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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Carpetright Plc | LSE:CPR | London | Ordinary Share | GB0001772945 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 4.955 | 4.85 | 5.08 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMCPR
RNS Number : 6330R
Carpetright PLC
13 December 2016
Embargoed until 07:00, 13 December 2016
Carpetright plc
Interim Results Announcement for the 26 weeks ended 29 October 2016
"Challenging first half - accelerating our plans to transform the business - encouraged by recent positive like-for-like trading."
Financial highlights
Group
Hot Features
Premium
-- Revenue decreased 3.8% to GBP222.3m (H1 FY16: GBP231.2m).
(note 1)
-- Underlying profit before tax of GBP5.0m (H1 FY16: GBP9.0m).
(note 2)
-- Net cash position of GBP0.4m at period end (H1 FY16: GBP4.1m).
(note 4)
-- Comfortable with the range of market expectations for the
Group's full year profit. (note 5)
-- Profit before tax of GBP4.1m (H1 FY16: GBP7.1m)
UK
-- Like-for-like sales declined by 2.9% (H1 FY16: +3.7%),
reflecting uneven consumer demand in an increasingly competitive
market. (notes 6, 7)
-- Underlying operating profit of GBP4.8m (H1 FY16: GBP9.4m).
Rest of Europe
-- Like-for-like sales decline of 1.5% in local currency (H1
FY16: +5.5%).
-- Improvement in underlying operating profit to GBP1.1m (H1
FY16: GBP0.6m).
Strategic Progress
-- At the end of the first half, we had 49 UK stores trading
under the new brand identity, delivering sales growth above
comparable stores in the rest of the estate. Our plan is
to accelerate the programme to 150 stores by the end of
the year, 50% more than the original target and over a
third of the UK estate.
-- Sales benefiting from strategic focus on hard flooring,
a category achieving double digit growth.
-- Focus on improving customer service - stronger satisfaction
metrics being achieved.
-- Continued progress made in reducing the number of underperforming
stores - net six closures to reduce the UK estate to 429
stores.
-- In the Rest of Europe, whilst the number of stores remained
unchanged at 137, the trading space reduced by 3.2%.
Current Trading
-- We have had a promising start to the second half, with
like-for-like sales in the UK up 2.6% in the six weeks
to 10 December 2016. Rest of Europe has also made an encouraging
start with like-for-like sales up 5.9%, on a local currency
basis over the same period. This provides confidence that
our strategy remains on track and will deliver.
Commenting on the results, Wilf Walsh, Chief Executive, said:
"We have had a challenging first half - the full impact of the UK decision to leave the EU remains unclear; consumer demand remains uneven; the market is extremely competitive and the impact of currency movements have combined to give us substantial trading headwinds. To address these challenges and revitalise the business, we have a programme of activities underway, but these will take time to deliver their full effect.
"The positive impact at the initial 49 refurbished stores has given us the confidence to accelerate this part of the programme. We are now scheduling investment to 150 stores by the year end - 50% more than the original target and representing over one third of our UK estate.
"We have made an encouraging start to the second half with a return to like-for-like sales growth in both businesses. As we enter the important January trading period, we remain comfortable with the range of market expectations. Looking longer term, we are confident that our plan to build on Carpetright's strong foundations, to modernise the business and to ensure we capitalise as market leader to the full is still on track."
Group Financial Summary
H1 FY17 H1 FY16
GBPm GBPm change
Group revenue (note 1) 222.3 231.2 (3.8%)
-------- -------- -------------
* UK 186.5 199.2 (6.4%)
-------- -------- -------------
* Rest of Europe 35.8 32.0 11.9%
-------- -------- -------------
Underlying operating profit
(note 2) 5.9 10.0 (41.0%)
-------- -------- -------------
* UK 4.8 9.4 (48.9%)
-------- -------- -------------
* Rest of Europe 1.1 0.6 83.3%
-------- -------- -------------
Underlying profit before tax 5.0 9.0 (44.4%)
-------- -------- -------------
Underlying earnings per share 5.6p 9.5p (41.1%)
-------- -------- -------------
Exceptional items (note 3) (0.9) (1.9) 52.6%
-------- -------- -------------
Profit before tax 4.1 7.1 (42.3%)
-------- -------- -------------
Basic earnings per share 5.8p 7.3p (20.5%)
-------- -------- -------------
Net cash (note 4) 0.4 4.1 Down GBP3.7m
-------- -------- -------------
Notes
1. Revenue represents amounts payable by customers for goods and services after deducting VAT and other charges.
2. 'Underlying' excludes exceptional items, related tax and exceptional tax items.
3. Exceptional items comprise net losses on disposal of properties of GBP0.9m (H1 FY16 GBP1.9m charge).
4. Net cash/(debt) is calculated as the total of cash-in-hand, or at bank, offset by borrowings, finance leases and unamortised fees.
5. Consensus for the year ending 29 April 2017 is for Group underlying profit before tax to be GBP16.1m, with a range from GBP13.9m to GBP18.5m.
6. Sales represents amounts payable by customers for goods and services before deducting VAT and other charges.
7. Like-for-like sales calculated as this year's sales compared to last year's sales for all stores that are at least 12 months old at the beginning of our financial year. Stores closed during the year are excluded from both years.
8. Comparative period for the year is the 26 week period ended 31 October 2015.
Results presentation
Carpetright plc will hold a presentation to analysts and investors at Citigate Dewe Rogerson, 3 London Wall Buildings, London Wall, London EC2M 5SY at 09:00 today.
Analysts unable to attend in person may listen to the presentation live at 09:00 by using the details below:
Telephone number: 0808 109 0700
Password: Carpetright
Webcast link: http://edge.media-server.com/m/p/p6isdhup
A copy of this interim statement can be found on our website www.carpetright.plc.uk
For further enquiries please contact:
Carpetright plc
Wilf Walsh, Chief Executive
Neil Page, Chief Financial Officer
Tel: 01708 802000
Citigate Dewe Rogerson
Kevin Smith
Nick Hayns
Tel: 020 7638 9571
Forthcoming news flow:
Carpetright will release a trading update for the third quarter on 31 January 2017.
Certain statements in this report are forward looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward looking statements. We undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.
Notes to Editors
Carpetright plc is Europe's leading specialist floor coverings and beds retailer. Since the first store was opened in 1988 the business has developed both organically and through acquisition within the UK and other European countries. The Group is organised into two geographical regions, the UK and the Rest of Europe (comprising The Netherlands, Belgium and the Republic of Ireland).
Interim Results
A summary of the reported financial results for the 26 weeks ended 29 October 2016 is set out below:
H1 FY17 H1 FY16
GBPm GBPm Change
----------------------------- -------- ------- ------------
Revenue 222.3 231.2 (3.8%)
----------------------------- -------- ------- ------------
Underlying operating profit 5.9 10.0 (41.0%)
----------------------------- -------- ------- ------------
Net finance charges (0.9) (1.0)
----------------------------- -------- ------- ------------
Underlying profit before tax 5.0 9.0 (44.4%)
----------------------------- -------- ------- ------------
Exceptional items (0.9) (1.9)
----------------------------- -------- ------- ------------
Profit before tax 4.1 7.1 (42.3%)
----------------------------- -------- ------- ------------
Earnings per share (pence)
----------------------------- -------- ------- ------------
- underlying 5.6p 9.5p (41.1%)
----------------------------- -------- ------- ------------
- basic 5.8p 7.3p (20.5%)
----------------------------- -------- ------- ------------
Net cash 0.4 4.1 Down GBP3.7m
----------------------------- -------- ------- ------------
Note - Where this review makes reference to "Underlying" these relate to profit / earnings before exceptional items.
Overview
Group revenue for the first half decreased by 3.8% to GBP222.3m, consisting of a decline in the UK business of 6.4% offset to a degree by an increase in reported currency performance of 11.9% in the Rest of Europe. Our continued focus on rationalising and repositioning the store portfolio saw the Group open five stores and close eleven during the half year which gave a net decrease of six stores, leaving a total store base of 566. Total store space declined by 2.1% to 5.0 million square feet during the period.
Group underlying operating profit decreased by 41.0% to GBP5.9m, driven by both sales and margin rate shortfalls in the UK, offset by the benefit from closing underperforming stores, and a strengthening performance in our Rest of Europe business. Underlying net finance charges were GBP0.1m lower at GBP0.9m. These factors combined to generate an underlying profit before tax of GBP5.0m, a 44.4% decrease on the prior year.
Exceptional items totalled GBP0.9m (H1 FY16: GBP1.9m), reflecting costs associated with rationalising the store portfolio.
The Group generated GBP4.1m profit before tax (H1 FY16: GBP7.1m) and basic earnings per share of 5.8p (H1 FY16: 7.3p).
Cash flow generated from underlying profitability and lower stock levels was offset in part by an adverse movement in working capital, the cash costs of rationalising the store portfolio and net capital expenditure, as we invest in modernising the estate. As a consequence, our net cash at the half year was GBP0.4m compared to a net debt position of GBP1.1m at year end 2016.
Chief Executive Review
Overview
After ten consecutive quarters of positive like-for-like sales growth, it is naturally disappointing to report a negative result for the first half of this financial year.
Despite the reported headwinds, we remain confident that our strategy, based on extensive customer research and proven through store trials, is on track to deliver significant benefits in the medium and longer term.
We are broadening the appeal of the brand by placing greater emphasis on the unrivalled breadth and quality of our product range, the expertise of our colleagues and the role floor coverings play in transforming our customers' homes. We are retaining our well established value heritage - something that will become more important as inflation increases and consumer spending potentially tightens up. We also have to "make it easy" for our customers who place a high value on convenience and speed. This all combines to make buying floor coverings a hassle-free end-to-end experience from researching online to the moment the fitter presents the finished product, and at every point in between.
Key areas of focus are:
1. Who we are - our people, the brand and our stores 2. What we sell - an unrivalled choice of floor coverings 3. How we sell it - making it easy with unbeatable value 4. Where we sell it - multi channel convenience and improving the store portfolio 1. Who we are
We launched our new brand identity in May 2016 and it now forms the main theme of all our advertising and promotions, on and off line, as well as internal communications. Encouraging new customers to consider Carpetright when they shop for floor coverings requires a significant repositioning and updating of the brand.
We have made progress in the following:
-- At the end of the first half, we had 49 stores trading under
the new brand identity, with investment in the first half
weighted to the latter part of the period. The initial performance
of these stores in encouraging. While there is some inevitable
disruption to trade while work is carried out, thereafter
they are outperforming comparable stores in the estate, giving
us confidence that where we invest we are able to drive a
material improvement in performance. Some stores are up against
new competition and we seek to mitigate that impact. We initially
challenged ourselves to refurbish 100 stores this financial
year. The success of the first round of this activity has
encouraged us to accelerate this plan and we will now, in
part or fully, refurbish 150 stores by the end of April 2017.
There will be an incremental GBP1.5m capital cost on the
previously announced figure, meaning the total cost of the
store refurbishment programme in this financial year will
be GBP11.5m.
-- We are in the process of rebranding our 'Storey Carpets'
fascia stores into 'Carpetright' or 'Carpetright Clearance'
stores. Those completed are achieving significant double
digit LFL sales growth and can now benefit significantly
from Carpetright brand advertising both off and on line
-- We have a similar programme to address the un-invested estate
in the Netherlands and Belgium, where we have refurbished
five stores to date. They have achieved significant sales
growth, giving encouragement that the Netherlands, in particular,
is becoming a significant opportunity to increase share and
profitability.
Market research tells us Carpetright's reputation and trust has not ranked highly with consumers for an extended period time. This is being addressed by:
-- The recruitment in summer 2016 of Lucy Alexander from the
cult BBC TV show "Homes Under The Hammer" to become our Carpetright
Brand Ambassador. Lucy is a very recognisable personality
for all things home improvement and she is the face of our
recent television sponsorship deal with UKTV as well as featuring
in our advertisements on line and on in-store point of sale.
Customer research shows that this activity is beginning to
yield positive results on brand metrics such as awareness,
consideration and value.
-- Carpetright also achieved 'Which? Trusted Trader Status'
for our recommended fitting service. This will give customers
peace of mind that their product will be fitted by reputable
traders at the all-important finishing point in the customer
service journey.
Internally, we have launched a new online training, development and communication tool - 'Fuse', which in a short time is having a tremendous impact on the business, specifically allowing us to reach all our employees individually for the first time:
-- Giving colleagues online access to managing their own training
and development plans on technical issues such as product
knowledge, as well as softer skills such as customer service
and sales techniques.
-- Instant communication by Regional and Divisional managers
to their communities - updates on sales, in-store performance
and allowing for compelling video messaging rather than traditional
e-mail.
-- Celebrating success, whether that's sales numbers or long
service as we continue our journey to modernise the culture
of the organisation.
2. What we sell
In the UK, Carpetright is the market leader in floor coverings and we have long offered the broadest range of carpets in the marketplace, including premium and specialist lines. However, we believe our capability to offer a full range of floor covering options is still not universally recognised by our potential customer base.
As consumer tastes evolve we are building market share in hard flooring such as laminate, luxury vinyl tiles and engineered wood. While we still over index on our main carpet offer, we look to differentiate our range versus competitors and broaden our appeal generally across customer segments.
Initiatives completed and being developed include:
-- A full roll out of the successful and exclusive 'House Beautiful'
range across the whole estate. Keeping this range fresh,
interesting and exclusive to Carpetright, will give us a
clear edge as seasons change and customers look for home
inspiration.
-- Double digit sales growth in hard flooring, a category where
we have a low share relative to the rest of the floor coverings
market. We are rolling out 100 hard flooring sections across
the highest volume stores in the estate and will have 200
new luxury vinyl tile stands in place by the end of November
and across the whole estate by the end of April 2017. Our
new, improved, take away vinyl offer will be rolled out across
all stores by end March 2017, while 200 stores will carry
the 'Kahrs' engineered wood range.
-- The launch of an entirely new rug range, which is both contemporary
in style and at a lower entry price point has strengthened
our competitive position in this market significantly.
-- Artificial grass proved incredibly popular last Summer and
we are developing a new range exclusive to Carpetright for
Spring 2017.
3. How we sell it
The strategic plan to put the customer's needs "at the heart of everything we do" has not changed and we continue to be driven by research and live feedback. We are absolutely committed to making customer service a genuine point of sustained competitive advantage.
Key initiatives delivered include:
-- Following the launch of 'Do We Measure Up?', our web-based
customer service programme, across the entire UK store network
in January 2015, we are now receiving an average of 307 reviews
per week, which enables each store to receive direct customer
feedback on their shopping experience. This important initiative
is driving service standards higher and helping to improve
our online customer ratings. Research indicates that customers
are more than twice as likely to recommend Carpetright when
they are 'Highly Satisfied' and customers in this zone of
satisfaction will spend on average 12% more. We have improved
our 'Highly Satisfied Rating' to 75% (H1 FY16: 71%).
-- We have introduced a tablet based solution for the production
of cutting plans by our Home Flooring Surveyors, making the
service far more efficient for our customers as well as for
the third party fitters.
-- Introducing hassle free 'Uplift and Disposal' where for a
small extra charge, our recommended fitters will take away
the customers old carpet. From this service we now generate
on average 1,300 tonnes of waste per month, of which we are
currently able to recycle approximately 50% into renewable
energy, and arrange for the responsible disposal of the balance.
Carpetright has a long-established and well-deserved reputation for value among its core customer base. We have built on this heritage and it will remain a key part of our proposition, supported by the three core elements of strong promotional offers; a promise of never being beaten on price; and interest free credit. Research indicates that our move to modernise the store estate and to make it more contemporary in appeal is not affecting consumers' perceptions of our ability to offer outstanding value.
We have made progress in the following:
-- Our enhanced Interest Free Credit offer of up to four years
for purchases over GBP500 has now reached 18% penetration
of all transactions and still has some way to go versus other
big ticket retailers. The average transaction value of an
IFC order is just under GBP1,300, four times the value of
a normal transaction.
-- Refreshing our take away offer as the 'essential value' range
to enhance our reputation for budget product.
-- Introducing 'Deal of the Week' - a rotating offer every seven
days across product categories, headlining the very best
deals available in store.
-- 'Price Checker' on Beds - naming our competitors and how
our products in store offer significantly better value for
money.
-- We are never beaten on price with our 'Price Promise' so
if a customer has a written quote for an identical product
from a rival retailer - we'll match it.
-- Free fitting in selected stores impacted by competition.
4. Where we sell it
While the ability to visit a store, to touch and view the product and to obtain specialist advice prior to making a purchase remain critical, the internet has become a vital research tool for many customers and the rapid growth in the use of mobile devices has made an integrated multi-channel proposition a necessity.
With our extensive geographic coverage, we see the opportunity to leverage the accessibility of our store estate, combined with the strength of our marketing reach and supported by an inspirational website, as a key advantage when compared to the majority of the competition.
Enhancements made online in the first half of the year include:
-- Introducing the Carpetright 'Visualiser' - giving the customer
the chance to upload photos of their rooms and see how they
will be enhanced by trying different product across our extensive
ranges.
-- Blogs designed to enhance consumer knowledge including decorating
tips and trends with Diana Civil, a leading UK interior stylist.
-- Practical videos on how to choose product, measure a room,
stain removal and other tips to enhance our authority as
market leaders in the sector.
-- Guides with brand ambassador Lucy Alexander as to how we
make it "easy with every step".
-- Ability to book a home visit direct with our Home Flooring
Surveyors online.
-- Ability to pay for products using Interest Free Credit online.
-- Complete rebranding of the site and associated materials.
We continue to aggressively manage our store portfolio to reduce total square footage; to eliminate store catchment overlap; to improve the quality of the estate by relocating to better sites; and to reduce property costs, with the overall objective of ensuring our store base is better aligned with the needs of customers.
Key areas of progress are:
-- We have opened one new high street store in Gerrards Cross
during the half which is trading extremely well and a new
retail park unit in Selly Oak, Birmingham which opened two
weeks into the second half.
-- We closed seven stores in the period, primarily a continuation
of the previously announced plan to eliminate stores with
overlapping catchments. Prior to committing to these closures
we model the expected level of transfer of sales to nearby
stores, assess the likely net reduction in cost and, after
considering any costs to facilitate the deal, look for a
cash payback within two years. We believe we will achieve
around 20 closures by the end of April 2017, in line with
previous guidance.
-- We continue to take a robust view at lease renewal, which
provides an opportunity to secure lower rents for future
years. Within the next five years 40% of the UK estate has
a lease renewal scheduled, providing further opportunity
to reduce the fixed store operating costs. As at 29 October
2016, we had 429 stores trading in the UK, with average length
of lease of 5.6 years (H1 FY16: 6.5 years).
-- In Benelux we have opened one and closed one store, while
relocating three others to a smaller format in the same location,
leaving 137 stores trading at 29 October 2016. The potential
to secure rent reductions in Rest of Europe is generally
dictated by the average length of lease remaining, with this
being 2.5 years (H1 FY16: 2.9 years) in the Netherlands and
2.3 years (H1 FY16: 1.5) in Belgium.
-- In the Republic of Ireland, this period is 8.6 years (H1
FY16: 9.6 years) reflecting long term deals during the expansion
into this market in the period from 2001 to 2008.
The actual results achieved thus far have been in line with our modelling which gives us confidence in our approach.
Dividend
The Board continues to prioritise the use of cash for the acceleration of the strategy by investing further in the existing store estate, while also reducing the fixed occupancy costs as quickly as possible. As a result, it has taken the decision not to pay an interim dividend (H1 FY16: Nil).
Current Trading
We have had promising start to the second half, with like-for-like sales in the UK up 2.6% in the six weeks to 10 December 2016. In the Rest of Europe, an equally encouraging start with like-for-like sales up 5.9% on a local currency basis over the same period. This provides confidence that our strategy remains on track and will deliver.
Summary and Outlook
We have had a challenging first half - the full impact of the UK decision to leave the EU remains unclear; consumer demand remains uneven; the market is extremely competitive and the impact of currency movements have combined to give us substantial trading headwinds. To address these challenges and revitalise the business, we have a programme of activities underway, but these will take time to deliver their full effect.
The positive impact at the initial 49 refurbished stores has given us the confidence to accelerate this part of the programme. We are now scheduling investment to 150 stores by the year end - 50% more than the original target and representing over one third of our UK estate.
We have made an encouraging start to the second half with a return to like-for-like sales growth in both businesses. As we enter the important January trading period, we remain comfortable with the range of market expectations. Looking longer term, we are confident that our plan to build on Carpetright's strong foundations, to modernise the business and to ensure we capitalise as market leader to the full is still on track.
Wilf Walsh
Chief Executive Officer
13 December 2016
Financial review
UK
Key financial results for the UK:
H1 FY17 H1 FY16
GBPm GBPm Change
------------------------------- -------- -------- ----------
Revenue 186.5 199.2 (6.4%)
=============================== ======== ======== ==========
Like-for-like sales (2.9%) 3.7%
=============================== ======== ======== ==========
Gross profit 111.0 121.5 (8.6%)
=============================== ======== ======== ==========
Gross profit % 59.5% 61.0% (1.5ppts)
=============================== ======== ======== ==========
Costs (106.2) (112.1) 5.3%
=============================== ======== ======== ==========
Cost to sales % (56.9%) (56.3%) (0.6ppts)
=============================== ======== ======== ==========
Underlying operating profit 4.8 9.4 (48.9%)
=============================== ======== ======== ==========
Underlying operating margin % 2.6% 4.7% (2.1ppts)
------------------------------- -------- -------- ----------
UK store portfolio:
Store numbers Gross Sq ft ('000)
--------------
30 April 29 Oct 30 April 29 Oct
2016 Openings Closures 2016 2016 2016
-------------- --------- ----------- ----------- ------- ----------- --------
Standalone 420 1 (6) 415 3,734 3,672
============== ========= =========== =========== ======= =========== ========
Concessions 15 0 (1) 14 29 26
============== ========= =========== =========== ======= =========== ========
435 1 (7) 429 3,763 3,698
-------------- --------- ----------- ----------- ------- ----------- --------
As at 31 Oct
2015 438 3,818
-------------- --------- ----------- ----------- ------- ----------- --------
Included in standalone stores:
Bed departments 246 2 0 248
---- ----
As at 31 Oct
2015 249
----------------- ---- ----
Like-for-like sales declined by 2.9% (H1 FY16: +3.7%), reflecting uneven consumer demand in an increasingly competitive market.
We opened one and closed seven stores during the period, which translated into net space decline of 65,000 sq ft, a decrease of 1.7%. At the close of the period there were 248 stores trading with a bed department (H1 FY16: 249). Sales within the beds category now represent 9.1% of the sales mix (H1 FY16: 8.9%).
Gross profit decreased by GBP10.5m to GBP111.0m, representing 59.5% of sales, a decrease of 150 basis points. This decline in margin rate reflects a combination of:
-- The adverse impact of the fall in Sterling to Euro exchange
rate on imported goods for resale.
-- Counter competition measures including a 'free fitting' offer
in selected stores.
-- A dilutive impact from product categories which attract lower
average gross margins.
-- An improvement in underlying floor covering margin through
improved sourcing and promotional planning.
The total UK cost base decreased by 5.3% compared with the prior year to GBP106.2m reflecting tight control of costs and the impact of store closures. Costs as a percentage of sales were 56.9%, a marginal uplift from 56.3% in the prior year, reflecting the operational gearing of the business. The movement in costs was a combination of:
-- Store payroll costs decreased by GBP1.4m to GBP29.7m (H1
FY16: GBP31.1m) from a reduction in headcount from store
closures, combined with a decline in sales commission and
bonus costs from the fall in sales
-- Store occupancy costs (rent, rates, other & depreciation)
decreased by 2.0% to GBP57.4m (H1 FY16: GBP58.6m) primarily
the impact of the store closures, offset in part by an increase
in depreciation from the refurbishment programme. The latter
includes GBP0.3m accelerated depreciation for assets written
off during these works.
-- Marketing and central support costs decreased by 14.0% to
GBP19.1m (H1 FY16: GBP22.2m), reflecting tight cost control
and non-repeating expenditure incurred in the prior year.
The combination of the above factors resulted in underlying operating profit decreasing by 48.9% to GBP4.8m.
Rest of Europe
Key financial results for the Rest of Europe
H1 FY17 H1 FY16 Change Change (Local)
GBPm GBPm (Reported)
---------------------- -------- -------- ------------ ---------------
Revenue 35.8 32.0 11.9% (1.4%)
====================== ======== ======== ============ ===============
Like-for-like sales
(local currency) (1.5%) 5.5%
====================== ======== ======== ============ ===============
Gross profit 20.6 18.5 11.4% (2.0%)
====================== ======== ======== ============ ===============
Gross profit % 57.5% 57.8% (0.3ppts)
====================== ======== ======== ============ ===============
Costs (19.5) (17.9) (8.9%) 3.6%
====================== ======== ======== ============ ===============
Cost to sales % (54.5%) (55.9%) 1.4ppts
====================== ======== ======== ============ ===============
Underlying operating
profit 1.1 0.6 83.3% 44.4%
====================== ======== ======== ============ ===============
Underlying operating
margin % 3.1% 1.9% 1.2ppts
---------------------- -------- -------- ------------ ---------------
Rest of Europe store portfolio:
Store numbers Gross Sq ft ('000)
--------------
30 April 29 Oct 30 April 29 Oct
2016 Openings Closures 2016 2016 2016
-------------- --------- ----------- ----------- ------- ----------- --------
Netherlands 93 3 (3) 93 985 950
============== ========= =========== =========== ======= =========== ========
Belgium 23 1 (1) 23 245 235
============== ========= =========== =========== ======= =========== ========
Republic of
Ireland 21 0 0 21 157 157
============== ========= =========== =========== ======= =========== ========
137 4 (4) 137 1,387 1,342
-------------- --------- ----------- ----------- ------- ----------- --------
As at 31 Oct
2015 138 1,453
-------------- --------- ----------- ----------- ------- ----------- --------
Macroeconomic indicators for our markets in Belgium and the Republic of Ireland remained fragile throughout the first half, however, the Netherlands experienced a recovery in market conditions with an increase in reported consumer confidence and encouraging economic indicators, such as the number of housing transactions fuelling demand. In local currency terms, the three businesses combined to produce a decline in revenue of 1.4% on the prior year. The combined like-for-like sales decreased by 1.5%. After exchange rate movements, total revenue increased by 11.9% in reported currency.
Whilst the number of stores remained unchanged at 137, the trading space reduced by 3.2% as a result of downsizing at three locations, one opening and one closure.
Gross profit percentage decreased 30 basis points to 57.5% the result of the impact of growth in lower margin product categories. The combination of volume and rate declines resulted in cash gross profit in local currency declining by 2.0%. After taking into account exchange rate movements this resulted in an increase of 11.4% in reported currency.
Operating costs in local currency reduced by 3.6%, primarily the result of reduced occupancy costs related to the downsizing and relocating stores. This was reflected in the decline in the costs as a percentage of sales to 54.5%, a reduction on the prior year figure of 55.9%. In reported currency, costs increased by 8.9% to GBP19.5m.
The net result was a year-on-year improvement in underlying operating profit of 44.4% in local currency, which translated to an increase of 83.3% in reported currency of GBP0.5m to GBP1.1m.
Group financial review
Net finance charges and taxation
Net finance charges for the period were GBP0.1m lower at GBP0.9m (H1 FY16: GBP1.0m) principally a result of lower levels of average drawings of facilities during the period.
The taxation charge on profit for the half year was GBP0.2m (H1 FY16: GBP2.1m). This is based on a full year effective tax rate of 25.0% (H1 FY16: 30.1%), a variance of 5.0% compared to the UK corporation tax rate of 20.0% due to the effects of non-deductible items, overseas tax rates and other permanent differences. The decrease on last half year's rate is predominantly due a reduction in non-deductible items.
Exceptional items
The Group recorded a net charge of GBP0.9m (H1 FY16: GBP1.9m) in the half year, a combination of surrender premiums paid to exit poor performing stores, the write off of any associated undepreciated assets and charges associated with onerous store locations, offset in part by premiums received.
During the period, the Group closed eleven trading stores for a net charge of GBP0.9m, a combination of exit premiums, asset write offs and fees. We also successfully disposed of one non-trading store, at a total cost of GBP0.2m against which we utilised GBP0.2m onerous lease provision.
At 30 April 2016 there were eleven vacant properties in the UK and two in the Republic of Ireland classed as onerous leases, against which we carried a provision. We disposed of one onerous location during the half year, removing us from all future liabilities associated with the property. There were no additions or re-openings of onerous stores during the period therefore there were twelve onerous stores remaining at the end of the financial period.
Earnings per share
Underlying earnings per share decreased by 41.1% to 5.6p (H1 FY16: 9.5p) reflecting the fall in underlying profitability of the Group.
Basic earnings per share decreased by 20.5% to 5.8p (H1 FY16: 7.3p). The reduction in basic earnings per share in less in percentage terms than the reduction in underlying earnings per share, a result of a deferred tax credit of GBP0.6m associated with the fall in the UK corporation tax rate to 17% being taken in the first half as an exceptional tax credit.
Balance sheet
The Group has net assets of GBP84.4m (Year end FY16: GBP74.0m) an increase of GBP10.4m since 30 April 2016.
Summary Balance sheet
29 Oct 30 April Movement
2016 2016 GBPm
GBPm GBPm
-------------------------------------- -------- --------- ---------
Freehold and long leasehold property 60.5 61.5 (1.0)
====================================== ======== ========= =========
Other non current assets 113.5 107.5 6.0
====================================== ======== ========= =========
Stock 38.4 41.6 (3.2)
====================================== ======== ========= =========
Trade & other current assets 26.2 20.0 6.2
====================================== ======== ========= =========
Creditors < 1 year (90.3) (91.1) 0.8
====================================== ======== ========= =========
Creditors > 1 year (60.6) (62.2) 1.6
====================================== ======== ========= =========
Net cash/(debt) 0.4 (1.1) 1.5
====================================== ======== ========= =========
Pension deficit (3.7) (2.2) (1.5)
====================================== ======== ========= =========
Net Assets 84.4 74.0 10.4
-------------------------------------- -------- --------- ---------
The Group owns a significant property portfolio, most of which is used for retail purposes. The carrying values are supported by a combination of value-in-use and independent valuations.
Net debt and cash flow
The Group's net cash at 29 October 2016 was GBP0.4m, a favourable movement of GBP1.5m from the year end FY16 net debt of GBP1.1m.
This increase in cash was driven by the underlying operating profit performance, supported by the GBP4.1m reduction in stock, being offset in part by a GBP2.4m cash outflow related to provisions; GBP0.5m contributions to pension schemes; GBP0.7m net expenditure on exiting operating leases and a GBP7.2m increase in working capital.
The increase in working capital was attributable to a combination of an increase in debtors due to the seasonality of sales; amortisation of deferred income relating to property incentives; an increase in expense prepayments due to timing differences; and a decrease in merchandise creditors driven by lower stock levels.
The resulting net inflow of cash generated by operations of GBP5.9m was offset by net capital expenditure, net interest paid, tax paid and other movements (primarily exchange differences) totalling GBP4.4m, resulting in free cash flow inflow of GBP1.5m (H1 FY16: GBP3.6m in flow).
Summary cash flow
H1 FY17 H1 FY16
GBPm GBPm
--------------------------------------------- -------- --------
Underlying Operating Profit 5.9 10.0
============================================= ======== ========
Depreciation and non-cash items 6.7 6.8
============================================= ======== ========
Decrease in stock 4.1 0.0
============================================= ======== ========
Increase in working capital (7.2) (1.8)
============================================= ======== ========
Net expenditure on exit of operating leases (0.7) (0.7)
============================================= ======== ========
Contributions to pension schemes (0.5) (0.4)
============================================= ======== ========
Provisions paid (2.4) (2.1)
--------------------------------------------- -------- --------
Cash generated by operations 5.9 11.8
============================================= ======== ========
Net interest paid (0.6) (1.5)
============================================= ======== ========
Corporation Tax received/(paid) 0.1 (1.3)
============================================= ======== ========
Net capital expenditure (4.5) (5.2)
--------------------------------------------- -------- --------
Free cash flow 0.9 3.8
============================================= ======== ========
Other 0.6 (0.2)
--------------------------------------------- -------- --------
Movement in net debt 1.5 3.6
============================================= ======== ========
Opening net (debt)/cash (1.1) 0.5
--------------------------------------------- -------- --------
Closing net cash 0.4 4.1
--------------------------------------------- -------- --------
Gross capital expenditure was GBP7.9m (H1 FY16: GBP6.0m), with the majority of this relating to the store refurbishment programme of GBP5.7m, new store fit outs of GBP0.4m, investment in IT systems of GBP1.3m and expenditure at the support offices of GBP0.5m. After allowing for proceeds generated from the disposal of two freehold properties, from which we no longer trade, net capital expenditure was GBP4.5m (H1 FY16: GBP5.2m).
H1 FY17 H1 FY16
GBPm GBPm
----------------------------------------------- -------- --------
Capital expenditure (7.9) (6.0)
=============================================== ======== ========
Net proceeds from freehold property disposals 3.4 0.8
=============================================== ======== ========
Net capital expenditure (4.5) (5.2)
----------------------------------------------- -------- --------
Current liquidity
At the half year the Group held cash balances of GBP13.8m (H1 FY16: GBP8.6m), principally a combination of Sterling and Euros. Gross bank borrowings at the balance sheet date were GBP11.2m (H1 FY16: GBP2.2m), being a combination of drawn down from overdraft and revolving credit facilities. The Group had further undrawn facilities of GBP43.5m at the balance sheet date.
In April 2015, the Group completed a refinancing arrangement of its principal facilities, providing approximately GBP58m of debt capacity split between revolving credit facilities and overdrafts in a mixture of Sterling and Euro currencies. The revolving credit facility matures in July 2019. In December 2015 the Group elected not to renew its EUR5.0m multi-option facility in Belgium due to a lack of requirement. This action reduced the Group's total facilities in GBP terms to GBP54.7m. The facilities contain financial covenants which are believed to be appropriate in the current economic climate and which are tested on a quarterly basis, against which the Group monitors compliance.
Pensions
At 29 October 2016 the IAS 19 net retirement benefit deficit was GBP3.7m (30 April 2016: GBP2.2m). The discount rate was 2.7% (30 April 2016: 3.5%), reflecting prevailing corporate bond rates. This lower discount rate resulted in an increase in the schemes liabilities and more than offset the combination of an increase in market value of the plan's assets and additional company contributions,
The Company agreed a recovery plan with the Trustees in 2015 and this will be reviewed following the completion of the next triennial valuation, which will be performed as at 5 April 2017.
Neil Page
Chief Financial Officer
13 December 2016
Condensed consolidated income statement
for 26 weeks ended 29 October 2016
26 weeks to 29 26 weeks to 31 52 weeks to 30
October 2016 October 2015 April 2016
Exceptional Exceptional Exceptional
Before Items Before Items Before Items
Exceptional (note Exceptional (note Exceptional (note
items 5) Total items 5) Total items 5) Total
Notes GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
Revenue 4 222.3 - 222.3 231.2 - 231.2 456.8 - 456.8
Cost of sales (90.7) - (90.7) (91.3) - (91.3) (182.6) - (182.6)
------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
Gross profit 131.6 - 131.6 139.9 - 139.9 274.2 - 274.2 Administration expenses (126.6) - (126.6) (130.7) - (130.7) (256.8) (0.9) (257.7) Other operating income/(loss) 0.9 (0.9) - 0.8 (1.9) (1.1) 1.9 (3.6) (1.7) ------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- ------- Operating profit/(loss) 4 5.9 (0.9) 5.0 10.0 (1.9) 8.1 19.3 (4.5) 14.8 Finance costs 6 (0.9) - (0.9) (1.0) - (1.0) (2.0) - (2.0) ------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- ------- Profit/(loss) before tax 5.0 (0.9) 4.1 9.0 (1.9) 7.1 17.3 (4.5) 12.8 Tax 7 (1.2) 1.0 (0.2) (2.5) 0.4 (2.1) (4.2) 1.5 (2.7) ------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- ------- Profit/(loss) for the financial period attributable to owners of the Company 3.8 0.1 3.9 6.5 (1.5) 5.0 13.1 (3.0) 10.1 ------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- ------- Basic earnings per share (pence) 8 5.6 0.2 5.8 9.5 (2.2) 7.3 19.3 (4.4) 14.9 Diluted earnings per share (pence) 8 5.6 0.2 5.8 9.5 (2.2) 7.3 19.3 (4.4) 14.9 ------------------ ----- ----------- ----------- ------- ----------- ----------- ------- ----------- ----------- -------
All items in the income statement arise from continuing operations.
Condensed consolidated statement of comprehensive income
for 26 weeks ended 29 October 2016
26 weeks 26 weeks 52 weeks
to to to
29 October 31 October 30 April
2016 2015 2016
Notes GBPm GBPm GBPm
----------------------------------------------------- ----- ----------- ----------- ---------
Profit for the financial period 3.9 5.0 10.1
----------------------------------------------------- ----- ----------- ----------- ---------
Items that will not be reclassified to the
income statement:
Re-measurements of defined benefit plans 14 (2.0) 0.4 1.1
Tax on items that will not be reclassified
to the income statement 0.3 (0.1) (0.4)
----------------------------------------------------- ----- ----------- ----------- ---------
Total items that may not be reclassified to
the income statement (1.7) 0.3 0.7
----------------------------------------------------- ----- ----------- ----------- ---------
Items that may be reclassified to the income
statement:
Exchange gains/(loss) 8.2 (1.1) 3.2
Tax on items that may be reclassified subsequently
to the income statement - - -
----------------------------------------------------- ----- ----------- ----------- ---------
Total items that may be reclassified to the
income statement 8.2 (1.1) 3.2
----------------------------------------------------- ----- ----------- ----------- ---------
Other comprehensive gain/(loss) for the period 6.5 (0.8) 3.9
----------------------------------------------------- ----- ----------- ----------- ---------
Total comprehensive income for the period
attributable to owners of the Company 10.4 4.2 14.0
----------------------------------------------------- ----- ----------- ----------- ---------
The notes on pages 23 to 28 form an integral part of this consolidated interim financial information.
Condensed consolidated statement of changes in equity
for 26 weeks ended 29 October 2016
Capital
Share Share Treasury redemption Translation Retained
capital premium shares reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 30 April 2016 0.7 17.8 (1.3) 0.1 3.3 53.4 74.0
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Profit for the period - - - - - 3.9 3.9
Other comprehensive income/(expense)
for the period - - - - 8.2 (1.7) 6.5
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive income for the
financial period - - - - 8.2 2.2 10.4
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Shares purchased by employee benefit
trust - - (0.1) - - - (0.1)
Share-based payments and related
tax - - - - - 0.1 0.1
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 29 October 2016 0.7 17.8 (1.4) 0.1 11.5 55.7 84.4
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Capital
Share Share Treasury redemption Translation Retained
capital premium shares reserve reserve earnings Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 3 May 2015 0.7 17.4 (0.4) 0.1 0.1 41.6 59.5
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Profit for the period - - - - - 5.0 5.0
Other comprehensive income/(expense)
for the period - - - - (1.1) 0.3 (0.8)
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Total comprehensive income for the
financial period - - - - (1.1) 5.3 4.2
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
Issue of new shares - 0.3 - - - - 0.3
Shares purchased by employee benefit
trust - - (0.4) - - - (0.4)
Share-based payments and related
tax - - - - - 0.5 0.5
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
At 31 October 2015 0.7 17.7 (0.8) 0.1 (1.0) 47.4 64.1
------------------------------------- -------- -------- -------- ----------- ----------- --------- -----
The notes on pages 23 to 28 form an integral part of this consolidated interim financial information.
Condensed consolidated balance sheet
as at 29 October 2016
29 October 31 October 30 April
2016 2015 2016
Notes GBPm GBPm GBPm
------------------------------------------ ----- ---------- ---------- --------
Assets
Non-current assets
Intangible assets 13 60.4 56.0 57.1
Property, plant and equipment 13 96.2 92.8 95.0
Investment property 14.8 17.8 14.5
Deferred tax assets 2.2 1.9 1.9
Trade and other receivables 0.4 0.5 0.5
------------------------------------------ ----- ---------- ---------- --------
Total non-current assets 174.0 169.0 169.0
------------------------------------------ ----- ---------- ---------- --------
Current assets
Inventories 38.4 33.9 41.6
Trade and other receivables 26.2 22.2 20.0
Cash and cash equivalents 10 13.8 8.6 8.3
------------------------------------------ ----- ---------- ---------- --------
Total current assets 78.4 64.7 69.9
------------------------------------------ ----- ---------- ---------- --------
Total assets 252.4 233.7 238.9
------------------------------------------ ----- ---------- ---------- --------
Liabilities
Current liabilities
Trade and other payables (86.9) (92.0) (88.8)
Obligations under finance leases 10 (0.1) (0.1) (0.1)
Borrowings and overdrafts 10 (11.2) (2.2) (7.1)
Current tax liabilities (3.4) (2.8) (2.3)
------------------------------------------ ----- ---------- ---------- --------
Total current liabilities (101.6) (97.1) (98.3)
------------------------------------------ ----- ---------- ---------- --------
Non-current liabilities
Trade and other payables (35.4) (37.0) (34.3)
Obligations under finance leases 10 (2.1) (2.2) (2.2)
Provisions for liabilities and charges 11 (10.4) (14.7) (12.6)
Deferred tax liabilities (14.8) (15.3) (15.3)
Retirement benefit obligations 14 (3.7) (3.3) (2.2)
------------------------------------------ ----- ---------- ---------- --------
Total non-current liabilities (66.4) (72.5) (66.6)
------------------------------------------ ----- ---------- ---------- --------
Total liabilities (168.0) (169.6) (164.9)
------------------------------------------ ----- ---------- ---------- --------
Net assets 84.4 64.1 74.0
------------------------------------------ ----- ---------- ---------- --------
Equity
Share capital 0.7 0.7 0.7
Share premium 17.8 17.7 17.8
Treasury shares (1.4) (0.8) (1.3)
Other reserves 67.3 46.5 56.8
Total equity attributable to shareholders
of the company 84.4 64.1 74.0
------------------------------------------ ----- ---------- ---------- --------
The notes on pages 23 to 28 form an integral part of this consolidated interim financial information.
Condensed consolidated statement of cash flows
for 26 weeks ended 29 October 2016
26 weeks 26 weeks 52 weeks
to to to
29 October 31 October 30 April
2016 2015 2016
Note GBPm GBPm GBPm
--------------------------------------------------- ----- ----------- ----------- ---------
Cash flows from operating activities
Profit before tax 4.1 7.1 12.8
Adjusted for:
Depreciation and amortisation 6.6 6.3 12.5
Loss on property disposals 0.9 1.9 3.6
Exceptional non-cash items - - 0.9
Share based compensation and other non-cash
items 0.1 0.5 1.0
Net finance costs 0.9 1.0 2.0
---------------------------------------------------------- ----------- ----------- ---------
Operating cash flows before movements in working
capital 12.6 16.8 32.8
Decrease/(increase) in inventories 4.1 - (7.0)
(Increase)/decrease in trade and other receivables (5.2) 3.8 6.2
Decrease in trade and other payables (2.0) (5.6) (10.5)
Net expenditure on exit of operating leases (0.7) (0.7) (2.2)
Contributions to pension scheme (0.5) (0.4) (0.9)
Provisions paid (2.4) (2.1) (5.1)
---------------------------------------------------------- ----------- ----------- ---------
Cash generated by operations 5.9 11.8 13.3
Interest paid (0.6) (1.5) (2.0)
Corporation taxes received/(paid) 0.1 (1.3) (3.0)
---------------------------------------------------------- ----------- ----------- ---------
Net cash flows from operating activities 5.4 9.0 8.3
---------------------------------------------------------- ----------- ----------- ---------
Cash flows from investing activities
Purchases of intangible assets (1.1) (1.5) (1.8)
Purchases of property, plant and equipment
and investment property (6.8) (4.5) (10.1)
Proceeds on disposal of property, plant, equipment
& investment property 3.4 0.8 2.2
Net cash used in investing activities (4.5) (5.2) (9.7)
---------------------------------------------------------- ----------- ----------- ---------
Cash flows from financing activities
Issue of new shares - 0.3 0.4
Purchase of treasury shares by employee benefit
trust (0.1) (0.4) (0.9)
Repayment of finance lease obligations (0.1) (0.2) (0.2)
Increase in borrowings 4.0 - -
---------------------------------------------------------- ----------- ----------- ---------
Net cash used in financing activities 3.8 (0.3) (0.7)
---------------------------------------------------------- ----------- ----------- ---------
Net increase in cash and cash equivalents
in the period 4.7 3.5 (2.1)
Cash and cash equivalents at the beginning
of the period 1.2 2.9 2.9
Exchange differences 0.7 - 0.4
---------------------------------------------------------- ----------- ----------- ---------
Cash and cash equivalents at the end of the
period 6.6 6.4 1.2
---------------------------------------------------------- ----------- ----------- ---------
For the purposes of the cash flow statement, cash and cash equivalents are reported net of overdrafts repayable on demand. Overdrafts are excluded from the definition of cash and cash equivalents disclosed in the balance sheet.
The notes on pages 23 to 28 form an integral part of this consolidated interim financial information.
Notes to the financial statements
1. General information
Carpetright plc ("the company"), its subsidiaries (together 'The Group') are engaged in the retail of flooring and bed products through a network of retail stores and other channels located in the UK and continental Europe.
Carpetright plc is a company listed on the London Stock Exchange and is incorporated and domiciled in the United Kingdom. The registered address office is, Purfleet Bypass, Purfleet, Essex RM19 1TT.
The condensed consolidated interim financial statements are unaudited but have been reviewed by the auditors whose report is set out on page 30. The financial information presented herein does not amount to statutory accounts within the meaning of Section 434 of the Companies Act 2006. The annual report and financial statements 2016 have been filed with the Registrar of Companies. The independent auditors' report on the annual report and financial statements 2016 was unqualified and did not contain a statement under Section 498 of the Companies Act 2006.
The financial period represents the 26 weeks to 29 October 2016 (comparative financial period 26 weeks to 31 October 2015; prior financial year 52 weeks to 30 April 2016). The financial information comprises the results of the Company and its subsidiaries (the 'Group').
These condensed consolidated interim financial statements were approved for issue by the Board of Directors on 13 December 2016.
2. Basis of preparation
The interim results, comprising the condensed consolidated interim financial statements and the interim management report have been prepared in accordance with the Disclosure Guidance and Transparency Rules source book of the Financial Conduct Authority and with IAS 34, 'Interim Financial Reporting' as adopted by the European Union. They should be read in conjunction with the annual report and financial statements for the 52 weeks ended 30 April 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.
Going concern
The Directors confirm that, after considering the expected performance of the business and future cash requirements, they have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for at least one year from the date the financial statements were signed. For this reason they continue to adopt the going concern basis in preparing the financial statements.
Financial assets and liabilities and foreign operations are translated at the following rates of exchange:
26 weeks 26 weeks 52 weeks
to to to
29 October 31 October 30 April
2016 2015 2016
GBPm GBPm GBPm
------------ ----------- ----------- ---------
Euro
Average 1.23 1.39 1.36
Closing 1.11 1.40 1.28
------------ ----------- ----------- ---------
3. Accounting policies
The accounting policies adopted are consistent with those of the annual financial statements for the 52 weeks ended 30 April 2016, as described in those Annual Report and Financial Statements.
Taxes on income for interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
There are no new standards, amendments to existing standards or interpretations that are effective for the first time in the financial year beginning on 1 May 2016 that would be expected to have a material impact on the Group's result.
On 1 May 2016 there were several new standards that were issued but not yet effective, nor adopted by the EU and have not been applied in the preparation of these interim financial statements. These include:
IFRS 15 'Revenue Contracts with customer' (effective for periods beginning on or after 1 January 2018)
IFRS 16 'Leases' ((effective for periods beginning on or after 1 January 2019)
The Group is in the process of assessing the impact of these standards.
Notes to the financial statements
4. Segmental analysis
The operating segments have been determined based on reports reviewed by the Board that are used to make strategic decisions.
The reportable operating segments derive their revenue primarily from the retail of floor coverings and beds. Central costs are incurred principally in the UK. As such these costs are included within the UK segment. Sales between segments are carried out at arm's length.
The segment information provided to the Board for the reportable segments for the 26 weeks ended 29 October 2016 is as follows:
26 weeks to 29 October 26 weeks to 31 October
2016 2015
UK Europe Group UK Europe Group
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- -------- ------- ------- -------- ------- -------
Gross revenue 188.1 35.8 223.9 201.4 32.0 233.4
Inter-segment revenue (1.6) - (1.6) (2.2) - (2.2)
--------------------------------- -------- ------- ------- -------- ------- -------
Revenues from external customers 186.5 35.8 222.3 199.2 32.0 231.2
--------------------------------- -------- ------- ------- -------- ------- -------
Gross profit 111.0 20.6 131.6 121.5 18.4 139.9
--------------------------------- -------- ------- ------- -------- ------- -------
Underlying operating profit 4.8 1.1 5.9 9.4 0.6 10.0
Exceptional items (0.7) (0.2) (0.9) (1.6) (0.3) (1.9)
--------------------------------- -------- ------- ------- -------- ------- -------
Operating profit 4.1 0.9 5.0 7.8 0.3 8.1
Finance costs (0.9) - (0.9) (1.0) - (1.0)
--------------------------------- -------- ------- ------- -------- ------- -------
Profit before tax 3.2 0.9 4.1 6.8 0.3 7.1
Tax - (0.2) (0.2) (2.0) (0.1) (2.1)
--------------------------------- -------- ------- ------- -------- ------- -------
Profit for the financial period 3.2 0.7 3.9 4.8 0.2 5.0
--------------------------------- -------- ------- ------- -------- ------- -------
Segment assets:
Segment assets 203.0 99.6 302.6 197.3 80.4 277.7
Inter-segment balances (29.4) (20.8) (50.2) (27.6) (16.4) (44.0)
--------------------------------- -------- ------- ------- -------- ------- -------
Balance sheet total assets 173.6 78.8 252.4 169.7 64.0 233.7
--------------------------------- -------- ------- ------- -------- ------- -------
Segment liabilities:
Segment liabilities (169.3) (48.9) (218.2) (167.9) (45.7) (213.6)
Inter-segment balances 20.8 29.4 50.2 16.4 27.6 44.0
--------------------------------- -------- ------- ------- -------- ------- -------
Balance sheet total liabilities (148.5) (19.5) (168.0) (151.5) (18.1) (169.6)
--------------------------------- -------- ------- ------- -------- ------- -------
Other segmental items:
Depreciation and amortisation 5.6 1.0 6.6 5.4 0.9 6.3
Additions to non-current assets 6.6 1.0 7.6 6.7 0.8 7.5
--------------------------------- -------- ------- ------- -------- ------- -------
Carpetright plc is domiciled in the UK. The Group's revenue from external customers in the UK is GBP186.5m (H1 FY16: GBP199.2m) and the total revenue from external customers from other countries is GBP35.8m (H1 FY16: GBP32.0m). The total of non-current assets (other than financial instruments and deferred tax assets) located in the UK is GBP142.3m (H1 FY16: GBP147.1m) and the total of those located in other countries is GBP79.7m (H1 FY16: GBP63.9m).
Carpetright's trade has historically shown no distinct pattern of seasonality with trade cycles more closely following economic indicators such as consumer confidence and mortgage approvals.
Notes to the financial statements
5. Exceptional items
26 weeks 26 weeks 52 weeks
to to to
29 October 31 October 30 April
2016 2015 2016
GBPm GBPm GBPm
----------------------------- ----------- ----------- ---------
Loss on property disposals (0.9) (1.9) (3.6)
Onerous lease provision - - (0.6)
Impairment Charge - stores
Store assets - - 0.1
Freehold properties - - (0.4)
Exceptional items before tax (0.9) (1.9) (4.5)
------------------------------ ----------- ----------- ---------
The Group recorded a net charge of GBP0.9m (H1 FY16: GBP1.9m) in the half year.
During the period, the Group closed eleven trading stores, three of which attracted a total of GBP0.2m exit premiums, a further GBP4.1m losses on disposals have been recognised as a result of asset write offs of GBP3.8m and other associated disposal fees of GBP0.3m. Set against this we received GBP3.4m of disposal proceeds, arriving at a net loss on disposal of GBP0.9m. We also successfully disposed of one non-trading store, at a total cost of GBP0.2m against which we utilised GBP0.2m onerous lease provision, hence nil net loss on disposal.
The tax impact of the exceptional items is a credit of GBP0.4 (H1 FY16 Credit of GBP0.4m), the Group also recognised an exceptional tax credit of GBP0.6m (H1 FY16: Nil) for the fall in the UK main rate of to 17% from 1 April 2020 (see note 7).
6. Finance costs
26 weeks 26 weeks 52 weeks
to to to
29 October 31 October 30 April
2016 2015 2016
GBPm GBPm GBPm
-------------------------------------------------- ----------- ----------- ---------
Interest on borrowings and overdrafts (0.6) (0.5) (1.1)
Fee amortisation (0.2) (0.3) (0.6)
Net finance expense on pension scheme obligations - (0.1) (0.2)
Interest on finance lease obligations (0.1) (0.1) (0.1)
Finance expense (0.9) (1.0) (2.0)
-------------------------------------------------- ----------- ----------- ---------
7. Income Tax
26 weeks 26 weeks 53 weeks
to to to
29 October 31 October 30 April
2016 2015 2016
GBPm GBPm GBPm
---------------------- ----------- ----------- ---------
UK Tax expense - 2.0 1.9
Overseas Tax expenses 0.2 0.1 0.8
Total Tax expense 0.2 2.1 2.7
----------------------- ----------- ----------- ---------
The Income tax expense is recognised based on management's best estimate of the full year weighted average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period.
The taxation charge on profit for the half year was GBP0.2m (H1 FY16: GBP2.1m). This is based on a full year effective tax rate of 25.0% (H1 FY16: 30.1%), a variance of 5.0% to the UK corporation tax rate of 20.0% is due to effects of one-off non-deductible items and overseas tax rates increasing the effective tax rate to 25.0%.
The March 2016 Budget announced a fall in UK corporation tax rate to 17% from 1 April 2020 and was substantively enacted in September 2016 and the effects of which are included in these financial statements. The reduction resulted in a deferred tax credit of GBP0.6m in the first half.
Notes to the financial statements
8. Earnings per share
Basic earnings per share is calculated by dividing earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period, excluding those held by the Group's LTIP Trust which are treated as cancelled.
In order to compute diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potentially dilutive ordinary shares. Those share options granted to employees and Executive Directors where the exercise price is less than the average market price of the Company's ordinary shares during the period, represent potentially dilutive ordinary shares.
26 weeks ended 26 weeks ended 52 weeks ended
29 October 2016 31 October 2015 30 April 2016
--------------------- ------------------------------- ------------------------------ ------------------------------
Weighted Earnings/ Weighted Weighted
average (loss) average Earnings average Earnings
number per number per number per
Earnings of shares share Earnings of shares share Earnings of shares share
GBPm Millions Pence GBPm Millions Pence GBPm Millions Pence
--------------------- -------- ---------- --------- -------- ---------- -------- -------- ---------- --------
Basic earnings per
share 3.9 67.7 5.8 5.0 68.2 7.3 10.1 67.7 14.9
Effect of dilutive
share
options - - - - 0.5 - - 0.2 -
--------------------- -------- ---------- --------- -------- ---------- -------- -------- ---------- --------
Diluted earnings per
share 3.9 67.7 5.8 5.0 68.7 7.3 10.1 67.9 14.9
--------------------- -------- ---------- --------- -------- ---------- -------- -------- ---------- --------
The Directors have presented an additional measure of earnings per share based on underlying earnings. This is in accordance with the practice adopted by most major retailers. Underlying earnings is defined as profit excluding exceptional items and related tax.
26 weeks ended 26 weeks ended 52 weeks ended
29 October 2016 31 October 2015 30 April 2016
---------------------- ------------------------------ ------------------------------ ------------------------------
Weighted Weighted Weighted
average Earnings average Earnings average Earnings
number per number per number per
Earnings of shares share Earnings of shares share Earnings of shares share
GBPm Millions Pence GBPm Millions Pence GBPm Millions Pence
---------------------- -------- ---------- -------- -------- ---------- -------- -------- ---------- --------
Basic earnings per
share 3.9 67.7 5.8 5.0 68.2 7.3 10.1 67.7 14.9
Adjusted for the
effect
of exceptional items:
Exceptional items 0.9 - 1.3 1.9 - 2.8 4.5 - 6.7
Tax thereon (0.4) - (0.6) (0.4) - (0.6) (0.2) - (0.3)
Exceptional tax
benefit
from tax rate
change (0.6) - (0.9) - - - (1.3) - (2.0)
Underlying earnings
per
share 3.8 67.7 5.6 6.5 68.2 9.5 13.1 67.7 19.3
---------------------- -------- ---------- -------- -------- ---------- -------- -------- ---------- --------
26 weeks ended 26 weeks ended 52 weeks ended
29 October 2016 31 October 2015 30 April 2016
---------------------- ------------------------------ ------------------------------ ------------------------------
Weighted Weighted Weighted
average Earnings average Earnings average Earnings
number per number per number per
Earnings of shares share Earnings of shares share Earnings of shares share
GBPm Millions Pence GBPm Millions Pence GBPm Millions Pence
---------------------- -------- ---------- -------- -------- ---------- -------- -------- ---------- --------
Diluted earnings per
share 3.9 67.7 5.8 5.0 68.7 7.3 10.1 67.9 14.9
Adjusted for the
effect
of exceptional items:
Exceptional items 0.9 - 1.3 1.9 - 2.8 4.5 - 6.7
Tax thereon (0.4) - (0.6) (0.4) - (0.6) (0.2) - (0.3)
Exceptional tax
benefit
from tax rate
change (0.6) - (0.9) - - - (1.3) - (2.0)
Diluted Underlying
earnings
per share 3.8 67.7 5.6 6.5 68.7 9.5 13.1 67.9 19.3
---------------------- -------- ---------- -------- -------- ---------- -------- -------- ---------- --------
9. Financial instruments
The condensed consolidated interim financial statements do not include all the financial risks management information and disclosures required in the annual financial statements, this should be read in conjunction with the Group's annual financial statements as at 30 April 2016. There have been no changes in the risk management since the year end.
The Group has no financial assets or liabilities that are measured at fair value.
Borrowings are measured at amortised cost, and the Directors are of the opinion that the carrying value of the borrowings are approximate to their fair value.
The carrying amount of all other financial assets and liabilities approximate their fair value.
Notes to the financial statements
10. Movement in cash and net debt
30 April 29 October
2016 2016
------------------------------------------- -------- ----- ------------ --------- ----------
Cash Exchange Other
Total flow differences non cash Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- -------- ----- ------------ --------- ----------
Cash and cash equivalents in the balance
sheet 8.3 - - - 13.8
Bank overdrafts (7.1) - - - (7.2)
-------- ----------
Cash and cash equivalents in the cash
flow statement 1.2 4.7 0.7 - 6.6
Borrowings
-------- ----------
Current borrowings - - - - -
Non-current borrowings - (4.0) - - (4.0)
-------- ----------
- (4.0) - - (4.0)
Obligations under finance leases
-------- ----------
Current obligations under finance leases (0.1) - - - (0.1)
Non-current obligations under finance
leases (2.2) - - - (2.1)
-------- ----------
(2.3) 0.2 - (0.1) (2.2)
Net cash/(debt) (1.1) 0.9 0.7 (0.1) 0.4
------------------------------------------- -------- ----- ------------ --------- ----------
3 May 31 October
2015 2015
------------------------------------------- ------ ------ ------------ --------- ----------
Cash Exchange Other
Total flow differences non cash Total
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- ------ ------ ------------ --------- ----------
Cash and cash equivalents in the balance
sheet 7.3 - - - 8.6
Bank overdrafts (4.4) - - - (2.2)
------ ----------
Cash and cash equivalents in the cash
flow statement 2.9 3.5 - - 6.4
Borrowings
------ ----------
Current borrowings - - - - -
Non-current borrowings - - - - -
------ ----------
- - - - -
Obligations under finance leases
------ ----------
Current obligations under finance leases (0.1) - - - (0.1)
Non-current obligations under finance
leases (2.3) - - - (2.2)
------ ----------
(2.4) 0.2 - (0.1) (2.3)
Net cash/(debt) 0.5 3.7 - (0.1) 4.1
------------------------------------------- ------ ------ ------------ --------- ----------
11 Provisions
Onerous
lease Re-organisation
provision provision Total
GBPm GBPm GBPm
--------------------------------------------- ---------- --------------- -----
Opening at 30 April 2016 12.5 0.1 12.6
Utilised during the period (2.6) - (2.6)
Impact of movement in foreign exchange rates 0.4 - 0.4
Closing balance at 29 October 2016 10.3 0.1 10.4
---------------------------------------------- ---------- --------------- -----
Opening at 3 May 2015 16.6 0.3 16.9
Utilised during the period (2.0) (0.1) (2.1)
Impact of movement in foreign exchange rates (0.1) - (0.1)
Closing balance at 31 October 2015 14.5 0.2 14.7
---------------------------------------------- ---------- --------------- -----
Notes to the financial statements
12. Dividends
No dividends were paid or proposed in the 26 weeks to 29 October 2016 or in the 26 weeks to 31 October 2015
13. Capital expenditure
During the period, additions were GBP1.1m (H1 FY16: GBP1.5m) on intangible assets and GBP6.5m (H1 FY16: GBP5.9m) on the acquisition and fit out of stores. Net proceeds from the sale of assets during the period are GBP3.4m (H1 FY16: GBP0.8m).
Capital commitments contracted but not provided for at the end of the period are GBP0.3m (H1 FY16: GBP0.7m for new store computer systems and GBPnil (H1 FY16: GBPnil) for store fit outs.
14. Retirement benefit obligation
26 weeks 26 weeks 52 weeks
to to to
29 October 31 October 30 April
2016 2015 2016
GBPm GBPm GBPm
-------------------------------------------- ----------- ----------- ---------
Deficit in scheme at beginning of period (2.2) (4.0) (4.0)
Net interest expense - (0.1) (0.1)
Employer contributions 0.5 0.4 0.9
Actuarial gains/(losses) (2.0) 0.4 1.0
-------------------------------------------- ----------- ----------- ---------
Deficit in scheme at end of period (3.7) (3.3) (2.2)
-------------------------------------------- ----------- ----------- ---------
Fair value of pension scheme assets 30.8 25.9 26.1
Present value of pension scheme obligations (34.5) (29.2) (28.3)
-------------------------------------------- ----------- ----------- ---------
Retirement benefit obligations (3.7) (3.3) (2.2)
-------------------------------------------- ----------- ----------- ---------
The key assumptions used, determined in conjunction with independent qualified actuaries, are:
29 October 31 October 30 April
2016 2015 2016
GBPm GBPm GBPm
-------------- ---------- ---------- --------
RPI inflation 3.5 3.2 3.1
Discount rate 2.7 3.7 3.5
-------------- ---------- ---------- --------
The mortality rates assumptions are taken from the S1NXA with medium cohort improvements, at a minimum of 1% pa.
The amount of the deficit varies if the main financial assumptions change, particularly the discount rate. If the discount rate increased/decreased by 0.1% the IAS 19 deficit would decrease/increase by approximately GBP0.5m.
15. Related party transactions
The Group's significant related parties are disclosed in the Group's 2016 annual financial statements. There were no material differences in related parties or related party transactions in the period compared to the prior period.
16. Events after the reporting period
There have been no events after the reporting period that require further disclosure or have a material impact on the interim financial statements.
Principal risks and uncertainties
The Group operates a structured risk management process which identifies and evaluates risks and uncertainties and reviews mitigating activity.
The Board considers that the principal risks and uncertainties which could have a material impact on the Group's performance in the remaining 26 weeks of the financial year remain the same as those stated on pages 26-27 of the 2016 Annual Report and Accounts, which are available on our website www.carpetright.plc.uk.
Forward looking statements
Certain statements in this half year report are forward looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Because these statements contain risks and uncertainties, actual results may differ materially from those expressed or implied by these forward looking statements. We undertake no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.
Statement of Directors' responsibilities
The Directors' confirm that these condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months and their impact on the condensed consolidated
interim financial statements, and a description of the principal
risks and uncertainties for the remaining six months of the
financial year; and
-- Material related-party transactions in the first six months
and any material changes in the related-party transactions
described in the last annual report
The Directors of Carpetright plc are listed in the Carpetright plc Annual Report for 30 April 2016, and on the Group's corporate website www.carpetright.plc.uk.
By order of the Board
Wilf Walsh Neil Page Chief Executive Chief Financial Officer
13 December 2016
Independent review report to Carpetright plc
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Carpetright plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim results announcement of Carpetright plc for the 26 week period ended 29 October 2016. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 29 October
2016;
-- the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period
then ended;
-- the condensed consolidated statement of cash flows for the
period then ended;
-- the condensed consolidated statement of changes in equity
for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results announcement have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the condensed consolidated interim financial statements and the review
Our responsibilities and those of the directors
The interim results announcement, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results announcement in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial statements in the interim results announcement based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the interim results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
13 December 2016
Notes:
a) The maintenance and integrity of the Carpetright plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FFFFAEFMSEIE
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December 13, 2016 02:00 ET (07:00 GMT)
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