Interim Results

Headlam Group PLC 18 August 2003 18 August 2003 Interim results for the six month period ended 30 June 2003 Headlam Group plc ('Headlam'), the UK's leading floorcoverings distributor, announces its interim results for the six months ended 30 June 2003. Financial highlights 2003 2002 Change Turnover from continuing operations £194.2m £176.6m +10.0% Operating profit from continuing operations before goodwill amortisation £14.4m £12.3m +17.1% Profit before taxation £13.9m £12.8m +8.6% Adjusted earnings per share 11.6p 10.6p +9.4% Dividend per share 3.60p 3.25p +10.8% Key points • Turnover from continuing operations up 10.0% and operating profit before goodwill amortisation increased by 17.1% • UK floorcovering businesses achieved on a like for like basis, 5.2% increase in turnover and 12% improvement in operating profit before goodwill amortisation • Interim dividend increased by 10.8% from 3.25p to 3.60p Tony Brewer, Chief Executive of Headlam, said: 'With the UK businesses performing particularly well and year to date results showing consistent monthly year on year increases, the group is well positioned to take advantage of the traditionally busy autumn trading period.' Enquiries: Headlam Group plc Tony Brewer, Chief Executive Tel: 01675 433000 Stephen Wilson, Finance Director Chairman's Statement When I reported in March of this year, I indicated that the group's original businesses were continuing strongly and that the businesses acquired during 2002 were performing above expectation. This progress has been maintained through the second quarter of 2003 resulting in group turnover, for the first six months, increasing by 10.0% to £194.2 million from £176.6 million achieved during the first six months of 2002. Group operating profits, before goodwill amortisation, increased by 17.1% to £14.4 million compared with £12.3 million achieved during the corresponding period in 2002. Our UK businesses in particular registered a strong improvement with operating profits, excluding the contribution from businesses acquired during 2002, increasing by 12% from £11.7 million to £13.1 million. Earnings and dividend Adjusted earnings per share increased by 9.4% from 10.6p to 11.6p and the board have declared an increase in the interim dividend of 10.8% from 3.25p per share to 3.60p. The dividend will be paid on 5 January 2004 to shareholders on the register at 12 December 2003. Operations Our UK floorcovering distribution businesses have again performed strongly and excluding the businesses acquired during 2002, produced like for like sales growth of 5.2% against the corresponding period last year. This level of increase has been achieved in both the commercial and residential sectors. We have developed an extensive market presence with now 42 individual businesses, geographically located throughout the UK, that service and support our customers on a daily basis. Our businesses are focussed on a comprehensive offering of the latest floorcovering products, ensuring that our customers are at the forefront of all new product initiatives. This combination of market presence, high levels of service and product diversity coupled with competitive supply has resulted in a 10.7% year on year sales increase. The new purpose built distribution centre in Leeds, developed to relocate our largest individual business, Mercado, will be fully operational during August. This new facility will allow Mercado to improve operational efficiency and provides additional capacity for further development of the business. In addition, the new Belfast distribution centre was completed in June and we currently have warehouse extensions under construction for both our Nottingham and Glasgow businesses. It is our intention over the coming years, to continue the policy of re-housing existing businesses into new purpose-built freehold distribution centres. This will enable businesses to improve operational efficiency and give increased capacity to further develop their market presence. In Continental Europe, our business in France has seen a small improvement in market conditions with Switzerland producing a solid performance and Holland maintaining a satisfactory result. Set against a trading environment that continues to be tough, the performance of these businesses remains encouraging. Cash flow Net cash inflow from operating activities amounted to £7.3 million. This was achieved after investing £8.6 million in working capital. This investment is a normal seasonal occurrence which we would expect to reverse during the last six months of the year. As mentioned previously, the group is involved in a number of capital projects this being the principal reason for £9.2 million capital expenditure cash outflow during the first half of the year. Whilst we expect to incur a similar level of gross expenditure during the second half of the year, our net cash outflow will be substantially reduced because of the £4.75m cash inflow arising from the sale of the existing Mercado property. The Group ended the first six months with a net cash position of £21.6 million, an increase of £10.8 million on the closing position of £10.8 million for the comparative period. Acquisitions Whilst we have not introduced any new businesses to the group during the first six months, we have continued and will continue to explore potential acquisition opportunities to add to our existing portfolio of businesses. Our intention would be to expand our presence in the geographical territories where we already have established businesses but, we would also respond to opportunities outside these areas if we believed that such a step would be in the long term interest of the group. We will proceed with care and our activities will remain focused on floorcovering distribution. Outlook With the UK businesses performing particularly well and year to date results showing consistent monthly year on year increases, the group is well positioned to take advantage of the traditionally busy autumn trading period. We therefore remain confident of achieving our objectives for the year. TG Larman, Chairman 18 August 2003 Headlam Group plc Consolidated profit and loss account (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2003 2002 2002 Note £'000 £'000 £'000 Turnover 1 Continuing operations 194,228 176,602 374,404 Discontinued operations - 16,424 21,319 194,228 193,026 395,723 Cost of sales (136,624) (137,322) (279,902) Gross profit 57,604 55,704 115,821 Net operating expenses (43,576) (42,526) (86,284) Operating profit Continuing operations 14,028 11,977 27,957 Discontinued operations - 1,201 1,580 Operating profit before goodwill amortisation 1 14,438 13,549 30,362 Goodwill amortisation (410) (371) (825) 14,028 13,178 29,537 Profit on disposal of operations - - 861 Profit on ordinary activities before interest 14,028 13,178 30,398 Net interest payable and other similar items (94) (393) (521) Profit on ordinary activities before taxation 13,934 12,785 29,877 Taxation on profit on ordinary activities (4,590) (4,210) (9,335) Profit for the financial period 9,344 8,575 20,542 Dividends paid and proposed on equity shares (3,026) (2,730) (10,550) Retained profit for the financial period 6,318 5,845 9,992 ====== ===== ===== Earnings per share Basic 2 11.1p 10.2p 24.4p ====== ===== ===== Diluted 2 11.0p 10.1p 24.1p ====== ===== ===== Adjusted 2 11.6p 10.6p 24.4p ====== ===== ===== Headlam Group plc Consolidated balance sheet (unaudited) At At At 30 June 30 June 31 December 2003 2002 2002 £'000 £'000 £'000 Fixed assets Intangible assets 13,357 13,882 13,767 Tangible assets 52,465 39,193 44,607 65,822 53,075 58,374 Current assets Stocks 72,875 77,626 66,951 Debtors: amounts falling due within one year 75,621 77,944 72,696 Debtors: amounts falling due after more than one year 1,500 1,500 1,500 Total debtors 77,121 79,444 74,196 Cash at bank and in hand 27,123 26,893 35,522 177,119 183,963 176,669 Creditors: amounts falling due within one year (136,784) (137,860) (135,287) Net current assets 40,335 46,103 41,382 Total assets less current liabilities 106,157 99,178 99,756 Creditors: amounts falling due after more than one year (1,610) (4,183) (1,670) Provisions for liabilities and charges (779) (513) (676) Net assets 103,768 94,482 97,410 ====== ===== ====== Capital and reserves Called up share capital 4,209 4,206 4,209 Share premium account 48,946 48,861 48,899 Revaluation reserve 4,013 4,066 4,042 Profit and loss account 46,600 37,349 40,260 Equity shareholders' funds 103,768 94,482 97,410 ====== ===== ====== Headlam Group plc Consolidated cash flow statement (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2003 2002 2002 Note £'000 £'000 £'000 Net cash inflow from operating activities 4 7,258 8,939 38,825 Servicing of finance (94) (360) (578) Taxation (3,499) (2,422) (7,476) Capital expenditure (9,200) (2,179) (10,592) Acquisitions and disposals - (2,574) 7,075 Equity dividends paid (2,734) (2,473) (9,555) Cash (outflow)/ inflow before financing (8,269) (1,069) 17,699 Financing Issue of equity share capital 47 266 307 Redemption of non-equity share capital - (4) (4) Reduction in debt (641) (16,817) (25,994) Cash outflow from financing (594) (16,555) (25,691) Decrease in cash in period (8,863) (17,624) (7,992) ====== ====== ====== Headlam Group plc Reconciliation of net cash flow to movements in net cash (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2003 2002 2002 £'000 £'000 £'000 Decrease in cash in period (8,863) (17,624) (7,992) Cash outflow from reduction in debt 641 16,816 26,008 Change in debt resulting from cash flows (8,222) (808) 18,016 New finance leases and similar hire purchase contracts - (128) (129) Translation difference (39) (661) (370) Movement in net cash in the period (8,261) 1,597 17,517 Net cash at beginning of period 29,875 12,358 12,358 Net cash at end of period 21,614 10,761 29,875 ====== ====== ====== Consolidated statement of total recognised gains and losses (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2003 2002 2002 £'000 £'000 £'000 Profit for the financial period 9,344 8,575 20,542 Currency translation differences on foreign currency net investments (7) 110 (1,150) Total recognised gains and losses for the financial period 9,337 8,685 19,392 ====== ===== ====== Headlam Group plc Reconciliation of movements in consolidated shareholders' funds (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2003 2002 2002 £'000 £'000 £'000 Profit for the financial period 9,344 8,575 20,542 Dividends on equity shares (3,026) (2,730) (10,550) Retained profit for the financial period 6,318 5,845 9,992 Equity share capital issued 47 266 307 Non-equity share capital redeemed - (4) (4) Currency translation differences on foreign currency net investments (7) 110 (1,150) Net addition to shareholders' funds 6,358 6,217 9,145 Shareholders' funds at beginning of period 97,410 88,265 88,265 Shareholders' funds at end of period 103,768 94,482 97,410 ======= ======= ======== Headlam Group plc Notes to the Interim Financial Statements (unaudited) 1. Segmental analysis By origin Six months Six months The year ended ended ended 30 June 30 June 31 December 2003 2002 2002 £'000 £'000 £'000 Turnover UK 161,531 160,563 330,933 Continental Europe 32,697 32,463 64,790 194,228 193,026 395,723 ====== ===== ====== Operating profit before goodwill amortisation UK 13,759 12,515 28,895 Continental Europe 679 1,034 1,467 14,438 13,549 30,362 ====== ====== ====== 2. Earnings 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 84,175,606 (2002: 84,075,819). The weighted average number of ordinary shares used for the diluted earnings per share calculation is 85,238,259 (2002: 85,081,851). The calculation of profit for the financial period used for the adjusted earnings per share is shown below. Headlam Group plc Notes to the Interim Financial Statements (unaudited) 3. Adjusted earnings per share Six months Six months The year ended ended ended 30 June 30 June 31 December 2003 2002 2002 £'000 £'000 £'000 Operating profit before goodwill amortisation 14,438 13,549 30,362 Net interest payable (94) (393) (521) Profit on ordinary activities before taxation 14,344 13,156 29,841 Taxation on profit on ordinary activities (4,590) (4,210) (9,335) Adjusted profit for the financial period 9,754 8,946 20,506 ====== ====== ====== The rate of taxation for each of the three periods is 32%. Adjusted earnings are shown above and exclude the effects of goodwill amortisation and exceptional items. The definition of adjusted earnings has been changed to now exclude goodwill amortisation. Therefore, the adjusted earnings per share for the six months ended 30 June 2002 and the year ended 31 December 2002 are now respectively 10.6p compared with 10.2p and 24.4p compared with 23.4p. 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 2003 2002 2002 £'000 £'000 £'000 Profit on ordinary activities before interest 14,028 13,178 30,398 Exceptional items - - (861) Operating profit 14,028 13,178 29,537 Depreciation of tangible fixed assets 1,380 1,530 2,976 Goodwill amortisation 410 371 825 Profit on sale of fixed tangible assets (5) (5) (54) Movement in stocks (5,999) (5,345) (2,910) Movement in debtors (3,003) 2,952 733 Movement in creditors 447 (3,742) 7,718 Net cash inflow from operating activities 7,258 8,939 38,825 ====== ====== ====== Headlam Group plc Notes to the Interim Financial Statements (unaudited) 5. Analysis of changes in net debt At At 1 January Cash Translation 30 June 2003 Flows differences 2003 £'000 £'000 £'000 £'000 Cash at bank and in hand 35,522 (8,398) (1) 27,123 Bank overdraft (635) (465) (47) (1,147) 34,887 (8,863) (48) 25,976 Debt due within one year (2,403) 22 9 (2,372) Finance leases and similar hire purchase contracts (2,609) 619 - (1,990) 29,875 (8,222) (39) 21,614 ====== ====== ====== ====== The interim financial statements have been prepared using accounting policies stated in the group's report and accounts for the year ended 31 December 2002 and are unaudited. The summary of results for the year ended 31 December 2002 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 2003 will be posted to shareholders on 27 August 2003 and copies will be available from that date from the Company's registered office. This information is provided by RNS The company news service from the London Stock Exchange

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