Interim Results
Headlam Group PLC
4 September 2001
4 September 2001
Interim results for the six month period ended 30 June 2001
Headlam Group plc ('Headlam'), the floorcoverings and windowcoverings
distributor, announces its interim results for the six month period ended 30
June 2001.
FINANCIAL HIGHLIGHTS
Six months ended 30 June
2001 2000 Change
Turnover £217.9 m £221.5 m -1.6%
Operating profit £14.5 m £14.4 m +1.0%
Exceptional items £(9.5) m - -
Profit before taxation £3.2 m £12.1 m -73.5%
Adjusted earnings per share 10.6p 11.7p -9.4%
Interim dividend per share 2.95p 2.8p +5.4%
Key points
- Increase in operating profit supported by continuing solid performance of
the core floorcovering distribution businesses
- Further progress made in restructuring the Windowcoverings division,
including the disposal of the Eclipse businesses in the USA
- As announced earlier this year, the disposal of certain windowcovering
operations has required an exceptional write off of goodwill previously
written off to reserves amounting to £8.9 million.
- Strong cash flow during the first six months has reduced net indebtedness
by £8.3 million to £30.6 million
- The board has increased the interim dividend to 2.95p reflecting the
strength of the core floorcovering distribution businesses and the strong
cash flow
Tony Brewer, Chief Executive of Headlam, said:
'The first six months of 2001 have shown another solid increase in profits
from the Floorcoverings division. With strong current trading in these
businesses and the restructuring of the Windowcoverings division largely
complete, we are confident in the future prospects for the group.'
Enquiries:
Headlam Group plc
Tony Brewer, Chief Executive Tel: 0207 457 2345
Stephen Wilson, Finance Director Thereafter: 01675 433000
Gavin Anderson & Company
Graham Prince/Victoria Seaton Tel: 0207 457 2345
Chairman's Statement
Results and dividend
It is pleasing to report that profit before exceptional items and taxation,
increased to £12.7 million, compared with £12.1 million for the corresponding
period last year. As previously advised, the restructuring and disposal
activities in the Windowcoverings division have given rise to an exceptional
loss on disposal, amounting to £9.6 million, of which £8.9 million relates to
goodwill previously written off to reserves. Turnover in continuing
operations increased by 3.2%, compared with last year, rising from £195.0
million to £201.3 million. Group turnover at £217.9 million compares to £
221.5 million in 2000, the reduction reflecting the impact of disposals made
since last year.
An interim dividend of 2.95p per ordinary share (2000: 2.80p), an increase of
5.4%, will be paid on 4 January 2002 to shareholders on the register at 14
December 2001.
Floorcoverings
Our UK distribution businesses have made good progress during the first six
months with an improvement in turnover, particularly during the more recent
months. Growth in market share in key product areas and an increase in
operating margins have shown through well, resulting in a very satisfactory
growth in operating profits.
In Continental Europe, our distribution businesses continue to make solid
progress. The extension of the product offering, an enlargement of the
supplier base, growth in market share and increasing gross margins, mean that
these businesses are well placed to achieve our performance targets.
The new and improved product initiatives in Gradus Accessories and Carpets
have helped these businesses achieve further gains in market share during the
first six months of this year, producing a particularly pleasing improvement
in profitability.
Windowcoverings
The restructuring and divestment of certain businesses in the Windowcoverings
division, has continued during the first half of the year.
The Fabrics businesses of BS Brown, Gordon John and Claremont were sold,
producing total proceeds of £3.9 million, of which £0.5 million is deferred.
Within Continental Europe, the Czech Republic and German businesses of Eclipse
were sold during June 2001 for a nominal consideration.
The Eclipse businesses in the USA were sold on 31 August 2001, for US $13.7
million (£9.4 million). The sale, which was at a premium to net assets, will
be fully reflected in the financial statements for the year ending 31 December
2001. The turnover and operating profits have been included within
discontinued operations in the interim results.
In the UK, the Eclipse businesses are showing progress and whilst operating
profits in the first six months were lower than last year, the results reflect
an improving trend with operating profits ahead of the second half of 2000.
Outlook
The first six months of 2001 have shown another solid increase in profits from
the Floorcoverings division. With strong current trading in these businesses
and the restructuring of the Windowcoverings division largely complete, we are
confident in the future prospects for the group.
Financial review
Turnover
During the period, the group's total turnover reduced by 1.6% from £221.5
million to £217.9 million.
Due to the disposal activity during the first half of the year, this
performance can be further analysed between continuing and discontinued
operations. Turnover from continuing operations increased by 3.2% from £195.0
million to £201.3 million, whilst turnover from discontinued operations, which
relates in full to businesses included in the Windowcoverings division,
declined from £26.5 million to £16.6 million.
The segmental analysis shown in note 1 to the interim financial statements
provides a breakdown on performance by division. Turnover in the
Floorcoverings division increased during the period by 5.7%, from £172.7
million to £182.5 million principally due to the gain in market share achieved
by the majority of businesses included within this division.
The turnover from continuing operations in the Windowcoverings division
declined by 15.5% from £22.3 million to £18.8 million. This reflects the
downturn in performance experienced by the businesses included within this
division during the second half of 2000.
Operating profits
The group's profit on ordinary activities before exceptional items and
interest increased from £14.4 million to £14.5 million during the period.
The operating profits from continuing operations increased by 9.2% from £12.8
million to £13.9 million and discontinued operations declined from £1.6
million to £0.6 million.
Operating profits from the Floorcoverings division for the period, as shown in
note 1 to the interim financial statements, improved by 7.5% increasing from £
12.8 million to £13.8 million whilst the Windowcoverings division declined
from £2.1 million to £1.4 million.
The cost of central operations increased from £0.5 million for the first half
of 2000 to £0.6 million for the period under review principally because of the
restructuring costs associated with the relocation of the group's corporate
head office from Northampton to its new location at Coleshill.
Exceptional items
During the period, the group has disposed of the following operations:
BS Brown January 2001
Gordon John February 2001
Claremont Fabrics April 2001
Haller Boden June 2001
HPM June 2001
The loss on disposal of BS Brown, Gordon John and Claremont Fabrics was
recognised in the financial statements for the year ended 31 December 2000
with the inclusion of a charge through the consolidated profit and loss
account for asset impairment. The impairment, which amounted to £5.8 million,
provided for the difference between book value of the net assets associated
with these businesses and their market value. On the subsequent disposal of
these operations however, an additional loss of approximately £140,000 was
realised and this is included within the loss on disposal of operations
excluding goodwill.
The disposal of Haller Boden, the windowcoverings business located in Germany
and HPM, a windowcoverings business located in the Czech Republic realised a
further loss of approximately £518,000. This loss represents the difference
between the book value of the net assets disposed and the consideration
received.
In combination with the loss incurred on the disposal of the Fabrics
operations, the total loss on disposal of operations during the period
amounted to approximately £658,000.
In the annual report and accounts for the year ended 31 December 2000, it was
disclosed that on disposal of the Fabrics businesses, it would be necessary to
recognise a goodwill write off of £9.3 million through the consolidated profit
and loss account. This goodwill had previously been written off directly to
reserves since the dates of these acquisitions all predated 1 January 1998.
In the event, the goodwill previously written off to reserves in relation to
the operations disposed amounts to £8.9 million, giving a total exceptional
loss on the disposal of operations of £9.6 million.
The business and assets less certain liabilities of Eclipse Blinds Systems Inc
and Scientific Plastics Inc, the component window blind manufacturing and
distribution businesses located in the USA, were disposed on 31 August 2001
for a total consideration of $13.7 million (£9.4 million). $10.0 million (£
6.9 million) was paid in cash on completion and the remaining $3.7 million (£
2.5 million) will be paid in cash in two equal instalments on the first two
anniversary dates of the disposal.
For the year ended 31 December 2000, the two businesses contributed a combined
profit before taxation of $0.6 million (£0.4 million) and had combined net
assets of $11.3 million (£7.6 million).
The disposal brings the group's direct operational involvement in the USA to
an end and marks a significant step forward in the restructuring and
divestment of the Windowcoverings division.
The proceeds from the disposal will be applied against the group's
indebtedness.
Net interest payable
Net interest payable during the period reduced by 21.4% from £2.3 million to £
1.8 million following a progressive reduction in the group's indebtedness.
Consequently, interest cover improved from 7.0 times to 8.2.
Taxation on profit on ordinary activities
The underlying taxation rate for the period amounted to 32% compared with 30%
for the previous period. The charge of £4.2 million is based on an operating
profit before goodwill amortisation of £14.9 million less net interest payable
of £1.8 million giving rise to chargeable profits of £13.1 million.
There is no relief available on the disposal of the German and Czech Republic
operations because of the absence of available profits, and potential relief
on losses arising on the disposal of the UK based Fabrics operations has been
deferred until determination of the full year taxation liability.
Proposed dividends
As already reported in the Chairman's Statement, the interim dividend for
ordinary shares, has been increased by 5.4% from 2.80p to 2.95p.
Earnings per share
In order to eliminate the effects of exceptional items, goodwill amortisation
and asset impairment, the consolidated profit and loss account discloses
adjusted earnings per share. The basis upon which this is derived is shown in
note 3 to the interim financial statements.
Working capital and net current assets
There has been a reduction in the net investment in stock and debtors and the
underlying position in creditors due within one year compared with the
position at 30 June 2000. This reduction is principally due to the effects
arising from the disposal of operations during the first half of 2001.
The disposals also account for the difference between the movement in working
capital as shown in the consolidated balance sheet and the working capital
cash flows shown in the consolidated cash flow.
Net current assets have declined from £34.0 million at 30 June 2000 to £24.3
million this year. This reduction is both attributable to the effect of the
disposed operations and the reclassification of term loans amounting to £20.0
million from creditors due after more than one year to creditors due within
one year.
Group indebtedness and cash flows
Group net indebtedness at the end of the period amounted to £30.6 million
compared with £46.9 million at the same date last year. An analysis of net
debt is provided in note 5 to the interim financial statements.
This reduction in net indebtedness is attributable to the strong cash flow
from operating activities during the second half of the year 2000 and the
first half of 2001 coupled with reducing interest costs, the benefit of
taxation receipts, firm control over capital expenditure and receipts from
disposals. The net result is that the group's cash position increased by £6.1
million during the first half compared with the decrease of £10.1 million for
the corresponding period last year.
The taxation receipt arises because of overpayments of taxation for the year
2000.
Treasury management and financial instruments
The group continues to operate a policy of centralised treasury management to
cover its funding arrangements, foreign exchange and interest rate exposure.
The group's financial instruments, other than derivatives, comprise cash,
borrowings and various items arising from its operations such as trade debtors
and creditors. The main purpose of these financial instruments is to raise
finance for the group's trading operations and to ensure adequate funding
levels for acquisition activities.
The group undertakes derivative transactions for forward foreign currency
contracts to manage the currency risks arising from its operations. The
number and quantum of these transactions has however declined significantly
following the disposal of the Fabrics operations.
The majority of the group's borrowings remain at floating rates since the
group has yet to complete its programme of divestment. Once finalised, the
board will be better placed to decide on the appropriate future funding
structure and interest rate policy. For the present the board holds the view
that the benefits of retaining flexibility still outweighs the uncertainty
associated with floating rates.
It is and has been throughout the period under review, the group's policy that
trading in financial instruments is not permitted.
Accounting policies
The financial statements have been prepared on a basis that is consistent with
previous years.
Headlam Group plc
Consolidated Profit and Loss Account Six months Six months The year
(unaudited) ended ended ended
30 June 30 June 31 Dec
2001 2000 2000
Note £000 £000 £000
Turnover 1
Continuing operations 201,315 194,979 400,562
Discontinued operations 16,575 26,495 48,084
217,890 221,474 448,646
Cost of sales (151,457) (151,891) (309,117)
Gross profit 66,433 69,583 139,529
Net operating expenses (51,914) (55,211) (176,593)
Operating profit/(loss) 1
Continuing operations 13,925 12,751 (33,815)
Discontinued operations 594 1,621 (3,249)
Operating profit before goodwill
amortisation
and asset impairment 14,908 16,282 29,516
Goodwill amortisation and impairment (389) (1,910) (60,757)
Asset impairment - - (5,823)
14,519 14,372 (37,064)
Loss on disposal of operations excluding (658) - (1,454)
goodwill
Goodwill previously written off to (8,902) - -
reserves
Loss on disposal of operations (9,560) - (1,454)
Profit/(loss) on sale of properties in continuing
operations 51 - (604)
5,010 14,372 (39,122)
Net interest payable and other similar (1,820) (2,315) (4,914)
items
Profit/(loss) on ordinary activities
before
taxation 3,190 12,057 (44,036)
Taxation on profit/(loss) on ordinary activities (4,188) (4,190) (3,696)
(Loss)/profit for the financial period (998) 7,867 (47,732)
Dividends paid and proposed on equity and
non-equity shares (2,476) (2,343) (8,650)
Retained (loss)/profit for the financial (3,474) 5,524 (56,382)
period
(Loss)/earnings per share
Basic 2 (1.2p) 9.4p (57.0p)
Diluted 2 (1.2p) 9.3p (57.0p)
Adjusted 3 10.6p 11.7p 19.7p
Headlam Group plc
Consolidated Balance Sheet
(unaudited) At At At
30 June 30 June 31 Dec
2001 2000 2000
£000 £000 £000
Fixed assets
Intangible assets 14,030 72,315 14,422
Tangible assets 48,608 55,946 54,856
Investments 641 516 466
63,279 128,777 69,744
Current assets
Stocks 80,269 90,809 82,115
Debtors 82,148 87,456 79,075
Investments - 28 -
Cash at bank and in hand 14,489 996 7,216
176,906 179,289 168,406
Creditors
Amounts falling due within one year (152,597) (145,309) (135,384)
Net current assets 24,309 33,980 33,022
Total assets less current liabilities 87,588 162,757 102,766
Creditors
Amounts falling due after more than one year (17,240) (36,522) (38,219)
Provisions for liabilities and charges (434) (836) (667)
Net assets 69,914 125,399 63,880
Capital and reserves
Called up share capital 4,244 4,229 4,235
Share premium account 48,541 48,097 48,303
Revaluation reserve 3,560 3,866 3,606
Special reserve - 49,654 -
Profit and loss account 13,569 19,553 7,736
Shareholders' funds
Equity 69,864 125,349 63,830
Non-equity 50 50 50
69,914 125,399 63,880
Financial gearing
After capitalisation of goodwill 44% 37% 61%
Before capitalisation of goodwill 55% 88% 79%
Net indebtedness 30,648 46,881 38,947
Headlam Group plc
Consolidated Cash Flow Six months Six months The year
Statement
(unaudited) ended ended ended
30 June 30 June 31 Dec
2001 2000 2000
Note £000 £000 £000
Net cash inflow from operating 4 9,085 6,330 32,309
activities
Returns on investments and servicing (1,809) (2,204) (4,652)
of finance
Taxation 449 (2,785) (9,184)
Capital expenditure and financial (265) (531) (847)
investments
Investment
Disposals and acquisitions 2,442 (7,614) (8,389)
Equity dividends paid (2,337) (2,035) (8,323)
Cash inflow/(outflow) before 7,565 (8,839) 914
financing
Financing
Issue of shares 247 268 480
Reduction in debt (1,710) (1,576) (4,891)
Cash outflow from financing (1,463) (1,308) (4,411)
Increase/(decrease) in cash 6,102 (10,147) (3,497)
in the period
Reconciliation of Net Cash Flow to Movements in Net Debt
(unaudited)
Six months Six months The year
ended ended ended
30 June 30 June 31 Dec
2001 2000 2000
£000 £000 £000
Increase/(decrease) in cash 6,102 (10,147) (3,497)
in the period
Cash outflow from reduction 1,710 1,576 4,891
in debt
Change in debt resulting from cash 7,812 (8,571) 1,394
flows
Debt disposed/(acquired) with 14 (3,079) (3,080)
subsidiaries
New finance leases and similar hire
purchase contracts
Contracts (101) (869) (2,996)
Translation difference 574 (731) (634)
Movement in net debt in the 8,299 (13,250) (5,316)
period
Net debt at beginning of (38,947) (33,631) (33,631)
period
Net debt at end of period (30,648) (46,881) (38,947)
Headlam Group plc
Consolidated Statement of Total Recognised Gains and Losses
(unaudited)
Six months Six months The year
ended ended ended
30 June 30 June 31 Dec
2001 2000 2000
£000 £000 £000
(Loss)/profit for the financial period (998) 7,867 (47,732)
Currency translation differences on foreign
currency net investments 359 158 167
Total recognised gains and losses for the
Financial period (639) 8,025 (47,565)
Reconciliation of Movements in Consolidated Shareholders' Funds
(unaudited)
Six months Six months The year
ended ended ended
30 June 30 June 31 Dec
2001 2000 2000
£000 £000 £000
(Loss)/profit for the financial period (998) 7,867 (47,732)
Dividends
Equity shares (2,475) (2,342) (8,647)
Non-equity shares (1) (1) (3)
Retained (loss)/profit for the financial (3,474) 5,524 (56,382)
period
Equity share capital issued 247 268 480
Goodwill previously written off to reserves 8,902 - -
Shares issued from Qualifying Employee Share Trust - - 166
Currency translation differences on foreign
currency net investments 359 158 167
Transfer from revaluation reserve (46) - (260)
Transfer to profit and loss reserve 46 - 260
Net addition/(reduction) to shareholders' funds 6,034 5,950 (55,569)
Shareholders' funds at beginning of period 63,880 119,449 119,449
Shareholders' funds at end of period 69,914 125,399 63,880
Headlam Group plc
Notes to the Interim Financial Statements
(unaudited)
1. Segmental analysis
By activity Six Six The
months months year
ended ended ended
Turnover 30 June 30 June 31 Dec
2001 2000 2000
£000 £000 £000
Floorcoverings 182,513 172,722 357,979
Windowcoverings
Continuing operations 18,802 22,257 42,583
Discontinued operations 16,575 26,495 48,084
217,890 221,474 448,646
Profit/(loss) before interest and taxation
Floorcoverings
Continuing operations 14,174 13,178 28,440
Less: goodwill amortisation (389) (358) (787)
13,785 12,820 27,653
Windowcoverings
Continuing operations 776 1,991 2,306
Less: goodwill amortisation - (1,552) -
Less: goodwill impairment - -(59,970)
Less: asset impairment - - (2,633)
776 439(60,297)
Discontinued operations 594 1,621 (59)
less: asset impairment - - (3,190)
594 1,621 (3,249)
1,370 2,060 (63,546)
15,155 14,880 (35,893)
Central operations (636) (508) (1,171)
Operating profit/(loss) 14,519 14,372 (37,064)
Less: exceptional items (9,509) - (2,058)
5,010 14,372 (39,122)
By origin
Turnover
UK 172,084 175,737 357,684
Europe 35,000 35,843 71,677
USA 10,806 9,894 19,285
217,890 221,474 448,646
Operating profit before goodwill
amortisation and asset impairment
UK 13,166 13,365 26,599
Europe 1,140 1,527 1,559
USA 602 1,390 1,358
14,908 16,282 29,516
Headlam Group plc
Notes to the Interim Financial Statements
(unaudited)
2. (Loss)/earnings per share
The calculation of earnings per share is based on the average number of
ordinary shares in issue during the first six months of the year of
83,832,078 (2000: 83,560,274). The weighted average number of ordinary
shares used for the diluted earnings per share calculation is 84,143,753
(2000: 84,337,502).
3. Adjusted earnings per share
Six months Six months The year
ended ended ended
30 June 30 June 31 Dec
2001 2000 2000
£000 £000 £000
Operating profit before goodwill amortisation
and asset impairment 14,908 16,282 29,516
Net interest payable and other similar items (1,820) (2,315) (4,914)
Profit on ordinary activities before taxation 13,088 13,967 24,602
Taxation on profit on ordinary activities (4,188) (4,190) (8,119)
Profit for the financial period 8,900 9,777 16,483
The rates of taxation for the three periods are 32% for the six months ended 30
June 2001, 30% for the six months ended 30 June 2000 and 33% for the year ended
31 December 2000.
Headlam Group plc
Notes to the Interim Financial
Statements (unaudited)
4. Reconciliation of group operating profit/(loss) to net cash inflow
from operating activites
Six months Six months The
year
ended ended ended
30 June 30 June 31
Dec
2001 2000 2000
£000 £000 £000
Operating profit/(loss) 14,519 14,372 (37,064)
Exceptional items (9,509) - (2,058)
5,010 14,372 (39,122)
Loss on disposal of operations 658 - -
Goodwill previously written off to reserves 8,902 - -
Depreciation of tangible fixed assets 2,471 2,157 5,319
Depreciation of intangible fixed assets - - 64
Fixed asset investment write down - - 28
Goodwill amortisation 389 1,910 787
Goodwill impairment - - 59,970
Asset impairment - - 5,823
(Profit)/loss on sale of fixed tangible assets (70) - 854
Movement in stocks (4,789) (4,752) 323
Movement in debtors (1,708) 328 4,804
Movement in creditors (1,778) (7,685) (6,541)
Net cash inflow from operating activities 9,085 6,330 32,309
5. Analysis of net debt
At 1 Cash Disposals Non-cash Translation At
Jan flow difference 30 June
2001 2001
£000 £000 £000 £000 £000 £000
Cash at bank and in hand 7,216 7,896 (801) - 178 14,489
Bank overdraft (729) (993) - - 41 (1,681)
6,487 6,903 (801) - 219 12,808
Debt due within one year (5,721) 971 -(19,976) 98(24,628)
Debt due after one year (34,573) - - 19,976 257(14,340)
Finance leases and similar
hire purchase contracts (5,140) 739 14 (101) - (4,488)
(38,947) 8,613 (787) (101) 574(30,648)
Headlam Group plc
Notes to the Interim Financial Statements
(unaudited)
6. The interim financial statements have been prepared using accounting
policies stated in the group's report and accounts for the year ended 31
December 2000 and are unaudited. The summary of results for the year
ended 31 December 2000 does not constitute full financial statements
within the meaning of the Companies Act 1985. The report and full
financial statements for that period have been filed with the Registrar
of Companies and contain an unqualified audit report within the meaning
of the Companies Act 1985 and the auditors have not made any statement
under section 237(2) or 237(3) of the Companies Act 1985.
7. The interim financial statements for the six months ended 30 June 2001
will be posted to shareholders on 14 September 2001 and copies will be
available from that date from the Company's registered office.
Latest directors dealings
- 1 day ago IntegraFin Holding
- 1 day ago Spirent Communications
- 1 day ago CRH (CDI)
- 1 day ago Bezant Resources
- 1 day ago EJF Investments Ltd NPV