UCG.L Regulatory News (UCG)

21 Dec 2007 07:01

United Carpets Group plc21 December 2007 UNITED CARPETS GROUP plc Interim Results for the period ended 30 September 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 interim results for the period ended 30 September 2007. Highlights • Network sales grew by 16.1% to £29.16m (2006: £25.12m) • Revenue increased by 14.8% to £10.31m (2006: £8.98m) • Like for like sales up 14.2% • Profit before tax increased by 73.9% to £706,000 (2006: £406,000) • Underlying profit before tax* increased by 44.7% to £735,000 (2006: £508,000) • 4 further stores have been opened and one closed since the year end bringing the current total to 62 • Interim dividend increased by 10.0% to 0.275p (2006: 0.25p) *Before goodwill impairment of £29,000 (2006: £28,000) and losses on disposalsof £Nil (2006: £74,000) Paul Eyre, Chief Executive, said: 'In a time of challenging trading conditions, our continued focus on customerservice, an increased product range and our innovative sales strategies haveenabled us to deliver solid growth throughout the period under review. Wecontinue to look to expand the group through the opening of new stores, whilstensuring that the same level of high service is maintained in our existingoperations and, as a result, are confident that United Carpets will trade inline with management expectations.' Enquiries: United Carpets Group plcPaul Eyre, Chief Executive 01709 579 450Ian Bowness, Finance Director Cardew Group 020 7930 0777Tim RobertsonJamie Milton Seymour PierceJonathan Wright 020 7107 8000 Chairman's statement I am pleased to announce the Group's interim results for the six months ended 30September 2007. These are the Group's first IFRS condensed consolidated interimfinancial statements. The Group generated revenue of £10.31m, compared to £8.98min the corresponding period in 2006, operating from 61 stores at 30 September2007 (31 March 2007: 59 stores) located across Northern and Central England. Ourcontinued revenue growth reflects the success of our strategy of the last 18months of raising customer service levels and improving product range within ourexisting stores, whilst seeking to gradually expand the number of storesoperating under the United Carpets brand. Financial review Revenue increased by 14.8% to £10.31m (2006: £8.98m), reflecting the increasedsales from individual stores generated by improved marketing, closure of poorerperforming stores and the recruitment of high quality new franchisees. Networksales across the Group, including the value of retail sales by our franchisees(to give a measure of the Group's revenue on a more comparable basis to aconventional retailer), increased to £29.16m (2006: £25.12m). Like for like sales were up 14.2% compared to the previous year. Given UnitedCarpets' franchise structure, like for like sales are not the best measure ofthe Group's financial performance but they do provide a good steer on theoverall trading performance. Within the like for like sales performance the coreflooring business achieved a 15.5% like for like increase on the previous yearwhilst bed like for like sales increased by 1.6%. We continue to develop ourbeds division through increased product range and sales incentives to staff andwe are focused on generating additional returns from this part of the businessin the future. Gross margin reduced slightly to 69.6% (2006: 70.1%) due to corporate stores andwholesale turnover increasing as a proportion of total revenue. Distribution expenses increased 25.3% broadly in line with the growth inturnover of corporate stores and administrative expenses increased by 8.5%. Underlying profit on ordinary activities (being before taxation, goodwillimpairment and losses on disposals) increased by 44.7% to £735,000 (2006:£508,000). Earnings per share were 0.57p (2006: 0.34p). Dividend The Board recommends an interim dividend of 0.275p per share (2006: 0.25p). Theinterim dividend will be paid on 31 January 2008 to those shareholders whosenames are on the register on 11 January 2008. Operations review The Group ended the period under review with 61 branded stores across Northernand Central England. With the exception of 12 corporate stores, the remainderwere all franchises operating under United Carpets' bespoke franchise model,which aims to combine the advantages of a multiple retailer with theentrepreneurial drive of an independent. As the Group continues to expand so itseconomics will improve, in particular, from more cost effective advertising, aswell as the ability to leverage the other benefits of increased scale. 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. Despite harsh conditions trading has beenstrong during the six months, with a particularly good performance in the firstfour months (against weaker comparatives due to the World Cup and hot weather inthe previous year) followed by two months of tougher comparatives. The salesperformance has been helped by increased advertising, improved store layout anda greater emphasis on customer service, backed by regular training days toensure best practice is shared across the Group. During the period under review,there has been a 15.5% 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 2008 in line with the growth of its store portfolio. The Group hasrecently introduced an in house cutting service which should enable some marginenhancement within our floor coverings sales to help offset increasing rawmaterial costs. Beds Beds are sold through the majority of the store network with franchisees earninga commission on sales. Historically, this part of the business has not performedto its full potential and like for like sales over the period under reviewincreased by 1.6%. However, improved product and store layouts, centralwarehousing with direct delivery to customers and dedicated staff with a newincentive scheme were successfully introduced generating significant sales andmargin improvements within our corporate stores and the franchise network willbe encouraged to adopt these new initiatives in order to increase like for likesales within the beds department over the medium term. Store opening programme At the end of the period under review, we operated 61 stores, of which 12 werecorporate stores and 49 were franchised. Our strategy continues to be to limitthe number of store openings and to continue consolidation of our existingposition and improve the quality of individual franchisees/store managers andcustomer service across all our stores. During the period under review, we successfully opened a new franchisee store inNorthenden and two corporate stores in Wetherby and Ilkeston, closing onecorporate store in Manchester. Since the period end, we opened a new corporate store in Sleaford, took backstores in Dudley, Ellesmere Port and Huddersfield as corporate stores andsuccessfully franchised our corporate store in Coventry, bringing the totalnumber of stores operating under the United Carpets brand to 62, as at 21December 2007. Of the current 15 corporate stores, six are to be retained to enable ongoingtraining and product development, one is likely to be closed and the remainderwill be matched with suitable franchisees. People The Group has performed well during a period of tough trading and our continuedsuccess reflects the commitment of our staff. As a function of driving sales andimproving our financial performance, the Group continues to invest in thedevelopment and training of our workforce. The Board thanks all employees fortheir dedication and commitment and looks forward to building on this during2008. Outlook Since the end of the period under review, trading has continued to be positivewith like for like sales between 30 September and 13 December up by 5.0% againsta period of strong comparatives. Whilst the widely reported "credit crunch" hasimpacted the broader retail sector, the Group's position at the value end of themarket means the majority of our sales are not linked to the success of thehousing market but by customers wishing to replace or maintain existing floorcoverings. By following our successful strategy of controlled growth andimproved profitability, the Board remains confident that United Carpets is wellpositioned to trade successfully during a tougher economic climate and tocontinue to expand its market share through enhanced sales from existing outletsand the addition of new stores. Peter Cowgill Chairman INDEPENDENT REVIEW REPORT TO UNITED CARPETS GROUP PLC Introduction We have reviewed the accompanying condensed balance sheet of United CarpetsGroup plc as at 30 September 2007 and the related condensed consolidated interim incomestatement and interim statement of cash flows for the six month period thenended. Management is responsible for the preparation and presentation of thisinterim financial information in accordance with applicable law and thoseInternational Financial Reporting Standards (IFRSs) adopted for use in theEuropean Union. Our responsibility is to express a conclusion on this interimfinancial information based on our review. Scope of Review We conducted our review in accordance with International Standard on ReviewEngagements 2410 "Review of Interim Financial Information Performed by theIndependent Auditor of the Entity." A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordance withInternational Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly, we do not express an auditopinion. Conclusion Based on our review, nothing has come to our attention that causes us to believethat the accompanying interim financial information is not prepared, in allmaterial respects, in accordance with applicable law and those InternationalFinancial Reporting Standards (IFRSs) adopted for use in the European Union. Tenon Audit LimitedChartered AccountantsCharnwood HouseGregory BoulevardNottinghamNG7 6NX 21 December 2007 Condensed consolidated interim income statement For the six months ended 30 September 2007 6 months 6 months Note Ended 30 Ended 30 Year ended September September 31 March 2007 2006 2007 Unaudited Unaudited Audited Total Total Total As restated £'000 £'000 £'000 Revenue 2 10,311 8,978 19,546Cost of sales (3,133) (2,683) (5,667) _____________________________Gross profit 7,178 6,295 13,879 Other operating income 38 55 110Distribution expenses (1,222) (975) (2,006)Administrative expenses (5,349) (4,930) (10,823)Loss on disposal - (74) (202) _____________________________Operating profit before financing 645 371 958costs Financial income 61 35 85Financial expenses - - (14) _____________________________Net financing costs 61 35 71 _____________________________Profit before tax 706 406 1,029 Income tax expense 3 (240) (132) (449) _____________________________Profit for the period 2 466 274 580 _____________________________Basic earnings per share: 6 0.57p 0.34p 0.71p _____________________________Diluted earnings per share: 6 0.57p 0.33p 0.71p _____________________________ All amounts are attributable to the equity holders of the parent, and all arisefrom continuing operations. No amounts were recognised directly in equity, andtherefore no separate statement of recognised income and expense has beenpresented. Condensed consolidated interim balance sheet As at 30 September 2007 6 months 6 months year ended 30 ended 30 ended September September 31 March 2007 2006 2007 Unaudited Unaudited Audited Total Total Total £'000 £'000 £'000Non-current assetsProperty, plant and equipment 4 3,932 3,385 3,818Intangible assets 191 248 220 _____________________________ 4,123 3,633 4,038 _____________________________Current assetsInventories 2,271 1,446 1,680Trade and other receivables 2,768 3,154 2,188Cash and cash equivalents 2,653 1,671 2,034 _____________________________ 7,692 6,271 5,902 _____________________________Total assets 11,815 9,904 9,940 _____________________________EquityIssued capital 5 4,070 4,070 4,070Share premium 5 1,106 1,106 1,106Reserves 5 (2,855) (3,000) (2,821)Retained earnings 2,728 2,060 2,162 _____________________________Total shareholders equity 5,049 4,236 4,517 _____________________________Non-current liabilitiesTrade and other payables 1,965 2,285 1,768Provisions 93 - 95Deferred tax liabilities 158 119 157 _____________________________ 2,216 2,404 2,020 _____________________________Current liabilitiesTrade and other payables 4,550 3,264 3,403 _____________________________ 4,550 3,264 3,403 _____________________________Total liabilities 6,766 5,668 5,423 _____________________________Total equity and liabilities 11,815 9,904 9,940 _____________________________ Condensed consolidated interim statement of cash flows For the six months ended 30 September 2007 6 months 6 months year ended 30 ended 30 ended September September 31 March 2007 2006 2007 Unaudited Unaudited Audited Total Total Total £'000 £'000 £'000Cash flows from operating activitiesCash generated from operations 6 259 2,146Interest paid - - (14)Income taxes refunded/(paid) 4 (2) 50 _____________________________Net cash from operating activities 10 257 2,182 _____________________________Cash flows from investing activitiesProceeds from sale of property, plant and - - 70equipmentInterest received 61 35 85Acquisition of property, plant and equipment (445) (174) (1,230) _____________________________Net cash from investing activities (384) (139) (1,075) _____________________________Cash flows from financing activitiesPayment of finance lease liabilities (3) (72) (87)Dividends paid - - (611) _____________________________Net cash from financing activities (3) (72) (698) _____________________________Net (decrease)/increase in cash and cash (377) 46 409equivalentsCash and cash equivalents at start of period 2,034 1,625 1,625 _____________________________Cash and cash equivalents 1,657 1,671 2,034 _____________________________ Notes to the condensed consolidated interim financial statements 1. Significant accounting policies United Carpets Group plc (the "Company") is a company domiciled in the UnitedKingdom. The condensed consolidated interim financial statements of the Companyfor the six months ended 30 September 2007 comprise the Company and itssubsidiary undertakings (together referred to as the "Group"). The condensed consolidated interim financial statements were authorised forissuance on 20 December 2007. (a) Statement of compliance The condensed consolidated interim financial statements have been prepared inaccordance with International Financial Reporting Standards (IFRSs) for interimfinancial statements as adopted for use in the European Union. These are theGroup's first IFRS condensed consolidated interim financial statements for partof the period covered by the first IFRS annual financial statements and IFRS 1First-time adoption of International Financial Reporting Standards has beenapplied. The condensed consolidated interim financial statements do not includeall of the information required for full annual financial statements. An explanation of how the transition to IFRSs has affected the reportedfinancial position, financial performance and cash flows of the Group isprovided in note 10. This note includes reconciliations of equity and profit orloss for comparative periods reported under United Kingdom GAAP (previous GAAP)to those reported for those periods under IFRSs. (b) Basis of preparation The financial statements are presented in pounds sterling, rounded to thenearest thousand. They are prepared on the historical cost basis except thatderivative financial instruments are stated at their fair value. The preparation of interim financial statements in conformity with IAS 34Interim Financial Reporting requires management to make judgements, estimatesand assumptions that affect the application of policies and reported amounts ofassets and liabilities, income and expenses. Actual results may differ fromthese estimates. These condensed consolidated interim financial statements have been prepared onthe basis of IFRSs in issue that are effective or available for early adoptionat the Group's first IFRS annual reporting date, 31 March 2008. Based on theseIFRSs, the Board of Directors have made assumptions about the accountingpolicies expected to be adopted (accounting policies) when the first IFRS annualfinancial statements are prepared for the year-ended 31 March 2008. The condensed set of financial statements included in this half-yearly financialreport has been prepared in accordance with International Accounting Standard34, "Interim Financial Reporting", as adopted by the European Union. The preparation of the condensed consolidated interim financial statements inaccordance with IAS 34 resulted in changes to the accounting policies ascompared with the most recent annual financial statements prepared underprevious GAAP. The accounting policies set out below have been appliedconsistently to all periods presented in these condensed consolidated interimfinancial statements. They also have been applied in preparing an opening IFRSbalance sheet at 1 April 2006 for the purposes of the transition to IFRSs, asrequired by IFRS 1. The impact of the transition from previous GAAP to IFRSs isexplained in note 10. The accounting policies have been applied consistently throughout the Group forpurposes of these condensed consolidated interim financial statements. Notes to the condensed consolidated interim financial statements Significant accounting policies (continued) (c) Basis of consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when theCompany has the power, directly or indirectly, to govern the financial andoperating policies of an entity so as to obtain benefits from its activities.The financial statements of subsidiaries are included in the condensedconsolidated interim financial statements from the date that control commencesuntil the date that control ceases. (ii) Uniting of interests method The results of the group and all of its subsidiary undertakings are consolidatedusing the uniting of interests method of accounting. The investment is recordedin the company's balance sheet at the nominal value of the shares issued,together with the fair value of any additional consideration paid. Merged subsidiary undertakings are treated as if they had always been a memberof the Group, for business combinations which took place before transition toIFRS. The corresponding figures for the previous period include its results for thatperiod, the assets and liabilities at the previous balance sheet date and theshares issued by the Company as consideration as if they had always been inissue. Any difference between the nominal value of the shares acquired by theCompany and those issued by the Company to acquire them is taken to reserves. (iii) Transactions eliminated on consolidation Intragroup balances, and any unrealised gains and losses or income and expensesarising from intragroup transactions, are eliminated in preparing the condensedconsolidated interim financial statements. Unrealised gains arising fromtransactions with associates and jointly controlled entities are eliminated tothe extent of the Group's interest in the entity. Unrealised losses areeliminated in the same way as unrealised gains. (d) Foreign currency (i) Foreign currency transactions Transactions in foreign currencies are translated at the foreign exchange rateruling at the date of the transaction. Monetary assets and liabilitiesdenominated in foreign currencies at the balance sheet date are translated topounds sterling at the foreign exchange rate ruling at that date. Foreignexchange differences arising on translation are recognised in profit or loss.Non-monetary assets and liabilities that are measured in terms of historicalcost in a foreign currency are translated using the exchange rate at the date ofthe transaction. Non-monetary assets and liabilities denominated in foreigncurrencies that are stated at fair value are translated to pounds sterling atforeign exchange rates ruling at the dates the fair value was determined. (e) Property, plant and equipment (i) Owned assets Items of property, plant and equipment are stated at cost or deemed cost lessaccumulated depreciation (see below) and impairment losses (see accountingpolicy j). When parts of an item of property, plant and equipment have different usefullives, those components are accounted for as separate items of property, plantand equipment. (ii) Leased assets Lease items of which the Group assumes substantially all of the risks andrewards of ownership are classified as finance leases. Lease payments areaccounted for as described in accounting policy o. Notes to the condensed consolidated interim financial statements Significant accounting policies (continued) (e) Property, plant and equipment (continued) (iii) Subsequent costs The Group recognises in the carrying amount of an item of property, plant andequipment the cost of replacing part of such an item when that cost is incurredif it is probable that the future economic benefits embodied within the itemwill flow to the Group and the cost of the item can be measured reliably. On thecapitalisation of subsequent costs, original cost and any related accumulateddepreciation are de-recognised. All other costs are recognised in profit or lossas an expense as incurred (iv) Depreciation Depreciation is charged to profit or loss on a straight-line basis over theestimated useful lives of each part of an item of property, plant and equipment.Land is not depreciated. The estimated useful lives are as follows: • Leasehold properties over the term of the lease • Office and computer equipment 25% straight line • Fixtures and fittings 10% straight line • Motor vehicles 25% straight line The residual value is reassessed annually. (f) Intangible assets (i) Other intangible assets Intangible assets, being purchased goodwill, is stated at cost less impairmentlosses (see accounting policy j). Cost is the fair value of the considerationpaid. (ii) Subsequent expenditure Subsequent expenditure on capitalised intangible assets is capitalised only whenit increases the future economic benefits embodied in the specific asset towhich it relates. All other expenditure is expensed as incurred. (g) Trade and other receivables Trade and other receivables are stated at their estimated recoverable amountafter allowance for impairment losses (see accounting policy j). (h) Inventories Stocks are valued at the lower of cost and net realisable value, after makingdue allowances for obsolete and slow moving items. Cost is based on the cost of purchase on a first in, first out basis. Netrealisable value is based on estimated selling price less additional costs tocompletion and disposal. (i) Cash and cash equivalents Cash and cash equivalents comprise cash balances and call deposits with anoriginal maturity of three months or less. Bank overdrafts that are repayable ondemand and form an integral part of the Group's cash management are included asa component of cash and cash equivalents for the purpose of the statement ofcash flows. Notes to the condensed consolidated interim financial statements Significant accounting policies (continued) (j) Impairment The carrying amounts of the Group's assets are reviewed at each balance sheetdate to determine whether there is any indication of impairment. If any suchindication exists, the asset's recoverable amount is estimated (see below). For intangible assets that have an indefinite useful life and intangible assetsthat are not yet available for use, the recoverable amount is estimated at eachannual balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or itscash-generating unit exceeds its recoverable amount. Impairment losses arerecognised in profit or loss unless the asset is recorded at a revalued amountin which case it is treated as a revaluation decrease. Impairment losses recognised in respect of cash-generating units are allocatedfirst to reduce the carrying amount of any goodwill allocated to thecash-generating unit (group of units) and then, to reduce the carrying amount ofthe other assets in the unit (group of units) on a pro rata basis. Indefinite-lived intangible assets were tested for impairment at 1 April 2006,the date of transition to IFRSs, even though no indication of impairmentexisted. An impairment loss is reversed if there has been a change in the estimates usedto determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carryingamount does not exceed the carrying amount that would have been determined, netof depreciation or amortisation, if no impairment loss had been recognised. (k) Employee benefits (i) Defined contribution plans Obligations for contributions to defined contribution pension plans arerecognised as an expense in profit or loss as incurred. (ii) Share-based payment transactions The share option programme allows Group employees to acquire shares of theCompany. The fair value of options granted is recognised as an employee expensewith a corresponding increase in equity. The fair value is measured at grantdate and spread over the period during which the employees becomeunconditionally entitled to the options. The fair value of the options grantedis measured using a Black-Scholes model, taking into account the terms andconditions upon which the options were granted. The amount recognised as anexpense is adjusted to reflect the actual number of share options that vestexcept where forfeiture is only due to share prices not achieving the thresholdfor vesting. (l) Provisions A provision is recognised in the balance sheet when the Group has a presentlegal or constructive obligation as a result of a past event, and it is probablethat an outflow of economic benefits will be required to settle the obligation.If the effect is material, provisions are determined by discounting the expectedfuture cash flows at a pre-tax rate that reflects current market assessments ofthe time value of money and, when appropriate, the risks specific to theliability. Notes to the condensed consolidated interim financial statements Significant accounting policies (continued) (l) Provisions (continued) A provision for restructuring is recognised when the Group has approved adetailed and formal restructuring plan, and the restructuring either hascommenced or has been announced publicly. Future operating costs are notprovided for. A provision for onerous contracts is recognised when the expected benefits to bederived by the Group from a contract are lower than the unavoidable cost ofmeeting its obligations under the contract. (m) Trade and other payables Trade and other payables are stated at fair value. (n) Revenue Franchise commission is recognised on the provision of services to franchises inthe period in which the services are provided. The initial franchise fee isrecognised over the 10 year term of the franchise agreement. Other turnover and operating income represents amounts receivable for goods andservices provided in the United Kingdom net of VAT. Turnover on retail productsis recognised when products have been delivered and payment becomes due.Turnover on trade products is recognised when products have been delivered. (o) Expenses (i) Operating lease payments Payments made under operating leases are recognised in profit or loss on astraight-line basis over the term of the lease. Lease incentives received arerecognised in profit or loss as an integral part of the total lease expense. (ii) Net financing costs Net financing costs comprise interest payable on borrowings calculated using theeffective interest rate method, interest receivable on funds invested andforeign exchange gains and losses. Interest income is recognised in profit or loss as it accrues, using theeffective interest method. (p) Income tax Income tax on the profit or loss for the periods presented comprises current anddeferred tax. Income tax is recognised in profit or loss except to the extentthat it relates to items recognised directly in equity, in which case it isrecognised in equity. Current tax is the expected tax payable on the taxable income for the year,using tax rates enacted or substantially enacted at the balance sheet date, andany adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing fortemporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for taxation purposes. Thefollowing timing differences are not provided for: goodwill not deductible fortax purposes, the initial recognition of assets or liabilities that affectneither accounting nor taxable profit, and differences relating to investmentsin subsidiaries to the extent that they will probably not reverse in theforeseeable future. The amount of deferred tax provided is based on the expectedmanner of realisation or settlement of the carrying amount of assets andliabilities, using tax rates enacted or substantively enacted at the balancesheet date. Notes to the condensed consolidated interim financial statements (p) Income tax (continued) A deferred tax asset is recognised only to the extent that it is probable thatfuture taxable profits will be available against which the asset can beutilised. Deferred tax assets are reduced to the extent that it is no longerprobable that the related tax benefit will be realised. Information as to the calculation of income tax on the profit or loss for theinterim periods presented is included in note 3. (q) Segment reporting A segment is a distinguishable component of the Group that is engaged either inproviding products or services (business segment), or in providing products orservices within a particular economic environment (geographical segment), whichis subject to risks and rewards that are different from those of other segments. (r) Employee benefit trust The Group has established trusts for the benefit of employees, former employeesand certain of their dependants. Monies held in these trusts are held byindependent trustees and managed at their discretion. Where the Group retains future economic benefit from, and has de facto controlof the assets and liabilities of the trust, they are accounted for as assets andliabilities of the Group until the earlier of the date that an allocation oftrust funds to employees in respect of past services is declared and the datethat assets of the trust vest in identified individuals. Where monies held in a trust are determined by the Group on the basis ofemployees' past services to the business and the Group can obtain no futureeconomic benefit from those monies, such monies, whether in the trust or accruedfor by the Group are charged to the profit and loss account in the period towhich they relate. Notes to the condensed consolidated interim financial statements 2. Segment reporting Segment information is presented in the condensed consolidated interim financialstatements in respect of the Group's business segments, which are the primarybasis of segment reporting. The business segment reporting format reflects theGroup'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 asthose that can be allocated on a reasonable basis. Business segments The Group is comprised of the following main business segments: • Flooring • Beds • Wholesaling • Franchising Business segments For the six months ended 30 September 2007 Flooring Beds Wholesaling Franchising Consolidated 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Segment revenue 3,377 2,877 1,729 1,504 759 490 4,446 4,107 10,311 8,978 _____________________________________________________________Segment result (55) (39) 150 47 72 62 1,009 682 1,176 752 ______________________________________________Unallocated (531) (381)expenses ____________Operating profit 645 371Net financing costs 61 35Income tax expense (240) (132) ____________Profit for the 466 274period ____________ 3. Income taxes Current tax Current tax expense for the interim periods presented is the expected taxpayable on the taxable income for the period, calculated as the estimatedaverage annual effective income tax rate applied to the pre-tax income of theinterim period. Current tax for current and prior periods is classified as a current liabilityto the extent that it is unpaid. Amounts paid in excess of amounts owed areclassified as a current asset. Deferred tax The amount of deferred tax provided is based on the expected manner ofrealisation or settlement of the carrying amount of assets and liabilities,using the estimated average annual effective income tax rate for the interimperiods presented. The primary components of the entity's deferred tax liabilities includetemporary differences related to property, plant and equipment. Notes to the condensed consolidated interim financial statements 3. Income taxes (continued) Deferred tax (continued) Deferred tax expense arises from the origination and reversal of temporarydifferences, the effects of changes in tax rates and the benefit of tax lossesrecognised. The primary component of deferred tax expense for the six monthsended 30 September 2007 is related to an increase in deferred tax liabilities,relating primarily to property, plant and equipment, intangible assets and otherinvestments. Reconciliation of effective tax rate The current tax expense for the six months ended 30 September 2007 wascalculated based on the estimated average annual effective income tax rate of34.0 percent (six months ended 30 September 2006: 32.5 percent), as compared tothe tax rates expected to be enacted or substantively enacted at the annualbalance sheet date of 30.0 percent (six months ended 30 September 2006:30.0 percent). Differences between the estimated average annual effective incometax rate and statutory rate include but are not limited to the effect of taxrates in foreign jurisdictions, non-deductible expenses, tax incentives notrecognised in profit or loss, the effect of tax losses utilised and under/(over)provisions in previous years. 4. Property, plant and equipment Acquisitions and disposals During the six months ended 30 September 2007, the Group acquired assets with acost of £445,000 (six months ended 30 September 2006: £174,000). Assets with anet book value of £Nil were disposed of during the six months ended 30 September2007 (six months ended 30 September 2006: £74,000), resulting in a gain ondisposal of £Nil (six months ended 30 September 2006: loss of £74,000). Capital commitments During the six months ended 30 September 2007, the Group entered into a contractto purchase property, plant and equipment for £Nil (six months ended 30September 2006: £Nil). Notes to the condensed consolidated interim financial statements 5. Capital and reserves Share capital and share premium The Group recorded the following amounts within shareholder's equity as a resultof the issuance of ordinary shares. Share capital At 30 At 30 At 31 Mar Sept Sept 2007 2006 2007 £'000 £'000 £'000 _____________________________81,400,000 ordinary shares of 5 pence each 4,070 4,070 4,070 Share premium At 30 At 30 At 31 Mar Sept Sept 2007 2006 2007 £'000 £'000 £'000 1,106 1,106 1,106 _____________________________ Reserves Share-based Merger payment reserve reserve As restated Total £'000 £'000 £'000At 1 April 2006 (3,110) 75 (3,035)Charge for the period - 35 35 _____________________________At 30 September 2006 (3,110) 110 (3,000)Charge for the period - 179 179 _____________________________At 31 March 2007 (3,110) 289 (2,821)Charge for the period - 66 66Transfer to retained earnings - (100) (100) _____________________________At 30 September 2007 (3,110) 255 (2,855) _____________________________ Notes to the condensed consolidated interim financial statements 6. Earnings per share Basic earnings per share The calculation of basic earnings per share for the six months ended 30September 2007 was based on the profit attributable to ordinary shareholders of£466,000 (six months ended 30 September 2006: £274,000, 31 March 2007: £580,000)and a weighted average number of ordinary shares outstanding during the sixmonths ended 30 September 2007 of 81,400,000 (six months ended 30 September2006: 81,400,000, 31 March 2007: 81,400,000). Diluted earnings per share The calculation of diluted earnings per share for the six months ended 30September 2007 was based on profit attributable to ordinary shareholders of £466,000 (six months ended 30 September 2006: £274,000, 31 March 2007 £580,000)and a weighted average number of ordinary shares outstanding during the sixmonths ended 30 September 2007 of 81,682,344 (six months ended 30 September2006: 81,900,326, 31 March 2007: 81,609,991), calculated as follows: Weighted average number of ordinary shares (diluted) For the six months ended 30 September 2007 At 30 At 30 At 31 Sept Sept March 2007 2006 2007 Weighted average number of ordinary shares at 81,400,000 81,400,000 81,400,00030 SeptemberEffect of share options in issue 282,344 500,326 209,991 ________________________________Weighted average number of ordinary shares 81,682,344 81,900,326 81,609,991(diluted) at 30 September ________________________________ 7. Employee benefits Pension plans The Group provides employee benefits under defined contribution pension plans,the details of which are disclosed in the most recent annual financialstatements. Expense recognised in the consolidated interim income statement The expense recognised in the consolidated interim income statement consistscontributions made to the defined contribution scheme. For the six months ended30 September 2007, the Group recognised expense of £46,000 (six months ended 30September 2006: £33,000, year ended 31 March 2007: £77,000). Share-based payments At 10 February 2005, the Group established a share option programme thatentitles key management personnel and senior employees to purchase shares in theentity. The terms and conditions of the share option programme and grants madeduring the year ended 31 March 2007 are disclosed in the most recent annualfinancial statements. At 20 July 2007, a further grant on similar terms has beenmade to these employee groups. In accordance with these programmes options areexercisable at the market price of the shares at the date of grant. Notes to the condensed consolidated interim financial statements 7. Employee benefits (continued) Share-based payments (continued) The terms and conditions of the grants made during the six months ended 30September 2007 are as follows; all option exercises are settled by physicaldelivery of shares: Number of ContractualGrant date / employees entitled instruments life of options Option grant to senior employees at 20 July 2007 1,052,631 10 years The fair values of services received in return for share options granted toemployees is measured by reference to the fair value of share options granted.The estimate of the fair value of the services received is measured based on aBlack-Scholes model. The contractual life of the option (10 years) is used as aninput into this model. Expectations of early exercise are incorporated into theBlack-Scholes. Fair value of share options and assumptions For the six months ended 30 September 2007 At 30 September At 31 March 2007 2006 2007 Fair value at measurement date 4.9p 2.4p 2.4pShare price 14.25p 8.75p 8.75pExercise price 14.25p 8.75p 8.75pExpected volatility (expressed as weighted averagevolatility used in the modelling under binomial 55% 55% 55%lattice model)Option life (expressed as weighted average lifeused in the modelling under binomial lattice 4 yearsmodel) 4 years 4 yearsExpected dividends 5.25% 8.0% 8.0%Risk-free interest rate (based on national 5.6% 4.7% 4.7%government bonds) The expected volatility is based on the historic volatility (calculated based onthe weighted average remaining life of the share options), adjusted for anyexpected changes to future volatility due to publicly available information. The options are exercisable not earlier than 10 February 2008 upon achievementof performance targets determined by the Remuneration Committee. 8. Financial instruments Interest-bearing loans and borrowings In the opinion of the directors there is no significant difference between thefair value of hire purchase contracts and the carrying value in the financialstatements. Trade and other receivables/payables The carrying value is deemed to reflect the fair value for all trade and otherreceivables/payables. Notes to the condensed consolidated interim financial statements 9. Related parties Transactions with key management personnel Loans to directors for the six months ended 30 September 2007 amounted to £Nil(six months ended 30 September 2006: £Nil), 31 March 2007: £Nil). Key management personnel receive compensation in the form of short-term employeebenefits, post-employment benefits and equity compensation benefits. Keymanagement personnel received total compensation of £313,000 for the six monthsended 30 September 2007 (six months ended 30 September 2006: £262,000), 31 March2007: £727,000). 10. Explanation of transition to IFRSs As stated in note 1(a), these are the Group's first condensed consolidatedinterim financial statements for part of the period covered by the first IFRSannual consolidated financial statements prepared in accordance with IFRSs. The accounting policies in note 1 have been applied in preparing the condensedconsolidated interim financial statements for the six months ended 30 September2007, the comparative information for the six months ended 30 September 2006,the financial statements for the year ended 31 March 2007 and the preparation ofan opening IFRS balance sheet at 1 April 2006 (the Group's date of transition). In preparing its opening IFRS balance sheet no adjustments were required toamounts reported in financial statements prepared in accordance with previousGAAP. An explanation of how the transition from previous GAAP to IFRSs has affectedthe Group's financial position, financial performance and cash flows is set outbelow Reconciliation of equity There are no material differences between the amounts presented in equity underthe previous GAAP with the amounts presented under IFRS. Reconciliation of profit for prior periods In preparing the IFRS statement of income and expense no adjustments arerequired to amounts reported in financial statements prepared in accordance withprevious GAAP. Explanation of material adjustments to the cash flow statement There are no material differences between the cash flow statement presentedunder IFRSs and the cash flow statement presented under previous GAAP. 11. Prior year adjustment At 31 March 2007, the directors reviewed the classification of costs in theprofit and loss account and considered that certain costs previously included incost of sales were more appropriately classified as administrative expenses. Accordingly, a prior year adjustment has been made to transfer £353,000 for thesix months ended 30 September 2006 (£702,000 for the year ended 31 March 2007)from cost of sales to administrative expenses. This adjustment has no impact onoperating profit or net assets in either period. This adjustment increases grossprofit for the six months ended 30 September 2006 by £353,000 (£702,000 for theyear ended 31 March 2007). This information is provided by RNS The company news service from the London Stock Exchange