Interim Results - Part 1

MFI Furniture Group PLC 26 July 2001 PART 1 MFI FURNITURE GROUP PLC Interim Results for the 24 weeks ended 16 June 2001 MFI Furniture Group Plc, the UK's largest manufacturer and retailer of kitchen and bedroom furniture, announces its interim results for the 24 weeks ended 16 June 2001. Financial Highlights * Turnover up 15.1% to £501.2m (H1 2000: £435.5m) - UK Retail up 9.5% to £369.0m - Howden Joinery up 52.3% to £88.5m * Pre-tax profit up 17.0% to £40.6m (H1 2000: £34.7m before exceptional items) * On track to achieve target cost savings of £15m for the full year * Pre-exceptional basic earnings per ordinary share up 14.3% to 4.8p (H1 2000: 4.2p) * Interim dividend increased by 33% to 1.2 pence per share (H1 2000: 0.9p) * Strong balance sheet with pre-exceptional operating cash flow of £95m (H1 2000: £71m) Strategic Priorities * Rollout of substantial new MFI format store programme. New format stores are outperforming the rest of the retail business. Capital expenditure of £65m planned over next three years * Pushing ahead with the new High Street format where we see potential for at least 50 stores * Investment in new product ranges and product areas like bathrooms (branded 'Splash!') and tiles * Re-invigoration programme planned for French retail business as well as store expansion * First low risk overseas venture launched in Taiwan * Continued expansion of Howdens trade business with over 50 depots to open this year and an eventual chain of over 300 depots planned (currently 199) * Re-alignment of manufacturing capability with consumer demand and £8m investment in new capacity John Hancock, Chief Executive, said: 'Today we are reporting on a strong first half. Having secured MFI's financial stability last year we are continuing to work on operational improvements. We are also starting to rollout a series of plans for organic growth which are low risk, build on the Group's existing strengths and skills, and have been extensively tested. We have new products, fresh store designs and new formats in place. 'I am confident that we can continue very successfully with the transformation of MFI. In summary, we are making good progress and considerably out-performing the UK furniture market.' - ends - Contacts: MFI Furniture Group Plc John Hancock, Chief Executive 020 8913 5319 Martin Clifford-King, Finance Director 020 8913 5350 Brunswick Group Limited Susan Gilchrist Charlotte Elston 020 7404 5959 William Cullum CHAIRMAN'S STATEMENT Results In the 24 weeks to 16 June 2001, we achieved continued growth in sales, margins and profitability following the recent structural improvements that we have made to the business, against a background where the UK furniture market grew by 1%-2% over the last year. Group sales at £501.2m were up 15.1% (like for like: up 7.5%) with profit before tax and exceptional items up 17.0% to £40.6m. Pre-exceptional operating profit grew 20.9% to £38.8m, and gross margin increased from 49.7% to 50.4%. Sales % increase % increase £m Total business Like for like UK Retail 369.0 9.5 5.5 Howdens 88.5 52.3 25.1 France 41.7 8.0 0.2 Other 2.0 n/a n/a _____ _____ _____ Total 501.2 15.1 7.5 ===== ===== ===== The Board is proposing to raise the interim dividend by 33% to 1.2p per share. Finance The gross margin has improved from 49.7% to 50.4%. This growth arises from raising our selling prices together with some cost of product reductions, offset in part by changes in sales mix which includes the growth of Howdens. We are on target to achieve an annualised £15m of cost reduction, of which £8m has been delivered in the first half. This has primarily been in the area of logistics and cost of product. These savings have been reinvested in revenue generating areas such as bringing new products into the business faster, more staff in Howdens' depots to support increased sales and staff incentives to drive add-on sales in areas like financial services and fittings. Stripping out the impact of new store opening costs totalling £15m, our selling and distribution costs have grown by 8.5% from last year's comparative of £159.3m; this is marginally above our like for like sales increase, reflecting increased levels of expenditure in customer focused activity such as bringing new product into the business faster. Net cash increased by £58.3m to £94.3m. The operating cash flow generated by the business remained strong at £95.4m. After dividends, investments, interest and tax, cash inflow was £79.6m of which £21.3m has been invested in the business in the form of capital expenditure. The tax charge for the first half is based on the estimated effective tax rate for the full year of 29% (2000 - 28%). The interim dividend of 1.2p per share (2000 - 0.9p) will be paid on 26 October 2001 to shareholders on the register at the close of business on 5 October 2001. Shares will be quoted ex-dividend from 3 October 2001. Operational Overview We have now completed the financial stabilisation of MFI, and have made very substantial progress in turning the core business around. Our strategy is to drive sales growth in the existing business, as well as exploiting the potential of new routes to market and new product categories. During the first half, we made progress in all our markets; we successfully launched the new MFI store format; and we began to restructure our manufacturing activities to align them more closely to what our customers want. At the same time, we achieved our planned cost savings. We are currently putting in place the foundations for future growth via new products and store formats. UK Retail The main development in the UK retail operation has been the launch and initial rollout of our new MFI store format, following the success of the Speke prototype. The new design format creates an attractive and exciting environment for the customer, as well as enabling our sales consultants to provide a considerably improved advisory and sales service. We have now reformatted 7 out of town stores and 6 high street stores, which are performing ahead of expectations. Consequently we are accelerating our programme of conversions to the new format using return on capital as the key factor in our decision-making. We plan to refurbish or relocate all outlets by the end of 2004. This will incur capital expenditure over the next three years of around £65 million, which will be funded from operational cash flow and current resources. High Street stores are still performing ahead of expectations. Nine have been opened to date and we see potential for a total of 50 stores, with about 20 to be operating by the end of this year. The Hygena at Currys business is still very much in its development phase. However, at present, its sales are not meeting our initial expectations. We are refining our product offer and remain confident about the future of the concept. Using our experience from Howdens as a benchmark, we believe it is more appropriate to review its potential after a longer timeframe. Howdens Howdens has continued to deliver buoyant growth ahead of its targets. Like- for-like growth has been maintained at 25.1%, with total sales up 52.3%. Depots which have been open for more than 3 years are continuing to show growth of 20% per annum. In addition to selling to the small builder, we are now targeting the new house-build market and have successfully introduced flooring and additional hardware product to the range. Eighteen depots have opened in the period and, with 199 depots trading today, we are on target to have over 300 by the end of 2003. International We are starting to focus more attention on our operations in France. Hygena Cuisines achieved a headline sales increase of 8%, with the bulk of the sales growth coming from the new fitting service, which carries no margin and like for like sales growth before fitting sales were up 0.2%. As a consequence operating profits have fallen by £1.5m. Hygena Cuisines has previously been managed as an outlet for manufacturing capacity. In future we intend to manage it as a growth business in its own right. We have put in place a new local management team and, as a result of a searching strategic review, we have identified that we have similar opportunities to those we found in the UK MFI business. This includes further geographical coverage, product development, branding, pricing and logistics. Our joint venture in Taiwan opened its first outlet in late July. We look forward to reporting fully on progress at the year-end. We are currently developing low risk plans to introduce the Howdens business to selected international markets, and we will report further in due course. In order to ensure that these businesses get the attention they deserve and to minimise distraction for the UK team, we have recently appointed a new international business development director to drive this expansion. Brand and Product The number of homes buying furniture has remained constant year on year, however the average transaction values have increased. The key elements of our brand rehabilitation are now in place. We have a better understanding of our consumers; we are designing and developing new product, improving our store formats and repositioning and communicating our brand. Our renewed focus on service and product range is continuing to attract more customers. We have maintained our position as the UK's leading furniture retailer. Our progress in new product development is impressive, with 48% of 2001 sales to date arising from products introduced in the last 2 years. We have introduced bathrooms into 12 stores (branded 'Splash') trading from sale areas of between 500 and 1000 square feet. This new product offering fits very well with our Topps Tiles concession - currently on trial in 5 stores. Initial customer reaction to both these offers has been very positive. Logistics Distribution costs are 1% lower, when expressed as a percentage of sales. The Home Delivery Centres at Gillingham and Cardiff have been shut in the last three months, following last year's closure of Potters Bar. This has reduced the number of home delivery centres to 11. Manufacturing We have recently undergone a thorough and wide-ranging review of our manufacturing strategy, in order to align our manufacturing capacity with the changing product requirements demanded by our customers. Manufacturing is recognised to be fundamental to our competitive advantage and will enable us to bring new complex product to market in a short time scale. As a result of significant cost savings that can be achieved through global sourcing, we have proposed the rationalisation of our doors and components factories in Hull. However we will be introducing new product lines into our other factories with a major investment in new technology for paper- wrapped product at our Scunthorpe factory and an increase in vinyl door production at our Stockton factory. These initiatives will in total generate annual savings of £6m from 2002 onwards, with a capital investment of £8m, and an exceptional cost in the second half of 2001 of approximately £6m. Current Trading and Outlook Trading in the first 5 weeks of the second half continues the trend from the first half performance with total orders up by 20% and the UK retail business ahead by 10% compared to last year. We remain confident of prospects for the balance of the year. Ian Peacock 26 July 2001 Chairman CONSOLIDATED PROFIT AND LOSS ACCOUNT 24 weeks Total to operations 16 June Pre- Exceptional 2001 exceptional items Total Notes Unaudited Unaudited Unaudited Unaudited (note 3) £m £m £m £m Turnover 2 501.2 435.5 - 435.5 Cost of sales (248.8) (219.2) - (219.2) _________ ________ ________ _______ Gross profit 252.4 216.3 - 216.3 Selling and distribution costs (187.9) (159.3) 12.2 (147.1) Administration costs (25.7) (24.9) (4.0) (28.9) _________ ________ ________ _______ Operating profit 38.8 32.1 8.2 40.3 Net profit on disposal of fixed assets - 0.7 - 0.7 Profit on disposal of discontinued operations - - 11.2 11.2 _________ ________ ________ _______ Profit on ordinary activities before interest 38.8 32.8 19.4 52.2 Interest receivable and similar income 1.9 2.1 - 2.1 Interest payable and similar charges (0.1) (0.2) - (0.2) _________ ________ ________ _______ Profit on ordinary activities before taxation 2 40.6 34.7 19.4 54.1 Tax 4 (11.8) (9.8) (2.6) (12.4) _________ ________ ________ _______ Profit for the financial period 28.8 24.9 16.8 41.7 Dividends (6.9) (5.3) - (5.3) _______ ________ ________ _______ Amount transferred to reserves 6 21.9 19.6 16.8 36.4 ======= ======= ======= ====== Earnings per share Basic earnings per 10p ordinary share 7 4.8p 4.2p 2.8p 7.0p ======= ======= ======= ====== Diluted earnings per 10p ordinary share 7 4.6p 4.1p 2.8p 6.9p ======= ======= ======= ====== Total operations Pre- Exceptional exceptional items Total Notes Audited Audited Audited £m £m £m Turnover 2 900.6 - 900.6 Cost of sales (453.7) - (453.7) _________ ___________ ______ Gross profit 446.9 - 446.9 Selling and distribution costs (350.5) 12.2 (338.3) Administration costs (55.5) (4.0) (59.5) _________ _______ ______ Operating profit 40.9 8.2 49.1 Net profit on disposal of fixed assets 0.5 - 0.5 Profit on disposal of discontinued operations - 11.2 11.2 _________ _______ ______ Profit on ordinary activities before interest 41.4 19.4 60.8 Interest receivable and similar income 4.8 - 4.8 Interest payable and similar charges (0.8) - (0.8) _________ _______ ______ Profit on ordinary activities before taxation 2 45.4 19.4 64.8 Tax 4 (12.7) (2.6) (15.3) _________ _______ ______ Profit for the financial period 32.7 16.8 49.5 Dividends (11.2) - (11.2) _________ _______ ______ Amount transferred to reserves 6 21.5 16.8 38.3 ======== ====== ===== Earnings per share Basic earnings per 10p ordinary share 7 5.5p 2.8p 8.3p ======= ======= ====== Diluted earnings per 10p ordinary share 7 5.4p 2.8p 8.2p ======= ======= ====== CONSOLIDATED BALANCE SHEET Restated As at As at As at 16 June 17 June 30 December 2001 2000 2000 (note 4) Notes Unaudited Unaudited Audited FIXED ASSETS £m £m £m Tangible assets 280.9 280.9 275.9 Investments 18.3 11.2 10.6 _________ ________ ________ 299.2 292.1 286.5 _________ ________ ________ CURRENT ASSETS Stocks 125.3 105.7 127.2 Debtors 91.8 81.9 86.9 Investments 10 0.2 0.5 0.3 Cash at bank and in hand 10 97.2 102.0 39.6 _________ ________ ________ 314.5 290.1 254.0 _________ ________ ________ CREDITORS FALLING DUE WITHIN ONE YEAR Borrowings 10 3.1 3.3 3.1 Other amounts 234.8 222.7 181.1 _________ ________ ________ 237.9 226.0 184.2 _________ ________ ________ Net current assets 76.6 64.1 69.8 TOTAL ASSETS LESS CURRENT 375.8 356.2 356.3 LIABILITIES CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR Borrowings 10 - 3.3 0.8 Other amounts 0.5 0.6 0.5 _________ ________ ________ 0.5 3.9 1.3 _________ ________ ________ PROVISIONS FOR LIABILITIES AND CHARGES 7.3 6.7 8.4 _________ ________ ________ Net assets 368.0 345.6 346.6 _________ ________ ________ CAPITAL AND RESERVES Called up share capital 59.5 59.5 59.5 Share premium account 6 43.9 43.9 43.9 Other reserves 6 20.6 18.2 19.4 Revaluation reserve 6 42.1 43.4 42.1 Profit and loss account 6 201.9 180.6 181.7 ________ ________ ________ Equity shareholders' funds 368.0 345.6 346.6 ======== ======== ======== CONSOLIDATED CASH FLOW STATEMENT 24 weeks 24 weeks 52 weeks to to to 16 June 17 June 30 December 2001 2000 2000 Notes Unaudited Unaudited Audited £m £m £m Cash inflow from operating activities 8 95.4 66.1 25.4 Returns on investments and servicing of finance 9 1.8 1.9 3.9 Taxation (3.2) 6.8 1.4 Capital expenditure (net) 9 (29.7) 7.7 (2.9) Proceeds from sale of subsidiary - 13.7 13.7 Equity dividends paid (5.8) (8.2) (13.6) ________ ________ _________ 58.5 88.0 27.9 Management of liquid resources 9 0.1 (0.1) 0.1 Financing 9 (0.8) (16.1) (18.6) ________ ________ _________ Increase in cash in the period 57.8 71.8 9.4 ======== ======== ========= RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT Increase in cash in the period 57.8 71.8 9.4 Cash movement on : - debt and lease financing 9 0.8 16.1 18.6 - cash flow from (decrease / increase in liquid resources 9 (0.1) 0.1 (0.1) ________ ________ _________ Change in net cash resulting from cash flows 58.5 88.0 27.9 Effect of foreign exchange rate changes 10 (0.2) - - ________ ________ ________ Movement in net cash in the period 58.3 88.0 27.9 Net cash at the beginning of the period 10 35.5 7.6 7.6 ________ ________ ________ Net cash at the end of the period 10 93.8 95.6 35.5 ======== ======== ======== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 24 weeks 24 weeks 52 weeks to to to 16 June 17 June 30 December 2001 2000 2000 Unaudited Unaudited Audited £m £m £m Profit for the financial period 28.8 41.7 49.5 Translation differences on foreign currency denominated net investments (0.5) - (0.9) _________ _________ ___________ Total recognised gains and losses relating to the period 28.3 41.7 48.6 Prior period adjustment (note 4) - 1.0 1.0 _________ _________ ___________ Total recognised gains and losses for the period 28.3 42.7 49.6 ======== ========= =========== RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS 24 weeks 24 weeks 52 weeks to to to 16 June 17 June 30 December 2001 2000 2000 Unaudited Unaudited Audited Profit for the financial period 28.3 41.7 48.6 Dividends (6.9) (5.3) (11.2) _________ _________ ___________ Retained profit for the financial 21.4 36.4 37.4 period Equity shareholders' funds at beginning of the period 346.6 309.2 309.2 ________ _________ _________ Equity shareholders' funds at end of the period 368.0 345.6 346.6 ======== ======== ========= MORE TO FOLLOW

Companies

Howden Joinery Group (HWDN)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today