11th May 2006 07:02
Findel PLC11 May 2006 11 May 2006 FINDEL PLC ("The Company") Preliminary Results for the period ended 31st March 2006 Findel p.l.c., the Yorkshire based home shopping and educational suppliesbusiness, today announces its preliminary results for the year ended 31 March2006. HIGHLIGHTS 2006 2005 % change Sales £527.8m £474.0m +11% Profit before tax * £52.1m £45.5m +14%Restructuring costs and amortisation £(17.0)m £(4.0)mProfit before tax £35.1m £41.5mEarnings per Share 35.58p 35.41p Benchmark# Results;Profit before tax £49.2m £45.5m +8%Earnings per share 47.04p 39.05p +20% Final Dividend 14.2p 12.9p +10% Total Dividends for year 18.0p 16.4p +10% * before amortisation of acquisition intangibles and restructuring costs and including in 2006,£2.9m profit on land held for resale # before amortisation of acquisition intangibles and restructuring costs and excluding in 2006,£2.9m profit on land held for resale • Sales exceed £500m for first time; 11% up at £527.8m• Benchmark# Earnings per share increased 20% to 47.04p• Final dividend increased by 10% to 14.2p per share• Management succession now fully in place Home Shopping• Sales £228.0m, down 4.6% (£239.1m)• Operating profit £31.9m, down 20.7% (£40.2m)• Focus on niche catalogues and frequent mailings to drive sales growth• Continued internet sales growth of 31%• Sales recovering in Spring Educational Supplies• Sales £228.3m, up 40% (£163.5m)• Benchmark# operating profit £27.6m, up 78% (£15.5m)• Excellent growth and strengthening margin• Major restructuring successfully completed. £6m benefits in year• Future annualised benefits increased to £10m Management changes• Patrick Jolly appointed as Chief Executive today• Philip Maudsley appointed Chief Operating Officer today Keith Chapman, Chairman, commented: "The Company has enjoyed another record year, with excellent growth in ourheadline figures. This was achieved despite the challenging retail environmentthat our Home Shopping division experienced last Autumn. We have seen excellentresults in particular at our Educational Supplies division, where we are nowseeing the rewards of our restructuring programme coming through. I am delighted with Patrick's appointment as Chief Executive today, and knowthat he and Philip will work together with the rest of the Board to delivervalue for all our shareholders. I remain confident that the Group will make further progress in the current year". - Ends - For further information, please contact: Patrick Jolly, Chief Executive Today: +44 (0) 207 831 3113Findel plc Thereafter: +44 (0) 1943 864686 Jonathon Brill/Billy Clegg Today: +44 (0) 207 831 3113Financial Dynamics Chairman's Statement Results I am pleased to report that your Company has enjoyed another record year,underpinned by a particularly strong performance in the education division.Overall sales for the financial year ended 31 March 2006 were 11% higher at £528m (2005: £474m). Profit before tax, and before amortisation of acquisition intangibles and restructuring costs, increased by 14% to £52.1m from £45.5m. These results include a profit of £2.9m (2005: £nil) on the sale of land held for resale; this is deducted to arrive at Benchmark* Profit before Tax for the year of £49.2m(2005: £45.5m), an increase of 8%. Statutory profit before tax was £35.1m(£41.5m) primarily reflecting the impact of the restructuring charges. Benchmark* earnings per share improved by 20% to 47.04p, having benefited from a lower tax charge this year. Basic earnings per share were 35.58p(2005: 35.41p). The restructuring of the Educational Supplies division is now substantiallycomplete. The principal elements of the restructuring comprised theconsolidation of warehousing, administrative offices and computer systems; therationalisation of the stock ranges, and the separation of our healthcareoperations into a standalone business. During the restructuring process a numberof additional opportunities were identified, increasing our expectation of thefinal run rate of benefits to a minimum of £10m annually, £2m ahead ofexpectations. It has been necessary to increase our investment in the project to£16.1m in order to achieve this; however the acceleration and improvement ofbenefits will mean that this extra cost should be recovered by the end of thecurrent financial year. Net finance costs increased by 8% to £14.7m (2005: £13.6m). Interest chargeswere more than four times covered by Benchmark* operating profit. Dividends The Directors are recommending an increase of 10% in the final dividend to 14.2pence per share (2005: 12.9 pence) to be paid on 6 July 2006 to shareholders onthe register at 9 June 2006. This will make the total dividend for the year 18.0p per share (2005: 16.4 p) an increase of 10%. Home Shopping In common with retailers generally our Home Shopping division had a difficultyear with sales reduced by 4.6% to £228.0m (2005:£239.1m) and operating profitalso down to £31.9m (2005: £40.2m). As reported in December, our recruitment andmarketing campaign for our main Christmas trading season coincided with one ofthe weakest consumer environments for many years. Recruitment from this campaignwas 27% down on the previous year. The lower sales to new customers were not theonly factor impacting on operating profit. Lower response rates meant thatmarketing expenditure increased by £3.8m and lower product sales resulted inless financial services income. Additionally the Company informed the market inDecember that it was taking a prudent approach to bad debt and as a result thecharge increased by £2.4m. Sales to established customers were 3.5% ahead of the previous year even aftertaking into account a 5% price deflation on carry forward lines. Repeat ordersfrom both established and new customers were satisfactory, confirming thestrength of the offer. Retention rates and average order value wereapproximately the same as the prior year at over 64% and £39 respectively.Internet sales grew by 31% and now account for 23% of all orders. Although we started this calendar year with a customer base some 9% less thanlast year, recruitment tests conducted in October produced response rates 10%ahead of those achieved in 2004. This recruitment method was retested in Spring,again with a positive result, giving confidence that we can again return togrowth in our base. We also believe we can increase sales to our existing customers. This belief issupported by the fact that since January we have succeeded in increasing productsales to them by 8%. Last year our Summer Living catalogue was very well received and we also saw adramatic 50% increase in sales from our Christmas Living catalogue, which wasmailed later in the season. Customers prefer merchandise offerings that areseasonally appropriate. In view of this, both of these catalogues will beincreased in size this year. Importantly Christmas Living, which was offered toless than half of our established base last year, offers scope for a significantincrease in distribution. After this year's experience the size and distributionof this catalogue will provide the necessary safety net should the early seasonagain prove difficult. It is becoming increasingly obvious that more nichecatalogues and frequent mailing provide additional sales opportunities, andsupport the main catalogue. We will introduce more editions of these nichecatalogues this year to take advantage of this trend. We are encouraged by the growth of Internet sales and have now established asubstantial database of customers who have positively opted to receive e-mail.We anticipate continued growth from this route to market. We have a very successful home shopping credit business. There is a much widercash with order audience that we do not currently reach. Whilst it is possibleto build this business organically we believe that small targeted acquisitionsare a more efficient way of gaining critical mass. We have the infrastructure,expertise and capacity to achieve cost savings and leverage profitability fromany such acquired business. Educational Supplies The Educational Supplies division has had an excellent year. Divisional salesrose by 40% to £228.3m (2005: £163.5m) both through the two acquisitions we madein the third quarter of last year, and through continued organic growth.Benchmark* operating profit was up 78% to £27.6m (2005: £15.5m). The major focus of the year was the implementation of the divisionalreorganisation plan. This has been a massive project and has taken a tremendousamount of time and effort from the Education team. The key aim of the restructuring project was to streamline our operations,improving service to customers whilst reducing operating costs and benefitingmargins. The implementation was such that it has been possible to complete anumber of key activities ahead of original schedule including consolidation ofthe warehousing and administrative operations and of computer systems. As aresult, some £6m of benefits have been realised from the project during thefinancial year. The reorganisation is now virtually complete allowing the division toconcentrate on further growth. In spite of having to cope with the reorganisation the division has made strongprogress: The new catalogues for our national, curricular based, education brands,consisting of the improved and rationalised product ranges, have been wellreceived since these were launched in January. These long established marketleading brands are the key to the unique nature of Findel's offering in theeducation marketplace. The new common catalogue for our regional commodity based brands was launched onschedule at the beginning of April. Successful promotional activity from our sports product ranges was undertakenduring the year with two major national retailers. Both have chosen to repeatthe activity in our current financial year. The March budget confirmed the continuing spending priority placed by theGovernment on Education, with an announced long term aim of bringing capitalprovision for public sector pupils up to the level of that in the privatesector. Combining this general objective with the previously announcedintroduction of multi-year guaranteed budgets from April 2006, supports ourbelief that schools will now have increasing confidence to invest in theresources they need. We also expect to benefit directly from the increased emphasis and investment inscience education, which will now form part of the Government's SchoolAccountability Framework. Our Philip Harris brand is the leading supplier ofscience equipment to secondary schools. The transactional websites operated by our key brands now integrate directlywith the administrative software in use in the majority of UK schools. We areconsulting with the Government's newly created Centre for ProcurementPerformance to ensure that our e-commerce strategy remains aligned withdeveloping Government thinking in this area. An important part of the restructuring in the Education division was to separateNRS Healthcare into a stand alone business. Today NRS is a substantial operationin its own right occupying the leading position in a growing market with its ownpremises, systems and infrastructure, and most importantly a dedicated andexperienced management team. Huntleigh has been successfully integrated and weanticipate the financial benefits to lead to a significant growth in operatingprofit in the current year. Having successfully completed field trials, we are now actively marketing ourTelecare wristcare patient monitoring products across the UK. To these, we haveadded a comprehensive range of Telecare products from other suppliers includinga wide range of sensors and detectors, pill dispensers, and an interactive carecompanion. Findel Services Divisional sales were level with the same period last year at £71.5m (2005:£71.4m). Benchmark* operating profit at £2.5m (2005: £2.6m) was in line withexpectations. Board Changes I am delighted to welcome Patrick Jolly to the Executive Board as ChiefExecutive. Patrick has been a Non-Executive Director for the past five yearswhere his contribution has been considerable. Philip Maudsley, who has beenGroup Managing Director for the last two years has been appointed ChiefOperating Officer bringing to that role his strong operational capability andin-depth knowledge of the Group. Over the last 12 months we have been givingurgent consideration to the most effective composition of the top managementteam, and in particular to the recruitment of a chief executive. We have lookedexternally as well as internally and, with the appointment of Patrick I believewe have now achieved the necessary blend of complementary skills to lead theGroup forward for the coming years. One of Patrick Jolly's first tasks is to conduct a thorough assessment of theGroup and its future development. This assessment will cover all the Group'sactivities, with the object of maximising shareholder value. Tony Johnson, our Deputy Chairman will become a Non-Executive Director at theAnnual General Meeting. Tony has made an invaluable contribution to the growthof the Group and I should like to thank him for all of the assistance he hasprovided over the last 18 years. I am pleased to report that he will also remainas a consultant enabling the Group to continue to benefit from his experienceand wise counsel. The Board is actively seeking to appoint an additional independent Non-ExecutiveDirector. Employees I thank all the Group's employees for their hard work and commitment. On behalfof the Board I would like to express our appreciation of the continued loyaltyand dedication shown by all Group employees. Prospects The inherent strength of the Home Shopping business together with experiencegained and opportunities identified provides confidence for its futuredevelopment. We are already seeing significant benefits from the restructuring programme inEducational Supplies, which has provided the division with strong long termgrowth potential. I remain confident that the Group will make further progress in the current year * Benchmark measures are stated excluding amortisation of acquisitionintangibles £0.9m (2005: £0.7m), restructuring costs £16.1m (2005: £3.9m), bothin the educational supplies division, and profit on sale of land held for resale£2.9m (2005: £nil) in the Services division Keith ChapmanChairman 11 May 2006 Consolidated Income Statement Notes Year to Year to 31/03/06 31/03/05 Unaudited Audited £000 £000 Revenue 2 527,796 474,031 Cost of sales (285,671) (246,390) Gross profit 242,125 227,641 Trading costs 3 (177,316) (169,379) Share of profit of associates 1,941 799 Amortisation of intangibles (930) (661) Restructuring costs (16,055) (3,274) Operating profit 2 49,765 55,126 Finance income 5,522 3,913 Finance costs (20,220) (17,516) (14,698) (13,603)Profit before tax Before Amortisation of intangibles and Restructuring costs 52,052 45,458Amortisation of intangibles and Restructuring costs (16,985) (3,935) Total profit before tax 35,067 41,523 Profit before tax 35,067 41,523 Income tax expense (4,933) (11,602) Profit for the year 30,134 29,921 Attributable to: Equity holders of the parent 29,660 29,339Minority interest 474 582 30,134 29,921 Earnings per share 4 Basic 35.58p 35.41p Benchmark 47.04p 39.05p All results relate to continuing operations. Consolidated Statement of Recognised Income and Expense Year to Year to 31/03/06 31/03/05 Unaudited Audited £000 £000 Currency translation differences 365 (106)Net income / (expense) recognised directly in equity 365 (106) Profit for the period 30,134 29,921 Total recognised income and expense for the period 30,499 29,815 Attributable to: Equity holders of the parent 30,025 29,233 Minority interest 474 582 30,499 29,815 Consolidated Balance Sheet At At 31/03/06 31/03/05 Unaudited Audited £000 £000ASSETS Non-current assetsProperty, plant and equipment 62,954 57,147Goodwill 48,427 47,853Other intangible assets 34,685 35,615Investments in associates 10,324 8,383 156,390 148,998Current assets Inventories 101,068 103,212 Trade and other receivables 232,506 199,362 Derivative financial instruments 254 43 Cash and cash equivalents 2,284 4,147 336,112 306,764 Total assets 492,502 455,762 LIABILITIES Current liabilities Trade and other payables 76,827 81,375 Current tax liabilities 3,627 7,979 Obligations under finance leases 518 421Bank overdrafts and loans 19,082 102,558Derivative financial instruments 24 820 100,078 193,153Non-current liabilitiesBank loans 244,172 130,000Retirement benefit obligation 18,024 19,814Deferred tax liabilities 7,024 5,614Obligations under finance leases 986 1,110 270,206 156,538 Total liabilities 370,284 349,691 NET ASSETS 122,218 106,071 EQUITY Capital and reservesShare capital 4,245 4,233Capital reserves 50,219 49,706Hedging and translation reserves 259 (106)Retained earnings 67,313 51,577 Equity attributable to equity holders of the parent 122,036 105,410 Minority interest 182 661 TOTAL EQUITY 122,218 106,071 Consolidated Cash Flow Statement Year to Year to 31/03/06 31/03/05 Unaudited Audited £000 £000Operating activities Operating profit 49,765 55,126 Adjustments for: Depreciation of property, plant and equipment 6,910 6,928Amortisation of other intangible assets 930 661Share-based payment expense 30 281 Gain on disposal of property, plant and equipment (4,049) (647) Pension contributions less income statement charge (2,307) (1,513) Share of profit of associates (1,941) (799) Operating cash flows before movements in working capital 49,338 60,037 Decrease / (increase) in inventories 2,229 (14,470) (Increase) in receivables (29,928) (20,254) (Decrease) / increase in payables (5,118) 856 Cash generated from operations 16,521 26,169 Income taxes paid (7,874) (11,779) Interest paid (15,364) (12,801) Net cash from operating activities (6,717) 1,589 Investing activities Interest received 256 102Proceeds on disposal of property, plant and equipment 4,567 2,578Purchases of property, plant and equipment (16,360) (8,985)Acquisition of subsidiary - (33,936) Net cash used in investing activities (11,537) (40,241) Financing activities Dividends paid (13,924) (12,317)Dividends paid to minorities (954) (706)Repayments of obligations under finance leases (27) (897)Proceeds on issue of shares 495 1,236New bank loans raised 35,000 25,000Movement on securitisation loan 4,783 8,774 Net cash from financing activities 25,373 21,090 Net increase / (decrease) in cash and cash equivalents 7,119 (17,562) Cash and cash equivalents at the beginning of the year (14,022) 3,594 Effect of foreign exchange rate changes 105 (54) Cash and cash equivalents at the end of the year (6,798) (14,022) Notes to the Group Financial Statements 1. Basis of preparation of consolidated financial statements In the year ended 31 March 2005 the Group prepared its consolidated financialstatements under UK Generally Accepted Accounting Principles (UK GAAP). Witheffect from 1 April 2005, the Group is required to prepare its consolidatedfinancial statements in accordance with International Financial ReportingStandards (IFRS). The comparative figures included in this report for the year ended 31 March 2005are restated for IFRS. Full details of the restatement and reconciliations ofthe UK GAAP financial information for the year ended 31 March 2005 werecirculated to shareholders on 1 December 2005 within the IFRS TransitionDocument, and can be obtained from the Group's website, www.findel.co.uk. The consolidated financial statements have been approved by the board but havenot been reviewed or audited by the auditors. They have been prepared under theaccounting policies set out in the IFRS Transition Document and are consistentwith those that will be applied in the accounts for the year ended 31 March2006. 2. Segmental analysis Year to Year to 31/03/06 31/03/05 £000 £000 RevenueHome Shopping 228,008 239,114Educational Supplies 228,256 163,523Services 71,532 71,394 527,796 474,031 Operating profitHome Shopping 31,839 40,131Educational Supplies 27,554 15,495Services 5,416 2,636Restructuring costs (16,055) (3,274)Share of profit of associates 1,941 799 Amortisation of intangibles (930) (661) 49,765 55,126 Restructuring costs and amortisation of intangibles relate entirely to theEducational Supplies business segment. The operating profit of the EducationalSupplies business after charging these items is £10,569,000 (2005: £11,560,000). Operating profit within the Services division includes a profit on the sale ofland held for resale of £2,878,000 (2005: £nil). 3. Trading costs Year to Year to 31/03/06 31/03/05 £000 £000 Selling and distribution costs 120,443 105,783Administrative expenses 62,193 65,831Other operating income (5,523) (2,372)Other operating expenses 203 137 177,316 169,379 Other operating income includes a profit on the sale of land held for resale of£2,878,000 (2005: £nil). 4. Earnings per share Year to Year to 31/03/06 31/03/05 £000 £000 Basic earnings 29,660 29,339Restructuring costs (net of tax) 11,499 2,357Amortisation of intangibles 930 661Profit on sale of land held for resale (2,878) -Benchmark earnings 39,211 32,357 Weighted average number of shares 83,359,631 82,857,757 Earnings per share - basic 35.58p 35.41p Earnings per share - benchmark 47.04p 39.05p 5. Dividends Year to Year to 31/03/06 31/03/05 £000 £000 Amounts recognised as distributions to equity holders in the periodFinal dividend for the year ended 31 March 2005 of 12.90p (2004: 11.40p) 10,755 9,405per shareInterim dividend for the year ended 31 March 2006 of 3.80p (2005: 3.50p) 3,169 2,912per share 13,924 12,317 The proposed final dividend of 14.20 pence per ordinary share in respect of theyear ending 31 March 2006 was approved by the board on 9 May 2006. Inaccordance with IFRS it has not been included as a liability as at 31 March2006. 6. Auditor involvement The financial information set out in the announcement does not constitute thecompany's statutory accounts for the years ended 31 March 2006 or 2005. Thefinancial information for the year ended 31 March 2005 is derived from the IFRSTransition Document. The statutory accounts for that year were prepared underUK GAAP and have been delivered to the Registrar of Companies. The auditorsreported on those accounts; their report was unqualified and did not contain astatement under s237(2) or s237(3) of the Companies Act 1985. The statutoryaccounts for the year ended 31 March 2006 will be finalised on the basis of thefinancial information presented by the directors in this preliminaryannouncement and will be delivered to the Registrar of Companies following thecompany's annual general meeting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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