26th Jun 2007 07:02
Carpetright PLC26 June 2007 26 June 2007 Carpetright plc Preliminary Results Announcement for the 52 weeks ended 28 April 2007 Carpetright plc, Europe's leading specialist carpet and floor coverings retailertrading within the UK, Republic of Ireland, Belgium, The Netherlands and Poland,today makes its preliminary announcement of its audited results for the 52 weeksended 28 April 2007. Highlights Group • Total Group sales increased by 5.4% to £475.9 million (2006: £451.4 million)• Profit before tax increased by 4.4% to £67.0 million (2006: £64.2 million)• Underlying pre tax profit* grew 1.8% to £57.7 million (2006: £56.7 million)• Basic earnings per share increased 4.9% to 68.2p (2006: 65.0p)• Strong cash generation with operating cash flow of £81.8 million• Net debt reduced to £6.9 million• Recommended final dividend of 30.0p giving a total of 50.0p, up 2.0% UK and Republic of Ireland • Total sales increased by 5.1% to £418.1 million (2006: £397.7 million)• Like-for-like sales decline 1.4%• Underlying operating profit* increased 0.9% to £55.6 million (2006: £55.1 million)• Underlying operating margin* of 13.3%• Gross margin improved to 61.9% (2006: 60.6%)• Strong store expansion, with 93 stores opened in the year Rest of Europe • Total sales increased by 7.6% to £57.8 million (2006: £53.7 million)• Operating profit grew 8.3% to £3.9 million (2006: £3.6 million)• Belgium / Netherlands operating profit grew 26.3% to £4.8 million• Store expansion plans accelerating, with 12 stores opened, including four in Poland * 'Underlying' excludes profits on property disposals Lord Harris, Chairman and Chief Executive, said: "I am pleased to report that Carpetright has had another solid year. Sales havegrown to record levels, earnings per share have risen by 4.9% and net debt hasfallen to £6.9 million." "I am now in my 50th year of selling carpets and remain as enthusiastic as ever. We continue to invest in the future and I am confident that our strategy ofproviding a comprehensive offer with the widest product range, best prices andexcellent customer service should support future growth." 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 Kevin Smith / Fiona MulcahyTelephone 020 7638 9571 There will be a presentation to analysts and investors at 9.00am today at theoffice of Deutsche Bank, Winchester House, 1 Great Winchester St, EC2N 2DB. A copy of the preliminary results and presentation to analysts can be found onour website www.carpetright.plc.uk today at 7.00am and 9.00am, respectively. Certain statements made in this announcement are forward looking statements.Such statements are based on current expectations and are subject to a number ofrisks and uncertainties that could cause actual events or results to differmaterially from any expected future events or results referred to in theseforward looking statements. Overview of Group financial performance 2007 2006 % changeKey Financial Results £'m £'m Group sales 475.9 451.4 5.4%Underlying operating profit*- UK and Republic of Ireland 55.6 55.1 0.9%- Belgium and The Netherlands 4.8 3.8 26.3%- Poland (0.9) (0.2) -- Total 59.5 58.7 1.4%Interest (1.8) (2.0) 10.0%Underlying pre tax profit* 57.7 56.7 1.8%Profit on property disposals 9.3 7.5 24.0%Profit before taxation 67.0 64.2 4.4%Underlying earnings* per share (pence) 58.3 57.5 1.4%Basic earnings per share (pence) 68.2 65.0 4.9%Net debt (6.9) (29.1) - * Note - Where this review makes reference to underlying operating profit /earnings and tax these relate to operating profits / earnings before profits onproperty disposals. Group profit before taxation increased by 4.4% to £67.0 million with basicearnings per share increasing by 4.9% to 68.2p. This reflects a reasonablystrong first half offset by a tougher than expected second half. Progress against the Group's financial objectives has been solid this year.Group sales increased by 5.4% to £475.9 million with growth being achieved inboth regions. The Rest of Europe grew faster than the UK & RoI and nowrepresents over 12% of total sales. The Group opened 105 stores and closed 22 giving a net increase of 83 stores anda total store base of 621. Many of the new stores are either concession storesor are small format stores resulting in total space growing by only 7.4% to 5.4million square feet. Underlying operating profit grew to £59.5 million, an increase of 1.4% on lastyear with UK & RoI profitability increasing by 0.9%. Profits in Belgium and TheNetherlands improved by 26.3% but these were offset, in part, by the start-uplosses in Poland which totalled £0.9 million. The Group's operating cash-flow was extremely strong. This was supported by£24.8 million of proceeds from property disposals. Net debt reduced by £22.2million over the year and totalled £6.9 million at the year-end. The interestcharge reduced by 10% to £1.8 million with lower levels of net debt offsettingincreases in interest rates. The Group recorded a profit on property disposals of £9.3 million (2006: £7.5million). This includes a profit of £5.3 million recorded from the sale of theGroup's freehold office and warehouses in Rainham. These profits are disclosedseparately by virtue of materiality. The Group's strategy to relocate storesdelivers strong cashflow and lowers the total rent exposure. The Boardanticipates that property profits and cashflow will continue to be achieved onan ongoing basis. UK and Republic of Ireland Operational Review Financial Results 2007 2006 ChangeUK & RoI - Key Financial Results £'m £'m Sales 418.1 397.7 5.1%Gross profit 258.8 241.2 7.3%Gross margin % 61.9% 60.6% 1.3ppUnderlying operating profit 55.6 55.1 0.9%Underlying operating margin % 13.3% 13.8% (0.5pp) Sales in the UK & RoI were 5.1% ahead of last year at £418.1 million. Like forlike sales declined by 1.4% with an increase in the first half of 0.9% (2006:decline 7.1%) and a decline in the second half of 3.6% (2006: increase 1.9%). The gross profit increased by 7.3% to £258.8 million with a continuing increasein the gross margin to 61.9%. This is 1.3 percentage points ahead of last yearand has been achieved through better management of the promotional mix, improvedsupplier rebates and lower levels of stock loss. Underlying operating profit increased by 0.9% to £55.6 million whilst theunderlying operating margin reduced from 13.8% to 13.3%. The margin movement isdetailed in the table below: Underlying operating margin last year 13.8% Increase in gross margin 1.3% Increase in store occupancy costs (1.4%) Increase in store wage costs (0.9%) Decrease in other overheads 0.5% Underlying operating margin this year 13.3% Store occupancy costs increased as a percentage of sales due to the impact oflower like for like sales on fixed expenses and a significant increase inabsolute costs for rent, rates and energy. These increases should moderate inthe year ahead. Wages increased as a percentage of sales mainly as a result of the decisiontaken at the beginning of the year to increase the salaries of store managers atan annual cost of approximately £2 million. We continue to ensure our managersremain well rewarded recognising the significant contribution they make tosales. Sales and Marketing The domestic floor covering market appears to have declined over the last year.Since the start of 2007 manufacturers and retailers have seen the declineaccelerate and we believe many independents have ceased trading. Against thisbackground Carpetright continues to grow market share. The trend in our business towards heavier weight twist carpets has continuedthroughout the year with a gradual increase in the average selling price. Thishas been supported through our advertising and range management which hasfocused heavily on this trend. We have introduced a number of new higherquality ranges, which command higher prices, and these are increasingly beingbought by our customers who recognise the value for money that these productsdeliver. The laminate and wood market, following several years of decline, appears tohave stabilised over the last year. Laminate remains a small part of ourbusiness (c 2%) and our offer comprises a small range of take-away product and amore extensive range that can be ordered. We remain happy with our performancein this area. Throughout the year we have sourced a wider range of rugs and have createdspecific rug-display areas in over 300 stores, at a cost of approximately £1million. As a result our rug sales have doubled and now represent over 2% ofour total business. Our medium term target is to grow rug sales to nearer 5% oftotal sales. Our 48 "Carpetright at home" vans continue to offer retail and insurancecustomers the opportunity to choose carpets from their home. We have noticed asmall reduction in the overall volume of business that we are receiving frominsurance companies as they appear to be settling their obligations with theircustomers in cash. Retail volumes have also fallen but we are looking toreverse this decline when we launch a transactional web-site, initially sellingrugs, in the current year. We believe this will help to drive greater awarenessof the "at home" service. Store portfolio development We continue to develop our store portfolio and have opened 93 stores during theyear. The store make-up is now: Store Numbers Sq ft (Thousands)UK & RoI Store Base April Openings Closures Other April April April 2006 2007 2006 2007 Large ( > 6,000 sq ft) 355 35 (15) (1) 374 3,486 3,601Small ( < 6,000 sq ft) 45 20 (1) 1 65 230 329Concessions 40 38 (5) - 73 105 154 440 93 (21) - 512 3,821 4,084 The last 12 months has seen a significant increase in the store openingprogramme. There has been a 16% increase in the number of stores with 38 newconcession units. 21 of the In House concessions are now located in House of Fraser stores. Allour new stores take time to mature and we expect to see stronger sales from themin the year ahead. Total space grew by 6.9% with a continuing reduction in the average store sizein line with our strategic aim. The average store size is now 7,977sq ft whichis a reduction of 8.1% over last year's figure. Across the year average total space grew by 8.2% reflecting the fact that manyof the stores were opened in the first half and there was also the increasearising from the stores opened in the second half of 2006. In the currentfinancial year we will reduce the rate at which we open stores and anticipateopening a net 25 stores with an increase in average space of approximately 2.5%. The Republic of Ireland remains a key growth opportunity with 25 stores tradingat the year-end. Six of these opened in the year and we remain on course toreach our medium term target of 30 stores. The performance of these storescontinues to improve and the RoI region achieved the strongest like for likesales growth in the year. Operational Initiatives We continue to invest in three key service areas: • The in-store experience including the new store computer system• The effectiveness of the supply chain• The quality of the fitting service In the stores we have introduced rug display areas, as noted earlier, and havealso introduced new lighting in the roll-stock areas which improves the storeexperience and reduces energy consumption. These initiatives have given thestores a much fresher look. Additionally, we have continued to review our pointof sale posters and price tickets, to ensure they actively communicate the greatvalue that we offer. The new store computer system, which forms part of the major IT investment thatwe have made over the last three years, was successfully trialled during theyear and we are now rolling it out to all stores. At the year-end it was in 80stores and we are converting approximately 10 stores per week. The benefitsinclude better management information, improved stock control and an improvedcustomer order process. The supply chain has performed well throughout the year and store staff havebeen able to sell with confidence. However, the supply chain is not asefficient as we would like and it will be transformed over the next 12 months.The Group has agreed a lease to occupy a new distribution centre in Purfleet,Essex which will accommodate the Group's cutting centre, distribution hub andcentral offices. This will allow us to close our existing premises. The benefits include: • Lower transport costs as carpets will now be cut and despatched to store from the same site• Lower labour costs as there will be less manual handling through the use of automation• Faster delivery times to stores of cut-length orders These savings will offset the additional leasing costs of the new site. As thebusiness grows the new site will be able to handle additional volume with littleincrease in cost. The quality of fitting continues to improve and independent fitters have beenfound to support each new store. Ensuring quality fitters are available for ourcustomers remains a key priority and the business continues to invest in the "fitters academy" with 176 fitters assessed in the past year. Storey Carpets Ltd 'Storeys' On 1 May 2007 the Group acquired Storeys for an initial consideration of £18.5million. Storeys comprises 30 stores primarily located in north-east England,and it has been trading for over 80 years. Turnover is approximately £30million per annum. We intend to trade Storeys as a standalone business but wewill consolidate their administrative functions with those of Carpetright. Ourinitial objectives are to implement appropriate changes to simplify Storeys'processes, improve its customer offer and deliver growth in its operatingmargin. Summary and prospects The last year has been more challenging than we anticipated with the January2007 interest rate increase having a significant, adverse, impact on sales. Weremain cautious about the short-term prospects but are confident that theinvestments we are making in our stores, ranges, new distribution centre, ITsystems and Storeys all support future growth. Rest of Europe - Operational Review Financial Results 2007 2006 ChangeRest of Europe - Key Financial Results £'m £'m Sales Belgium and The Netherlands 56.8 53.7 5.8% Poland 1.0 - - Rest of Europe 57.8 53.7 7.6% Underlying operating profit Belgium and The Netherlands 4.8 3.8 26.3% Poland (0.9) (0.2) - Rest of Europe 3.9 3.6 8.3% Underlying operating margin Belgium and The Netherlands 8.5% 7.1% 1.4pp Poland - - - Rest of Europe 6.7% 6.7% - The business recorded an underlying operating profit of £3.9 million, anincrease of 8.3% on last year. The underlying operating profit in Belgium andThe Netherlands increased by 26.3% to £4.8 million. This was offset by thePolish start up losses which totalled £0.9 million (2006: £0.2 million loss). Sales in the Rest of Europe were 7.6% ahead of last year at £57.8 million.Poland sales were £1.0 million. Like for like sales increased by 3.9%. The gross profit increased by 8.8% to £32.0 million with an improvement in thegross margin in Belgium and The Netherlands of 0.9 percentage points on the backof better rebates as volumes increased. Costs were tightly controlled with most of the increase attributable to newspace. Store portfolio development The store expansion programme continued during the year with 12 stores openingof which one was a relocation. The portfolio is now as follows: Store numbers Sq ft (Thousands)Rest of Europe Store Base April Openings Closures April April April 2006 2007 2006 2007 Belgium 28 - - 28 347 347Netherlands 68 8 (1) 75 836 903Poland 2 4 - 6 23 63 98 12 (1) 109 1,206 1,313 The plans for the current year include a further six stores in The Netherlandsand five stores in Poland. Operational Initiatives Belgium and The Netherlands The key focus throughout the last year has been on the ongoing evolution of theproduct offer in the stores, supported by an increase in promotional activity,and a controlled store opening programme. In Belgium we identified, followingmarket research, that the stores in the French speaking region could be rangedmore effectively. As a result specific changes were made to the ranges whichhas led to strong sales and margin growth. In The Netherlands the focus hasbeen on new store openings, with eight new stores added, and a strongpromotional programme. The strength of our offer continues to enable us tooutperform the competition and we have increased our market share to 11.2%.Much of this growth is attributable to an improvement in our customer conversionrate which has risen from 49% in 2003 to its current level of 69%. The sales mix in Belgium and The Netherlands has not changed significantly overthe course of the year. Laminate and vinyl are more important than in the UK &RoI business, representing 38% of total sales, and we continue to focus oninitiatives that will drive these sales. Specifically we have reviewed thecolours offered in vinyl and have extended the product range in laminate towiden customer choice. We will look to grow sales from these categoriesthroughout 2007/08 whilst we continue to develop the best carpet ranges forthese countries. Poland The Group traded from six stores in Poland at the year-end and the key focus hasbeen on opening the new stores and ensuring that there are sufficient,appropriately trained staff. Most sales are either rugs or take-away roll stockcarpet but, during the year, the product offer was extended to include cutlength carpets. These are supplied through the UK cutting operation. Summary and Prospects The performance in the Rest of Europe over the last year has been excellent andthe growth potential remains strong. We are continuing to grow our marketshare. In the year ahead, the Group will continue to drive sales and profits in TheNetherlands and Belgium towards our targeted operating margin of 10%. In Polandthe focus will be on driving sales in the existing stores and ensuring theformat supports profitable expansion. FINANCIAL REVIEW Financial results 2007 2006 % ChangeTaxation rate %- Underlying 31.4 31.4 -- Effective 30.8 31.2 0.4ppEarnings per share (pence)- Underlying 58.3 57.5 1.4%- Basic 68.2 65.0 4.9%Dividend per share (pence)- Proposed and paid 50.0 49.0 2.0%- Cover 1.36 1.33 2.3%Net debt (£'m) 6.9 29.1 76.3%Pension deficit (£'m) 1.8 1.5 (20.0%)Interest cover (times) 38.2 33.1 15.4% Taxation The effective tax rate on profits is 30.8% (2006: 31.2%). The effective rate isbelow the underlying rate because the taxable gain is lower than the accountinggain for the profits on property disposals. The ongoing effective rate isexpected to remain slightly higher than the combined statutory rate for theGroup due to a number of disallowable items in relation to the Group's freeholdproperties and other small items. Earnings per share Basic earnings per share has increased by 4.9% to 68.2 pence. Underlyingearnings per share (which removes the effect of profits on property disposals)increased by 1.4% to 58.3 pence. Dividend The Board is proposing a final dividend of 30.0p per share (2006: 30.0p)bringing the full year dividend to 50.0p (2006: 49.0p) an increase of 2.0%.Dividend cover, based on basic earnings per share, is 1.36 times (2006: 1.33times). The Board remains comfortable with this level of cover which reflectsthe Board's confidence in the Group's ongoing cash generating ability. Cash-flow and net debt Summary cash-flow 2007 2006 £'m £'m Operating cash inflows 81.8 86.4Net interest paid (1.6) (1.7)Taxation paid (15.9) (12.9)Dividends (33.9) (31.9)Payment for tangible and intangible assets (33.2) (35.5)Proceeds on disposal of tangible assets 24.8 19.0 Free cash-flow 22.0 23.4 Purchase of own shares (0.4) (9.3)Purchase of Mays Holdings Ltd - (5.2)Other 0.6 (0.1) Movement in net debt 22.2 8.8 Opening net debt (29.1) (37.9)Closing net debt (6.9) (29.1) Net debt reduced year-on-year by £22.2 million. The Group continues to behighly cash generative and proceeds from the sales of freehold and longleasehold properties and the surrender of leases was very strong at £24.8million. This includes £14 million received from the sale of the Group'soffices and warehouses in Rainham. Capital expenditure included £8.6 million on long leaseholds and freeholds,£15.8 million on stores and £7.2 million on the new IT systems. Working capitalimproved by £8.7 million with increased payables offsetting a small increase instock. Calendar The Group's financial reporting year ends on the nearest Saturday to 30 April.The UK & RoI accounts for next year will therefore be for the 53 weeks ending 3May 2008. The Rest of Europe will continue to account on a calendar month basis to 30April. Details of all the calendar dates for the 2007/08 financial year can be found onour web site www.carpetright.plc.uk Consolidated income statementfor the period ended 28 April 2007 2007 2006 Note £m £m Revenue 2 475.9 451.4 Cost of sales (185.1) (180.8) Gross profit 2 290.8 270.6Other operating income 12.3 9.2Administrative expenses (234.3) (213.6) Operating profit 2 68.8 66.2 Operating profit before profits on property disposals 59.5 58.7 Profits on property disposals 3 9.3 7.5 Interest payable (2.6) (2.5)Interest receivable 0.8 0.5 Profit before tax 67.0 64.2Tax 4 (20.7) (20.1) Profit for the financial period attributable to equity holders of the 46.3 44.1Company 2007 2006 Note Pence Pence Basic earnings per share 5 68.2 65.0Diluted earnings per share 5 68.2 65.1 Dividend per share - interim paid 6 20.0 19.0Dividend per share - final proposed 6 30.0 30.0 2007 2006 Note £m £m Dividends paid to equity shareholders in the year 6 33.9 31.9Final dividend proposed to equity shareholders in respect of the year 20.4 20.4 All material items in the income statement arise from continuing operations. Statement of recognised income and expensefor the period ended 28 April 2007 2007 2006 Note £m £m Profit for the financial period 46.3 44.1 Actuarial gains/(losses) on defined benefit pension scheme 8 (0.3) 0.9Fair value gains taken to equity in respect of cash flow hedges - 0.1Exchange gains/(losses) in respect of hedged equity investments 8 (0.3) 0.8Tax on items taken directly to or transferred from equity 8 0.1 (0.3) Net gains/(losses) recognised directly in equity (0.5) 1.5 Total recognised income for the financial period attributable to equity 45.8 45.6holders of the Company Consolidated balance sheet at 28 April 2007 2006 2007 restated Note £m £mAssetsNon-current assetsIntangible assets 38.9 34.3Property, plant and equipment 123.8 122.0Investment property 19.5 21.3Investments in subsidiaries - -Deferred tax asset 1.0 1.0Derivative financial instruments 7 0.1 0.1Trade and other receivables 1.6 1.7 Total non-current assets 184.9 180.4 Current assetsInventories 35.9 32.6Trade and other receivables 26.7 25.7Cash and cash equivalents 7 20.7 9.3 Total current assets 83.3 67.6 Total assets 268.2 248.0 LiabilitiesCurrent liabilitiesTrade and other payables (120.1) (111.5)Obligations under finance leases 7 (0.8) (0.8)Borrowings and overdrafts 7 (12.2) (13.3)Current tax liabilities (9.7) (8.9) Total current liabilities (142.8) (134.5) Non-current liabilitiesTrade and other payables (17.6) (11.8)Obligations under finance leases 7 (3.7) (4.4)Borrowings 7 (11.0) (20.0)Provisions - (0.1)Deferred tax liabilities (23.3) (19.7)Retirement benefit obligation (1.8) (1.5) Total non-current liabilities (57.4) (57.5) Total liabilities (200.2) (192.0) Net assets 68.0 56.0 EquityShare capital 0.7 0.7Share premium 14.8 14.8Treasury shares (0.5) (0.1)Other reserves 53.0 40.6 Total equity attributable to equity holders of the Company 68.0 56.0 These financial statements from pages 13 to 20 were approved by the Board ofDirectors on 25 June 2007 and were signed on its behalf by: Lord Harris of Peckham Ian Kenyon Directors Consolidated cash flow statementfor the period ended 28 April 2007 2007 2006 Note £m £m Cash flows from operating activitiesProfit before tax 67.0 64.2Adjusted for:Depreciation and amortisation 13.1 13.6Share-based payments 0.5 0.4Profits on property disposals (9.3) (7.5)Net interest payable 1.8 2.0 Operating cash flows before movements in working capital 73.1 72.7Increase in inventories (3.3) (1.9)Increase in trade and other receivables (3.0) (5.3)Increase in trade and other payables 15.0 20.9Cash generated by operations 81.8 86.4 Interest paid (1.9) (2.4)Interest received 0.3 0.7Corporation taxes paid (15.9) (12.9) Net cash generated from operating activities 64.3 71.8 Cash flows from investing activitiesProceeds on disposal of property, plant and equipment and 24.8 19.0investment propertyPurchases of intangible assets (5.8) (8.5)Purchases of property, plant and equipment and investment property (27.4) (27.0)Acquisition of shares in subsidiary net of cash acquired - (5.2) Net cash used in investing activities (8.4) (21.7) Cash flows from financing activitiesNet proceeds from issue of ordinary share capital to satisfy share - 0.7option scheme exercisesPurchase of own shares (1) (0.4) (9.3)Repayment of borrowings (8.8) (1.5)Receipt of funds from finance company - 3.7Repayment of obligation under finance leases (0.7) (0.7)Dividends paid to Company shareholders (33.9) (31.9) Net cash used in financing activities (43.8) (39.0) Net increase in cash and cash equivalents in the period 12.1 11.1Cash and cash equivalents at the beginning of the period 6.8 (4.2)Exchange differences 0.3 (0.1) Cash and cash equivalents at the end of the period 7 19.2 6.8 (1) The cash outflow for the period ended 29 April 2006 includes a £9.3m paymentfor shares bought back from the market before 30 April 2005, but not paid foruntil the period ended 29 April 2006. For the purposes of the cash flow statement, cash and cash equivalents arereported net of overdrafts repayable on demand. Overdrafts are excluded fromthe definition of cash and cash equivalents disclosed in the balance sheet. Notes to the accounts 1 Basis of preparation The financial statements of the Group are made up to the Saturday nearest to 30April. The financial year for 2007 represents the 52 weeks ended 28 April 2007.The comparative financial year for 2006 was 52 weeks ended29 April 2006. The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) and International Financial ReportingInterpretations Committee (IFRIC) interpretations endorsed by the EuropeanUnion, together with those parts of the Companies Act 1985 applicable tocompanies reporting under IFRS. The information is derived from the full Group financial statements for the 52week period to 28 April 2007 and does not constitute full accounts within themeaning of section 240 of the Companies Act 1985 (as amended). The Group'sAnnual Report and Financial Statements, on which the auditors have given anunqualified report which does not contain a statement under section 237(2) or(3) of the Companies Act 1985 (as amended), will be delivered to the Registrarof Companies in due course and posted to shareholders in July 2007. The financial information for the 52 weeks to 29 April 2006 is derived from theAnnual Report for that year which has been delivered to the Registrar ofCompanies. The independent auditors reported on those accounts, their report wasunqualified and did not contain a statement under section 237 (2) or (3) of theCompanies Act 1985 (as amended). Comparative amounts have been restated to conform with current presentation.This relates to the recognition of deferred income due in over one year of £11.8million. 2 Segmental analysis The Group's primary reporting segment is geographic, as this is the basis onwhich the Group is both organised and managed. The Group does not report asecondary segment on the basis of business operations because businessoperations throughout the Group are the same. The geographical sectors are:United Kingdom & Republic of Ireland ("UK & RoI"), and Poland, Belgium and TheNetherlands ("Rest of Europe"). Central costs are incurred principally in theUK and are immaterial. As such these costs are included within the UK & RoIsegment. Segment revenue, expense, result, assets and liabilities includetransfers between geographical segments. Such transfers are priced at arm'slength and are eliminated on consolidation. Analysis by geography: 2007 2006 Rest of Rest of UK & RoI Europe Group UK & RoI Europe Group £m £m £m £m £m £m Gross Revenue 421.2 57.8 479.0 400.7 53.7 454.4Inter-segment revenue (3.1) - (3.1) (3.0) - (3.0) Segment Revenue (by origin and destination) 418.1 57.8 475.9 397.7 53.7 451.4Gross profit 258.8 32.0 290.8 241.2 29.4 270.6Operating profit before profits on property 55.6 3.9 59.5 55.1 3.6 58.7disposals Segment Result: operating profit after 63.9 4.9 68.8 62.6 3.6 66.2profits on property disposals Net interest payable (1.8) (2.0) Profit before tax 67.0 64.2Tax (20.7) (20.1) Profit for the financial period 46.3 44.1 Other segmental items:Depreciation and amortisation 10.7 2.4 13.1 11.1 2.5 13.6Share-based payments 0.5 - 0.5 0.4 - 0.4 Segment Assets:Gross assets (by origin and destination) (1) 177.5 71.4 248.9 163.1 74.8 237.9Inter-segment balances (2.5) - (2.5) (0.4) - (0.4) Segment assets 175.0 71.4 246.4 162.7 74.8 237.5 Unallocated assets 21.8 10.5 Total assets 268.2 248.0 Segment Liabilities:Gross liabilities (by origin and destination) 122.8 19.2 142.0 110.0 15.0 125.0(1)Inter-segment balances - (2.5) (2.5) - (0.4) (0.4) Segment Liabilities 122.8 16.7 139.5 110.0 14.6 124.6 Unallocated liabilities 60.7 67.4 Total liabilities 200.2 192.0 Capital Expenditure:Capital expenditure (by origin and 30.1 3.1 33.2 30.8 4.3 35.1destination) (1) Segment assets and liabilities exclude interest-bearing balances as well astax assets and liabilities. 3 Profits on property disposals The £9.3m profit for 2007 was in respect of the disposal of property, plant andequipment and investment property (2006: £7.5m). 4 Tax (i) Analysis of the charge in the period 2007 2006 £m £m UK current tax 16.1 16.5Foreign current tax 0.8 0.2 Total current tax 16.9 16.7 UK deferred tax 3.8 2.6Foreign deferred tax - 0.8 Total deferred tax 3.8 3.4 Total tax 20.7 20.1 (ii) Reconciliation of profit before tax to total tax 2007 2006 £m £m Profit before tax 67.0 64.2 Tax charge at UK Corporation Tax rate of 30% (2006: 30%) 20.1 19.3Adjusted for the effects of:Overseas tax rates (0.4) -Non-qualifying depreciation 0.6 0.7Other permanent differences 0.3 0.1 Tax charge for the period 20.6 20.1Adjustments in respect of prior periods 0.1 - Total tax 20.7 20.1 Tax of £2.6m (2006: £2.4m) has been charged to the income statement in respectof profits on property disposals. 5 Earnings per share Basic earnings per share is calculated by dividing earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the period, excluding those held by Equity Trust (Guernsey) Limited whichare treated as cancelled. In order to compute diluted earnings per share, the weighted average number ofordinary shares in issue is adjusted to assume conversion of all potentiallydilutive ordinary shares. Those share options granted to employees andExecutive Directors where the exercise price is less than the average marketprice of the Company's ordinary shares during the period, represent potentiallydilutive ordinary shares. 2007 2006 Weighted Weighted average average number Earnings number Earnings Earnings of shares per share Earnings of shares per share £m Million Pence £m Million Pence Basic earnings per share 46.3 67.9 68.2 44.1 67.8 65.0Effect of dilutive share options 0.1 0.1 - 0.1 0.1 0.1 Diluted earnings per share 46.4 68.0 68.2 44.2 67.9 65.1 Reconciliation of earnings per share excluding post tax profits on propertydisposals: 2007 2006 Weighted Weighted average average number Earnings number Earnings Earnings of shares per share Earnings of shares per share £m Million Pence £m Million Pence Basic earnings per share 46.3 67.9 68.2 44.1 67.8 65.0Adjusted for the effect of profits on (9.3) - (13.7) (7.5) - (11.1)disposal of propertyTax 2.6 - 3.8 2.4 - 3.6 Underlying earnings per share 39.6 67.9 58.3 39.0 67.8 57.5 The Directors have presented an additional measure of earnings per share basedon underlying earnings. This is in accordance with the practice adopted by mostmajor retailers. Underlying earnings is defined as profit excluding profits onproperty disposals and related tax. 6 Dividends 2007 2006 Pence £m Pence £m per share per shareGroup and CompanyPrior year final dividend paid 30.0 20.4 28.0 19.0Current year interim dividend paid 20.0 13.5 19.0 12.9 50.0 33.9 47.0 31.9 The Directors propose a final dividend of 30.0p per share (2006: 30.0p) which isnot included as a liability in these financial statements. Subject to approvalby the shareholders at the Annual General Meeting, the proposed dividend will bepaid on 28 September 2007 to shareholders who are on the register of members on14 September 2007. This would take the 2007 interim and final dividend payments to 50.0p (2006:49.0p). 7 Net debt Net debt incorporates the Group's borrowings, bank overdrafts and obligationsunder finance leases, less cash and cash equivalents. 2006 2007 Cash Exchange flow movement Revaluation £m £m £m £m £m Cash and cash equivalents per the balance sheet 9.3 11.3 0.1 - 20.7Bank overdrafts (2.5) 0.8 0.2 - (1.5) Cash and cash equivalents per the cash flow 6.8 12.1 0.3 - 19.2statementBorrowings Borrowings (current) (10.8) 0.1 - - (10.7) Borrowings (non-current) (20.0) 8.7 0.3 - (11.0)Obligation under finance leases Obligation under finance leases (current) (0.8) - - - (0.8) Obligation under finance leases (non-current) (4.4) 0.7 - - (3.7)Derivative financial instruments 0.1 - - - 0.1 Net debt (29.1) 21.6 0.6 - (6.9) 8 Total Equity Share Share Other Retained capital premium Reserves earnings Total £m £m £m £m £m At 29 April 2006 0.7 14.8 0.8 39.7 56.0Purchase of treasury shares - - (0.4) - (0.4)Actuarial gain on defined benefit pension scheme - - - (0.3) (0.3)Exchange difference in respect of hedged equity - - (0.3) - (0.3)investmentsTax on items taken directly to or transferred - - - 0.1 0.1from equity through the SORIEProfit for the financial period - - - 46.3 46.3 Total recognised income and expense for the - - (0.7) 46.1 45.4financial periodShare-based payments net of tax - - - 0.5 0.5Dividend paid to Group shareholders - - - (33.9) (33.9) At 28 April 2007 0.7 14.8 0.1 52.4 68.0 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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