16th Aug 2005 17:51
Headlam Group PLC16 August 2005 16 August 2005 Interim financial results for the six month period ended 30 June 2005 Headlam Group plc ("Headlam"), Europe's leading floorcovering distributor,announces its interim results for the six months ended 30 June 2005. Financial highlights 2005 2004 Change £'000 £'000 Revenue 232,336 217,811 +6.7% Profit from operations 18,501 16,974 +9.0% Profit before tax 18,205 16,744 +8.7% Earnings per share 14.7p 13.5p +8.9% Dividend per share 4.4p 4.0p +10.0% Key points Revenues from UK operations increase by 2.8% on a like for like basis Profit before tax increased by 8.7% Cash generated from operations up 11.7 % to £10.6 million Net capital investment during the period amounted to £7.9 million Interim dividend increased by 10.0% from 4.0p to 4.4p Tony Brewer, Chief Executive of Headlam, said: "We are particularly encouraged by the positive sales performance of the groupin the first six months of 2005 which has continued through July and intoAugust. With the traditional busy autumn period before us, the group remainsconfident of achieving its operating objectives for the year." Enquiries: Headlam Group plc Tony Brewer, Chief Executive Tel: 01675 433000Stephen Wilson, Finance Director CHAIRMAN'S STATEMENT During the first six months of 2005, revenues from UK operations have shown anincrease of 2.8% on a like-for-like basis. We believe this result hasout-performed market conditions and therefore the group has continued toincrease its market share. Group revenues for the first six months increased by 6.7% from £217.8 million to£232.3 million, an improvement principally attributable to the organic growthreferred to above combined with a full six months contribution from NationalCarpets. Profit from operations increased by 9.0% from £17.0 million to £18.5million. Earnings and dividendBasic earnings per share increased by 8.9% from 13.5p to 14.7p. The board havedeclared an interim dividend of 4.4p per share, an increase of 10.0% on lastyear's interim dividend of 4.0p per share. The dividend will be paid on 3 January 2006 to shareholders on the register at 2 December 2005. OperationsIn the UK this positive sales performance was achieved through our 48 autonomousbusinesses and their 292 external sales personnel who visit their customers tomaximise market opportunities. These businesses are defined into four sectors;regional multi-product, national multi-product, residential specialist andcommercial specialist. Each of these sectors has shown an increased salesperformance during the period. The businesses constantly work with our suppliers to develop and subsequentlylaunch new products, into both the residential and commercial sectors. This hasresulted in 2,377 new product lines being launched in the first six months of2005, with the sales and marketing of these products supported by over 555,000new point of sale items being positioned within our customers' premises. This positive sales trend is also reflected in the performance of our customerswho are principally independent floorcovering retailers and flooringcontractors. A further illustration of the widespread financial strength amongstour customers is their commitment to paying their bills on time. Our averagecredit allowed on trade receivables has remained constant at 40 days. During the first quarter of 2005, we finalised the construction of our newpurpose built freehold distribution centre in Tamworth and this is now fullyoperational. As intended, we have also moved four businesses previouslyoperating from Coleshill into the new Tamworth facility, therefore releasingcapacity for further growth of the eight businesses remaining in the Coleshillfacility. Planning permission has now been granted for a new distribution centreto re-house Wilkies, our regional distribution business in Leeds and this willbe operational in July 2006. Our Continental European businesses in France, Holland and Switzerland continueto improve their performance and have made an increased contribution to groupprofitability. AcquisitionsDuring the last six months we have acquired the intellectual property rights ofClarendon Carpets and the business of Gaskell Wool Rich. Both of theseacquisitions have complemented our existing residential speciality businessesfocused on higher quality products. We continue to evaluate potentialacquisitions in each of our core sectors and these would be made to furtherenhance the market position and earnings of the group. Cash flowCash generated from operations during the first six months was £10.6 millioncompared with £9.5 million for the equivalent period last year. Net workingcapital investment increased from £9.4 million to £10.0 million. Net investment in property, plant and equipment totalled £7.9 million, themajority of which related to completing the Tamworth distribution centre. During the six month period cash and cash equivalents declined by £6.7 millionto £31.0 million and net funds at 30 June 2005 amounted to £28.9 millioncompared with £22.6 million at 30 June 2004. OutlookWe are particularly encouraged by the positive sales performance of the group inthe first six months of 2005 which has continued through July and into August.With the traditional busy autumn period before us, the group remains confidentof achieving its operating objectives for the year. TG Larman, Chairman16 August 2005 Consolidated Income Statementunaudited Six months Six months The year ended ended ended 30 June 30 June 31 December 2005 2004 2004 Note £'000 £'000 £'000 Revenue 3 232,336 217,811 464,789 Cost of sales (161,475) (153,074) (323,924) -------- -------- -------- Gross profit 70,861 64,737 140,865 Distribution costs (38,087) (34,705) (70,592)Administration expenses (14,273) (13,058) (31,349) -------- -------- --------Profit from operations 18,501 16,974 38,924Net financing costs (296) (230) (440) -------- -------- -------- Profit before tax 18,205 16,744 38,484 Income tax expense (5,564) (5,193) (11,738) -------- -------- --------Profit for the period 3 12,641 11,551 26,746 ======== ======== ======== Dividend per share 4 4.40p 4.00p 16.25p Earnings per shareBasic 14.7p 13.5p 31.3p ===== ===== ===== Diluted 5 14.5p 13.4p 31.0p ===== ===== ===== Consolidated Statement of Recognised Income and ExpenseUnaudited Six months Six months The year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Actuarial gains/(losses) on definedbenefit pension schemes 328 180 (2,667)Exchange differences arising ontranslation of overseas operations (815) (457) (256) ------- ------- ------- Net losses not recognised in the incomestatement (487) (277) (2,923)Profit for the period 12,641 11,551 26,746 ------- ------- -------Total recognised gains and losses 12,154 11,274 23,823 ======= ======= ======= Consolidated Balance Sheetunaudited At At At 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000ASSETSNon-current assetsGoodwill 13,210 13,210 13,210Other intangible assets 418 1,271 836Property, plant and equipment 77,631 64,786 71,753Deferred taxation 8,245 7,145 8,167 -------- -------- -------- 99,504 86,412 93,966Current assetsInventories 92,505 80,835 79,692Trade and other receivables 68,900 66,385 66,274Other current assets 10,981 9,527 19,276Cash and cash equivalents 30,969 26,309 37,747 -------- -------- -------- 203,355 183,056 202,989Non-current assets classified as held forsale 203 151 203 -------- -------- -------- 203,558 183,207 203,192 -------- -------- -------- Total assets 303,062 269,619 297,158 -------- -------- -------- LIABILITIESCurrent liabilitiesTrade and other payables (153,004) (134,132) (145,509)Short-term borrowings (430) (458) (280)Current proportion of long-term borrowings (1,089) (2,303) (1,124)Current tax payable (11,640) (8,964) (11,053) -------- -------- -------- (166,163) (145,857) (157,966)Non-current liabilitiesLong-term borrowings (537) (973) (738)Deferred taxation (1,214) (2,078) (1,212)Retirement benefit obligation (18,321) (14,513) (18,365) -------- -------- -------- (20,072) (17,564) (20,315) -------- -------- --------Total liabilities (186,235) (163,421) (178,281) -------- -------- --------Net assets 116,827 106,198 118,877 ======== ======== ======== EQUITYEquity attributable to the holders of theparentIssued share capital 4,310 4,281 4,306Share premium account 51,875 51,118 51,731Retained earnings 60,642 50,799 62,840 -------- -------- --------Total equity 116,827 106,198 118,877 ======== ======== ======== Consolidated Cash Flow StatementUnaudited Six months Six months The year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Operating activitiesNet profit before tax 18,205 16,744 38,484Adjustments for:Depreciation 2,265 2,083 4,313Equity based transactions 29 29 57Investment income (8) (13) 11Interest expense 296 230 440 -------- -------- -------- Operating profit before working capitalchanges 20,787 19,073 43,305Increase in inventories (12,839) (6,160) (3,753)Decrease/(increase) in trade and otherreceivables 4,969 515 (8,118)(Decrease)/increase in trade and otherpayables (2,316) (3,940) 14,588 -------- -------- --------Cash generated from operations 10,601 9,488 46,022Interest paid (659) (545) (1,093)Income taxes paid (5,661) (6,432) (12,082) -------- -------- --------Net cash from operating activities 4,281 2,511 32,847 ======== ======== ========Investing activitiesAcquisition of subsidiary net of cashacquired (435) (3,452) (3,779)Purchase of property, plant and equipment (8,034) (4,737) (14,374)Proceeds from sale of property, plantand equipment 108 62 282Interest received 643 506 1,055 -------- -------- --------Net cash used in investing activities (7,718) (7,621) (16,816) ======== ======== ========Financing activitiesProceeds from issuance of share capital 149 2,125 2,763Repayment of borrowings 174 304 (1,071)Payment of finance lease liabilities (208) (243) (498)Dividends paid (3,421) (3,030) (11,795) -------- -------- --------Net cash used in financing activities (3,306) (844) (10,601) ======== ======== ========Net (decrease)/increase in cash and cashequivalents (6,743) (5,954) 5,430 Cash and cash equivalents at beginningof period 37,747 32,336 32,336Effect of exchange rate fluctuations oncash and cash equivalents held (35) (73) (19) -------- -------- --------Cash and cash equivalents at end ofperiod 30,969 26,309 37,747 ======== ======== ======== Consolidated Statement of Changes in Shareholders EquityUnaudited Share Share Translation Retained Total capital premium reserve earnings equity £'000 £'000 £'000 £'000 £'000 Balance at31 December 2003 4,213 49,061 - 51,993 105,267 -------- -------- -------- -------- --------Total recognisedincome and expense 4,213 49,061 (457) 11,731 11,274 Dividends - - - (12,048) (12,048) Equity basedtransactions - - - 29 29 Deferred taxationon share options - - - (449) (449) Share optionsexercised by employees 68 2,057 - - 2,125 -------- -------- -------- -------- --------Balance at30 June 2004 4,281 51,118 (457) 51,256 106,198 Total recognisedincome andexpense - - 201 12,348 12,549 Dividends - - - (138) (138) Equity basedtransactions - - - 28 28 Deferred taxationon share options - - - (398) (398) Share optionsexercised by employees 25 613 - - 638 -------- -------- -------- -------- --------Balance at31 December 2004 4,306 51,731 (256) 63,096 118,877 Total recognisedincome andexpense - - (815) 12,969 12,154 Dividends - - - (14,325) (14,325) Equity basedtransactions - - - 29 29 Deferred taxationon share options - - - (56) (56) Share optionsexercised by employees 4 144 - - 148 -------- -------- -------- -------- --------Balance at30 June 2005 4,310 51,875 (1,071) 61,713 116,827 ======== ======== ======== ======== ======== Notes to the Interim Financial Resultsunaudited 1 General information The interim financial results have been prepared using updated accountingpolicies stated in the Financial Information on the Transition to InternationalFinancial Reporting Standards which was published on 15 August 2005 on thegroup's website www.headlam.com. The accounting policies of the group havechanged to enable the group to comply with International Financial ReportingStandards (IFRS). The directors of the group have elected to not comply withInternational Accounting Standard (IAS) 34 Interim financial reporting and IAS39 Financial instruments: recognition and measurement. The information for the year ended 31 December 2004 does not constitute fullfinancial statements as defined in section 240 of the Companies Act 1985. Thereport and full financial statements for that period were prepared under UK GAAPand have been filed with the Registrar of Companies, they contain an unqualifiedaudit report within the meaning of the Companies Act 1985 and the auditors havenot made any statement under section 237(2) or 237(3) of the Companies Act 1985. 2 Accounting policies The interim financial results have been prepared in accordance with IFRS. Thefinancial periods ending 30 June 2004 and 31 December 2004 have been restatedunder IFRS. 3 Business segments For management purposes, the group is currently organised into two operatingdivisions UK and Continental Europe. These divisions are the basis on which thegroup reports its primary segment information. Segment information about these businesses is presented below. UK Continental Europe Total 31 31 31 30 June 30 June December 30 June 30 June December 30 June 30 June December 2005 2004 2004 2005 2004 2004 2005 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000RevenueExternalsales 197,460 184,695 395,696 34,876 33,116 69,093 232,336 217,811 464,789 ====== ======= ======= ======= ======= ======= ======= ======= ======= ResultSegment result 18,243 16,629 38,445 803 778 1,719 19,046 17,407 40,164 ------- ------- ------- ------- ------- ------- Unallocatedcorporateexpenses (545) (433) (1,240) ------- ------- -------Profit fromoperations 18,501 16,974 38,924 Netfinancing costs (296) (230) (440) Taxation (5,564) (5,193) (11,738) ------- ------- -------Profit forthe period 12,641 11,551 26,746 ======= ======= ======= Notes to the Interim Financial Results (Continued)unaudited 4 Dividends Six months Six months The year ended ended 30 June ended 30 June 31 December 2005 2004 2004 £'000 £'000 £'000Amounts proposed and declared asdistributions to equity holders in the period: Final proposed dividend for theyear ended 31 December 2004 of 12.25p per share (final proposeddividend for the year ended31 December 2003 of 10.25pper share) 10,536 8,627 10,536 ======== ======== ======== Declared interim dividend forthe year ended 31 December2005 of 4.40p (2004: 4.0p)per share 3,789 3,421 3,421 ======== ======== ======== The declared interim dividend was approved by Directors on 30 June 2005 andtherefore has been included as a liability as at 30 June 2005. 5 Earnings per share The calculation of the basic and diluted earnings per share is based on thefollowing data. Six months Six months The year ended ended 30 June ended 30 June 31 December 2005 2004 2005 £'000 £'000 £'000EarningsEarnings for the purposes ofbasic earnings per sharebeing net profit attributableto equity holders of the parent 12,641 11,551 26,746 ======== ======== ======== Earnings for the purposesof diluted earnings per share 12,641 11,551 26,746 ======== ======== ========Number of sharesWeighted average number of ordinary shares for thepurposes of basic earningsper share 86,178,980 85,313,350 85,352,589 Effect of dilutive potentialordinary shares: Share options 1,411,138 1,924,789 1,534,175 Number of shares that would have been issued at fair value (624,241) (858,589) (737,011) ---------- ---------- ----------Weighted average number of ordinary shares for thepurposes of diluted earningsper share 86,965,877 86,379,550 86,149,753 ========== ========== ========== 6 Share capital During the six months ended 30 June 2005 the issued share capital increased by95,362 to 86,206,799 shares. This was due to the exercise of 67,000 shareoptions from the Headlam approved executive scheme, 25,000 from the unapprovedexecutive scheme and 3,362 from the Savings related scheme. Notes to the Interim Financial Results (Continued)unaudited 7 Acquisitions On 4 April 2005, the group acquired the retail division of Gaskell FlooringLimited, trading as Gaskell Wool Rich and Tomkinson Carpets for a cashconsideration of £0.5 million. The transaction has been accounted for by thepurchase method of accounting. 8 Analysis of cash and cash equivalents Six months Six months The year ended ended 30 June ended 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Cash at bank and in hand 30,969 26,309 37,747 ======= ======= ======= 9 Analysis of changes in net funds At 1 January Cash flows Translation At 30 June 2005 differences 2005 £'000 £'000 £'000 £'000Cash and cashequivalents 37,747 (6,743) (35) 30,969Bank overdrafts (279) (174) 18 (435) ------- ------- ------- ------- 37,468 (6,917) (17) 30,534Debt due within one year (687) - 34 (653)Finance leases and similarhire purchase contracts (1,176) 208 - (968) ------- ------- ------- ------- 35,605 (6,709) 17 28,913 ======= ======= ======= ======= 10 Related party transactions Transactions between the company and its subsidiaries, which are relatedparties, have been eliminated on consolidation and are not disclosed in thisnote. The interim financial results for the six months ended 30 June 2005 will beposted to shareholders on 25 August 2005 and copies will be available from thatdate from the Company's registered office. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Headlam