Interim Results

Headlam Group PLC 16 August 2005 16 August 2005 Interim financial results for the six month period ended 30 June 2005 Headlam Group plc ('Headlam'), Europe's leading floorcovering distributor, announces its interim results for the six months ended 30 June 2005. Financial highlights 2005 2004 Change £'000 £'000 Revenue 232,336 217,811 +6.7% Profit from operations 18,501 16,974 +9.0% Profit before tax 18,205 16,744 +8.7% Earnings per share 14.7p 13.5p +8.9% Dividend per share 4.4p 4.0p +10.0% Key points Revenues from UK operations increase by 2.8% on a like for like basis Profit before tax increased by 8.7% Cash generated from operations up 11.7 % to £10.6 million Net capital investment during the period amounted to £7.9 million Interim dividend increased by 10.0% from 4.0p to 4.4p Tony Brewer, Chief Executive of Headlam, said: 'We are particularly encouraged by the positive sales performance of the group in the first six months of 2005 which has continued through July and into August. With the traditional busy autumn period before us, the group remains confident of achieving its operating objectives for the year.' Enquiries: Headlam Group plc Tony Brewer, Chief Executive Tel: 01675 433000 Stephen Wilson, Finance Director CHAIRMAN'S STATEMENT During the first six months of 2005, revenues from UK operations have shown an increase of 2.8% on a like-for-like basis. We believe this result has out-performed market conditions and therefore the group has continued to increase its market share. Group revenues for the first six months increased by 6.7% from £217.8 million to £232.3 million, an improvement principally attributable to the organic growth referred to above combined with a full six months contribution from National Carpets. Profit from operations increased by 9.0% from £17.0 million to £18.5 million. Earnings and dividend Basic earnings per share increased by 8.9% from 13.5p to 14.7p. The board have declared an interim dividend of 4.4p per share, an increase of 10.0% on last year's interim dividend of 4.0p per share. The dividend will be paid on 3 January 2006 to shareholders on the register at 2 December 2005. Operations In the UK this positive sales performance was achieved through our 48 autonomous businesses and their 292 external sales personnel who visit their customers to maximise market opportunities. These businesses are defined into four sectors; regional multi-product, national multi-product, residential specialist and commercial specialist. Each of these sectors has shown an increased sales performance during the period. The businesses constantly work with our suppliers to develop and subsequently launch new products, into both the residential and commercial sectors. This has resulted in 2,377 new product lines being launched in the first six months of 2005, with the sales and marketing of these products supported by over 555,000 new point of sale items being positioned within our customers' premises. This positive sales trend is also reflected in the performance of our customers who are principally independent floorcovering retailers and flooring contractors. A further illustration of the widespread financial strength amongst our customers is their commitment to paying their bills on time. Our average credit allowed on trade receivables has remained constant at 40 days. During the first quarter of 2005, we finalised the construction of our new purpose built freehold distribution centre in Tamworth and this is now fully operational. As intended, we have also moved four businesses previously operating from Coleshill into the new Tamworth facility, therefore releasing capacity for further growth of the eight businesses remaining in the Coleshill facility. Planning permission has now been granted for a new distribution centre to re-house Wilkies, our regional distribution business in Leeds and this will be operational in July 2006. Our Continental European businesses in France, Holland and Switzerland continue to improve their performance and have made an increased contribution to group profitability. Acquisitions During the last six months we have acquired the intellectual property rights of Clarendon Carpets and the business of Gaskell Wool Rich. Both of these acquisitions have complemented our existing residential speciality businesses focused on higher quality products. We continue to evaluate potential acquisitions in each of our core sectors and these would be made to further enhance the market position and earnings of the group. Cash flow Cash generated from operations during the first six months was £10.6 million compared with £9.5 million for the equivalent period last year. Net working capital investment increased from £9.4 million to £10.0 million. Net investment in property, plant and equipment totalled £7.9 million, the majority of which related to completing the Tamworth distribution centre. During the six month period cash and cash equivalents declined by £6.7 million to £31.0 million and net funds at 30 June 2005 amounted to £28.9 million compared with £22.6 million at 30 June 2004. Outlook We are particularly encouraged by the positive sales performance of the group in the first six months of 2005 which has continued through July and into August. With the traditional busy autumn period before us, the group remains confident of achieving its operating objectives for the year. TG Larman, Chairman 16 August 2005 Consolidated Income Statement unaudited Six months Six months The year ended ended ended 30 June 30 June 31 December 2005 2004 2004 Note £'000 £'000 £'000 Revenue 3 232,336 217,811 464,789 Cost of sales (161,475) (153,074) (323,924) -------- -------- -------- Gross profit 70,861 64,737 140,865 Distribution costs (38,087) (34,705) (70,592) Administration expenses (14,273) (13,058) (31,349) -------- -------- -------- Profit from operations 18,501 16,974 38,924 Net financing costs (296) (230) (440) -------- -------- -------- Profit before tax 18,205 16,744 38,484 Income tax expense (5,564) (5,193) (11,738) -------- -------- -------- Profit for the period 3 12,641 11,551 26,746 ======== ======== ======== Dividend per share 4 4.40p 4.00p 16.25p Earnings per share Basic 14.7p 13.5p 31.3p ===== ===== ===== Diluted 5 14.5p 13.4p 31.0p ===== ===== ===== Consolidated Statement of Recognised Income and Expense Unaudited Six months Six months The year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Actuarial gains/(losses) on defined benefit pension schemes 328 180 (2,667) Exchange differences arising on translation of overseas operations (815) (457) (256) ------- ------- ------- Net losses not recognised in the income statement (487) (277) (2,923) Profit for the period 12,641 11,551 26,746 ------- ------- ------- Total recognised gains and losses 12,154 11,274 23,823 ======= ======= ======= Consolidated Balance Sheet unaudited At At At 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 ASSETS Non-current assets Goodwill 13,210 13,210 13,210 Other intangible assets 418 1,271 836 Property, plant and equipment 77,631 64,786 71,753 Deferred taxation 8,245 7,145 8,167 -------- -------- -------- 99,504 86,412 93,966 Current assets Inventories 92,505 80,835 79,692 Trade and other receivables 68,900 66,385 66,274 Other current assets 10,981 9,527 19,276 Cash and cash equivalents 30,969 26,309 37,747 -------- -------- -------- 203,355 183,056 202,989 Non-current assets classified as held for sale 203 151 203 -------- -------- -------- 203,558 183,207 203,192 -------- -------- -------- Total assets 303,062 269,619 297,158 -------- -------- -------- LIABILITIES Current liabilities Trade and other payables (153,004) (134,132) (145,509) Short-term borrowings (430) (458) (280) Current proportion of long-term borrowings (1,089) (2,303) (1,124) Current tax payable (11,640) (8,964) (11,053) -------- -------- -------- (166,163) (145,857) (157,966) Non-current liabilities Long-term borrowings (537) (973) (738) Deferred taxation (1,214) (2,078) (1,212) Retirement benefit obligation (18,321) (14,513) (18,365) -------- -------- -------- (20,072) (17,564) (20,315) -------- -------- -------- Total liabilities (186,235) (163,421) (178,281) -------- -------- -------- Net assets 116,827 106,198 118,877 ======== ======== ======== EQUITY Equity attributable to the holders of the parent Issued share capital 4,310 4,281 4,306 Share premium account 51,875 51,118 51,731 Retained earnings 60,642 50,799 62,840 -------- -------- -------- Total equity 116,827 106,198 118,877 ======== ======== ======== Consolidated Cash Flow Statement Unaudited Six months Six months The year ended ended ended 30 June 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Operating activities Net profit before tax 18,205 16,744 38,484 Adjustments for: Depreciation 2,265 2,083 4,313 Equity based transactions 29 29 57 Investment income (8) (13) 11 Interest expense 296 230 440 -------- -------- -------- Operating profit before working capital changes 20,787 19,073 43,305 Increase in inventories (12,839) (6,160) (3,753) Decrease/(increase) in trade and other receivables 4,969 515 (8,118) (Decrease)/increase in trade and other payables (2,316) (3,940) 14,588 -------- -------- -------- Cash generated from operations 10,601 9,488 46,022 Interest paid (659) (545) (1,093) Income taxes paid (5,661) (6,432) (12,082) -------- -------- -------- Net cash from operating activities 4,281 2,511 32,847 ======== ======== ======== Investing activities Acquisition of subsidiary net of cash acquired (435) (3,452) (3,779) Purchase of property, plant and equipment (8,034) (4,737) (14,374) Proceeds from sale of property, plant and equipment 108 62 282 Interest received 643 506 1,055 -------- -------- -------- Net cash used in investing activities (7,718) (7,621) (16,816) ======== ======== ======== Financing activities Proceeds from issuance of share capital 149 2,125 2,763 Repayment of borrowings 174 304 (1,071) Payment of finance lease liabilities (208) (243) (498) Dividends paid (3,421) (3,030) (11,795) -------- -------- -------- Net cash used in financing activities (3,306) (844) (10,601) ======== ======== ======== Net (decrease)/increase in cash and cash equivalents (6,743) (5,954) 5,430 Cash and cash equivalents at beginning of period 37,747 32,336 32,336 Effect of exchange rate fluctuations on cash and cash equivalents held (35) (73) (19) -------- -------- -------- Cash and cash equivalents at end of period 30,969 26,309 37,747 ======== ======== ======== Consolidated Statement of Changes in Shareholders Equity Unaudited Share Share Translation Retained Total capital premium reserve earnings equity £'000 £'000 £'000 £'000 £'000 Balance at 31 December 2003 4,213 49,061 - 51,993 105,267 -------- -------- -------- -------- -------- Total recognised income and expense 4,213 49,061 (457) 11,731 11,274 Dividends - - - (12,048) (12,048) Equity based transactions - - - 29 29 Deferred taxation on share options - - - (449) (449) Share options exercised by employees 68 2,057 - - 2,125 -------- -------- -------- -------- -------- Balance at 30 June 2004 4,281 51,118 (457) 51,256 106,198 Total recognised income and expense - - 201 12,348 12,549 Dividends - - - (138) (138) Equity based transactions - - - 28 28 Deferred taxation on share options - - - (398) (398) Share options exercised by employees 25 613 - - 638 -------- -------- -------- -------- -------- Balance at 31 December 2004 4,306 51,731 (256) 63,096 118,877 Total recognised income and expense - - (815) 12,969 12,154 Dividends - - - (14,325) (14,325) Equity based transactions - - - 29 29 Deferred taxation on share options - - - (56) (56) Share options exercised by employees 4 144 - - 148 -------- -------- -------- -------- -------- Balance at 30 June 2005 4,310 51,875 (1,071) 61,713 116,827 ======== ======== ======== ======== ======== Notes to the Interim Financial Results unaudited 1 General information The interim financial results have been prepared using updated accounting policies stated in the Financial Information on the Transition to International Financial Reporting Standards which was published on 15 August 2005 on the group's website www.headlam.com. The accounting policies of the group have changed to enable the group to comply with International Financial Reporting Standards (IFRS). The directors of the group have elected to not comply with International Accounting Standard (IAS) 34 Interim financial reporting and IAS 39 Financial instruments: recognition and measurement. The information for the year ended 31 December 2004 does not constitute full financial statements as defined in section 240 of the Companies Act 1985. The report and full financial statements for that period were prepared under UK GAAP and have been filed with the Registrar of Companies, they 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. 2 Accounting policies The interim financial results have been prepared in accordance with IFRS. The financial periods ending 30 June 2004 and 31 December 2004 have been restated under IFRS. 3 Business segments For management purposes, the group is currently organised into two operating divisions UK and Continental Europe. These divisions are the basis on which the group reports its primary segment information. Segment information about these businesses is presented below. UK Continental Europe Total 31 31 31 30 June 30 June December 30 June 30 June December 30 June 30 June December 2005 2004 2004 2005 2004 2004 2005 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Revenue External sales 197,460 184,695 395,696 34,876 33,116 69,093 232,336 217,811 464,789 ====== ======= ======= ======= ======= ======= ======= ======= ======= Result Segment result 18,243 16,629 38,445 803 778 1,719 19,046 17,407 40,164 ------- ------- ------- ------- ------- ------- Unallocated corporate expenses (545) (433) (1,240) ------- ------- ------- Profit from operations 18,501 16,974 38,924 Net financing costs (296) (230) (440) Taxation (5,564) (5,193) (11,738) ------- ------- ------- Profit for the period 12,641 11,551 26,746 ======= ======= ======= Notes to the Interim Financial Results (Continued) unaudited 4 Dividends Six months Six months The year ended ended 30 June ended 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Amounts proposed and declared as distributions to equity holders in the period: Final proposed dividend for the year ended 31 December 2004 of 12.25p per share (final proposed dividend for the year ended 31 December 2003 of 10.25p per share) 10,536 8,627 10,536 ======== ======== ======== Declared interim dividend for the year ended 31 December 2005 of 4.40p (2004: 4.0p) per share 3,789 3,421 3,421 ======== ======== ======== The declared interim dividend was approved by Directors on 30 June 2005 and therefore has been included as a liability as at 30 June 2005. 5 Earnings per share The calculation of the basic and diluted earnings per share is based on the following data. Six months Six months The year ended ended 30 June ended 30 June 31 December 2005 2004 2005 £'000 £'000 £'000 Earnings Earnings for the purposes of basic earnings per share being net profit attributable to equity holders of the parent 12,641 11,551 26,746 ======== ======== ======== Earnings for the purposes of diluted earnings per share 12,641 11,551 26,746 ======== ======== ======== Number of shares Weighted average number of ordinary shares for the purposes of basic earnings per share 86,178,980 85,313,350 85,352,589 Effect of dilutive potential ordinary shares: Share options 1,411,138 1,924,789 1,534,175 Number of shares that would have been issued at fair value (624,241) (858,589) (737,011) ---------- ---------- ---------- Weighted average number of ordinary shares for the purposes of diluted earnings per share 86,965,877 86,379,550 86,149,753 ========== ========== ========== 6 Share capital During the six months ended 30 June 2005 the issued share capital increased by 95,362 to 86,206,799 shares. This was due to the exercise of 67,000 share options from the Headlam approved executive scheme, 25,000 from the unapproved executive scheme and 3,362 from the Savings related scheme. Notes to the Interim Financial Results (Continued) unaudited 7 Acquisitions On 4 April 2005, the group acquired the retail division of Gaskell Flooring Limited, trading as Gaskell Wool Rich and Tomkinson Carpets for a cash consideration of £0.5 million. The transaction has been accounted for by the purchase method of accounting. 8 Analysis of cash and cash equivalents Six months Six months The year ended ended 30 June ended 30 June 31 December 2005 2004 2004 £'000 £'000 £'000 Cash at bank and in hand 30,969 26,309 37,747 ======= ======= ======= 9 Analysis of changes in net funds At 1 January Cash flows Translation At 30 June 2005 differences 2005 £'000 £'000 £'000 £'000 Cash and cash equivalents 37,747 (6,743) (35) 30,969 Bank overdrafts (279) (174) 18 (435) ------- ------- ------- ------- 37,468 (6,917) (17) 30,534 Debt due within one year (687) - 34 (653) Finance leases and similar hire purchase contracts (1,176) 208 - (968) ------- ------- ------- ------- 35,605 (6,709) 17 28,913 ======= ======= ======= ======= 10 Related party transactions Transactions between the company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. The interim financial results for the six months ended 30 June 2005 will be posted to shareholders on 25 August 2005 and copies will be available from that date from the Company's registered office. This information is provided by RNS The company news service from the London Stock Exchange
UK 100