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United Carpets Group plc  -  UCG   

Final Results

Released 07:00 20-Jul-2017

RNS Number : 5592L
United Carpets Group plc
20 July 2017
 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

 

20 July 2017

 

UNITED CARPETS GROUP PLC

 

Unaudited Preliminary Results for the year ended 31 March 2017

 

 

 

United Carpets Group plc ("the Group" or "the Company" or "United Carpets"), the third largest chain of specialist retail carpet and floor covering stores in the UK, today announces its preliminary results for the year ended 31 March 2017.

 

Highlights

 

·      Like for like sales* increased by 1.3%

 

·      Revenue for the year was £21.2m (2016: £21.4m)

 

·      Profit before tax was £1.53m (2016: £1.49m)

 

·      Earnings per share were 1.58p (2016: 1.51p)

 

·      Store numbers reduced from 61 to 57

 

·      Special dividend of 1.0p per share paid 25 May 2017

 

·      Recommending a final dividend of 0.275p per share (2016: 0.265p per share) payable on 12 October 2017

 

·      Net funds were £2.60m (2016: £1.59m)

 

 

*Like for like sales are defined in the Financial Review

 

Paul Eyre, Chief Executive, said:

 

"These results show a modest improvement on the prior year together with a positive like for like performance up 1.3%. This is a creditable result against a backdrop of increasing economic uncertainty which has tended to damage consumer confidence. We have been helped by the resilience of our franchise model together with the strength of our core customer offering of providing great quality products at attractive price points."

 

 

 

 

 

 

 

 

 

 

 

Enquiries:

 

 

United Carpets Group plc

Paul Eyre, Chief Executive

Ian Bowness, Finance Director

 

Novella Communications Ltd

Tim Robertson  

Toby Andrews

 

 

 

01709 732 666

 

 

020 3151 7008

Cantor Fitzgerald Europe

Marc Milmo, Catherine Leftley (Corporate Finance)

 

 

020 7894 7000

 

 

 

 

 

Chairman's statement

 

Given the wider environment, this has been a good year for United Carpets. Political and economic changes have affected consumer confidence and this has resulted in a more challenging retail environment so a modest improvement in profit before tax represents sound progress.

 

During the year, we reduced the overall size of the store portfolio to 57, being 4 fewer than at the start of the financial year, maintaining our focus on stores which meet our performance criteria. That said, the Group will continue to seek to open new stores where it believes there is an opportunity to establish a profitable long-term presence.

 

It remains difficult to predict the full impact that Brexit and other political developments might have on the UK, however a prolonged period of significant uncertainty has meant that the mood of the UK consumer has fluctuated throughout the past year. It appears probable that this state of flux is unlikely to stabilise in the near term as we go through the Brexit process and therefore we expect the challenging market conditions to remain prevalent over the coming year.

 

Despite some recent weakening, the UK housing market continues to function reasonably positively and this alongside the Group's debt free, stable financial base and strong market positioning makes the Group, in the Board's opinion, well positioned going forward. 

 

Financial review

 

Revenue, which includes marketing and rental costs incurred by the Group and recharged to franchisees, was £21.2m (2016: £21.4m). This small overall reduction in revenue reflected the decrease in the average number of corporate stores during the year compared to the prior year, which was largely offset by increased activity through the Group's Warehousing division.

Like for like sales across the whole of the network (based on stores that have traded throughout both the period under review and the corresponding period in the prior year and thus excluding stores that closed during either period) were up 1.3%. This was a pleasing result against strong comparatives in the prior year and during what is considered to be a tough trading environment.

 

Gross margin in the period was 61.2% compared to 63.8% in the prior year. This primarily reflects the change in the mix of revenue attributable to Franchising and Retail and Warehousing due to the reduction in the average number of corporate stores year on year and increasing proportion of total revenue derived from the Warehousing division which operates on relatively low gross margin. Underlying gross margin was little changed year on year with a small improvement in Franchising and Retail gross margin offset by a reduction in Warehousing gross margin.

 

Distribution costs and administrative expenses, which include rent, rates and staff costs at the corporate stores, decreased by £0.8m largely as a result of the reduction in the average number of corporate stores year on year, improved efficiency in marketing expenditure and the release of a provision for deferred consideration of £0.15m which is no longer considered necessary. Distribution costs and administrative expenses decreased from 57.2% of revenue to 54.1% principally reflecting the reduction in the proportion of revenue derived from corporate stores.

 

Profit before tax was £1.53m (2016: £1.49m) and earnings per share were 1.58p (2016: 1.51p).

 

The statement of financial position included net funds of £2.60m at 31 March 2017 (2016: £1.59m).

 

Dividend

 

On 11 May 2017, the Group announced a special dividend of 1.0 pence per share.  This dividend was paid on 25 May 2017 and demonstrates the continuing, strong cash generation of the Group, reflecting the improvements made in the business over the last few years.

 

 

 

Dividend (continued)

 

Looking ahead, dividend distributions will remain an important part of the Board's strategy going forwards and when deciding on future, regular dividend payments, modest reductions in dividend cover will be considered subject to any overriding requirements of the business to fund future growth.

 

The Board is therefore pleased to be recommending a final dividend of 0.275p per share (2016: 0.265p per share). Subject to approval at the Annual General Meeting, this dividend will be paid on 12 October 2017 to all shareholders on the register at the close of business on 29 September 2017.  The ex-dividend date will be

28 September 2017.

 

Operations review

 

The store portfolio is increasingly stable with the majority of stores producing satisfactory or better returns.

 

At 31 March 2016, there were 61 stores of which 52 were franchised and 9 were corporate stores. Over the following 12 months, 2 franchised stores and 2 corporate stores were closed and 2 franchised stores and a corporate store were re-located within the same town. As a result, at the end of the financial year, the Group had 57 stores of which 50 were franchised and 7 were corporate.

 

The streamlining of the store portfolio during the year reflects the Group's continuing focus on developing stores that meet or exceed the performance criteria. Of the 4 stores that were closed, 3 were relatively recent openings that were considered unlikely to be strong long-term contributors. The decision to close them was taken quickly, ensuring that they did not detract from the main focus of profitable contribution to the core portfolio.

 

The Group continues to seek to open new stores where it can establish a profitable long-term presence. It is anticipated that future opportunities will involve sites with modestly higher annual rental charges reflecting the decision to target slightly higher profile locations. The appointment of a new franchise recruitment manager in May 2017 is aimed at increasing the Group's pool of high quality franchisees.

 

Across the business, the Group continues to develop its marketing capabilities and during the year it invested in building a long-term online presence. The Group's website functionality has now been expanded to include a transactional facility with online sales being fulfilled via our store network to the benefit of franchisees. Further ongoing investments are anticipated to continue the development of the Group's online capabilities. Alongside this, the Group continues to support the network with a centralised programme of marketing, underpinning awareness of the brand and promotional offers on specific products designed to increase footfall across the store network.

 

Franchising and Retail

 

Floor coverings are the Group's primary driver of sales (predominantly carpet, laminate and vinyl floorings) through both franchised stores and the Group's own corporate stores. During the year, the Group delivered a reasonable performance relative to the wider market, with sales up 0.8% on a like for like basis. The product mix was extended during the year, with the introduction of a premium vinyl tile that has added to the overall appeal of the store offer. 

 

While still contributing less than 10% of the Group's total revenues, Beds again delivered in the period recording a like for like sales increase of 7.2% against what are now much tougher comparatives. During the year, the bed range was significantly expanded with the introduction of Silent Night, the dominant bed brand in the UK and this has helped to further establish the Group's credentials amongst its target customers.

 

Warehousing

 

Our in-house cutting operation continues to support the whole network providing a quick, efficient cutting and delivery service enabling our franchisees to offer attractive retail price points with good margins. This division continues to benefit from the consolidation of the previously separate Flooring and Beds warehouses into adjacent locations which has led to improved delivery efficiencies and better customer service.

 

Property

 

The Property division leases properties from third parties and sublets those properties to the store network.

 

People

 

The business performed well in a tougher environment during the year and the Board would like to thank all of its franchisees, suppliers, employees and other stakeholders connected to the Group directly and indirectly for their contribution to the business and looks forward to continuing to work together in the future.

 

Outlook

 

Since the year end, the trading environment has remained challenging. Like for like sales for the 15 weeks since the period end to 13 July 2017 have continued to be slightly positive, despite a significant increase in marketing activity.

 

United Carpets has a well-positioned store portfolio and a debt free base to operate from. The market environment continues to be unsettled. The recent general election has done little to change that and the process of Brexit is likely to create ongoing fluctuations in consumer confidence. This adds a note of caution to the Board's outlook for the business but nevertheless, we expect the Group to continue to develop and pursue expansion opportunities on a selective basis and retain its core focus on its customer offering of providing great quality products at attractive price points.

 

 

 

 

Peter Cowgill

Chairman

 

 

 

 

 

 

 

 

 

   

 

 

Preliminary announcement of results for the year ended 31 March 2017

Consolidated statement of comprehensive income

 

 


 

 

 

Note


Year ended

31 March 2017


Year

 ended

 31 March

2016

 




£'000


£'000







Revenue

2


21,192


21,369

Cost of sales



(8,231)


(7,730)













Gross profit



12,961


13,639







Distribution costs



(384)


(299)

Administrative expenses



(11,085)


(11,925)

Other operating income



27


63













Operating profit

3


1,519


1,478







Financial income


11


12

Financial expenses


(3)


(3)











Profit before tax


1,527


1,487






 Income tax expense


(243)


(258)






Profit for the year*


1,284


1,229












Earnings per share





-  Basic (pence per share)


1.58p


1.51p

-  Diluted (pence per share)


1.57p


1.49p






 

*All activities relate to continuing operations and are attributable to the owners of the parent.

 

There were no items of other comprehensive income and therefore no separate section of other comprehensive income has been presented.

 

 

 

 

 

Preliminary announcement of results for the year ended 31 March 2017

Consolidated statement of financial position

 

           




At

 31 March


At

 31 March




2017


2016




£'000


£'000







Non-current assets






Property, plant and equipment



2,017


2,105

Investment property



97


100

Deferred tax assets



184


208
















2,298


2,413













Current assets






Inventories



1,721


1,628

Trade and other receivables



1,836


2,651

Cash and cash equivalents



2,621


1,671
















6,178


5,950













Total assets



8,476


8,363













Capital and reserves






Issued capital



814


814

Retained earnings



4,323


3,361













Total equity attributable to owners of the parent



5,137


4,175













Non-current liabilities






Borrowings - finance leases



3


24

Trade and other payables



519


640
















522


664













Current liabilities






Borrowings - finance leases



20


52

Trade and other payables



2,406


2,984

Provisions



156


240

Current tax liabilities



235


248
















2,817


3,524













Total liabilities



3,339


4,188













Total equity and liabilities



8,476


8,363







 



Preliminary announcement of results for the year ended 31 March 2017

Consolidated statement of changes in equity

 

 


 

 

 

Note

 

Issued capital

 

Retained earnings

Total equity attributable to owners of the parent



£'000

£'000

£'000






At 31 March 2015


814

3,251

4,065






Profit for the year


-

1,229

1,229

Equity dividends paid

6

-

(1,119)

(1,119)











At 31 March 2016


814

3,361

4,175






Profit for the year


-

1,284

1,284

Equity dividends paid

6

-

(322)

(322)











At 31 March 2017


814

4,323

5,137











 

 

 

 

Preliminary announcement of results for the year ended 31 March 2017

Consolidated statement of cash flows

 




Year

 ended

31 March


Year     ended

31 March


Note


2017


2016




£'000


£'000







Cash flows from operating activities






Cash generated from operations

7


1,986


1,396

Interest paid



(3)


(3)

Income tax (paid)/received



(232)


136













Net cash flows from operating activities



1,751


1,529













Cash flows from investing activities






Acquisition of property, plant and equipment



(437)


(1,216)

Acquisition of investment property



-


(100)

Proceeds from sale of property, plant and equipment



-


5

Interest received



11


12













Net cash flows from investing activities



(426)


(1,299)












Cash flows from financing activities






Payment of finance lease liabilities



(53)


(50)

Equity dividends paid



(322)


(1,119)













Net cash flows from financing activities



(375)


(1,169)













Increase/(decrease) in cash and cash equivalents in the year



950


(939)

Cash and cash equivalents at the start of the year



1,671


2,610













Cash and cash equivalents at the end of the year



2,621


1,671







 

 

 

 

 

 

Preliminary announcement of results for the year ended 31 March 2017

Notes to the preliminary announcement

 

 

1.   Basis of preparation

 

The financial information contained in this unaudited preliminary announcement does not constitute accounts as defined by section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2016 is derived from the statutory accounts for that period which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2017 will be finalised based on the information in this unaudited preliminary announcement and will be delivered to the Registrar of Companies in due course. The Group has prepared its consolidated financial statements for the year ended 31 March 2017 in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union. The accounting policies applied are consistent with those included in the financial statements of the Group for the year ended 31 March 2016.

 

2.   Segment reporting

     

Segment information is presented in the financial statements in respect of the Group's business segments, which are the primary basis of segment reporting. The business segment reporting format reflects the Group's management and internal reporting structure.

 

Franchising and Retail is the income that the Group receives from its franchise activities together with the results of its corporate stores. Warehousing reflects the results of the Group's in-house cutting operation which services the franchised and corporate stores and a small number of third parties. The Property division leases properties from third parties and sublets those to the store network.

 

Inter-segment pricing is determined on an arm's length basis. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

 

Unallocated income includes rent receivable from investment property.

 


Franchising and Retail

Warehousing

Property

Consolidated


 

 

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

 

 

 

2017

 

 

 

2016

Year

ended

31 March 2017

Year

   ended

31 March 2016

 


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










Gross sales

11,633

13,004

8,823

8,393

2,957

3,076

23,413

24,473

Inter-segment sales

-

____

-

____

(1,710)

____

(2,426)

____

(511)

____

(678)

____

(2,221)

____

(3,104)

____

Segment revenue

11,633

____

13,004

____

7,113

____

5,967

____

2,446

____

2,398

____

21,192

____

21,369

____










Segment results

1,373

____

1,005

____

63

___

311

____

(11)

___

31

____

1,425

 

1,347

 










Unallocated income







67

68

Other operating income







27

____

63

____










Operating profit







1,519

1,478

Financial income







11

12

Financial expenses







(3)

(3)

Income tax expense







(243)

____

(258)

____

Profit for the year

 







1,284

_____

1,229

_____

 

 

 

 

 

Preliminary announcement of results for the year ended 31 March 2017

Notes to the preliminary announcement (continued)

 

 

3.   Operating profit

 

Operating profit is arrived at after charging/(crediting):

 


Year

ended

31 March

 2017


Year

ended

31 March

 2016


£'000


£'000





Release of the deferred consideration creditor relating to the acquisition of the trade, assets and certain liabilities of United Carpets (Northern) Limited

(148)


-

Provision for the estimated costs associated with vacating properties

206


84

(Release of provision)/charge for impairment of trade receivables

(132)


42

Release of provision for impairment of inventories

-


(110)

 

The liquidators of UNCN Realisations 2012 Limited (formerly United Carpets (Northern) Limited) have indicated that the potential dividend owed to United Carpets Group plc is likely to exceed the remaining deferred consideration of £148,000 owed by United Carpets Group plc. While the final amount of the dividend has not yet been announced, the Directors consider that the provision previously held in respect of the deferred consideration is no longer required.

 

During the year, 4 stores and a small warehouse/store closed and 3 stores relocated resulting in a charge to the provision for vacating properties of £206,000 in the year.

 

Progress continues to be made working with franchisees to recover historic debts resulting in a release of provision for impairment of trade receivables of £132,000 in the year.

 

In the prior year, the basis for impairing inventories was reconsidered resulting in a release of provision for impairment of inventories of £110,000.

 

4.   Income tax expense

 

      Analysis of charge for the year:

                                                                                                                                         


Year ended

31 March 2017


Year  ended

31 March 2016


£'000


£'000





Current tax:




Current year

265


269

Adjustment in respect of prior periods

(46)


(34)


219


235

Deferred tax:




Current year

38


41

Adjustment in respect of prior periods

(14)


(18)

Total income tax expense recognised in the current year

 

243


 

258

 

 

 

 

Preliminary announcement of results for the year ended 31 March 2017

Notes to the preliminary announcement (continued)

 

 

4.   Income tax expense (continued)

 

The tax charge for the year differs to the standard rate of corporation tax in the UK of 20% (2016: 20%). The differences are explained below:

      


Year

 ended

31 March 2017


Year

 ended

31 March 2016


£'000


£'000





Profit before tax

1,527


1,487









Profit before tax multiplied by the rate of corporation tax in the UK of 20% (2016: 20%)

305


297





Effect of:




Expenses not deductible for tax purposes

13


12

Adjustments to tax charge in respect of prior periods

(60)


(52)

Other

(15)


1

 

Total tax

 

243


 

258

                                                                     

5.   Earnings per share

 

      Basic earnings per share


The calculation of basic earnings per share for the year ended 31 March 2017 was based on the profit attributable to ordinary shareholders of £1,284,000 (2016: £1,229,000) and a weighted average number of ordinary shares outstanding during the year ended 31 March 2017 of 81,400,000 (2016: 81,400,000).

 

      Diluted earnings per share


The calculation of diluted earnings per share for the year ended 31 March 2017 was based on the profit attributable to ordinary shareholders of £1,284,000 (2016: £1,229,000) and a weighted average number of ordinary shares outstanding and potential ordinary shares due to options during the year ended 31 March 2017 of 81,784,987 (2016: 82,286,571).

 

 

 

 

 

Preliminary announcement of results for the year ended 31 March 2017

Notes to the preliminary announcement (continued)

 

 

6.   Equity dividends

 


Year

 ended

31 March 2017


Year

 ended

31 March 2016


£'000


£'000





Special dividend paid during 2015/16 on ordinary shares of 1.0p per share

-


814

Final dividend in respect of 2014/15 paid during the year on ordinary shares of 0.25p per share

-


203

Interim dividend in respect of 2015/16 paid during the year on ordinary shares of 0.125p per share

-


102

Final dividend in respect of 2015/16 paid during the year on ordinary shares of 0.265p per share

216


-

Interim dividend in respect of 2016/17 paid during the year on ordinary shares of 0.13p per share

106


-






322


1,119

 

A special dividend of 1.0p per share was paid on 25 May 2017.

 

A final dividend of 0.275p per share in respect of the year ended 31 March 2017 has been recommended.

 

7.   Cash generated from operations

 


Year ended

31 March 2017


Year  ended

31 March 2016


£'000


£'000





Profit before tax

1,527


1,487

Depreciation and other non-cash items:




    Depreciation of property, plant and equipment

221


208

    Impairment of property, plant and equipment

304


62

    Loss on disposal of property, plant and equipment

-


2

    Depreciation of investment property

3


-

Changes in working capital:




    Increase in inventories

(93)


(254)

    Decrease/(increase) in trade and other receivables

815


(288)

    (Decrease)/increase in trade and other payables

(699)


196

    Decrease in provisions

(84)

  

(8)

Financial income

(11)


(12)

Financial expenses

3


3





Cash generated from operations

1,986


1,396

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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