Preliminary Results

MFI Furniture Group PLC 28 February 2002 28 February, 2002 Preliminary results for the 52 weeks to 29 December 2001 ________________________________________________________ Financial Highlights - Turnover up 19.7% to Â£1,078m - UK Retail up 14.1% to Â£766m - Howden Joinery up 54.6% to Â£225m - France up 5.6% to Â£84m - *Pre-tax profit up 42.5% to Â£64.7m - *Operating cash inflow of Â£104m compared to Â£30m last year - *Earnings per share up 40.0% to 7.7p - Dividend per share up 31.6% to 2.5p - Current trading up 25% on last year, 16% on a like for like basis * before exceptional items Operational Highlights - Sales exceed Â£1 billion for the first time - New store format generates strong uplift in sales; 45 further out of town openings planned for 2002 - High Street stores performing ahead of average - Strong sales and profit performance from Howden Joinery - Logistics costs further lowered - Investment planned in new ventures, international growth, manufacturing and IT John Hancock, Chief Executive, said: 'I am pleased to announce another highly positive set of results, which include our first-ever Â£1 billion annual sales. They testify to the effective work of everyone in the Group and to the success of our programme to transform the MFI business. We have improved our performance and financial position, created a solid foundation for future growth, identified a range of high-potential, low-risk opportunities both in the UK and abroad, and plan further investment to exploit them to the full'. - ends - Contacts: MFI Furniture Group Plc John Hancock, Chief Executive 020 8913 5319 Martin Clifford-King, Finance Director 020 8913 5350 Brunswick Group Limited William Cullum / Katya Reynier 020 7404 5959 Interviews with John Hancock, Group Chief Executive and Martin Clifford-King, Finance Director in video, audio and text will be available from 10:15am on www.cantos.com and www.mfigroup.co.uk Chairman's Statement Financial Results We continued to make good progress throughout 2001, achieving further growth in sales, margins and profitability. Encouragingly, the second half of the year produced significant performance gains over the first half. Group sales of Â£1,078 million represented a 19.7% increase on the previous year. Profit before tax and exceptional items rose by 42.5% to Â£64.7 million, and earnings per share by 40.0% to 7.7p. Sales % increase % increase Â£m Total business Like for like UK Retail 766 14.1 8.9 Howden Joinery 225 54.6 29.1 France 84 5.6 (0.4) Other 3 n/a n/a _____ ______ _____ Total Group 1078 19.7 11.1 _____ ______ _____ Dividend The Board is proposing a final dividend of 1.3p, making a total for the year of 2.5p per share. This represents a 31.6% increase on the total dividend for 2000, reflecting a fair balance between return to shareholders and investing in the growth prospects of the company. The final dividend will be paid on 14 June 2002 to shareholders on the register as at 31 May 2002. The shares will be quoted ex-dividend from 29 May 2002. Finance The gross margin increased from 49.6% to 50.0%. This increase was driven by product cost reductions together with a selling price increase from the introduction of new product, partially offset by changes in the mix of products and services. We have achieved cost savings of Â£16 million - exceeding our target of Â£15 million - primarily in the area of logistics and sourcing product. These savings continue to be invested in areas that benefit our customers. Excluding the impact of new store opening costs totalling Â£35 million, like for like costs have increased by 9% which is below our like for like sales increase of 11%. The business has produced operating cash inflows before exceptional items of Â£104 million compared to Â£30 million last year, demonstrating our focus on managing working capital in a business which has increased sales by 19.7%. Capital expenditure amounted to Â£51.1 million (2000: Â£35.4 million), mainly invested in new stores, refurbishment of existing stores, manufacturing and introduction of new product. Our pension scheme actuary has estimated that FRS 17 'Retirement Benefits' will have minimal impact on the published Group profit before tax. We are complying with the transitional provisions of FRS 17 in our forthcoming Annual Report. Operational Overview - UK Retail Sales were Â£766 million, representing an increase over the previous year of 14.1% (8.9% on a like for like basis). Out of town stores: The year saw the launch of our new store format. These stores bring a new and higher standard of presentation and customer service to our industry, and provide a greatly improved showcase for our developing range of products. The new format, in conjunction with extensive staff training, has resulted in substantially increased sales, with a shift towards higher-value and higher-margin product lines. At the year-end there were 18 stores operating in the new format, and a further 45 will be added during 2002. This substantial increase in refit activity will impact us in the short term as we lose sales during the refurbishment, sell off display stock and write off fixtures and fittings. By the end of the current year, approximately one-third of our out of town stores will be in the new format. High Street stores: These stores allow us to access new demographic groups of customers - potentially around 5 million of the UK's more affluent homes - without cannibalising our existing customer base. Two years after launch, the MFI high street stores have become a Â£35 million business in their own right, and have achieved sales of Â£300 per square foot against the out of town average of Â£190. Sales are skewed towards higher-value kitchens, with a proportionally higher penetration of fitting. There are currently 20 stores. During 2002 we plan to open a further 10, and we are aiming for 50 by the end of 2003. Building on this experience of appealing to more affluent customers, we have entered into a joint venture with Ethan Allen, America's largest retailer of premium furniture, and will open 4 pilot stores in the UK. We expect to open two stores in the summer, the first of these will be in Kingston. Hygena at Currys: This venture was launched at the end of 2000 and now operates in 112 Currys outlets. Performance has improved strongly in recent weeks, as we learn important lessons about store format, staff training, range mix and advertising/promotion. - Howden Joinery This business recorded another excellent performance, with like-for-like sales up by 29.1% and total sales up by 54.6% to Â£225 million. The operation has a strong profitability profile as the business matures in the UK, and already achieves 11% net margins. The success of Howden Joinery is based on its ability to supply smaller builders with a highly competitive service tailored to their needs. Critical factors include location, appropriate product offer and strong customer support. We are presently evaluating the potential for establishing this highly successful concept in overseas markets. - International In France, Hygena Cuisines achieved Â£84 million in sales, a 5.6% increase (though sales were slightly down on the previous year in like for like terms). We have been carrying out a thorough analysis of our business in this market and have identified clear growth opportunities. Using experience gained in our UK High Street operation, we plan to increase the number of stores from 125 to 170 over the next 3 to 5 years and anticipate significant sales and profit growth from 2003 onwards. We have appointed the manager responsible for our UK store refurbishment programme to the position of managing director in France. In Taiwan, we have now opened four stores in a joint venture with Mercuries & Associates. Stores are modelled on our successful UK High Street format, and are trading ahead of expectations. A further 10 stores will be opened in 2002. - Brand and product We continue to strengthen the MFI brand. It has almost universal brand recognition and people think that we offer a wider range of product than we actually do. Our central brand proposition is becoming 'Your Home, Your Way', as we extend our product lines to cover all rooms in the house through a series of low risk initiatives that will be rigorously tested at every stage. - Logistics We continue to drive for increased efficiency in this part of our business - as in the rest of the supply chain. Delivery costs have now been reduced by over 1% from 13.4% to 12.3% of sales, and we continue to target a figure of 10%. - Manufacturing During 2001, we have undergone a thorough and wide ranging review of strategy, in order to align our manufacturing capacity with the changing product requirements of our customers. Manufacturing is recognised to be fundamental to our competitive advantage and will enable us to bring new product to market in a short timescale. As a result of significant annual cost savings totalling Â£6 million which can be achieved through global sourcing, we have rationalised our doors and components factories in Hull. An exceptional cost of Â£5.9 million has been incurred in the second half of the year. We have invested some Â£8 million in new manufacturing processes and technologies, particularly in paper-wrapped product at our Scunthorpe factory and in vinyl door production at our Stockton factory. We are training and developing our workforce in lean manufacturing techniques and we continue to review our 'make or buy' decisions on a product-by-product basis. - Systems In order to meet the increasing scale and diversity of the business, particularly around the supply chain, we intend to put new integrated systems in place. The project is a three year phased programme and we expect to spend Â£15 million on this in 2002. Overall, we are looking for a significant improvement in the way we manage the supply chain, the purpose being to nurture a culture of customer service throughout the business as a whole. Current trading Orders since Boxing Day for the Group are 25% higher than last year and 16% higher on a like for like basis. The UK retail business is 26% up on last year with a 17% like for like increase. However it should be noted that the sale period lasted for an extra week last year and, after adjusting for this, it is expected that the underlying performance of the Group will be closer to 11% on a like for like basis. Outlook During the past three years, MFI has been undergoing a process of transformation. Since 1998, we have increased total sales from Â£777 million to Â£1,078 million and grown Group profits nearly fourfold from Â£17 million to Â£65 million. We have proven our business model of vertical integration, and validated the potential of our MFI, Hygena, Schreiber and Howden Joinery brands. Our strategic priorities continue to be the improvement of UK sales productivity, the development of new routes to market, the exploration of new opportunities abroad and an increase in productivity throughout our entire supply chain. MFI is a growth company in a growth industry with a strongly improving brand image. We shall continue to drive our new product development programme, to research new product categories, to enhance customer service throughout the business, and to invest in our growth potential, both in the UK and abroad. CONSOLIDATED PROFIT AND LOSS ACCOUNT For the 52 weeks to 29 December 2001 52 Weeks 52 Weeks to 29 December 2001 to 30 December 2000 Total Total operations Excep- operations Excep- Pre- Excep- tional Pre-excep- tional tional items Total tional items Total Notes (note 3) (note 3) Â£m Â£m Â£m Â£m Â£m Â£m Turnover: 2 1,078.2 - 1,078.2 900.6 - 900.6 Group and share of joint venture Less : (0.2) - (0.2) - - - Share of joint venture ________ ______ ______ _________ ______ ______ Group turnover 2 1,078.0 - 1,078.0 900.6 - 900.6 Cost of sales (539.3) (4.7) (544.0) (453.7) - (453.7) ________ ______ ______ _________ ______ ______ Gross profit 538.7 (4.7) 534.0 446.9 - 446.9 Selling and (419.7) - (419.7) (350.5) 12.2 (338.3) distribution costs Administration (57.1) - (57.1) (55.5) (4.0) (59.5) costs ________ ______ ______ _________ ______ ______ Operating 2 61.9 (4.7) 57.2 40.9 8.2 49.1 profit/(loss) Share of (0.9) - (0.9) - - - operating loss of joint venture ________ ______ ______ _________ ______ ______ Total operating 2 61.0 (4.7) 56.3 40.9 8.2 49.1 profit/(loss) - Group and share Of joint venture Net profit/(loss) 0.5 (1.2) (0.7) 0.5 - 0.5 on disposal of fixed assets Profit on - - - - 11.2 11.2 disposal of discontinued operations ________ ______ ______ _________ ______ ______ Profit/(loss) 61.5 (5.9) 55.6 41.4 19.4 60.8 on ordinary activities before interest Interest 4.2 - 4.2 4.8 - 4.8 receivable and similar income Interest payable (1.0) - (1.0) (0.8) - (0.8) and similar charges ________ ______ ______ _________ ______ ______ Profit/(loss) 2 64.7 (5.9) 58.8 45.4 19.4 64.8 on ordinary activities before taxation Tax 4 (18.7) 1.8 (16.9) (12.7) (2.6) (15.3) ________ ______ ______ _________ ______ ______ Profit/(loss) 46.0 (4.1) 41.9 32.7 16.8 49.5 for the financial period Dividends 5 (14.7) - (14.7) (11.2) - (11.2) ________ ______ ______ _________ ______ ______ Amount transferred 6 31.3 (4.1) 27.2 21.5 16.8 38.3 to reserves ======== ====== ====== ========= ====== ====== Earnings per share Basic earnings 7.7p (0.7)p 7.0p 5.5p 2.8p 8.3p per 10p ordinary share ======== ====== ====== ========= ====== ====== Diluted earnings 7.4p (0.7)p 6.7p 5.4p 2.8p 8.2p per 10p ordinary share ======== ====== ====== ========= ====== ====== CONSOLIDATED BALANCE SHEET As at 29 December 2001 29 Dec 2001 30 Dec 2000 Notes Â£m Â£m FIXED ASSETS Tangible assets 300.6 275.9 Investments Investment in own shares 18.8 2.6 Other investments 8.0 8.0 Share of joint venture net assets 0.9 - ________ ________ Total investments 27.7 10.6 ________ ________ Total fixed assets 328.3 286.5 ________ ________ CURRENT ASSETS Stocks 128.7 127.2 Debtors 111.0 86.9 Investments 0.2 0.3 Cash at bank and in hand 52.1 39.6 ________ ________ 292.0 254.0 CREDITORS Amounts falling due within one year 7 229.5 184.2 ________ ________ Net current assets 62.5 69.8 ________ ________ Total assets less current liabilities 390.8 356.3 CREDITORS Amounts falling due after more than 8 0.1 1.3 one year PROVISIONS FOR LIABILITIES AND CHARGES 9 15.2 8.4 ________ ________ Net assets 375.5 346.6 ======== ======== CAPITAL AND RESERVES Called up share capital 59.9 59.5 Share premium account 6 48.6 43.9 Revaluation reserve 6 42.1 42.1 Other reserves 6 21.9 19.4 Profit and loss account 6 203.0 181.7 ________ ________ Equity shareholders' funds 375.5 346.6 ======== ======== CONSOLIDATED CASH FLOW STATEMENT For the 52 weeks to 29 December 2001 52 weeks to 52 weeks to 29 Dec 2001 30 Dec 2000 Notes Â£m Â£m Net cash inflow from operating activities 10 102.8 25.4 Returns on investments and servicing 10 3.2 3.9 of finance Taxation (11.9) 1.4 Capital expenditure and financial investment 10 (68.3) (2.9) Proceeds from sale of subsidiary - 13.7 Equity dividends paid (12.7) (13.6) ________ ________ Cash inflow before use of liquid 13.1 27.9 resources and financing Management of liquid resources 0.1 0.1 Financing 10 (0.6) (18.6) ________ ________ Increase in cash in the period 10 12.6 9.4 ======== ======== RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET CASH 52 weeks to 52 weeks to 29 Dec 2001 30 Dec 2000 Notes Â£m Â£m Increase in cash in the period 10 12.6 9.4 Cash movement on : - debt and lease financing 3.2 18.6 - cash flow from decrease in liquid (0.1) (0.1) resources ________ ________ Change in net cash resulting from cash flows 15.7 27.9 Effect of foreign exchange rate changes (0.1) - ________ ________ Movement in net cash in the period 15.6 27.9 Net cash at the beginning of the period 10 35.5 7.6 ________ ________ Net cash at the end of the period 10 51.1 35.5 ======== ======== 1. Basis of Preparation The financial information set out does not constitute statutory financial statements for the periods ended 52 weeks to 29 December 2001 and 52 weeks to 30 December 2000, but is derived from those accounts. Statutory accounts for the 52 weeks to 30 December 2000 have been delivered to the Registrar of Companies and those for the 52 weeks to 29 December 2001 will be sent to shareholders and filed with the Registrar of Companies on 2 April 2002. The auditors have reported on the accounts, their reports were unqualified and did not contain statements under Section 237(2) or (3) of the Companies Act 1985. 2. Segmental Analysis Before Before Except- Except- 52 weeks except- Except- 52 weeks ional ional to 29 ional ional to 30 items items Dec 2001 items items Dec 2000 Â£m Â£m Â£m Â£m Â£m Â£m TURNOVER 1 UK - Retail 765.9 671.4 - Howden Joinery 224.5 145.2 France 84.2 79.7 Other operations 3.4 4.3 _________ _________ 1078.0 900.6 Joint Venture 0.2 - Operations _________ _________ Total 1078.2 900.6 _________ _________ PROFIT BEFORE TAXATION UK - Retail 34.9 (4.7) 30.2 20.6 8.7 29.3 - Howden 24.5 - 24.5 15.3 - 15.3 Joinery France 3.0 - 3.0 5.4 (0.5) 4.9 Other operations (0.5) - (0.5) (0.4) - (0.4) _________ ________ __________ _______ __________ __________ 61.9 (4.7) 57.2 40.9 8.2 49.1 Joint Venture (0.9) - (0.9) - - - Operations _________ ________ __________ _______ __________ __________ Operating profit 61.0 (4.7) 56.3 40.9 8.2 49.1 Profit on disposal - - - - 11.2 11.2 of a subsidiary 2 Profit/(Loss) on 0.5 (1.2) (0.7) 0.5 - 0.5 disposal of fixed assets Net interest 3.2 - 3.2 4.0 - 4.0 receivable _________ ________ __________ _______ __________ __________ Profit/(Loss) 64.7 (5.9) 58.8 45.4 19.4 64.8 before taxation _________ ________ __________ _______ __________ __________ NET ASSETS/ (LIABILITIES) UK - Retail 219.4 233.4 - Howden Joinery 74.3 58.5 France 17.9 23.5 Other operations 0.6 1.1 Joint venture 0.9 - _________ ________ __________ _______ __________ __________ 313.1 316.5 Unallocated 62.4 30.1 net assets 3 _________ ________ __________ _______ __________ __________ Total 375.5 346.6 _________ ________ __________ _______ __________ __________ 1 The analysis of turnover by destination is not materially different to the analysis of turnover by origin. 2 The sale of Hygena Packaging Limited was sold on 4 January 2000, accordingly no turnover or operating profit is included for either period. 3 Unallocated net assets comprise balances in respect of dividends, cash, borrowings and investment in own shares. 3. Exceptional Items The exceptional items charged in the consolidated profit and loss account for the 52 weeks to 29 December 2001 arose from the closure of the manufacturing business at Hull and the partial relocation to other manufacturing sites. The exceptional credit for the 52 weeks to 30 December 2000 relates principally to the restructuring of the UK retail business and the sale of the Hygena Packaging Limited subsidiary on 4 January 2000. They are analysed as follows:- 52 weeks to 52 weeks to 29 Dec 2001 30 Dec 2000 Â£m Â£m Reorganisation of manufacturing division (5.9) - Re-occupation of Northampton Distribution - 12.7 Centre Reorganisation of supply chain and structural - (4.0) change costs Disposal of Spanish operations - (0.5) ________ ________ Total operating exceptionals (5.9) 8.2 Sale of Hygena Packaging Limited - 11.2 ________ ________ (5.9) 19.4 ======== ======== 4. Tax Pre 52 weeks Pre 52 weeks Except- Except- to 29 Except- Except- to 30 ional ionals Dec 2001 ional ionals Dec 2000 Â£m Â£m Â£m Â£m Â£m Â£m Taxation on profit for the period comprises: UK corporation 18.4 (0.5) 17.9 9.2 2.6 11.8 tax at 30.0% (2000 - 30.0%) Adjustments relating (1.3) - (1.3) 1.5 - 1.5 to prior periods Deferred tax 1.6 (1.3) 0.3 2.0 - 2.0 - Origination and reversal of timing differences _________ ________ _________ __________ ________ _________ 18.7 (1.8) 16.9 12.7 2.6 15.3 ========= ======== ========= ========== ======== ========= The taxation charge is calculated at 28.9% (2000 - 28.0%) on profits before exceptional items. 5. Equity Dividends 52 weeks to 52 weeks to 29 Dec 2001 30 Dec 2000 Â£m Â£m Interim paid - 1.2 pence per share 6.9 5.3 (2000 - 0.9 pence per share) Final proposed - 1.3 pence per share 7.8 5.9 (2000 - 1.0 pence per share) ______ ______ Total dividend - 2.5 pence per share 14.7 11.2 (2000 - 1.9 pence per share) ====== ====== 6. Reserves Share Profit and premium Other Revaluation Loss account reserves reserve account Â£m Â£m Â£m Â£m At 31 December 2000 43.9 19.4 42.1 181.7 Retained profit for the period - - - 27.2 Share Issue 4.7 - - (2.5) Amortisation of goodwill - 2.5 - (2.5) Foreign exchange and other - - - (0.9) adjustments ________ _________ ________ ________ At 29 December 2001 48.6 21.9 42.1 203.0 ======== ========= ======== ======== 7. Creditors AMOUNTS FALLING DUE WITHIN ONE YEAR 29 Dec 2001 30 Dec 2000 Â£m Â£m Borrowings 0.8 3.1 Trade creditors 84.2 66.7 Corporation tax 15.7 10.9 Other taxes and social security 15.0 9.4 Obligations under finance leases 0.4 0.3 Proposed dividends 7.9 5.9 Other creditors 10.6 4.7 Accruals and deferred income 94.9 83.2 ________ ________ 229.5 184.2 ________ ________ 8. Creditors AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR 29 Dec 2001 30 Dec 2000 Â£m Â£m Borrowings - 0.8 Obligations under finance leases - 0.2 Other creditors 0.1 0.3 ________ ________ 0.1 1.3 ======== ======== 9. Provisions for Liabilities and Charges Pension Property Deferred provision provision taxation Total (note 4) Â£m Â£m Â£m Â£m At 31 December 2000 7.4 - 1.0 8.4 Created in the period 2.7 - 0.3 3.0 Transfer from creditors - 3.8 - 3.8 __________ __________ _____________ _________ At 29 December 2001 10.1 3.8 1.3 15.2 2001 ========== ========== ============= ========= 10. Consolidated Cash Flow Statement a) Reconciliation of operating profit to net cash inflow from operating activities 52 weeks to 52 weeks to 29 Dec 2001 30 Dec 2000 Â£m Â£m Operating profit before exceptional items 61.9 40.9 Depreciation of tangible fixed assets 30.9 30.4 Amortisation of fixed asset investment 1.8 1.1 Increase in stocks (1.2) (35.4) Increase in debtors (24.1) (28.4) Increase in creditors and provisions 34.9 21.3 ________ ________ Net cash inflow - pre-exceptional operating 104.2 29.9 activities Net cash outflow - operating exceptionals (1.4) (4.5) ________ ________ Net cash inflow from operating activities 102.8 25.4 ======== ======== b) Analysis of cash flows for headings netted in the cash flow statement 52 weeks to 52 weeks to 29 Dec 2001 30 Dec 2000 Â£m Â£m Returns on investments and servicing of finance Interest received 4.2 4.8 Interest paid (1.0) (0.9) ________ ________ Net inflow on investments and servicing of finance 3.2 3.9 ________ ________ Capital expenditure and financial investment Payments to acquire tangible fixed assets (51.1) (35.4) Receipts from sales of tangible fixed assets 2.6 35.0 Payment to acquire own shares (18.0) (2.5) Investment in joint ventures (1.8) - ________ ________ Net outflow for capital expenditure and (68.3) (2.9) financial investment ======== ======== Financing Share issue 2.6 - Decrease in bank finance (3.1) (18.7) Capital element of finance lease rental payments (0.1) 0.1 ________ ________ Net outflow from financing (0.6) (18.6) ======== ======== c) Analysis of net cash Current Revolving Total Cash at asset in- credit Term Net Finance net bank vestments facility loans cash leases cash Â£m Â£m Â£m Â£m Â£m Â£m Â£m As at 1 January 2000 30.2 0.4 (15.0) (7.6) 8.0 (0.4) 7.6 Cash flow 9.4 (0.1) 15.0 3.7 28.0 (0.1) 27.9 _______ ________ _________ _____ ______ _______ ______ As at 31 December 39.6 0.3 - (3.9) 36.0 (0.5) 35.5 2000 Cash flow 12.6 (0.1) - 3.1 15.6 0.1 15.7 Exchange difference (0.1) - - - (0.1) - (0.1) _______ ________ _________ _____ ______ _______ ______ As at 29 December 52.1 0.2 - (0.8) 51.5 (0.4) 51.1 2001 ======= ======== ========= ===== ====== ======= ====== This information is provided by RNS The company news service from the London Stock Exchange

Companies

Howden Joinery Group (HWDN)

Full Archive

UK 100

Latest directors dealings

All directors dealings today