UCG.L Regulatory News (UCG)

28 Dec 2006 07:00

United Carpets Group plc28 December 2006 For immediate release28 December 2006 UNITED CARPETS GROUP plc Interim announcement of results for the period ended 30 September 2006 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 period ended 30 September 2006. Highlights • Turnover increased by 17.4% to £8.97m (2005: £7.64m) • Like for like sales up 11.6% against the prior year • Adjusted operating profit up 30.3% to £0.5m* • Profit before tax up 6.8% to £0.4m • Earnings per share up 13.3% to 0.34p • Increase in marketing activities and appointment of a new Retail Operations Director • 60 stores in Northern and Central England • Like for like sales since the period end up 13.0% * Adjusted operating profit is stated before amortisation and FRS20 share-basedpayment charges Paul Eyre, Chief Executive, said: "The Group has performed well during this trading period. We have introduced anumber of new franchisees into the business, which together with a slightlyimproved trading environment has lifted the Group's overall performance." Enquiries: United Carpets Group plcPaul Eyre, Chief ExecutiveIan Bowness, Finance Director 01709 579 450 Cardew GroupTim Robertson 020 7930 0777/William Scott-Gall 07900 927 650 Chairman's statement I am pleased to announce United Carpets Group's interim results for the periodended 30 September 2006. This has been a good trading period for the Group andour decision to slow down the new store opening programme and focus instead onmaximising revenues from our existing stores has proved to be the rightstrategy. We began the financial year with 60 stores and, whilst the totalnumber now trading is unchanged, we have addressed the poorer performing storesby either changing the existing franchisee or closing the store. In addition wehave opened three new stores. The net effect of these actions has been tosignificantly improve the overall trading performance of the Group shown by the17.4% improvement in turnover and the 11.6% increase in like for like sales. The Group will continue to roll out its franchise concept in the second half ofthe year on a measured basis. We believe the business now has a much firmerfoundation on which to grow and we are increasing our focus on strengthening theretail offering and expanding the marketing programme, while continuing toaddress trading issues in a small number of stores. Financial review Total revenues increased by 17.4% to £8.97m (2005: £7.64m) reflecting theimproved trading performance of the store portfolio, the full period impact ofthe nine new stores opened during the previous financial year and the increasein the number of corporate stores in comparison to the previous year. Networksales across the Group increased to £25.1m, which includes the value of retailsales by our franchisees on which we base our like for like comparisons. Like for like sales were up 11.6% compared to the previous period. Given theCompany's 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 12.9% increase and like for like sales forbeds increased by 0.8%. The trading environment appears to have improved alittle supported by continued strength in the housing market, however, this hasbeen offset to some extent by a more challenging environment in the wider retailmarket. Our margin has improved slightly from 65.8% to 66.2%. The increase indistribution costs principally reflects the additional salary and marketingcosts associated with the increased number of corporate stores in comparison tothe previous year. The increase in administrative expenses principally reflectsthe increase in rental costs and marketing as the network grows in comparison tothe same period last year and increased investment in marketing. These costs arerecharged to franchisees in turnover. Consequently adjusted operating profitbefore amortisation and FRS20 share-based payment charges increased by 30.3% to£508k (2005: £390k). Profit on ordinary activities before taxation increased by 6.8% to £406k (2005:£380k). Earnings per share were 0.34p (2005: 0.30p). The Board recommends aninterim dividend of 0.25p per share (2005: 0.25p). The interim dividend will bepaid on 31 January 2007 to those shareholders whose names are on the register on12 January 2007. Operations review The Group operates 60 branded stores across Northern and Central England. Withthe exception of 12 corporate stores, the remainder are all franchises operatingunder United Carpets' bespoke franchise model, which aims to combine theadvantages of a multiple retailer with the entrepreneurial drive of anindependent. As the Group continues to expand so its economics will improve, inparticular, from more cost effective advertising, as well as the ability toleverage the other benefits of increased scale. We have made significant progress during 2006, creating a solid platform onwhich to enter 2007. The reassignment of a number of stores to new franchiseesand the closure of other non-performing stores has lifted the overall tradingperformance and created a much stronger portfolio. As a result, management isnow increasingly focused on improving the retail offer and expanding themarketing programme to support the current growth in sales. The Group has recently appointed Ray Tricker as Retail Operations Director, witheffect from 1 January 2007. Ray joins the Group from Topps Tiles plc withextensive experience of managing successful retail chains throughout thecountry. He will be focused on developing the retail proposition across thestore portfolio from individual store presentation to improved customer service. The Group's co-ordinated marketing programme, which includes television, printand radio advertising campaigns has been key to the increased sales performance.In the first half of this financial year we increased our advertising spend andhave benefited both in terms of sales and brand awareness. We will continue torun campaigns throughout the year targeting our specific areas of operation. 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. This has been a good trading period for floorcoverings, the active housing market together with improved store presentationand increased advertising has led to a 12.9% improvement in like for like sales. Beds Beds are sold through the majority of the store network with franchisees earninga commission on sales. Although the like for like sales performance of thisdivision showed a 0.8% increase against the same period last year, this part ofthe business is not performing to its potential. The management team are workingclosely with franchisees to better integrate the sales of beds with floorcoverings, reviewing the sales space allocated to beds and training sales staff. Store opening programme At the end of the period, we had 58 stores of which 12 were corporate stores and46 were franchisees. The decision to slow down the store opening programme andfocus on maximising revenues from existing stores meant that no new stores wereopened during this period. Instead we reassigned five stores to new franchiseesand closed a further two stores. These changes have had a positive effect onGroup trading. Since the half-year end, we have successfully opened three new stores in Ripley,Stockport and Coventry. We have also reassigned a further four stores to newfranchisees and closed one store. As a result, the total portfolio is now 60strong with 12 corporate stores and 48 franchisees. Of the 12 corporate stores,six are considered to be core corporate stores to be retained to enable ongoingtraining and product development, two are likely to be closed and four will beassigned to suitable franchisees. We expect to continue to open new sites on a measured basis and although furtherchanges to existing franchised stores may occur, the bulk of these changes havenow been completed. People The Company has performed well during the period and much of this achievement isdue to the hard work of the people employed by the Company. The Board wouldtherefore like to thank all employees for their dedication and commitment andlooks forward to building on this during 2007. Outlook Since the half-year end trading has continued to be positive with like for likesales for the 12 weeks to 21 December 2006 up by 13.0%. The Board has beenencouraged by this start to the second half, together with the success of theactions that have been taken to underpin the foundations of the business andbelieves the Group is well positioned to meet its' expectations. A key focusduring 2007 will be to improve the retail expertise within each store, open newstores on a measured basis and where appropriate continue to ensure we have theright franchisees in the right stores. Peter CowgillChairman 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 statement of recognised gains and losses, unaudited consolidatedbalance sheet, unaudited consolidated cash flow statement and notes to theinterim report and we have read the other information contained in the interimreport and considered whether it contains any apparent misstatements or materialinconsistencies 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 International Standards on Auditing (U.K. and Ireland) andtherefore provides a lower level of assurance than an audit. Accordingly we donot express an audit opinion on 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 6 months ended30 September 2006. Tenon Audit LimitedRegistered 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 ended30 September 2006 6 months 6 months ended 30 ended 30 Year ended September September 31 March 2006 2005 2006 Unaudited Unaudited Audited Restated Restated Note £'000 £'000 £'000 Turnover 8,978 7,647 17,649 Cost of sales (3,036) (2,612) (5,894) ______ ______ ______Gross profit 5,942 5,035 11,755 Distribution costs (975) (859) (1,678)Administrative expenses (4,577) (3,893) (9,269)Other operating income 55 42 207 ______ ______ ______Adjusted operating profit* 508 390 1,146Amortisation (28) (28) (56)Share based payment (35) (37) (75) ______ ______ ______Operating profit 445 325 1,015 Loss on disposal of fixed assets (74) - (121) ______ ______ ______Profit on ordinaryactivities before interest 371 325 894 Interest receivable 35 55 106Interest payable - - (18) ______ ______ ______Profit on ordinaryactivities before taxation 406 380 982 Taxation (132) (135) (443) ______ ______ ______Profit on ordinaryactivities after taxation 4 274 245 539 ______ ______ ______Earnings per share- Basic 0.34p 0.30p 0.66p ______ ______ ______ - Diluted 0.33p 0.30p 0.66p ______ ______ ______ All amounts relate to continuing activities. The notes on pages 10 to 15 formpart of these financial statements. * Adjusted operating profit is stated before amortisation and FRS20 share-basedpayment charges. Unaudited consolidated statement of total recognised gains and losses as at30 September 2006 6 months 6 months Year ended ended ended 30 30 31 September September March 2006 2005 2006 Unaudited Unaudited Audited Restated Restated £'000 £'000 £'000 Profit for the period 274 245 539 ______ ______ ______Total recognised gains and losses 274 245 539relating to the period ______ ______ Prior year adjustment (41) ______Total gains and losses recognised 233since last annual financial statements Unaudited consolidated balance sheet as at 30 September 2006 At 30 September At 30 September At 31 March 2006 2005 2006 Unaudited Unaudited Audited Restated Restated Note £'000 £'000 £'000 £'000 £'000 £'000 Fixed assetsIntangible assets 248 305 277Tangible assets 3,385 3,016 3,570 ______ ______ ______ 3,633 3,321 3,847Current assetsStocks 1,446 1,450 1,345Debtors 3,154 3,876 3,622Cash at bank and in hand 1,671 2,195 1,625 ______ ______ ______ 6,271 7,521 6,592Creditors: amounts falling (3,264) (4,797) (3,861)due within one year ______ ______ _____Net current assets 3,007 2,724 2,731 ______ ______ _____Total assets less current 6,640 6,045 6,578assetsCreditors: amounts (2,285) (2,043) (2,125)falling due aftermore than one yearProvisions for liabilities and (119) - (119)charges ______ ______Net assets 4,236 4,002 4,334 ______ ______ _____Capital and reserves - equityCalled up share capital 4,070 4,070 4,070Share premium account 1,106 1,106 1,106 Profit and loss account 4 2,060 1,899 2,193Other reserves 5 (3,000) (3,073) (3,035) ______ ______ ______Shareholders' funds 6 4,236 4,002 4,334 ______ ______ Unaudited cashflow statement for the 6 month period ended 30 September 2006 6 months ended 6 months ended Year ended 30 September 30 September 31 March 2006 2006 2006 Unaudited Unaudited Audited Note £'000 £'000 £'000 £'000 £'000 £'000 Net cash inflow fromoperating activities 3 259 60 1,820 Returns on investments andservicing of financeInterest received 35 55 106Interest paid - - (18) _______ _______ _______Net cash inflow fromreturns on investments andservicing of finance 35 55 88 TaxationCorporation tax (payment)/receipt (2) 23 (908) Capital expenditurePurchase of tangible fixedassets (174) (537) (1,519)Sale of tangible fixed - - 51assets _______ _______ _______Net cash outflow fromcapital expenditure (174) (537) (1,468) _______ _______ _______Net cash inflow/(outflow) before financing 118 (399) (468) Equity dividends paid - - (204) FinancingCapital element of hirepurchase repayments (72) (62) (85) _______ _______ _______Net cash outflow fromfinancing (72) (62) (85) _______ _______ _______Increase/(decrease) in 3 46 (461) (757)cash _______ _______ _______ 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 2006. The interim results were approvedby the Board on 27 December 2006 and are unaudited. Changes of accounting policy As disclosed in the Annual Report at 31 March 2006, there has been a change ofaccounting policy for income recognition in respect of the initial fee paid bynew franchises at the outset of a franchise agreement. Previously the policy wasto recognise the initial franchise fee income in full upon commencing afranchise arrangement. This policy has changed to spread this initial fee overten years, the term of the franchise arrangement. The change in accountingpolicy has reduced the profit before tax for the period ended 30 September 2005by £51,000 (£36,000 after tax) and net assets by £1,713,000. The group is required to adopt FRS20 "Share-based Payment (IFRS2)" in respect ofthe financial statements for the year ended 31 March 2007. Accordingly, theseaccounts have been prepared in accordance with this standard. The effect ofadopting this standard has been to decrease reported profit for the periodsended 30 September 2006, 31 March 2006 and 30 September 2005 by £35,000, £37,000and £75,000 for amounts charged in respect of share based payments. The charge in the period ended 31 March 2006 was reduced by £34,000 as a resultof the removal of amounts previously provided within creditors in respect ofUITF17 which has now been superseded by FRS20. The net prior year adjustment tothe results previously reported for the period ended 31 March 2006 was £41,000and net assets were increased by £34,000. There was no adjustment to net assetsat 30 September 2006 or 30 September 2005 following the change. There is no impact on taxation as a result of the implementation of FRS20. Thetable below shows the overall impact of the FRS20 adjustments made. 30 30 September September 31 March 2006 2005 2006 £'000 £'000 £'000Change in net assets - - (34)Change in reported profit (38) (37) (41) 2. Taxation The tax charge accrued in these interim results reflects an estimated tax rateof 32.5% for the period to 30 September 2006. 3. Notes to cash flow statement (a) Reconciliation of operating profit to net cash inflow from operatingactivities: 6 months 6 months Year ended ended ended 30 30 31 March September September 2006 2005 2006 Restated Restated £'000 £'000 £'000Operating profit as previously reported 480 362 1,056 Prior year adjustment (35) (37) (41) ______ _______ _______ Operating profit 445 325 1,015Depreciation 285 223 479Amortisation of goodwill and intangibles 28 28 56Share based payment 35 37 75Increase in stock (101) (218) (113)Decrease in debtors 468 686 756Decrease in creditors (901) (1,021) (448) ____ _______ _______ 259 60 1,820 ________ _______ _________ (b) Reconciliation of net cash flow to movements in net funds Net funds at start of period 1,528 2,200 2,200Increase/(decrease) in 46 (461) (757)cash in the periodRepayment of hire 72 62 85purchase contract _______ _______ _______Net funds at end of period 1,646 1,801 1,528 (c) Analysis of changes in net funds At At 1 April 30 September 2006 Cashflows 2006 £'000 £'000 £'000Bank and cash 1,625 46 1,671Hire purchase (97) 72 (25)contracts _________ ________ ________Net funds 1,528 118 1,646 _________ ________ ________ 4. Movement on profit and loss account reserves At 30 At 30 At September September 31 March 2006 2005 2006 Restated Restated £'000 £'000 £'000Profit and loss account 2,234 1,858 1,858brought forward Prior year adjustment (41) - - ______ ______ ______ As restated 2,193 1,858 1,858 Profit on ordinaryactivitiesafter taxation 274 245 539 Dividends (407) (204) (204) ______ ______ ______Profit and loss accountcarried forward 2,060 1,899 2,193 ______ ______ ______ 5. Movement on other reserves Merger Share - Total reserve based payment reserve Restated* £'000 £'000 £'000 At 1 April 2005 (3,110) - (3,110)Charge for the period - 37 37 ______ ______ ______At 30 September 2005 (3,110) 37 (3,073)Charge for the period - 38 38 ______ ______ ______At 31 March 2006 (3,110) 75 (3,035)Charge for the period - 35 35 ______ ______ ______At 30 September 2006 (3,110) 110 (3,000) ______ ______ ______ *Prior to the restatement of the results for 2005 and 2006 as required by FRS20there was no share-based payment reserve. 6. Reconciliation of movement in shareholders funds At At At 30 30 31 March September September 2006 2005 2006 Restated Restated £'000 £'000 £'000 Profit for the period 274 245 580Dividend paid and (407) (204) (204)proposedShare based payment 35 37 75adjustment ______ ______ ______Net (decrease)/increasein shareholders' funds (98) 78 451 ______ ______ ______Opening shareholders'fundsas previously stated 4,334 3,924 3,924Prior year adjustment - - (41) ______ ______ ______Opening shareholders'funds as restated 4,334 3,924 3,883 ______ ______ ______Closing shareholders' 4,236 4,002 4,334funds ______ ______ ______ 7. Earnings per share Basic earnings per share is calculated on a weighted average of the shares inissue for the periods. In each period this is 81,400,000 shares. Diluted earnings per share is calculated on a weighted average of the shares inissue for the period, adjusted to take into account the potential ordinaryshares. In the period ended 30 September 2006, this is 81,900,326 shares. In theperiods ended 30 September 2005 and 31 March 2006 this is 81,400,000 shares. 8. 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 periods ended 30 September 2006 and 30September 2005 is unaudited and does not constitute statutory accounts withinthe meaning of Section 240 of the Companies Act 1985. The financial information for the twelve months ended 31 March 2006 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