Interim Results

Headlam Group PLC 09 August 2004 9 August 2004 Interim results for the six month period ended 30 June 2004 Headlam Group plc ('Headlam'), the UK's leading floorcoverings distributor, announces its interim results for the six months ended 30 June 2004. Financial highlights 2004 2003 Change £'000 £'000 Turnover 217,811 194,228 +12.1% Operating profit before goodwill amortisation 17,177 14,438 +19.0% Profit before taxation 16,678 13,934 +19.7% Adjusted earnings per share 13.9p 11.6p +19.8% Dividend per share 4.0p 3.6p +11.1% Key points •UK floorcovering businesses achieve an 11.4% like for like increase in turnover •Group operating profit before goodwill amortisation increased by 19.0% with UK floorcovering achieving a 19.4% improvement on a like for like basis •Cash flow from operating activities increased by 30.1% to £9.5 million •Investment in facilities during the period amounted to £4.7 million •Interim dividend increased by 11.1% from 3.6p to 4.0p Tony Brewer, Chief Executive of Headlam, said: 'Our businesses in the UK and Continental Europe have all contributed to an encouraging first six months. With the benefit of this, combined with a constant focus on our suppliers, products, customers and service, we look forward to the traditional busy autumn trading period and remain confident of achieving the group's operating objectives for the year.' Enquiries: Headlam Group plc Tony Brewer, Chief Executive Tel: 01675 433000 Stephen Wilson, Finance Director CHAIRMAN'S STATEMENT The first six months of 2004 have seen a particularly positive trend, with like for like sales increasing by 10.3%. This has been achieved by an increase in sales of all product categories across our geographical locations. Group turnover for the first six months increased by 12.1% from £194.2 million to £217.8 million. Operating profits, before goodwill amortisation, increased by 19.0% from £14.4 million to £17.2 million. Earnings and dividend Adjusted earnings per share increased by 19.8% from 11.6p to 13.9p and the board has declared an interim dividend of 4.0p per share, an increase of 11.1% on last years interim dividend of 3.6p per share. The dividend will be paid on 3 January 2005 to shareholders on the register at 10 December 2004. Operations In the UK, our 45 businesses operating from 21 distribution centres all contributed to the increased sales performance. We continue with our policy of operating these businesses autonomously, therefore maximising market presence and our relationship with customers, principally independent floorcovering retailers and contractors, ensuring that they have a continual flow of new products and point of sale material. Close association with our suppliers has further enhanced the position of each product category. Carpet improved its market position with like for like sales increasing by 11.8%. Residential vinyl increased by 10.8% and laminate flooring by 17.6%. In the commercial market where our focus is on regular small order business, rather than large contracts, our sales increased by 9.2%. We currently have under construction an extension to our facility in Thatcham, which will give the Florco business 40% more capacity. Construction has commenced on a new 158,000 square feet distribution centre in Tamworth which will be completed at the end of the first quarter 2005. Planning permission has been granted for an extension to our Stockport facility and initial agreement has been made to re-house Wilkies, our regional distribution business in Leeds. It is pleasing that our Continental European businesses in France, Switzerland and the Netherlands have continued to show an improving performance. Whilst they represent a relatively small proportion of our earnings, it is encouraging that they are out performing local market conditions. Acquisitions The acquisition of National Carpets on 30 April 2004 broadened the group's customer base, to encompass the DIY sector. National Carpets will continue to be located in its Rochdale distribution centre and has opportunities to further develop its service and product offering. We continually evaluate potential acquisitions and these will be made where they enhance the market position and earnings of the group. Cash flow Net cash flow from operating activities increased from £7.3 million to £9.5 million after an investment of £9.4 million (2003: £8.6 million) in working capital. Investment in working capital usually occurs during the first six months of the financial year and then subsequently reverses during the second six months. The increased working capital investment was a result of higher levels of activity. As mentioned above, the group has maintained its programme of investment in facilities. These activities have given rise to a cash outflow of £4.7 million during the first six months. In the event that planning is received for the construction of the new Wilkies facility, capital expenditure during the second six months could reach £12.9 million bringing total expenditure for 2004 to £17.6 million. The acquisition of National Carpets has led to an initial cash outflow of £3.5 million. There is a further payment of £0.6 million to be made in connection with this acquisition in two equal amounts of £0.3 million during April 2005 and April 2006. The Group completed the first six months with net cash of £22.6 million (2003: £21.6 million). Outlook Our businesses in the UK and Continental Europe have all contributed to an encouraging first six months. With the benefit of this, combined with a constant focus on our suppliers, products, customers and service, we look forward to the traditional busy autumn trading period and remain confident of achieving the group's operating objectives for the year. TG Larman, Chairman 9 August 2004 Headlam Group plc Consolidated profit and loss account (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Note £'000 £'000 £'000 Turnover 1 Continuing operations 215,106 194,228 412,295 Acquisitions 2,705 - - -------- -------- -------- 217,811 194,228 412,295 Cost of sales (153,074) (136,624) (289,315) -------- -------- -------- Gross profit 64,737 57,604 122,980 Net operating expenses (48,020) (43,576) (90,301) -------- -------- -------- Operating profit Continuing operations 16,717 14,028 32,679 Acquisitions - - - -------- -------- -------- Operating profit before goodwill amortisation 1 17,177 14,438 33,514 Goodwill amortisation (460) (410) (835) -------- -------- -------- Profit on ordinary activities before interest 16,717 14,028 32,679 Net interest payable and other similar items (39) (94) (86) -------- -------- -------- Profit on ordinary activities before taxation 16,678 13,934 32,593 Taxation on profit on ordinary activities (5,312) (4,590) (10,464) -------- -------- -------- Profit for the financial period 11,366 9,344 22,129 Dividends paid and proposed on equity shares (3,421) (3,026) (11,657) -------- -------- -------- Retained profit for the financial period 7,945 6,318 10,472 ======== ======== ======== Earnings per share Basic 2 13.3p 11.1p 26.3p ======== ======== ======== Diluted 2 13.2p 11.0p 25.9p ======== ======== ======== Adjusted 3 13.9p 11.6p 27.3p ======== ======== ======== Headlam Group plc Consolidated balance sheet (unaudited) At At At 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Fixed assets Intangible assets 14,445 13,357 13,210 Tangible assets 67,368 52,465 64,236 -------- -------- -------- 81,813 65,822 77,446 -------- -------- -------- Current assets Stocks 80,835 72,875 73,889 Debtors: amounts falling due within one year 74,994 75,621 72,419 Debtors: amounts falling due after more than one year 1,500 1,500 1,500 Total debtors 76,494 77,121 73,919 Cash at bank and in hand 26,309 27,123 32,336 -------- -------- -------- 183,638 177,119 180,144 Creditors: amounts falling due within one year (145,556) (136,784) (147,378) -------- -------- -------- Net current assets 38,082 40,335 32,766 -------- -------- -------- Total assets less current liabilities 119,895 106,157 110,212 Creditors: amounts falling due after more than one year (1,273) (1,610) (1,175) Provisions for liabilities and charges (749) (779) (777) -------- -------- -------- Net assets 117,873 103,768 108,260 ======== ======== ======== Capital and reserves Called up share capital 4,281 4,209 4,213 Share premium account 51,118 48,946 49,061 Revaluation reserve 2,814 4,013 2,844 Profit and loss account 59,660 46,600 52,142 -------- -------- -------- Equity shareholders' funds 117,873 103,768 108,260 ======== ======== ======== Headlam Group plc Consolidated cash flow statement (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2004 2003 2003 Note £'000 £'000 £'000 Net cash inflow from operating activities 4 9,488 7,258 36,046 Returns on investments and servicing of finance (39) (94) (105) Taxation (6,432) (3,499) (8,750) Capital expenditure (4,675) (9,200) (16,952) Acquisitions and disposals (3,452) - (1,189) Equity dividends paid (3,030) (2,734) (10,550) -------- -------- -------- Cash outflow before financing (8,140) (8,269) (1,500) -------- -------- -------- Financing Issue of equity share capital 2,125 47 166 Repayment of amounts borrowed - (23) (591) Capital element of finance leases and similar hire purchase contract payments (243) (618) (935) -------- -------- -------- Cash inflow/(outflow) from financing 1,882 (594) (1,360) Decrease in cash in period (6,258) (8,863) (2,860) ======== ======== ======== 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 2004 2003 2003 £'000 £'000 £'000 Decrease in cash in period (6,258) (8,863) (2,860) Cash outflow from reduction in debt 243 641 1,526 -------- -------- -------- Change in debt resulting from cash flows (6,015) (8,222) (1,334) Translation difference (26) (39) 75 -------- -------- -------- Movement in net cash in the period (6,041) (8,261) (1,259) Net cash at beginning of period 28,616 29,875 29,875 -------- -------- -------- Net cash at end of period 22,575 21,614 28,616 ======== ======== ======== Consolidated statement of total recognised gains and losses (unaudited) Six months Six months The year ended ended ended 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Profit for the financial period 11,366 9,344 22,129 Currency translation differences on foreign currency net investments (457) (7) 212 -------- -------- -------- Total recognised gains and losses for the financial period 10,909 9,337 22,341 ======== ======== ======== 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 2004 2003 2003 £'000 £'000 £'000 Profit for the financial period 11,366 9,344 22,129 Dividends on equity shares (3,421) (3,026) (11,657) -------- -------- -------- Retained profit for the financial period 7,945 6,318 10,472 Equity share capital issued 2,125 47 166 Currency translation differences on foreign currency net investments (457) (7) 212 -------- -------- -------- Net addition to shareholders' funds 9,613 6,358 10,850 Shareholders' funds at beginning of period 108,260 97,410 97,410 -------- -------- -------- Shareholders' funds at end of period 117,873 103,768 108,260 ======== ======== ======== Headlam Group plc Notes to the Interim Financial Statements (unaudited) 1. Segmental analysis Six months Six months The year ended ended ended 30 June 30 June 31 December 2004 2003 2003 £'000 £'000 £'000 Turnover By origin UK 184,695 161,531 345,300 Continental Europe 33,116 32,697 66,995 -------- -------- -------- 217,811 194,228 412,295 ======== ======== ======== Operating profit before interest and taxation By activity Floorcoverings 17,610 14,596 34,464 Central operations (433) (158) (950) -------- -------- -------- 17,177 14,438 33,514 Less goodwill amortisation (460) (410) (835) -------- -------- -------- 16,717 14,028 32,679 ======== ======== ======== By origin UK 16,399 13,759 31,974 Continental Europe 778 679 1,540 -------- -------- -------- 17,177 14,438 33,514 Less goodwill amortisation (460) (410) (835) -------- -------- -------- 16,717 14,028 32,679 ======== ======== ======== 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 85,313,350 (2003: 84,175,606). The weighted average number of ordinary shares used for the diluted earnings per share calculation is 86,379,550 (2003: 85,238,259). The calculation of profit for the financial period used for the adjusted earnings per share is shown in note 3 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 2004 2003 2003 £'000 £'000 £'000 Operating profit before goodwill amortisation 17,177 14,438 33,514 Net interest payable and other similar items (39) (94) (86) -------- -------- -------- Profit on ordinary activities before taxation 17,138 14,344 33,428 Taxation on profit on ordinary activities (5,312) (4,590) (10,464) -------- -------- -------- Adjusted profit for the financial period 11,826 9,754 22,964 ======== ======== ======== The effective rate of taxation for the period ended 30 June 2004 was 31%. For the period ended 30 June 2003 and 31 December 2003 the rate was 32%. Adjusted earnings are shown above and exclude the effects of goodwill amortisation. 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 2004 2003 2003 £'000 £'000 £'000 Profit on ordinary activities before interest 16,717 14,028 32,679 Depreciation of tangible fixed assets 1,689 1,380 2,947 Goodwill amortisation 460 410 835 Profit on sale of fixed tangible assets (13) (5) (26) Movement in stocks (6,160) (5,999) (5,619) Movement in debtors 715 (3,003) (3,667) Movement in creditors (3,920) 447 8,897 -------- -------- -------- Net cash inflow from operating activities 9,488 7,258 36,046 ======== ======== ======== Headlam Group plc Notes to the Interim Financial Statements (unaudited) 5. Analysis of changes in net funds At At 1 January Cash Translation 30 June 2004 flows differences 2004 £'000 £'000 £'000 £'000 Cash at bank and in hand 32,336 (5,954) (73) 26,309 Bank overdraft (217) (304) 1 (520) -------- -------- -------- -------- 32,119 (6,258) (72) 25,789 Debt due within one year (1,829) - 46 (1,783) Finance leases and similar hire purchase contracts (1,674) 243 - (1,431) -------- -------- -------- -------- 28,616 (6,015) (26) 22,575 ======== ======== ======== ======== The interim financial statements have been prepared using accounting policies stated in the group's report and accounts for the year ended 31 December 2003 and are unaudited. The summary of results for the year ended 31 December 2003 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 2004 will be posted to shareholders on 18 August 2004 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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