28th Jun 2005 07:01
Carpetright PLC28 June 2005 28 June 2005 Carpetright plc Robust full year pre tax profits Carpetright plc, Europe's leading specialist carpet and floor coverings retailertrading within the UK, Republic of Ireland, Belgium and The Netherlands, todaymakes its preliminary announcement of its audited results for the 52 weeks ended30 April 2005. Highlights Group • Pre tax profit £72.5m up 8.0% compared to last year • Underlying pre tax profit * £62.3m a reduction of 4.1% compared to last year • Basic earnings per share 75.3p up 9.4% compared to last year • Underlying earnings * per share 62.0p a reduction of 1.3% against last year • Strong cash generation with operating cash flow of £72.6m • Recommended final dividend of 28.0p giving a total of 47.0p, up 6.8% UK and Republic of Ireland • Underlying operating margin * of 15.1% despite tough trading conditions • Store expansion plans on track, target to achieve 450 stores within three years • Good profits and cash flow from the development of property portfolio Belgium and Netherlands • Underlying operating profit * £3.0m, up 65.0% compared to last year • Store re-branding and modernisation programme completed • Store expansion plans on track, target 20% extra space within three years * 'Underlying' excludes goodwill amortisation and profits / (losses) from thedisposal of property assets or termination of businesses. It also excludes anyone off and prior period tax adjustments. Lord Harris, Chairman and Chief Executive, said: "I am pleased to report a solid profit performance for the Group as well ascontinued strong cash flows and an increased dividend of 6.8%." "Our UK and Republic of Ireland business has continued to grow market share andhas improved its gross margin. Underlying operating profits are slightly down asa consequence of the tougher market conditions in the second half as well ascost pressures from increased rent and the dual running costs of our newdistribution operations. However our business expansion plans are well on trackand we continue to produce good cash flow and profits from the development ofour property portfolio." "Our Belgium and Netherlands business has grown market share, sales and profitsin a market that remains subdued. We have achieved good gross margin improvementas well as tight control of costs. Our investment programme in our existingstores is now complete and we have started to implement our expansion plans inboth countries. "There is no doubt that the UK floor coverings market has become more difficultsince the start of 2005 in line with several other DIY and housing relatedsectors as well as retail in general. However the Carpetright business is wellplaced, with its strong competitive position, to continue to grow market share.This, alongside our clear UK and European expansion plans, continued drive formargin growth, ongoing profits from property and strong cash generation shouldenable the business to continue to deliver good returns for shareholders goingforward." For further enquiries please contact: Carpetright plc Lord Harris of Peckham, Chairman and Chief ExecutiveDarren Shapland, Group Finance DirectorTelephone 020 7282 8000 (until 2pm), 01708 525522 (thereafter) Citigate Dewe Rogerson Patrick Toyne Sewell / Sara BatchelorTelephone 020 7638 9571 There will be a presentation to analysts and investors at 8.30am today at theoffice of Citigate Dewe Rogerson, 26 Finsbury Square, London, EC2A 1DS. A copy of the preliminary results and presentation to analysts can be found onour website www.carpetright.plc.uk today at 7.00am and 8.30am, respectively. Certain statements made in this announcement are forward looking. Suchstatements are based on current expectations and are subject to a number ofrisks and uncertainties that could cause the actual results to differmaterially. Operating Review Overview of Group Financial Performance 2005 2004 % change £'m £'mUnderlying operating profit * - UK and Republic of Ireland 60.9 64.8 - 6.0- Belgium and Netherlands 3.0 1.8 + 65.0- Total 63.9 66.6 - 4.1 Interest - 1.6 - 1.7 + 3.0 Underlying pre tax profit * 62.3 65.0 - 4.1 Non operating Profits / (Losses)- Profit on disposal of assets 13.0 3.0 + 337.6- Loss on Carpet Express termination - 1.5 - -- Total 11.5 3.0 + 287.0 Goodwill amortisation - 1.4 - 0.9 - 59.2 Pre tax profit 72.5 67.1 + 8.0 Underlying earnings * per share (pence) 62.0 62.8 - 1.3 Basic earnings per share (pence) 75.3 68.8 + 9.4 * 'Underlying' excludes goodwill amortisation and profits / (losses) from thedisposal of property assets or termination of businesses. It also excludes anyone off and prior period tax adjustments. The Group recorded an underlying operating profit * of £63.9m, a reduction of4.1% on last year, reflecting improved results in Belgium and The Netherlandsoffset by a reduction in profits for the UK and Republic of Ireland. Theinterest charge of £1.6m was £0.1m lower than last year. The underlying pre taxprofit * was £62.3m, a reduction of 4.1% on last year. The Group recorded a profit on the disposal of fixed assets and disposal andtermination of businesses of £11.5m (2004: £3.0m), which included the disposalof the freehold property in Croydon which produced a profit £7.6m. It alsoincluded £1.5m for the termination and disposal of the Carpet Express business.The goodwill charge for the year was £1.4m (2004: £0.9m), which included the£0.5m impairment of the goodwill in the Carpet Express business. The Group profit on ordinary activities before taxation increased by 8.0% to£72.5m. Note - Where the following text has reference to underlying operating profit /earnings and tax, these relate to operating profits / earnings before goodwillamortisation and profits / (losses) on disposal of assets or the termination ofbusinesses. Additionally in the calculation of the underlying tax rate thiswould also exclude any one off and prior period adjustments which would distortthe taxation charge on current year earnings. Carpetright excludes goodwillamortisation from its review of its operations as it considers this to be a nonoperating item whilst any profits / (losses) on disposal of assets or thetermination of businesses are discussed separately from the underlyingperformance because of their one off nature. UK and Republic of Ireland Financial results The business achieved an underlying operating profit of £60.9m, a reduction of6.0% compared to last year. The business made a further £11.5m (2004: £3.0m)from the disposal of fixed assets offset by the termination of the CarpetExpress operation. Sales for the year were £409.2m, which included £5.1m of third party turnoverfrom the Carpet Express distribution business which was closed during the year.In the following comparisons and ratios we have excluded the third party CarpetExpress turnover impact as it is non-retail and not part of the ongoingbusiness. Sales, therefore, were £404.1m, an increase of 2.1% compared to lastyear, reflecting a like for like sales decline of 1.3% mitigated by sales fromadditional Carpetright space of 2.0% with the balance of 1.4% from concessionsin department stores. The like for like sales performance was again very different across the twohalves. The first half saw an increase in like for like sales of 3.0% with anespecially good performance coming from the months of May to August, helped byfavourable weather conditions compared to the previous year as well as a strongpromotional programme. Second half like for like sales were down by 5.4%reflecting the tougher trading environment, particularly since the start of the2005 calendar year. Despite this slowdown the business continued to gain marketshare as well as grow gross margin and we remain confident that the combinationof a wide range, best prices and our investment in service will enable us tocontinue to outperform the market in the future. Gross margin increased by 0.9 percentage points with equal growth coming fromeach half. The increase reflected further buying scale improvements as well as areduction in stock losses and damage through better management of thedistribution network and improvements in the stores. We expect these factorswill enable us to continue to improve gross margin during the coming year. Costs net of other income as a percentage of sales increased by 2.1 percentagepoints reflecting; higher underlying costs for rent, rates and energy; dualrunning costs for the close down of Carpet Express and our new distributionoperations; as well as the reduced like for like sales performance. Whilst thedistribution costs will reduce during the coming year, as we are now onlyrunning one operation, we expect that the underlying pressure on rents, ratesand energy costs will continue to drive our overall costs up. This will bepartially mitigated by a further variable cost reduction programme which weimplemented during April and May 2005 in reaction to the tougher tradingenvironment as well as the continuing benefit of our move from A1 parks to bulkygoods parks. Underlying operating margin was 15.1% (2004: 16.3%). Whilst the operating marginhas reduced for the year it is still a good performance for the business in whathas been a difficult trading environment and given the level of external costpressures that are being seen across the retail market. Store portfolio development We continue to develop our store portfolio and ended the year with 376 storestrading from 3,556k sq ft, including stockroom space. The net gain of 12 storesduring the year was a result of 28 openings offset by 16 closures as we continueto develop the quality of our locations, as well as move from the more expensiveA1 parks on to the bulky goods parks as opportunities become available. We now trade from 31 of our new small store format with eight opening during theyear. This new format, which we began rolling out in the last financial year,enables us to enter markets where we had not previously been represented andwhich up to now were dominated by the independents. We have a three year targetto trade 100 stores of this type and have established a good pipeline duringthis and the next financial year. Republic of Ireland expansion Our expansion programme across the Republic of Ireland continues to make goodprogress. Following our initial openings around Dublin in 2001 we started tomove into some of the other major towns and cities across the country during thesecond half of 2004. Our decision to expand was a result of the strong salesgrowth we were achieving in our existing stores as well as the detailedassessment we had completed on the market place. At the end of the year we are trading from a total of 17 stores in the Republicof Ireland with a further four due to open in the current financial year. Webelieve the potential for this market is between 25 to 30 stores and as we growbrand recognition and advertising presence we expect that the Republic ofIreland will continue to show good like for like sales growth. Concessions It has been a mixed year for our concessions business. We achieved growthfollowing our entry into the Debenhams stores but this was offset by thecontraction of the Allders operations when they went into administration inearly 2005 and subsequently closed or sold the majority of their stores. Our "In House Carpets" brand had been trading well within Allders and, havingcompleted its first peak season through autumn and the January sale, wasachieving both sales and profits growth. We generated good net cash returns fromour Allders operation over the time we traded and we have successfully proventhe concept of the business trading within department stores. We continue totrade in one Allders store as well as eight of the stores which were sold to BHSin March. Our business in Debenhams continues to make good progress following our firstopenings in November 2004. We now trade from 16 stores which include seven exAllders stores and have a further three stores agreed to open during the comingmonths. Whilst it is still early in this area of business development, it isapparent that the strong Debenhams brand and the customer footfall this createsshould enable the Group to build a good trading operation in a sector of themarket where until now we had not been represented. Following the lessons from Allders and the encouraging start at Debenhams wehave started our concession expansion plans into regional department storesacross the country. We opened two of these concessions in Liverpool andSunderland towards the end of the financial year and have a number of others innegotiation. We believe that there is potential for at least 100 concessions indepartment stores in the medium term. Profits from property As we have outlined previously there is a significant opportunity for us togenerate cash, make profits, improve trading adjacencies and reduce our ongoingrent bill by moving from A1 retail parks to bulky goods parks. During the yearwe negotiated to relocate from nine A1 parks. Additionally we took theopportunity to dispose of our freehold interest in our Croydon store which wehad acquired in 1999. This disposal achieved a net profit of £7.6m. Our portfolio is now broadly split 50/50 in relation to occupancy on A1 or bulkygoods parks. Our intention is to continue this strategy of moving whereverpossible to bulky goods parks, as we believe that we will not only generate asteady stream of property profits but also gradually reduce our underlyingrental payments over time. Carpetright at home Our Carpetright at home business which services both retail and insurancecustomers continues to make good progress. During the year we won a further fourinsurance contracts as well as seeing the take up of our retail business via theinternet and call centre achieve high double digit growth. We have againincreased our van fleet and now have a total of 50 vans in service. Whilst thisbusiness currently makes up a small part of our overall turnover and profits,the growth rate and potential is significant and we expect to see further growthin the coming year. Product Our product offer has continued to develop with vinyl flooring being the starperformer, its strong growth being driven by new product development. The carpetmarket share has now stabilised and carpet continues to take the majority shareof the market with brown and chocolate shades being on trend, replacing some ofthe creams and ivories of recent years. Laminate has, as expected, slowed fromthe growth rates seen in recent years and we have adjusted our rangesaccordingly. The take away roll stock offer continues to be our most consistent performer,once again reflecting the desire to update and improve a room at a veryaffordable average cost of under £95. Service investment During the year we completed our programme to assess our third party floorcovering fitters run in association with the Flooring Industry TrainingAssociation ("FITA"). All of the 1,500 plus fitters to whom we sub contract havenow been assessed and the majority are now up to our standard. We are alreadyseeing the benefit of this programme with reduced customer complaints and lessdamage and replacements helping to underpin our better overall service offeringwhich continues to make this a source of competitive advantage. Distribution investment We completed our review of distribution operations during the year. We openedour new stand alone distribution operation at Huntingdon in January 2005 and ournew fleet of 90 Carpetright liveried trailers and "linked-pod" vehicles arrivedtowards the end of the financial year. This new operation is managed by ExelLogistics and enables us to provide a quicker service to our stores as well asbetter product tracking, helping us to reduce loss and damage. The existing Carpet Express operation was closed during the year and the one offtermination and disposal costs of £1.5m have been reflected in the results. Withthe closure complete and our new operation up and running we expect to see ourdistribution costs reduce over time as we become more efficient and benefit fromhaving control of our own dedicated operations. Systems investment We also commenced our systems investment programme for the UK and Republic ofIreland operations during the year. The first phase of our investment went liveover Easter 2005 with a new central database and a data warehouse reportingsystem being implemented. This will be followed with new integrated centralsystems for buying, operations and finance during the first half of the currentfinancial year. Once the central systems have been bedded down the storeprogramme will commence and we intend to pilot in a number of stores towards theend of the current financial year. Our intention is to create an improved systems platform for our UK and Republicof Ireland operations which can then be rolled out across the other countries inwhich we trade so keeping operations clear, simple and consistent. Summary and prospects The business has made significant progress during the year with expansion in theRepublic of Ireland and growth of the new smaller stores as well as thedevelopment of the concession operation. The growth plans are very much on trackand these are supported by our ongoing investment in service, distribution andsystems. Whilst the floor coverings market is expected to remain challenging inthe short term, the business is well placed to continue its growth plans andincrease market share. Acquisition of Mays Carpets We are pleased to announce that today we have agreed to purchase Mays HoldingsLimited, which trades as Mays Carpets from three stores at Abingdon, Cheltenhamand Swindon. The purchase price is £6.5m for a business which currently makes£1.4m pre tax profit from sales of £7.6m. The business which has been tradingfor over 45 years operates from the best retail sites in the three towns inwhich it trades and will significantly improve our representation in theseareas. Carpetright will re-brand the stores and reorganise or close its existingstores in these areas releasing cash benefits and improving the overallprofitability of our representation. The transaction will be completed by theend of July and will be earnings enhancing in the current financial year. Belgium and Netherlands Financial results The business in Belgium and The Netherlands recorded an underlying operatingprofit of £3.0m, an increase of 65.0% on last year. This was a good performancein a market place which continues to contract and represents significant gainsin market share as well as improvements to margins and costs. Sales in both Belgium and The Netherlands have shown growth on the year withproduct sales in local currency increasing by a total of 1.3%. The businesstraded from an average of 89 stores during the year compared to last year's 88.The average space for the year was up 6k sq ft, net of sublets, a total growthof 0.5%. In both Belgium and The Netherlands the offer has been improved withbetter ranges, new products and further investments in the market leading priceposition. In September 2004 we changed the business process in the Dutch stores so thatthe cost of fitting is now paid direct to the third party contracted fitter bythe customer. This is a more efficient operation and is in line with the UK process. The impact of thischange is that the turnover for the fitting services in The Netherlands is nowno longer recognised in the sales number. Hence whilst total sales for the yearhave fallen compared to last year, this is as a direct result of the fittingturnover being removed. The gross product margin for the period has increased by 1.8 percentage pointsdue to a combination of buying scale, efficiency and reduced losses and damage.We expect the gross product margin to continue to grow during this financialyear as a result of a continuation of these factors. Costs net of other income remain tightly controlled, with the benefit of actionstaken in the previous financial year feeding through. Additional initiativesincluding subletting of excess space and the variable cost reduction programmehave also provided benefits. Costs net of other income as a percentage ofproduct sales reduced by 0.5 percentage points across the year; despite theadditional investment in advertising as well as the extra depreciation due tothe re-branding and modernisation programme. Underlying operating margin as a percentage of product sales has improved to6.2% (2004: 3.9%). The underlying operating margin is measured as a percentageof product sales to remove the distortion of the fitting service income as notedabove and also to enable comparison to the UK and Republic of Ireland which iscompleted on the same basis. The improvement in the underlying operating margin reflects the benefits of thesales growth, improved gross margin, and cost control coming through and thisimprovement is a significant step towards achieving our medium term targets. Store portfolio development The business closed the year with 89 stores having opened one store during theyear. The business is trading from 28 stores in Belgium and 61 stores in TheNetherlands with a combined trading space of 1,143k sq ft net of sublet space.We have commenced our expansion plans and since the year end we have opened afurther two stores with a further five due to open later in the year. These newstores are in areas where the business is not currently represented and is aresult of 18 months development work. We are working towards a target of 110stores across Belgium and The Netherlands in total within a three year timeframe. We continue to assess the sublet opportunities for the business where we haveexcess space. We had completed ten such sublets by the year end with a furtherten opportunities still available within both our one and two floor outlets.Whilst the timing of these can not be definite, as much depends on planning andpermits, this remains a potential source of revenue over the coming years. Re-branding and modernisation We completed the re-branding and modernisation of the remaining stores in TheNetherlands towards the end of the first half. All the stores are now furnishedin the latest format with new signage, branding and layout. This concludes theprocess we commenced when we purchased the business just over two years ago. Thebusiness will now follow a refurbishment cycle similar to the UK and Republic ofIreland which requires a minimal amount of ongoing capital investment unlessthere is a significant development of an individual site. Summary and prospects The business continues to benefit from the wide range of floor covering productssold and the focus of the business as a floor covering specialist. This widerange, alongside the best prices underpinned by good service and productknowledge has enabled the business to achieve strong profit and cash flow growthdespite the contracting market. With the modernisation programme complete andthe store expansion plans underway the business is well placed to continue togrow market share. Financial review Taxation The underlying taxation rate is 31.2% (2004: 31.1%). We have restated theunderlying rate last year to remove any one off and prior period adjustmentswhich would distort the taxation charge on current year earnings. The effectivetaxation rate is 28.0% (2004: 27.1%) which has once again benefited from therollover relief on the profits on disposal of fixed assets. We would expect theongoing underlying rate to be slightly higher than the combined statutory ratefor the Group due to a number of disallowable items in relation to the Group'sfreehold properties in Belgium and The Netherlands. Earnings per share The Group's underlying earnings per share has reduced by 1.3% to 62.0p. Thisrepresented a reduction in underlying post tax earnings of 4.3% offset by areduction in the average number of shares of 3.1%. The average number of sharesin issue for the year was 69.2m and at the year end the Group had 67.8m sharesin issue. The Group's basic earnings per share have increased by 9.4% to 75.3p. Thisincrease reflects the small reduction in underlying earnings per share offset bythe continued strong profit stream from trading the property portfolio and therelated rollover tax effect. The Group purchased 1.8m of its own shares at an average price of 970.3p duringthe year as part of its share buy back programme. The total consideration forthe shares was £17.8m including fees and taxes. The impact of the buy backprogramme over the last two years has been to increase the underlying earningsper share by 3.8%. Of the consideration for shares purchased during the yearsome £9.3m remained unpaid at the year end and was paid in the first week of thenew financial year. Dividend The Board is recommending that the final dividend be increased by 3.7% to 28.0p,which together with the interim dividend of 19.0p takes the total dividend forthe year to 47.0p per share, an increase of 6.8% on the prior year. Dividendcover based on basic earnings per share excluding goodwill is 1.64 times (2004:1.59 times). The final dividend will be paid on 23 September 2005 toshareholders on the register on 9 September 2005. With strong operating cashflows and limited capital expenditure requirements the Group intends to maintainits current dividend policy of approximately 1.5 times dividend cover for theimmediate future. Cash flow and net debt The Group continues to be highly cash generative and achieved an operating cashflow of £72.6m (2004: £91.5m) during the year. The reduction from last year isdue to some large cash inflows which have fallen just after the year end, areduction in creditors due to some timing differences, as well as last yearbenefiting from an improvement in trade creditors' terms. After interest and taxas well as net capital expenditure and acquisitions and disposals the free cashflow for the Group is £34.9m (2004: £70.8m). The gross capital expenditure included £13.6m of freehold property purchases,£6.5m of stores expenditure and £13.1m on systems, distribution and other items.The net capital expenditure of £16.1m (2004: £0.9m) is after receipts of £17.1mfrom the disposal of assets. The free cash flow was utilised on the payment ofdividends of £31.9m as well as the payment of £8.5m for the purchase of shares.Net debt at the year end was £35.7m an increase of £5.7m compared to last year. International Financial Reporting Standards (IFRS) It will be mandatory for the consolidated financial statements of all EuropeanUnion listed companies to be reported in accordance with IFRS for periodscommencing on or after 1 January 2005. The first full accounting period forwhich IFRS will apply to Carpetright will be the 52 weeks ending 29 April 2006.Therefore the interim results for the 26 weeks ending 29 October 2005 will bethe first results to be affected. The move to IFRS will not change how the Group is managed and will have noimpact on cash flows. It will, though, potentially lead to some greatervolatility in the profit and loss account as well as the balance sheet. Thepresentation of the key financial statements and accompanying ratios will alsobe affected. Carpetright has prepared for the introduction of IFRS over the last 24 months.The greatest impact from the adoption of IFRS is likely to come from changes tothe accounting treatment of goodwill, taxation, leases and employee benefits. Carpetright will issue an unaudited statement covering its results for the 52weeks to 30 April 2005 under IFRS on 27 September 2005. This is about one monthlater than originally planned to allow the new Group Finance Director who joinson 30 August 2005 sufficient time to review the restated results. Calendar Carpetright will issue its next trading announcement at the Annual GeneralMeeting on 16 August 2005; this will cover the first 15 weeks of the financialyear. The pre first half closing announcement will be made on 25 October 2005and this will cover the first 25 weeks of the financial year. The first halfcloses on 29 October 2005. Board Executive Directors As announced on 23 May 2005 Ian Kenyon will join the Board on 30 August 2005 asGroup Finance Director. Ian will replace Darren Shapland who is leaving theGroup on 29 July 2005 to become Chief Financial Officer of J Sainsbury plc. Wewould like to thank Darren for his contribution since joining the Board in 2002. We have also realigned the responsibilities of the other executive directors asfollows: John Kitching, previously Group Managing Director, has become Europe ChiefExecutive and has taken direct responsibility for the growth of our business inBelgium and The Netherlands as well as our potential development further intomainland Europe. Christian Sollesse, previously Group Sales Director, has become UK and Republicof Ireland Managing Director and has taken responsibility for the UK tradingoperation. Martin Harris remains as Group Commercial Director and has taken on additionalresponsibility for the warehouse, distribution and property. Lord Harris remains as Chairman and Chief Executive of the Group working withthe other executive directors in the development towards the Group's medium termtargets. Non Executive Directors As announced on 2 February 2005 Guy Weston joined the company as a non-executivedirector. Sir Harry Djanogly retired from the Board on 24 March 2005. We wouldlike to thank Sir Harry for his hard work and efforts since joining the Board atflotation in 1993. Carpetright plc - Preliminary Announcement - 28 JUNE 2005 Consolidated profit and loss accountfor the year to 30 April 2005 52 weeks to 52 weeks to Note 30 April 2005 1 May 2004 £'000 £'000Turnover 3 462,497 452,721Cost of sales (179,713) (182,841)Gross profit 3 282,784 269,880Net operating expenses (221,986) (205,483)Other operating income 1,731 1,379 Operating profit before goodwill amortisation 3 63,911 66,644 Goodwill amortisation 4 (1,382) (868) Operating profit 3 62,529 65,776Profit on disposal and termination 5 11,529 2,979Profit on ordinary activities before interest 74,058 68,755Net interest payable 3 (1,605) (1,654)Profit on ordinary activities before taxation 3 72,453 67,101Tax on profit on ordinary activities 6 (20,263) (18,164)Profit on ordinary activities after taxation 52,190 48,937Minority interest (141) 201Profit for the financial period 9 52,049 49,138Dividends 7 (32,060) (30,434)Retained profit 9 19,989 18,704 Note pence penceUnderlying earnings per share (see note below) 8 62.0 62.8Basic earnings per share 8 75.3 68.8Fully diluted earnings per share 8 75.2 68.8Dividend per ordinary share 7 47.0 44.0 Note:Underlying earnings per share (EPS) has been redefined as basic EPS after allowing for, when relevant, goodwillamortisation, profit on disposal and termination and non operating tax adjustments (see note 8). The figures for2004 have been restated to be comparable. There are no differences between the Group's historical cost profit and that recorded in the profit and lossaccount (2004: £nil). All material items in the profit and loss account arise from continuing operations. Consolidated statement of total recognised gains and losses for the year to 30 April 2005 52 weeks to 52 weeks to Note 30 April 2005 1 May 2004 £'000 £'000Profit for the financial period 52,049 49,138Exchange rate movement (136) (736)Exchange rate movement on deferred tax (32) 82Total exchange rate movement 9 (168) (654)Total recognised gains relating to the period 51,881 48,484 Exchange rate movement includes an amount of £0.1m arising on the retranslation of foreign currency borrowingsthat has been offset against the other foreign exchange movements (2004: £1.1m). Carpetright plc - Preliminary Announcement - 28 June 2005 Consolidated balance sheetat 30 April 2005 Note 30 April 30 April 1 May 1 May 2005 2005 2004 2004 £'000 £'000 £'000 £'000Fixed assetsIntangible assets 14,623 15,743Tangible assets 140,417 129,938 155,040 145,681Current assetsStock 30,887 34,492Debtors 26,795 20,076Cash at bank and in hand 5,222 13,341 62,904 67,909Creditors: amounts falling due within one year (150,067) (141,765)Net current liabilities (87,163) (73,856)Total assets less current liabilities 67,877 71,825Creditors: amounts falling due after more than (21,209) (28,647)one yearProvisions for liabilities and charges (4,146) (2,889)Net assets 3 42,522 40,289 Capital and reservesCalled up share capital 678 696Share premium account 14,146 14,146Capital redemption reserve 125 107Profit and loss account 27,573 25,541Equity shareholders' funds 9 42,522 40,490Equity minority interest - (201) 42,522 40,289 Carpetright plc - Preliminary Announcement - 28 June 2005 Consolidated cash flow statementfor the year to 30 April 2005 Note 52 weeks to 52 weeks to 52 weeks to 52 weeks to 30 April 30 April 1 May 1 May 2005 2005 2004 2004 £'000 £'000 £'000 £'000Net cash inflow from operating activities 10 72,559 91,467Returns on investments and servicing of financeInterest received 207 113Interest paid (1,657) (1,267)Interest on finance leases - (112)Net cash outflow from investments and (1,450) (1,266)servicing of financeTaxation paid (18,559) (18,014)Payments to acquire intangible fixed assets - (50)Payments to acquire tangible fixed assets (33,181) (17,322)Receipts from sales of tangible fixed assets 17,032 16,482Net cash outflow for capital expenditure (16,149) (890)Costs associated with the termination of subsidiary (1,506) -operationsPurchase of subsidiary undertakings - (458)Acquisitions and disposals (1,506) (458)Equity dividends paid (31,876) (27,823)Net cash inflow before financing 3,019 43,016FinancingIssue of Ordinary shares - 208Purchase of own shares (see note below) (8,521) (41,126)Net repayment of loans (6,505) (514)Capital element of finance lease rental payments - (3,020)Net cash outflow from financing (15,026) (44,452)Decrease in cash in the period (12,007) (1,436) Note - Reconciliation of net cash flow to movement in net debt Note 2005 2004 £'000 £'000Decrease in cash in the period (12,007) (1,436)Opening net debt (30,003) (33,760) (42,010) (35,196)Exchange movement (168) 1,659Capital element of finance lease rental payments - 3,020Net repayment of loans 6,505 514Closing net debt 3 (35,673) (30,003) Note - Analysis of changes in net debt during the year 2004 Cash flow Exchange 2005 £'000 £'000 movement £'000 £'000Cash at bank and in hand 13,341 (8,174) 55 5,222Overdrafts (5,572) (3,833) 31 (9,374)Loans (37,772) 6,505 (254) (31,521)Net debt (30,003) (5,502) (168) (35,673) Note - Purchase of own sharesThe parent company, Carpetright plc, repurchased 1,029,000 shares before the end of the year. The totalconsideration of £9.3m was not paid until after the year end so does not appear in the cash flow statement.The 2004 cash outflow includes £9.3m payment for shares bought back from the market at the end of 2003 butsettled during 2004. Carpetright plc - Preliminary Announcement - 28 June 2005 Note 1: Basis of preparation The financial information does not constitute the Group's statutory accounts for the years ended 30 April 2005 or 1 May2004 but is derived from those accounts. Statutory accounts for 2004 have been delivered to the Registrar ofCompanies, and those for 2005 will be delivered following the Group's Annual General Meeting. The auditors havereported on those accounts; their reports were unqualified and did not include statements under section 237(2) or (3)of the Companies Act 1985. Note 2: Basis of consolidation The consolidated accounts include the accounts of the Company, its UK subsidiary undertakings and its Belgium and TheNetherlands subsidiaries made up to 30 April 2005. The acquisition method of accounting has been adopted foracquisitions made during the period. Under this method, the results of subsidiary undertakings acquired or disposed ofin the period are included in the consolidated profit and loss account from the date of acquisition or up to the dateof disposal. Intra group transactions are fully eliminated on consolidation. Note 3: Segmental analysis Analysis by geography: 52 weeks to 30 April 2005 52 weeks to 1 May 2004 UK Belgium & Group UK Belgium & Group The The Netherlands Netherlands £'000 £'000 £'000 £'000 £'000 £'000Profit and loss accountTurnover (by origin and destination) 409,154 53,343 462,497 397,127 55,594 452,721Gross profit 254,998 27,786 282,784 243,291 26,589 269,880Operating profit before goodwill 60,901 3,010 63,911 64,818 1,826 66,644amortisationOperating profit 60,376 2,153 62,529 64,815 961 65,776Profit on disposal and termination 11,529 2,979Net interest payable (1,605) (1,654)Profit on ordinary activities before 72,453 67,101taxation Balance sheetNet assets pre debt * 22,349 55,846 78,195 20,127 50,165 70,292Net debt (35,673) (30,003)Net assets 42,522 40,289 * Following a restructure within the Group during the current financial year, the net assets pre debt for 2004 have beenre-allocated to be consistent with the 2005 presentation. Note 4: Goodwill amortisation Amortisation of goodwill for the 52 weeks to 30 April 2005 includes £0.5m impairment of goodwill resulting from thedisposal and termination of the New Carpet Express distribution business. Note 5: Profit on disposal and termination The £11.5m profit for the 52 weeks to 30 April 2005 includes £13.0m profit on disposal of tangible fixed assets net of£1.5m costs of disposal and termination of the New Carpet Express distribution business. The £3.0m profit for 52 weeksto 1 May 2004 arose solely from the disposal of tangible fixed assets. Note 6: Taxation The estimated effective tax rates on the profits of the Group are as follows: 52 weeks 52 weeks to to 30 April 1 May 2005 2004 Underlying tax rate (see note below) 31.2% 31.1%Effective tax rate 28.0% 27.1% Note: Underlying tax rate is defined as basic effective tax rate after allowing for goodwill amortisation, profit/(loss)on disposal and termination and tax adjustments in respect of one-off items and prior periods. Note 7: Dividends The final ordinary dividend of 28p per share (2004: 27p) will be paid on 23 September 2005 to shareholders registeredat the close of business on 9 September 2005, subject to shareholders' approval at the Annual General Meeting to beheld on 16 August 2005. An interim ordinary dividend of 19p (2004: 17p) per share was paid on 18 February 2005 givinga total ordinary dividend for the year of 47p per share (2004: 44p).Copies of the full accounts for the year ended 30 April 2005 will be circulated to shareholders for approval at theAnnual General Meeting. Further copies of the Annual Report will be available from that date from the registeredoffice of Carpetright plc, Amberley House, New Road, Rainham, Essex, RM13 8QN. Note 8: Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weightedaverage number of ordinary shares in issue during the year, excluding those held in the employee share trust which aretreated as cancelled. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assumeconversion of all potential dilutive ordinary shares. The group has two classes of potential dilutive ordinary shares:those share options granted to employees where the exercise price is less than the average market price of thecompany's ordinary shares during the year and the contingently issuable shares under the group's long-term incentiveplan. 2005 2004 Earnings Weighted Earnings Earnings Weighted Earnings average per share average per share number number of of shares shares £'000 '000 pence £'000 '000 pence Basic earnings per share 52,049 69,168 75.3 49,138 71,377 68.8Effect of dilutive share options - 86 (0.1) - 47 -Fully diluted earnings per share 52,049 69,254 75.2 49,138 71,424 68.8 Reconciliation of earnings per share to exclude profit on disposal and termination, goodwill amortisation and nonoperating tax adjustments: 2005 2004 Basic earnings per share 52,049 69,168 75.3 49,138 71,377 68.8Effect of goodwill amortisation 1,382 - 2.0 868 - 1.3Effect of profit on disposal and (11,529) - (16.7) (2,979) - (4.2)terminationEffect of taxation on non operating tax 959 - 1.4 (2,222) - (3.1)adjustmentsUnderlying earnings per share 42,861 69,168 62.0 44,805 71,377 62.8 The Directors have presented an additional measure of earnings per share based on underlying earnings. In accordancewith the practice adopted by most major retailers, the Directors have amended the definition of underlying earnings fromthat disclosed in the annual report 2004, as they believe this provides a more comparable measure on an ongoing basis.Underlying earnings is defined as profit after allowing for, when relevant, goodwill amortisation, profit on disposaland termination and non operating tax adjustments. The figures for 2004 have been restated to be comparable. Note 9: Reconciliation of movements in equity shareholders' funds 2005 2004 £'000 £'000Profit for the financial period 52,049 49,138Dividends (32,060) (30,434)Retained profit for the period 19,989 18,704Exchange rate movement (168) (654)Issue of Ordinary shares - 208Purchase of own shares by employee share trust (125) -Credit in respect of employee share schemes 102 -Purchase of own shares (17,766) (31,861)Net increase/(decrease) in equity shareholders' funds 2,032 (13,603)Opening equity shareholders' funds 40,490 54,093Closing equity shareholders' funds 42,522 40,490 Note 10: Reconciliation of operating profit to net cash inflow from operating activities 2005 2004 £'000 £'000 Operating profit 62,529 65,776Depreciation 12,135 12,510Amortisation 1,385 869Decrease in stocks 3,620 5,688Increase in debtors (1,447) (1,288)(Decrease)/increase in creditors (5,663) 7,912Net cash inflow from operating activities 72,559 91,467 Note 11: Post balance sheet event Carpetright plc has agreed to purchase Mays Holdings Limited, which trades as Mays Carpets from three stores atAbingdon, Cheltenham and Swindon. The purchase price is £6.5m for a business which currently makes £1.4m pre tax profitfrom sales of £7.6m. The transaction will be completed by the end of July. Note 12: Foreign Exchange Euro 52 weeks to 52 weeks to 30 April 2005 1 May 2004 Average rate 1.47 1.45Closing rate 1.48 1.49 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
CPR.L