Carpetright PLC
29 June 2004
29 June 2004
Carpetright plc
Record full year profits
Carpetright plc, Europe's leading specialist carpet and floor coverings retailer
with 490 stores and concessions across the UK, Republic of Ireland, Belgium and
Holland, today makes its preliminary announcement of its audited results for the
52 weeks ended 1 May 2004.
Highlights
Group
• Underlying operating profit * after interest £65.0m, up 23.4% on last year
**
• Profit on ordinary activities before taxation £67.1m, up 33.3% on last
year **
• Underlying earnings * per share 70.1p, up 26.1% on last year **
• Basic earnings per share 68.8p, up 37.3% on last year **
• Net cash inflow from operating activities £91.5m, up 26.0% on last year
• Recommended final dividend of 27.0p giving a total of 44.0p, up 18.9%
UK and Republic of Ireland
• Underlying operating margin * 16.3%, a new record for the business
• New smaller town format rolling out and 38 In House Carpets concessions
opened at Allders
Benelux
• Business achieves its first underlying operating profit * of £1.8m
• Platform now in place to achieve mid term objectives
* 'Underlying' excludes exceptional costs and goodwill amortisation
** Last year re-stated for the impact of FRS 5 application note G
Lord Harris, Chairman and Chief Executive, said:
'I am pleased to report another year of record profit performance for the Group
with continued strong cash flows and a dividend increase of 18.9%.
'Our UK and Republic of Ireland business has performed well despite difficult
trading conditions and has continued to gain market share. This combined with
our focus to improve gross margins and reduce variable costs has delivered
another encouraging year. Whilst the floor coverings market remains tough the
business is well placed to continue to grow market share, sales and profits.
'We are very pleased that our Benelux business has achieved its first full year
operating profit since we acquired it 18 months ago. We have grown market share
in what has been a difficult market, increased our margin and reduced costs. We
are confident we have created a good foundation to achieve our mid term
objectives for the business.'
For further enquiries please contact:
Carpetright plc
Lord Harris of Peckham, Chairman and Chief Executive
Darren Shapland, Group Finance Director
Telephone 020 7282 8000 (until 2pm), 01708 525522 (thereafter)
Citigate Dewe Rogerson
Patrick Toyne Sewell / Sara Batchelor
Telephone 020 7638 9571
A copy of the interim results and presentation to analysts can be found on our
website www.carpetright.plc.uk today at 7.00am and 9.30am, respectively.
Chairman's statement
Trading results and operational review
Group Summary
UK and Benelux Total Group
Republic of Ireland
£'m % v ly £'m £'m % v ly **
***
Sales
- Continuing 395.7 + 4.3% 55.6 451.3 + 3.4%
- Acquired 1.4 1.4
- Total 397.1 + 4.7% 55.6 452.7 + 3.7%
Underlying operating
profit * (see note 1)
- Continuing 65.4 + 15.1% 1.8 67.2 + 23.6%
- Acquired (0.6) (0.6)
- Total 64.8 + 14.1% 1.8 66.6 + 22.5%
Underlying operating 65.0 + 23.4%
profit * after interest
Underlying profit * 68.0 + 20.4%
before tax
Profit on ordinary activities 67.1 +33.3%
before taxation
Underlying earnings * 70.1 + 26.1%
per share (pence)
Basic earnings per share 68.8 +37.3%
(pence)
* 'Underlying' excludes exceptional costs and goodwill amortisation
** Last year re-stated for the impact of FRS 5 application note G
*** Last year re-stated for the impact of FRS 5 application note G and adjusted
to 52 weeks
Note 1 - The impact of implementing FRS 5 application note G was to reduce the
UK and Republic of Ireland operating profit by £0.1m this year and last year by
£0.6m.
Where the following text includes comparisons to last year they have been
re-stated for the impact of FRS 5 application note G. Additionally references
to underlying operating profit/earnings relate to operating profit/earnings
before exceptional costs and goodwill amortisation. Carpetright excludes
goodwill amortisation from its review of its businesses as it considers this to
be a non operating item, whilst any exceptional items are discussed separately
from the underlying business performance because of their one-off nature.
UK and Republic of Ireland
Results
I am pleased to report another record underlying operating profit of £64.8m, an
increase of 14.1% against the comparable 52 weeks last year. The business made
a further £3.1m on the disposal of fixed assets.
Sales for the year were £397.1m, an increase of 4.7% against the comparable 52
weeks last year, of which £1.4m, 0.4%, was generated by the Carpet Express
distribution business acquired on 11 March 2004. The net increase for the
continuing business was 4.3% against the comparable 52 weeks last year. This
growth was achieved from a like for like sales increase of 1.2%, sales from
additional Carpetright space of 1.2% with the balance of 1.9% being the sales
from the rollout of the concessions departments within Allders stores. The
sales performance was again somewhat different over the two halves. The first
half saw a reduction in like for like sales of 1.8%, although market share
increased in what was a negative market. In the second half like for like sales
increased by 4.1%, against a slightly improved market, as the business ran a
number of successful promotions to make further gains in market share. We
remain confident that our business proposition of offering the widest range,
best prices and excellent service will enable us to continue to grow sales and
market share in the future.
Gross margin, excluding Carpet Express, improved by 1.6 percentage points to
61.1% against the comparable 52 weeks last year. This growth was driven by a
strong first half increase of 2.9 percentage points reflecting the full year
effect of our in house cutting operation, our new 5 metre warehouse, and buying
scale from Group sourcing. The second half gross margin was up 0.2 percentage
points on last year. This was in line with our expectations as the continued
benefit of the Group sourcing was offset by the success of the sale in January
and the lower margin recorded in the concessions within the Allders department
stores. We expect to continue to improve gross margin going forward, primarily
through further in-house efficiencies and buying scale.
Costs as a percentage of sales, excluding Carpet Express, were 44.8% a reduction
of 0.1 percentage points against the comparable 52 weeks last year. This was
slightly better than we had expected and reflects the programme, started in the
second half of the previous year, to reduce variable costs across the business
whilst still allowing for additional investment in customer service. The
rollout of the concessions within the Allders department stores had a small
adverse impact on the costs to sales ratio; we expect this will continue into
the current year.
Underlying operating margin has increased to 16.3%, a 1.5 percentage point
increase on last year and a new record for the business. Excluding Carpet
Express the underlying operating margin would have been 16.5%. This is a
significant achievement in what has been a difficult trading environment and
reflects the growth in market share as well as the improvements to gross margin
and the cost base.
Stores and Selling Channels
We continue to expand our store portfolio and ended the year with an additional
13 Carpetright stores giving a total of 364 stores trading from some 3,488k
sqft. This net gain of 13 stores was a result of 38 openings and 25 closures as
we continue to improve both the quality of our locations as well as gradually
rebalance our portfolio from A1 parks to bulky goods parks as opportunities
become available.
Many of the new openings were in our new small store format in smaller towns.
These stores enable us to trade in areas dominated by the independents and
where, up to now, Carpetright has been under-represented. Having successfully
developed the smaller store concept we are now searching for up to 80-100
additional sites over the next three to five years. We believe this will enable
us to gain market share in towns and areas where we have previously not been
represented and will give us an excellent platform for further growth in the UK.
Including this expansion programme we have revised our store targets to 450. We
expect to add a net 10 stores to our estate this year, weighted towards the
second half. The business generated £3.1m of property profits in the year as a
result of the active management of the portfolio and we expect to continue to
make property profits from similar activity in the future.
We successfully completed the rollout of flooring departments to a total of 38
Allders stores, five more than indicated at our interim results, in record time
during the four months to March. These flooring departments average 1,600 sqft
and sell a wide range of carpet, laminate and vinyl to Allders customers
providing both excellent value and a strong focus on service as a critical part
of the offer. The rollout has enabled us to reach a new market sector not
currently served by the Group whilst bringing benefits for the Group's buying
scale and investment in centralised cutting and infrastructure.
With the concessions up and trading we have decided to now re-brand them in
order to create a specialist department store brand, which can be rolled out to
other locations and department stores. This brand is called 'In House Carpets'
and provides a distinctive look, point of sale and marketing platform for the
department store concessions environment. The re-branding of the existing 38
departments within the Allders stores was completed during June.
Our Carpetright at Home business has continued to show good sales and profit
growth during the year. The van fleet has been expanded to 40 and we can now
provide coverage for all areas of the country. The Insurance business also
continues to grow market share, sales and profits. We now have a
well-established, professional operation serving many of the country's leading
insurance groups. As the year closed we agreed two further contracts which will
start later in this financial year.
Product
The rollout of the laminate offer was completed at the end of the first half and
has provided a significant contribution to the improved second half sales
performance. Sales of laminate during the second half were more than double the
previous year as the appeal of our wide range, good prices and excellent service
provided a compelling offer to the customer. The offer and range will continue
to be further refined in the next six months as we implement the lessons learned
from the period of trading post rollout. Our vinyl sales have also grown
strongly due to the impact of the improved ranges of takeaway roll stock, better
in store display and the success of the wood effect vinyl flooring.
Whilst laminate and vinyl have been a growing part of the flooring market,
carpet still makes up the majority of flooring sales. Our sales of carpet have
continued to improve during the year with the roll stock showing consistent
performance throughout, once again illustrating the importance of this offering,
where the average room cost remains at under £95. The cut length product range
had a more difficult start to the year but came back strongly in the second half
when the business managed to grow sales and market share following the
introduction of new ranges, improved offers and point of sale as well as the
updating of our own brands.
Service
During the year we have continued to invest in service through providing better
product information, improved labelling and more training for our store teams.
This has led to further improvements in both our qualitative and quantitative
service measures. Our programme to assess and train floor-covering fitters run
in association with the Flooring Industry Training Association ('FITA'), has
progressed well over the year. At the year-end we had assessed over 700
fitters, with over 60% of our regions completed. We will complete the programme
towards the end of the current financial year and we are already seeing the
benefits of improved customer service.
Carpet Express
As previously announced, on 11 March 2004 Carpetright entered into an
arrangement with Associated Weavers International (AWI) to purchase from the
receiver the assets and operations of Carpet Express Limited. Carpet Express
operates a nationwide carpet distribution service and counts both Carpetright
and AWI amongst its many customers. The business made an underlying operating
loss of £0.6m in the 7.5 week trading period from 11 March to 1 May 2004. The
£0.6m loss has been consolidated into the Group's financial results and has been
included within the UK and Republic of Ireland geographical sector. The AWI
share of the loss based on its 33% shareholding is £0.2m.
Since acquisition the focus has been to stabilise the operations, improve the
systems, reduce losses and ensure that the business is operating effectively.
This has now been largely completed and we have commenced a review of the
longer-term requirements and infrastructure. We expect this review to be
completed by the end of the first half of the current financial year.
Benelux
Results
The Benelux business recorded its first underlying operating profit of £1.8m for
the year to 30 April 2004 compared to a £2.9m loss for the 10 months to 30 April
2003.
Sales in both Holland and Belgium have continued to improve throughout the year
as the lessons learnt from trading the business have been implemented and
refined. The offer has been tailored differently for each country and then as
required to specific geographical areas within those countries. The range has
been expanded to give us authority as the floor covering specialist and our
market leading price position has been further improved. This has been
underpinned by both Group sourcing and the improvement of retail disciplines to
create a focus on sales and customer service. As a result of this action, sales
were broadly level on a comparable basis for the year despite trading from five
fewer stores during that time. With both markets down on last year this
resulted in an improvement in the market share for both the Dutch and Belgian
operations. We believe that with the platform now in place in both countries
and our better understanding of the local requirements there is significant
opportunity to grow market share over the short and medium term.
Gross margin has continued to improve as the benefits of the Group's sourcing,
supply chain efficiency and more effective promotions take effect. The product
margin for the year improved to 53.5% a full 7.1 percentage points above the
comparable period last year. There is scope for further margin growth both from
internal efficiency and improved sourcing over the medium term.
Costs continue to benefit from the action initiated during the second half of
last year and then completed in the first half of this financial year. Costs as
a percentage of sales have reduced to 45.7% a 2.4 percentage point reduction on
last year.
Underlying operating margin has improved to 3.3% having last year recorded a
negative 5.8%. This has been an excellent improvement and a significant move
for the Benelux business towards achieving our medium term targets.
Stores and Operations
We closed the year with 88 stores trading, having closed three stores during the
year and opened one. The business was trading from 60 stores in Holland and 28
stores in Belgium at the year-end with a combined trading space of 1,158k sqft.
During the year we completed our evaluation of all the stores and market
opportunities in both countries and are now working to a target of over 100
stores to achieve our full potential and market coverage. We completed our
first new store opening at Venlo, Holland, during March and the second new store
at Deventer, Holland, opened just after the year-end.
We have continued to sublet excess trading space to complementary retailers
during the year. We had completed five such sublets by the year-end and a
further three were completed in May and June. Whilst this does cause some
business disruption in the short term, we believe the benefits of additional
footfall, better store economics, as well as rental income, should improve the
profitability of these previously over- spaced stores.
The store modernisation programme has also re-started following a period of
review whilst we assessed the performance of the first phase modernisations and
learnt more about the customers and the market. The stores in Belgium have now
all been re-branded and modernised except where a sublet opportunity remains.
The remaining stores in Holland will be completed by the autumn in time for the
peak trading period.
Whilst we are still only 18 months into our first acquisition in mainland Europe
we believe we have established the foundations of a good long-term business.
Our objective remains to create a focussed, market-leading, floor-covering
specialist generating good returns over a 3 to 5 year period as well as
providing a platform for further expansion into mainland Europe in the medium
term.
Group
Results
The Group recorded an underlying operating profit after interest of £65.0m an
increase of 23.4% compared to last year. The interest charge was £1.7m, which
was 6.5% lower than last year, reflecting the continued strong operational cash
flows of the Group, which have offset the full year borrowing cost for the
acquired Benelux business. The Group recorded profits from the disposal of
fixed assets of £3.0m, compared to £3.8m last year. The Group profit on
ordinary activities before taxation increased by 33.3% to £67.1m inclusive of
the £0.9m goodwill amortisation from the Benelux and Carpet Express acquisition.
Earnings per share
The Group's underlying earnings per share increased by 26.1% to 70.1p. Basic
earnings per share increased by 37.3% to 68.8p. The average number of shares
for the year was 71.4m, compared to 75.1m last year and at the year end the
Group had 69.6m shares in issue.
The Group purchased 4.0m of its own shares at an average price of 791.2p during
the year as part of the share buy back programme. The total cost was £31.8m
including fees and taxes. The buy back programme including the shares bought
back at the end of the previous financial year has increased the basic earnings
per share in the year by 2.4p equivalent to 3.6% of the total increase.
Dividend
The Board is recommending that the final dividend be increased by 22.7% to
27.0p, which together with the interim dividend of 17.0p takes the total
dividend for the year to 44.0p per share, an increase of 18.9% on the prior
year. Dividend cover (pre exceptional costs and goodwill amortisation) is 1.64
times; last year was 1.52 times. The final dividend will be paid on 24
September 2004 to shareholders on the register on 10 September 2004.
Finance and Cash flow
The Group continues to be highly cash generative and during the year achieved an
operating cash flow of £91.5m. This funded freehold property purchases of
£5.5m, other capital expenditure of £11.8m, dividends of £27.8m and taxation
payments of £18.0m. The total payments for share buybacks during the year were
£41.1m, this included the shares purchased at the end of the previous financial
year but paid for in this. The net debt at the year-end was £30.0m an
improvement £3.8m on last year.
Board
The Group announced on 1 June 2004 that Mr Simon Metcalf had joined the company
as a non-executive director. Sir Harry Djanogly has confirmed his intention to
stand down from the Board in Spring 2005 having served on the Board since the
Group's flotation in 1993. The Group has started a process to recruit a further
Non Executive Director to replace Sir Harry in line with this timetable.
Baroness Noakes has assumed the role of Senior Independent Director with effect
from 29 June 2004.
Incentives
The Group intends to launch a new Long Term Incentive Plan ('LTIP') from the
start of the current financial year. This LTIP would reward within a range from
above average to excellent performance an allocation of up to 40% of annual
salary in shares, which the Group would purchase on the employee's behalf. The
LTIP is applicable to the Executive Directors as well as up to 20 of the Group's
senior managers and full details will be provided within the Annual Report for
proposal to the shareholders.
The Group will also be requesting approval from shareholders to launch a new
savings related share option scheme for all employees. This will enable
eligible employees to save up to £250 per month for the purchase of the Group's
shares on favourable terms.
Calendar
As previously announced, as the Group is now providing more regular trading
updates on a quarterly basis (as adjusted to key trading periods) it will not be
providing a statement on current trading at either the preliminary or interim
results.
The Group will provide its next trading announcement at the Annual General
Meeting on 10 August 2004 (first 14 weeks of the financial year). A further pre
first half closing announcement will be made on 26 October 2004 (first 25 weeks
of the financial year). The first half closes on 30 October 2004.
Summary and Prospects
The Group has had a good year with strong profit growth in the UK and Republic
of Ireland business as well as a first profit from the business in the Benelux,
despite what have been difficult trading conditions for both of our businesses.
We remain confident that the proposition of widest range, best prices and
excellent service will enable us to continue to grow market share. This along
with the continued drive to grow margin and maintain tight costs as well as a
number of new growth opportunities should enable us to grow profits into the
future.
Consolidated profit and loss account for the year to 1 May 2004
Note 52 weeks to 53 Weeks to
1 May 2004 3 May 2003
£'000 (restated)*
£'000
Turnover 3 452,721 436,433
Cost of sales (182,841) (185,801)
Gross profit 3 269,880 250,632
Distribution costs (4,687) (5,512)
Administrative Expenses (200,796) (198,654)
Other operating income 1,379 1,828
Operating profit before exceptional costs and goodwill 3 66,644 54,423
amortisation (Note below)
Exceptional costs** - (5,448)
Goodwill amortisation** 6 (868) (681)
Operating profit 3, 8 65,776 48,294
Profit on disposal of fixed assets 2,979 3,797
Profit on ordinary activities before interest 3 68,755 52,091
Net interest payable (1,654) (1,768)
Profit on ordinary activities before taxation 67,101 50,323
Tax on profit on ordinary activities 4 (18,164) (14,038)
Profit on ordinary activities after taxation 48,937 36,285
Minority interest 201 1,360
Profit for the financial period 6, 7 49,138 37,645
Dividends 5, 7 (30,434) (27,461)
Retained profit 7 18,704 10,184
Note:
* 2003 restated due to adoption of FRS 5 Application Note G (see note 9).
** Operating profit before exceptional costs and goodwill amortisation is after
adding back the items marked (**), which are included within Administrative
expenses.
pence pence
Note (restated)*
Earnings per share (pre exceptional costs and goodwill 6 70.1 55.6
amortisation)
Basic earnings per share 6 68.8 50.1
Fully diluted earnings per share 6 68.8 50.1
Dividend per ordinary share 5 44.0 37.0
There are no differences between the Group's historical cost profit and that
recorded in the profit and loss account (2003: £nil). All items in the profit
and loss account arise from continuing operations.
Consolidated statement of total recognised gains and losses for the year to 1
May 2004
Note 52 weeks to 53 Weeks to
1 May 2004 3 May 2003
(restated)*
£'000 £'000
Profit for the financial period 49,138 37,645
Exchange rate movement 7 (654) 609
Total recognised gains relating to the year 48,484 38,254
Prior year adjustment 7, 9 (2,350)
Total gains and losses recognised since last annual report 46,134
Exchange rate movement includes an amount of £1.1m arising on the retranslation
of foreign currency borrowings that has been offset against the other foreign
exchange movements (2003: £3.5m).
Consolidated balance sheet at 1 May 2004
3 May 2003 3 May 2003
Note 1 May 2004 1 May 2004 (restated)* (restated)*
£'000 £'000 £'000 £'000
Fixed assets
Intangible fixed assets 15,743 16,866
Tangible fixed assets 129,938 140,152
145,681 157,018
Current assets
Stock 34,492 40,453
Debtors 20,076 19,801
Cash at bank and in hand 13,341 13,266
67,909 73,520
Creditors: amounts falling due within (141,765) (140,982)
one year
Net current liabilities (73,856) (67,462)
Total assets less current liabilities 71,825 89,556
Creditors: amounts falling due after (28,647) (31,836)
more than one year
Provisions for liabilities and charges (2,889) (3,627)
Net assets 3 40,289 54,093
Capital and reserves
Called up share capital 696 736
Share premium account 14,146 13,938
Capital redemption reserve 107 67
Profit and loss account 25,541 39,352
Equity shareholders' funds 7 40,490 54,093
Equity minority interest (201) -
40,289 54,093
* 2003 restated due to adoption of FRS 5 Application Note G (see note 9).
Consolidated cash flow statement for the year to 1 May 2004
Note 52 weeks 52 weeks 53 weeks 53 weeks
to to to to
1 May 2004 1 May 2004 3 May 2003 3 May 2003
£'000 £'000 £'000 £'000
Net cash inflow from operating activities 8 91,467 72,611
Returns on investments and servicing of
finance
Interest received 113 251
Interest paid (1,267) (1,703)
Interest on finance leases (112) (316)
Net cash outflow from investments and (1,266) (1,768)
servicing of finance
Taxation paid (18,014) (18,659)
Purchase of intangible fixed assets (50) -
Payments to acquire tangible fixed assets (17,322) (20,485)
Receipts from sales of tangible fixed assets 16,482 9,462
Net cash outflow for capital expenditure (890) (11,023)
Purchase of subsidiary undertakings (458) (34,227)
Acquisitions and disposals (458) (34,227)
Equity dividends paid (27,823) (26,301)
Net cash inflow/(outflow) before financing 43,016 (19,367)
Financing
Issue of Ordinary shares 208 67
Purchase of own shares (Note below) (41,126) -
Net (repayment)/increase in loans (514) 28,830
Capital element of finance lease rental (3,020) (2,864)
payments
Net cash (outflow)/inflow from financing (44,452) 26,033
(Decrease)/increase in cash in the period (1,436) 6,666
Note - Reconciliation of net cash flow to movement in net funds
Note 2004 2003
£'000 £'000
(Decrease)/increase in cash in the period (1,436) 6,666
Opening net (debt)/funds (33,760) 313
(35,196) 6,979
Exchange movement 1,659 (4,470)
Finance leases 3,020 2,864
Loans acquired with subsidiary - (10,389)
Cash acquired with subsidiary - 86
Net repayment/(increase) in loans 514 (28,830)
Closing net debt 3 (30,003) (33,760)
Note - Analysis of changes in net debt during the
year Exchange
2003 Cash flow movement 2004
£'000 £'000 £'000 £'000
Cash at bank and in hand 13,266 254 (179) 13,341
Overdrafts (4,100) (1,690) 218 (5,572)
Loans (39,906) 514 1,620 (37,772)
(30,740) (922) 1,659 (30,003)
Finance leases (3,020) 3,020 - -
Net debt (33,760) 2,098 1,659 (30,003)
Note - Purchase of own shares
The 2004 cash outflow includes £9.3m payment for shares bought back from the
market at the end of 2003 but settled during 2004.
Note 1: Basis of preparation
The financial information does not constitute the Group's statutory accounts for
the years ended 1 May 2004 or 3 May 2003 but is derived from those accounts.
Statutory accounts for 2003 have been delivered to the Registrar of Companies,
and those for 2004 will be delivered following the Group's Annual General
Meeting. The auditors have reported on those accounts; their reports were
unqualified and did not include statements under section 237(2) or (3) of the
Companies Act 1985.
Note 2: Basis of consolidation
The consolidated accounts include the accounts of the Company and its UK
subsidiary undertakings made up to 1 May 2004 and those of its Benelux
subsidiary undertakings made up to 30 April 2004. Unless otherwise stated, the
acquisition method of accounting has been adopted for acquisitions made during
the period. Under this method, the results of subsidiary undertakings acquired
or disposed of in the period are included in the consolidated profit and loss
account from the date of acquisition or up to the date of disposal. Intra group
transactions are fully eliminated on consolidation.
Note 3: Segmental analysis
Analysis by geography:
52 weeks to 1 May 2004 53 weeks to 3 May 2003 (restated)*
UK Benelux Group UK Benelux Group
£'000 £'000 £'000 £'000 £'000 £'000
Profit and loss account
Turnover (by origin and destination) 397,127 55,594 452,721 386,506 49,927 436,433
Gross profit 243,291 26,589 269,880 229,992 20,640 250,632
Operating profit before exceptional 64,818 1,826 66,644 57,318 (2,895) 54,423
costs
and goodwill amortisation
Operating profit 64,815 961 65,776 57,318 (9,024) 48,294
Profit before interest and tax 67,917 838 68,755 61,115 (9,024) 52,091
Balance sheet
Net assets pre debt 36,488 33,804 70,292 49,199 38,654 87,853
Net debt (30,003) (33,760)
Net assets 40,289 54,093
* 2003 restated due to adoption of FRS 5 Application Note G (see note 9).
The 2004 UK geographical segment includes the following post-acquisition results
and balances of New Carpet Express Ltd, a distribution company: Turnover £1.4m,
Gross profit £1.4m, Operating loss £(0.6)m, and Net liabilities £(0.6)m (2003:
all amounts £nil). If New Carpet Express Ltd had not been consolidated into the
results, the Group turnover from retailing would be £451.3m, distribution costs
£5.5m and administrative expenses £198.0m.
Note 4: Taxation
The effective tax rate on the profits for the Group for the year ended 1 May
2004 is 27.1% (2003: 27.9%). This includes a release of £0.9m relating to
overprovisions in prior years.
Note 5: Dividends
The final ordinary dividend of 27p per share (2003: 22p) will be paid on 24
September 2004 to shareholders registered at the close of business on 10
September 2004, subject to shareholders' approval at the Annual General Meeting
to be held on 10 August 2004. An interim ordinary dividend of 17p (2003: 15p)
per share was paid on 20 February 2004 giving a total ordinary dividend for the
year of 44p per share (2002: 37p).
As a result of share repurchases between 3 May 2003 and the date of the final
dividend, £0.3m of the proposed 2003 final dividend was not paid on those shares
and has been released to the profit and loss account.
Copies of the full accounts for the year ended 1 May 2004 will be circulated to
shareholders for approval at the Annual General Meeting. Further copies of the
Annual Report will be available from that date from the registered office of
Carpetright plc, Amberley House, New Road, Rainham, Essex, RM13 8QN.
Note 6: Earnings per share
2004 2003 (restated)*
Weighted Weighted
average average
number Earnings number Earnings
Earnings of shares per share Earnings of shares per share
£'000 '000 pence £'000 '000 pence
Basic earnings per share 49,138 71,377 68.8 37,645 75,128 50.1
Effect of dilutive share options - 47 - - 12 -
Fully diluted earnings per share 49,138 71,424 68.8 37,645 75,140 50.1
Reconciliation of earnings per share to exclude exceptional costs and goodwill
amortisation:
2004 2003 (restated)*
Basic earnings per share 49,138 71,377 68.8 37,645 75,128 50.1
Exceptional costs after tax - - - 3,993 - 5.3
Goodwill amortisation 868 - 1.3 681 - 0.9
Minority interest in adjustments - - - (547) - (0.7)
Basic earnings per share before 50,006 71,377 70.1 41,772 75,128 55.6
exceptional costs and goodwill
amortisation
* 2003 restated due to adoption of FRS 5 Application Note G (see note 9).
The directors have presented an additional measure of earnings per share based
on profit before exceptional costs and goodwill amortisation as they consider
this provides a more comparable measure on an ongoing basis.
Note 7: Reconciliation of movements in shareholders' funds:
2004 2003
£'000 (restated)*
£'000
Profit for the financial period 49,138 37,645
Dividends (30,434) (27,461)
Retained profit for the period 18,704 10,184
Exchange rate movement (654) 609
Issue of Ordinary shares 208 67
Purchase of own shares (31,861) (9,265)
Net increase in shareholders' funds (13,603) 1,595
Shareholders' funds restated at 3 May 2003 (see below) 54,093 52,498
Shareholders' funds at 1 May 2004 40,490 54,093
* 2003 restated due to adoption of FRS 5 Application Note G.
2004 2003
£'000 £'000
Opening shareholders' funds as reported in last annual 56,443 54,419
accounts
Prior year adjustment (see Note 9) (2,350) (1,921)
Restated opening shareholders' funds 54,093 52,498
Note 8: Reconciliation of operating profit to net cash inflow from operating
activities
52 weeks 53 weeks to
to 3 May 2003
1 May 2004 (restated)*
£'000 £'000
Operating profit 65,776 48,294
Exceptional asset write off - 2,445
Depreciation 12,510 12,853
Amortisation 869 681
Decrease in stocks 5,688 637
(Increase)/decrease in debtors (1,288) 1,480
Increase in creditors 7,912 6,221
Net cash inflow from operating activities 91,467 72,611
* 2003 restated due to adoption of FRS 5 Application Note G (see note 9).
Note 9: Prior year adjustment
Application note G of Financial Reporting Standard 5 'Revenue Recognition' has
been adopted for the first time in these financial statements. The new standard
requires turnover to be recognised when a business has substantially fulfilled
its obligations to the customer. This has the impact of deferring some of the
turnover and related costs until these obligations have been fulfilled. The
current period figures have been adjusted for this change in accounting policy,
together with a prior year adjustment to the previously reported figures. If
the previous policy of recognising turnover and related costs had been in place
at the year end the impact would have been as follows:
2004 2003
£'000 £'000
Turnover (53) 333
Profit before tax 107 613
Taxation 5 (184)
Adjustment to profit for the 112 429
financial period
The cumulative impact on the Balance Sheet at 3 May 2003 was £(2.4)m decrease in
reserves. In respect of the balance sheet at 27 April 2002 the impact was a
decrease in reserves of £(1.9) represented by £(0.5) Debtors, £(2.0) Creditors,
£(0.2) Stock and £0.8 Tax Creditor.
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