Findel PLC
11 May 2006
11 May 2006
FINDEL PLC ('The Company')
Preliminary Results for the period ended 31st March 2006
Findel p.l.c., the Yorkshire based home shopping and educational supplies
business, today announces its preliminary results for the year ended 31 March
2006.
HIGHLIGHTS
2006 2005 % change
Sales £527.8m £474.0m +11%
Profit before tax * £52.1m £45.5m +14%
Restructuring costs and amortisation £(17.0)m £(4.0)m
Profit before tax £35.1m £41.5m
Earnings per Share 35.58p 35.41p
Benchmark# Results;
Profit before tax £49.2m £45.5m +8%
Earnings per share 47.04p 39.05p +20%
Final Dividend 14.2p 12.9p +10%
Total Dividends for year 18.0p 16.4p +10%
* before amortisation of acquisition intangibles and restructuring costs and including in 2006,
£2.9m profit on land held for resale
# before amortisation of acquisition intangibles and restructuring costs and excluding in 2006,
£2.9m profit on land held for resale
• Sales exceed £500m for first time; 11% up at £527.8m
• Benchmark# Earnings per share increased 20% to 47.04p
• Final dividend increased by 10% to 14.2p per share
• Management succession now fully in place
Home Shopping
• Sales £228.0m, down 4.6% (£239.1m)
• Operating profit £31.9m, down 20.7% (£40.2m)
• Focus on niche catalogues and frequent mailings to drive sales growth
• Continued internet sales growth of 31%
• Sales recovering in Spring
Educational Supplies
• Sales £228.3m, up 40% (£163.5m)
• Benchmark# operating profit £27.6m, up 78% (£15.5m)
• Excellent growth and strengthening margin
• Major restructuring successfully completed. £6m benefits in year
• Future annualised benefits increased to £10m
Management changes
• Patrick Jolly appointed as Chief Executive today
• Philip Maudsley appointed Chief Operating Officer today
Keith Chapman, Chairman, commented:
'The Company has enjoyed another record year, with excellent growth in our
headline figures. This was achieved despite the challenging retail environment
that our Home Shopping division experienced last Autumn. We have seen excellent
results in particular at our Educational Supplies division, where we are now
seeing the rewards of our restructuring programme coming through.
I am delighted with Patrick's appointment as Chief Executive today, and know
that he and Philip will work together with the rest of the Board to deliver
value for all our shareholders.
I remain confident that the Group will make further progress in the current
year'.
- Ends -
For further information, please contact:
Patrick Jolly, Chief Executive Today: +44 (0) 207 831 3113
Findel plc Thereafter: +44 (0) 1943 864686
Jonathon Brill/Billy Clegg Today: +44 (0) 207 831 3113
Financial Dynamics
Chairman's Statement
Results
I am pleased to report that your Company has enjoyed another record year,
underpinned by a particularly strong performance in the education division.
Overall sales for the financial year ended 31 March 2006 were 11% higher at
£528m (2005: £474m). Profit before tax, and before amortisation of acquisition
intangibles and restructuring costs, increased by 14% to £52.1m from £45.5m.
These results include a profit of £2.9m (2005: £nil) on the sale of land held
for resale; this is deducted to arrive at Benchmark* Profit before Tax for the
year of £49.2m(2005: £45.5m), an increase of 8%. Statutory profit before tax was
£35.1m(£41.5m) primarily reflecting the impact of the restructuring charges.
Benchmark* earnings per share improved by 20% to 47.04p, having benefited from a
lower tax charge this year. Basic earnings per share were 35.58p
(2005: 35.41p).
The restructuring of the Educational Supplies division is now substantially
complete. The principal elements of the restructuring comprised the
consolidation of warehousing, administrative offices and computer systems; the
rationalisation of the stock ranges, and the separation of our healthcare
operations into a standalone business. During the restructuring process a number
of additional opportunities were identified, increasing our expectation of the
final run rate of benefits to a minimum of £10m annually, £2m ahead of
expectations. It has been necessary to increase our investment in the project to
£16.1m in order to achieve this; however the acceleration and improvement of
benefits will mean that this extra cost should be recovered by the end of the
current financial year.
Net finance costs increased by 8% to £14.7m (2005: £13.6m). Interest charges
were more than four times covered by Benchmark* operating profit.
Dividends
The Directors are recommending an increase of 10% in the final dividend to 14.2
pence per share (2005: 12.9 pence) to be paid on 6 July 2006 to shareholders on
the register at 9 June 2006. This will make the total dividend for the year
18.0p per share (2005: 16.4 p) an increase of 10%.
Home Shopping
In common with retailers generally our Home Shopping division had a difficult
year with sales reduced by 4.6% to £228.0m (2005:£239.1m) and operating profit
also down to £31.9m (2005: £40.2m). As reported in December, our recruitment and
marketing campaign for our main Christmas trading season coincided with one of
the weakest consumer environments for many years. Recruitment from this campaign
was 27% down on the previous year. The lower sales to new customers were not the
only factor impacting on operating profit. Lower response rates meant that
marketing expenditure increased by £3.8m and lower product sales resulted in
less financial services income. Additionally the Company informed the market in
December that it was taking a prudent approach to bad debt and as a result the
charge increased by £2.4m.
Sales to established customers were 3.5% ahead of the previous year even after
taking into account a 5% price deflation on carry forward lines. Repeat orders
from both established and new customers were satisfactory, confirming the
strength of the offer. Retention rates and average order value were
approximately the same as the prior year at over 64% and £39 respectively.
Internet sales grew by 31% and now account for 23% of all orders.
Although we started this calendar year with a customer base some 9% less than
last year, recruitment tests conducted in October produced response rates 10%
ahead of those achieved in 2004. This recruitment method was retested in Spring,
again with a positive result, giving confidence that we can again return to
growth in our base.
We also believe we can increase sales to our existing customers. This belief is
supported by the fact that since January we have succeeded in increasing product
sales to them by 8%.
Last year our Summer Living catalogue was very well received and we also saw a
dramatic 50% increase in sales from our Christmas Living catalogue, which was
mailed later in the season. Customers prefer merchandise offerings that are
seasonally appropriate. In view of this, both of these catalogues will be
increased in size this year. Importantly Christmas Living, which was offered to
less than half of our established base last year, offers scope for a significant
increase in distribution. After this year's experience the size and distribution
of this catalogue will provide the necessary safety net should the early season
again prove difficult. It is becoming increasingly obvious that more niche
catalogues and frequent mailing provide additional sales opportunities, and
support the main catalogue. We will introduce more editions of these niche
catalogues this year to take advantage of this trend.
We are encouraged by the growth of Internet sales and have now established a
substantial database of customers who have positively opted to receive e-mail.
We anticipate continued growth from this route to market.
We have a very successful home shopping credit business. There is a much wider
cash with order audience that we do not currently reach. Whilst it is possible
to build this business organically we believe that small targeted acquisitions
are a more efficient way of gaining critical mass. We have the infrastructure,
expertise and capacity to achieve cost savings and leverage profitability from
any such acquired business.
Educational Supplies
The Educational Supplies division has had an excellent year. Divisional sales
rose by 40% to £228.3m (2005: £163.5m) both through the two acquisitions we made
in the third quarter of last year, and through continued organic growth.
Benchmark* operating profit was up 78% to £27.6m (2005: £15.5m).
The major focus of the year was the implementation of the divisional
reorganisation plan. This has been a massive project and has taken a tremendous
amount of time and effort from the Education team.
The key aim of the restructuring project was to streamline our operations,
improving service to customers whilst reducing operating costs and benefiting
margins. The implementation was such that it has been possible to complete a
number of key activities ahead of original schedule including consolidation of
the warehousing and administrative operations and of computer systems. As a
result, some £6m of benefits have been realised from the project during the
financial year.
The reorganisation is now virtually complete allowing the division to
concentrate on further growth.
In spite of having to cope with the reorganisation the division has made strong
progress:
The new catalogues for our national, curricular based, education brands,
consisting of the improved and rationalised product ranges, have been well
received since these were launched in January. These long established market
leading brands are the key to the unique nature of Findel's offering in the
education marketplace.
The new common catalogue for our regional commodity based brands was launched on
schedule at the beginning of April.
Successful promotional activity from our sports product ranges was undertaken
during the year with two major national retailers. Both have chosen to repeat
the activity in our current financial year.
The March budget confirmed the continuing spending priority placed by the
Government on Education, with an announced long term aim of bringing capital
provision for public sector pupils up to the level of that in the private
sector. Combining this general objective with the previously announced
introduction of multi-year guaranteed budgets from April 2006, supports our
belief that schools will now have increasing confidence to invest in the
resources they need.
We also expect to benefit directly from the increased emphasis and investment in
science education, which will now form part of the Government's School
Accountability Framework. Our Philip Harris brand is the leading supplier of
science equipment to secondary schools.
The transactional websites operated by our key brands now integrate directly
with the administrative software in use in the majority of UK schools. We are
consulting with the Government's newly created Centre for Procurement
Performance to ensure that our e-commerce strategy remains aligned with
developing Government thinking in this area.
An important part of the restructuring in the Education division was to separate
NRS Healthcare into a stand alone business. Today NRS is a substantial operation
in its own right occupying the leading position in a growing market with its own
premises, systems and infrastructure, and most importantly a dedicated and
experienced management team. Huntleigh has been successfully integrated and we
anticipate the financial benefits to lead to a significant growth in operating
profit in the current year.
Having successfully completed field trials, we are now actively marketing our
Telecare wristcare patient monitoring products across the UK. To these, we have
added a comprehensive range of Telecare products from other suppliers including
a wide range of sensors and detectors, pill dispensers, and an interactive care
companion.
Findel Services
Divisional sales were level with the same period last year at £71.5m (2005:
£71.4m). Benchmark* operating profit at £2.5m (2005: £2.6m) was in line with
expectations.
Board Changes
I am delighted to welcome Patrick Jolly to the Executive Board as Chief
Executive. Patrick has been a Non-Executive Director for the past five years
where his contribution has been considerable. Philip Maudsley, who has been
Group Managing Director for the last two years has been appointed Chief
Operating Officer bringing to that role his strong operational capability and
in-depth knowledge of the Group. Over the last 12 months we have been giving
urgent consideration to the most effective composition of the top management
team, and in particular to the recruitment of a chief executive. We have looked
externally as well as internally and, with the appointment of Patrick I believe
we have now achieved the necessary blend of complementary skills to lead the
Group forward for the coming years.
One of Patrick Jolly's first tasks is to conduct a thorough assessment of the
Group and its future development. This assessment will cover all the Group's
activities, with the object of maximising shareholder value.
Tony Johnson, our Deputy Chairman will become a Non-Executive Director at the
Annual General Meeting. Tony has made an invaluable contribution to the growth
of the Group and I should like to thank him for all of the assistance he has
provided over the last 18 years. I am pleased to report that he will also remain
as a consultant enabling the Group to continue to benefit from his experience
and wise counsel.
The Board is actively seeking to appoint an additional independent Non-Executive
Director.
Employees
I thank all the Group's employees for their hard work and commitment. On behalf
of the Board I would like to express our appreciation of the continued loyalty
and dedication shown by all Group employees.
Prospects
The inherent strength of the Home Shopping business together with experience
gained and opportunities identified provides confidence for its future
development.
We are already seeing significant benefits from the restructuring programme in
Educational Supplies, which has provided the division with strong long term
growth potential.
I remain confident that the Group will make further progress in the current year
* Benchmark measures are stated excluding amortisation of acquisition
intangibles £0.9m (2005: £0.7m), restructuring costs £16.1m (2005: £3.9m), both
in the educational supplies division, and profit on sale of land held for resale
£2.9m (2005: £nil) in the Services division
Keith Chapman
Chairman
11 May 2006
Consolidated Income Statement
Notes Year to Year to
31/03/06 31/03/05
Unaudited Audited
£000 £000
Revenue 2 527,796 474,031
Cost of sales (285,671) (246,390)
Gross profit 242,125 227,641
Trading costs 3 (177,316) (169,379)
Share of profit of associates 1,941 799
Amortisation of intangibles (930) (661)
Restructuring costs (16,055) (3,274)
Operating profit 2 49,765 55,126
Finance income 5,522 3,913
Finance costs (20,220) (17,516)
(14,698) (13,603)
Profit before tax
Before Amortisation of intangibles and Restructuring costs 52,052 45,458
Amortisation of intangibles and Restructuring costs (16,985) (3,935)
Total profit before tax 35,067 41,523
Profit before tax 35,067 41,523
Income tax expense (4,933) (11,602)
Profit for the year 30,134 29,921
Attributable to:
Equity holders of the parent 29,660 29,339
Minority interest 474 582
30,134 29,921
Earnings per share 4
Basic 35.58p 35.41p
Benchmark 47.04p 39.05p
All results relate to continuing operations.
Consolidated Statement of Recognised Income and Expense
Year to Year to
31/03/06 31/03/05
Unaudited Audited
£000 £000
Currency translation differences 365 (106)
Net income / (expense) recognised directly in equity 365 (106)
Profit for the period 30,134 29,921
Total recognised income and expense for the period 30,499 29,815
Attributable to:
Equity holders of the parent 30,025 29,233
Minority interest 474 582
30,499 29,815
Consolidated Balance Sheet
At At
31/03/06 31/03/05
Unaudited Audited
£000 £000
ASSETS
Non-current assets
Property, plant and equipment 62,954 57,147
Goodwill 48,427 47,853
Other intangible assets 34,685 35,615
Investments in associates 10,324 8,383
156,390 148,998
Current assets
Inventories 101,068 103,212
Trade and other receivables 232,506 199,362
Derivative financial instruments 254 43
Cash and cash equivalents 2,284 4,147
336,112 306,764
Total assets 492,502 455,762
LIABILITIES
Current liabilities
Trade and other payables 76,827 81,375
Current tax liabilities 3,627 7,979
Obligations under finance leases 518 421
Bank overdrafts and loans 19,082 102,558
Derivative financial instruments 24 820
100,078 193,153
Non-current liabilities
Bank loans 244,172 130,000
Retirement benefit obligation 18,024 19,814
Deferred tax liabilities 7,024 5,614
Obligations under finance leases 986 1,110
270,206 156,538
Total liabilities 370,284 349,691
NET ASSETS 122,218 106,071
EQUITY
Capital and reserves
Share capital 4,245 4,233
Capital reserves 50,219 49,706
Hedging and translation reserves 259 (106)
Retained earnings 67,313 51,577
Equity attributable to equity holders of the parent 122,036 105,410
Minority interest 182 661
TOTAL EQUITY 122,218 106,071
Consolidated Cash Flow Statement
Year to Year to
31/03/06 31/03/05
Unaudited Audited
£000 £000
Operating activities
Operating profit 49,765 55,126
Adjustments for:
Depreciation of property, plant and equipment 6,910 6,928
Amortisation of other intangible assets 930 661
Share-based payment expense 30 281
Gain on disposal of property, plant and equipment (4,049) (647)
Pension contributions less income statement charge (2,307) (1,513)
Share of profit of associates (1,941) (799)
Operating cash flows before movements in working capital 49,338 60,037
Decrease / (increase) in inventories 2,229 (14,470)
(Increase) in receivables (29,928) (20,254)
(Decrease) / increase in payables (5,118) 856
Cash generated from operations 16,521 26,169
Income taxes paid (7,874) (11,779)
Interest paid (15,364) (12,801)
Net cash from operating activities (6,717) 1,589
Investing activities
Interest received 256 102
Proceeds on disposal of property, plant and equipment 4,567 2,578
Purchases of property, plant and equipment (16,360) (8,985)
Acquisition of subsidiary - (33,936)
Net cash used in investing activities (11,537) (40,241)
Financing activities
Dividends paid (13,924) (12,317)
Dividends paid to minorities (954) (706)
Repayments of obligations under finance leases (27) (897)
Proceeds on issue of shares 495 1,236
New bank loans raised 35,000 25,000
Movement on securitisation loan 4,783 8,774
Net cash from financing activities 25,373 21,090
Net increase / (decrease) in cash and cash equivalents 7,119 (17,562)
Cash and cash equivalents at the beginning of the year (14,022) 3,594
Effect of foreign exchange rate changes 105 (54)
Cash and cash equivalents at the end of the year (6,798) (14,022)
Notes to the Group Financial Statements
1. Basis of preparation of consolidated financial statements
In the year ended 31 March 2005 the Group prepared its consolidated financial
statements under UK Generally Accepted Accounting Principles (UK GAAP). With
effect from 1 April 2005, the Group is required to prepare its consolidated
financial statements in accordance with International Financial Reporting
Standards (IFRS).
The comparative figures included in this report for the year ended 31 March 2005
are restated for IFRS. Full details of the restatement and reconciliations of
the UK GAAP financial information for the year ended 31 March 2005 were
circulated to shareholders on 1 December 2005 within the IFRS Transition
Document, and can be obtained from the Group's website, www.findel.co.uk.
The consolidated financial statements have been approved by the board but have
not been reviewed or audited by the auditors. They have been prepared under the
accounting policies set out in the IFRS Transition Document and are consistent
with those that will be applied in the accounts for the year ended 31 March
2006.
2. Segmental analysis
Year to Year to
31/03/06 31/03/05
£000 £000
Revenue
Home Shopping 228,008 239,114
Educational Supplies 228,256 163,523
Services 71,532 71,394
527,796 474,031
Operating profit
Home Shopping 31,839 40,131
Educational Supplies 27,554 15,495
Services 5,416 2,636
Restructuring costs (16,055) (3,274)
Share of profit of associates 1,941 799
Amortisation of intangibles (930) (661)
49,765 55,126
Restructuring costs and amortisation of intangibles relate entirely to the
Educational Supplies business segment. The operating profit of the Educational
Supplies business after charging these items is £10,569,000 (2005: £11,560,000).
Operating profit within the Services division includes a profit on the sale of
land held for resale of £2,878,000 (2005: £nil).
3. Trading costs
Year to Year to
31/03/06 31/03/05
£000 £000
Selling and distribution costs 120,443 105,783
Administrative expenses 62,193 65,831
Other operating income (5,523) (2,372)
Other operating expenses 203 137
177,316 169,379
Other operating income includes a profit on the sale of land held for resale of
£2,878,000 (2005: £nil).
4. Earnings per share
Year to Year to
31/03/06 31/03/05
£000 £000
Basic earnings 29,660 29,339
Restructuring costs (net of tax) 11,499 2,357
Amortisation of intangibles 930 661
Profit on sale of land held for resale (2,878) -
Benchmark earnings 39,211 32,357
Weighted average number of shares 83,359,631 82,857,757
Earnings per share - basic 35.58p 35.41p
Earnings per share - benchmark 47.04p 39.05p
5. Dividends
Year to Year to
31/03/06 31/03/05
£000 £000
Amounts recognised as distributions to equity holders in the period
Final dividend for the year ended 31 March 2005 of 12.90p (2004: 11.40p) 10,755 9,405
per share
Interim dividend for the year ended 31 March 2006 of 3.80p (2005: 3.50p) 3,169 2,912
per share
13,924 12,317
The proposed final dividend of 14.20 pence per ordinary share in respect of the
year ending 31 March 2006 was approved by the board on 9 May 2006. In
accordance with IFRS it has not been included as a liability as at 31 March
2006.
6. Auditor involvement
The financial information set out in the announcement does not constitute the
company's statutory accounts for the years ended 31 March 2006 or 2005. The
financial information for the year ended 31 March 2005 is derived from the IFRS
Transition Document. The statutory accounts for that year were prepared under
UK GAAP and 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 s237(2) or s237(3) of the Companies Act 1985. The statutory
accounts for the year ended 31 March 2006 will be finalised on the basis of the
financial information presented by the directors in this preliminary
announcement and will be delivered to the Registrar of Companies following the
company's annual general meeting.
This information is provided by RNS
The company news service from the London Stock Exchange
