Interim Results

RNS Number : 8580U

ScS Group PLC

12 April 2016

 



For Immediate Release	12 April 2016

ScS Group PLC

("ScS", the "Group" or the "Company")

Interim Results for the 26 weeks ended 23 January 2016

ScS, one of the UK's largest retailers of upholstered furniture and floorings, is pleased to announce its Interim results for the 26 weeks ended 23 January 2016.

Financial Highlights:

·      Total sales order intake up 9.1% on a like-for-like basis

·      Gross sales up 10.2% to £145.4m (H1 2015: £132.0m)

·      Gross profit increased 13.0% to £64.8m (H1 2015: £57.3m)

·      Gross margin increased to 44.6% (H1 2015: 43.4%)

·      EBITDA improved by £2.0m to negative £1.0m (H1 2015: negative £3.0m before exceptional items)

·      Operating loss of £3.4m (H1 2015 loss: £5.3m before exceptional items)

·      Loss per share 7.08p (H1 2015 loss: 31.37p)

·      Strong cash inflow from operating activities of £17.3m (H1 2015: £11.9m)

·      Interim dividend of 4.67p per share (H1 2015: 2.8p per share) - reflecting the first full financial year as a quoted company and an anticipated one third and two thirds split between interim and final

·      Strong balance sheet with  cash of £32.2m (H1 2015: £26.6m)

Operational Highlights:

·      One new store opened in Bromborough, on the Wirral on Boxing Day 2015 (total: 97 Stores).

·      Two further stores in Aberdeen and Plymouth are targeted to open in late summer 2016 followed by Thanet on Boxing Day 2016

·      House of Fraser concession gross sales up 18.1% as we build consumer awareness and develop the bespoke website

·      Further development of the ScS e-commerce platform with online gross sales up 17.3% to £4.3m (H1 2015: £3.7m)

·      Successful implementation of route planning and central arranging initiatives producing improved efficiencies in distribution

·      "Excellent" rating achieved on Trustpilot, the customer review site

Current Trading and Outlook:

·      Strong sales order intake up 12.0% on a like-for-like basis for the first 37 weeks of the year, including the key Easter sales period

·      Although the key May Bank Holiday trading period is still to come, the Board currently expects results for this financial year to be modestly ahead of market expectations following the trading update on 16 January 2016

David Knight, Chief Executive Officer of ScS commented:

"We are delighted to be reporting significant growth across all areas of the Group in the first half of the current financial year. These results demonstrate the progress that has been made in developing ScS into a strong national brand with three very clear retail offers - upholstered furniture, flooring and our House of Fraser concessions, all supported by an improving online platform. Our sales order intake is the highest ever achieved in this period and is up 9.1% on a like-for-like basis, a strong performance against tough prior year like-for-like comparatives (up 7.8%).

Current trading, supported by enhanced marketing spend, remains strong with like-for-like sales orders up 12.0% for the first 37 weeks of FY16, including the key Easter sales period. This gives us good visibility for the second half and although the key May Bank Holiday day trading period is still to come, the Board currently expects results for this financial year to be modestly ahead of market expectations following the trading update on 16 January 2016.

Looking to the future, we are excited about our growth prospects, including the continued growth from our concession agreement with House of Fraser, our flooring offering and online proposition. We continue to identify new store opportunities for further growth within our target areas. The Group's cash flow dynamics and committed bank facilities underpin the strong financial position which will support our ambitions for future growth and deliver value for our shareholders. To reflect this confidence, the Board is today declaring an interim dividend of 4.67p per share."

Enquiries:

ScS Group PLC David Knight, Chief Executive Officer Ron Turnbull, Chief Financial Officer	c/o Buchanan [phone]
Buchanan Mark Edwards / Helen Chan / Jane Glover	Tel: [phone] [e-mail]

Investor and Analyst Meeting

A meeting for analysts will be held at the office of Buchanan, 107 Cheapside, London, EC2V 6DN on 12 April 2016 commencing at 11.00am. ScS Group plc's Interim Results 2016 are available at www.scsplc.co.uk

Photography

Photographs are available from Buchanan.  To arrange to receive soft copies, please contact [phone] or [e-mail].

Notes to Editors

ScS is one of the UK's largest retailers of upholstered furniture and floorings, promoting itself as the "Sofa Carpet Specialist" seeking to offer value and choice through a wide range of upholstered furniture and flooring products. The Group's product range is designed to appeal to a broad customer base with a mid-market priced offering and currently trades from 97 stores.

The Company's upholstered furniture business specialises primarily in fabric and leather sofas and chairs. ScS sells a range of branded products which are not sold under registered trade marks (such as the Lotti, the Danni and the Zamba) and a range of branded products which are sold under registered trade marks owned by ScS (such as Endurance and SiSi Italia). The Group also offers a range of third party brands (which include La-Z-Boy, G Plan and Parker Knoll). The Company's flooring business includes carpets, as well as laminate and vinyl flooring. 

In 2014 ScS began to operate the furniture and carpet concession ranges for the House of Fraser "For Living" brand. ScS currently operates in 29 House of Fraser stores across the UK.

CHAIRMAN'S STATEMENT

I am very pleased to introduce the Group's interim statement for H1 2016. The period has seen excellent progress in its trading operations throughout the business.

The ScS Group now has well established foundations in all three parts of its retail portfolio; a very strong offer in both furniture and floor coverings in ScS stores and the fast developing concessions in House of Fraser.

The executive team has continued determinedly to pursue our strategy of growing revenue and gross profit whilst tightly controlling costs and cash flow. This strategy is well underpinned by our consistent and continual pursuit of our four strategic goals, namely:

·      increasing sales densities by broadening the product offer and raising brand awareness;

·      growing online revenue and margin;

·      achieving strong and speedy financial returns from new store openings; and

·      optimising the opportunity with House of Fraser consumers.

The strength of these interim results and order intake so far in the second half of the year means that although the key May Bank Holiday trading period is still to come, the Board currently expects results for this financial year to be modestly ahead of market expectations following the trading update on 16 January 2016.

As previously reported Chris Muir joined the Company as Chief Financial Officer on 4 April 2016.  Chris joins the Company from Northgate plc where he was Group Finance Director, appointed on May 2011.   The appointment follows the decision by Ron Turnbull to step down from the Board and resign from the Company.  Ron will remain in his role for as much of the current financial year as is necessary to ensure a smooth handover to Chris. 

I am delighted to welcome Chris to ScS. He brings substantial experience to the Board and will be an extremely valuable addition as we look to further grow and develop our business.  I would also like to thank Ron for his huge contribution to the business and wish him well in his future endeavours.

Alan Smith

Chairman

CHIEF EXECUTIVE'S REPORT

Business Review

The 26 week period ended 23 January 2016 has been a hugely successful period for ScS during which we have:

·      Grown like-for-like sales orders by 9.1% as we continue to gain market share, assisted by ongoing development of our branded upholstered furniture product range, our flooring business and our House of Fraser concession;

·      Opened 1 new store (Bromborough 26^th December 2015) taking our total number of stores to 97;

·      Undertaken further development of our scalable e-commerce platform that continues to improve user experience, visual merchandising, search engine optimisation and delivers a responsive mobile solution like-for-like KPIs are positive with website hits up 7.7%, conversion up 6.5% and sales order intake up 12.3%;

·      Executed effective marketing campaigns, which have stimulated the market and increased brand awareness, driving improvements in conversions within the store;

·      Continued our store refurbishment programme; and

·      Implemented improvements to our supply chain management which continues to deliver efficiencies and improve our customers' experience.

Total gross sales increased from £132.0m to £145.4m, an increase of £13.4m or 10.2%, and gross profit increased from £57.3m to £64.8m, an increase of £7.5m or 13.0%.

Total operating expenses increased from £62.6m (before exceptional items) to £68.2m an increase of 8.9%. This includes an increase in advertising and marketing expenditure of £1.5m, which is typically larger in H1 due to seasonal holidays, with revenue from orders booked during late December/January recognised in H2. Total operating expenses expressed as a percentage of gross sales reduced from 47.4% to 46.9%, despite the increase in advertising spend.

The operating loss of £3.4m is in line with our expectations, and we have good visibility over H2 as a result of our strong sales order intake, meaning that although the key May Bank Holiday trading period is still to come, the Board currently expects results for this financial year to be modestly ahead of market expectations following the trading update on 16 January 2016.

Financial Review

	H1 FY16	H1 FY15	FY15
	£m	£m	£m
Gross Sales	145.4	132.0	292.2
Revenue	137.7	125.0	276.7
Gross profit	64.8	57.3	127.1
Distribution costs	(7.3)	(7.1)	(14.0)
Administration expenses (excluding exceptionals)	(60.9)	(55.5)	(106.7)
Total operating expenses (excluding exceptionals)	(68.2)	(62.6)	(120.7)
Operating (loss)/profit (excluding exceptionals)	(3.4)	(5.3)	6.4
Net finance costs (excluding exceptionals)	-	(3.8)	(3.9)
Exceptional items	-	(4.0)	(4.2)
Loss before tax	(3.4)	(13.1)	(1.7)
Tax	0.6	1.4	(0.5)
Loss after tax	(2.8)	(11.7)	(2.2)
EBITDA (excluding exceptionals)	(1.0)	(3.0)	11.3

Gross sales

The strong growth in gross sales, up by £13.4m or 10.2%, is attributable to:

·    an increase in upholstered furniture gross sales in ScS stores of 6.9%  to £109.9m;

·    an increase in flooring gross sales in ScS stores of 15.1% to £17.0m;

·    Increase from 3 new stores opened in FY15, contributing gross sales of £1.8m;

·    an increase in online gross sales of 17.3% to £4.3m; and

·    an increase in gross sales from the House of Fraser concession of 18.1% to £10.4m.

Revenue

This represents gross sales less charges relating to interest-free credit sales and increased by 10.2% in H1 2016.

Gross profit

Gross margin as a percentage of gross sales increased by 120 bps from 43.4% in H1 2015 to 44.6% with the margin in H1 2015 impacted by very competitive promotions, notably a "free carpet" offer during the 2014 Autumn (pre-Christmas) sale as we pushed to successfully grow and promote our flooring business, as well as increasing combined sales of furniture/flooring. The increase in gross margin and our focus on generating growth in cash margin resulted in an increase in gross profit of £7.5m or 13.0%.

Distribution costs

Distribution costs comprise the total cost of the in-house distribution function and includes employment costs, the cost of leasing vehicles and related running costs and property costs (principally rent, rates and utilities) for the ten distribution centres, as well as costs of third party delivery services contracted to support peak delivery periods. During H1 2016 we have successfully implemented initiatives for improved route planning and central arranging of onward delivery to customers. The resulting efficiency gains have contributed to the reduction in distribution costs expressed as a percentage of gross sales year on year from 5.4% to 5.0%.

Administrative expenses

Administrative expenses comprise:

·    store operating costs, principally employment costs and property related costs (rent and rates, utilities, store repairs and depreciation of capital investment) and costs associated with the concession agreement with House of Fraser;

·    advertising and marketing expenditure; and

·    general administrative expenditure which includes the employment costs for the directors and senior management and all head office based functions (customer call centre, finance, human resources, IT, merchandising, advertising and marketing, online sales support, flooring administration, administrative support for House of Fraser concession), company pension contributions, legal and professional costs, insurance, company car costs, IT systems support and telecommunications.

Administrative expenses increased to £60.9m from £55.5m in H1 2015, however reduced as a percentage of gross sales, 42.0% to 41.9% despite an increase in advertising spend of £1.5m.

EBITDA

An analysis of EBITDA is as follows:

		26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
		£m	£'m	£m
Operating (loss)/profit		(3.4)	(8.7)	2.8
Depreciation		2.2	2.0	4.2
Amortisation		0.2	0.3	0.6
Exceptional items		-	3.4	3.7
EBITDA		(1.0)	(3.0)	11.3

EBITDA is usually negative in H1 reflecting the seasonal nature of our business, with higher revenue, lower media costs and higher profits occurring in H2. The year on year movement reflects the strong growth in sales and gross profit whilst retaining good control over costs.

Exceptional costs

Exceptional costs in 52 weeks ended 25 July 2015 comprised legal and professional fees associated with the IPO, management fees paid to an affiliate of Parlour Product Holding (Lux) Sarl, the principal shareholder, in relation to the early termination of a management services agreement as a result of the IPO and commitment and legal fees relating to the new banking facilities.

Net finance costs

Net finance costs in H1 2015 and FY 2015 comprise the interest payable on the pre-IPO US$ denominated debt owed to the principal shareholder, together with a loss on exchange thereon.

Taxation

The tax credit for H1 2016 is lower than if the standard rate of corporation tax had been applied, mainly due to charges not deductible for tax purposes, principally depreciation on capital expenditure that does not qualify for capital allowances (in the 26 weeks ended 24 January 2015 and 52 weeks ended 25 July 2015 charges not deductible for tax purposes also included IPO costs and foreign exchange losses).

Cash and cash equivalents

Despite the adjusted EBITDA loss which typically occurs during H1, a strong cash flow has been generated from operations reflecting the negative working capital business model whereby:

·    for cash/card sales, customers pay deposits at the point of order and settle outstanding balances before delivery

·    for consumer credit sales, the loan provider pays ScS approximately 7-10 days after delivery

·    the majority of product suppliers are paid at the end of the month following the month of delivery into the distribution centres.

Net cash inflow from operating activities is £17.3m (H1 2015: £11.9m). After capital expenditure of £1.6m (H1 2015: £3.4m, including investment of £2.4m on 3 new stores) and dividends paid of £4.5m (H1 2015: £nil), cash increased by £11.2m to £32.2m during the period.

Dividend

As an expression of our confidence in the Group's prospects, I am delighted to announce an increased interim dividend of 4.67p per ordinary share, reflecting 2015/16 being our first full financial year as a quoted company and an anticipated one third and two thirds split between the interim and final respectively. This dividend will be payable on 27 May 2016 to shareholders on the register on 4 May 2016. The ex-dividend date is 3 May 2016. 

Current Trading and Outlook

Current trading remains strong with like-for-like sales orders up 12.0% for the first 37 weeks of FY16, and means that although the key May Bank Holiday trading period is ahead, the Board currently expects results for this financial year to be modestly ahead of market expectations following the trading update on 16 January 2016. The Board remains confident of the medium term outlook and strategy to maintain and grow the business. The Group's cash flow dynamics and committed facilities help to maintain a strong financial position which will support our ambitions for future growth and returns for our shareholders.

Principal risks and uncertainties

The principal risks and uncertainties for the remainder of the financial year are unchanged from those detailed on pages 20 to 21 of the Annual Report 2015 dated 14 October 2015, available from the ScS Group plc website: www.scsplc.co.uk.

David Knight

Chief Executive Officer

12 April 2016

STATEMENT OF DIRECTORS RESPONSIBILITIES 

The directors' confirm that these condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely: 

·      an indication of important events that have occurred during the first 26 weeks and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining 26 weeks of the financial year; and 

·      material related-party transactions in the first 26 weeks and any material changes in the related-party transactions described in the last annual report.

The directors of ScS Group plc are listed on pages 24 and 25 of the Annual Report 2015 dated 14 October 2015.

A list of current directors is maintained on the ScS Group plc website: www.scsplc.co.uk.

By order of the Board

Ronald Turnbull

Company Secretary

12 April 2016

Independent review report to ScS Group plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed ScS Group plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim results of ScS Group plc for the 26 week period ended 23 January 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

·      the condensed consolidated balance sheet as at 23 January 2016;

·      the condensed consolidated statement of comprehensive income for the period then ended;

·      the condensed consolidated cash flow statement for the period then ended;

·      the condensed consolidated statement of changes in equity for the period then ended; and

·      the explanatory notes to the interim financial statements.

The interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Rules and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

Newcastle upon Tyne

12 April 2016

a)    The maintenance and integrity of the ScS Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.

b)    Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

ScS Group plc

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Note	Unaudited 26 weeks ended 23 January 2016	Unaudited 26 weeks ended 24 January 2015	Audited 52 weeks ended 25 July 2015
		£'000	£'000	£'000
Gross Sales		145,354	132,005	292,163
Revenue		137,743	124,952	276,734
Cost of sales		(72,912)	(67,599)	(149,583)
Gross profit		64,831	57,353	127,151
Distribution costs		(7,268)	(7,117)	(14,041)
Administrative expenses		(60,978)	(58,937)	(110,343)
Operating (loss)/profit		(3,415)	(8,701)	2,767
Analysed as:
Operating (loss)/profit before exceptional items		(3,415)	(5,263)	6,420
Exceptional items	9	-	(3,438)	(3,653)
Operating (loss)/profit		(3,415)	(8,701)	2,767
Finance costs	10	(72)	(4,432)	(4,515)
Finance income	11	37	-	20
Net finance costs		(35)	(4,432)	(4,495)
Loss before taxation		(3,450)	(13,133)	(1,728)
Taxation	12	617	1,439	(496)
Loss for the year		(2,833)	(11,694)	(2,224)
Attributable to:
Owners of the parent		(2,833)	(11,694)	(2,224)
Loss attributable and total comprehensive income for the year		(2,833)	(11,694)	(2,224)

Loss per share (expressed in pence per share):
Basic loss per share	13	(7.08)p	(31.37)p	(5.56)p

There is no variance between the diluted and basic earnings per share.

There are no other sources of comprehensive income.

ScS Group plc

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Attributable to owners of the parent
		Share capital	Share premium	Capital  Redemption Reserve	Merger Reserve	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 27 July 2014		-	-	-	-	4,253	4,253
Loss for the period		-	-	-	-	(11,694)	(11,694)
Share based payment expense		-	-	-	-	86	86
Group re-organisation		37	-	13	25,561	-	25,611
Balance at 24 January 2015		37	-	13	25,561	(7,355)	18,256
Balance at 25 January 2015		37	-	13	25,561	(7,355)	18,256
Profit for period		-	-	-	-	9,470	9,470
Share-based payment expense		-	-	-	-	148	148
Group re-organisation		-	-	-	(50)	-	(50)
Dividend paid		-	-	-	-	(1,044)	(1,044)
Balance at 25 July 2015		37	-	13	25,511	1,219	26,780

Balance at 26 July 2015		37	-	13	25,511	1,219	26,780
Shares issued/proceeds		3	16	-	-	-	19
Loss for the period		-	-	-	-	(2,833)	(2,833)
Share-based payment expense		-	-	-	-	130	130
Dividend paid		-	-	-	-	(4,481)	(4,481)
Balance at 23 January 2016		40	16	13	25,511	(5,965)	19,615

ScS Group plc

CONDENSED CONSOLIDATED BALANCE SHEET

	Note	Unaudited 26 weeks ended 23 January 2016	Unaudited 26 weeks ended 24 January 2015	Audited 52 weeks ended 25 July 2015
		£'000	£'000	£'000
Assets
Non-current assets
Intangible assets		1,198	1,436	1,291
Property, plant and equipment		24,356	26,617	25,005
Total non-current assets		25,554	28,053	26,296
Current assets
Inventories		22,423	20,161	20,705
Trade and other receivables		10,662	9,926	8,887
Cash and cash equivalents		32,244	26,550	21,055
Total current assets		65,329	56,637	50,647
Total assets		90,883	84,690	76,943

Capital and reserves attributable to
the equity shareholders of the
Parent
Share capital		40	37	37
Share premium		16	-	-
Capital redemption reserve		13	13	13
Merger reserve		25,511	25,561	25,511
Retained earnings		(5,965)	(7,355)	1,219
Total equity		19,615	18,256	26,780
Non-current liabilities
Trade and other payables		5,937	5,612	5,668
Deferred tax liability		167	1,134	530
Total non-current liabilities		6,104	6,746	6,198
Current liabilities
Current income tax liabilities		-	-	675
Trade and other payables	14	65,164	59,688	43,290
Total current liabilities		65,164	59,688	43,965
Total liabilities		71,268	66,434	50,163
Total equity and liabilities		90,883	84,690	76,943

ScS Group plc

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

		Unaudited 26 weeks ended 23 January 2016	Unaudited 26 weeks ended 24 January 2015	Audited 52 weeks ended 25 July 2015
Cash flows from operating activities		£'000	£'000	£'000
Loss before taxation		(3,450)	(13,133)	(1,728)
Adjustments for:
Depreciation		2,185	1,992	4,185
Amortisation of intangible assets		245	286	596
Share-based payment charge		130	86	234
Finance costs		72	3,877	4,515
Finance income		(37)	-	(20)
		(855)	(6,892)	7,782
Changes in working capital:
Increase in inventories		(1,719)	(160)	(704)
Increase in trade and other receivables		(1,545)	(899)	(571)
Increase in trade and other payables		22,143	19,831	3,492
Cash generated from operations		18,024	11,880	9,999
Interest paid		(72)	(93)	(731)
Tax (paid)/received		(651)	67	(1,088)
Net cash inflow from operating activities		17,301	11,854	8,180
Cash flows from investing activities
Purchase of property, plant and equipment		(1,525)	(3,085)	(3,666)
Purchase of intangible assets		(162)	(315)	(480)
Interest received		37	-	20
Net cash outflow from investing activities		(1,650)	(3,400)	(4,126)
Cash flows from financing activities
Repayments of loan from a parent company		-	(748)	(799)
Dividends paid		(4,481)	-	(1,044)
Proceeds of  share issue		19	50	50
Net cash outflow from financing activities		(4,462)	(698)	(1,793)
Net increase in cash and cash equivalents		11,189	7,756	2,261
Cash and cash equivalents at beginning of period		21,055	18,794	18,794
Cash and cash equivalents at end of period		32,244	26,550	21,055

Notes to the unaudited condensed consolidated financial statements

1.             General information

ScS Group plc (the "Company") is incorporated and domiciled in the UK (Company registration number 03263435). The address of the registered office is 45-49 Villiers Street, Sunderland, SR1 1HA. The principal activity of the Company and its subsidiaries (the "Group") is the provision of upholstered furniture and flooring, trading under the name ScS.

The 2015 audited financial statements for the Group have been filed with Companies House.

2.             Basis of preparation

This interim report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (previously the Financial Services Authority) and IAS 34 "Interim Financial Reporting" as adopted by the European Union.

The condensed consolidated financial statements for the 26 weeks ended 23 January 2016 should be read in conjunction with the Annual Report 2015 dated 14 October 2015 (the "Annual Report 2015").

The report of the auditors for the financial statements for the 52 weeks ended 25 July 2015, included in the Annual Report 2015, was unqualified, did not contain an emphasis of matter paragraph and did not include a statement under Section 498 of the Companies Act 2006.

The Group's interim condensed consolidated financial information is not audited and does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006.

These condensed interim financial statements were approved for issue on 12 April 2016.

3.             Going concern

The Group generates strong cash flows, reflecting the negative working capital requirements of the business model. In addition the Group has a committed £12m revolving credit facility in place. The Group's forecasts and projections show that the Group has adequate resources to continue to operational existence for the foreseeable future. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, being at least 12 months from the date of the approval of the interim results and did not identify any material uncertainties to the Group's ability to do so.  The Group therefore continues to adopt the going concern basis in preparing its condensed interim financial statements. 

4.             Accounting policies

The Group's principal accounting policies used in preparing this information are as stated in note 2 to the Consolidated Financial Statements on pages 52 to 55 of the Annual Report 2015. There has been no change to any accounting policy from the date of the Annual Report.

5.             Segmental Information

The directors have determined the operating segments based on the operating reports reviewed by the senior management team (the Executive directors and the other directors of the trading subsidiary, A. Share & Sons Limited) that are used to assess both performance and strategic decisions. The directors have identified that the senior management team are the chief operating decision makers in accordance with the requirements of IFRS 8 'Segmental reporting'. 

The directors consider the business to be one main type of business generating revenue; the retail of upholstered furniture and flooring. All segment revenue, (loss)/profit before taxation, assets and liabilities are attributable to the principal activity of the Group and other related services. All revenues are generated in the United Kingdom. There have been no changes to the directors determination of segments since those disclosed in the Annual Report 2015.

Analysis of gross sales is as follows:

		26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
		£'000	£'000	£'000
Sale of goods		135,995	123,581	273,491
Associated warranties		9,359	8,424	18,672
		145,354	132,005	292,163

6.             Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the more important judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the historical financial information in the Annual Report.

7.             Financial risk management

The Groups activities expose it to a variety of financial risks which include funding and liquidity risk, credit risk, interest rate risk and other price risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements and they should be read in conjunction with the Annual Report 2015. There have been no change to the risk management procedures or the accounting policies from those included in the Annual Report 2015.

8.             Seasonality of Operations

Due to the seasonal nature of this retail segment, higher revenues and operating profits are usually expected in the second half of the year than the first half. In the 52 week period ended 25 July 2015, 45% of revenues accumulated in the first half of the year and an operating loss (before exceptional items) of £5.3m was incurred. In the second half of 52 week period ended 25 July 2015, 55% of total revenue was earned and an operating profit (before exceptional items) of £11.7m was generated.

9.             Exceptional items

Items that are material either because of their size and nature, or that are non-recurring, are considered as exceptional items and are presented within the line items in the income statement to which they best relate.

Exceptional items comprise:

	Note		26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
			£'000	£'000	£'000
Management fees	9(a)		-	1,100	1,100
IPO deal fees	9(b)		-	2,338	2,553
Bank facility fees	9(c)		-	555	555
			-	3,993	4,208

9 (a)        Management fees paid to an affiliate of Parlour Product Holding (Lux) Sarl, the principal shareholder, in relation to the termination of a management service agreement due to the IPO.

9 (b)        Legal and professional fees related to the IPO.

9 (c)        Banking and legal fees related to the committed £12.0 million revolving credit facility.

10.          Finance costs

		26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
		£'000	£'000	£'000
Foreign exchange losses on amounts owed to
Group undertakings		-	2,829	2,829
Interest payable on amounts owed to Group
undertakings		-	955	955
Bank facility fees - exceptional item (note 9)		-	555	555
Other finance costs		72	93	176
		72	4,432	4,515

11.          Finance income                                                                                                                                   

			26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
			£'000	£'000	£'000
Bank interest received			37	-	20
			37	-	20

12.          Taxation

The tax credit for the 26 weeks ended 23 January 2016 is based on an estimated effective tax rate for the period of 17.9% (26 weeks ended 24 January 2015: tax credit 11.0%; 52 weeks ended 25 July 2015: tax charge 25.8% on profit before tax adjusted for exceptional IPO costs). The tax credit is lower than if the standard rate of corporation tax had been applied, mainly due to charges not deductible for tax purposes, principally depreciation on capital expenditure that does not qualify for capital allowances (in the 26 weeks ended 24 January 2015 and 52 weeks ended 25 July 2015 charges not deductible for tax purposes also included IPO costs and foreign exchange losses).

13.          Loss per share

		26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
		£'000	£'000	£'000
Loss attributable to owners of the Company		(2,833)	(11,694)	(2,224)

Basic weighted average number of shares in issue		40,004,104	37,277,437	40,000,000
Basic loss per share (in pence per share)		(7.08)	(31.37)	(5.56)

There is no variance between the diluted and basic loss per share.

The weighted average number of shares figure for 26 weeks ended 24 January 2015 reflect the share capital movements that occurred on the reorganisation of the Group prior to the initial Public Offering on 28 January 2015("IPO") for the full period retrospectively.

On IPO the Company issued a further 2,722,563 ordinary shares of £0.001 each bringing the total number of ordinary shares in issue to 40,000,000 at that date.

14.          Trade and other payables current

		26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
		£'000	£'000	£'000
Trade payables		23,115	20,582	24,356
Payments received on account		22,685	19,049	7,247
Other tax and social security payable		6,224	5,931	3,449
Accruals		13,140	14,126	8,238
		65,164	59,688	43,290

The fair value of financial liabilities approximates their carrying value due to short maturities. Financial liabilities are denominated in pounds sterling.

15.          Dividend

                An interim dividend of 4.67p per ordinary share was proposed by the Board of directors on 11 April 2016. Subject to approval by shareholders, the dividend is payable on 27 May 2016 to all shareholders who are on the register on 4 May 2016. The interim dividend, amounting to £1.9m has not been recognised as a liability in this interim financial information. It will be recognised in shareholders' equity in the year to 23 July 2016.

16.          Related party transactions

                Loans from related parties

Prior to the IPO the Group had received the following loans from Parlour Product Holding (Lux) Sarl, the principal shareholder:

·      23,987,885 Series 1 - 8% unsecured payment in Kind notes of US$1.00 payable on demand

·      9,233,000 Series 2 - 8% unsecured payment in Kind notes of US$1.00 payable on demand

·      18,076,284 unsecured payment in kind notes of US$1.00 payable on demand in recognition of interest accrued and capitalised at each balance sheet date

As part of the Group reorganisation on 22 January 2015 the amounts outstanding at that date were capitalised. The movement on the amounts outstanding were as follows:

Series 1 payment in kind notes

	26 weeks ended 23 January 2016	26 weeks Ended 24 January 2015	52 weeks ended 25 July 2015
	£'000	£'000	£'000
Opening balance	-	13,987	13,987
Issued	-	593	593
Repaid	-	(748)	(748)
Foreign exchange loss	-	1,756	1,756
Capitalised in period	-	(15,588)	(15,588)
Closing Balance	-	-	-

Series 2 payment in kind notes

	26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
	£'000	£'000	£'000
Opening balance	-	8,539	8,539
Issued	-	362	362
Foreign exchange loss	-	1,073	1,073
Capitalised in period	-	(9,974)	(9,974)
Closing Balance	-	-	-

Purchases of goods and services

Management fees and expenses were paid to an affiliate of the principal shareholder under the terms of a Management Services Agreement as follows:

	26 weeks ended 23 January 2016	26 weeks ended 24 January 2015	52 weeks ended 25 July 2015
	£'000	£'000	£'000
Management Fees and expenses	-	152	152
Termination fee	-	1,100	1,100
	-	1,252	1,252

Letter of Credit

Prior to IPO the Bank of Montreal had provided Barclays Bank plc, the Group's bankers at those dates, with an irrevocable standby letter of credit for £6.0 million to underwrite merchant services transactions in A Share & Sons Limited, the Group's trading subsidiary. Sun Capital Partners inc. had provided a guarantee in favour of the Bank of Montreal for any losses suffered in connection with such irrevocable standby letter of credit. This standby letter of credit was cancelled as part of the Group reorganisation.

 

END

 

 

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