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Homestyle Group PLC (HME)

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Thursday 26 January, 2006

Homestyle Group PLC

Interim Results

Homestyle Group PLC
26 January 2006

                                                                 26 January 2006



                               HOMESTYLE GROUP PLC

        UNAUDITED INTERIM RESULTS FOR THE 26 WEEKS TO 29th OCTOBER 2005


Homestyle is a leading UK furniture retailing group with two divisions; the
furniture division sells upholstery, dining and bedroom furniture under the
Harveys brand in 169 stores, and the beds division sells mattresses, divans and
bed frames under the Bensons, Sleepmasters and Bed Shed brands in 418 stores.


Highlights

  • First half results reflect the aftermath of the financial and trading
    difficulties encountered prior to the refinancing underwritten by Steinhoff
    Europe AG in July 2005.
  • Considerable improvement in performance as positive impact of refinancing
    felt at trading level:-

         -   Sales orders for May to August 2005 were down 8% on prior year

         -     Sales orders for September 2005 to 21st January 2006 were up 13% 
               on prior year

         -     Cumulative sales orders for the 38 weeks to 21st January 2006 
               are up 5%

  • New management structure completed at Group and Divisional level.
  • Development of trading arrangements with Steinhoff International companies
    progressing well.


Commenting on the results, Donald Macpherson, Chairman said:

'Despite the uncertain consumer spending outlook and competitive trading
environment in home related markets, our businesses have progressed well in
recent months.  The Group is now on a sound financial footing and our improving
performance gives us considerable confidence for the future'.



ENQUIRIES
Ian Topping, Chief Executive                              Andrew Hayes/James Hill
Tim Kowalski, Finance Director
Homestyle Group PLC                                       Hudson Sandler
Tel:  020 7796 4133 on 26 January 2006                    Tel:  020 7796 4133

Tel:  01925 647 200 thereafter



CHAIRMAN'S STATEMENT

Following the appointment of a new management team led by Ian Topping subsequent
to the refinancing last June, all areas of the business have been reviewed and
initiatives put in place to restore the business to acceptable levels of
profitability.  We are now beginning to see improving sales trends along with
tighter operational controls which leaves us in no doubt that we have two
fundamentally sound businesses which are able to exploit their leading market
positions in the medium term.


Financial Performance

The legacy of the Group's historic and well publicised cashflow problems and the
consequent implications for trading impacted significantly on financial
performance in the six months ended 29th October 2005 giving rise to a
substantial loss as disclosed at the Annual General Meeting in October 2005.
Turnover for the period was £182.8m (2004 : £206.5m) and the loss before
taxation was £25.4m (2004 : loss of £3.4m). The basic loss per share was 11.5p
(2004 : loss of 3.8p per share).  The Group does not intend to pay an interim
dividend.

As at 29th October 2005 the Group had net cash and cash equivalents of £0.8m
compared to net debt of £57.6m a year earlier.  The net cash position is after
settlement in July 2005 of all Bank borrowings and the long standing VAT
structural guarantee liability.  This fundamental change is the result of the
refinancing underwritten by Steinhoff Europe AG in June 2005 whereby £100.0m of
funds were raised.


Furniture Division

The Furniture Division which trades under the Harveys brand and operates from
169 locations throughout the UK had a poor first half year achieving sales of
£87.9m (2004 : £111.6m).   The sharp reduction in sales orders was mainly as a
result of the problems encountered from February to July 2005 when the Group's
financial predicament was most acute.

These problems manifested themselves in supply shortfalls, an inability to
promote the business, low staff morale and logistics inefficiencies.  The
outcome was a significant operating loss of £27.0m in the first half.

However, since August 2005 there has been a marked improvement in Harvey's
trading performance.  A combination of innovative new products, revived national
advertising, more attractive store layouts and improved staff confidence have
resulted in a significant uplift in sales orders.  This positive momentum has
continued into 2006 with a good performance in the key January 2006 sales
period.  Cumulative sales orders for the 38 weeks to 21st January 2006 are up
10% on the comparable period last year; a major turnaround from the large
cumulative shortfall that existed at the end of August 2005.

Harveys is re-establishing itself as a significant national furniture retail
chain, although much remains to be done to maintain the recent sales progress
through ongoing product innovation and well targeted promotions.  In addition
the supply chain and logistics will be receiving considerable attention during
2006 as this is an area which offers potential for enhancements to customer
service and cost reductions.


Beds Division

The Beds Division, which trades under the Bensons, Sleepmasters and Bed Shed
brands through 418 outlets in the UK, achieved sales of £94.9m, in line with the
previous year.

However, operating profit at £2.9m (2004 : £6.7m) was well down as a result of
reduced gross margins from more competitive market conditions and increased
fixed costs, particularly in the areas  of occupancy costs, utilities,
warehousing and distribution.  Moreover, the loss of a number of senior
Divisional executives during the period, together with the uncertainty created
and inevitable delays in decision making that ensued, contributed to a first
half performance that was below expectations.

Bill Carrahar has since been appointed as Managing Director of the Beds
Division.  Formerly Managing Director of Buoyant Upholstery and with
considerable general management expertise in the furniture industry, Bill has
brought a new vigour and leadership to the Division.

A new senior management team has been appointed covering all the key positions
in the business which has in itself brought renewed enthusiasm for driving
product development and reducing costs in 2006.

Recent progress has been positive although cumulative sales orders for the 38
weeks to 21st January 2006 are down by 1% on the comparable period in the prior
year.

Having gone through a testing period of instability and management change, the
Division has now been stabilised and the outlook for 2006 is encouraging as we
exploit our position as the UK's leading bed specialist.


Steinhoff

The strategic arrangements with Steinhoff International Holdings, one of the
world's leading furniture and household goods groups, are progressing well.  The
major benefit is in respect of product innovation and sourcing but the
relationship is already helping Homestyle to strengthen areas such as logistics
and financial management.  The fundamental change in our business prospects
started with the refinancing but is being embedded through the many positive
business enhancements that the relationship with Steinhoff brings.


Board

In the Preliminary Results statement for 2005 released on 28th July 2005 we set
out changes to the Board structure and that I would be acting as Interim
Chairman.  My Board colleagues have since invited me to stay on as Chairman and
I have confirmed my willingness to do so.  I am delighted to be able to
contribute on an ongoing basis, particularly at a time when we see so many
positive opportunities developing.


Outlook

The increase in confidence both from our customers and suppliers and within the
Group since last year's refinancing took effect has been marked.

This is reflected in the most recent trading figures where cumulative sales
orders for the Group as a whole are ahead 5% on last year up to 21st January
2006 and 13% for the period since September 2005.  The Group is now on a sound
financial footing and our improving performance gives us considerable confidence
for the future'.

                                                               Donald Macpherson
                                                                        Chairman

26 January 2006



HOMESTYLE GROUP PLC
CONSOLIDATED INCOME STATEMENT (unaudited)
For the 26 weeks to 29 October 2005
                                                                 26 weeks to            26 weeks to         52 weeks to
                                                             29 October 2005        30 October 2004       30 April 2005
                                                  Note                                   (restated)          (restated)
                                                                        £000                   £000                £000


Revenue - continuing operations                     4                182,789                206,480             453,573


Operating (loss)/profit - continuing operations                     (24,062)                     75            (13,204)

Operating (loss)/profit - continuing operations
is stated after charging
                                                      
Settlement of VAT dispute (including                                    
professional fees)                                                         -                  (108)            (19,729)

Property provisions                                                  (2,091)                      -             (7,595)

Professional fees relating to restructuring
review                                                                     -                      -               (990)




Finance costs                                                        (1,025)                (1,337)             (4,078)
Pension finance cost                                                       -                      -               (333)
Finance costs on restructuring                                             -                (2,108)             (7,929)
Fair value adjustments to financial instruments                        (296)                      -                   -


Total finance costs                                                  (1,321)                (3,445)            (12,340)


Loss before taxation                                5               (25,383)                (3,370)            (25,544)
Taxation                                                                   -                    876               3,760
Loss for the period from continuing operations                      (25,383)                (2,494)            (21,784)
Loss for the period from discontinued operations                           -                  (288)             (2,138)
Loss attributable to the equity holders of the                  
parent                                              7               (25,383)                (2,782)            (23,922)
                                                    

Loss per share from continuing operations

Basic and diluted                                                    (11.5)p                 (3.8)p             (33.3)p


Loss per share from continuing and discontinued
operations
                                                                  
Basic and diluted                                                    (11.5)p                 (4.3)p             (36.6)p




HOMESTYLE GROUP PLC
CONSOLIDATED BALANCE SHEET (unaudited)
At 29 October 2005
                                                                       29 October         30 October           30 April
                                                                             2005               2004               2005
                                                                                          (restated)         (restated)
                                                                             £000               £000               £000
Non-current assets

Goodwill                                                                   90,654             90,654             90,654
Other intangible assets                                                       133              2,994                137
Property plant and equipment                                               50,702             49,580             51,968
Deferred tax assets                                                         8,894              4,509              9,144

                                                                          150,383            147,737            151,903

Current assets

Inventories                                                                37,955             36,064             38,422
Trade and other receivables                                                22,519             25,552             31,502
Cash and cash equivalents                                                  19,888                594              2,032
                                                                           80,362             62,210             71,956

Total assets                                                              230,745            209,947            223,859



Current liabilities

Trade and other payables                                                 (99,983)           (99,341)          (100,191)
Retirement benefit obligation                                             (1,572)            (1,265)            (1,572)
Tax liabilities                                                          (15,620)           (18,349)           (27,271)
Obligations under finance leases                                            (676)              (446)            (1,017)
Bank overdrafts and loans                                                 (1,117)            (7,510)           (69,309)
Loan notes                                                                (1,670)            (2,155)            (2,050)
Other loan                                                               (15,000)                  -                  -
Short term provisions                                                     (3,385)            (1,903)            (3,587)
                                                                        (139,023)          (130,969)          (204,997)

Net current liabilities                                                  (58,661)           (68,759)          (133,041)



Non-current liabilities

Trade and other payables                                                  (4,037)            (4,296)            (4,166)
Retirement benefit obligation                                            (15,075)           (13,764)           (15,907)
Tax liabilities                                                           (1,875)                  -            (1,875)
Obligations under finance leases                                            (239)              (745)              (313)
Bank loans                                                                      -           (46,838)                  -
Loan notes                                                                  (414)              (454)              (414)
Long term provisions                                                     (11,696)            (6,261)           (11,162)
                                                                         (33,336)           (72,358)           (33,837)

Total liabilities                                                       (172,359)          (203,327)          (238,834)
Net assets/(liabilities)                                                   58,386              6,620           (14,975)



Equity

Share capital                                                              64,769             16,751             17,037
Share premium account                                                     130,211             78,330             79,229
Merger reserve                                                             38,649             38,649             38,649
Capital redemption reserve                                                    288                288                288
Other reserve                                                                   -                  -              1,731
Reserve for treasury shares                                               (4,880)            (4,940)            (4,910)
Retained earnings                                                       (170,651)          (122,458)          (146,999)
Total equity                                                               58,386              6,620           (14,975)




HOMESTYLE GROUP PLC
CONSOLIDATED CASH FLOW (unaudited)
For the 26 weeks to 29 October 2005

                                                                              26 weeks to    26 weeks to    52 weeks to
                                                                               29 October     30 October       30 April
                                                                   Note              2005           2004           2005 
                                                                                              (restated)     (restated)
                                                                                     £000           £000           £000
Cash flows from operating activities

Operating loss                                                                   (24,062)             75       (13,204)
Operating loss from discontinued activities                                             -          (346)            601
Depreciation and fixed asset impairments                                            4,711          5,122         10,205
Loss on disposals of property, plant and equipment                                      -              -              -
Amortisation of other intangibles                                                       4              -              7
Share based payments charge                                                            30             30             60
Exceptional items - cash effect                                                         -              -         16,500
Property provisions within material items                                           2,091              -          7,595
Provision for dilapidations                                                             -              -            244
Cash effect of provisions utilised                                                (1,759)          (984)        (4,569)
Pension contributions charged to provisions                                         (832)          (756)        (1,600)
Taxation refunded                                                                     787          4,403          4,356


Operating cash flows before changes in working capital                           (19,030)          7,544         20,195


Decrease/(increase) in inventories                                                    467        (2,969)        (7,255)
Decrease/(increase) in trade and other receivables                                  8,446        (3,774)       (13,015)
Decrease in trade and other payables                                             (11,988)       (11,333)       (11,051)


Net cash outflows from operating activities                                      (22,105)       (10,532)       (11,126)



Cash flows from investing activities

Purchase of property, plant and equipment                                         (3,445)        (3,153)       (10,725)
Proceeds on disposal of property, plant and equipment                                   -            977          1,812
Disposal of subsidiary                                                                  -         45,200         42,544
Disposal of investments                                                                 -              -          2,600


Net cash flows from investing activities                                          (3,445)         43,024         36,231



Cash flows from financing activities

Interest paid                                                                     (1,025)        (1,431)        (4,172)
Interest received                                                                       -             28             28
Exceptional finance costs                                                               -        (2,108)        (5,299)
Proceeds of bank loans                                                                  -         13,990         20,314
Proceeds of other loans                                                            15,000              -              -
Repayment of bank loans                                                          (59,584)       (34,822)       (34,823)
Repayment of obligations under finance leases                                       (415)          (442)          (787)
Repayment of loan notes                                                             (380)           (54)          (199)
Proceeds on issue of share capital                                                 98,714              -            286
Decrease in bank overdrafts                                                       (8,904)       (18,349)        (9,711)


Net cash flows from financing activities                                           43,406       (43,188)       (34,363)


Net increase/(decrease) in cash and cash equivalents                               17,856       (10,696)        (9,258)
Opening cash and cash equivalents                                                   2,032         11,290         11,290


Closing cash and cash equivalents                                                  19,888            594          2,032





HOMESTYLE GROUP PLC
CONSOLIDATED STATEMENT OR RECOGNISED INCOME AND EXPENSE (unaudited)
For the 26 weeks to 29 October 2005

                                                                              26 weeks to    26 weeks to    52 weeks to
                                                                               29 October     30 October       30 April
                                                                   Note              2005           2004           2005 
                                                                                              (restated)     (restated)
                                                                                     £000           £000           £000

Actuarial gains/(losses) on defined benefit pension schemes                             -              -        (2,580)


Net income recognised directly in equity                                            1,731              -        (2,580)

Transferred to the initial carrying amount of non financial                         
hedged items on cash flow hedges                                                        -              -          (821)


Loss for the period                                                              (25,383)        (2,782)       (23,922)


Total recognised income and expense for the period                               (25,383)        (2,782)       (27,323)




HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005



General information

The financial statements for the 26 weeks ended 29 October 2005 do not
constitute statutory accounts for the purposes of Section 240 of the Companies
Act 1985 and have not been audited.  No statutory accounts for the period have
been delivered to the Registrar of Companies.

The financial information in respect of the 52 week period ended 30 April 2005
has been produced using extracts from the statutory accounts under UK GAAP for
this period and amended by adjustments arising from the implementation of
International Financial Reporting Standards (IFRS).  The statutory accounts for
this period have been filed with the Registrar of Companies.  The auditors'
report on these accounts was unqualified and did not contain a statement under
Sections 237 (2) or (3) of the Companies Act 1985 which deal respectively with
the maintaining of proper accounting books and records and the availability of
information to the auditors.

The financial information has been prepared based on the adoption of IFRS,
including International Accounting Standards (IAS) and interpretations issued by
the International Accounting Standards Board (IASB) and its committees, as
interpreted by any regulatory bodies relevant to the group.  These are subject
to ongoing amendment by the IASB and subsequent endorsement by the European
Commission and are therefore subject to change.  As a result the accounting
policies used to prepare the interim financial report will need to be updated
for any subsequent amendment to IFRS required for first time adoption, or any
new standards that the group may elect to adopt early.

This interim report was approved by the directors on 20 January 2006.  This
announcement is being sent to shareholders and will be made available at the
company's registered office at 520 Europa Boulevard, Westbrook, Warrington WA5
7TP.  Copies of this report will also be made available on the company's website
at www.homestylegroup.com.


1.  Basis of preparation

The group's interim results for the 26 weeks ended 29 October 2005 have been
prepared using accounting policies consistent with International Financial
Reporting Standards (IFRS) for the first time.  Consequently, a number of
accounting policies adopted in the preparation of these statements are different
to those adopted in the financial statements for the 52 weeks ended 30 April
2005 which were prepared in accordance with UK Generally Accepted Accounting
Practice (UK GAAP).

The group's first annual report under IFRS will be for the 61 weeks ending 1
July 2006.  The adoption of IFRS represents an accounting change only and does
not affect the operations or cash flows of the group.

The financial information in this document has been prepared in accordance with
IFRS and the accounting policies set out in note 3 below.

In accordance with IFRS 1 'First Time Adoption of International Financial
Reporting Standards', the group has elected not to restate comparative
information for the impact of IAS 32 and IAS 39 'Financial Instruments' for the
52 week period ended 30 April 2005.  For the group's interim result for the 26
weeks ended 29 October 2005 the opening balance sheet at 30 April 2005 has been
adjusted in accordance with the requirements of these standards.

In accordance with IAS 16, Property, plant and equipment, the group has elected
to retain the UK GAAP value of property, plant and equipment at historic cost at
the date of acquisition.


2.  Explanation of transition to IFRS

This note sets out details of the changes in accounting policies arising from
the adoption of IFRS, together with restated financial information for the
opening balance sheet at 1 May 2004 and 30 April 2005, the 26 weeks ended 30
October 2004 and the 52 weeks ended 30 April 2005.



HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


IFRS 1 - First time adoption of International Financial Reporting Standards

In implementing the transition to IFRS, the group has followed the requirements
of IFRS 1, which in general requires IFRS accounting policies to be applied
fully retrospectively in deriving the opening balance sheet at the date of
transition.  Significant accounting policy changes, together with the relevant
transitional provisions, and their effect on the financial statements of the
group are explained in this section.

However, IFRS 1 contains certain mandatory exceptions and some optional
exemptions to this principle of retrospective application.  The relevant
transitional provisions are set out where applicable below.

IFRS 2 - Share based payments

The charge recognised in the income statement for share based payments is based
on the fair value of the option or award at date of grant, which is expensed
over the vesting period of the option or award.  Fair value is measured by use
of the Hoadley Binomial TS valuation model.


IFRS 3 - Business combinations and goodwill

The group has elected to take the exemption available under IFRS 1 to not apply
IFRS 3 retrospectively to goodwill and business combinations arising before the
date of transition to IFRS.  Goodwill arising on such acquisitions has therefore
been retained at its UK GAAP carrying value at 1 May 2004.

Under UK GAAP, goodwill arising as a result of the acquisition of a subsidiary
undertaking was amortised over 20 years.  However, under IFRS, no amortisation
charge is to be made.  Instead, any goodwill recognised in the balance sheet, is
subject to an annual impairment review, or more frequently if events or changes
in circumstances indicate that the carrying value may be impaired.  The group
has carried out an impairment review of the carrying value of its goodwill as at
1 May 2004 and found that no charge for impairment need be made from this date.
The effect of this review has been to reverse the charges originally made
against the income statement, and thereby to increase the profit by the amounts
of £2,368,000 in respect of the 26 weeks ended 30 October 2004 , and by
£4,736,000 for the 52 weeks ended 30 April 2005.



IAS 17 -Leases

Under UK GAAP, operating lease incentives in respect of rent free periods were
recognised in the income statement over the period to the date of the first rent
review.  In accordance with IAS 17, all lease incentives must now be recognised
in the income statement over the full term of the lease.  The effect of this
standard has resulted in an adjustment carrying forward an increased amount in
the value of rent free periods in deferred lease incentives within current
liabilities and in deferred lease incentives within non current liabilities
totalling £3,790,000 at 1 May 2004.  In respect of the 26 weeks to 30 October
2004, and the 52 week period to 30 April 2005, adjustments have been made to
decrease deferred lease incentives creditors by £64,000 and £143,000
respectively.


IAS 32 and 39 - Financial instruments

The group adopted IAS 32 and IAS 39 on 1 May 2005 as permitted under the
exemptions of IFRS 1.  The impact was limited to the recognition of fair value
movements in interest rate swaps and embedded derivatives on the group's balance
sheet when the group becomes a party to the contractual provisions of such an
instrument.  Profits and losses on financial instruments are recognised in the
income statement as they arise.


IAS 33 - Earnings per share

The method of calculating earnings per share has not changed on the transition
to IFRS.  However the calculations have changed as a result of those
restatements on the transition from UK GAAP to IFRS which affect profit.



HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


Reconciliation of net assets          UK GAAP          Lease       Employee    Share based      Effect of      Restated
                                              incentives IAS   benefits IAS  payments IFRS  transition to    under IFRS
                                         £000             17             19              2           IFRS
At 1 May 2004                            £000           £000           £000           £000           £000          £000

Non-current assets

Goodwill                               90,654                                                                    90,654
Other intangible assets                 2,994                                                                     2,994
Property plant and equipment           80,750                                                                    80,750
Deferred tax assets                         -                         4,831                         4,831         4,831
                                      174,398              -          4,831              -          4,831       179,229

Current assets

Inventories                            68,212                                                                    68,212
Trade and other receivables            26,064                                                                    26,064
Cash and cash equivalents              11,290                                                                    11,290
                                      105,566              -              -              -              -       105,566

Total assets                          279,964              -          4,831              -          4,831       285,932


Current liabilities

Trade and other payables            (140,862)             96                                           96     (140,766)
Retirement benefit obligation         (1,265)                                                                   (1,265)
Tax liabilities                       (6,214)                                                                   (6,214)
Obligations under finance     
leases                                  (278)                                                                     (278)
Bank overdrafts and loans            (41,052)                                                                  (41,052)
Loan notes                            (2,209)                                                                   (2,209)
Short term provisions                 (4,219)                                                                   (4,219)
                                    (196,099)             96                                           96     (196,003)

Net current (liabilities)/assets     (90,533)             96                                           96      (90,437)


Non-current liabilities

Trade and other payables                (166)        (3,886)                                      (3,886)       (4,052)
Retirement benefit obligation        (10,011)                       (4,831)                       (4,831)      (14,842)
Obligations under finance leases        (441)                                                                     (441)
Bank loans                           (52,477)                                                                  (52,477)
Loan notes                              (454)                                                                     (454)
Long term provisions                  (7,154)                                                                   (7,154)
                                     (70,703)        (3,886)        (4,831)              -        (8,717)      (79,420)

Total liabilities                   (266,802)        (3,790)        (4,831)              -        (8,621)     (275,423)
Net assets                             13,162        (3,790)              -              -        (3,790)         9,372


Equity

Share capital                          16,751                                                                    16,751
Share premium account                  78,330                                                                    78,330
Merger reserve                         38,649                                                                    38,649
Capital redemption reserve                288                                                                       288
Reserve for treasury shares           (5,150)                                          180            180       (4,970)
Retained earnings                   (115,706)        (3,790)                         (180)        (3,970)     (119,676)

Total equity                           13,162        (3,790)              -              -        (3,790)         9,372





HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005



Reconciliation of group            UK GAAP   Goodwill        Lease    Share based  Discontinued     Effect of  Restated
income statement                      £000     IFRS 3   incentives       payments    activities transition to     under 
                                                            IAS 17         IFRS 2                        IFRS      IFRS
For the 26 weeks ended 30             £000       £000         £000           £000          £000          £000      £000
October 2004
Revenue                            217,436                                             (10,956)      (10,956)   206,480

Operating(loss)/profit             (2,673)      2,368           64           (30)           346         2,620        75
Finance costs (net)                (3,511)                                                   66            66   (3,445)

(Loss)/profit before taxation      (6,184)      2,368           64           (30)           412         2,686   (3,370)
Taxation                             1,000                       -                        (124)         (124)       876

(Loss)/profit from continuing    
operations                         (5,184)      2,368           64           (30)           288         2,562   (2,494)
Loss from discontinued operations        -                                                (288)         (288)     (288)

(Loss)/profit for the period       (5,184)      2,368           64           (30)             -         2,274   (2,782)

Earning per share from
continuing and discontinued
operations
Basic and fully diluted             (8.0)p                                                                       (4.3)p



HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


Reconciliation of net assets    UK GAAP  Goodwill         Lease     Employee   Share based      Effect of      Restated
                                   £000    IFRS 3    incentives     benefits      payments     transition 
                                                         IAS 17       IAS 19        IFRS 2        to IFRS          IFRS
At 30 October 2004                 £000      £000          £000         £000          £000           £000          £000

Non-current assets

Goodwill                         88,286     2,368                                                   2,368        90,654
Other intangible assets           2,994                                                                           2,994
Property plant and equipment     49,580                                                                          49,580
                                      -                                4,509                        4,509         4,509
Deferred tax assets
                                140,860     2,368             -        4,509             -          6,877       147,737

Current assets

Inventories                      36,064                                                                          36,064
Trade and other receivables      25,552                                                                          25,552
Cash and cash equivalents           594                                                                             594
                                 62,210         -             -            -             -              -        62,210

Total assets                    203,070     2,368             -        4,509             -          6,877       209,947


Current liabilities

Trade and other payables       (99,911)                     570                                       570      (99,341)
Retirement benefit obligation   (1,265)                                                                         (1,265)
Tax liabilities                (18,349)                                                                        (18,349)
Obligations under finance       
leases                            (446)                                                                           (446)
Bank overdrafts and loans       (7,510)                                                                         (7,510) 
Loan notes                      (2,155)                                                                         (2,155)
Short term provisions           (1,903)                                                                         (1,903)
                              (131,539)         -           570            -             -            570     (130,969)

Net current assets/            (69,329)         -           570            -             -            570      (68,759)
(liabilities)

Non-current liabilities
Trade and other payables              -                 (4,296)                                   (4,296)       (4,296)
Retirement benefit obligation   (9,255)                              (4,509)                      (4,509)      (13,764)
                                  
Obligations under finance
leases                            (745)                                                                           (745)
Bank loans                     (46,838)                                                                        (46,838) 
Loan notes                        (454)                                                                           (454) 
Long term provisions            (6,261)                                                                         (6,261)
                               (63,553)         -       (4,296)      (4,509)             -        (8,805)      (72,358)

Total liabilities             (195,092)         -       (3,726)      (4,509)             -        (8,235)     (203,327)
Net assets                        7,978     2,368       (3,726)            -             -        (1,358)         6,620


Equity

Share capital                    16,751                                                                          16,751
Share premium account            78,330                                                                          78,330
Merger reserve                   38,649                                                                          38,649
Capital redemption reserve          288                                                                             288
Reserve for treasury shares     (5,150)                                                210            210       (4,940)
Retained earnings             (120,890)     2,368       (3,726)                      (210)        (1,568)     (122,458)

Total equity                      7,978     2,368       (3,726)            -             -        (1,358)         6,620




HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


Reconciliation of group income    UK GAAP     Goodwill        Lease  Share based  Discontinued      Effect of  Restated
statement                            £000       IFRS 3   incentives     payments    activities     transition     under 
                                                             IAS 17       IFRS 2                      to IFRS      IFRS
For the 52 weeks ended 30 April      £000         £000         £000         £000          £000           £000      £000
2005

Revenue                           464,968                                             (11,395)       (11,395)   453,573

Operating loss                   (17,422)        4,736        (143)         (60)         (601)          4,218  (13,204)
Finance costs (net)              (14,918)                                                2,578          2,578  (12,340)

Loss before taxation             (32,340)        4,736        (143)         (60)         1,977          6,796  (25,544)
Taxation                            3,599                                                  161            161     3,760

Loss from continuing operations  (28,741)        4,736        (143)         (60)         2,138          6,957  (21,784)
Loss from discontinued operations       -                                              (2,138)        (2,138)   (2,138)

Loss for the period              (28,741)        4,736        (143)         (60)             -          4,819  (23,922)

Earning per share from
continuing and discontinued
operations

Basic and fully diluted           (44.0)p                                                                       (36.6)p





HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


Reconciliation of net assets    UK GAAP  Goodwill      Lease   Employee Share based   Financial    Effect of   Restated
                                   £000    IFRS 3 incentives   Benefits    Payments derivatives   transition      Under
                                                      IAS 17     IAS 19      IFRS 2      IAS 39      to IFRS       IFRS
At 30 April 2005                   £000      £000       £000       £000        £000        £000         £000       £000

Non-current assets

Goodwill                         85,918     4,736                                                      4,736     90,654

Other intangible assets             137                                                                    -        137
Property plant and equipment     51,968                                                                    -     51,968
Deferred tax assets               3,900                           5,244                                5,244      9,144
                                141,923     4,736          -      5,244           -           -        9,980    151,903

Current assets

Inventories                      38,422                                                                          38,422
Trade and other receivables      31,502                                                                          31,502

Cash and cash equivalents         2,032                                                                           2,032
                                 71,956         -          -          -           -           -            -     71,956
Total assets                    213,879     4,736          -      5,244           -           -        9,980    223,859
Current liabilities
Trade and other payables      (100,710)                  519                                             519  (100,191)
Retirement benefit obligation   (1,572)                                                                    -    (1,572)
Tax liabilities                (27,271)                                                                    -   (27,271)
Obligations under finance     
leases                          (1,017)                                                                    -    (1,017)
Bank overdrafts and loans      (68,488)                                                   (821)        (821)   (69,309) 
Loan notes                      (2,050)                                                                    -    (2,050)
Short term provisions           (3,587)                                                                    -    (3,587)
                              (204,695)         -        519          -           -       (821)        (302)  (204,997)

Net current assets/     
(liabilities)                 (132,739)         -        519          -           -       (821)        (302)  (133,041)
Non-current liabilities

Trade and other payables              -              (4,166)                                         (4,166)    (4,166)
Retirement benefit obligation  (10,663)                         (5,244)                              (5,244)   (15,907)
Tax liabilities                 (1,875)                                                                    -    (1,875) 
   
Obligations under finance
leases                            (313)                                                                    -      (313)
Loan notes                        (414)                                                                    -      (414)
Long term provisions           (11,162)                                                                    -   (11,162)
                               (24,427)         -    (4,166)    (5,244)           -           -      (9,410)   (33,837)
Total liabilities             (229,122)         -    (3,647)    (5,244)           -       (821)      (9,712)  (238,834)
Net liabilities                (15,243)     4,736    (3,647)          -           -       (821)          268   (14,975)


Equity

Share capital                    17,037                                                                    -     17,037
Share premium account            79,229                                                                    -     79,229
Merger reserve                   38,649                                                                    -     38,649
Capital redemption reserve          288                                                                    -        288
Other reserve                     1,731                                                                    -      1,731
Reserve for treasury shares     (5,150)                                         240                      240    (4,910)
Retained earnings             (147,027)     4,736    (3,647)                  (240)       (821)           28  (146,999)

Total equity                   (15,243)     4,736    (3,647)          -           -       (821)          268   (14,975)





HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


3.  Accounting policies

Basis of accounting

The next annual financial statements of the group will be prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted for use in
the EU.  Accordingly, the interim financial information has been prepared using
accounting policies consistent with IFRS.  IFRS is subject to amendment and
interpretation by the International Accounting Standards Board (IASB) and there
is an ongoing process of review and endorsement by the European Commission.  The
financial information has been prepared on the basis of IFRS that the directors
expect to be applicable as at 1 July 2006.

Homestyle Group plc's consolidated financial statements were prepared in
accordance with United Kingdom Generally Accepted Accounting Principles (UKGAAP)
until 30 April 2005.  UK GAAP differs in some areas from IFRS.  In preparing
this interim financial information, management has amended certain accounting
and valuation methods applied in the UK GAAP financial statements to comply with
the recognition and measurement criteria of IFRS.  The comparative figures in
respect of 2004 were restated to reflect these requirements.

The group has made use of the exemption available under IFRS 1 to only apply IAS
32, 'Financial Instruments: Disclosure and Presentation' and IAS 39 'Financial
Instruments: Recognition and Measurement' from 1 May 2005.

The disclosures required by IFRS 1 concerning the transition from UK GAAP to
IFRSs are given in note 2.

The financial statements have been prepared on the historical cost basis except
for the financial instruments and share based payments.  The principle
accounting policies adopted are set out below.


Basis of consolidation

The group accounts consolidate the accounts of Homestyle Group PLC and its
subsidiary undertakings made up to the end of each financial period. The
acquisition method of accounting has been adopted in consolidating subsidiary
undertakings within the group.  On acquisition, the assets and liabilities of a
subsidiary are measured at their fair values at the date of acquisition.  Any
excess of the cost of acquisition over the fair values of the identifiable net
assets is recognised as goodwill.  Any deficiency of the cost of acquisition
below the fair values of the identifiable assets acquired is credited to the
income statement. The results of subsidiary undertakings acquired or sold are
consolidated for the periods from or to the date on which control passes.




HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005



Goodwill

Goodwill arising on the acquisition of subsidiary undertakings and businesses
represents any excess of the cost of acquisition over the fair value of the
identifiable assets and liabilities acquired.

Goodwill is recognised as an asset and reviewed for impairment at least
annually.  Any impairment is recognised immediately in the income statement and
is not subsequently reversed.

On disposal of a subsidiary the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.


Property, plant and equipment

Property, plant and equipment is stated at cost, net of depreciation and any
recognised impairment loss.

Depreciation is provided on all property, plant and equipment, other than
freehold land, at rates calculated to write off the cost, less estimated
residual value, of each asset on a straight-line basis over its expected useful
life, as follows:


Freehold and long-leasehold buildings                     2% per annum
Short-leasehold interests           - premiums            Term of lease
                                    - tenants fixtures    8-10% per annum
                                    - mezzanine floors    4% per annum
Fixtures and fittings                                     10-25% per annum
Vehicles                                                  20-25% per annum
Display assets                                            50% per annum


Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets, or where shorter, over the term of the
relevant lease.

The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in income.


Other intangible assets

Other intangible assets are stated at cost less any recognised impairment loss.

Impairment of tangible and intangible assets excluding goodwill

At each balance sheet date, the group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss.  If any such indication exists,
the recoverable amount of the asset is estimated in order to determine the
extent of the impairment loss (if any).  Where the asset does not generate cash
flows that are independent from other assets, the group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in
use.  In assessing value in use, the estimated future cash flows are discounted
to their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to
be less than its carrying amount, the carrying amount of the asset
(cash-generating unit) is reduced to its recoverable amount.  An impairment loss
is recognised as an expense immediately.




HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


Where an impairment loss subsequently reverses, the carrying amount of the asset
(cash-generating unit) is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior years.  A reversal of an
impairment loss is recognised as income immediately.


Inventories

Inventories are stated at the lower of cost and net realisable value. Cost
comprises the purchase price of materials and merchandise. Net realisable value
is based on estimated selling price, less further costs expected to be incurred
to completion and disposal. Provision is made for obsolete, slow-moving or
defective items where appropriate.


Taxation

The tax expense represents the sum of the tax currently payable and deferred
tax.

Current tax, including UK corporation tax and foreign tax, is provided at
amounts expected to be paid (or recovered) using the tax rates and laws that
have been enacted by the balance sheet date.  Taxable profit differs from net
profit as reported in the income statement because it excludes items of income
or expense that are taxable or deductible in other years and it further excludes
items that are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method.  Deferred
tax is recognised in respect of all timing differences that have originated but
not reversed at the balance sheet date where transactions or events that result
in an obligation to pay more tax in the future or a right to pay less tax in the
future have occurred at the balance sheet date.

A net deferred tax asset is regarded as recoverable and therefore recognised
only when, on the basis of all available evidence, it can be regarded as more
likely than not that there will be suitable taxable profits from which the
future reversal of the underlying timing differences can be deducted.

Deferred tax is measured at the tax rates that are expected to apply in the
periods in which the timing differences are expected to reverse based on tax
rates and laws that have been enacted or substantially enacted by the balance
sheet date.  Deferred tax is measured on a non-discounted basis.


Foreign currency

Transactions in foreign currencies are recorded at the rate of exchange at the
date of the transaction or, if hedges, at the forward contract rate.  At each
balance sheet date monetary assets and liabilities denominated in foreign
currencies are restated at the rates prevailing on the balance sheet date or, if
appropriate, at the forward contract rate.  Gains and losses arising on
retranslation are recognised in the income statement for the period in which the
gain or loss arises except for exchange differences arising on non-monetary
assets and liabilities where the changes in fair value are recognised directly
in equity.


Financial instruments

Financial assets and financial liabilities are recognised on the group's balance
sheet when the group becomes a party to the contractual provisions of the
instrument.  Profits and losses on financial instruments are recognised in the
income statement as they arise.



HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


Debt

Debt is initially stated at the amount of the net proceeds after deduction of
issue costs. The carrying amount is increased by the finance cost in respect of
the accounting period and reduced by payments made in the period. Costs incurred
in connection with a financial restructuring or renegotiation are written off to
the income statement as incurred. Where such costs are material they are
separately identified within finance costs.


Retirement benefit costs

Payments to defined contribution retirement benefit schemes are charged as an
expense as they fall due.  Payments made to state-managed retirement benefit
schemes are dealt with as payments to defined contribution schemes where the
group's obligations under the schemes are equivalent to those arising in a
defined contribution retirement benefit scheme.

For defined benefit schemes, the cost of providing benefits is determined using
the Projected Unit Credit Method, with actuarial valuations being carried out at
each balance sheet date.  Actuarial gains and losses are recognised in full in
the period in which they occur.  They are recognised outside profit or loss and
presented in the statement of recognised income and expense.

Past service cost is recognised immediately to the extent that the benefits are
already vested, and otherwise is amortised on a straight-line basis over the
average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the
present value of the defined benefit obligation as adjusted for unrecognised
past service cost, and as reduced by the fair value of scheme assets.  Any asset
resulting from this calculation is limited to past service cost, plus the
present value of available refunds and reductions in future contributions to the
scheme.


Reserve for treasury shares

The group has applied IAS 32 in respect of shares held to meet its obligations
under its long term incentive plan for key employees. The shares are held at
cost and are shown as a deduction from equity shareholder's funds.


Share warrants

Share warrants represent the shares issued to the syndicated banks as part of
the new facilities and are valued at the difference between the nominal value
and the company share price at date of issue.


Share based payments

The group has applied the requirements of IFRS 'Share-based Payments'.  In
accordance with the transitional provisions, IFRS 2 has been applied to all
grants of equity instruments after 7 November 2002 that were unvested as of 1
May 2005.

The group issues equity-settled share-based payments to certain employees.
Equity settled share-based payments are measured at fair value at the date of
grant.  The fair value determined at the date of grant of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the group's estimate of shares that will eventually vest.

Fair value is measured by use of a Hoadley BinomialTS valuation model.



HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


Finance leases

Assets held under finance leases, which confer rights and obligations similar to
those attached to owned assets, are capitalised as tangible fixed assets and are
depreciated over the shorter of the lease terms and their useful economic lives.
The capital elements of future lease obligations are recorded as liabilities,
while the interest elements are charges to the income statement over the period
of the leases to produce a constant rate of charge on the balance of capital
repayments outstanding. Hire purchase transactions are dealt with similarly,
except that assets are depreciated over their useful economic lives.


Operating leases

Rentals under operating leases are charged on a straight-line basis over the
lease term, even if the payments are not made on such a basis. Benefits received
and receivable as an incentive to sign an operating lease are similarly spread
on a straight-line basis over the lease term.


Revenue recognition

Revenue represents the fair value of amounts receivable for goods and services
provided in the normal course of business, net of trade discounts, VAT and other
sales related taxes.  Sales are recognised on delivery to customers.


Branch operating costs

Branch opening costs comprising costs such as rent, rates and employee
remuneration incurred at a store prior to its opening are written off as
incurred.



4.  Analysis of revenue and operating profit

                                                                           26 weeks to       26 weeks to    52 weeks to
                                                                       29 October 2005   30 October 2004  30 April 2005
                                                                                              (restated)     (restated)
                                                                                  £000              £000           £000
Analysis of revenue
Continuing

Furniture retailing                                                             87,851           111,597        253,495
Bed retailing                                                                   94,938            94,883        200,078

                                                                               182,789           206,480        453,573

Discontinued                                                                         -            10,956         11,395 
Home Textiles retailing                                                        182,789           217,436        464,968
                                                                             

Analysis of operating profit

Continuing
Furniture retailing                                                           (27,010)           (6,600)       (26,331)
Bed retailing                                                                    2,948             6,675         13,127

                                                                              (24,062)                75       (13,204)

Discontinued
Home Textiles retailing                                                              -             (346)            601
                                                                              (24,062)             (271)       (12,603)




HOMESTYLE GROUP PLC
NOTES TO THE INTERIM STATEMENTS
For the 26 weeks to 29 October 2005


5.  Taxation

The taxation charge for the 26 weeks ended 29 October 2005 is based on the
estimated effective rate for the full year.

                                                                           26 weeks to       26 weeks to    52 weeks to
                                                                            29 October        30 October       30 April 
                                                                                  2005              2004           2005
                                                                                              (restated)     (restated)
                                                                                  £000              £000           £000

Current tax                                                                          -                 -              -
Deferred tax                                                                         -               876          3,760
                                                                                     -               876          3,760



6.  Discontinued operations

On 28 May 2004, the group completed the sale of its textile operations.  The
disposal was made to generate cash flow to repay bank borrowings.

The results of the discontinued operations, which have been included in the
consolidated income statement, were as follows:


                                                                           26 weeks to       26 weeks to    52 weeks to
                                                                            29 October        30 October       30 April 
                                                                                  2005              2004           2005
                                                                                              (restated)     (restated)
                                                                                  £000              £000           £000

Revenue                                                                              -            10,956         11,395
Expenses                                                                             -          (11,368)       (13,372)
Profit before tax                                                                    -             (412)        (1,977)
Attributable tax expense                                                             -               124            161
Loss on disposal of discontinued operations                                          -             (288)        (2,138)



7.  Statement of changes in shareholders' equity

                                 Share      Share     Merger       Capital     Other   Treasury    Retained     Total
                               capital    premium    reserve    Redemption   reserve     shares    earnings
                                                                   reserve
                                  £000       £000       £000          £000      £000       £000        £000      £000

At 1 May 2004                   16,751     78,330     38,649           288         -    (4,970)   (119,676)     9,372

Share based payments                 -          -          -             -         -         30           -        30
Loss for the period                  -          -          -             -         -          -     (2,782)   (2,782)

At 30 October 2004              16,751     78,330     38,649           288         -    (4,940)   (122,458)     6,620

Benefit of warrants issued      
to the bank                          -          -          -             -     2,630          -           -     2,630
Exercise of warrants by the bank   286        899          -             -     (899)          -           -       286
Actuarial loss on retirement      
benefit schemes                      -          -          -             -         -          -     (2,580)   (2,580)
Recognition of fair values         
of financial instruments             -          -          -             -         -          -       (821)     (821)
Share based payments                 -          -          -             -         -         30           -        30
Loss for the period                  -          -          -             -         -          -    (21,140)  (21,140)

At 30 April 2005                17,037     79,229     38,649           288     1,731    (4,910)   (146,999)  (14,975)

Cancellation of warrants         
issued to the bank                   -          -          -             -   (1,731)          -       1,731         -
Issue of ordinary share      
capital                         47,732     50,982          -             -         -          -           -    98,714
Share based payments                 -          -          -             -         -         30           -        30
Loss for the period                  -          -          -             -         -          -    (25,383)  (25,383)

At 29 October 2005              64,769    130,211     38,649           288         -    (4,880)   (170,651)    58,386



On 4 March 2005, warrants exercised by the bank resulted in the issue of
1,145,949 ordinary shares of 25p each.

In connection with the refinancing 6,814,794 ordinary shares of 25p each were
issued on 25 May 2005,  3,407,397 ordinary shares of 25p each were issued on 27
May 2005 and 180,704,708 ordinary shares of 25p each were issued on 17 June
2005.


8.  (Loss)/earnings per share

The calculation of earnings per share is based on the loss for the financial
period and the weighted average number of shares in issue during the period of
220,122,177 (2004: 65,007,857).  For diluted earnings per share, the weighted
average number of shares of 220,122,177 (2004: 67,002,354) has been calculated
after adjusting for the potential dilution of outstanding share options.


9.  Dividend

The directors do not intend to pay an interim dividend (2004 - nil).



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