12th Dec 2006 07:01
Carpetright PLC12 December 2006 12 December 2006 Carpetright plc Interim Results Announcement for the 26 weeks ended 28 October 2006 Strong first half profit growth Carpetright plc, Europe's leading specialist carpet and floor covering retailertrading within the UK, Republic of Ireland, Belgium, The Netherlands and Poland,today announces its interim results for the 26 weeks to 28 October 2006. Highlights Group • Profit before tax increased 11.2% to £27.7m (2005: £24.9m) • Underlying* profit before tax increased 17.6% to £26.0m (2005: £22.1m) • Underlying* earnings per share increased 17.0% to 26.2p (2005: 22.4p) • Basic earnings per share increased 10.7% to 28.0p (2005: 25.3p) • Net debt reduced to £22.9m (2005: £49.7m) • Interim dividend increased by 5.3% to 20.0p (2005: 19.0p) UK and Republic of Ireland • Underlying* operating profit increased 16.7% to £25.2m (2005: £21.6m) • Total sales increased by 5.7% with like for like sales up by 0.9% • Gross margin increased to 61.9% (2005: 59.6%) • 63 stores opened and nine closed taking the total store base to 494 Rest of Europe • Underlying* operating profit increased by 21.4% to £1.7m (2005: £1.4m) • Total sales increased 8.1% with like for like sales up by 4.4% • Three new stores opened taking the total store base to 101 • Poland expansion continues as planned * 'Underlying' excludes profits / (losses) from the disposal of property, plantand equipment together with associated tax Lord Harris, Chairman and Chief Executive, said: "We are pleased with Carpetright's first half performance. Sales and margingrowth have enabled the Group to deliver a strong increase in underlyingoperating profit. Net debt has reduced by £26.8 million to £22.9 million despite a stronginvestment in new stores. We have opened 66 stores in the period and increasedour selling space by 5.3%. These openings include 20 concession stores in Houseof Fraser and our third store in Poland. In the Rest of Europe we have delivered strong underlying profits in Belgium andThe Netherlands of £2.0 million and the initial operating loss in Poland of £0.3million is in line with our plans. We are confident about the Group's prospects. Since the end of October we haveopened our 600th store and we are continuing to grow sales in all our markets." For further enquiries please contact: Carpetright plc Lord Harris of Peckham, Chairman and Chief ExecutiveIan Kenyon, Group Finance DirectorTelephone 020 7638 9571 (until 2pm), 01708 525522 (thereafter) Citigate Dewe Rogerson Sara Batchelor / Kevin Smith / Fiona MulcahyTelephone 020 7638 9571 A copy of the interim results can be found on our website www.carpetright.plc.uktoday from 7.00am. There will be a presentation today at 9.00am to analysts and investors atDeutsche Bank AG London, Winchester House, 1 Great Winchester Street, London,EC2N 2DB. A copy of the slides used for this presentation can be found on ourwebsite www.carpetright.plc.uk from 9.00am. 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. Overview of Group financial performance 2006 2005 %Key financial results £m £m Change Group sales 228.4 215.5 6.0%Underlying operating profit*- UK and RoI 25.2 21.6 16.7%- Rest of Europe 1.7 1.4 21.4%- Total 26.9 23.0 17.0%Exceptional items 1.7 2.8 (39.3%)Operating profit 28.6 25.8 10.9%Interest (0.9) (0.9) -Profit before taxation 27.7 24.9 11.2%Underlying pre tax profit* 26.0 22.1 17.6%Underlying earnings* per share (pence) 26.2 22.4 17.0%Basic earnings per share (pence) 28.0 25.3 10.7%Interim dividend per share (pence) 20.0 19.0 5.3% * "Underlying" excludes profits / (losses) from the disposal of property, plantand equipment together with associated tax. Carpetright has continued to make good progress - during the first half of theyear 66 stores were opened, including our 100th store in the Rest of Europe.The Group was trading from 595 stores at the end of the period. The number ofsmall stores has nearly doubled in the last year, from 34 to 64, reflecting ourstated strategy of moving to small, less expensive retail units. Sales of cutlength carpet have been strong and we are seeing good growth from new stores andnew products. Results Group sales increased by 6.0% to £228.4 million with like for like growth of0.9% in the UK & RoI and 4.4% in the Rest of Europe. Underlying operatingprofit increased by 17.0% to £26.9 million (2005: £23.0 million) whichrepresents an 11.8%(2005: 10.7%) return on sales. The net interest charge remained flat at £0.9 million resulting in theunderlying profit before tax increasing by 17.6% to £26.0 million (2005: £22.1million). The Group recorded, as exceptional items, a profit on the disposal of propertyassets of £1.7 million (2005: £2.8 million) resulting in a profit before tax of£27.7 million (2005: £24.9 million). Underlying earnings per share increased by17.0% to 26.2p whilst basic earnings per share increased by 10.7% to 28.0p. Cash flow and debt The Group remains highly cash generative and has continued to invest in itsstore opening programme. Net debt has reduced by £26.8 million to £22.9 million(2005: £49.7 million). This is a reduction of £6.2 million on the April 2006year-end. Operating cash-flow was £37.6 million (2005: £33.6 million) and capital paymentstotalled £15.3 million. The capital payments include £3.0 million spent on theacquisition of freehold / long leasehold properties. Dividend The Board has declared an interim dividend of 20.0p (2005: 19.0p) an increase of5.3%. The dividend will be paid on 16 February 2007 to shareholders on theregister on 2 February 2007. UK and Republic of Ireland Financial results 2006 2005 %UK & RoI - Key financial results £m £m Change Sales 200.5 189.7 5.7%Gross Profit 124.2 113.0 9.9%Gross margin % 61.9% 59.6% 2.3ppUnderlying operating profit 25.2 21.6 16.7%Underlying operating margin % 12.6% 11.4% 1.2pp The business achieved an underlying operating profit of £25.2 million, anincrease of 16.7% compared to last year. Total sales increased by 5.7% to £200.5 million and like for like salesincreased by 0.9%. The remainder of the increase came from new stores, with anoverall growth in average space of 7.8%. Sales growth during the period wasinterrupted by the summer heatwave. The promotional programme succeeded in increasing sales of cut-length carpetswhilst the continuing decline in laminate sales was more than offset by thegrowth in rug sales. The gross profit increased by 9.9% with a continued increase in the gross marginto 61.9%. This is 2.3 percentage points ahead of the first half last year and30 basis points ahead of the second half. This improvement reflects bettermanagement of the promotional mix, improved supplier rebates and lower levels ofstock loss. Operating costs increased by 8.3% to £99.0 million. The major increases havebeen in labour costs, rates and utilities but these have been offset, in part,by reductions in advertising spend. Rent costs have continued to increase butwe see signs that the level of increase is reducing and some reviews are nowbeing settled with no increase. The underlying operating margin was 12.6% (2005: 11.4%). We expect this tocontinue to increase as the new stores mature and like for like sales improve. Stores Our store base continues to expand - we have opened 63 stores in the periodincluding our first outlets in Jersey. The store make-up is now : April 2006* 26 weeks to October 2006UK & RoI 28 October 2006store base Stores Sq ft '000 Openings Closures Stores Sq ft '000 Large 355 3,486 19 (7) 367 3,591Small 45 230 19 - 64 320Concession 40 105 25 (2) 63 146 440 3,821 63 (9) 494 4,057 * Restated for recategorisation of stores 20 concession stores in House of Fraser were opened - their early performance issatisfactory. The small store expansion has accelerated whilst the ongoingsteady reduction in the size of the large stores helps to control rental costs.Four new stores opened in the Republic of Ireland in the period taking the totalto 23. We plan to open another 20 stores in the second half and expect to close theyear with over 500 stores in the UK and Republic of Ireland. Product The main area of growth in the first half has been the cut-length business withmocha starting to replace beige in terms of colours. Wool product ranges havebeen extended and this has supported a small increase in the average sellingprice. The major innovation has been in the areas of vinyls, rugs and laminate. Thevinyl ranges have been simplified and the in-store ranges are moving from fivecolours per range to six as new vinyl racks are introduced. The laminate marketappears to have stabilised following two years of decline and the laminateranges in store have been simplified into three clear price points. Theseranges are supported by a range of approximately 24 laminates, available toorder, which are typically at higher price points. During 2006 the business has expanded its range and sales of rugs and is now inthe process of rolling out new rug areas into approximately 200 stores. Theseprovide more space and appropriate displays to encourage customers to view theranges more easily and sales have built steadily. It is our intention to growsales from rugs to 5% of the total sales from the current level of approximately2%. Operations The primary focus has been on the successful opening of the 63 new stores byensuring that new staff are properly trained to provide great service and thatthey are supported by an adequate pool of quality fitters. At the same time the business has concentrated on the new store system that ispart of the IT infrastructure investment. The system, Navision, has beenpiloted during the period and is now operational in 16 stores. The system isworking as anticipated and has been welcomed by the store staff. Roll-out willcommence in February 2007 and will be completed during 2008. We were delighted to be awarded the prize of Retail IT Team of the Year in theRetail Systems magazine awards. This recognised the success of the overall ITinfrastructure programme and in particular our sustained efforts with gettingSAP and Navision live. Rest of Europe Financial Results 2006 2005 %Rest of Europe - Key financial results £m £m Change Sales 27.9 25.8 8.1%Gross profit 15.1 13.9 8.6%Gross margin % 54.1% 53.9% 0.2ppUnderlying operating profit 1.7 1.4 21.4%Underlying operating margin % 6.1% 5.4% 0.7pp The business achieved an underlying operating profit of £1.7 million, anincrease of 21.4% compared to last year. Included within this result are theinitial operating losses in Poland which totalled £0.3 million. Excluding theselosses the business has increased underlying operating profit by 42.9%. Total sales increased by 8.1% to £27.9 million. In local currency Belgium andThe Netherlands grew sales by 7.4% with like for like growth of 4.4%. Thisperformance demonstrates the continuing improvements we are making and thegrowing awareness of the Carpetright brand in both countries. The sales mix in Belgium and The Netherlands has remained relatively stablealthough, unlike the UK, we have seen continued increases in laminate sales asthe market is far stronger. The gross profit increased with the gross margin improving to 54.1% (2005:53.9%). This represents a 30 basis point improvement in Belgium and TheNetherlands offset by lower margins in Poland. The margin in Poland is aboveour initial expectation and continues to improve. We will continue to growmargins in each country as sales volumes increase. Average space increased by 7.3% compared to last year whilst operating costsincreased by 7.2% to £13.4 million. Utility costs increased, though not assharply as in the UK, and there is not the same pressure on property costs.Sub-let income fell slightly in the period following the disposal of a sub-letproperty which generated an exceptional profit of £0.1 million. The underlying operating margin (excluding Poland) rose to 7.2% (2005: 5.4%) andwe expect this to continue increasing as the sales continue to grow. Stores We opened three stores in the period and now have over 100 stores trading in theRest of Europe. The store make-up at the period end is : April 2006 26 weeks to October 2006Rest of Europe 28 October 2006store base Stores Sq ft '000 Openings Closures Stores Sq ft '000 Belgium 28 347 - - 28 347Netherlands 68 836 2 - 70 854Poland 2 23 1 - 3 35 98 1,206 3 - 101 1,236 Since the half year two more stores have opened in Poland and we are targeting afurther three more in Poland and three more in The Netherlands before the yearend. This would bring us to eight stores in Poland and 73 in The Netherlands. Product The major focus in the period has been to develop our ranges in Belgium totailor them more closely to the different customer demands in the French andFlemish speaking markets. Across all the stores we have looked to create new marketing initiatives thatstimulate customer demand and we have run successful "spend and save", singlediscount and "Madness" promotions in Belgium and The Netherlands. In Poland we have introduced cut-length product into our third store and believethis will help to drive sales of roll-stock carpet as well as cut-length. Thesales mix is gradually moving from rugs towards carpet as the Polish customerbecomes more familiar with the product. Operations Having completed the re-branding of our existing stores, the operational focushas been on the successful opening of new stores. In our existing stores we have continued to drive performance through therollout of sales training across The Netherlands, with Belgium to follow in thesecond half. Sales skill training has also formed a key part of our initialinvestment in the Polish market. Summary and Outlook Overall we are pleased with the Group's first half performance. Revenue growthand margin improvements more than offset the increased costs enabling us todeliver a strong increase in operating profits. Since the end of October we have opened our 600th store. Looking ahead, theGroup will continue to focus on delivering sales growth and increased marketshare in all its markets through a combination of new stores and same storegrowth. Gross margin is expected to improve further and cost inflation should start tomoderate in 2007. This will be supported by our ongoing relocation strategy aswe exit large, expensive stores in favour of smaller, cheaper units. Cash generation will also remain a key objective in order to sustain long-termorganic growth in our existing and new markets. We are confident that these actions will continue to provide our customers withoutstanding service, choice and value and will deliver sustainable growth forshareholders. STORE PORTFOLIO 2006 2005Store Base - Numbers 28 October 29 April 29 October 30 April 2006 2006 2005 2005UK & RoI Large 367 355 346 345 Small 64 45 34 28 Concessions 63 40 35 30 494 440 415 403Rest of Europe Belgium 28 28 29 28 The Netherlands 70 68 64 61 Poland 3 2 - - 101 98 93 89 Group Total 595 538 508 492 2006 2005Store Space 28 October 29 April 29 October 30 April(Sq ft - thousands) 2006 2006 2005 2005UK & RoI Large 3,591 3,486 3,421 3,404 Small 320 230 178 146 Concessions 146 105 77 68 4,057 3,821 3,676 3,618Rest of Europe Belgium 347 347 368 359 The Netherlands 854 836 814 784 Poland 35 23 799 - 1,236 1,206 1,167 1,143Group Total 5,293 5,027 4,843 4,761 2006 2005Store Size 28 October 29 April 29 October 30 April(Average sq ft per store) 2006 2006 2005 2005 UK & RoI Large 9,784 9,820 9,887 9,867 Small 5,000 5,111 5,235 5,214 Concessions 2,317 2,625 2,200 2,267 8,213 8,684 8,858 8,978Rest of Europe Belgium 12,393 12,393 12,690 12,821 The Netherlands 12,200 12,294 12,484 12,852 Poland 11,667 11,500 - - 12,238 12,306 12,548 12,843 Group Total 8,897 9,344 9,533 9,677 Some historical information has been restated for recategorisation of stores Carpetright plc Consolidated income statement (unaudited) 26 weeks to 28 October 2006Continuing operations Note 26 weeks to 26 weeks to 52 weeks to 28 October 29 October 29 April 2006 2005 2006 £m (restated) (restated) £m £m Revenue 2 228.4 215.5 451.4Cost of sales (89.1) (88.6) (180.8) Gross profit 2 139.3 126.9 270.6Other operating income 2.5 3.6 9.2Administrative expenses (113.2) (104.7) (213.6) Operating profit 2 28.6 25.8 66.2 Analysed as: Operating profit before exceptional items 26.9 23.0 58.7 Exceptional items 3 1.7 2.8 7.5 Interest payable (1.0) (1.0) (2.5)Interest receivable 0.1 0.1 0.5 Profit before tax 27.7 24.9 64.2Tax 4 (8.7) (7.7) (20.1) Profit for the financial period, attributable to 19.0 17.2 44.1equity shareholders of the parent company Basic earnings per share 6 28.0p 25.3p 65.0pDiluted earnings per share 6 28.0p 25.3p 65.1pInterim dividend per share 5 20.0p 19.0p 49.0p Consolidated statement of recognised income and expenses (unaudited)26 weeks to 28 October 2006 Note 26 weeks to 26 weeks to 52 weeks to 28 October 29 October 29 April 2006 2005 2006 £m £m £m Profit for the financial period 19.0 17.2 44.1 Actuarial gains on defined benefit pension scheme 8 - - 0.9Fair value gains/(losses) in respect of cash flowhedges: On first-time adoption of IAS 32 and IAS 39 - - (0.1) Transferred to hedging reserve - - 0.2Exchange differences 10 (1.0) 0.1 0.8Tax on items taken directly to or transferred from equity - - (0.3) Net gains/(losses) recognised directly in equity (1.0) 0.1 1.5 Total recognised income and expense for the financial period, attributable to equity shareholders of theparent company 18.0 17.3 45.6 Carpetright plcGroup balance sheet (unaudited)As at 28 October 2006 Note 29 October 29 April 28 October 2005 2006 2006 (restated) (restated) £m £m £mAssets Non-current assets Intangible assets 36.7 32.4 34.3Property, plant and equipment 125.4 119.7 122.0Investment property 20.4 23.0 21.3Deferred tax asset 0.9 1.1 1.0Derivative financial instruments 11(ii) 0.1 - 0.1 Trade and other receivables 1.6 - 1.7 Total non-current assets 185.1 176.2 180.4 Current assets Inventories 34.2 28.8 32.6Trade and other receivables 28.9 27.1 25.7Cash and cash equivalents 11(ii) 9.5 3.6 9.3 Total current assets 72.6 59.5 67.6 Total assets 257.7 235.7 248.0 Liabilities Current liabilities Trade and other payables (127.3) (107.3) (112.3)Borrowings and overdrafts 11(ii) (15.1) (24.1) (13.3) Current tax liabilities (9.1) (4.9) (8.9) Total current liabilities (151.5) (136.3) (134.5) Non-current liabilities Trade and other payables (13.9) (11.1) (11.8)Obligation under finance leases 11(ii) (4.1) (4.8) (4.4) Borrowings 11(ii) (12.6) (23.7) (20.0) Provisions (0.1) (0.3) (0.1)Deferred tax liabilities (20.6) (17.8) (19.7)Retirement benefit obligation (1.5) (2.4) (1.5)Total non-current liabilities (52.8) (60.1) (57.5) Total liabilities (204.3) (196.4) (192.0) Net assets 53.4 39.3 56.0 EquityShare capital 9 0.7 0.7 0.7Share premium 9 14.8 14.1 14.8Treasury share reserve 9 (0.5) (0.1) (0.1)Other reserves 10 38.4 24.6 40.6 Total equity, attributable to equity shareholders of 53.4 39.3 56.0the parent company Carpetright plcConsolidated cash flow statement (unaudited)26 weeks to 28 October 2006 Note 26 weeks to 26 weeks to 52 weeks to 28 October 29 October 29 April 2006 2005 2006 £m £m £mCash flows from operating activities Profit before tax 27.7 24.9 64.2Adjusted for:Depreciation and amortisation 6.6 6.4 13.6Share based payments 0.2 0.1 0.4Profit on sale of property, plant and equipment and 3 (1.7) (2.8) (7.5)investment property Net interest payable 0.9 0.9 2.0 Operating cash flows before movements in working capital 33.7 29.5 72.7(Increase)/decrease in inventories (1.8) 1.9 (1.9)Increase in trade and other receivables (4.0) (6.4) (5.3)Increase in trade and other payables 18.1 15.9 20.9Cash generated by operations 46.0 40.9 86.4Interest paid (1.0) (0.8) (2.4)Interest received 0.1 0.1 0.7Corporation taxes paid (7.5) (6.6) (12.9) Net cash from operating activities 37.6 33.6 71.8 Cash flows from investing activitiesProceeds on disposal of property, plant and equipment and investment property 3 3.7 7.9 19.0Purchases of intangible assets (3.3) (5.3) (8.5)Purchases of property, plant and equipment and investment property (12.0) (14.3) (27.0)Acquisition of shares in subsidiary net of cash acquired - (5.2) (5.2) Net cash used in investing activities (11.6) (16.9) (21.7) Cash flows from financing activities Net proceeds from issue of ordinary share capital to satisfy share option scheme exercises 9 - - 0.7Purchase of own shares (ii) 9 (0.4) (9.3) (9.3)Repayment of borrowings (4.9) - (1.5)Receipt of funds from finance company - 3.7 3.7Repayment of obligation under finance leases (0.4) (0.3) (0.7)Dividends paid to Group shareholders 5 (20.4) (19.0) (31.9) Net cash used in financing activities (26.1) (24.9) (39.0) Net increase/(decrease) in cash and cash equivalents in the period 11(i) (0.1) (8.2) 11.1 Cash and cash equivalents at beginning of period 6.8 (4.2) (4.2)Exchange differences - (0.1) (0.1) Cash and cash equivalents at end of period (i) 11(ii) 6.7 (12.5) 6.8 (i) For the purposes of the consolidated cash flow statement, cash and cashequivalents include bank overdrafts of £2.8m (£16.1m at 29 October 2005, £2.5mat 29 April 2006) shown within borrowings on the balance sheet. (ii) The cash outflow for the period to 29 October 2005 includes a £9.3m paymentfor shares bought back from the market before 30 April 2005, but not paid foruntil the period ended 29 October 2005. Carpetright plc Notes to the interim financial statements 26 weeks to 28 October 2006 1. Basis of preparation This financial information comprises the consolidated interim balance sheets asat 28 October 2006 and 29 October 2005 and related consolidated interimstatements of income, recognised income and expenses and cash flows for the sixmonths then ended of Carpetright plc ("financial information"). This financialinformation has been prepared in accordance with the Listing rules of theFinancial Services Authority. This financial information has been prepared usingthe principal accounting policies as set out on pages 44 to 51 of the Group'sannual financial statements for the year ended 29 April 2006. In preparing theseinterim financial statements the Group has chosen not to adopt IAS 34 - 'InterimFinancial Reporting' early and, therefore, they are not in full compliance withIFRS. Following a review of the classifications of some items changes in presentationhave been made in the current accounting period. Comparative periods have beenrestated to conform with current presentation. The effects on the period to 29October 2005 are: i) To move £0.3m (April 2006; £0.3m) of costs in Rest of Europe fromadministrative expenses to cost of sales to treat distribution costsconsistently with UK & RoI. ii) To move £0.7m from borrowings and overdrafts to current trade and otherpayables to consistently disclose the current portion of finance leaseobligations. iii) To move £11.1m (April 2006; £11.8m) from current trade and other payablesto non-current trade and other payables to correctly analyse deferred incomerelating to lease incentives. iv) To move £23.0m from property, plant and equipment to investment property. This interim report does not constitute statutory accounts as defined by Section240 of the Companies Act 1985. It has been reviewed but not audited by theGroup's auditors. The statutory accounts for the year ended 29 April 2006, whichwere prepared under IFRS, have been delivered to the Registrar of Companies. Theauditors opinion on those accounts was unqualified and did not contain astatement made under Section 237 (2) or (3) of the Companies Act 1985. 2. Segment information The Group's primary reporting segment is geographic, as this is the basis onwhich the Group is organised and managed. The Group does not report a secondarysegment on the basis of business operations because business operationsthroughout the Group are the same. The geographical sectors are: United Kingdom& Republic of Ireland ("UK & RoI"), and Poland, Belgium and The Netherlands("Rest of Europe"). Central costs are incurred principally in the UK and areimmaterial. As such these costs are included within the UK & RoI segment.Segment revenue and result include transfers between geographical segments.Such transfers are priced at arm's length and are eliminated on consolidation. Geographical segments: 26 weeks to 28 October 2006 26 weeks to 29 October 2005 Rest of (restated) UK & RoI Europe Total UK & Rest of RoI Europe Total £m £m £m £m £m £m Gross Revenue 201.8 27.9 229.7 191.0 25.8 216.8Inter-segment revenue (1.3) - (1.3) (1.3) - (1.3) Segment Revenue (by origin and destination) 200.5 27.9 228.4 189.7 25.8 215.5 Gross profit 124.2 15.1 139.3 113.0 13.9 126.9 Operating profit before exceptional items 25.2 1.7 26.9 21.6 1.4 23.0 Segment result: operating profit after exceptional items 26.8 1.8 28.6 24.4 1.4 25.8 Net interest payable (0.9) (0.9) Profit before tax 27.7 24.9 Tax (8.7) (7.7) Profit for the financial period 19.0 17.2 Carpetright plcNotes to the interim financial statements 26 weeks to 28 October 2006 3. Exceptional items 26 weeks to 26 weeks to 52 weeks to 28 October 29 October 29 April 2006 2005 2006 £m £m £mDisclosed in the income statement:Profit on disposal of property, plant and equipment and investment property 1.7 2.8 7.5Recognised in the balance sheet:Property debtors 2.3 2.9 1.7Reported in the cash flow statement:Within investing activities 3.7 7.9 19.0 4. Tax 26 weeks to 26 weeks to 52 weeks to 28 October 29 October 29 April 2006 2005 2006 £m £m £m Current 7.7 6.0 16.7Deferred 1.0 1.7 3.4 8.7 7.7 20.1 The estimated tax rates on the profits of the Group are as follows: 52 weeks to 52 weeks to 28 April 29 Apri 2007 2006 % % Estimated average annual underlying tax rate 31.4 31.4Estimated average annual effective tax rate 31.3 31.2 The effective tax rate is defined as the tax charged or credited as a percentageof the accounting profit before tax. The underlying tax rate is defined as theeffective tax rate after adjusting for, when relevant, exceptional items and taxadjustments in respect of one-off items and prior periods. 5. Dividends 26 weeks to 28 October 2006 26 weeks to 29 October 2005 Pence/share £m Pence/share £m Final prior year dividend paid (see note 10) 30.0 20.4 28.0 19.0Current year interim dividend 20.0 13.6 19.0 12.9 The current year interim dividend of 20.0p per share was declared by the Boardof Directors on 11 December 2006 but has not been included as a liability inthese financial statements. The dividend will be paid on 16 February 2007 toshareholders who are on the register of members on 2 February 2007. Carpetright plcNotes to the interim financial statements26 weeks to 28 October 2006 6. Earnings per share 26 weeks to 28 October 2006 26 weeks to 29 October 2005 52 weeks to 29 April 2006 Earnings Weighted Earnings Earnings Weighted Earnings Earnings Weighted Earnings £m Average Per £m Average per share £m Average per share number of Share Number Pence Number Pence shares Pence of shares of shares Millions Millions Millions Basic earningsper share 19.0 67.9 28.0 17.2 67.8 25.3 44.1 67.8 65.0Effect of dilutiveshareoptions - - - - - - 0.1 0.1 0.1Diluted earningsper share 19.0 67.9 28.0 17.2 67.8 25.3 44.2 67.9 65.1 The Directors have presented an additional measure of earnings per share basedon underlying earnings, in accordance with the practice adopted by most majorretailers, as they believe this provides a more comparable measure on an ongoingbasis. Underlying earnings is defined as profit after adjusting for post taxexceptional items. 26 weeks to 26 weeks to 52 weeks to 28 October 29 October 29 April 2006 2005 2006 Pence Pence Pence Basic earnings per share 28.0 25.3 65.0 Adjusted for the effect of exceptional items: Profit on disposal of property, plant and equipment and investment (2.5) (4.2) (11.1)property Tax 0.7 1.3 3.6 Underlying earnings per share 26.2 22.4 57.5 7. Intangible assets, property, plant and equipment and investment property During the period, the Group spent £15.3m on the acquisition of assets £12.0m ofwhich related to new and existing stores, with most of the remainder arising onthe capitalisation of software costs. During the period the Group disposed of a number of properties in the UK & RoIand one property in the Rest of Europe. The proceeds from these disposals were£3.7m giving a profit of £1.7m. 8. Retirement benefit obligation The assets and liabilities of the Group's UK defined benefit pension scheme werevalued on an IAS 19 basis at 29 April 2006 by a qualified actuary. The amountrecognised in the income statement in the period reflects the expected servicecosts, the expected return on assets and the expected interest cost on thepension scheme obligations. As there has been no valuation of the pension fundat 28 October 2006 no actuarial gains or losses have been recognised in theStatement of recognised income and expenses. Carpetright plcNotes to the interim financial statements26 weeks to 28 October 2006 9. Share capital, share premium and treasury share reserve Number of Share Share Treasury Shares Capital Premium Shares Total Million £m £m £m £m At 30 April 2005 67.8 0.7 14.1 (0.1) 14.7Issue of ordinary share capital to satisfy share option scheme exercises 0.1 - 0.7 - 0.7At 29 April 2006 67.9 0.7 14.8 (0.1) 15.4Purchase of own shares by employee share trust - - - (0.4) (0.4)At 28 October 2006 67.9 0.7 14.8 (0.5) 15.0 There were no movements in the period to 29 October 2005. During the period the Group funded the purchase of 30,000 Company shares by theGroup's LTIP trust via an interest-free loan amounting to £0.4m. These sharesare classified as treasury shares. 10. Other reserves Capital Redemption Translation Hedging Retained Reserve Reserve Reserve Earnings Total £m £m £m £m £m At 30 April 2006 0.1 0.6 0.2 39.7 40.6 Exchange difference in respect of hedged equity investments - (1.0) - - (1.0)Profit for the period - - - 19.0 19.0Total recognised income and expense for the period - (1.0) - 19.0 18.0Share-based payments net of tax - - - 0.2 0.2Dividend paid to Group shareholders - - - (20.4) (20.4) At 28 October 2006 0.1 (0.4) 0.2 38.5 38.4 Capital Redemption Translation Hedging Retained Reserve Reserve Reserve Earnings Total £m £m £m £m £m At 1 May 2005 0.1 (0.2) - 26.3 26.2Exchange difference in respect of hedged equity investments - 0.1 - - 0.1Profit for the period - - - 17.2 17.2Total recognised income and expense for the period - 0.1 - 17.2 17.3Share-based payments net of tax - - - 0.1 0.1Dividend paid to Group shareholders - - - (19.0) (19.0)At 29 October 2005 0.1 (0.1) - 24.6 24.6 Carpetright plcNotes to the interim financial statements26 weeks to 28 October 2006 11. Notes to cash flow statement i) Reconciliation of Net debt 26 weeks to 26 weeks to 52 weeks to 28 October 29 October 29 April 2006 2005 2006 £m £m £m Net debt at the beginning of the period (29.1) (37.9) (37.9) Net increase/(decrease) in cash and cash equivalents (0.1) (8.2) 11.1(Increase)/decrease in borrowings, obligations under finance leases and 5.3 (3.4) (1.4)derivative financial instruments (1)Exchange differences 1.0 (0.2) (0.9) Net debt at the end of the period (22.9) (49.7) (29.1) ii) Components of net debt Cash and cash equivalents per the balance sheet 9.5 3.6 9.3Bank overdrafts (2.8) (16.1) (2.5) Cash and cash equivalents per the cash flow statement 6.7 (12.5) 6.8 Borrowings less than one year (12.3) (8.0) (10.8)Borrowings over one year (12.6) (23.7) (20.0)Obligation under finance leases less than one year (0.7) (0.7) (0.8)Obligation under finance leases over one year (4.1) (4.8) (4.4)Derivative financial instruments 0.1 - 0.1 Net debt (22.9) (49.7) (29.1) (1) Comparatives have been restated to include derivative financial instruments 12. Foreign Exchange The principle exchange rates used were as follows:Euro 26 weeks to 26 weeks to 52 weeks to 28 October 29 October 29 April 2006 2005 2006 Average 1.47 1.47 1.46Closing 1.49 1.47 1.44 Independent review report to Carpetright Plc Introduction We have been instructed by the company to review the financial information forthe six months ended 28 October 2006 which comprises the consolidated interimbalance sheet as at 28 October 2006 and the related consolidated interimstatements of income, cash flows and statements of recognised income and expensethen ended and related notes. We have read the other information contained inthe interim report and considered whether it contains any apparent misstatementsor material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out inNote 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. The maintenance and integrity of the Carpetright plc's web site is theresponsibility of the directors; the work carried out by the auditors does notinvolve consideration of these matters and, accordingly, the auditors accept noresponsibility for any changes that may have occurred to the interim reportsince it was initially presented on the web site. Legislation in the United Kingdom governing the preparation and dissemination offinancial information may differ from legislation in other jurisdictions. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 28 October 2006. PricewaterhouseCoopers LLPChartered AccountantsLondon 11th December 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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