Interim Results
Headlam Group PLC
16 August 2005
16 August 2005
Interim financial results for the six month period ended 30 June 2005
Headlam Group plc ('Headlam'), Europe's leading floorcovering distributor,
announces its interim results for the six months ended 30 June 2005.
Financial highlights
2005 2004 Change
£'000 £'000
Revenue 232,336 217,811 +6.7%
Profit from operations 18,501 16,974 +9.0%
Profit before tax 18,205 16,744 +8.7%
Earnings per share 14.7p 13.5p +8.9%
Dividend per share 4.4p 4.0p +10.0%
Key points
Revenues from UK operations increase by 2.8% on a like for like basis
Profit before tax increased by 8.7%
Cash generated from operations up 11.7 % to £10.6 million
Net capital investment during the period amounted to £7.9 million
Interim dividend increased by 10.0% from 4.0p to 4.4p
Tony Brewer, Chief Executive of Headlam, said:
'We are particularly encouraged by the positive sales performance of the group
in the first six months of 2005 which has continued through July and into
August. With the traditional busy autumn period before us, the group remains
confident of achieving its operating objectives for the year.'
Enquiries:
Headlam Group plc
Tony Brewer, Chief Executive Tel: 01675 433000
Stephen Wilson, Finance Director
CHAIRMAN'S STATEMENT
During the first six months of 2005, revenues from UK operations have shown an
increase of 2.8% on a like-for-like basis. We believe this result has
out-performed market conditions and therefore the group has continued to
increase its market share.
Group revenues for the first six months increased by 6.7% from £217.8 million to
£232.3 million, an improvement principally attributable to the organic growth
referred to above combined with a full six months contribution from National
Carpets. Profit from operations increased by 9.0% from £17.0 million to £18.5
million.
Earnings and dividend
Basic earnings per share increased by 8.9% from 13.5p to 14.7p. The board have
declared an interim dividend of 4.4p per share, an increase of 10.0% on last
year's interim dividend of 4.0p per share. The dividend will be paid on
3 January 2006 to shareholders on the register at 2 December 2005.
Operations
In the UK this positive sales performance was achieved through our 48 autonomous
businesses and their 292 external sales personnel who visit their customers to
maximise market opportunities. These businesses are defined into four sectors;
regional multi-product, national multi-product, residential specialist and
commercial specialist. Each of these sectors has shown an increased sales
performance during the period.
The businesses constantly work with our suppliers to develop and subsequently
launch new products, into both the residential and commercial sectors. This has
resulted in 2,377 new product lines being launched in the first six months of
2005, with the sales and marketing of these products supported by over 555,000
new point of sale items being positioned within our customers' premises.
This positive sales trend is also reflected in the performance of our customers
who are principally independent floorcovering retailers and flooring
contractors. A further illustration of the widespread financial strength amongst
our customers is their commitment to paying their bills on time. Our average
credit allowed on trade receivables has remained constant at 40 days.
During the first quarter of 2005, we finalised the construction of our new
purpose built freehold distribution centre in Tamworth and this is now fully
operational. As intended, we have also moved four businesses previously
operating from Coleshill into the new Tamworth facility, therefore releasing
capacity for further growth of the eight businesses remaining in the Coleshill
facility. Planning permission has now been granted for a new distribution centre
to re-house Wilkies, our regional distribution business in Leeds and this will
be operational in July 2006.
Our Continental European businesses in France, Holland and Switzerland continue
to improve their performance and have made an increased contribution to group
profitability.
Acquisitions
During the last six months we have acquired the intellectual property rights of
Clarendon Carpets and the business of Gaskell Wool Rich. Both of these
acquisitions have complemented our existing residential speciality businesses
focused on higher quality products. We continue to evaluate potential
acquisitions in each of our core sectors and these would be made to further
enhance the market position and earnings of the group.
Cash flow
Cash generated from operations during the first six months was £10.6 million
compared with £9.5 million for the equivalent period last year. Net working
capital investment increased from £9.4 million to £10.0 million.
Net investment in property, plant and equipment totalled £7.9 million, the
majority of which related to completing the Tamworth distribution centre.
During the six month period cash and cash equivalents declined by £6.7 million
to £31.0 million and net funds at 30 June 2005 amounted to £28.9 million
compared with £22.6 million at 30 June 2004.
Outlook
We are particularly encouraged by the positive sales performance of the group in
the first six months of 2005 which has continued through July and into August.
With the traditional busy autumn period before us, the group remains confident
of achieving its operating objectives for the year.
TG Larman, Chairman
16 August 2005
Consolidated Income Statement
unaudited
Six months Six months The year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
Note £'000 £'000 £'000
Revenue 3 232,336 217,811 464,789
Cost of sales (161,475) (153,074) (323,924)
-------- -------- --------
Gross profit 70,861 64,737 140,865
Distribution costs (38,087) (34,705) (70,592)
Administration expenses (14,273) (13,058) (31,349)
-------- -------- --------
Profit from operations 18,501 16,974 38,924
Net financing costs (296) (230) (440)
-------- -------- --------
Profit before tax 18,205 16,744 38,484
Income tax expense (5,564) (5,193) (11,738)
-------- -------- --------
Profit for the period 3 12,641 11,551 26,746
======== ======== ========
Dividend per share 4 4.40p 4.00p 16.25p
Earnings per share
Basic 14.7p 13.5p 31.3p
===== ===== =====
Diluted 5 14.5p 13.4p 31.0p
===== ===== =====
Consolidated Statement of Recognised Income and Expense
Unaudited
Six months Six months The year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Actuarial gains/(losses) on defined
benefit pension schemes 328 180 (2,667)
Exchange differences arising on
translation of overseas operations (815) (457) (256)
------- ------- -------
Net losses not recognised in the income
statement (487) (277) (2,923)
Profit for the period 12,641 11,551 26,746
------- ------- -------
Total recognised gains and losses 12,154 11,274 23,823
======= ======= =======
Consolidated Balance Sheet
unaudited
At At At
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
ASSETS
Non-current assets
Goodwill 13,210 13,210 13,210
Other intangible assets 418 1,271 836
Property, plant and equipment 77,631 64,786 71,753
Deferred taxation 8,245 7,145 8,167
-------- -------- --------
99,504 86,412 93,966
Current assets
Inventories 92,505 80,835 79,692
Trade and other receivables 68,900 66,385 66,274
Other current assets 10,981 9,527 19,276
Cash and cash equivalents 30,969 26,309 37,747
-------- -------- --------
203,355 183,056 202,989
Non-current assets classified as held for
sale 203 151 203
-------- -------- --------
203,558 183,207 203,192
-------- -------- --------
Total assets 303,062 269,619 297,158
-------- -------- --------
LIABILITIES
Current liabilities
Trade and other payables (153,004) (134,132) (145,509)
Short-term borrowings (430) (458) (280)
Current proportion of long-term borrowings (1,089) (2,303) (1,124)
Current tax payable (11,640) (8,964) (11,053)
-------- -------- --------
(166,163) (145,857) (157,966)
Non-current liabilities
Long-term borrowings (537) (973) (738)
Deferred taxation (1,214) (2,078) (1,212)
Retirement benefit obligation (18,321) (14,513) (18,365)
-------- -------- --------
(20,072) (17,564) (20,315)
-------- -------- --------
Total liabilities (186,235) (163,421) (178,281)
-------- -------- --------
Net assets 116,827 106,198 118,877
======== ======== ========
EQUITY
Equity attributable to the holders of the
parent
Issued share capital 4,310 4,281 4,306
Share premium account 51,875 51,118 51,731
Retained earnings 60,642 50,799 62,840
-------- -------- --------
Total equity 116,827 106,198 118,877
======== ======== ========
Consolidated Cash Flow Statement
Unaudited
Six months Six months The year
ended ended ended
30 June 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Operating activities
Net profit before tax 18,205 16,744 38,484
Adjustments for:
Depreciation 2,265 2,083 4,313
Equity based transactions 29 29 57
Investment income (8) (13) 11
Interest expense 296 230 440
-------- -------- --------
Operating profit before working capital
changes 20,787 19,073 43,305
Increase in inventories (12,839) (6,160) (3,753)
Decrease/(increase) in trade and other
receivables 4,969 515 (8,118)
(Decrease)/increase in trade and other
payables (2,316) (3,940) 14,588
-------- -------- --------
Cash generated from operations 10,601 9,488 46,022
Interest paid (659) (545) (1,093)
Income taxes paid (5,661) (6,432) (12,082)
-------- -------- --------
Net cash from operating activities 4,281 2,511 32,847
======== ======== ========
Investing activities
Acquisition of subsidiary net of cash
acquired (435) (3,452) (3,779)
Purchase of property, plant and
equipment (8,034) (4,737) (14,374)
Proceeds from sale of property, plant
and equipment 108 62 282
Interest received 643 506 1,055
-------- -------- --------
Net cash used in investing activities (7,718) (7,621) (16,816)
======== ======== ========
Financing activities
Proceeds from issuance of share capital 149 2,125 2,763
Repayment of borrowings 174 304 (1,071)
Payment of finance lease liabilities (208) (243) (498)
Dividends paid (3,421) (3,030) (11,795)
-------- -------- --------
Net cash used in financing activities (3,306) (844) (10,601)
======== ======== ========
Net (decrease)/increase in cash and cash
equivalents (6,743) (5,954) 5,430
Cash and cash equivalents at beginning
of period 37,747 32,336 32,336
Effect of exchange rate fluctuations on
cash and cash equivalents held (35) (73) (19)
-------- -------- --------
Cash and cash equivalents at end of
period 30,969 26,309 37,747
======== ======== ========
Consolidated Statement of Changes in Shareholders Equity
Unaudited
Share Share Translation Retained Total
capital premium reserve earnings equity
£'000 £'000 £'000 £'000 £'000
Balance at
31 December
2003 4,213 49,061 - 51,993 105,267
-------- -------- -------- -------- --------
Total recognised
income and
expense 4,213 49,061 (457) 11,731 11,274
Dividends - - - (12,048) (12,048)
Equity based
transactions - - - 29 29
Deferred taxation
on share options - - - (449) (449)
Share options
exercised by
employees 68 2,057 - - 2,125
-------- -------- -------- -------- --------
Balance at
30 June 2004 4,281 51,118 (457) 51,256 106,198
Total recognised
income and
expense - - 201 12,348 12,549
Dividends - - - (138) (138)
Equity based
transactions - - - 28 28
Deferred taxation
on share options - - - (398) (398)
Share options
exercised by
employees 25 613 - - 638
-------- -------- -------- -------- --------
Balance at
31 December
2004 4,306 51,731 (256) 63,096 118,877
Total recognised
income and
expense - - (815) 12,969 12,154
Dividends - - - (14,325) (14,325)
Equity based
transactions - - - 29 29
Deferred taxation
on share options - - - (56) (56)
Share options
exercised by
employees 4 144 - - 148
-------- -------- -------- -------- --------
Balance at
30 June 2005 4,310 51,875 (1,071) 61,713 116,827
======== ======== ======== ======== ========
Notes to the Interim Financial Results
unaudited
1 General information
The interim financial results have been prepared using updated accounting
policies stated in the Financial Information on the Transition to International
Financial Reporting Standards which was published on 15 August 2005 on the
group's website www.headlam.com. The accounting policies of the group have
changed to enable the group to comply with International Financial Reporting
Standards (IFRS). The directors of the group have elected to not comply with
International Accounting Standard (IAS) 34 Interim financial reporting and IAS
39 Financial instruments: recognition and measurement.
The information for the year ended 31 December 2004 does not constitute full
financial statements as defined in section 240 of the Companies Act 1985. The
report and full financial statements for that period were prepared under UK GAAP
and have been filed with the Registrar of Companies, they 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.
2 Accounting policies
The interim financial results have been prepared in accordance with IFRS. The
financial periods ending 30 June 2004 and 31 December 2004 have been restated
under IFRS.
3 Business segments
For management purposes, the group is currently organised into two operating
divisions UK and Continental Europe. These divisions are the basis on which the
group reports its primary segment information.
Segment information about these businesses is presented below.
UK Continental Europe Total
31 31 31
30 June 30 June December 30 June 30 June December 30 June 30 June December
2005 2004 2004 2005 2004 2004 2005 2004 2004
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue
External
sales 197,460 184,695 395,696 34,876 33,116 69,093 232,336 217,811 464,789
====== ======= ======= ======= ======= ======= ======= ======= =======
Result
Segment
result 18,243 16,629 38,445 803 778 1,719 19,046 17,407 40,164
------- ------- ------- ------- ------- -------
Unallocated
corporate
expenses (545) (433) (1,240)
------- ------- -------
Profit from
operations 18,501 16,974 38,924
Net
financing
costs (296) (230) (440)
Taxation (5,564) (5,193) (11,738)
------- ------- -------
Profit for
the period 12,641 11,551 26,746
======= ======= =======
Notes to the Interim Financial Results (Continued)
unaudited
4 Dividends
Six months Six months The year ended
ended 30 June ended 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Amounts proposed and declared as
distributions to equity holders
in the period:
Final proposed dividend for the
year ended 31 December 2004 of
12.25p per share (final proposed
dividend for the year ended
31 December 2003 of 10.25p
per share) 10,536 8,627 10,536
======== ======== ========
Declared interim dividend for
the year ended 31 December
2005 of 4.40p (2004: 4.0p)
per share 3,789 3,421 3,421
======== ======== ========
The declared interim dividend was approved by Directors on 30 June 2005 and
therefore has been included as a liability as at 30 June 2005.
5 Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data.
Six months Six months The year ended
ended 30 June ended 30 June 31 December
2005 2004 2005
£'000 £'000 £'000
Earnings
Earnings for the purposes of
basic earnings per share
being net profit attributable
to equity holders of the
parent 12,641 11,551 26,746
======== ======== ========
Earnings for the purposes
of diluted earnings per share 12,641 11,551 26,746
======== ======== ========
Number of shares
Weighted average number of
ordinary shares for the
purposes of basic earnings
per share 86,178,980 85,313,350 85,352,589
Effect of dilutive potential
ordinary shares:
Share options 1,411,138 1,924,789 1,534,175
Number of shares that
would have been issued at
fair value (624,241) (858,589) (737,011)
---------- ---------- ----------
Weighted average number of
ordinary shares for the
purposes of diluted earnings
per share 86,965,877 86,379,550 86,149,753
========== ========== ==========
6 Share capital
During the six months ended 30 June 2005 the issued share capital increased by
95,362 to 86,206,799 shares. This was due to the exercise of 67,000 share
options from the Headlam approved executive scheme, 25,000 from the unapproved
executive scheme and 3,362 from the Savings related scheme.
Notes to the Interim Financial Results (Continued)
unaudited
7 Acquisitions
On 4 April 2005, the group acquired the retail division of Gaskell Flooring
Limited, trading as Gaskell Wool Rich and Tomkinson Carpets for a cash
consideration of £0.5 million. The transaction has been accounted for by the
purchase method of accounting.
8 Analysis of cash and cash equivalents
Six months Six months The year ended
ended 30 June ended 30 June 31 December
2005 2004 2004
£'000 £'000 £'000
Cash at bank and in hand 30,969 26,309 37,747
======= ======= =======
9 Analysis of changes in net funds
At 1 January Cash flows Translation At 30 June
2005 differences 2005
£'000 £'000 £'000 £'000
Cash and cash
equivalents 37,747 (6,743) (35) 30,969
Bank overdrafts (279) (174) 18 (435)
------- ------- ------- -------
37,468 (6,917) (17) 30,534
Debt due within one year (687) - 34 (653)
Finance leases and similar
hire purchase contracts (1,176) 208 - (968)
------- ------- ------- -------
35,605 (6,709) 17 28,913
======= ======= ======= =======
10 Related party transactions
Transactions between the company and its subsidiaries, which are related
parties, have been eliminated on consolidation and are not disclosed in this
note.
The interim financial results for the six months ended 30 June 2005 will be
posted to shareholders on 25 August 2005 and copies will be available from that
date from the Company's registered office.
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