Final Results

Dunelm Group plc 19 September 2007 19 September 2007 Dunelm Group plc Preliminary Results for the 52 weeks to 30 June 2007 Dunelm Group plc, the leading specialist out-of-town homewares retailer, today announces its maiden preliminary results as a listed company, for the 52 weeks to 30 June 2007. Financial highlights • Sales up 12.5% to £354.7m (2006: £315.2m) • Like-for-like sales increase of 6.1% • Gross margin up 0.4% points to 44.0% (2006: 43.6%) • Underlying operating profit up 15.3% to £44.0m* (2006: £38.2m) • Operating profit of £40.8m (2006: £38.2m) • Underlying profit before taxation up 7.8% to £41.0m* (2006: £38.0m) • Profit before taxation of £37.8m (2006: £38.0m) • Underlying EPS (fully diluted) up 5.3% to 13.7p* (2006: 13.0p) • EPS (fully diluted) of 12.2p (2006: 13.0p) • Recommended final dividend of 3.0p per share; resultant total dividend for the period post IPO of 3.8p per share * excludes non-recurring items i.e. profit on sale of former warehouse, costs of warehouse transition, IPO costs Business highlights • Like-for-like sales growth of 6.1% exceeded wider retail market, demonstrating strength of Dunelm's retail proposition; • Four new superstores opened in year; two further units opened since year-end; • Contractually committed to 4 new units with strong pipeline of other opportunities; • Successful transition to new Stoke warehouse, increasing central warehousing capacity; • SAP stock management system rolled out to all stores; • Further improvement of product offering with focus on 'Simply Value For Money' proposition; • For 11 weeks to 15 September, like-for-like sales growth of 7.0%, and total growth of 12.5%. Will Adderley, Chief Executive, said: "This has been an excellent year for Dunelm. Having completed our flotation almost a year ago, we have delivered record sales and profits despite the uncertain market environment. "I firmly believe that Dunelm remains the leading multiple homewares specialist in the UK, and our continued like-for-like sales growth ahead of the wider retail market demonstrates the real strength of our "Simply Value for Money" proposition. "We have invested significantly in our warehousing and IT infrastructure, the pipeline of new store opportunities looks very promising, and we continue to strengthen our product offering across our categories. All of this is encouraging for the current year. "We are very pleased by the like-for-like sales growth of 7.0% in recent weeks. At the same time, we are naturally cautious about the outlook for the next few months, given the uncertainty over the state of consumer demand. However, the business is in excellent shape and we will be working hard to ensure that our offer remains as compelling for customers as ever." For further information please contact: Dunelm Group plc 0116 2644 356 Will Adderley, Chief Executive David Stead, Finance Director Hogarth Partnership 020 7357 9477 John Olsen / Fiona Noblet / Anna Keeble Notes to Editors Dunelm is amongst the top 10 retailers operating in the £12bn UK homewares market. The Group currently operates 84 stores, branded Dunelm Mill, of which 70 are out-of-town superstores and 14 are high street shops. The majority of the stores are located in the Midlands or north-west of England. Dunelm employs over 5,000 full and part time staff, the vast majority of whom work in the stores. Dunelm was founded in 1979 as a market stall business, selling ready made curtains. The first shop was opened in Leicester in 1984 and over the following years the business developed into a successful chain of high street shops in the Midlands specialising in soft furnishings. The first Dunelm superstore was opened in 1991, leading to the Group's expansion into the broader homewares market. The superstores provide an average of 28,000 sq ft of selling space and offer an extensive range of around 20,000 products across a broad spectrum of categories, including bedding, curtains, gifts and seasonal items, cushions, bathroom products, kitchenware, quilts, pillows and rugs. Dunelm also specialises in offering a wide range of fabrics, made to measure curtains and a frequently changing series of special buys. The directors are passionate about ensuring that all ranges live up to Dunelm's philosophy of offering customers "Simply Value for Money". Last year Dunelm also introduced an on-line store, to be found at www.dunelm-mill.com. Currently over 7,500 products are available through the website. Dunelm listed on the London Stock Exchange in October 2006 (DNLM.L) and has a current market capitalisation of over £350 million. Dunelm Group plc Preliminary Results for the 52 weeks to 30 June 2007 Chairman's Statement This has been a momentous year in Dunelm's development which has included the successful IPO last October. At the same time, the business has delivered record sales and profits. I believe this is a real tribute both to the strength of the Dunelm proposition and particularly to the focus and determination of its management team. Within the strong all-round financial performance, the like-for-like sales increase of 6.1% deserves particular comment. This performance demonstrates the continuing appeal of the Dunelm proposition to a wide range of customers. Dunelm's philosophy is 'simply value for money', focused on giving all our customers a great deal, whatever price point they are looking to buy at. The choice and value we offer our customers across the board in homewares is second to none in the UK. The transition to becoming a publicly listed company was eased by the Company's policy, adopted some five years ago, of applying much of the rigour and processes required when answerable to public shareholders. However, one of the few ways in which we have changed is to bring the membership of our Board more into line with the requirements of the Combined Code. We have addressed this through the appointment of Simon Emeny as a Non-Executive Director and I am delighted to welcome Simon to the Board. He has an excellent track record of achievement as Managing Director of the major operating businesses within Fuller, Smith and Turner P.L.C and I am sure that his experience and drive will be of great benefit to us. I would like to take this opportunity to pay public tribute to the founders of Dunelm, Bill and Jean Adderley. They have laid the foundations for the long-term prosperity of the Group not only by driving its growth and development until relatively recently, but equally importantly by having the strength to stand back from the Group and let others take it forward, both in terms of management and ownership. Of course, Bill and Jean remain major shareholders and Bill is still an active and challenging Non-Executive Director. His son, Will, has already demonstrated immense capability as Chief Executive of the business and I am certain that he and the rest of the senior team will continue to push it forward to even greater success, to the benefit of all shareholders. Chief Executive's Review Trading I am delighted to report continued successful growth of the Group during the last financial year. Our overall sales increased by 12.5%, including growth of 6.1% in like-for-like sales. This like-for-like sales growth was particularly strong in the final quarter, at 10.1%. Our growth in the year exceeded the wider retail market and will almost certainly give us a further increase in our market share within homewares. The market environment was uncertain for much of the year. Consumer demand held up better than might have been expected given the series of base rate increases from mid-2006, and in our view the homewares market experienced steady but unspectacular growth. The intensity of competition also increased during the period, with the supermarkets continuing to give additional space to homewares along with other multiple retailers. Nevertheless, I firmly believe that Dunelm remains the leading multiple homewares specialist in the UK, a position we intend to hold onto by continuing to pursue the four strategic priorities which we outlined at the time of our flotation. Priority 1 - Growing the store portfolio We opened four new superstores in the year, at Stevenage, Colchester, Perth and Bradford. All have received strongly positive customer reaction and all are trading in line with our expectations. In addition we relocated our Swansea superstore to an adjacent, larger unit and have seen a very strong increase in trading as a result. Altogether the chain of 68 superstores as at the year-end provided over 1.9m square feet of selling space. It remains our firm intention to grow the superstore portfolio as rapidly as we can, without compromising our long-term financial returns. We have opened two further units since the year-end, in Aberdeen and Shoreham. We are contractually committed to 4 more units which are due to open this financial year or early next and we have numerous further opportunities under negotiation. We believe that the demand for retail space has cooled over the past couple of years and we are therefore optimistic that we will be able to achieve a good number of additions to our estate in the coming year, on attractive terms. Whilst expanding our superstore chain, we have taken the opportunity to close three high street stores. In all three cases there is already a superstore serving the same catchment area and the total space exited is less than one average superstore. This leaves us with 14 high street stores at present and we will continue to look for opportunities to relocate to superstores in these towns. Priority 2 - Developing the customer offer We know that it is essential for us to continue improving our retail proposition. We are as passionate as ever about giving 'simply value for money' to all our customers - a combination of great prices, unrivalled choice, excellent quality, great product availability and friendly service. We respect our competitors and know that they will keep improving; we know that we always have to get better too if we want to keep satisfying our customers. A good example of the way we operate is our decision to cease selling beds. This was a range we experimented with but where we found we were unable to outdo the established specialists in the field. Accordingly we have made a rapid but low-cost withdrawal, giving the space released back to mainstream categories, particularly bedding. The extra space has allowed us to introduce an additional range of plain-dye linen, and also to showcase new designs from Dorma which are exclusive to Dunelm. The result has been a significant increase in bedding sales and further reinforcement of our position as the specialist in this area. Looking ahead we see opportunities to improve our product offering in several categories and to provide even better customer service through our friendly staff. We look forward to giving our customers an even more enjoyable shopping experience as a result. Priority 3 - Exploiting our infrastructure The last financial year saw some important milestones achieved in our infrastructure development. First, the transition from our Burton warehouse to a new facility at Stoke was fully completed and this now gives us a much larger central warehousing capacity - approximately four times as many pallet locations as were previously available. With around 80% of merchandise still being supplied direct to stores, we believe that the current Stoke warehouse will be able to support the central distribution requirement for a chain of over 100 superstores and we will continue to drive efficiency in the warehouse operation to ensure this is the case. The second major achievement was the roll-out of SAP stock management to all of our stores. For the first time, this gives us full visibility of all stock throughout the chain and enables us to control stock levels more tightly. Priority 4 - Longer term growth We aim to develop a number of initiatives to increase the potential for longer term growth. Our webstore opened in early 2006 and now contains over 7,500 products - to which we are adding all the time. Whilst this channel remains small relative to the business as a whole, sales are growing and we believe that we are well positioned to benefit from any significant migration of customer purchasing to the internet. Outlook In the early weeks of our new financial year, we have continued to benefit from relatively soft comparatives driven by last year's very hot summer together with the climax of the football World Cup. For the 11 weeks to 15 September, total sales growth has been 12.5% and like-for-like growth has been 7.0%. We are very pleased with these figures. At the same time, we are naturally cautious about the outlook for the next few months. Not only do we start to see more challenging comparatives, but the state of consumer demand remains uncertain. We do not take continued strong growth for granted, but I can assure all shareholders that we will be working hard to ensure that our offer remains as compelling for customers as ever. Finance Director's Review Underlying operating result Sales in the financial year were £354.7m, an increase of 12.5%. On our conservative definition of like-for-like (i.e. including only stores which traded throughout the financial year in question and all of the preceding financial year), the like-for-like growth was 6.1%. We continued to benefit from our increased scale and buying power as well as weakness of the US dollar, allowing us to achieve a 0.4% point increase in gross margin. Operating costs remained well controlled, with an overall 3.7% increase in costs in like-for-like stores. However, as we have explained previously, the non-store cost base now includes a rent charge on the new Stoke distribution centre and amortisation of the new SAP software and associated hardware. In the previous financial year there was no rent charge for the distribution centre and only a part year amortisation charge for SAP. The overall effect is an increase in our non-store cost base due to these items of £2.1m. Operating profit on an underlying basis (i.e. after charging the new costs described above, but before non-recurring items) was £44.0m, an increase of 15.3%. Non-recurring items In our definition of underlying operating profit we exclude the following items which we consider to be outside the normal running of the business: • IPO costs - the Group bore £3.0m of costs in relation to the IPO in October 2006. • Warehouse transition - costs of £1.3m arose during the year in respect of the transfer of operations from the former distribution centre at Burton to the new facility at Stoke, including redundancy, other closure costs and the incremental cost of parallel running the two sites for a period during the year. • Warehouse disposal - a gain of £1.1m was realised on disposal of the Burton freehold property. After including all of the above items, the operating result for the year was a profit of £40.8m, an increase of 7.0%. EBITDA Earnings before interest, tax, depreciation and amortisation were £53.5m, excluding non-recurring items. This has been calculated as underlying operating profit (£44.0m) plus depreciation and amortisation (£9.5m) and represented a 15.2% increase on the previous year. The EBITDA margin achieved, at 15.1% of sales, demonstrates the strength of Dunelm's business model. Financial items and PBT In October 2006, immediately prior to IPO, the Group assumed bank debt of £50m in order to fund a special dividend. Historically the Group has held a cash surplus. Accordingly, there was a shift from net interest receivable of £0.7m in the prior year to net interest payable of £1.6m in the latest financial year. Additionally, the Group suffered foreign exchange losses in respect of US dollar holdings which amounted to £1.4m, based on a year-end exchange rate of $2.00. The equivalent net loss last year was £0.8m, with a closing exchange rate of $1.84. The Group has no further forward exchange contracts outstanding and the dollars held in cash will be utilised to fund purchases of stocks over the coming year. Going forward, it is our intention to purchase foreign currency at spot rates as and when required for actual foreign currency payments. After accounting for interest and foreign exchange impacts, underlying profit before tax for the year amounted to £41.0m, an increase of 7.8%. Statutory PBT, after non-recurring items, was £37.8m. TAX, PAT and EPS The headline tax charge for the year was 34.9% of statutory PBT. However, the effective tax rate was impacted by the IPO costs which are not deductible for corporation tax purposes. It also includes the impact of recalculating deferred tax based on the new corporation tax rate of 28%. Excluding these factors, the effective tax rate for the year was 31.8% of pre-tax profit. Underlying EPS (i.e. excluding non-recurring items) on a fully diluted basis shows a rise of 5.3% to 13.7p. Our reported earnings per share are 12.2p on a fully diluted basis, 6.5% below last year. Implementation of IFRS IFRS has been fully implemented by Dunelm and the three year record shown at the time of our IPO was on a consistent IFRS basis. The major impact of this change in accounting principles is that lease incentives are spread over the life of the lease rather than up to the first rent review (as under UK GAAP). Capital expenditure The business has undertaken significant capital expenditure in recent years, including major investments in systems and technology infrastructure and the fit-out of the new distribution centre. The major part of these investments was already incurred by June 2006, so gross capital expenditure in the most recent financial year was reduced to £15.1m (previously £25.4m). This included one significant freehold store acquisition as well as the fit-out costs for the other new stores opened in the year. Working capital Stocks increased by £4.3m during the financial year mainly as a result of new store openings. Net working capital was slightly reduced compared with the start of the year. Cash position The Group's profile of strong cash generation continued in the last financial year. Net cash generated from operations, after interest and tax, was £34.7m (an increase of 44.0%) and net debt at the year-end was £22.6m. Dividend In addition to the special pre-IPO dividend of 25p per share, an interim dividend of 0.8p was paid in April 2007. It is proposed to pay a final dividend of 3.0p per share. Consolidated income statement For the 52 weeks ended 30 June 2007 2007 2006 Note £'000 £'000 ---------------------------------- ------- --------- --------- Revenue 354,721 315,187 Cost of sales (297,481) (264,599) ---------------------------------- ------- --------- --------- Gross profit 57,240 50,588 ---------------------------------- ------- --------- --------- Administrative expenses ongoing 2 (13,247) (12,438) Administrative expenses non-recurring 2 (3,178) - ---------------------------------- ------- --------- --------- Total administrative expenses (16,425) (12,438) Operating profit 40,815 38,150 ---------------------------------- ------- --------- --------- Analysed as: Operating profit before non-recurring items 43,993 38,150 Non-recurring items (3,178) - ---------------------------------- ------- --------- --------- Financial income 4 503 983 Financial expenses 4 (3,492) (1,094) ---------------------------------- ------- --------- --------- Profit before taxation 37,826 38,039 Taxation 5 (13,198) (11,839) ---------------------------------- ------- --------- --------- Profit for the period 24,628 26,200 ---------------------------------- ------- --------- --------- Earnings per ordinary share - basic 7 12.3p 13.1p Earnings per ordinary share - diluted 12.2p 13.0p Dividend proposed per ordinary share 6 3.0p - Dividend paid per ordinary share 6 25.8p 3.7p All activities relate to continuing operations. All profit is attributable to equity shareholders. There were no gains or losses for the current or comparative periods other than those reported above. Consolidated balance sheet As at 30 June 2007 30 June 1 July 2007 2006 Note £'000 £'000 ---------------------------------- ------- --------- --------- Non-current assets Intangible assets 3,668 3,665 Property, plant and equipment 67,064 61,490 Deferred tax asset 3,276 2,272 ---------------------------------- ------- --------- --------- Total non-current assets 74,008 67,427 ---------------------------------- ------- --------- --------- Current assets Inventories 60,657 56,345 Trade and other receivables 8,996 10,024 Cash and cash equivalents 17,368 2,964 Assets held-for-sale - 5,998 ---------------------------------- ------- --------- --------- Total current assets 87,021 75,331 ---------------------------------- ------- --------- --------- Total assets 161,029 142,758 ---------------------------------- ------- --------- --------- Current liabilities Trade and other payables (51,464) (47,271) Liability for current tax (6,310) (6,213) Interest-bearing loans and borrowings (21) (150) Provisions - (58) ---------------------------------- ------- --------- --------- Total current liabilities (57,795) (53,692) ---------------------------------- ------- --------- --------- Non-current liabilities Interest-bearing loans and borrowings (40,000) - ---------------------------------- ------- --------- --------- Total non-current liabilities (40,000) - ---------------------------------- ------- --------- --------- Total liabilities (97,795) (53,692) ---------------------------------- ------- --------- --------- Net assets 63,234 89,066 ---------------------------------- ------- --------- --------- Equity Issued capital 2,006 2,000 Share premium 267 - Retained earnings 60,961 87,066 ---------------------------------- ------- --------- --------- Total equity attributable to equity holders of the 63,234 89,066 parent ------- --------- --------- ---------------------------------- Consolidated cash flow statement For the 52 weeks ended 30 June 2007 30 June 1 July 2007 2006 Note £'000 £'000 ---------------------------------- ------- --------- --------- Cash flows from operating activities 8 49,300 35,118 Interest paid (1,536) (57) Interest received 451 983 Tax paid (13,468) (11,910) ---------------------------------- ------- --------- --------- Net cash generated from operating activities 34,747 24,134 ---------------------------------- ------- --------- --------- Cash flows from investing activities Proceeds on disposal of property, plant and 7,200 1 equipment Acquisition of property, plant and equipment (14,130) (21,256) Acquisition of intangible assets (996) (4,176) ---------------------------------- ------- --------- --------- Net cash utilised in investing activities (7,926) (25,431) ---------------------------------- ------- --------- --------- Cash flows from financing activities Proceeds from issue of share capital 273 - Net funds raised from bank loan 40,000 - Repayment of finance lease liability (150) (392) Dividends paid (51,605) (7,400) ---------------------------------- ------- --------- --------- Net cash flows utilised in financing activities (11,482) (7,792) Net increase/(decrease) in cash and cash 15,339 (9,089) equivalents Foreign exchange revaluations (956) - Cash and cash equivalents at the beginning of the 2,964 12,053 period ------- --------- --------- ---------------------------------- Cash and cash equivalents at the end of the period 9 17,347 2,964 ---------------------------------- ------- --------- --------- Statement of changes in equity Issued Share Share Retained Total capital premium earnings Equity £'000 £'000 £'000 £'000 ---------------------------- --------- ------- --------- ------- As at 3 July 2005 2,000 - 68,235 70,235 Total recognised income and expense - - 26,200 26,200 Share based payments - - 31 31 Dividends - - (7,400) (7,400) ---------------------------- --------- ------- --------- ------- As at 1 July 2006 2,000 - 87,066 89,066 ---------------------------- --------- ------- --------- ------- Issued Share Share Retained Total capital premium earnings Equity £'000 £'000 £'000 £'000 ---------------------------- --------- ------- --------- ------- As at 2 July 2006 2,000 - 87,066 89,066 Total recognised income and expense - - 24,628 24,628 Issue of share capital 6 267 - 273 Share based payments - - 234 234 Deferred tax on share based payments - - 327 327 Corporation tax on share options - - 311 311 exercised Dividends - - (51,605) (51,605) ---------------------------- --------- ------- --------- ------- As at 30 June 2007 2,006 267 60,961 63,234 ---------------------------- --------- ------- --------- ------- Notes to the annual financial statements Basis of preparation The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the 'Group'). The Group financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRSs'). The accounting policies have been applied consistently to all periods presented in these Group financial statements and in preparing an opening IFRS balance sheet at 1 July 2006 for the purposes of the transition to Adopted IFRSs. Dunelm Group plc ('the Company') and its subsidiary companies have previously prepared consolidated financial statements in accordance with UK Generally Accepted Accounting Practice ('UK GAAP'). Following admission to the London Stock Exchange, in common with all companies listed on European Union (EU) regulated markets, the Group is now required to prepare its financial statements in accordance with International Financial Reporting Standards as adopted by the EU ('Adopted IFRSs'). The Group has adopted IFRS 1 from 3 July 2005 (The Group's date of transition to IFRS). IFRS 1 'First Time adoption of IFRS' establishes the transitional requirements for the preparation of financial information in accordance with IFRS for the first time. The general principle is to establish accounting policies under IFRS then to apply these retrospectively at the date of transition to determine the opening balance sheet. IFRS 1 permits a number of first time adoption exemptions, none of which are relevant to the Group. The annual financial statements are prepared under the historical cost convention. In addition assets classified as held-for-sale are valued at the lower of net book value and fair value less costs to sell. The financial statements are prepared in pounds sterling, rounded to the nearest thousand. Use of estimates and judgements The presentation of the annual financial statements requires the Directors to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The Director's consider that there are no areas of judgement or uses of estimates which need to be highlighted. 1 OPERATING PROFIT 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Operating profit is stated after charging/(crediting) the following items: Inventories: Cost of inventories included in cost of sales 198,537 177,798 Write down of inventories 2,228 954 Amortisation of intangible assets 1,742 511 Depreciation of property, plant and equipment: Owned 7,543 7,615 Leased 243 182 Operating lease rentals: Land and buildings 16,785 15,947 Plant and machinery 1,061 927 Loss/(profit) on disposal of properties (1,130) 3 2 ADMINISTRATIVE EXPENSES 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Ongoing 13,247 12,438 Non-recurring: IPO 2,997 - Warehouse transition 1,297 - Profit on sale of former warehouse (1,116) - --------------------------------------- --------- --------- 16,425 12,438 --------------------------------------- --------- --------- Administrative expenses relate to central support functions and do not include any selling or distribution expenses. Non-recurring expenses have been specifically identified because of their non-recurring nature within the business. The Group believes that this categorisation aids the understanding of the underlying results of the business. 3 EMPLOYEE NUMBERS AND COSTS The average number of people employed by the Group (including Directors) was: 2007 2007 2006 2006 Number of Full time Number of Full time heads equivalents heads equivalents --------------------------- -------- -------- -------- -------- Selling 4,808 3,198 4,781 3,174 Distribution 213 206 120 120 Administration 142 139 115 112 --------------------------- -------- -------- -------- -------- 5,163 3,543 5,016 3,406 --------------------------- -------- -------- -------- -------- The aggregate remuneration of all employees including Directors comprises: 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Wages and salaries including bonuses and termination 42,323 37,941 benefits Social security costs 2,766 2,202 Share-based payment expense 234 31 Defined contribution pension costs 114 74 --------------------------------------- --------- --------- 45,437 40,248 --------------------------------------- --------- --------- 4 FINANCIAL INCOME AND EXPENSE 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Finance income Interest on bank deposits 503 791 Realised foreign exchange gains - 192 --------------------------------------- --------- --------- 503 983 --------------------------------------- --------- --------- Finance expenses Bank borrowings and overdraft (2,113) (57) Foreign exchange losses (1,379) (1,037) (3,492) (1,094) --------------------------------------- --------- --------- Net finance expense (2,989) (111) --------------------------------------- --------- --------- 5 TAXATION 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Current taxation UK corporation tax charge for the period 12,957 12,306 Adjustments in respect of prior periods 918 (75) --------------------------------------- --------- --------- 13,875 12,231 --------------------------------------- --------- --------- Deferred taxation Origination of timing differences 26 (345) Adjustment in respect of prior periods (914) (47) Tax rate differential 211 - --------------------------------------- --------- --------- (677) (392) --------------------------------------- --------- --------- Total taxation expense in the income statement 13,198 11,839 --------------------------------------- --------- --------- The tax charge is reconciled with the standard rate of UK corporation tax as follows: 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Profit before tax 37,826 38,039 --------------------------------------- --------- --------- UK corporation tax at standard rate of 30% (2006: 30%) 11,348 11,412 Factors affecting the charge in the period: Non-deductible expenses 953 35 Ineligible depreciation 845 821 Lease incentive deductions (184) (307) Adjustments to tax charge in respect of prior years 4 (122) Profit on disposal in excess of capital gain 21 - Tax rate differential 211 - --------------------------------------- --------- --------- 13,198 11,839 --------------------------------------- --------- --------- The taxation charge for the period as a percentage of profit before tax is 34.9%. This is affected by the IPO costs, which are non-deductible for corporation tax purposes; and by the recalculation of the deferred tax asset to reflect the future corporation tax rate of 28%. Excluding these factors, the effective tax rate would have been 31.8% for the year. 6 DIVIDENDS All dividends relate to the 1p ordinary shares. 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Interim for the period ended 30 June 2007 - paid 25p (50,000) - Interim for the period ended 30 June 2007 - paid 0.8p (1,605) - Interim for the period ended 1 July 2006 - paid 3.7p - (7,400) --------------------------------------- --------- --------- (51,605) (7,400) --------------------------------------- --------- --------- The Directors are proposing a final dividend of 3.0p per ordinary share for the period ended 30 June 2007 which equates to £6.0 million. The dividend will be paid on 30 November 2007 to shareholders on the register at the close of business on 16 November 2007. 7 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit for the period attributable to equity shareholders by the weighted average number of ordinary shares in issue during the period. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. Weighted average numbers of shares: 52 weeks 52 weeks ended ended 30 June 1 July 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Weighted average number of shares in issue during the period 200,363 200,000 Impact of share options 2,324 1,508 --------------------------------------- --------- --------- Number of shares for diluted earnings per share 202,687 201,508 --------------------------------------- --------- --------- In addition to standard earnings per share, an underlying earnings per share calculation is provided below which excludes non-recurring costs and income (net of tax). The earnings used for the standard and underlying calculations, together with the resultant earnings per share are shown below: 52 weeks 52 weeks ended ended 30 June 1 July 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Profit for the period 24,628 26,200 Non-recurring items (net of tax) 3,109 - --------------------------------------- --------- --------- Profit for the period excluding non-recurring items 27,737 26,200 --------------------------------------- --------- --------- Basic earnings per share - standard 12.3p 13.1p Basic earnings per share - underlying 13.8p 13.1p Full diluted earnings per share - standard 12.2p 13.0p Full diluted earnings per share - underlying 13.7p 13.0p 8 CASH FLOWS FROM OPERATING ACTIVITIES 2007 2006 £'000 £'000 --------------------------------------- --------- --------- Profit before tax 37,826 38,039 Adjusted for: Net financing costs 2,989 111 --------------------------------------- --------- --------- Operating profit 40,815 38,150 Depreciation and amortisation 9,529 8,325 Loss/(profit) on disposal of property, plant and equipment (1,130) 3 --------------------------------------- --------- --------- Operating cash flows before movements in working capital 49,214 46,478 --------------------------------------- --------- --------- (Increase) in inventories (4,312) (11,224) (Increase)/decrease in debtors 1,028 (2,636) Increase in creditors 4,480 2,523 --------------------------------------- --------- --------- Net movement in working capital 1,196 (11,337) (Decrease) in provisions (58) (54) Share based payments expense 234 31 Foreign exchange losses (1,286) - --------------------------------------- --------- --------- Cash flows from operating activities 49,300 35,118 --------------------------------------- --------- --------- 9 ANALYSIS OF MOVEMENT IN NET DEBT IAS 7 'Cash Flow Statements' does not require the disclosure of a net debt reconciliation. The Group has shown this reconciliation to assist in the interpretation of the financial statements. Net debt is defined as cash at bank less loan and overdraft balances. At 2 July Cash Flow Other At 30 June 2006 non cash 2007 changes £'000 £'000 £'000 £'000 --------------------------- -------- -------- -------- -------- Cash at bank and in hand 2,964 14,404 - 17,368 Bank overdrafts - (21) - (21) --------------------------- -------- -------- -------- -------- 2,964 14,383 - 17,347 Debt due within one year (150) 150 - - Debt due after one year - (40,000) - (40,000) --------------------------- -------- -------- -------- -------- Net debt 2,814 (25,467) - (22,653) --------------------------- -------- -------- -------- -------- This information is provided by RNS The company news service from the London Stock Exchange

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