UCG.L Regulatory News (UCG)

23 Dec 2005 07:00

United Carpets Group plc23 December 2005 UNITED CARPETS GROUP plc Interim announcement of results for the period ended 30 September 2005 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 interim results for the six months ended 30 September2005. Highlights •Group revenues increased to £7.70m (2004: £6.58m) •Like for like sales slightly positive •Challenging trading environment led to profit before tax of £0.47m (2004: £1.23m) •Since the period end recorded positive like for like sales of 4.7% •Maiden interim dividend of 0.25p, reflecting the underlying strength of the business Paul Eyre, United Carpets' Chief Executive said: "Like many retailers we havefound market conditions very challenging, however, the Group's positive like forlike sales performance demonstrates the underlying strength of our business. Wehave held back the new opening programme during this period, allowing themanagement team to concentrate their efforts on those stores most severelyaffected by the downturn. This has resulted in a number of store franchisesbeing terminated and reallocated to new franchisees. This process is ongoing.The Group intends to continue the roll-out of its franchise concept acrossNorthern and Central England, but given the challenging market conditions, willdo so at a more cautious rate than originally envisaged. This will enablemanagement to focus on increasing the efficiency of its existing portfolio." Enquiries: United Carpets Group plcPaul Eyre, Chief Executive 01709 579 450Ian Bowness, Finance Director Cardew GroupTim Robertson 020 7930 0777Will Scott-Gall Chairman's Statement I am pleased to present United Carpets' results for the six months to 30September 2005. It has been a challenging market environment for retailers,exemplified by a marked slowdown in consumer spending which has had asignificant impact upon the Group's trading performance. As we stated at thetime of our AGM in October, we have adopted a more defensive strategy than weenvisaged taking earlier this year, by reducing the number of new store openingsand focusing instead on supporting those stores most severely affected by thedownturn. As a result we recorded slightly positive like for like sales growthof 0.3%, a creditable achievement in this environment. Financial Review Total revenue increased to £7.70m (2004: £6.58m) with the new stores openedduring the period under review helping to offset the impact of the marketenvironment. 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 £22.9m (2004: £19.7m). Like for like sales were slightly positive, up 0.3% compared with the previousyear, with floor coverings sales up 2.1% like for like, reflecting the strengthof our retail position and continued spend on marketing, resulting in a seriesof successful television, radio and print advertising campaigns. Since theperiod-end, like for like sales have improved to 4.7% for the 11 weeks to 15December 2005, with core floor coverings sales ahead by 4.5% like for like andbeds sales up 6.6% like for like. Gross margin increased to 66.1% in the first half, reflecting the increasingproportion of total turnover derived from the provision of services tofranchisees. Floor coverings and beds gross margins reduced in the first half byaround 200 basis points as the Group invested in aggressive promotional activityto win market share in an increasingly competitive environment. The increase in administrative expenses, compared to the same period last year,principally reflects the increased costs of rents and advertising associatedwith new stores, opened during the period and the previous financial year, whichare recharged, within Group turnover, to the appropriate franchisees. Additionalcosts were incurred whilst operating centrally, during the period, six storeswhich are not considered to be long-term corporate stores. Furthermore theincremental costs associated with being an AIM listed company amounted toapproximately £200k in the period. Total administrative expenses for the halfwere broadly similar to the second half of the previous financial year. Profit on ordinary activities before taxation was £0.47m (2004: £1.23m). The Group remains in a robust financial position, supported by a strong balancesheet with net cash of £1.9m at the period end. Earnings per share reduced to 0.4p (2004: 1.2p). An interim dividend of 0.25pper share will be paid on 30 January 2006 to shareholders on the register on 6January 2006. Operations Review The Group ended the period with 58 stores, which included five new stores.Despite the decision to reduce the store opening programme in the second half ofthis calendar year the Group remains committed to developing its storeportfolio. With the exception of 11 corporate stores, the remainder were allfranchises operating under United Carpets' bespoke franchise model, which aimsto combine the advantages of a multiple retailer with the entrepreneurial driveof an independent. As the Group expands so its economics improve, in particular,from more cost-effective advertising, as well as the ability to leverage theother benefits of increased scale. Floor coverings Sales of floor coverings, predominantly carpet, laminate and vinyl flooring,held up reasonably well as shown by our positive like for like salesperformance. Our product offering remains extremely competitive, appealing to awide range of fashion conscious customers at relatively low cost and providing acertain level of protection from the current downturn. Our ability to rapidly source and select new styles from a wide range of floorcovering manufacturers ensures we continue to provide our customers with thelatest designs and styles. We have continued to invest in the Group's marketing strategy in targeted areaswhere we have sufficient critical mass. We produced a number of successfulprint, television and radio advertising campaigns, which have proved effectivein generating footfall into our stores. Beds Beds represent approximately 20% of Group turnover and have, due to the higheraverage purchase price, been more affected by the general downturn in consumerspending. Like for like sales for the first half were down 11.5% but have shownpositive like for like growth in the period since then. Store Opening Programme The decision to slow down the store opening programme impacted on the Group'sfinancial results for the six months under review. Instead of pursuing ourroll-out programme of new franchisee stores at the rate set at the beginning of2005, irrespective of market conditions, we switched our focus to addressingthose stores that were significantly under performing by introducing newfranchisees to run them. This has meant that we finished the first six months ofthis financial year with 58 stores, three less than our initial target. Despitethis, we believe these actions will benefit the future performance of the Group. During the period we managed eleven stores centrally of which five are long-termcorporate stores. The remaining six stores struggled under the prevailing marketconditions and have had a disproportionately adverse affect on our overallprofitability. Of the six stores, one has already been successfullyre-franchised, a second is in advanced negotiations, one has been closed withanother scheduled to be closed. Suitable franchisees are being sought for theremaining two stores. We opened five new stores in Chorley, Dudley, Huddersfield, Keighley andSouthport. Since the period end we have opened in Leeds and Long Eaton andcurrently have several sites under consideration with a number of franchiseeswaiting to take up franchises as they become available. We believe there issignificant scope for adding further sites within our existing target regions,where they can benefit from local familiarity with the brand name and fromongoing advertising campaigns. People The Group directly and indirectly employs over 300 people all of whom haveworked hard to combat what has been a difficult trading period. The Board wouldlike to thank colleagues in all parts of the business for their hard work andcommitment to growing the Group. Outlook The Group's core retail position has proved to be more resilient to the currentmarket conditions than many of our peers and this is a positive indicator forour longer-term future. The decision to slow down our store opening programmeduring this period will also have longer-term benefits. Trading since theperiod-end has improved with like for like sales 4.7% ahead of the comparativeperiod last year. Our franchise model is well suited to our target markets andthe Board believes there are numerous exciting opportunities where new storeswill be able to flourish. Independent review report to United Carpets Group plc Introduction We have been instructed by the Company to review the financial information whichcomprises the unaudited consolidated profit and loss account, unauditedconsolidated balance sheet, unaudited consolidated cash flow statement and notesto the interim report and we have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report, including the conclusion has been prepared for and only for theCompany for the purpose of the AIM Rules of the London Stock Exchange and for noother purpose. Our work has been undertaken so that we might state to theCompany those matters we are required to state to them in an independent reviewreport and for no other purpose. To the fullest extent permitted by law, we donot accept or assume responsibility to anyone other than the Company for ourwork, for this report, or for the conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the Directors. The Directors areresponsible for preparing the interim report in accordance with the AIM Rules ofthe London Stock Exchange which require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of management and applying analyticalprocedures to the financial information and underlying financial data and basedthereon, assessing whether the accounting policies and presentation have beenconsistently applied unless otherwise disclosed. A review excludes auditprocedures such as tests of controls and verification of assets, liabilities andtransactions. It is substantially less in scope than an audit performed inaccordance with United Kingdom Auditing Standards and therefore provides a lowerlevel of assurance than an audit. Accordingly we do not express an audit opinionon the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2005. Tenon Audit LimitedChartered Accountantsand Registered AuditorNottingham Note: Legislation in the United Kingdom governing the preparation and dissemination offinancial information may differ from legislation in other jurisdictions. Unaudited consolidated profit and loss account for the 6 month period ended 30September 2005 Note 6 months ended 6 months ended Year ended 30 Sept 2005 30 Sept 2004 31 March 2005 Unaudited Unaudited Audited £'000 £'000 £'000 Turnover 7,698 6,579 15,716Cost of sales (2,612) (2,318) (5,466) ______ ______ ______ Gross profit 5,086 4,261 10,250 Distributioncosts (859) (668) (1,433)Administrativeexpenses (3,856) (2,375) (6,518)Otheroperatingincome 42 41 210 ______ ______ ______ Operatingprofit 413 1,259 2,509 Mergerexpenses - - (61)Profit ondisposal of fixed assets - - 168 ______ ______ ______Profit onordinary activitiesbeforeinterest 413 1,259 2,616 Interestreceivable 55 13 52Interestpayable - (39) (28) ______ ______ ______ Profit onordinary activitiesbeforetaxation 468 1,233 2,640 Taxation (150) (370) (818) ______ ______ ______ Profit onordinary 5 activitiesaftertaxation 318 863 1,822 ______ ______ ______ Earnings pershare 6 - Basic anddiluted 0.4p 1.2p 2.4p ______ ______ ______ All amounts relate to continuing activities. There are no recognised gains orlosses other than the profit for the period as shown above. The notes belowform part of these financial statements. Unaudited consolidated balance sheet as at 30 September 2005 Note At 30 September 2005 At 30 September 2004 At 31 March 2005 Unaudited Unaudited Audited £'000 £'000 £'000 £'000 £'000 £'000 FixedassetsIntangibleassets 305 360 333Tangibleassets 3,016 2,139 2,702 -------- ------- ------- 3,321 2,499 3,035 CurrentassetsStocks 1,450 1,265 1,232Debtors 3,216 2,939 3,925Cash at bankand in hand 2,195 788 2,654 -------- -------- ------- 6,861 4,992 7,811 Creditors:amountsfalling duewithin oneyear (4,346) (4,325) (5,063) -------- -------- ------- Net currentassets 2,515 667 2,748 -------- ------- ------- Total assetsless currentassets 5,836 3,166 5,783 Creditors:amountsfalling dueafter morethan one year (46) (241) (108) Provisions forliabilitiesand charges (74) - (74) -------- ------- -------Net assets 5,716 2,925 5,601 ======== ======= ======= Capital and reserves- equityCalled upshare capital 4,070 3,520 4,070Share premiumaccount 1,106 - 1,106Profit andloss account 5 3,650 2,515 3,535Other reserve (3,110) (3,110) (3,110) -------- ------- -------Shareholders'funds 5,716 2,925 5,601 ======== ======= ======= The notes below form part of these financial statements. Unaudited cashflow statement for the 6 month period ended 30 September 2005 Note 6 months ended 6 months ended 2005 30 September 2005 30 September 2004 Unaudited Unaudited Audited £'000 £'000 £'000 £'000 £'000 £'000 Net cashinflow/(outflow)fromoperating activities 4 60 (366) 1,146 Returns oninvestmentsandservicing offinanceInterestreceived 55 13 52Interest paid - (39) (28) ______ ______ ______ Net cashinflow/(outflow)fromreturns oninvestmentsand servicing of finance 55 (26) 24 TaxationCorporationtaxreceipt/(payment) 23 (18) (170) ______ ______ ______ CapitalexpenditurePurchase oftangiblefixed assets (537) (574) (1,618)Sale oftangiblefixed assets - 26 522 ______ ______ ______Net cashoutflow fromcapitalexpenditure (537) (548) (1,096) _______ _______ _______Net cashoutflowbefore financing (399) (958) (96) FinancingCapitalelement ofhirepurchaserepayments (62) (19) (137)Bank loans - (490) (635)Shares issuedincludingpremium - - 1,717 ______ ______ ______ Net cash(outflow)/inflow from financing (62) (509) 945 ______ ______ ______ (Decrease)/increase 4 (461) (1,467) 849 ______ ______ ______ The notes below form part of these financial statements. United Carpets Group plc Notes to the interim report 1. Results and accounting policies The interim report has been prepared under the historical cost convention and inaccordance with the Group's accounting policies as set out in the financialstatements for the year ended 31 March 2005. In accordance with FRS 18, theBoard is currently undertaking a review of all accounting policies to ensurethat they remain appropriate to the Group's circumstances. The interim resultswere approved by the Board on 20 December 2005 and are unaudited. The accounts have been prepared in accordance with the principles of mergeraccounting as set out in Financial Reporting Standard 6 "Acquisitions andMergers". Accordingly, the financial information for the Group has been presented as ifUnited Carpets (Franchisor) Limited, United Carpets (Central) Limited, DebrikInvestments Limited, Weavers Carpets Limited and Nottingham Carpet WarehouseLimited ("the merged entities") had been owned by United Carpets plc throughoutthe current and prior periods. Accordingly, the consolidated financialstatements include the whole of the results of the merged entities for the yearended 31 March 2005. The corresponding figures for the previous year and period include the resultsof the merged entities, the assets and liabilities at the previous balance sheetdate and the shares issued by United Carpets Group plc as consideration as ifthey had always been in issue. The difference between the nominal value ofshares and the share premium accounts of the merged entities and the nominalvalue of shares issued by the Company to acquire the merged entities is taken toreserves. 2. Taxation The tax charge accrued in these interim results reflects an estimated tax rateof 30% for the period to 30 September 2005. 3. Interim dividend An interim dividend of 0.25p per share has been proposed (2004: No interimdividend proposed). Following a change to the requirements of the Companies Act 1985, the proposeddividend is not shown on the face of the profit and loss account but is shown asa movement in reserves within note 5. 4. Notes to cash flow statement (a)Reconciliation of operating profit to net cash inflow/(outflow) from operating activities: 6 months 6 months Year ended ended 30 September ended 30 September 31 March 2005 2004 2005 £'000 £'000 £'000 Operating profit 413 1,259 2,509Depreciation 223 197 335Profit on disposal offixed assets - (9) -Amortisation of goodwilland intangibles 28 - 58Merger expenses - - (61)Increase in stock (218) (240) (207)Decrease/(increase) indebtors 686 (912) (1,542)(Decrease)/increase increditors (1,072) (661) 54 ________ _______ _________ 60 (366) 1,146 _________ _______ __________ (b) Reconciliation of net cash flow to movements in net funds Net funds at start of period 2,200 646 646(Decrease)/increase in cash in (461) (1,467) 849the periodDecrease in debt resulting from - 490 635cash flowsRepayment of hire purchase contract 62 19 138Inception of finance leases - (43) (68) _________ _______ _______Net funds/(debt) at end of period 1,801 (355) 2,200 _________ _______ _______ (c) Analysis of changes in net funds At At 1 April 30 September 2005 Cashflows 2005 £'000 £'000 £'000Net cashBank and cash 2,654 (459) 2,195Bank overdraft (272) (2) (274) _________ _________ _________ 2,382 (461) 1,921DebtFinance leases (182) 62 (120) Net funds/(debt) 2,200 (399) 1,801 _________ ________ ________ 5. Movement on profit and loss account reserves At At At 30 September 30 September 31 March 2005 2004 2005 £ £ £Profit and loss account broughtforward 3,535 1,652 1,652Transfer of merger expenses - - 61Profit on ordinary activitiesafter taxation 318 863 1,822 Dividends (203) - - ______ ______ ______Profit and loss account carriedforward 3,650 2,515 3,535 ______ ______ ______ 6. Earnings per share Basic earnings per share is calculated on a weighted average of 81,400,000shares in issue for the period(30 September 2004 :70,399,992; 31 March 2005 :74,893,151). The weighted average share capital for earnings per share calculated on adilutive basis was 81,400,000(30 September 2004 :74,893,151; 31 March 2005 :75,222,055). 7. Interim financial information Copies of this interim report are being sent to all shareholders and will beavailable to the public from the Company's registered office. The interim financial information for the period ended 30 September 2005 isunaudited and does not constitute statutory accounts within the meaning of s240of the Companies Act 1985. The financial information for the twelve months ended 31 March 2005 is derivedfrom the statutory accounts. Full accounts were delivered to the Registrar of Companies. The report of theauditors was unqualified and did not contain any statement under s237(2) or (3)of the Companies Act 1985. This information is provided by RNS The company news service from the London Stock Exchange