1st Dec 2005 07:02
Findel PLC01 December 2005 1 December 2005 FINDEL PLC Findel p.l.c., the Yorkshire based home shopping and educational suppliesbusiness, today announces its interim results for the six months to30 September 2005 FINANCIAL HIGHLIGHTS Benchmark Results (*) 2005 2004 % change-----------------------Revenues £233.2m £191.8m +22%Profit from Operations £9.4m £7.6m +23%Profit before tax £2.2m £2.2m +3%Earnings per share 2.18p 1.88p +16%Interim Dividend 3.80p 3.50p +9% Statutory Results-------------------Profit before tax £(0.1)m £1.9mEarnings per share 0.03p 1.56p DIVISIONAL HIGHLIGHTS Home Shopping Division - turnover £97.2m (£101.3m)- Profit from operations £3.3m (£3.4m)- turnover (35 weeks to 25 November) down 4%- Margins maintained whilst prices of re-included lines reduced by 5%- Internet now accounts for over 21% of orders, up 30% on prior year- Improved customer service reduces queries by 15%- Sales of electrical products strong Educational Supplies Division - turnover up 55%, to £115.9m (£74.7m)- Benchmark profit from operations up 18% to £6.8m (£5.7m)- turnover (35 weeks to 25 November) up 60%; like for like up 6%- Acquisitions performing to expectations- Restructuring ahead of plan- Stock lines reduced from over 50,000 to 27,000- NRS growth continues Findel Services Division - turnover up 27% to £20.1m (£15.9m)- Loss from operations of £0.7m (loss of £1.6m) Keith Chapman, Chairman, commented: "The Group has produced a good set of results for the first six months in achallenging trading environment. Our Home Shopping division has once againoutperformed the wider Home Shopping sector and our Educational Suppliesdivision has not only progressed the reorganisation ahead of plan but hassucceeded in growing sales. We continue to be excited by the prospects for theGroup." (*) Benchmark measures are stated before amortisation of acquisition intangiblesand before non-recurring items such as restructuring costs, gains or losses ondisposal or closure of businesses, and goodwill impairment charges. Interim Report Findel p.l.c Chairman's Statement I am pleased to report record sales for the first six months of the financialyear. Sales (including from businesses acquired) at £233.2m (2004: £191.8m) are22% higher than for the comparable period last year. This is the first occasion on which we report our results under IFRS. An auditedtransition document has been provided alongside this interim statement, whichprovides an explanation of the comparative information and appropriatereconciliation. In order to ensure consistency of reporting we have, in common with othercompanies in our sector, identified measures of benchmark profit fromoperations, profit before tax and earnings per share which we believe will aidin the understanding of our business. Benchmark measures are stated before amortisation of acquisition intangibles andbefore non-recurring items such as restructuring costs, gains or losses ondisposal or closure of businesses, and goodwill impairment charges. Benchmark profit from operations improved by 23% to £9.4m from £7.6m. The groupachieved a benchmark profit before tax in the first six months of £2.2m comparedto £2.2m in the same period last year. However, on a full statutory basis theresult before tax for the period was a loss of £0.1m (2004: profit of £1.9m)reflecting the impact of the restructuring costs and amortisation ofintangibles. The acquisitions of GLS and Huntleigh National Care were completed in December2004 at a cash cost of £33.9m. This has impacted the interest charge in thefirst six months by just over £1m. A slight rise in the average interest ratesuffered by the group in the period added a further £0.3m. Total finance costswere £7.2m for the period against £5.3m last year. Dividend The directors have declared an interim dividend of 3.80p (2004: 3.50p), anincrease of 9% over last year. The interim dividend will be paid on 13 January2006 to shareholders on the register on 16 December 2005; with an ex-dividenddate of 14 December 2005. Trading Home Shopping Home Shopping saw a sales reduction under IFRS in the six months of 4%, to£97.2m from £101.3m reflecting the downturn in the retail market in Septemberwhich we reported in our October trading statement. In each month to 25 Novembersales were level or ahead of the same period last year, with the sole exceptionof September. This has resulted in sales to 25 November 4% behind prior year; abetter performance than the non-food, non-clothing market as a whole. This hasbeen achieved despite price deflation of 5% on re-included lines. Benchmark profit from operations in the six months was £3.3m (2004: £3.4m). In view of the economic climate prevailing this year, whilst maintaining ouroverall marketing spend at £21m (2004: £21m), we felt it prudent to concentratea greater proportion of our marketing effort on developing sales within ourexisting customer base as opposed to recruiting new customers. We also took adecision to tightly control credit vetting, which resulted in more newapplicants being rejected this year than last. The combined effect of this hasbeen that the base has reduced slightly from 1.6 million customers to just under1.5 million, whilst retention rates have remained strong at 65%, helped by ourcontinued focus on customer service, where year on year enquiry volumes are down15%. Sales via the internet continued to perform strongly. This attractive route tomarket is now accounting for over 21% of all orders, up from 16% in prior year.With the increasing penetration of broadband, the internet market is growingfast. To date, we have not sought to use the internet as a marketing andrecruitment medium but purely as an additional and cost efficient method ofdealing with our existing customers. Next year we have plans to not only furtherextend the service to existing customers, but to approach a new audience whichwe are currently not servicing. Christmas trading for us has come later this year in common with otherretailers. This is highlighted by a strong performance from our Christmas Livingcatalogue in October and November, and a significant improvement in sales ofChristmas merchandise in our main Autumn/Winter catalogue since September. Each season we conduct a series of tests on both recruitment and activation ofestablished customers. Over the past eight weeks we have been testing newcreative formats and have seen significant uplifts in response rates. The testswe conducted in mid October delivered a 10% improvement in response rates bycomparison with those achieved in 2004. Even in the current climate, we areconfident that the experience we have gained from these tests will enable us tocontinue the growth we have enjoyed over recent years. Educational Supplies The Educational Supplies division has seen significant sales growth in the halfyear to 30 September, both through the two acquisitions we made in the thirdquarter last year and through continued organic growth from our healthcarecontracts. Both of the acquisitions are performing to expectations. Total salesin the division increased by 55% to £115.9m (2004: £74.7m). In the 35 weeks to25 November total sales are 60% ahead of the same period last year, with likefor like sales up by 6%. Benchmark operating profit in the division rose by 18% to £6.8m (2004: £5.7m).Costs relating to the restructuring of the division of £1.9m were incurred inthe period, all in cash, and amortisation of intangibles amounted to £0.5m(2004: £0.3m). Spending by UK schools was affected as a result of the introduction of workforcereform with effect from 1 September this year. This has required schools to takeon additional resource to remove administrative tasks from teachers and enablethem to devote 10% of their time to planning, preparation and assessment. Theeducational suppliers' trade association, BESA, reports that this has had adampening impact across the sector, and this is borne out by comments inrecently published results from other companies operating in the sector. Lookingforward, we expect to see a much more positive picture with regard to schoolfunding, due to the new Government policy of multi-year budgets and guaranteedminimum funding increases which will begin to be phased in from 2006-7. The division has this year successfully worked with certain well known nationalretailers to assist schools in the purchase of sports equipment. Thesepromotions are ongoing and will not complete until the end of March, with themajority of the sales falling in the second half. We are also pro-active outsidethe UK, where our efforts have resulted in an increase, albeit small at thistime, in export sales. The restructuring of the division is progressing well, enabling a number of thekey elements to be brought forward. The former Novara Head Office in the EastMidlands will be substantially vacated by Christmas, with all centraladministrative functions now located in enlarged facilities in Hyde. Consolidation of our National operations to a single central warehouse,originally scheduled for the first quarter of 2006, has already commenced andwill be completed during December 2005. The product range for the 2006catalogues has been successfully reduced from over 50,000 products to 27,000without compromising customer choice, and will reduce further in 2007. Thetransfer of the Hope, Galt and Step by Step brands onto the SAP computingplatform remains on track for completion in December 2005, prior to launch ofthe new catalogues in January 2006. As a result of this progress it isanticipated that some of the benefits of the reorganisation will be realised more quickly than our original expectations, with a small contribution being achieved in the current financial year. Over the last six months, we have not neglected our shop window. A great deal ofeffort and attention has been directed towards production of the new cataloguesdue for delivery to our customers in January 2006. We are very excited aboutthese releases since they are the first catalogues to go out uncompromised bythe stock issues that had been experienced from acquisition and integration offive businesses by the division in just two years. They willbe supported by a single integrated division structured to deliver a first classservice. An important part of the reorganisation of the division was developing NRS, ourhealthcare business, into a standalone company. This business has grown to be asubstantial operation in its own right, with annualised turnover in excess of£50m. It now operates its own computer system, running customised software, fromits own central warehouse. This is supported by its own board and administrativeteam based in Nottingham. Direct Care now comprises by far the largest element of the NRS business. Overthe last six months we have concentrated our efforts on the successfulintegration of Huntleigh National Care, the healthcare business we bought lastyear. Their depots have been converted to operate on our systems, and to thesame standards as the existing NRS contracts. Our Telecare trials have now been running since August, with increasing numbersof patients participating, and whilst formal evaluation will not take placeuntil the end of the trials period in March the results thus far are promising. Our catalogue based Primary Care business, the historic origin of the NRS brand,remains an important element of the business. In October the first new NRSPrimary Care catalogue for two years was launched, following extensive andthorough market research. Although early days, since launch demand from thecatalogue has seen an uplift of some 11%. Findel Services Sales in the division rose to £20.1m (2004: £15.9m) as a result of increasingdemand from third party companies through our overseas sourcing operations. Inconsequence, the loss from operations reduced to £0.7m (2004: loss of £1.6m).The majority of sales in this division derive from our mature Hampers andFundraising businesses and fall in the second half of the financial year. Whilstwe anticipate a continued decline in sales from these businesses we expect theprofit from operations in this division to be at least maintained in the fullyear. The fulfilment services we provide to charities, hampers and other thirdparty contracts have continued to operate well in the busy Autumn season. Prospects The group has produced a good set of results for the first six months in achallenging trading environment. Our Home Shopping division has once againoutperformed the wider Home Shopping sector and our Educational Suppliesdivision has not only progressed the reorganisation ahead of plan but hassucceeded in growing sales. We continue to be excited by the prospects for thegroup. Burley House K. ChapmanBradford Road ChairmanBurley-in-WharfedaleWest YorkshireLS29 7DZ 1 December 2005 Group Financial Statements (unaudited) Consolidated Income Statements Note 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 £'000 £'000 £'000 (restated) (restated)Revenue 2 233,227 191,805 474,031Cost of sales (130,154) (95,995) (246,390) ========= ========= ========Gross profit 103,073 95,810 227,641 Trading costs (93,679) (88,196) (169,379)Amortisation of intangibles (465) (263) (661)Restructuring costs (1,900) - (3,274) --------- --------- -------- Profit from operations Before Amortisation ofintangiblesand Restructuring costs 9,394 7,614 58,262Amortisation of intangiblesand Restructuring costs (2,365) (263) (3,935) --------- --------- --------Total profit from operations 7,029 7,351 54,327 --------- --------- -------- Profit from operations 2 7,029 7,351 54,327Share of profit/(loss) ofassociates 17 (168) 799Finance costs (7,812) (5,285) (13,603) --------- --------- -------- (Loss)/profit before tax (136) 1,898 41,523Income tax 49 (736) (11,602) --------- --------- -------- (Loss)/profit for the year (87) 1,162 29,921 ========= ========= ======== Attributable to:Equity holders of the parent 21 1,292 29,339Minority interest (108) (130) 582 --------- --------- -------- (87) 1,162 29,921 ========= ========= ======== Earnings per share 3Basic 0.03p 1.56p 35.41p ========= ========= ========Adjusted 2.18p 1.88p 39.05p ========= ========= ======== All results relate to continuingoperations. Group Financial Statements (Unaudited) Consolidated Statement of Recognised Income and Expense 6 months 6 months Year to to 30.9.2005 to 30.9.2004 31.3.2005 £'000 £'000 £'000 (restated) (restated) Currency translation differences 273 88 (106) --------- --------- ---------Net expense recognised directly inequity 273 88 (106)(Loss)/profit for the period (87) 1,162 29,921 --------- --------- ---------Total recognised income and expensefor the period 186 1,250 29,815 ========= ========= =========Attributable to:Equity holders of the parent 294 1,380 29,233Minority interest (108) (130) 582 --------- --------- --------- 186 1,250 29,815 ========= ========= ========= Group Financial Statements (Unaudited) Consolidated Balance Sheets At 30.9.2005 At 30.9.2004 At 31.3.2005 £'000 £'000 £'000 (restated) (restated)ASSETS Non-current assetsProperty, plant and equipment 58,579 56,163 57,147Goodwill 48,410 33,283 47,853Other intangible assets 35,150 20,748 35,615Investments in associates 8,400 7,416 8,383 --------- --------- --------- 150,539 117,610 148,998 --------- --------- ---------Current assetsInventories 112,965 102,928 103,212Trade and other receivables 225,837 201,055 199,362Derivative financial instruments 173 180 43Cash and cash equivalents 2,178 9,602 4,147 --------- --------- --------- 341,153 313,765 306,764 --------- --------- ---------Total assets 491,692 431,375 455,762 --------- --------- ---------LIABILITIES Current liabilitiesTrade and other payables 114,008 118,122 81,375Current tax liabilities 4,022 4,066 7,979Obligations under finance leases 420 579 421Bank overdrafts and loans 92,184 7,964 102,558Derivative financial instruments 197 204 820 --------- --------- --------- 210,831 130,935 193,153 --------- --------- ---------Non-current liabilitiesBank loans 160,000 197,429 130,000Retirement benefit obligation 18,945 20,414 19,814Deferred tax liabilities 5,616 2,017 5,614Obligations under finance leases 900 1,118 1,110 185,461 220,978 156,538 --------- --------- ---------Total liabilities 396,292 351,913 349,691 --------- --------- ---------NET ASSETS 95,400 79,462 106,071 ========= ========= ========= Group Financial Statements (Unaudited) Consolidated Balance Sheets continued At 30.9.2004 At 30.9.2004 At 31.3.2005 £'000 £'000 £'000 (restated) (restated) EQUITY Capital and reservesShare capital 4,244 4,208 4,233Capital reserves 50,175 48,776 49,706Hedging and translation reserves 167 88 (106)Retained earnings 40,842 26,440 51,577 --------- --------- ---------Equity attributable to equityholders of the parent 95,428 79,512 105,410Minority interest (28) (50) 661 --------- --------- ---------Total equity 95,400 79,462 106,071 ========= ========= ========= Group Financial Statements (Unaudited) Consolidated Cash Flow Statements 6 months 6 months Year to to 30.9.2005 to 30.9.2004 31.3.2005 £'000 £'000 £'000 (restated) (restated) Operating activitiesProfit from operations for theperiod/year 7,029 7,351 54,327 Adjustments for:Depreciation of property, plant andequipment 3,391 3,746 6,928Amortisation of other intangibleassets 465 263 661Share-based payment expense 15 131 281Gain on disposal of property, plantand equipment (235) (31) (647) --------- --------- ---------Operating cash flows beforemovements in working capital 10,665 11,460 61,550Increase in inventories (9,689) (19,776) (14,470)Increase in receivables (26,412) (37,913) (20,254)Increase/(decrease) in payables 31,077 47,813 (657) --------- --------- ---------Cash generated from operations 5,641 1,584 26,169Income taxes paid (3,906) (4,168) (11,779)Interest paid (7,797) (5,092) (12,801) --------- --------- ---------Net cash from operating activities (6,062) (7,676) 1,589 --------- --------- ---------Investing activitiesInterest received 56 54 102Proceeds on disposal of property,plant and equipment 387 83 2,578Purchases of property, plant andequipment (4,971) (5,140) (8,985)Acquisition of subsidiary - (93) (33,936) --------- --------- ---------Net cash used in investingactivities (4,528) (5,096) (40,241) ========= ========= ========= Group Financial Statements (Unaudited) Consolidated Cash Flow Statements continued Note 6 months 6 months Year to 30.9.2005 to 30.9.2004 to 31.3.2005 £'000 £'000 £'000 (restated) (restated) Financing activitiesDividends paid (10,756) (9,407) (12,317)Dividends paid to minorities (582) (705) (706)Repayments of borrowings (681) - -Repayments of obligationsunder finance leases (211) (483) (897)Proceeds on issue of shares 7 296 1,236New bank loans raised 35,000 26,087 33,774Net cash from financingactivities 22,777 15,788 21,090 --------- --------- ---------Net increase/(decrease) incash and cash equivalents 12,187 3,016 (17,562) (Overdraft)/cash and cashequivalents at the beginningof the year (14,022) 3,594 3,594 Effect of foreign exchangerate changes 79 27 (54) --------- --------- ---------(Overdraft)/cash and cashequivalents at the end ofthe year 5 (1,756) 6,637 (14,022) ========= ========= ========= Notes to the Group Financial Statements 1. Basis of preparation of consolidated financial statementsIn 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 2005and for the six months ended 30 September 2004 are restated for IFRS. Fulldetails of the restatement and reconciliations of the UK GAAP financialinformation for the year ended 31 March 2005 and the six months ended 30September 2004 are contained in the group's "IFRS Transition Document" which hasbeen circulated to shareholders with this report, and can be obtained from thegroup's web site, www.findel.co.uk. IFRS are subject to continuing review and amendment by the InternationalAccounting Standards Board and subsequent endorsement by the European Commissionand, therefore, are subject to change. Consequently, in determining the group'sIFRS accounting policies, the board of directors has used its best endeavours inmaking assumptions about those IFRS expected to be effective or available foradoption when the first IFRS annual financial statements are prepared for theyear ending 31 March 2006. The consolidated interim financial statements have been approved by the board,but have not been reviewed or audited by the auditors. The financial information relating to the year ended 31 March 2005 comprisesnon statutory accounts. The full financial statements for that year, preparedunder UK GAAP, have been reported on by the company's auditors and have beenfiled with the Registrar of Companies. The audit report was unqualified and didnot contain a statement under either S237(2) or S237(3) of the Companies Act1985. 2. Segmental analysis (Primary Segment) 6 months to 6 months to Year to 30.9.2005 30.9.2004 31.3.2005 £'000 £'000 £'000 (restated) (restated)TurnoverHome Shopping 97,214 101,271 239,114Services 20,105 15,845 71,394Educational Supplies 115,908 74,689 163,523 --------- --------- --------- 233,227 191,805 474,031 ========= ========= ========= Profit/(loss) from operationsHome Shopping 3,332 3,435 40,131Services (709) (1,550) 2,636Educational Supplies 6,771 5,729 15,495Restructuring costs (1,900) - (3,274)Amortisation of intangibles (465) (263) (661) --------- --------- --------- 7,029 7,351 54,327 ========= ========= ========= Restructuring costs and amortisation of intangibles relate entirely to theEducational Supplies business segment. Notes to the Group Financial Statements 3. Earnings per share 6 months 6 months Year to 30.9.2005 to 30.9.2004 to 31.3.2005 £'000 £'000 £'000 (restated) (restated) Basic earnings 21 1,292 29,339Restructuring costs(net of tax) 1,330 - 2,357Amortisation ofintangibles 465 263 661 ------------ -------------- -------------Adjusted earnings 1,816 1,555 32,357 ============ ============== =============Weighted averagenumber of shares 83,332,618 82,564,676 82,857,757 ============ ============== =============Earnings per share- basic 0.03p 1.56p 35.41pEarnings per share- adjusted 2.18p 1.88p 39.05p 4. Dividends Amounts recognised asdistributionsto equity holders in the periodFinal dividend for the yearended 31 March 2005 of12.9p (2004:11.4p)per share 10,756 9,407 9,407Interim dividend for the yearended 31 March 2005 3.5pper share 2,910 ------------ -------------- ------------- 10,756 9,407 12,317 ============ ============== ============= The proposed interim dividend of 3.8p per ordinary share in respect of the yearending 31 March 2006 was approved by the board on 21 November 2005. In accourdance with IFRS it has not been included as a liability as at 30 September2005. 5. Net borrowings The movements in cash and cash equivalents and borrowings in the period were asfollows: Net Borrowings Total net (overdraft)/cash borrowings and cash equivalents £'000 £'000 £'000 At 1 April 2005 (14,022) (215,920) (229,942)Cash flow for theyear 12,187 (34,108) (21,921)Exchange rateadjustments 79 - 79 ------------ -------------- -------------At 30 September2005 (1,756) (250,028) (251,784) ============ ============== ============= This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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