Consequently, on a comparable basis, gross marginhas increased slightly from 70.6% to 71.0% with the benefits from improvedproduct margins and better stock control being offset to some extent by areduction in the proportion of franchise related income to total revenue ascorporate stores have accounted for a greater proportion of turnover. Distribution costs increased in line with the increase in turnover fromcorporate stores and administrative expenses increased by 8.5% reflectingincreases in rental costs and marketing as the network grew in the first half ofthe year in comparison to the same period in the previous year and furtherstrengthening of the management team to support future growth. Profit on ordinary activities before taxation, goodwill amortisation andexceptional items increased by 23.6% to £1.433m (2006: £1.159m). During theperiod the company incurred exceptional costs and a loss on disposal of fixedassets totaling £347,000 relating to the closure of four stores and onerelocation and a further £57,000 as a result of goodwill amortisation. As aresult, profit before tax was £1.03m. Earnings per share were 0.71p (2006: 0.66p). The Board recommends a finaldividend of 0.5p per share (2006: 0.5p) which together with the interim dividendof 0.25p per share (2006: 0.25p) paid in January makes a total ordinary dividendof 0.75p per share for the year (2006: 0.75p). Subject to approval at the AnnualGeneral Meeting, the final dividend will be paid on 7 December 2007 to thoseshareholders whose names are on the register on 2 November 2007. Operations review The Group ended the financial year with 59 branded stores across Northern andCentral England. With the exception of 11 corporate stores, the remainder wereall franchises operating under United Carpets' bespoke franchise model, whichaims to combine the advantages of a multiple retailer with the entrepreneurialdrive of an independent. As the Group continues to expand so its economics willimprove, in particular, from more cost effective advertising, as well as theability to leverage the other benefits of increased scale. Last year was one of consolidation in which we sought to maximize revenues fromindividual stores to provide a solid foundation for expansion of the franchisein 2007. Poorer performing branches have been closed and 12 new franchisees havebeen appointed over the year in addition to the opening of three new branches inRipley, Coventry and Stockport. The appointment of a Franchisee RecruitmentManager will help us to recruit the quality individuals the Group will need inorder to drive our next phase of expansion. As part of a drive to improve returns from the existing store portfolio thecompany has implemented a series of measures aimed at improving customer serviceand retail techniques. A central part of this strategy has been the appointmentof Ray Tricker as Retail Operations Director in January 2007. Ray has focused onincreasing the quality of customer service through a series of training days, instore visits and increased sales incentives for store staff which, in turn, hasdriven our growth in sales and the level of upselling on popular items. The Group is currently in the process of reviewing its sourcing and distributionsystems in order to ensure greater efficiency in supplying the right stores withthe right products, cutting costs associated with large individual storeinventories and increasing understanding of trends in customer tastes. Acentralised depot has already been set up in order to handle deliveries of bedsand customers choose from a wide selection of examples within individual storesafter which they receive their delivery from the central depot within a fortyeight hour period. Any future expansion in store numbers is expected to generatefurther efficiencies through greater central control of product sourcing anddistribution. Floor coverings The majority of Group revenues are derived from the sale of floor coverings,predominantly carpet, laminate and vinyl flooring through franchised stores andthe Group's own corporate stores. Trading has been strong throughout the year,helped by an active housing market, increased advertising, improved store layoutand a greater emphasis on customer service, backed by regular training days toensure best practice is shared across the Group. Over the course of the year,there has been a 13.5% improvement in like for like sales. The Group continues to carry out significant advertising in targeted areas whereit has sufficient critical mass and will look to increase its area of networkcoverage in 2007 in line with the growth of its store portfolio. Beds Beds are sold through the majority of the store network with franchisees earninga commission on sales. Recently, this part of the business has not performed toits full potential and like for like sales over 2006 showed a 2.8% decrease.However, restructuring of the incentive scheme for salespersons, the sourcing ofa new product range with higher margins and greater opportunity for upsellingand innovative use of store layout has seen an 11.6% improvement in like forlike sales in the first 15 weeks of the new financial year. By combining thesein store improvements with the centralised depot for bed distribution, whichremoves the necessity for individual stores to carry large stocks of beds, theGroup aims to build its market share of these products, alongside its corebrands of floor coverings. Store opening programme At the end of the year, we operated 59 stores, of which 11 were corporate storesand 48 were franchised. Our strategy throughout this year has been to reduce thenumber of store openings and to increase focus on consolidation of our existingposition and improving the quality of individual franchisees/store managers andcustomer service across all our stores. During 2006, we successfully opened three new stores in Ripley, Stockport andCoventry, reassigned 12 stores to new franchisees, closed four stores andrelocated one store. Of the 11 corporate stores, six are considered to be corecorporate stores to be retained to enable ongoing training and productdevelopment, one is likely to be closed and four will be assigned to suitablefranchisees. In the three months since the end of the financial year, we have successfullyopened a corporate store in Wetherby and a franchised store in Northenden withIlkeston due to open shortly and we aim to pursue a policy of steady growth inthe number of outlets throughout 2007. People The Company has performed well during the period and much of this achievement isdue to the hard work of the people employed throughout the Group. Staff trainingand development has been one of the key drivers in the improved financialperformance of the Group in 2006 and we will continue to invest in this areagoing forward. The Board thanks all employees for their dedication andcommitment and looks forward to building on this during 2007. Outlook Since the year end, trading has continued to be positive with total like forlike sales for the 15 weeks to 12 July 2007 up by 20.9%, albeit against weakercomparables due to the World Cup and exceptionally hot weather in the previousyear. The Group has also been affected by the extensive flooding in NorthernEngland, which caused the Rotherham store to close for 12 days. However, ingeneral, the Board has been encouraged by this start to the first half of 2007and believes that it shows the Group has adopted the correct strategy to supportfuture growth. A key focus during 2007 will be to ensure that new stores andfranchisees maintain and build on the level of store quality and customer carethat has been achieved during the consolidation period of 2006. Peter CowgillChairman Preliminary announcement of results for the year ended 31 March 2007Consolidated profit and loss account Note Results before Goodwill 2007 Results before Goodwill 2006 goodwill amortization goodwill amortization amortization and exceptional amortization and exceptional and items and exceptional items exceptional items items As restated As restated As restated £'000 £'000 £'000 £'000 £'000 £'000Turnover 19,546 - 19,546 17,649 - 17,649Cost of sales (5,667) - (5,667) (5,192) - (5,192) ______ ______ ______ ______ ______ ______Gross profit 13,879 - 13,879 12,457 - 12,457 Distributioncosts (2,006) - (2,006) (1,678) - (1,678) Administrativeexpenses 2 (10,621) (202) (10,823) (9,915) (56) (9,971) Otheroperatingincome 110 - 110 207 - 207 ______ ______ ______ ______ ______ ______Operatingprofit 1,362 (202) 1,160 1,071 (56) 1,015 Loss ondisposal of fixed assets 2 - (202) (202) - (121) (121) ______ ______ ______ ______ ______ ______Profit onordinary activitiesbeforeinterest 1,362 (404) 958 1,071 (177) 894 Interestreceivable 85 - 85 106 - 106 Interestpayable (14) - (14) (18) - (18) ______ ______ ______ ______ ______ ______Profit onordinary 1,433 (404) 1,029 1,159 (177) 982activitiesbeforetaxation Taxation 3 (449) (443) ______ ______Profit on ordinary activitiesafter taxationtransferred toreserves 6 580 539 Earnings pershare 4 ______ ______ - Basic 0.71p 0.66p - Diluted 0.71p 0.66p ______ ______ All amounts relate to continuing activities. The notes on pages 8 to 11 form part of these financial statements. Preliminary announcement of results for the year ended 31 March 2007Statement of total recognised gains and losses and reconciliation of movementsin shareholders' funds Statement of total recognised gains and losses 2007 2006 As restated £'000 £'000Profit for the financial year 580 539 ______ ______Total recognised gains and losses relating to the year 580 539 _____Prior year adjustment (note 7) (41) ______Total gains and losses recognised since last annualfinancial statements 539 ______ Reconciliation of movements in equity shareholders' funds 2007 2006 As restated £'000 £'000 Profit for the year as previously stated 580 580Prior year adjustment (note 7) - (41) ______ ______Profit for the year as restated 580 539 Share-based payment reserve movement 214 75 Dividends paid (611) (204) ______ ______Net increase in shareholders' funds 183 410 Opening shareholders' funds 4,334 3,924 ______ ______Closing shareholders' funds 4,517 4,334 ______ ______ The notes on pages 8 to 11 form part of these financial statements. Preliminary announcement of results for the year ended 31 March 2007Consolidated balance sheet Note 2007 2006 As restated £'000 £'000 £'000 £'000 Fixed assetsIntangible assets 220 277Tangible assets 3,818 3,570 ______ ______ 4,038 3,847 Current assetsStocks 1,680 1,345Debtors 2,188 3,622Cash at bank and in hand 2,034 1,625 ______ ______ 5,902 6,592Creditors: amounts falling dueafter more than one year (3,403) (3,861) ______ ______Net current assets 2,499 2,731 _____ _____Total assets less current assets 6,537 6,578 Creditors: amounts falling dueafter more than one year (1,768) (2,125) Provisions for liabilities (252) (119) ______ ______Net assets 4,517 4,334 ______ ______ Capital and reserves Called up share capital 4,070 4,070Share premium account 6 1,106 1,106Profit and loss account 6 2,162 2,193Merger reserve 6 (3,110) (3,110)Share-based payment reserve 6 289 75 ______ ______Shareholders' funds 4,517 4,334 ______ ______ The notes on pages 8 to 11 form part of these financial statements. Preliminary announcement of results for the year ended 31 March 2007Consolidated cash flow statement 2007 2006 Note £'000 £'000 £'000 £'000Net cash inflow from operatingactivities 8 2,146 1,820 Returns on investments andservicing of finance Interest received 85 106Interest paid (14) (18) ______ ______Net cash inflow from returns oninvestments and servicing of finance 71 88 Taxation 50 (908) ______ ______ 50 (908)Capital expenditure Purchase of tangible fixed assets (1,230) (1,519)Sale of tangible fixed assets 70 51 ______ ______Net cash outflow from capital expenditure (1,160) (1,468) Equity dividends paid (611) (204) ______ ______Net cash inflow/(outflow) beforefinancing 496 (672) Financing Capital element of hire purchaserepayments (87) (85) ______ ______Net cash outflow from financing (87) (85) ______ ______ Increase/decrease in cash 10 409 (757) ______ ______ The notes on pages 8 to 11 form part of these financial statements. Preliminary announcement of results for the year ended 31 March 2007Notes to the preliminary announcement 1. Results and accounting policies The preliminary results have been prepared under the historical cost convention,in accordance with applicable Accounting Standards in the United Kingdom andwith the group's accounting policies as will be set out in the financialstatements for the year ended 31 March 2007. The preliminary results wereapproved by an authorised committee of the Board on 17 July 2007 and areunaudited. The financial information contained in this unaudited preliminary announcementdoes not constitute statutory accounts as defined by Section 240 of theCompanies Act 1985. There have been no changes in accounting policy in the year, other than asdisclosed in note 7. 2. Goodwill amortisation and exceptional items Included in administrative expenses are exceptional store closure costs of£145,000 (2006: £Nil) and £57,000 (2006: £56,000) which relates to theamortisation of goodwill. The loss on disposal of fixed assets principally reflects the write off ofassets on the closure of the Warrington, Bradford and Leeds stores followinglease terminations. 3. Taxation on ordinary activities Analysis of charge in the year: 2007 2006 As restated £'000 £'000 Corporation tax:Current year 359 -Over provision in prior years 52 (330) ______ ______ 411 (330)Deferred tax:Origination and reversal of timing differences 38 773 ______ ______ 449 443 ______ ______ Preliminary announcement of results for the year ended 31 March 2007Notes to the preliminary announcement (continued) 4. Basic and diluted earnings per share The profit per share has been calculated in accordance with FRS22 'Earnings pershare'. The calculation of the profit per ordinary share is based on profits of£580,000 (2006: £539,000) and on a weighted average of 81,400,000 (2006:81,400,000) ordinary shares in issue during the year. The weighted average sharecapital for earnings per share calculated on a dilutive basis is 81,609,991(2006: 81,400,000). 5. Dividends Dividends on equity shares 2007 2006 £'000 £'000Dividends paid during the year on ordinary shares 611 204 ______ ______ 6. Reserves Share premium Profit and loss Merger Share based account account reserve payment reserve £'000 £'000 £'000 £'000 At 1 April2006 aspreviouslystated 1,106 2,234 (3,110) - Prior yearadjustment - (41) - 75 ______ ______ ______ ______At 1 April2006 asrestated 1,106 2,193 (3,110) 75 Profit for theyear - 580 - - Dividends paid - (611) - - Share-basedpayments - - - 214 ______ ______ ______ ______At 31 March2007 1,106 2,162 (3,110) 289 ______ ______ ______ ______ The merger reserve is the difference between the nominal value of shares issuedin order to acquire the merged entities and the share capital and share premiumaccount of the merged entities. Preliminary announcement of results for the year ended 31 March 2007Notes to the preliminary announcement (continued) 7. Prior year adjustments The group is required to adopt FRS20 "Share-based payment (IFRS2)" in respect ofthe financial statements for the year ended 31 March 2007. The effect of adopting this standard has been to decrease reported profit forthe year ended 31 March 2006 by £75,000 for amounts charged in respect ofshare-based payments which has been credited to a separate share- based paymentreserve. The charge in the year was reduced by £34,000 as a result of theremoval of amounts previously provided within creditors in respect of UITF17which has now been superseded by FRS20. The net prior year adjustment to the results previously reported for the yearended 31 March 2006 was a £41,000 decrease and net assets were increased by£34,000. In addition to this, the directors have reviewed the classification of costs inthe profit and loss account and consider that certain costs previously includedin cost of sales are more appropriately classified as administrative expenses. Accordingly, a prior year adjustment has been made to transfer £702,000 fromcost of sales to administrative expenses. This adjustment has no impact onoperating profit or net assets in either year. This adjustment increases grossprofit for the year ended 31 March 2006 by £702,000. 8. Reconciliation of operating profit to net cash inflow from operatingactivities 2007 2006 As restated £'000 £'000 Operating profit 1,160 1,015Depreciation 589 479Amortisation of goodwill and intangibles 57 56Share-based payments 214 75Decrease in fixed assets due to transfer to stock 121 -Increase in stock (335) (113)Decrease in debtors 981 756Decrease in creditors (736) (448)Increase in provisions 95 - ______ ______ 2,146 1,820 ______ ______ Preliminary announcement of results for the year ended 31 March 2007Notes to the preliminary announcement (continued) 9. Analysis of changes in net funds 2006 Cashflow Non cash 2007 movements £'000 £'000 £'000 £'000 Bank and cash 1,625 409 - 2,034Bank overdraft - - - - ______ ______ ______ ______ 1,625 409 - 2,034 Hire purchase contracts:Due within one year (58) 58 (7) (7)Due after more than one year (39) 29 7 (3) ______ ______ ______ ______Net funds 1,528 496 - 2,024 ______ ______ ______ ______ 10. Reconciliation of net cash flow to movement in net funds 2007 2006 £'000 £'000Increase/(decrease) in cash in the year 409 (757)Cash outflow from hire purchase financing 87 85 ______ ______Change in net funding from cashflows 496 (672)Net funds at start of year 1,528 2,200 ______ ______Net funds at end of year 2,024 1,528 ______ ______ This information is provided by RNS The company news service from the London Stock Exchange