Interim Results

Headlam Group PLC 14 August 2002 HEADLAM CONFIDENT FOR THE FUTURE AT INTERIM STAGE Headlam Group plc ('Headlam'), the UK's leading floorcoverings distributor, announces its interim results for the six months ended 30 June 2002. Financial highlights 2002 2001 Change Turnover from continuing operations £190.3m £183.8m +3.5% Operating profit from continuing operations before £13.4m £12.1m +10.8% goodwill amortisation Profit before taxation £12.8m £3.2m +400.0% Basic earnings per share 10.2p (1.2p) Dividend per share 3.25p 2.95p +10.2% Key points Turnover from continuing operations up 3.5%, with UK floorcovering distribution achieving 6% like for like growth Operating profit from continuing operations before goodwill amortisation increased by 10.8% with UK floorcovering distribution achieving 11.0% Interim dividend increased by 10.2% from 2.95p to 3.25p Tony Brewer, Chief Executive of Headlam, said: ' Our UK floorcovering distribution business has performed particularly well in the first six months of 2002, with an 11% increase in operating profit. The benefit of recently acquired businesses has further enhanced our market presence and with current trading showing a similar positive trend, we look forward to achieving our performance objectives for the year.' -ends- Date: 14 August 2002 For further information contact: Headlam Group plc City Profile Tony Brewer, Chief Executive Simon Courtenay Stephen Wilson, Finance Director Ed Senior Tel: 01675 433000 Tel: 020 7448 3244 Web: www.headlam.com E-mail: simon.courtenay@city-profile.com E-mail: headlamgroup@headlam.com CHAIRMAN'S STATEMENT Results and dividend The performance from the group's continuing activities improved with turnover increasing by 3.5% from £183.8 million to £190.3 million and operating profits up by 10.8% from £12.1 million to £13.4 million. Based upon this strong performance, the board have declared an interim dividend of 3.25p per ordinary share, an increase of 10.2% (2001: 2.95p per ordinary share). The dividend will be paid on 6 January 2003 to shareholders on the register at 13 December 2002. Operations The UK floorcovering distribution business performed particularly well, with like for like sales up 6% in the period. Carpet sales showed significant year on year increases. In addition, sales of other residential products have also shown meaningful improvement. In the commercial sector, our sales out-performed market indicators and we gained market share. Acquisitions made over the last eight months have all been integrated logistically into existing distribution centres, whilst retaining their individual presence in the market place. These acquisitions will make a positive contribution to profits for the year and we look forward to an improving performance, as the return on investment in additional sales resource is realised. The acquisitions, in addition to our existing operations, provide the group with 40 individual businesses in the UK floorcovering market place, therefore enhancing market presence in all geographical regions and product sectors. Market conditions in Continental Europe proved to be more difficult, but our businesses in France, Holland and Switzerland have been able to perform within expectations and provide a solid base for development when these markets improve. The restructured Windowcovering division achieved a 10% increase in profitability and these businesses are now stabilised and performing to expectations. Outlook The recent months of June and July have shown performances consistent with our year to date position and the UK floorcovering distribution business in particular, looks set to enjoy the benefits from the traditionally busy autumn trading period. We are therefore confident of achieving our performance objectives for the year. Trevor G. Larman 14 August 2002 FINANCIAL REVIEW Turnover The group's turnover for the six month period to 30 June 2002 was £193.0 million compared with £217.9 million for the previous year. The change was attributable to three factors. • Turnover from continuing operations increased by 3.5% from £183.8 million to £190.3 million. • Acquired operations, all of which were floorcovering businesses located in the UK, contributed £2.8 million. • The first half of 2001 included a contribution of £34.1 million from discontinued operations. Turnover from continuing operations in the Floorcoverings division increased by 4.2% from £166.8 million to £173.8 million with UK businesses in particular recording another strong performance, increasing by 6.0% from £135.1 million to £143.2 million. Turnover from continuing operations in the Windowcoverings division during the first half of 2002 declined to £16.4 million from £17.0 million achieved in 2001. Operating profit Operating profit during the first six months on ordinary activities before goodwill amortisation, amounted to £13.5 million compared with £14.9 million for the previous period. The change in operating profit is attributable to the same factors affecting turnover. • Operating profit from continuing operations increased by 10.8% from £12.11 million to £13.42 million. • Acquired operations during 2002 contributed £0.13 million. • The first half of 2001 included £2.80 million from discontinued operations. Operating profit from continuing operations in the Floorcoverings division increased by 8.2% from £11.66 million to £12.62 million. This result was underpinned with a strong performance from the UK businesses with operating profit increasing by 11.0% from £10.53 million to £11.69 million. Operating profit from continuing activities in the Windowcoverings division increased by 10.1% from £1.09 million to £1.20 million. Cash flow and borrowings Cash flow from operating activities reduced by £0.2 million from £9.1 million to £8.9 million. In line with normal seasonality, investment in net working capital during the first half year amounted to £6.1 million compared with £8.3 million last year. Capital expenditure on tangible fixed assets during the first half amounted to £2.2 million. A combined total of £1.5 million was invested in the purchase of the freehold interest in the distribution centre located in Bristol, a facility that was previously leased and the investment in a new freehold distribution centre in Newcastle. The remainder of the expenditure related to the routine replacement of plant and machinery. Acquisitions during the first half resulted in a cash outflow of £2.6 million. The combined cash outflow of investment activities, taxation and dividend payments amounting to £10.0 million exceeded the £8.9 million of cash generated by operating activities leaving a net cash outflow before financing of £1.1 million. The financing outflows of £16.6 million, which principally related to the repayment of a sterling term facility of £16.0 million, meant that cash outflows during the first half totalled £17.6 million. Cash balances declined from £42.8 million to £25.2 million over the period because of the repayment of debt referred to above. Debt therefore reduced from £30.4 million to £14.4 million. The group's net cash position at 31 December 2001 of £12.4 million reduced to £10.8 million at 30 June because of the cash outflows during the period exceeding cash inflows from operations. Headlam Group plc Consolidated profit and loss account (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 Note £000 £000 £000 Turnover 1 Continuing operations 190,259 183,808 381,324 Acquisitions 2,767 - - _________ _______ _______ 193,026 183,808 381,324 Discontinued operations - 34,082 52,798 _________ _______ _______ 193,026 217,890 434,122 Cost of sales (137,322) (151,457) (298,951) _________ _______ _______ Gross profit 55,704 66,433 135,171 Net operating expenses (42,526) (51,914) (103,843) _________ _______ _______ Operating profit Continuing operations 13,419 12,107 26,670 Acquisitions 130 - - _________ _______ _______ 13,549 12,107 26,670 Discontinued operations - 2,801 4,658 _________ _______ _______ Operating profit before goodwill amortisation 1 13,549 14,908 32,111 Goodwill amortisation (371) (389) (783) 13,178 14,519 31,328 (Loss)/profit on disposal of operations excluding - (658) 13,741 goodwill Goodwill previously written off to reserves - (8,902) (32,552) Loss on disposal of operations - (9,560) (18,811) Profit/(loss) on sale of properties - 51 (434) Profit on ordinary activities before interest 1 13,178 5,010 12,083 Net interest payable and other similar items (393) (1,820) (3,403) _________ _______ _______ Profit on ordinary activities before taxation 12,785 3,190 8,680 Taxation on profit on ordinary activities (4,210) (4,188) (9,188) _________ _______ _______ Profit/(loss) for the financial period 8,575 (998) (508) Dividends paid and proposed on equity and non-equity (2,730) (2,476) (9,558) shares _________ _______ _______ Retained profit/(loss) for the financial period 5,845 (3,474) (10,066) _________ _______ _______ Earnings/(loss) per share Basic 2 10.2p (1.2p) (0.6p) _________ _______ _______ Diluted 2 10.1p (1.2p) (0.6p) _________ _______ _______ Adjusted 2 10.2p 10.2p 22.4p _________ _______ _______ Headlam Group plc Consolidated balance sheet (unaudited) At At At 30 June 30 June 31 December 2002 2001 2001 £000 £000 £000 Fixed assets Intangible assets 13,882 14,030 12,741 Tangible assets 39,193 48,608 37,913 Investments - 641 - _______ _______ _________ 53,075 63,279 50,654 _______ _______ _________ Current assets Stocks 77,626 80,269 70,742 Debtors: amounts falling due within one year 77,944 82,148 79,008 Debtors: amounts falling due after more than one year 1,500 - 2,180 Total debtors 79,444 82,148 81,188 Cash at bank and in hand 26,893 14,489 44,464 _______ _______ _________ 183,963 176,906 196,394 Creditors: amounts falling due within one year (137,860) (152,597) (153,803) _________ _______ _________ Net current assets 46,103 24,309 42,591 _________ _______ _________ Total assets less current liabilities 99,178 87,588 93,245 Creditors: Amounts falling due after more than one year (4,183) (17,240) (4,498) Provisions for liabilities and charges (513) (434) (482) _________ _______ _________ Net assets 94,482 69,914 88,265 _________ _______ _________ Capital and reserves Called up share capital 4,206 4,244 4,200 Share premium account 48,861 48,541 48,605 Revaluation reserve 4,066 3,560 4,102 Profit and loss account 37,349 13,569 31,358 _________ _______ _________ Shareholders' funds Equity 94,482 69,864 88,261 Non-equity - 50 4 _________ _______ _________ 94,482 69,914 88,265 _________ _______ _________ Headlam Group plc Consolidated cash flow statement (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 Note £000 £000 £000 Net cash inflow from operating activities 4 8,939 9,085 36,130 Returns on investments (360) (1,809) (3,872) Taxation (2,422) 449 (4,849) Capital expenditure (2,179) (265) 5,017 Acquisitions and disposals (2,574) 2,442 26,874 Equity dividends paid (2,473) (2,337) (8,657) ________ ________ ________ Cash (outflow)/ inflow before financing (1,069) 7,565 50,643 Financing (16,555) (1,463) (14,476) ________ ________ ________ (Decrease)/increase in cash in period (17,624) 6,102 36,167 ________ ________ ________ Reconciliation of net cash flow to movements in net funds (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 £000 £000 £000 (Decrease)/increase in cash in period (17,624) 6,102 36,167 Cash outflow from reduction in debt 16,816 1,710 14,745 ________ ________ ________ Change in debt resulting from cash flows (808) 7,812 50,912 Debt disposed of with subsidiaries - 14 576 New finance leases and similar hire purchase contracts (128) (101) (308) Translation difference (661) 574 125 ________ ________ ________ Movement in net cash/(debt) in the period (1,597) 8,299 51,305 Net cash/(debt) at beginning of period 12,358 (38,947) (38,947) ________ ________ ________ Net cash/(debt) at end of period 10,761 (30,648) 12,358 ________ ________ ________ Headlam Group plc Consolidated statement of total recognised gains and losses (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 £000 £000 £000 Profit/(loss) for the financial period 8,575 (998) (508) Currency translation differences on foreign currency net 110 359 38 investments Surplus on revaluation of tangible fixed assets - - 1,594 _______ _______ _______ Total recognised gains and losses for the financial period 8,685 (639) 1,124 _______ _______ _______ Reconciliation of movements in consolidated shareholders' funds (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 £000 £000 £000 Profit/(loss) for the financial period 8,575 (998) (508) Dividends Equity shares (2,730) (2,475) (9,556) Non-equity shares - (1) (2) _______ _______ _______ Retained profit/(loss) for the financial period 5,845 (3,474) (10,066) Equity share capital issued 266 247 313 Preference share capital redeemed (4) - (46) Goodwill previously written off to reserves - 8,902 32,552 Transfer from revaluation reserve (35) (46) (1,098) Transfer to profit and loss account 35 46 1,098 Surplus on revaluation of tangible fixed assets - - 1,594 Currency translation differences on foreign currency net 110 359 38 investments _______ _______ _______ Net addition to shareholders' funds 6,217 6,034 24,385 Shareholders' funds at beginning of period 88,265 63,880 63,880 _______ _______ _______ Shareholders' funds at end of period 94,482 69,914 88,265 _______ _______ _______ Headlam Group plc Notes to the Interim Financial Statements (unaudited) 1. Segmental analysis By activity Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 £000 £000 £000 Floorcoverings Continuing operations 173,835 166,791 346,377 Acquisitions 2,767 - - ________ _______ _______ 176,602 166,791 346,377 Windowcoverings Continuing operations 16,424 17,017 34,947 Discontinued operations - 34,082 52,798 ________ _______ _______ 193,026 217,890 434,122 ________ _______ _______ Profit/(loss) before interest and taxation By activity Floorcoverings Continuing operations 12,618 11,658 26,365 Less: goodwill amortisation (365) (389) (783) ________ _______ _______ 12,253 11,269 25,582 ________ _______ _______ Acquisitions 130 - - Less: goodwill amortisation (6) - - ________ _______ _______ 124 - - 12,377 11,269 25,582 Windowcoverings Continuing operations 1,201 1,085 2,174 Discontinued operations - 2,801 4,658 ________ _______ _______ 13,578 15,155 32,414 ________ _______ _______ Central operations (400) (636) (1,086) Exceptional items - (9,509) (19,245) ________ _______ _______ 13,178 5,010 12,083 ________ _______ _______ Headlam Group plc Notes to the Interim Financial Statements (unaudited) By origin Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 £000 £000 £000 Turnover UK 160,563 172,084 344,491 Continental Europe 32,463 35,000 72,862 USA - 10,806 16,769 ________ _______ _______ 193,026 217,890 434,122 ________ _______ _______ Operating profit before goodwill amortisation UK 12,515 13,166 29,519 Continental Europe 1,034 1,140 1,880 USA - 602 712 ________ _______ _______ 13,549 14,908 32,111 ________ _______ _______ 2. Earnings/(loss) per share The calculation of earnings per share is based on the average number of ordinary shares in issue during the first six months of the year of 84,075,819 (2001: 83,832,078). The weighted average number of ordinary shares used for the diluted earnings per share calculation is 85,081,851 (2001: 84,143,753). The calculation of profit for the financial period used for the adjusted earnings per share is shown below. 3. Adjusted earnings per share Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 £000 £000 £000 Operating profit after goodwill amortisation 13,178 14,519 31,328 Net interest payable (393) (1,820) (3,403) _______ _______ _______ Profit on ordinary activities before taxation 12,785 12,699 27,925 Taxation on profit on ordinary activities (4,210) (4,188) (9,188) _______ _______ _______ Profit for the financial period 8,575 8,511 18,737 _______ _______ _______ The rate of taxation for each of the three periods is 32%. 4. Reconciliation of group operating profit to net cash inflow from operating activities Six months Six months The year ended ended ended 30 June 30 June 31 December 2002 2001 2001 £000 £000 £000 Profit on ordinary activities before interest 13,178 5,010 12,083 Exceptional items - 9,560 19,245 Operating profit 13,178 14,570 31,328 _______ ______ ______ Depreciation of tangible fixed assets 1,530 2,471 4,589 Depreciation of intangible fixed assets - - 4 Goodwill amortisation 371 389 783 (Profit)/loss on sale of fixed tangible assets (5) (70) 8 Movement in stocks (5,345) (4,789) (2,675) Movement in debtors 2,952 (1,708) (6,005) Movement in creditors (3,742) (1,778) 8,098 _______ ______ ______ Net cash inflow from operating activities 8,939 9,085 36,130 _______ ______ ______ 5. Analysis of changes in net funds At Cash Other Translation At 1 January flows non-cash differences 30 June 2002 changes 2002 £000 £000 £000 £000 £000 Cash at bank and in hand 44,464 (17,656) - 85 26,893 Bank overdraft (1,695) 32 - (41) (1,704) _________ ________ _______ ________ _______ 42,769 (17,624) - 44 25,189 Debt due within one year (24,631) 16,170 - (581) (9,042) Debt due after one year (1,904) - - (124) (2,028) Finance leases and similar hire purchase (3,876) 646 (128) - (3,358) contracts _________ ________ _______ ________ _______ 12,358 (808) (128) (661) 10,761 _________ ________ _______ ________ _______ The interim financial statements have been prepared using accounting policies stated in the group's report and accounts for the year ended 31 December 2001 and are unaudited. The summary of results for the year ended 31 December 2001 does not constitute full financial statements within the meaning of the Companies Act 1985. The report and full financial statements for that period have been filed with the Registrar of Companies and contain an unqualified audit report within the meaning of the Companies Act 1985 and the auditors have not made any statement under section 237(2) or 237(3) of the Companies Act 1985. The interim financial statements for the six months ended 30 June 2002 will be posted to shareholders on 23 August 2002 and copies will be available from that date from the Company's registered office, PO BOX 1, Gorsey Lane, Coleshill, Birmingham, B46 1LW. This information is provided by RNS The company news service from the London Stock Exchange

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