Final Results

RNS Number : 8317I
Headlam Group PLC
19 March 2010
 



19 March 2010

 

Preliminary Results for the Year Ended 31 December 2009

Headlam Group plc ("Headlam"), Europe's leading floorcoverings distributor, announces its final results for the year ended

31 December 2009.

 

Financial highlights

 


2009

£000

2008

£000

Change





Revenue

533,793

557,296

-4.2%





Operating profit before impairment

25,969

41,722

-37.8%





Profit before tax and impairment

23,275

40,120

-42.0%





Impairment of assets held for sale

(1,211)

-

-





Profit before tax

22,064

40,120

-45.0%





Basic earnings per share

19.1p

34.5p

-44.6%





Dividend per share

11.0p

19.7p

-44.2%

 

Key points

 

·     UK revenues decrease by 6.1% on a like for like basis

 

·     Continental European revenues decrease by 8.3% on a like for like basis

 

·     Cash generated from operations increased by 59.2% to £43.7 million 

 

·     Dividend cover ratio consistent with 2008 at 1.7 times 

 

Tony Brewer, Headlam's Group Chief Executive, said:

 

"Following a more positive end to 2009, we are optimistic about a return to growth in 2010.  However, market conditions, particularly in the UK, continue to be challenging, which has made normal seasonal trends and predictability difficult to establish.

 

Notwithstanding the current uncertainty, we believe the management and structure is in place to enable us to continue

out-performing the market and take advantage of any improvement in the economy."

 

Enquiries:

Headlam Group plc                                                    

Tony Brewer, Group Chief Executive                             Tel: 01675 433000

Stephen Wilson, Group Finance Director                        



Chairman's Statement

 

As anticipated, 2009 proved to be a challenging year following the downturn in market conditions that prevailed in the second half of 2008 and into the first half of 2009.  More encouragingly, we experienced an improving trading trend in the second half of 2009, particularly the final quarter, as contraction in the floorcovering market appeared to cease, albeit at a level reduced on previous year.

 

Total sales revenue for 2009 amounted to £533.8 million, a decline of 4.2% on the previous year.  Profit before tax declined by 45.0% to £22.1 million.  Notwithstanding the decline in revenue, we believe the group has out-performed the floorcovering market and by retaining our fundamental operating structure, we are well positioned to take advantage as conditions improve.

 

Earnings and dividend

The board has elected to maintain a dividend cover ratio in line with 2008 and is therefore recommending a final dividend of 7.3p per share.  Total dividend for the year will decrease by 44.2% from 19.7p to 11.0p per share.

 

The final dividend, if approved by shareholders at the Annual General Meeting, will be paid on 1 July 2010, to shareholders on the register at the close of business on 4 June 2010.

 

Strategy

Of significant importance to the group's strategy are the autonomous activities and initiatives of our individual businesses.  Whilst we implemented limited re-structuring in the autumn of 2008, we have essentially retained the same operational structure throughout 2009 in order to preserve our service levels and maintain operating capacity.  Based on our trading experience towards the end of 2009, which has broadly continued into 2010, it is our intention to retain the current business structure for the foreseeable future.

 

The separate management teams are focused on the responsibilities specific to their business, covering activity with suppliers, product and customers, whilst complying with defined operating and financial policies.  The performance measurement of our management teams and their subsequent reward is based on the achievement of their individual business objectives.

 

The group strategy for senior and operational management is to maintain our concentration on floorcovering distribution and enlarge our activities in the UK and Continental Europe.  This will allow us to develop further the business as markets improve, through a combination of organic growth and appropriate floorcovering acquisitions as opportunities are assessed and concluded.

 

Operations

We believe the group has benefited significantly, in difficult markets, from the autonomous initiatives of our 49 businesses, operating from 18 principal distribution centres in the UK, each one focused on maximising activity in their target geographical areas and various product categories.

 

We very much appreciate the ongoing support from both our suppliers, in creating and launching new products and our customers, principally the independent flooring retailers and contractors.  The ongoing success of our customers creates the opportunity to out-perform the market.

 

Through a constant process of development, we have launched 2,900 new products across our core residential activities of carpet, vinyl and laminate.  During the year, 648,000 point of sale items, principally display stands and pattern books, were positioned into independent flooring retailers and flooring contractors by our 347 external sales people.

 

All three businesses in Continental Europe have made a positive contribution.  Our operations in France and Switzerland performed well and in the Netherlands, progress was made despite a more challenging market.

 

Management and employees

Andrew Simpson, who has been instrumental in the development of Headlam, in his position as Managing Director of UK Operations since 1991, has informed the board of his intention to retire.  We thank Andrew for his major contribution to the development of individual managers and the group as a whole.

 

David Grove, after three years as a non-executive director, has decided to step down from the board to concentrate on his other business interests.  We would like to thank David for his positive contribution.

 

With the benefit of our group structure, we have continued with our policy of internal promotion and career progression where possible.  This enables employees to progress their career to sales representatives, sales and general management and in certain cases, senior management positions.

 

We wish to thank all of our management and employees for their contribution to the group's performance in 2009.

 

Outlook

With market conditions continuing to be challenging and whilst uncertainty prevails, we have taken a prudent approach to our financial and operating plan for 2010 and set realistic growth targets for sales representatives and management teams.

 

The core dynamics of the group are well developed and with our autonomous management teams focused on the objectives before them, we are confident of producing a positive outcome for the year.

 

 

Graham Waldron, Chairman



Chief Executive's Review

 

During 2009, revenue from the UK businesses collectively declined by 6.1% on a like for like basis.  As reported previously, the decline in revenue was 10.7% in the first half.  A generally improving performance in the second half, resulting in a like for like deficit of only 1.8%, culminated with the final quarter actually producing improved revenue of 1.0% against the corresponding period in 2008.

 

Various market indicators would suggest that residential and commercial floorcovering markets suffered a substantial decline during the year and therefore, we believe our result represents a solid performance.

 

We will continue with our strategy of concentrating on floorcovering distribution in the UK and Continental Europe.  Utilising the business and management structure through which we operate, we are confident of continuing to out-perform the floorcovering market and develop our business, principally by organic growth and appropriate strategic acquisitions.

 

UK operations

The UK operations now incorporate 49 individual businesses, operating from 18 distribution centres and 13 service centres.  The management teams of these businesses are positioned within five market sectors, dependent upon geographical focus and product offering.

 

Whilst we have not undertaken any significant restructuring during 2009, we have been extremely prudent with staff recruitment and therefore staff numbers in the UK, which peaked at 1,874 in 2008, have reduced from 1,729 in January 2009, to 1,661 in December 2009.  Currently, the total number of staff in the UK is 1,655.

 

Following the restructuring in 2008 and the retention of that structure into 2009, we have ensured that our high service levels are maintained, which incorporates the ongoing launch of new products, a comprehensive stock holding and distribution infrastructure, to provide an efficient next day delivery service to our customers.

 

The five market sectors are:

 

Regional multi-product:       These 20 businesses, which maximise their geographical market position by selling both residential and commercial floorcovering, now represent 53.8% of UK sales revenue.

 

National multi-product:         The Mercado network of businesses, with a presence throughout England, Wales and Northern Ireland, selling residential and commercial floorcovering produced a robust performance.

 

Regional commercial:           The 15 operations in this sector increased their revenue during the year.  Through organic growth, investment and potential acquisitions, we believe this is a particular area of growth, with regard to the number of locations and revenue.

 

Residential specialist:            The 14 businesses that represent our residential specialist activities have also increased revenue and now account for 16.5% of total UK revenue.  The market presence and trade brands of our various residential specialist businesses has been strengthened through increased point of sale and an enhanced product offering, giving this business sector a particularly strong opportunity for growth over the coming years.

 

Commercial specialist:          During the autumn of 2009, we decided to merge the sales and marketing activity of two commercial specialist businesses into the main commercial JHS brand, providing JHS with a much stronger sales and marketing platform for future growth.

 

Suppliers

It is encouraging that our suppliers have remained stable during this challenging period.  We work very closely with our principal suppliers, both from a group perspective and through our individual management teams.  This ensures an ongoing process of development and new product launches, to ensure that our customers in both the residential and commercial sectors are at the forefront of all new initiatives introduced into the UK market.

 

Products

Carpet remains our largest product category, accounting for 44.7% of UK revenue.  We have an extremely broad base of products covering all aspects of the market and consumer taste, from base grade polypropylene to luxury woollen products.

 

Sales of carpet, which continue to be dominated by plain styles, produced an encouraging performance, with a revenue decline of 5.9%.  This was achieved through the activity of our sales representatives positioning 2,112 new products, through 502,000 point of sale items.  Our sales representatives also generated an increased proportion of sales from full rolls, which amounted to 27.5% of our carpet revenue.

 

Residential vinyl benefits from an ongoing improvement in production techniques, creating attractive cost-effective flooring.  We were able to introduce 470 new products, marketed with 102,000 point of sale items into independent retailers.

 

Wood and laminate experienced the same market challenges as our other residential product categories,   however, through a continual process of product launches, we were able to maintain our market position.

 

Rugs are an increasing presence through both independent and national retailers.  The acquisition of Oriental Weavers' UK distribution activities in the spring of 2009 further enhanced our position as we develop into a leading UK supplier of both traditional and contemporary rugs.

 

Commercial flooring activities target various aspects of the commercial flooring market through flooring contractors.  Products are supplied into a variety of sectors including education, healthcare, offices and retail stores and whilst sales revenue declined by 6.3%, this again would suggest an out performance of the general commercial market.

 

Market presence

We have increased the market presence of our various businesses, through sales representatives positioning new point of sale on a daily basis, into independent flooring retailers.  This is achieved through our traditional multi-product distribution businesses and the specialist residential activities.

 

With the involvement and support of our suppliers, we are launching a new initiative under the Lifestyle Floors brand, to enable our multi-product distribution businesses to further strengthen their market presence within independent retailers.

 

Customers

The number of active accounts was stable at 41,334 (2008: 41,539.)  Whilst debtor days moved marginally from 44.3 to 45.4 days, the widespread activity of our customers and payment in accordance with terms reflects the underlying strength of the independent floorcovering retailer and contractor.

 

Continental Europe

Our businesses in France, Switzerland and the Netherlands, produced a solid performance during the year.  Market conditions in France and Switzerland enabled our businesses to further develop their activities in both residential and commercial flooring.

 

The Netherlands proved to be a more difficult marketplace.  However, with the benefit of the new 65,000 square feet distribution centre, which became operational in the spring of 2009, both Lethem Vergeer and Silvester were able to produce a satisfactory performance.

 

Acquisitions

We are currently assessing a number of opportunities, particularly in the UK, and would be hopeful that during the course of 2010 we will be able to complete acquisitions to enhance our market position in both residential and commercial floorcovering.

 

We will continue to evaluate potential acquisitions, to enlarge our core business activities in the UK and Continental Europe.

 

Investments

We are continuing with the project to relocate Faithfulls, our regional multi-product business in the south east of England, to a development site in Hadleigh, near Ipswich.  We would anticipate finalising the purchase of land during the course of this year, with the construction of a 127,500 square feet purpose built freehold distribution centre completing in the summer of 2011.

 

We have since 2004, occupied on a leasehold basis, 50% of a distribution centre in Rochdale, from which National Carpets operate.  We are currently concluding the purchase of the 110,000 square feet freehold distribution centre which will give us ownership of the total site and provide National Carpets with increased capacity and an opportunity to enlarge its activities.

 

With the growth of our regional commercial businesses, it is still the group's intention to increase the number of service centres in key geographical locations.

 

Outlook

Following a more positive end to 2009, we are optimistic about a return to growth in 2010.  However, market conditions, particularly in the UK, continue to be challenging, which has made normal seasonal trends and predictability difficult to establish.

 

Notwithstanding the current uncertainty, we believe the management and structure is in place to enable us to continue out-performing the market and take advantage of any improvement in the economy.

 

Financial review

 

Trading

 

Revenue

Group revenues declined during the year by 4.2% from £557.3 million to £533.8 million.

 

In the UK, like for like revenue decreased by 6.1% and revenue from the Continental European businesses, reduced on a like for like basis by 8.3%.  However, group revenue has benefited from currency gains amounting to £11.6 million.

 

Gross margin

Gross margin, expressed as a percentage of revenue, decreased from 31.3% to 30.4%, the reduction occurring because of a change in product mix and the absence of any significant price increases during the year.  The change in product mix was attributable to the higher proportion of roll sales during the year.

 

Inflationary pressures still remain a concern because of the continuing weakness of Sterling and in particular, the affect on cost of goods sourced from Continental Europe.

 

Expenses

Distribution and administration expenses, collectively representing 25.8% (2008: 23.8%) of revenue, increased by 3.5% compared with the previous year.

 

Distribution expenses amounting to £100.7 million (2008: £98.5 million) have increased by 2.2% compared with last year, the increase being wholly attributable to the currency effects arising from the translation of the Continental European businesses.  Underlying this overall position is a decrease in expense associated with the contraction in the number of commercial vehicles and fuel which has been offset by pay increases introduced at the start of the year.

 

Administration expenses increased by 7.0% from £34.4 million to £36.8 million due to a combination of currency translation and the charge associated with impairment of assets held for sale.  The underlying position reveals an offset with pay increases generally equating to reductions in property related expenses.

 

Impairment of assets held for sale

During early 2010, we disposed of two vacant properties.  In both instances, the selling price was less than book value.  The impairment, amounting to £1.2 million, has been recognised in the 2009 results by transferring the properties to assets held for sale at their market value and recognising the loss in the Income Statement.

 

We now have two vacant properties remaining in the freehold property portfolio, which are currently being marketed for disposal.  However, given the limited interest, it is unlikely that these properties will be sold in the foreseeable future.

 

Net finance costs

Net finance costs increased by 68.2% from £1.6 million to £2.7 million as a result of a significant change in the income and expense associated with the defined benefit plan.  During the year, the return on plan assets reduced from £3.9 million to

£3.1 million whilst interest on the plan's obligations increased from £4.1 million to £4.2 million.  The net finance costs associated with funding the group's operations were largely unchanged.

 

Taxation

The effective tax rate for the year was 28.0%.  Going forward, we anticipate a progressive increase in the group's underlying rate, which over the medium term, is likely to rise to just over 30.0%.

 

Dividends

Dividend cover has been maintained at a level which is consistent with the prior year ratio of 1.7 times.  Therefore, total dividends for 2009, amounting to 11.0p per share, have decreased by 44.2% on the previous year.  During the year, the board has taken the opportunity to rebase the weighting between the interim and final dividend increasing the interim to approximately one third of the total dividend for the year.  The board anticipate maintaining this balance for the future.

 

Cash flows and net funds

 

Cash generated from operations

Cash flows from operations before net movement in working capital, declined by 33.2% during the year from £47.1 million to £31.5 million due primarily to the decrease in profit before tax for the year.

 

Investment in net working capital reduced substantially compared with last year moving from a net cash outflow of £19.7 million in 2008 to a net cash inflow of £12.2 million during the year as the group rebalanced its requirements to service the reduction in revenue activity.  As a result cash generated from operations increased from £27.4 million to £43.7 million.

 

Investment in inventories and trade receivables decreased by £6.6 million and £3.0 million respectively, and following the change in purchasing activity during the second half of 2008, which occurred because of the reduction in revenue, purchasing resumed during the year but at levels supporting the group's current need.  This resulted in a cash inflow from trade and other payables amounting to £2.5 million.

 

Cash flows from investing and financing activities

Net cash outflows from investing activities totalled £5.8million compared with £7.1 million during 2008.  Investment in property, plant and equipment amounted to £7.3million compared with £10.7 million for 2008.  The two main areas of expenditure related to completing the Dutch property, £2.4 million, and acquiring the freehold interest, £3.1 million, of the site located in Kidderminster which was formerly occupied on a leasehold basis.

 

Net cash flow from financing activities moved from a cash inflow of £13.1 million during 2008 to a cash outflow of £15.2 million in 2009, the principal differences between the two years being the proceeds from borrowings amounting to £33.7 million in 2008, an absence of share buy-back activity in 2009 and a reduction in dividends paid.

  

Changes in net funds

Group net funds increased from £0.7 million to £9.7 million during the year as detailed in the table below. 

 


 

At

1 January

2009

£000

 

 

Cash

flows

£000

 

 

Translation

differences

£000

 

At

31 December

2009

£000






Cash at bank and in hand

35,193

11,102

(558)

45,737

Bank overdraft

-

(758)

-

(758)







35,193

10,344

(558)

44,979

Debt due within one year

(4,506)

3,244

362

(900)

Debt due after one year

(30,000)

(4,396)

4

(34,392)







687

9,192

(192)

9,687

 

 

Employee benefits

During the year, the employee benefits net deficit, as measured under IAS 19, increased by £8.2 million from £14.6 million to £22.8 million.  The adverse movement on the UK defined benefit pension plan was the principal cause with the deficit increasing from £12.9 million to £21.8 million as a result of a significant increase in the defined benefit obligation brought about by a decline in bond yields.

 

As at 31 December 2009, membership of the UK plan totalled 870 and consisted of 103 active, 460 deferred and 307 pensioners.  Given the increase in the defined benefit obligation, the company has elected to offer deferred members the opportunity to transfer out of the plan.  The cost of funding the offer, if all deferred members, included in the offer, elect to accept, based on the position as at 31 December 2009, would be approximately £12.0 million.  This would be expected to reduce the defined benefit obligation by approximately £22.6 million from £88.3 million to £65.7 million, leading to significant reduction in the group's exposure to the funding risks associated with defined benefit pension plans.

 

Facilities and going concern

The group's total bank facilities amount to £80.5 million.  The UK facilities of £65.0 million are comprised of £35.0 million relating to on demand facilities, which are renewed on an annual basis and a five-year term loan amounting to £30.0 million that matures in July 2012.  The group's two principal UK banks have indicated that it is their intention to renew the on demand facilities for a further twelve months.

 

The facilities relating to the Continental European businesses amount to £15.5 million and include a facility amounting to

£5.3 million, which is repayable over a ten year term ending November 2019.  The remaining facilities are renewed annually.  The group's banking partners in Continental Europe have also signalled their intent to provide continued support.

 

Having reviewed the group's resources and a range of likely trading out-turns, the directors believe they have reasonable grounds for stating that the group has adequate resources to continue in operational existence for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the group's financial statements.


Consolidated Income Statement

for the year ended 31 December 2009

 

 


Note

2009

£000

2008

£000





Revenue

1

533,793

557,296

Cost of sales


(371,533)

(382,670)





Gross profit


162,260

174,626





Distribution expenses


(100,698)

(98,517)

Administrative expenses


(36,804)

(34,387)





Operating profit

1

24,758

41,722





Finance income


3,764

7,016

Finance expenses


(6,458)

(8,618)





Net finance costs                                                       


(2,694)

(1,602)





Profit before tax


22,064

40,120

Taxation


(6,168)

(11,433)





Profit for the year attributable to the equity shareholders


15,896

28,687





Dividend paid per share

3

19.70p

23.10p





Earnings per share




Basic

2

19.1p

34.5p





Diluted

2

19.1p

34.5p

 

 

All group operations during the financial years were continuing operations.

 

Consolidated Statement of Comprehensive Income

for the year ended 31 December 2009

 

 



2009

£000

2008

£000





Profit for the year attributable to the equity shareholders


15,896

28,687





Other comprehensive income:




Foreign exchange translation differences arising on translation of overseas operations


 

(1,808)

 

6,631

Actuarial gains and losses on defined benefit plans


(10,042)

(4,245)

Effective portion of changes in fair value of cash flow hedges


(157)

(800)

Transfers to profit or loss on cash flow hedges


781

(48)

Income tax on other comprehensive income


2,854

1,304





Other comprehensive (expenses)/income


(8,372)

2,842









Total comprehensive income attributable to the equity shareholders

 

 

7,524

31,529





 

 

 

 Consolidated Statement of Changes in Equity

for the year ended 31 December 2009

 

 


 

Share

capital

£000

 

Share

premium

£000

Capital

redemption

reserve

£000

 

Translation

reserve

£000

Cash flow

hedging

reserve

£000

 

Treasury

reserve

£000

 

Retained

earnings

£000

 

Total

equity

£000










Balance at

1 January 2008

 

4,268

 

53,512

 

88

 

474

 

-

 

(11,604)

 

103,303

 

150,041

Total comprehensive income for the period

 

-

 

-

 

-

 

6,631

 

(848)

 

-

 

25,746

 

31,529










Transactions with equity shareholders, recorded directly in equity









Share-based payments

-

-

-

-

-

-

426

426

Consideration for purchase of own shares

 

-

 

-

 

-

 

-

 

-

 

(2,204)

 

-

 

(2,204)

Share options exercised by employees

 

-

 

-

 

-

 

-

 

-

 

751

 

-

 

751

Deferred tax on share options

 

-

 

-

 

-

 

-

 

-

 

-

 

(227)

 

(227)

Dividends to equity holders

 

-

 

-

 

-

 

-

 

-

 

-

 

(19,182)

 

(19,182)

Total contributions by and distributions to equity shareholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(1,453)

 

 

(18,983)

 

 

(20,436)

Balance at

31 December 2008

 

4,268

 

53,512

 

88

 

7,105

 

(848)

 

(13,057)

 

110,066

 

161,134










Balance at

1 January 2009

 

4,268

 

53,512

 

88

 

7,105

 

(848)

 

(13,057)

 

110,066

 

161,134

Total comprehensive income for the period

 

-

 

-

 

-

 

(1,808)

 

624

 

-

 

8,708

 

7,524










Transactions with equity shareholders, recorded directly in equity









Share-based payments

-

-

-

-

-

-

316

316

Deferred tax on share options

 

-

 

-

 

-

 

-

 

-

 

-

 

9

 

9

Dividends to equity holders

 

-

 

-

 

-

 

-

 

-

 

-

 

(16,354)

 

(16,354)

Total contributions by and distributions to equity shareholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(16,029)

 

 

(16,029)

Balance at

31 December 2009

 

4,268

 

53,512

 

88

 

5,297

 

(224)

 

(13,057)

 

102,745

 

152,629

 

Consolidated Balance Sheet

at 31 December 2009

 

 




Restated *


Notes

2009

£000

2008

£000

Assets




Non-current assets




Property, plant and equipment


96,530

99,741

Intangible assets


13,210

13,210

Deferred tax assets

4

4,731

1,516



114,471

114,467





Current assets




Inventories


99,637

107,597

Trade and other receivables


101,149

105,942

Cash and cash equivalents


45,737

35,193

Assets held for sale


2,275

-







248,798

248,732









Total assets

1

363,269

363,199





Liabilities




Current liabilities




Bank overdraft


(758)

-

Other interest-bearing loans and borrowings


(900)

(4,506)

Trade and other payables


(143,216)

(143,369)

Employee benefits


(2,506)

(2,428)

Income tax payable


(8,615)

(9,546)







(155,995)

(159,849)





Non-current liabilities




Other interest-bearing loans and borrowings


(34,392)

(30,000)

Employee benefits


(20,253)

(12,216)



(54,645)

(42,216)

Total liabilities

1

(210,640)

(202,065)





Net assets


152,629

161,134





 

Equity attributable to equity holders




 

of the parent




 

Share capital


4,268

4,268

 

Share premium


53,512

53,512

 

Other reserves


(7,896)

(6,712)

 

Retained earnings


102,745

110,066

 





 

Total equity


152,629

161,134

 

 

* See note 4.

 

 

 

Consolidated Cash Flow Statement

for the year ended 31 December 2009

 

 



2009

£000

2008

£000

Cash flows from operating activities




Profit before tax for the year


22,064

40,120

Adjustments for:




Depreciation, amortisation and impairment


6,524

5,305

Finance income


(3,764)

(7,016)

Finance expense


6,458

8,618

Profit on sale of property, plant and equipment


(102)

(337)

Share-based payments


316

426





Operating profit before changes in working capital and other payables


31,496

47,116

Change in inventories


6,618

(1,480)

Change in trade and other receivables


3,028

876

Change in trade and other payables


2,511

(19,096)





Cash generated from the operations


43,653

27,416

Interest paid


(2,272)

(4,552)

Tax paid


(7,425)

(11,012)

Additional contributions to defined benefit plan


(2,607)

(1,147)





Net cash from operating activities


31,349

10,705





Cash flows from investing activities




Proceeds from sale of property, plant and equipment


664

1,309

Interest received


846

2,997

Acquisition of subsidiaries, net of cash acquired


-

(726)

Acquisition of property, plant and equipment


(7,313)

(10,664)





Net cash from investing activities


(5,803)

(7,084)





Cash flows from financing activities




Proceeds from the issue of treasury shares


-

751

Proceeds from borrowings


1,152

33,726

Payment to acquire own shares


-

(2,204)

Dividends paid


(16,354)

(19,182)





Net cash from financing activities


(15,202)

13,091





Net increase in cash and cash equivalents


10,344

16,712

Cash and cash equivalents at 1 January


35,193

16,702

Effect of exchange rate fluctuations of cash held


(558)

1,779

Cash and cash equivalents at 31 December


44,979

35,193

 


Notes

 

 

1. Segment reporting

 

The group has 54 operating segments which represent the individual trading operations throughout the UK (49 segments) and Continental Europe (5 sements).  Each of the operations is wholly aligned to the sales, marketing, supply and distribution of floorcovering products.  The operating results of each are regularly reviewed by the Chief Operating Decision Maker, which is deemed to be the Group Chief Executive.  Discrete financial information is available for each and used by the Group Chief Executive to make decisions about resources to be allocated to the segment and assess its performance. 

 

The operating segments have been aggregated to the extent that they have similar economic characteristics, with relevance to products/services, type and class of customer, methods of sale and distribution and the regulatory environment in which they operate.  The group's internal management structure and financial reporting systems differentiate the operating segments on the basis of the differing regulatory and economic environment in the UK and Continental Europe and accordingly report these as two separate reportable segments.  This distinction is embedded in the construction of operating reports reviewed by the Group Chief Executive, the board and the executive management team and forms the basis for the presentation of operating segment information given below.

 


UK

Continental Europe

Total


2009

£000

2008

£000

2009

£000

2008

£000

2009

£000

2008

£000

Revenue







External revenues

429,646

458,572

104,147

98,724

533,793

557,296








Depreciation

2,834

2,929

733

537

3,567

3,466

Amortisation

-

44

-

257

-

301








Reportable segment result

23,106

39,174

2,487

3,574

25,593

42,748















Reportable segment assets

223,044

220,832

49,636

54,701

272,680

275,533








Capital expenditure

926

2,295

2,197

384

3,123

2,679








Reportable segment liabilities

(123,088)

(117,052)

(20,662)

(25,470)

(143,750)

(142,522)

 

During the year there have been no inter-segment revenues (2008: £nil).

 

Reconciliations of reportable segment profit, assets and liabilities and other material items:

 






2009

£000

2008

£000

Profit for the year







Total profit for reportable segments




25,593

42,748

Impairment of assets





(1,211)

-

Unallocated income/(expense)





376

(1,026)








Operating profit





24,758

41,722








Finance income





3,764

7,016

Finance expense





(6,458)

(8,618)








Profit before taxation





22,064

40,120

Taxation





(6,168)

(11,433)








Profit for the year





15,896

28,687








Notes (continued)

 

 

1. Segment reporting - Continued

 






2009

£000

2008

£000

Assets







Total assets for reportable segments




272,680

275,533

Unallocated assets:







Properties, plant and equipment





83,583

86,150

Deferred tax assets





4,731

1,516

Assets held for sale





2,275

-








Total assets





363,269

363,199








Liabilities







Total liabilities for reportable segments




(143,750)

(142,522)

Unallocated liabilities:







Employee benefits





(22,759)

(14,643)

Net borrowings





(35,292)

(34,506)

Income tax payable





(8,615)

(9,546)

Derivative liabilities





(224)

(848)








Total liabilities





(210,640)

(202,065)








 

 

Other material items 2009




Reportable segment totals

 

Group items

 

Consolidated totals








Capital expenditure




3,123

4,190

7,313

Depreciation




3,567

1,746

5,313

Impairment of assets




-

1,211

1,211












6,690

7,147

13,837








Other material items 2008







Capital expenditure




2,679

7,985

10,664

Depreciation




3,466

1,538

5,004





6,145

9,523

15,668

 

Each segment is a continuing operation.

 

The Group Chief Executive, the board and the executive management team has access to information that provides details on revenue by principal product group for the two reportable segments, as set out in the following table:

 


Notes (continued)

 

 

1. Segment reporting - Continued

 

Revenue by principal product group is summarised below:

 


UK

Continental Europe

Total


2009

£000

2008

£000

2009

£000

2008

£000

2009

£000

2008

£000

Revenue







Carpet

185,805

197,572

13,897

14,110

199,702

211,682

Rugs

11,496

10,758

-

-

11,496

10,758

Commercial

133,686

142,613

44,190

41,926

177,876

184,539

Underlay

14,849

16,384

381

344

15,230

16,728

Domestic vinyl

47,743

56,147

13,509

11,456

61,252

67,603

Wood & laminate

29,829

28,500

23,909

22,189

53,738

50,689

Miscellaneous

6,238

6,598

8,261

8,699

14,499

15,297









429,646

458,572

104,147

98,724

533,793

557,296

 

 

2. Earnings per share

 

The calculation of the basic and diluted earnings per share is based on the following data:

 


2009

£000

2008

£000

Earnings



Earnings for the purposes of basic and diluted earnings per share being profit attributable to equity holders of the parent

 

15,896

 

28,687








2009

2008

Number of shares



Issued ordinary shares at 1 January

85,363,743

85,363,743

Effect of shares held in treasury

(2,248,647)

(2,223,206)




Weighted average number of ordinary shares for the purposes of basic earnings per share

 

83,115,096

 

83,140,537




Effect of diluted potential ordinary shares:



  Weighted average number of ordinary shares at 31 December

83,115,096

83,140,537

  Share options

595,162

433,308

  Number of shares that would have been issued at fair value

(500,540)

(401,137)




Weighted average number of ordinary shares for the purposes of diluted earnings per share

 

83,209,718

 

83,172,708

 

At 31 December 2009, the company held 2,248,647 shares in treasury and these are excluded from the

calculation of earnings per share.

 

 

Notes (continued)

 

 

3. Dividends

 


2009

£000

2008

£000




Interim dividend for 2008 of 5.60p paid 2 January 2009

4,649

-

Final dividend for 2008 of 14.10p paid 1 July 2009

11,705

-

Interim dividend for 2007 of 5.35p paid 2 January 2008

-

4,454

Final dividend for 2007 of 17.75p paid 1 July 2008

-

14,728





16,354

19,182

 

 

The final proposed dividend of 7.30p per share (2008: 14.10p per share) will not be provided for until authorised by shareholders at the forthcoming AGM.

 

Interim dividends of 3.70p per share (2008: 5.60p per share) are provided for when the dividend is paid.

 

The total value of dividends proposed but not recognised at 31 December 2009 is £9,132,000 (2008: £16,354,000).

 

 

4. Deferred taxation

 

Deferred tax balances in the 2008 Consolidated Balance Sheet have been reclassified to disclose deferred tax balances as a net amount, being an asset of £1,516,000, as required by IAS 12.  Previously these amounts were shown as separate deferred tax assets of £5,372,000 and deferred tax liabilities of £3,856,000.

 

 

5. Additional information

 

The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2009 or 2008. Statutory accounts for 2008 have been delivered to the registrar of companies, and those for 2009 will be delivered in due course. The auditors have reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 237 (2) or (3) of the Companies Act 1985 in respect of the accounts for 2008 nor a statement under section 498 (2) or (3) of the Companies Act 2006 in respect of the accounts for 2009.

 

We anticipate that the company's statutory accounts will be posted to shareholders during April 2010 and will be displayed on the company's website at www.headlam.com during April 2010.  Copies of the statutory accounts will also be available from the company's registered office at Headlam Group plc, PO Box 1, Gorsey Lane, Coleshill, Birmingham, B46 1LW

 

This preliminary announcement of results for the year ended 31 December 2009 was approved by the board on 19 March 2010.

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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