Half Yearly Report

RNS Number : 2920Q
Headlam Group PLC
29 August 2014
 



 

29 August 2014

 

Interim Financial Results for the six month period ended 30 June 2014

Headlam Group plc ("Headlam"), Europe's leading floorcoverings distributor, announces its Interim Financial Results for the six months ended 30 June 2014.

 

Financial highlights


2014

£000

2013

£000

Change





Revenue

301,580

280,385

+7.6%





Operating profit

11,331

9,738

+16.4%





Profit before tax

10,759

9,076

+18.5%





Basic earnings per share

10.2p

8.4p

+21.4%





Dividend per share

5.20p

4.65p

+11.8%





Key points                                                                     

 

·     Further market gains in the UK with revenue increasing by 7.9% on a like for like basis

 

·     Continental European contribution to group operating profit improved

 

·     Basic earnings per share up by 21.4 %

 

·     Interim dividend increased by 11.8% to 5.2p

 

·     Increase in net funds to £11.7 million compared with £4.8 million at 30 June 2013

 

 

Tony Brewer, Headlam's Group Chief Executive, said:

 

"The particularly positive performance for the first six months, due in part to improved market conditions, is principally as a result of the various business initiatives combined with the efforts of management, sales representatives and all employees.

 

The momentum created during the first half as a result of these factors has continued into July and August and is evident in both the commercial and residential sectors. Assuming that normal seasonality in the traditionally busy autumn selling period prevails, the group is very well placed to continue this trend for the remainder of 2014."

 

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 group revenue in the first six months of 2014 increased from £280.4 million to £301.6 million.  Improving market conditions in the UK contributed to a like for like revenue increase of 7.9% and with more stable conditions on the Continent, we experienced only a slight revenue decline of 0.1%.

 

 

Earnings and dividend

Basic earnings per share increased by 21.4% from 8.4p to 10.2p compared with the first six months of 2013 and as a result, your board has decided to increase the interim dividend by 11.8% from 4.65p to 5.20p.  The dividend will be paid on 2 January 2015 to shareholders on the register at 5 December 2014.

 

UK operations

The first six months of 2014 have produced a particularly positive performance and whilst undoubtedly improved market conditions will have contributed to the result, the various initiatives introduced across all our businesses, including management and sales representative training, enhanced point of sale and improved selling techniques, have enabled the group to out-perform the overall market.

 

The group now operates with 54 businesses from 18 distribution centres and 26 service centres and continues to be structured in the five business sectors of regional multi-product, national multi-product, regional commercial, residential specialist and commercial specialist.  The increase in revenue reflected a slightly stronger performance from our residential business, where the growth rate was greater than our commercial business resulting in the overall product mix moving marginally to 69% residential and 31% commercial.

 

We have recently established service centres in Stoke and Norwich and a further opening in Hayes, west London is imminent.  This will result in 43 collection points in the UK to assist in the servicing of our customers' requirements and there are plans to open additional service centres, in strategic geographical locations, to further extend the service proposition for our customers.

 

During the last five years when markets and trading have been particularly difficult, we decided to retain the group's structure in order to maintain our service levels.  It is now particularly encouraging that the regional and national multi-product businesses, which historically have been the foundation of the group's success, are recovering from their recent subdued performances and are now once again providing a platform for growth and contributing to the group's improving performance.

 

The second phase of our Management Training Programme for general and sales management has now been completed.  Sales representatives are currently undertaking their phase two training, all of which is intended to improve communication, individual motivation, preparation and ultimately an improved service and business development with our customers.

 

The Customer Relationship Management App ("CRM"), utilised on our management and sales representatives' iPads, continues to advance and is now a hugely beneficial facility, particularly for our 419 sales representatives.  They collectively make over 530,000 visits each year to customers and the iPad CRM, in conjunction with the training programmes, ensures that our sales representatives are fully prepared when visiting a customer, with clearly focused objectives, and are able to measure their achievement whilst interacting with their sales manager.

 

Market presence in independent floorcovering retailers and contractors continues to be enhanced through our ongoing product development with suppliers, resulting in the launch of 1,830 new products, supported by 319,796 point of sale items.  Lifestyle Floors, which continues to take a more prominent market position, now has a huge presence in independent floorcovering retailers providing point of sale for each of the key residential product categories of carpet, vinyl, wood, laminate and luxury vinyl tile.  With the constant launch of new products through Lifestyle Floors and our other business activities, we will continue to provide the independent floorcovering retailer and contractor with a comprehensive selection of product initiatives into the UK market.

 

Hall's Floorings and Fell's Carpets, the businesses acquired during 2013, have been fully integrated operationally, whilst maintaining their individual and autonomous sales and marketing activities.  These businesses are now making a positive contribution to the group's results.  We continue to assess similar acquisition opportunities to further strengthen our geographical or product position where appropriate.

 

As reflected in our increase in revenue, the independent floorcovering retailer and contractor are trading positively.  A measure of their financial health is that their payment activity has resulted in a further reduction in outstanding debtor days and the occurrence of bad debts continues to decline.

 

The project to extend the Coleshill distribution hub to 300,000 square feet was completed in January and is now fully operational both to the benefit of the businesses directly operating from Coleshill and the enhancement it provides for the group's overall supply chain management.

 

We are now intending to proceed with the development of a new purpose-built 145,000 square feet distribution facility in the south-east of England for our regional multi-product business, Faithfulls.  The enlarged facility, to be located in Ipswich, will allow Faithfulls to extend its product offering, increase its service and enhance its historically strong customer relationships.

 

 

Continental Europe

It is pleasing to report an improved performance from our businesses in France and the Netherlands, where a slight improvement in market conditions, in conjunction with local initiatives, has delivered an increase in profitability.  Unfortunately, market conditions in Switzerland continue to hamper our overall development in Continental Europe.

 

 

Cash flow

The cash flow from operating profit, before changes in working capital and other payables, amounted to £13.9 million compared with £12.3 million during the comparative six months in 2013.  The increase was largely attributable to the £1.7 million improvement in profit before tax during the first six months of 2014.

 

Net working capital cash outflow amounted to £3.5 million compared with a net cash outflow of £8.9 million during the equivalent period in 2013.  The group's operations typically lead to an increase in net working capital investment during the first six months which then tends to reverse through the second half of the year.

 

On average, this characteristic of the group's operations would normally give rise to a net working capital investment during the first six months equating to approximately 3.5% of revenue for the period.  However, this year, the investment level, measured by reference to group revenue for the first six months, has been confined to 1.2% due to increased levels of activity during the period.  If trading during the second half of the year continues in line with internal expectations, it is likely that the level of net working capital investment will double.

 

As a result of the reduced first half working capital investment, cash generated from operations amounted to £5.1 million compared with a cash outflow of £1.7 million during the corresponding period in 2013.

 

Cash outflows from investing activities during the first half of 2014 totalled £3.8 million, which was £2.0 million down on the previous year's cash outflow due to the completion of the investment in the Coleshill extension and no acquisition activity during this year's first half. 

 

Cash outflows from financing activities were up £5.0 million on the previous year due to the repayment of term debt.

 

Overall, cash and cash equivalents decreased during the first six months by £7.5 million compared with a decrease of £11.4 million during the equivalent period in 2013. As shown below, the group ended the first six months with net funds of £11.7 million compared with £4.8 million at 30 June 2013, and £14.0 million at 31 December 2013.

 

 

Changes in net funds

 

 

At

1 January

2014

£000

 

Cash

flows

£000

 

Translation

differences

£000

At

30 June

2014

£000

 

 

 

 

 

Cash at bank and in hand

47,477

(6,591)

(67)

40,819

Bank overdraft

-

(944)

19

(925)

 

 

 

 

 

 

47,477

(7,535)

(48)

39,894

 

 

 

 

 

Debt due within one year

(218)

-

8

(210)

 

 

 

 

 

Debt due after one year

(33,239)

5,089

120

(28,030)

 

 

 

 

 

 

14,020

(2,446)

80

11,654

 

 

Employee benefits

The actuarial assumptions at the half year have been derived using the same methodology adopted for 31 December 2013, but based on economic market conditions as at 30 June 2014.  Over the six month period, there has been a fall in the discount rate of 0.2%, which has increased all the liabilities, and a fall in the assumed rate of inflation of 0.1%, which has reduced the liabilities linked to inflation, compared to the assumptions used at 31 December 2013.  Therefore, the change in the discount rate assumption has been the predominant factor giving rise to the modest increase in the employee benefits liability, £16.0 million, compared with the liability at 31 December 2013 of £15.6 million.

 

The net actuarial losses arising from changes in the financial assumptions in the disclosures at 31 December 2013 of £0.08 million were lower than at 30 June 2014, £1.1 million, because during 2013, the increase in the inflation assumption of 0.5% had a greater impact in offsetting the increase in the discount rate of 0.3%.

 

 

Principal risks and uncertainties

The board has ultimate responsibility for identifying and managing the effect of risk and uncertainty on the group's business, results and financial condition.  Whilst the board maintains a policy of continuous identification and review, it nevertheless recognises that a number of risks and uncertainties lie beyond its control.

 

Currently, the key risks and uncertainties, which have or can potentially affect the group's operations are, market demand, competition, credit risk, IT failure, people, pension costs, legislation and regulation.  The potential impact and mitigation of these risks and uncertainties are discussed in more detail on pages 28 and 29 of the 2013 Annual Report and Accounts.

 

 

Outlook

The particularly positive performance for the first six months, due in part to improved market conditions, is principally as a result of the various business initiatives combined with the efforts of management, sales representatives and all employees.

 

The momentum created during the first half as a result of these factors has continued into July and August and is evident in both the commercial and residential sectors. Assuming that normal seasonality in the traditionally busy autumn selling period prevails, the group is very well placed to continue this trend for the remainder of 2014.

 

 



Condensed Consolidated Interim Income Statement

Unaudited

 

 


Note

Six months ended

30 June

2014

£000

Six months ended

30 June

2013

£000

 

* Year ended

31 December 2013

£000






Revenue

2

301,580

280,385

603,051

Cost of sales


(212,104)

(195,751)

(421,796)

Gross profit


89,476

84,634

181,255

Distribution expenses


(58,515)

(56,161)

(115,067)

Administrative expenses


(19,630)

(18,735)

(43,860)

Operating profit

2

11,331

9,738

22,328

Finance income

3

126

96

629

Finance expenses

3

(698)

(758)

(1,870)

Net finance costs


(572)

(662)

(1,241)

Profit before tax


10,759

9,076

21,087

Taxation

4

(2,313)

(2,110)

(6,146)

Profit for the period attributable to the equity

 shareholders

 

2

 

8,446

 

6,966

 

14,941






Dividend paid per share

6

15.30p

14.85p

14.85p






Earnings per share





Basic

5

10.2p

8.4p

18.0p






Diluted

5

10.0p

8.3p

17.9p

 

All group operations during the financial periods were continuing operations.

 

* Included within administrative expenses in the results for the year ended 31 December 2013 are non-underlying items that relate to the impairment of intangible and tangible fixed assets, totalling £5,352,000, details of which can be found in the Annual Report of the group.



Condensed Consolidated Interim Statement of Comprehensive Income

Unaudited

 

 


Six months

 ended

30 June

 2014

£000

Six months

 ended

30 June

 2013

£000

 

Year ended

31 December

 2013

£000

Profit for the period attributable to the equity

  shareholders

 

8,446

 

6,966

 

14,941





Other comprehensive income:




Items that will never be reclassified to profit or loss




Re-measurement of defined benefit plans

(1,391)

(410)

450

Related tax

291

(124)

(529)


(1,100)

(534)

(79)

Items that are or may be reclassified to profit or loss




Foreign exchange translation differences arising on

  translation of overseas operations

 

(548)

 

999

 

397

Effective portion of changes in fair value of cash flow hedges

(15)

75

115

Transfers to profit or loss on cash flow hedges

67

68

137

Related tax

(13)

(14)

(65)


(509)

1,128

584





Other comprehensive (expense)/income for the period

(1,609)

594

505





Total comprehensive income attributable to the equity shareholders for the period

 

6,837

 

7,560

 

15,446

 

 



Condensed Consolidated Interim Statement of Financial Position

Unaudited

 

 



At

30 June

2014

£000

At

30 June

2013

£000

At

31 December 2013

£000

Assets





Non-current assets





Property, plant and equipment


104,434

99,608

103,079

Intangible assets


10,013

13,210

10,013

Deferred tax assets


2,393

2,173

2,388



116,840

114,991

115,480

Current assets





Inventories


120,624

120,656

115,678

Trade and other receivables


113,525

109,932

119,488

Cash and cash equivalents


40,819

40,444

47,477



274,968

271,032

282,643

Total assets


391,808

386,023

398,123






Liabilities





Current liabilities





Bank overdraft


(925)

(1,918)

-

Other interest-bearing loans and borrowings


(210)

(225)

(218)

Trade and other payables


(169,024)

(159,061)

(164,519)

Employee benefits


(2,887)

(2,798)

(2,842)

Income tax payable


(5,687)

(5,863)

(7,022)



(178,733)

(169,865)

(174,601)

Non-current liabilities





Other interest-bearing loans and borrowings


(28,030)

(33,468)

(33,239)

Employee benefits


(13,096)

(13,917)

(12,780)



(41,126)

(47,385)

(46,019)

Total liabilities


(219,859)

(217,250)

(220,620)

Net assets


171,949

168,773

177,503






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


(5,165)

(4,639)

(4,742)

Retained earnings


119,334

115,632

124,465

Total equity


171,949

168,773

177,503



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 2013

 

4,268

 

53,512

 

88

 

5,768

 

(339)

 

(11,329)

 

121,361

 

173,329

Profit for the period attributable to the equity shareholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

6,966

 

 

6,966

Other comprehensive income

-

-

-

999

143

-

(548)

594

Total comprehensive income for the period

 

-

 

-

 

-

 

999

 

143

 

-

 

6,418

 

7,560










Transactions with equity shareholders, recorded directly in equity









Share-based payments

-

-

-

-

-

-

166

166

Share options exercised by employees




 

-

 

-

 

31

 

(16)

 

15

Deferred tax on share options

-

-

-

-

-

-

3

3

Dividends to equity holders

-

-

-

-

-

-

(12,300)

(12,300)

Total contributions by and distributions to equity shareholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

31

 

 

(12,147)

 

 

(12,116)

Balance at

  30 June 2013

 

4,268

 

53,512

 

88

 

6,767

 

(196)

 

(11,298)

 

115,632

 

168,773










Balance at

  1 July 2013

 

4,268

 

53,512

 

88

 

6,767

 

(196)

 

(11,298)

 

115,632

 

168,773

Profit for the period attributable to the equity shareholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

7,975

 

 

7,975

Other comprehensive income

-

-

-

(602)

109

-

404

404

Total comprehensive income for the period

 

-

 

-

 

-

 

(602)

 

109

 

-

 

8,379

 

7,886










Transactions with equity shareholders, recorded directly in equity









Share-based payments

-

-

-

-

-

-

122

122

Share options exercised by employees

 

-

 

-

 

-

 

-

 

-

 

390

 

(162)

 

228

Deferred tax on share options

-

-

-

-

-

-

494

494

Total contributions by and distributions to equity shareholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

390

 

 

454

 

 

844

Balance at

  31 December 2013

 

4,268

 

53,512

 

88

 

6,165

 

(87)

 

(10,908)

 

124,465

 

177,503

 

 

 



 

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 2014

 

4,268

 

53,512

 

88

 

6,165

 

(87)

 

(10,908)

 

124,465

 

177,503

Profit for the period attributable to the equity shareholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

8,446

 

 

8,446

Other comprehensive income

-

-

-

(548)

52

-

(1,113)

(1,609)

Total comprehensive income for the period

 

-

 

-

 

-

 

(548)

 

52

 

-

 

7,333

 

6,837










Transactions with equity shareholders, recorded directly in equity









Share-based payments

-

-

-

-

-

-

233

233

Share options exercised by employees

 

-

 

-

 

-

 

-

 

-

 

73

 

(10)

 

63

Deferred tax on share options

-

-

-

-

-

-

2

2

Dividends to equity holders

-

-

-

-

-

-

(12,689)

(12,689)

Total contributions by and distributions to equity shareholders

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

73

 

 

(12,464)

 

 

(12,391)

Balance at

  30 June 2014

 

4,268

 

53,512

 

88

 

5,617

 

(35)

 

(10,835)

 

119,334

 

171,949

 

 

 

 



 

Condensed Consolidated Interim Cash Flow Statements

Unaudited

 

 



Six months ended

30 June 2014

£000

Six months ended

30 June 2013

£000

Year ended

31 December

 2013

£000

Cash flows from operating activities





Profit before tax for the period


10,759

9,076

21,087

Adjustments for:





Depreciation, amortisation and impairment


2,380

2,412

10,136

Finance income


(126)

(96)

(629)

Finance expense


698

758

1,870

Profit on sale of property, plant and equipment


(14)

(10)

(177)

Share-based payments


233

166

288

Operating profit before changes in working capital and other payables


13,930

12,306

32,575

Change in inventories


(5,409)

(3,790)

1,967

Change in trade and other receivables


5,406

(19)

(9,114)

Change in trade and other payables


(3,497)

(5,119)

9,421

Cash generated from the operations


10,430

3,378

34,849

Interest paid


(429)

(314)

(1,565)

Tax paid


(3,370)

(3,307)

(6,344)

Additional contributions to defined benefit plan


(1,495)

(1,449)

(2,913)

Net cash flow from operating activities


5,136

(1,692)

24,027

Cash flows from investing activities





Proceeds from sale of property, plant and equipment


115

66

479

Interest received


161

64

613

Acquisition of subsidiaries, net of cash acquired


-

(600)

(1,974)

Acquisition of property, plant and equipment


(4,065)

(5,343)

(13,267)

Net cash flow from investing activities


(3,789)

(5,813)

(14,149)

Cash flows from financing activities





Proceeds from the issue of treasury shares


63

15

243

Repayment of borrowings


(5,089)

(93)

(223)

Dividends paid


(3,856)

(3,850)

(12,300)

Net cash flow from financing activities


(8,882)

(3,928)

(12,280)

Net decrease in cash and cash equivalents


(7,535)

(11,433)

(2,402)

Cash and cash equivalents at 1 January


47,477

49,798

49,798

Effect of exchange rate fluctuations on cash held


(48)

161

81

Cash and cash equivalents at end of period


39,894

38,526

47,477

 



Notes to the Condensed Consolidated Interim Financial Statements

Unaudited

 

1 BASIS OF REPORTING

 

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 2014. 

The Consolidated Financial Statements of the group as at and for the year ended 31 December 2013 are available upon request from the company's registered office or the website.

The comparative figures for the financial year ended 31 December 2013 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.

 

Statement of compliance

These Condensed Consolidated Interim Financial Statements have been prepared and approved by the directors in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and International Accounting Standard IAS 34 Interim Financial Reporting as adopted by the EU.  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 2013.

 

These Condensed Consolidated Interim Financial Statements were approved by the board of directors on

29 August 2014.

 

Significant accounting policies

As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements 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 2013, except as explained below.

 

Adoption of new and revised standards

 

The following standards and interpretations are applicable to the group and have been adopted in 2014 as they are mandatory for the year ended 31 December 2014.

 

·     IFRS 10 Consolidated Financial Statements: This standard provides a single model to be applied in the control analysis for all investees, including entities that currently are special purpose entities in the scope of SIC-12.

 

·     IFRS 11 Joint Arrangements: This standard carves out from IAS 31, those cases in which there is a separate vehicle but that separation is overcome by form, contract or other facts and circumstances and removes the choice of equity or proportionate accounting for jointly controlled entities (as was under IAS 31).

 

 



Notes to the Condensed Consolidated Interim Financial Statements continued

Unaudited

 

1 BASIS OF REPORTING - continued

 

Significant accounting policies (continued)

 

·     IFRS 12 Disclosure of Interests in Other Entities: Contains the disclosure requirements for entities that have interests in subsidiaries, joint arrangements (i.e. joint operations or joint ventures), associates and/or unconsolidated structured entities.

 

·     IAS 27 Separate Financial Statements 2011: IAS 27 (2011) carries forward the existing accounting and disclosure requirements of IAS 27 (2008) for separate financial statements, with some minor clarifications.

 

·     IAS 28 Investments in Associates and Joint Ventures 2011: Amendments relating to held for sale interests and changes of classification.

 

·     Amendments to IAS 32 and IFRS 7 for 'Offsetting Financial Assets and Financial Liabilities': Amendments to clarify offsetting criteria and specific disclosures.

 

There are no other new standards, amendments to standards or interpretations mandatory for the first time for the year ending 31 December 2014. The above standards have not had a significant impact on the financial statements of the group.

 

Going concern

The group's business activities, together with the factors likely to affect its future development, performance and position are described in the Chairman's Statement.

 

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 undrawn borrowing facilities, at 30 June 2014 totalling £57.2 million.  This comprised committed credit facilities of £15 million and uncommitted of £42.2 million.  At 30 June 2014, the group had drawn upon £28.2 million of the committed credit facilities, and £0.9 million of the uncommitted credit facilities.

 

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 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 2013.

 

Risks and uncertainties

The risk factors which could cause the group's results to differ materially from expected results and the result of the board's review of those risks are set out in the Chairman's Statement.

Notes to the Condensed Consolidated Interim Financial Statements continued

Unaudited

 

2 SEGMENT REPORTING

 

The group has 54 operating segments in the UK and five operating segments in Continental Europe.  Each segment represents an individual trading operation and each operation is wholly aligned to the sales, marketing, supply and distribution of floorcovering products.  The operating results of each operation 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 segment and used by the Group Chief Executive to assess performance and decide on resource allocation. 

 

The operating segments have been aggregated to the extent that they have similar economic characteristics, with relevance to products and 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 economic characteristics in the UK and Continental Europe and accordingly present 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

2014

£000

30 June

2013

£000

31 December

2013

£000

30 June

2014

£000

30 June

2013

£000

31 December

2013

£000

30 June

2014

£000

30 June

2013

£000

31 December

2013

£000

Revenue










External revenues

257,770

234,708

509,340

43,810

45,677

93,711

301,580

280,385

603,051





















Reportable segment operating profit

 

11,356

 

9,936

 

26,877

 

614

 

498

 

1,678

 

11,970

 

10,434

 

28,555





















Reportable segment assets

 

232,288

 

217,195

 

233,913

 

32,590

 

38,611

 

35,708

 

264,878

 

255,806

 

269,621











Reportable segment liabilities

 

(144,868)

 

(134,740)

 

(148,457)

 

(16,213)

 

(17,593)

 

(15,975)

 

(161,081)

 

(152,333)

 

(164,432)

 

During the periods shown above there have been no inter-segment revenues for the reportable segments (2013: £nil).

 

Reconciliations of reportable segment profit, assets and liabilities and other material items:

 





30 June

2014

£000

30 June

2013

£000

31 December

2013

£000

Profit for the period







Total profit for reportable segments



11,970

10,434

28,555

Impairment of intangibles and assets




-

-

(5,352)

Unallocated expense




(639)

(696)

(875)








Operating profit




11,331

9,738

22,328








Finance income




126

96

629

Finance expense




(698)

(758)

(1,870)








Profit before taxation




10,759

9,076

21,087

Taxation




(2,313)

(2,110)

(6,146)








Profit for the period




8,446

6,966

14,941








 



Notes to the Condensed Consolidated Interim Financial Statements continued

Unaudited

 

 

2 SEGMENT REPORTING - continued

 







 

 

 

 



30 June

2014

£000

30 June

2013

£000

31 December

2013

£000

 

Assets






 

Total assets for reportable segments


264,878

255,806

269,621

 

Unallocated assets:






 

Properties, plant and equipment



96,449

92,364

93,883

 

Deferred tax assets



2,393

2,173

2,388

 

Cash and cash equivalents



28,088

35,680

32,231

 







 

Total assets



391,808

386,023

398,123

 







 

Liabilities






 

Total liabilities for reportable segments


(161,081)

(152,333)

(164,432)

 

Unallocated liabilities:






 

Employee benefits



(15,983)

(16,714)

(15,622)

 

Other interest-bearing loans and borrowings



(28,240)

(33,693)

(33,457)

 

Income tax payable



(5,687)

(5,863)

(7,022)

 

Proposed dividend



(8,833)

(8,450)

-

 

Derivative liabilities



(35)

(196)

(87)

 







 

Total liabilities



(219,859)

(217,250)

(220,620)

 







 

 

 


 

 

UK

 

Continental Europe

Reportable segment

total

 

 

Unallocated

 

Consolidated total


£000

£000

£000

£000

£000

Other material items 30 June 2014






Capital expenditure

1,986

182

2,168

1,897

4,065

Depreciation

1,107

286

1,393

987

2,380







Other material items 30 June 2013






Capital expenditure

1,333

470

1,803

3,540

5,343

Depreciation

1,110

318

1,428

905

2,333

Amortisation

-

-

-

79

79







Other material items 31 December 2013






Capital expenditure

3,043

649

3,692

9,847

13,539

Depreciation

2,171

666

2,837

1,797

4,634

Amortisation

-

-

-

150

150

Impairment of assets

-

-

-

2,155

2,155

Impairment of intangible assets

-

-

-

3,197

3,197

 

In the UK the group's freehold properties are held within Headlam Group plc and a rent is charged to the operating segments for the period of use.  Therefore the operating reports reviewed by the Group Chief Executive show all the UK properties as unallocated and the operating segments report a segment result that includes a property rent.  This is reflected in the above disclosure.

 

Each segment is a continuing operation.

Notes to the Condensed Consolidated Interim Financial Statements
 continued

Unaudited

 

 

2 SEGMENT REPORTING - continued

 

The Group Chief Executive, the board and the senior executive management team have access to information that provides details on revenue by principal product group for the two reportable segments, as set out in the following table:

 


UK

Continental Europe

Total


30 June

2014

£000

30 June

2013

£000

31 December

2013

£000

30 June

2014

£000

30 June

2013

£000

31 December

2013

£000

30 June

2014

£000

30 June

2013

£000

31 December

2013

£000

Revenue










Residential

178,268

160,567

350,020

19,917

20,816

47,608

198,185

181,383

397,628

Commercial

79,502

74,141

159,320

23,893

24,861

46,103

103,395

99,002

205,423












257,770

234,708

509,340

43,810

45,677

93,711

301,580

280,385

603,051

 

 

3 FINANCE INCOME AND EXPENSE

 


Six months

 ended

30 June

2014

£000

Six months

 ended

30 June

2013

£000

 

Year ended

31 December 2013

£000

Interest income:




Bank interest

29

65

629

Other

97

31

-

Finance income

126

96

629





Interest expense:




Bank loans, overdrafts and other financial expenses

(361)

(392)

(1,044)

Net change in fair value of cash flow hedges transferred from equity

(67)

(68)

(137)

Interest on net defined benefit plan deficit

(270)

(298)

(578)

Other

-

-

(111)

Finance expenses

(698)

(758)

(1,870)

 

 



Notes to the Condensed Consolidated Interim Financial Statements continued

Unaudited

 

 

4 TAXATION

 

The group's consolidated effective tax rate in respect of continuing operations for the six months ended        30 June 2014 was 21.5% (for the six months ended 30 June 2013: 23.25%; for the year ended 31 December 2013: 23.25% based on results prior to including non-underlying items that relate to the impairment of intangible and tangible fixed assets, totalling £5,352,000.).

 

The Budget 2013, issued on 20 March 2013, announced that the main rate of corporation tax would be reduced to 21% from 1 April 2014 and to 20% with effect from 1 April 2015.  These future rate reductions were substantively enacted on 2 July 2013 and have been appliedreducing the company's current tax charge accordingly.

 

The deferred tax asset at 30 June 2014 has been calculated based on the rates of 20% and 21% substantively enacted at the balance sheet date.

 

5 EARNINGS PER SHARE

 

The calculation of the basic and diluted earnings per share is based on the following data:

 


Six months

 ended

30 June

2014

£000

Six months

 ended

30 June

2013

£000

 

Year ended

31 December 2013

£000

Earnings




Earnings for the purposes of basic and diluted earnings per share being profit attributable to equity holders of the parent

 

8,446

 

6,966

 

14,941






2014

2013

2013

Number of shares




Issued ordinary shares at end of period

85,363,743

85,363,743

85,363,743

Effect of shares held in treasury

(2,328,375)

(2,422,387)

(2,383,937)





Weighted average number of ordinary shares for the purposes of basic earnings per share

 

83,035,368

 

82,941,356

 

82,979,806





Effect of diluted potential ordinary shares:




Weighted average number of ordinary shares at period end

83,035,368

82,941,356

82,979,806

Dilutive effect of share options

1,072,187

744,954

646,209





Weighted average number of ordinary shares for the purposes of diluted earnings per share

 

84,107,555

 

83,686,310

 

83,626,015

 

 



 

Notes to the Condensed Consolidated Interim Financial Statements continued

Unaudited

 

 

6 DIVIDENDS


Six months ended

30 June

2014

£000

Six months ended

30 June

2013

£000

 

Year ended

31 December 2013

£000





Interim dividend for 2013 of 4.65p paid 2 January 2014

3,856

-

-

Final dividend for 2013 of 10.65p proposed

8,833

-

-

Interim dividend for 2012 of 4.65p paid 2 January 2013

-

3,850

3,850

Final dividend for 2012 of 10.20p proposed

-

8,450

8,450


12,689

12,300

12,300

 

The final proposed dividend for 2013 of 10.65p per share was authorised by shareholders at the Annual General Meeting on 21 May 2014 and paid on 1 July 2014.  The final proposed dividend for 2012 of 10.20p per share was authorised by shareholders at the Annual General Meeting on 24 May 2013 and paid on 1 July 2013.

 

 

7 CAPITAL COMMITMENTS

 

As at 30 June 2014, the group had contractual commitments relating to the purchase of property, plant and equipment of £198,000 (30 June 2013: £8,969,000, 31 December 2013: £2,261,000). 

 

8 RELATED PARTIES

 

The group has a related party relationship with its subsidiaries and with its key management.  There have been no changes to the nature of related party transactions entered into since the last annual report.

 

9 SUBSEQUENT EVENTS

 

Management have given due consideration to any events occurring in the period from the reporting date to the date these Interim Financial Statements were authorised for issue and have concluded that there are no material adjusting or non-adjusting events to be disclosed in these Interim Financial Statements, with the exception of the matter described below.

 

On 2 July 2014, the group completed the acquisition of the business and certain assets of Kalm Investments Limited.  Kalm Investments consisted of two trading entities; RPS Flooring based in Mansfield and Mytton Flooring based in Norwich.  The combined annual sales revenue of the two businesses is approximately £2.8 million.  Consideration at completion amounted to £297,000 and a further £158,000 was paid following the verification of the fair value of assets acquired. 

 

At the end of July, the RPS Flooring business was transferred to and now operates from our distribution facility in Nottingham, whilst retaining its autonomous sales and marketing identity.

 

Mytton Flooring remains in Norwich and will now also provide an enhanced logistics service for our businesses operating from Tamworth and Coleshill for customers located in East Anglia.

 

 

 

 



Statement of Directors' Responsibilities

 

 

 

We confirm to the best of our knowledge:








(a)   the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;

 

(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

 

 

 

 

Dick Peters

Chairman

29 August 2014

 

 

 

 

 

 

 

 

 

 

 


This information is provided by RNS
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