21st Jul 2005 07:00
United Carpets Group plc21 July 2005 For immediate release UNITED CARPETS GROUP plc Preliminary announcement of results for the year ended 31 March 2005 United Carpets Group plc ("the Group" or "the Company" or "United Carpets"), thethird largest chain of specialist retail carpet and floor covering stores in theUK, today announces its preliminary results for the year ended 31 March 2005. Highlights •Turnover increased by 26% to £15.72m (2004: £12.44m) •Operating profit before goodwill amortisation increased by 43% to £2.57m (2004: £1.80m before directors' emoluments of £1.61m) •Profit before tax pre-exceptional costs rose to £2.76m €12 new stores added during the year plus 3 since the year end creating a total of 56 stores •Strong pipeline of new sites and potential franchisees •Earnings per share increased to 2.4p (2004: 0.1p) Paul Eyre, United Carpet's, Chief Executive said: "These results represent a good trading performance during a time when theretail environment became increasingly difficult. Following our admission to theAIM market in February, the Company now has an excellent base from which to meetits store opening target of 100 stores by March 2008. While the current retailenvironment is challenging, we remain wholly confident in the longevity of ourfranchise model which continues to attract new franchisees based on the strengthof our brand in northern and central England." Enquires: United Carpets Group plcPaul Eyre, Chief Executive 01709 579 450Ian Bowness, Finance Director Seymour Pierce 020 7107 8000Jonathan Wright Cardew GroupTim Robertson 020 7930 0777Alex Pettifer Chairman's statement It gives me great pleasure to announce the first set of results since ouradmission to AIM in February 2005. The Company has generated a 26% increase inturnover and driven operating profits by 43% compared to the previous year(before exceptional directors' emoluments of £1.61m in 2004). Underpinning theCompany's current and future financial growth is the store opening programme,and during the period under review 12 new stores were added. While thisprogramme remains on track, the retail environment has been challenging,particularly in the early months of 2005 and we along with many other retailershave been affected by the downturn in discretionary household expenditure.However, the business fundamentals remain strong and the group remains wellpositioned to roll-out its franchise concept. Financial Review Total revenue increased by 26% to £15.72m (2004: £12.44m), reflecting the growthin store numbers during the year. Network sales across the Group increased to£42.23m (2004: £36.75m). Like for like sales were down 3% compared to the previous year reflecting thechallenging market particularly towards the end of the financial year. Sincethen trading has improved a little despite the tough retail environment withlike for like sales down 1.8% against last year for the 15 weeks since the yearend. Within the like for like sales performance the core floorcoverings businesshas achieved a very small like for like increase whilst bed sales have declinedon a like for like basis. Gross margin has improved from 63.2% to 65.2% which largely reflects theincreased proportion of franchise income to total revenue as the store networkincreases. Total overhead costs before goodwill amortisation were £7.89m for theyear, an increase of 27% in comparison to the previous year (before director'semoluments in 2004) and broadly in line with the growth in store numbers andturnover. Profit on ordinary activities before taxation, goodwill amortisationand exceptional item was £2.76m an increase of 54% on the previous year (beforedirectors' emoluments in 2004). As reported in our trading statement on 12 April 2005, following the integrationof the various companies which were amalgamated in forming the Group in February2005, the Board identified some historic issues, principally relating to latepayments by franchisees. Ordinarily this would have resulted in an exceptionaloperating expense of £273,000 to provide for doubtful debts. However, reflectingthe historic nature of these issues Mr. P. Eyre and Mrs. D. Grayson have agreedto underwrite the relevant debtors, thus removing the need for the exceptionalitem. The Board is also now confident that all of these historic issues havebeen resolved. The Company successfully raised £1.67m net of expenses at the time of itsadmission to the AIM market. As a result the Group's cash position is strong,with £2.65 million of cash as at 31 March 2005. Earnings per share increased to 2.4p (2004: 0.1p). As previously indicated theBoard is not recommending the payment of a dividend at this stage in theCompany's development. Operations Review The Group operates 56 branded stores across northern and central England. Ourtarget is to open a further 44 stores over the next three years. With theexception of 10 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 expands so its economics improve, in particular, frommore cost effective advertising, as well as the ability to leverage the otherbenefits 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. A typical store size is between 5000 and 8000square feet in a secondary out of town location, often close to a retail park. The average store holds enough stock to carpet the equivalent of 1250 rooms (orfour football pitches) and has a further 1100 samples to choose from. Ourproduct offering appeals to the fashion conscious customer who wants to updateand modernise individual rooms at relatively low cost. The broad range ofproduct offerings includes roll stock, roll-ends, extensive sample area and afully stocked laminate department. Each store offers a cash and carry option orthe full estimating, delivery and fitting service. Carpets remain the Group's primary product with demand for different styles andcolours changing all the time. The rapid growth in demand for laminate flooringappears to be reversing and our product range has been adjusted in line with ourcustomers changing requirements. The Group carries out significant advertising in targeted areas where it hassufficient critical mass. Selective television advertising in particular hasbeen very effective for the Group combined with print and radio. Beds Beds are sold through the majority of the store network with franchisees earninga commission on sales. Whilst bed income accounts for approximately 20% of theGroup's turnover, bed sales account for around 11% of total retail sales. Theeffect of the general downturn in consumer spending has been more noticeable onbeds due to the higher average purchase price of £250-£300 compared to flooringof £120. Store Opening Programme The Group is progressing well with its store opening programme. Currently, wehave 56 stores clustered around our target areas of northern and centralEngland, with a further 4 stores primed to open in the coming months. Beforeextending the Company beyond its existing parameters we want to ensure that wehave completed the current opportunities to infill where we have gaps in ourcurrent markets. For example we believe there is capacity within our coreYorkshire market to add at least a further 12 stores, thereby enabling us tomaximise our economies of scale, in particular from television advertising. In the year ended 31 March 2005, 12 new stores were opened in the followinglocations: Fenton, Chester, Leicester, Wolverhampton, Bradford, Urmston,Liverpool, Batley, Nelson, Warrington, Macclesfield and Northfield (Birmingham).Three stores have opened in the new financial year in Southport, Huddersfieldand Dudley. Currently we have a further 10 sites under consideration and 9 potentialfranchisees positioned to take on stores. In most instances, the Group matchessites to franchisees, but we are also able to take on sites without franchisees,and to run them as corporate stores before selecting suitable franchisees. People The Board joins me in thanking all our employees for their hard work during theyear and looks forward to working together in the future. Outlook Although the short-term outlook for the flooring market remains challenging, theBoard firmly believes that the Group's robust franchise model will continue togenerate solid returns. Awareness amongst target customers of the United Carpetsbrand continues to grow, driven by the store expansion programme and ourincreased advertising programme utilising television, radio and the print media.This not only underpins future sales but also helps us to attract futurefranchisees to match with our pipeline of new sites. The opportunity to build asignificant flooring business in our chosen markets remains eminentlyachievable. The Company is in a strong financial position to achieve its objectivesfollowing its listing on AIM in February. Since the year end like for like saleshave held up reasonably in what is acknowledged as a particularly tough tradingenvironment. Overall the Company is in a good position to expand the UnitedCarpets concept across northern and central England. Peter CowgillChairman Preliminary announcement of results for the year ended 31 March 2005Consolidated profit and loss account Results before goodwill Goodwill amortisation amortisation Results and and before exceptional exceptional goodwill Goodwill Note item item 2005 amortisation amortisation 2004 £'000 £'000 £'000 £000 £000 £'000 Turnover 2 15,716 - 15,716 12,440 - 12,440 Cost of (5,466) - (5,466) (4,576) - (4,576)sales ------- ------- ------- ------- ------- ------- Gross profit 10,250 - 10,250 7,864 - 7,864 Distributioncosts (1,433) - (1,433) (1,921) - (1,921)Administrativeexpenses (6,460) (58) (6,518) (5,904) (24) (5,928)Otheroperatingincome 210 - 210 141 - 141 ------- ------- ------- ------- ------- ------- Operatingprofit 2,567 (58) 2,509 180 (24) 156 Mergerexpenses 3 - (61) (61) - - -Profit ondisposal offixed assets 168 - 168 10 - 10 ------- ------- ------- ------- ------- -------Profit onordinaryactivitiesbeforeinterest 2,735 (119) 2,616 190 (24) 166 Interestreceivable 52 - 52 37 - 37Interestpayable (28) - (28) (54) - (54) ------- ------- ------- ------- ------- -------Profit onordinaryactivitiesbeforetaxation 2,759 (119) 2,640 173 (24) 149 Taxation 4 (818) (81) ======= =======Profit onordinaryactivitiesaftertaxationtransferred toreserves 6 1,822 68 ------- ------- Earnings pershare 5- Basic anddiluted 2.4p 0.1p ======= ======= All amounts relate to continuing activities.There are no recognised gains or losses other than the profit for both years asshown above.The notes on pages 8 to 12 form part of these financial statements. Preliminary announcement of results for the year ended 31 March 2005Consolidated balance sheet Note 2005 2004 £'000 £'000 £'000 £'000 Fixed assetsIntangible assets 333 391Tangible assets 2,702 1,705 ------- ------- 3,035 2,096Current assetsStocks 1,232 1,025Debtors 3,925 2,027Cash at bank and in hand 2,654 1,564 ------- ------- 7,811 4,616Creditors: amounts fallingdue within one year (5,063) (4,391) ------- ------- Net current assets 2,748 225 ------- -------Total assets less current 5,783 2,321assets Creditors: amounts falling dueafter more than one year (108) (259) Provisions for liabilities (74) -and charges ------- -------Net assets 5,601 2,062 ======= ======= Capital and reserves -equityCalled up share capital 4,070 3,520Share premium account 6 1,106 -Profit and loss account 6 3,535 1,652Merger reserve 6 (3,110) (3,110) ------- -------Shareholders' funds 7 5,601 2,062 ======= ======= The notes on pages 8 to 12 form part of these financial statements. Preliminary announcement of results for the year ended 31 March 2005Consolidated cash flow statement 2005 2004 Note £'000 £'000 £'000 £'000Net cash inflow fromoperating activities 8 1,146 724 Returns on investmentsandservicing of financeInterest received 52 37Interest paid (28) (54) ------- -------Net cash inflow/(outflow) fromreturnson investments and servicing of finance 24 (17) TaxationCorporation tax payment (170) (120) ------- ------- (170) (120)Capital expenditurePurchase of tangible fixed assets (1,618) (735)Sale of tangible fixed assets 522 23 ------- -------Net cash outflowfrom capital expenditure (1,096) (712) AcquisitionsPurchase of new subsidiary - (316)Cash acquired with new subsidiary - 26 ------- ------- - (290) ------- ------- Net cash outflow before financing (96) (415) FinancingCapital element ofhire purchaserepayments (137) (38)Bank loans (635) 30Shares issued including premium 1,717 - ------- -------Net cash inflow/ (outflow) fromfinancing 945 (8) ------- ------- Increase/(decrease) in cash 10 849 (423) ======= ======= The notes on pages 8 to 12 form part of these financial statements. Preliminary announcement of results for the year ended 31 March 2005Notes to the preliminary announcement 1. Results and accounting policies The preliminary results have been prepared under the historical cost convention,in accordance with applicable Accounting Standards in the United Kingdom andwith the group's accounting policies as will be set out in the financialstatements for the year ended 31 March 2005. The preliminary results wereapproved by an authorised committee of the Board on 20 July 2005 and areunaudited. The financial information contained in this unaudited preliminary announcementdoes not constitute statutory accounts as defined by Section 240 of theCompanies Act 1985. United Carpets Group Plc ("the Company") was incorporated on 1 December 2004with an authorised share capital of £10 million divided into 100,000,000ordinary shares of 10p each; of which 500,000 subscriber shares were issued. On3 February 2005 the shares were subdivided into 5p shares. On 7 February 2005,70,400,000 ordinary shares were issued by the Company in exchange for the entireissued share capital of United Carpets (Franchisor) Limited, United Carpets(Central) Limited, Debrik Investments Limited, Weavers Carpets Limited andNottingham Carpet Warehouse Limited. The group reconstruction has been accountedfor in accordance with the principles of merger accounting as set out inFinancial Reporting Standard 6 "Acquisitions and Mergers". Accordingly, the financial information for the group has been presented as ifUnited Carpets (Franchisor) Limited, United Carpets (Central) Limited, DebrikInvestments Limited, Weavers Carpets Limited and Nottingham Carpet WarehouseLimited ("the merged entities") had been owned by United Carpets plc throughoutthe current and prior periods. Accordingly, the consolidated financialstatements include the whole of the results of the merged entities for the yearended 31 March 2005. The corresponding figures for the previous year include the results of themerged entities, the assets and liabilities at the previous balance sheet dateand the shares issued by United Carpets Group plc as consideration as if theyhad always been in issue. The difference between the nominal value of shares andthe share premium accounts of the merged entities and the nominal value ofshares issued by the Company to acquire the merged entities is taken toreserves. Financial information for the year ended 31 March 2004 is derived from theindividual company statutory accounts for that year which have been delivered tothe Registrar of Companies. The auditors reported on those accounts; theirreports were unqualified and did not contain a statement under either Section237 (2) or Section 237 (3) of the Companies Act 1985. The statutory accounts forthe year ended 31 March 2005 and the auditors' report thereon will be finalisedbased on the information in this preliminary announcement and will be deliveredto the Registrar of Companies following the Company's Annual General Meeting. Preliminary announcement of results for the year ended 31 March 2005Notes to the preliminary announcement (continued) 2. Segmental analysis Turnover is wholly attributable to the principal activities of the group andoriginates in the United Kingdom. The directors consider it would becommercially prejudicial to disclose the analysis of turnover of differentclasses of business. 3. Exceptional item 2005 2004 £'000 £'000 Merger expenses 61 - ========== ========= 4. Taxation on ordinary activities Analysis of charge in the period 2005 2004 £'000 £'000 Corporation taxCurrent year 776 123Over provision in prior years (58) - ========== ========= 718 123 Deferred tax: Origination and reversalof timing differences 100 (42) ---------- --------- Tax on profit on ordinaryactivities 818 81 ========== ========= 5. Basic and diluted earnings per share The earnings per share has been calculated in accordance with FRS14 'Earningsper share'. The calculation of the earnings per ordinary share is based onprofits of £1,822,000 (2004: £68,000) and on a weighted average of 74,893,151(2004: 70,400,000) ordinary shares in issue during the year. The weightedaverage share capital for earnings per share calculated on a dilutive basis is75,222,055 (2004: 70,400,000). Preliminary announcement of results for the year ended 31 March 2005Notes to the preliminary announcement (continued) 6. Reserves Share Profit premium and loss Merger account account reserve £'000 £'000 £'000 At 1 April 2004 - 1,652 (3,110)Profit for the year - 1,822 -Issue of shares in the year (net of expenses) 1,167 - -Transfer of merger expenses (61) 61 - ------- ------- -------At 31 March 2005 1,106 3,535 (3,110) ======= ======= ======= The merger reserve is the difference between the nominal value of shares issuedin order to acquire the merged entities and the share capital and share premiumaccount of the merged entities. 7. Reconciliation of movements in equity shareholders' funds 2005 2004 £'000 £'000 Profit for the year 1,822 68Shares issued at nominal value 550 3,520Share premium arising on issue (net of expenses) 1,167 - ------- -------Net increase in shareholders' funds 3,539 3,588Opening shareholders' funds 2,062 (1,526) ------- ------- Closing shareholders' funds 5,601 2,062 ======= ======= Preliminary announcement of results for the year ended 31 March 2005Notes to the preliminary announcement (continued) 8. Reconciliation of operating profit to net cash inflow from operatingactivities 2005 2004 £'000 £'000 Operating profit 2,509 156Depreciation 335 305Amortisation 58 24Merger expenses (61) -(Increase)/decrease in stock (207) 408(Increase)/decrease in debtors (1,542) 56Increase/(decrease) in creditors 54 (225) ------- ------- 1,146 724 ======= ======= 9. Analysis of changes in net funds Other non cash 2004 Cashflow changes 2005 £'000 £'000 £'000 £'000Debt due within one yearBank and cash 1,564 1,090 - 2,654Bank overdraft - (241) - (241) ------- ------- ------- ------- 1,564 849 - 2,413 Debt due in more than one yearBank loans (583) 552 - (31)Hire purchase contracts (76) 76 (74) (74)Debt due after one year - - - -Bank loans (83) 83 - -Obligations under hire purchasecontracts (176) 61 6 (109) ------- ------- ------- ------- 646 1,621 (68) 2,199 ======= ======= ======= ======= Preliminary announcement of results for the year ended 31 March 2005Notes to the preliminary announcement (continued) 10. Reconciliation of net cash flow to movement in net debt 2005 2004 £'000 £'000 Increase/(decrease) in cash in the year 849 (423) Cash outflow from hire purchase financing 137 38Cash outflow/(inflow) from bank loans 635 (30) ------- -------Change in net debt resulting from cashflows 1,621 (415) New hire purchase contracts (68) (236) ------- -------Movement in net funds/(debt) in the year 1,553 (651)Net funds at start of year 646 1,297 ------- -------Net funds at end of year 2,199 646 ======= ======= This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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