27 August 2010
Headlam Group plc ("Headlam"), Europe's leading floorcoverings distributor, announces its Interim Financial Results for the six months ended 30 June 2010.
Financial highlights
|
2010 £000 |
2009 £000 |
Change |
|
|
|
|
Revenue |
254,884 |
253,354 |
+0.6% |
|
|
|
|
Underlying operating profit * |
9,350 |
9,015 |
+3.7% |
|
|
|
|
Profit before tax |
8,473 |
7,701 |
+10.0% |
|
|
|
|
Basic earnings per share |
7.3p |
6.7p |
+9.0% |
|
|
|
|
Dividend per share |
3.83p |
3.70p |
+3.5% |
|
|
|
|
Key points
· UK revenues increased by 0.3% on a like for like basis
· Indicators suggest UK performance ahead of the market
· Continental European revenues increased by 0.9% on a like for like basis
· Earnings increased by 9.0%
· Dividend increased by 3.5% from 3.70p to 3.83p
* Underlying operating profit for 2010 is arrived at by adding back exceptional pension costs of £0.18 million to the operating profit for the first six months amounting to £9.17 million.
Tony Brewer, Headlam's Group Chief Executive, said:
"We will continue with our strategy of concentrating on floorcovering distribution in the UK and Continental Europe. Utilising the business and management structure through which we operate, we are well positioned to sustain our out-performance of the floorcovering market trend and develop our business, principally by organic growth and also appropriate strategic acquisitions.
Trading in July and August 2010 has continued to be positive against the corresponding period in 2009 and in line with our internal expectations. Therefore, with the traditional busier autumn period ahead of us, we remain confident of achieving our objectives for the year."
Enquiries:
Headlam Group plc
Tony Brewer, Group Chief Executive Tel: 01675 433000
Steve Wilson, Group Finance Director
Chairman's Statement
I am pleased to report that whilst market conditions remain challenging, group revenue for the first six months of 2010 has shown improvement, increasing by 0.6% from £253.4 million to £254.9 million.
On a like for like basis, revenue increased in the UK by 0.3% and in Continental Europe by 0.9%. Trading in the UK was undoubtedly disrupted in January because of the unusually poor weather conditions and if we exclude this month, like for like revenue from February to June increased by 1.2%.
Underlying operating profit increased by 3.7% from £9.02 million to £9.35 million. Underlying operating profit for 2010 is arrived at by adding back exceptional pension costs of £0.18 million to the operating profit for the first six months, which amounted to £9.17 million.
Earnings and dividend
Basic earnings per share increased by 9.0% from 6.7p to 7.3p and the board have declared a 3.5% increase in the interim dividend from 3.70p to 3.83p. The dividend will be paid on 4 January 2011 to shareholders on the register at 3 December 2010.
UK operations
Through the group's UK structure of 49 autonomous businesses, we were able to improve our market position and increase share. The structure enables the group to out-perform the market when it is particularly challenging and provides opportunities for growth as conditions improve.
The 49 businesses operate from 18 distribution centres and 13 service centres and are positioned within five market sectors dependent upon their geographical focus or product offering. They are categorised as regional multi-product, national multi-product, regional commercial, residential specialist and commercial specialist.
This ensures that our high service levels to customers are maintained, which incorporates the ongoing launch of new products, a comprehensive stock holding and a distribution infrastructure to provide a next day delivery service.
With our autonomous management teams focused on their specific responsibilities, developing product with our suppliers and continually positioning new product into independent flooring retailers and contractors, indicators would suggest that our performance in the first half of 2010 exceeded the general market trend.
Our supplier base is well established and by working closely with them, we have launched 2,108 new products in the first half of 2010, supported by 393,478 new point of sale items positioned into independent flooring retailers and contractors. With the involvement and support of our suppliers, we have launched a new initiative under the Lifestyle Floors brand. This is initially focused on carpet products, but will be enhanced in the late autumn, by the addition of residential vinyl, wood and laminate. This initiative has been well received by independent flooring retailers and will further strengthen the group's market presence.
Customers, both in residential and commercial flooring, have maintained their market share with the number of active accounts, payment to terms and debtor days consistent with the previous year. The incidence of bad debts has slightly reduced compared with last year.
The overall product mix of carpet, residential vinyl, commercial flooring, wood, laminate and rugs, remained fairly constant during the first six months. However, there has been a moderate improvement in gross margin, due to an increased proportion of carpet cut length sales, rather than full rolls.
Continental Europe
Conditions in Continental Europe, particularly France and the Netherlands have been similar to the UK and these businesses have produced a satisfactory performance during the first half of 2010.
In Switzerland, we have produced a more positive result, particularly due to an increased proportion of commercial flooring, which has been developed over recent years.
The positive contribution from all three businesses has resulted in an increase in profitability in the first six months.
Board appointment
Andrew Eastgate, who was a partner at Pinsent Masons for nearly 20 years until 2004, was appointed to the board as a non-executive director on 17 May 2010. Andrew's extensive corporate knowledge and expertise complements the commercial and financial experience of our two other non-executive directors and we look forward to working with him in the future.
Investments
In May, we completed the purchase of a 110,000 square feet freehold distribution centre, located in Rochdale, to provide National Carpets with increased capacity to expand its activities. We are still progressing the project to relocate Faithfulls, our regional multi-product business in the southeast of England, to a development site in Hadleigh near Ipswich. We anticipate that the project to construct a 127,000 square feet purpose built freehold distribution centre, will now be completed late 2011.
There are no further plans in the medium term, for any additional major projects and therefore, capital expenditure will only relate to refurbishment.
Pensions
As mentioned in the 2009 Annual Report and Accounts, the company decided to offer deferred members of the UK defined benefit pension plan the opportunity to transfer out of the plan. This exercise has now completed with 54% of the members accepting the offer.
The total cost to the company in respect of the transfer will amount to £7.2 million of which, £1.2 million was expended before 30 June 2010. A further £5.0 million was transferred to accepting members during July and August 2010, with the balance to be transferred during September 2010.
The offer was made to reduce and limit the company's exposure to the future risk of escalating defined benefit pension liabilities. By way of illustration, the IAS19 deficit at 30 June 2010 would have been £25.2 million instead of the £18.2 million recorded in the Condensed Consolidated Interim Financial Statements and, on a buyout basis, the liability would have been £64.7 million instead of £47.6 million following the transfer.
Administration and actuarial costs associated with the exercise and included in the income statement for the first six months amounted to approximately £180,000. Further costs will be incurred during the second half of the year, but these are not expected to be significant.
Cash flow
Cash generated from operations, before changes in working capital, amounted to £11.9 million during the first six months of 2010 compared with £11.7 million in the corresponding period in 2009.
The net investment in working capital, £6.6 million, reverted back to a level more typically associated with the first six months of the year compared with the slightly more unusual cash inflow of £3.4 million which occurred during the first half of last year because of the reduction in revenue activity. This change in working capital cash flow meant that cash generated from operations during the first six months reduced from £15.1 million to £5.2 million.
Cash flows from investing activities were as anticipated and the net cash outflow from financing activities of £5.0 million, compared with the £2.8 million outflow last year, was mainly due to a repayment of borrowings and the cash outflow that occurred in connection with the offer made to deferred members of the UK defined benefit pension plan.
Overall, the first six months gave rise to a net decrease in cash of £10.3 million compared with £0.7 million decrease last year, the variance being principally due to the working capital cash flow as mentioned above. The group ended the first six months with net funds amounting to £0.4 million compared with net debt at
30 June 2009 amounting to £2.0 million and net funds at 31 December 2009 of £9.7 million.
Outlook
We will continue with our strategy of concentrating on floorcovering distribution in the UK and Continental Europe. Utilising the business and management structure through which we operate, we are well positioned to sustain our out-performance of the floorcovering market trend and develop our business, principally by organic growth and also appropriate strategic acquisitions.
Trading in July and August 2010 has continued to be positive against the corresponding period in 2009 and in line with our internal expectations. Therefore, with the traditional busier autumn period ahead of us, we remain confident of achieving our objectives for the year.
Graham Waldron
27 August 2010
Condensed Consolidated Interim Income Statement
Unaudited
|
Note |
Six months ended 30 June 2010 £000 |
Six months ended 30 June 2009 £000 |
Year ended 31 December 2009 £000 |
|
|
|
|
|
Revenue |
7 |
254,884 |
253,354 |
533,793 |
Cost of sales |
|
(177,358) |
(177,392) |
(371,533) |
Gross profit |
|
77,526 |
75,962 |
162,260 |
Distribution expenses |
|
(51,117) |
(49,081) |
(100,698) |
Administrative expenses |
|
(17,237) |
(17,866) |
(36,804) |
Operating profit |
7 |
9,172 |
9,015 |
24,758 |
Finance income |
8 |
2,186 |
1,878 |
3,764 |
Finance expenses |
8 |
(2,885) |
(3,192) |
(6,458) |
Net finance costs |
|
(699) |
(1,314) |
(2,694) |
Profit before tax |
|
8,473 |
7,701 |
22,064 |
Taxation |
9 |
(2,415) |
(2,156) |
(6,168) |
Profit for the period attributable to the equity shareholders |
7 |
6,058 |
5,545 |
15,896 |
|
|
|
|
|
Dividend paid per share |
11 |
11.00p |
19.70p |
19.70p |
|
|
|
|
|
Earnings per share |
|
|
|
|
Basic |
10 |
7.3p |
6.7p |
19.1p |
|
|
|
|
|
Diluted |
10 |
7.3p |
6.7p |
19.1p |
All group operations during the financial periods were continuing operations.
Condensed Consolidated Interim Statement of Comprehensive Income
Unaudited
|
|
Six months ended 30 June 2010 £000 |
Six months ended 30 June 2009 £000 |
Year ended 31 December 2009 £000 |
Profit for the period attributable to the equity shareholders |
|
6,058 |
5,545 |
15,896 |
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
Foreign exchange translation differences arising on translation of overseas operations |
|
(951) |
(3,614) |
(1,808) |
Actuarial gains and losses on defined benefit plans |
|
(4,230) |
(8,763) |
(10,042) |
Effective portion of changes in fair value of cash flow hedges |
|
(1) |
(53) |
(157) |
Transfers to profit or loss on cash flow hedges |
|
225 |
290 |
781 |
Income tax on other comprehensive income |
|
1,184 |
2,456 |
2,854 |
|
|
|
|
|
Other comprehensive expenses for the period |
|
(3,773) |
(9,684) |
(8,372) |
|
|
|
|
|
Total comprehensive income/(expenses) attributable to the equity shareholders for the period |
|
2,285 |
(4,139) |
7,524 |
Condensed Consolidated Interim Statement of Changes in Equity
Unaudited
|
Share capital £000 |
Share premium £000 |
Capital redemption reserve £000 |
Translation reserve £000 |
Cash flow hedging reserve £000 |
Treasury reserve £000 |
Retained earnings £000 |
Total equity £000 |
|
|
|
|
|
|
|
|
|
Balance at 1 January 2009 |
4,268 |
53,512 |
88 |
7,105 |
(848) |
(13,057) |
110,066 |
161,134 |
Total comprehensive income for the period |
- |
- |
- |
(3,614) |
237 |
- |
(762) |
(4,139) |
|
|
|
|
|
|
|
|
|
Transactions with equity shareholders, recorded directly in equity |
|
|
|
|
|
|
|
|
Share-based payments |
- |
- |
- |
- |
- |
- |
132 |
132 |
Deferred tax on share options |
- |
- |
- |
- |
- |
- |
1 |
1 |
Dividends to equity holders |
- |
- |
- |
- |
- |
- |
(16,354) |
(16,354) |
Total contributions by and distributions to equity shareholders |
- |
- |
- |
- |
- |
- |
(16,221) |
(16,221) |
Balance at 30 June 2009 |
4,268 |
53,512 |
88 |
3,491 |
(611) |
(13,057) |
93,083 |
140,774 |
|
|
|
|
|
|
|
|
|
Balance at 1 July 2009 |
4,268 |
53,512 |
88 |
3,491 |
(611) |
(13,057) |
93,083 |
140,774 |
Total comprehensive income for the period |
- |
- |
- |
1,806 |
387 |
- |
9,470 |
11,663 |
|
|
|
|
|
|
|
|
|
Transactions with equity shareholders, recorded directly in equity |
|
|
|
|
|
|
|
|
Share-based payments |
- |
- |
- |
- |
- |
- |
184 |
184 |
Deferred tax on share options |
- |
- |
- |
- |
- |
- |
8 |
8 |
Total contributions by and distributions to equity shareholders |
- |
- |
- |
- |
- |
- |
192 |
192 |
Balance at 31 December 2009 |
4,268 |
53,512 |
88 |
5,297 |
(224) |
(13,057) |
102,745 |
152,629 |
Condensed Consolidated Interim Statement of Changes in Equity continued
Unaudited
|
Share capital £000 |
Share premium £000 |
Capital redemption reserve £000 |
Translation reserve £000 |
Cash flow hedging reserve £000 |
Treasury reserve £000 |
Retained earnings £000 |
Total equity £000 |
|
|
|
|
|
|
|
|
|
Balance at 1 January 2010 |
4,268 |
53,512 |
88 |
5,297 |
(224) |
(13,057) |
102,745 |
152,629 |
Total comprehensive income for the period |
- |
- |
- |
(951) |
224 |
- |
3,012 |
2,285 |
|
|
|
|
|
|
|
|
|
Transactions with equity shareholders, recorded directly in equity |
|
|
|
|
|
|
|
|
Share-based payments |
- |
- |
- |
- |
- |
- |
166 |
166 |
Deferred tax on share options |
- |
- |
- |
- |
- |
- |
(12) |
(12) |
Dividends to equity holders |
- |
- |
- |
- |
- |
- |
(9,132) |
(9,132) |
Total contributions by and distributions to equity shareholders |
- |
- |
- |
- |
- |
- |
(8,978) |
(8,978) |
Balance at 30 June 2010 |
4,268 |
53,512 |
88 |
4,346 |
- |
(13,057) |
96,779 |
145,936 |
Condensed Consolidated Interim Balance Sheet
Unaudited
|
|
At 30 June 2010 £000 |
At 30 June 2009 £000 |
At 31 December 2009 £000 |
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Property, plant and equipment |
|
99,937 |
102,063 |
96,530 |
Intangible assets |
|
13,210 |
13,210 |
13,210 |
Deferred tax assets |
|
3,685 |
3,712 |
4,731 |
|
|
116,832 |
118,985 |
114,471 |
Current assets |
|
|
|
|
Inventories |
|
105,429 |
106,399 |
99,637 |
Trade and other receivables |
|
98,026 |
96,120 |
101,149 |
Cash and cash equivalents |
|
34,616 |
34,977 |
45,737 |
Assets held for sale |
|
- |
- |
2,275 |
|
|
238,071 |
237,496 |
248,798 |
Total assets |
|
354,903 |
356,481 |
363,269 |
|
|
|
|
|
Liabilities |
|
|
|
|
Current liabilities |
|
|
|
|
Bank overdraft |
|
- |
(1,198) |
(758) |
Other interest-bearing loans and borrowings |
|
(215) |
(5,749) |
(900) |
Trade and other payables |
|
(150,726) |
(149,452) |
(143,216) |
Employee benefits |
|
(2,545) |
(2,460) |
(2,506) |
Income tax payable |
|
(4,885) |
(7,057) |
(8,615) |
|
|
(158,371) |
(165,916) |
(155,995) |
Non-current liabilities |
|
|
|
|
Other interest-bearing loans and borrowings |
|
(33,958) |
(30,000) |
(34,392) |
Employee benefits |
|
(16,638) |
(19,791) |
(20,253) |
|
|
(50,596) |
(49,791) |
(54,645) |
Total liabilities |
|
(208,967) |
(215,707) |
(210,640) |
Net assets |
|
145,936 |
140,774 |
152,629 |
|
|
|
|
|
Equity attributable to equity holders |
|
|
|
|
of the parent |
|
|
|
|
Share capital |
|
4,268 |
4,268 |
4,268 |
Share premium |
|
53,512 |
53,512 |
53,512 |
Other reserves |
|
(8,623) |
(10,089) |
(7,896) |
Retained earnings |
|
96,779 |
93,083 |
102,745 |
Total equity |
|
145,936 |
140,774 |
152,629 |
Condensed Consolidated Interim Cash Flow Statements
Unaudited
|
Note |
Six months ended 30 June 2010 £000 |
Six months ended 30 June 2009 £000 |
Year ended 31 December 2009 £000 |
Cash flows from operating activities |
|
|
|
|
Profit before tax for the period |
|
8,473 |
7,701 |
22,064 |
Adjustments for: |
|
|
|
|
Depreciation, amortisation and impairment |
|
2,578 |
2,604 |
6,524 |
Finance income |
|
(2,186) |
(1,878) |
(3,764) |
Finance expense |
|
2,885 |
3,192 |
6,458 |
Profit on sale of property, plant and equipment |
|
(38) |
(34) |
(102) |
Share-based payments |
|
166 |
132 |
316 |
Operating profit before changes |
|
|
|
|
in working capital and other payables |
|
11,878 |
11,717 |
31,496 |
Change in inventories |
|
(6,387) |
(904) |
6,618 |
Change in trade and other receivables |
|
3,069 |
7,135 |
3,028 |
Change in trade and other payables |
|
(3,321) |
(2,868) |
2,511 |
Cash generated from the operations |
|
5,239 |
15,080 |
43,653 |
Interest paid |
|
(618) |
(1,306) |
(2,272) |
Tax paid |
|
(3,927) |
(4,294) |
(7,425) |
Additional contributions to defined benefit plan |
|
(1,236) |
(1,305) |
(2,607) |
Net cash flow from operating activities |
|
(542) |
8,175 |
31,349 |
Cash flows from investing activities |
|
|
|
|
Proceeds from sale of property, plant and equipment |
|
1,425 |
38 |
664 |
Interest received |
|
284 |
457 |
846 |
Acquisition of property, plant and equipment |
|
(6,530) |
(6,589) |
(7,313) |
Net cash flow from investing activities |
|
(4,821) |
(6,094) |
(5,803) |
Cash flows from financing activities |
|
|
|
|
(Repayment)/proceeds from borrowings |
|
(742) |
1,855 |
1,152 |
Pension buy-out initiative |
|
(1,159) |
- |
- |
Dividends paid |
|
(3,072) |
(4,649) |
(16,354) |
Net cash flow from financing activities |
|
(4,973) |
(2,794) |
(15,202) |
Net (decrease)/increase in cash and cash |
|
|
|
|
equivalents |
|
(10,336) |
(713) |
10,344 |
Cash and cash equivalents at 1 January |
|
44,979 |
35,193 |
35,193 |
Effect of exchange rate fluctuations on cash held |
|
(27) |
(701) |
(558) |
Cash and cash equivalents at end of period |
12 |
34,616 |
33,779 |
44,979 |
Notes to the Condensed Consolidated Interim Financial Statements
Unaudited
1 REPORTING ENTITY
Headlam Group plc the "company" is a company incorporated in the UK. The Condensed Consolidated Interim Financial Statements consolidate those of the company and its subsidiaries which together are referred to as the "group" as at and for the six months ended 30 June 2010.
The Consolidated Financial Statements of the group as at and for the year ended 31 December 2009 are available upon request from the company's registered office or the website.
The comparative figures for the financial year ended 31 December 2009 are not the group's statutory accounts for that financial year. Those accounts have been reported on by the group's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2)or(3) of the Companies Act 2006.
These Condensed Consolidated Interim Financial Statements have not been audited or reviewed by the auditor pursuant to the Auditing Practices Board's Guidance on Financial Information.
2 STATEMENT OF COMPLIANCE
These Condensed Consolidated Interim Financial Statements have been prepared and approved by the directors in accordance with International Financial Reporting Standard (IFRS) IAS 34 Interim Financial Reporting as adopted by the EU (adopted IAS 34). They do not include all of the information required for full annual financial statements, and should be read in conjunction with the Consolidated Financial Statements of the group as at and for the year ended 31 December 2009.
These Condensed Consolidated Interim Financial Statements were approved by the board of directors on
27 August 2010.
3 SIGNIFICANT ACCOUNTING POLICIES
Impact of newly adopted accounting standards
The Condensed Consolidated Interim Financial information has been prepared applying the accounting policies and presentation that were applied in the preparation of the group's published Consolidated Financial Statements for the year ended 31 December 2009 except for the following accounting standards and interpretations which are effective for the group from 1 January 2010:
· International Accounting Standard (IAS) 27 'Consolidated and separate financial statements (revised 2008)'
· International Financial Reporting Standard (IFRS) 3 'Business combinations (revised 2008)'
· International Financial Reporting Interpretations Committee (IFRIC) 12 'Service concession arrangements'
· IFRIC 15 'Agreements for the construction of real estate'
· IFRIC 16 'Hedges of a net investment in a foreign operation'
Notes to the Condensed Consolidated Interim Financial Statements continued
Unaudited
3 SIGNIFICANT ACCOUNTING POLICIES - continued
As outlined in the audited Financial Statements for the year ended 31 December 2009, revised IFRS 3 'Business Combinations (2008)' incorporates certain changes that amend the group's current accounting policies in respect of business combinations, the main change being that transaction costs, other than share and debt issue costs, will be expensed as incurred. The adoption of amended IAS 27 'Consolidated and Separate Financial Statements (2008)' requires accounting for changes in ownership interests by the group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in profit or loss.
All other new, revised or amended standards and interpretations have not had any material impact on the group's results or presentation of these Condensed Interim Financial Statements.
New standards and interpretations not yet adopted |
The following standards and interpretations have been published, endorsed by the EU, and are available for early adoption, but have not yet been applied by the group in these Condensed Interim Financial Statements.
· Amendments to IAS 32 'Classification of Rights Issues' - requires that rights, options or warrants to acquire a fixed number of the entity's own equity instruments for a fixed amount of any currency are equity instruments if the entity offers the rights options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments.
· IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments' - deals with how entities should measure equity instruments issued in a debt for equity swap. It addresses the accounting for such a transaction by the debtor only.
The above new standards, amendments to standards or interpretations will become mandatory for the group's 2011 Consolidated Financial Statements and are not expected to have a material impact.
4 GOING CONCERN
The directors have reviewed current performance and forecasts, combined with borrowing facilities and expenditure commitments, including capital expenditure, pensions and proposed dividends. After making enquiries, the directors have a reasonable expectation that the group has adequate financial resources to continue its current operations, including contractual and commercial commitments for the foreseeable future. For these reasons, the going concern basis has been adopted in preparing the financial statements.
The group has in place £34.2 million of committed credit facilities and £44.8 million of uncommitted facilities. The uncommitted facilities are due to mature at various times during 2011 and the directors believe that appropriate replacements will be renewed in advance of the maturity date.
5 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.
Notes to the Condensed Consolidated Interim Financial Statements continued
Unaudited
5 ESTIMATES - continued
In preparing these Condensed Consolidated Interim Financial Statements, the significant judgements made by management in applying the group's accounting policies and key sources of estimation uncertainty were the same as those that applied to the Consolidated Financial Statements as at and for the year ended 31 December 2009.
6 FINANCIAL RISK MANAGEMENT
All aspects of the group's financial risk management objectives and policies are consistent with that disclosed in the Consolidated Financial Statements as at and for the year ended 31 December 2009.
7 SEGMENT REPORTING
The group has 54 operating segments which represent the individual trading operations throughout the UK
(49 segments) and Continental Europe (5 segments). Each of the operations is wholly aligned to the sales, marketing, supply and distribution of floorcovering products. The operating results of each are regularly reviewed by the Chief Operating Decision Maker, which is deemed to be the Group Chief Executive. Discrete financial information is available for each and used by the Group Chief Executive to make decisions about resources to be allocated to the segment and assess its performance.
The operating segments have been aggregated to the extent that they have similar economic characteristics, with relevance to products/services, type and class of customer, methods of sale and distribution and the regulatory environment in which they operate. The group's internal management structure and financial reporting systems differentiate the operating segments on the basis of the differing regulatory and economic environment in the UK and Continental Europe and accordingly report these as two separate reportable segments. This distinction is embedded in the construction of operating reports reviewed by the Group Chief Executive, the board and the executive management team and forms the basis for the presentation of operating segment information given below.
|
UK |
Continental Europe |
Total |
||||||
|
30 June 2010 £000 |
30 June 2009 £000 |
31 Dec 2009 £000 |
30 June 2010 £000 |
30 June 2009 £000 |
31 Dec 2009 £000 |
30 June 2010 £000 |
30 June 2009 £000 |
31 Dec 2009 £000 |
Revenue |
|
|
|
|
|
|
|
|
|
External revenues |
204,340 |
202,827 |
429,646 |
50,544 |
50,527 |
104,147 |
254,884 |
253,354 |
533,793 |
|
|
|
|
|
|
|
|
|
|
Depreciation |
1,319 |
1,406 |
2,834 |
356 |
321 |
733 |
1,675 |
1,727 |
3,567 |
|
|
|
|
|
|
|
|
|
|
Reportable segment result |
8,686 |
8,449 |
23,106 |
1,018 |
837 |
2,487 |
9,704 |
9,286 |
25,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable segment assets |
218,205 |
217,708 |
223,044 |
44,783 |
46,977 |
49,636 |
262,988 |
264,685 |
272,680 |
|
|
|
|
|
|
|
|
|
|
Capital expenditure |
441 |
460 |
926 |
384 |
2,017 |
2,197 |
825 |
2,477 |
3,123 |
|
|
|
|
|
|
|
|
|
|
Reportable segment liabilities |
(122,181) |
(115,703) |
(123,088) |
(22,486) |
(22,631) |
(20,662) |
(144,667) |
(138,334) |
(143,750) |
During the periods shown above there have been no inter-segment revenues.
Notes to the Condensed Consolidated Interim Financial Statements continued
Unaudited
7 SEGMENT REPORTING - continued
Reconciliations of reportable segment profit, assets and liabilities and other material items:
|
|
|
|
30 June 2010 £000 |
30 June 2009 £000 |
31 Dec 2009 £000 |
|||
Profit for the period |
|
|
|
|
|
|
|||
Total profit for reportable segments |
|
|
9,704 |
9,286 |
25,593 |
||||
Impairment of assets |
|
|
|
- |
- |
(1,211) |
|||
Unallocated (expense)/income |
|
|
|
(532) |
(271) |
376 |
|||
|
|
|
|
|
|
|
|||
Operating profit |
|
|
|
9,172 |
9,015 |
24,758 |
|||
|
|
|
|
|
|
|
|||
Finance income |
|
|
|
2,186 |
1,878 |
3,764 |
|||
Finance expense |
|
|
|
(2,885) |
(3,192) |
(6,458) |
|||
|
|
|
|
|
|
|
|||
Profit before taxation |
|
|
|
8,473 |
7,701 |
22,064 |
|||
Taxation |
|
|
|
(2,415) |
(2,156) |
(6,168) |
|||
|
|
|
|
|
|
|
|||
Profit for the period |
|
|
|
6,058 |
5,545 |
15,896 |
|||
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|||
|
|
|
|
30 June 2010 £000 |
30 June 2009 £000 |
31 Dec 2009 £000 |
|||
Assets |
|
|
|
|
|
|
|||
Total assets for reportable segments |
|
|
262,988 |
264,685 |
272,680 |
||||
Unallocated assets: |
|
|
|
|
|
|
|||
Properties, plant and equipment |
|
|
|
88,231 |
88,084 |
83,583 |
|||
Deferred tax assets |
|
|
|
3,685 |
3,712 |
4,731 |
|||
Assets held for sale |
|
|
|
- |
- |
2,275 |
|||
|
|
|
|
|
|
|
|||
Total assets |
|
|
|
354,904 |
356,481 |
363,269 |
|||
|
|
|
|
|
|
|
|||
Liabilities |
|
|
|
|
|
|
|||
Total liabilities for reportable segments |
|
|
(144,667) |
(138,334) |
(143,750) |
||||
Unallocated liabilities: |
|
|
|
|
|
|
|||
Employee benefits |
|
|
|
(19,183) |
(22,251) |
(22,759) |
|||
Net borrowings |
|
|
|
(34,173) |
(35,749) |
(35,292) |
|||
Income tax payable |
|
|
|
(4,884) |
(7,057) |
(8,615) |
|||
Proposed dividend |
|
|
|
(6,060) |
(11,705) |
- |
|||
Derivative liabilities |
|
|
|
- |
(611) |
(224) |
|||
|
|
|
|
|
|
|
|||
Total liabilities |
|
|
|
(208,967) |
(215,707) |
(210,640) |
|||
|
|
|
|
|
|
|
|||
Notes to the Condensed Consolidated Interim Financial Statements continued
Unaudited
7 SEGMENT REPORTING - continued
|
|
|
|
|
|
|
|
|
|
|
Reportable segment totals |
Group items |
Consolidated totals |
Other material items 30 June 2010 |
|
|
|
£000 |
£000 |
£000 |
Capital expenditure |
|
|
|
825 |
5,704 |
6,529 |
Depreciation |
|
|
|
1,675 |
903 |
2,578 |
|
|
|
|
|
|
|
|
|
|
|
2,500 |
6,607 |
9,107 |
Other material items 30 June 2009 |
|
|
|
|
|
|
Capital expenditure |
|
|
|
2,477 |
4,112 |
6,589 |
Depreciation |
|
|
|
1,727 |
877 |
2,604 |
|
|
|
|
|
|
|
|
|
|
|
4,204 |
4,989 |
9,193 |
|
|
|
|
|
|
|
Other material items 31 December 2009 |
|
|
|
|
|
|
Capital expenditure |
|
|
|
3,123 |
4,190 |
7,313 |
Depreciation |
|
|
|
3,567 |
1,746 |
5,313 |
Impairment of assets |
|
|
|
- |
1,211 |
1,211 |
|
|
|
|
|
|
|
|
|
|
|
6,690 |
7,147 |
13,837 |
Each segment is a continuing operation.
8 FINANCE INCOME AND EXPENSE
|
Six months ended 30 June 2010 £000 |
Six months ended 30 June 2009 £000 |
Year ended 31 December 2009 £000 |
Interest income: |
|
|
|
Bank interest |
179 |
365 |
641 |
Other |
129 |
66 |
62 |
Return on defined benefit plan assets |
1,878 |
1,447 |
3,061 |
Finance income |
2,186 |
1,878 |
3,764 |
|
|
|
|
Interest expense: |
|
|
|
Bank loans, overdrafts and other financial expenses |
(536) |
(1,171) |
(2,256) |
Interest on defined benefit plan obligation |
(2,349) |
(2,021) |
(4,202) |
Finance expenses |
(2,885) |
(3,192) |
(6,458) |
Notes to the Condensed Consolidated Interim Financial Statements continued
Unaudited
9 TAXATION
The group consolidated effective tax rate in respect of continuing operations for the six months ended
30 June 2010 was 28.5% (for the six months ended 30 June 2009: 28%, for the year ended
31 December 2009: 28%).
The Emergency Budget on 22 June 2010 announced that the UK corporation tax rate will reduce from 28% to 24% over a period of 4 years from 2011. The first reduction in the UK corporation tax rate from 28% to 27% will be effective from 1 April 2011. If the rate change from 28% to 27% had been substantively enacted on or before the balance sheet date it would have had the effect of reducing the deferred tax asset recognised at that date by £132,000. It has not yet been possible to quantify the full anticipated effect of the announced further 3% rate reduction, although it is expected to further reduce the company's future current tax charge and reduce the company's deferred tax assets accordingly.
10 EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is based on the following data:
|
Six months ended 30 June 2010 £000 |
Six months ended 30 June 2009 £000 |
Year ended 31 December 2009 £000 |
Earnings |
|
|
|
Earnings for the purposes of basic and diluted earnings per share being profit attributable to equity holders of the parent |
6,058 |
5,545 |
15,896 |
|
|
|
|
|
2010 |
2009 |
2009 |
Number of shares |
|
|
|
Weighted average number of ordinary shares for the purposes of basic earnings per share |
83,115,096 |
83,115,096 |
83,115,096 |
|
|
|
|
Effect of diluted potential ordinary shares: |
|
|
|
Weighted average number of ordinary shares at period end |
83,115,096 |
83,115,096 |
83,115,096 |
Share options |
982,135 |
613,727 |
595,162 |
Number of shares that would have been issued at fair value |
(809,858) |
(540,301) |
(500,540) |
|
|
|
|
Weighted average number of ordinary shares for the purposes of diluted earnings per share |
83,287,373 |
83,188,522 |
83,209,718 |
Notes to the Condensed Consolidated Interim Financial Statements continued
Unaudited
11 DIVIDENDS
|
Six months ended 30 June 2010 £000 |
Six months ended 30 June 2009 £000 |
Year ended 31 December 2009 £000 |
|
|
|
|
Interim dividend for 2009 of 3.70p paid 4 January 2010 |
3,072 |
- |
- |
Final dividend for 2009 of 7.30p proposed |
6,060 |
- |
- |
Interim dividend for 2008 of 5.60p paid 2 January 2009 |
- |
4,649 |
4,649 |
Final dividend for 2008 of 14.10p proposed |
- |
11,705 |
11,705 |
|
9,132 |
16,354 |
16,354 |
The final proposed dividend for 2009 of 7.30p per share was authorised by shareholders at the Annual General Meeting on 25 June 2010 and paid on 1 July 2010. The final proposed dividend for 2008 of 14.10p per share was authorised by shareholders at the Annual General Meeting on 26 June 2009 and paid on 1 July 2009.
12 CASH, CASH EQUIVALENTS AND BANK OVERDRAFTS
|
|
At 30 June 2010 £000 |
At 30 June 2009 £000 |
At 31 December 2009 £000 |
|
|
|
|
|
Cash and cash equivalents per balance sheet |
|
34,616 |
34,977 |
45,737 |
Bank overdrafts |
|
- |
(1,198) |
(758) |
Cash and cash equivalents per cash flow statements |
|
34,616 |
33,779 |
44,979 |
13 CAPITAL COMMITMENTS
As at 30 June 2010, the group had contractual commitments relating to the purchase of property, plant and equipment of £53,000 (30 June 2009: £122,000, 31 December 2009: £225,000). These commitments are expected to be settled prior to 31 December 2010.
14 RELATED PARTIES
The group has a related party relationship with its subsidiaries and with its directors. There have been no changes to the nature of related party transactions entered into since the last annual report.
Statement of Directors' Responsibilities
We confirm to the best of our knowledge: |
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(a) the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union; |
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(b) the interim management report includes a fair review of the information required by:
(i) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(ii) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so. |
This report has been approved by the board of directors and signed on its behalf by
Graham Waldron
Chairman
27 August 2010
The Interim Financial Results for the six months ended 30 June 2010 will be posted to shareholders on
13 September 2010 and copies will be available from that date from the company's registered office or website.
Registered office
Headlam Group plc
PO Box 1
Gorsey Lane
Coleshill
Birmingham
B46 1LW
Website: www.headlam.com