TIDMHEAD
RNS Number : 4668O
Headlam Group PLC
21 August 2017
21 August 2017
Headlam Group plc
('Headlam' or the 'Company')
Interim Results for the six months ended 30 June 2017
Headlam Group plc (LSE: HEAD), Europe's largest distributor of
floorcoverings, is pleased to announce its interim results for the
six months ended 30 June 2017.
Financial and Operational Highlights
-- Total revenue increased by 4.0% to GBP341.9 million (H1 2016: GBP328.7 million)
-- UK like-for-like revenue* growth of 2.1% (H1 2016: 3.4%) and
Continental Europe like-for-like revenue* growth of 3.0% (H1 2016:
2.8%)
-- Gross margin improvement of 103 basis points to 31.06%
reflecting efficiency initiatives and more effective organisation
and streamlining of the Company's businesses' practices
-- Profit before tax increased by 11.0% to GBP16.8 million (H1 2016: GBP15.1 million)
-- Interim dividend for 2017 increased by 12.7% to 7.55p (2016
interim dividend: 6.70p), equivalent to the uplift in basic
earnings per share
-- Net funds of GBP49.8 million as at 30 June 2017 (GBP33.9 million as at 30 June 2016)
-- Appointment of Chris Payne as Chief Financial Officer and
Executive Director, who joins the Company on 13 September 2017
-- Two bolt-on acquisitions completed in the period, both adding
new geographic locations in the UK
-- Continued expansion of the distribution network with 60 trade
counters (FY 2015: 48; FY 2016: 55)
-- Number of operating efficiency initiatives undertaken and ongoing to support future growth
*Like-for-like revenue is calculated based on constant currency
from activities and businesses that made a full contribution in
both the 2017 and 2016 periods and is adjusted for any variances in
working days
Current Trading
-- Commercial sector summer refurbishment revenue currently
above the level of the comparable period in 2016
-- Trading in the first few weeks of the second half is
performing to expectations with continued growth in the UK and
Continental Europe against the prior period
-- Continuing to trade in-line with the Board's expectations for the full year
Steve Wilson, Chief Executive, said:
"The first half of 2017 represented another period of both
financial and operational growth, and it is particularly pleasing
that that our concerted efforts on more effective organisation and
efficiency initiatives have resulted in enhanced profitability for
the period."
Analyst meeting
A meeting for analysts will be held at 10am this morning, 21
August 2017, at the offices of Buchanan, 107 Cheapside, London EC2V
6DN. For further details, please contact Buchanan on 020 7466
5000.
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
Enquiries:
Headlam Group plc
Steve Wilson, Chief Executive Tel: 01675 433 000
Catherine Miles, Director of Communications Tel: 01675 433 006
Investec Bank plc (Corporate Broker) Tel: 020 7597 5970
Garry Levin / David Flin / Alex
Wright
Buchanan (Financial PR and IR) Tel: 020 7466 5000
Mark Court / Sophie Cowles / Catriona
Flint
Notes for Editors:
Headlam is Europe's largest distributor of floorcoverings having
grown significantly via organic growth and acquisition since
1992.
Headlam provides the distribution link between suppliers and
customers of floorcoverings, providing suppliers with the greatest
coverage and customer penetration for their products across the UK
and Continental Europe, and customers with the broadest range of
products supported by next day delivery.
The Company is engaged with suppliers across 16 countries whose
products cover a significant proportion of the floorcoverings
market (including carpet, residential vinyl, wood, laminate, luxury
vinyl tile, underlay and commercial flooring). The Company's
customers are within the residential and commercial sectors and
comprise principally independent retailers and flooring
contractors.
The Company currently comprises 61 wholly-owned businesses in
the UK and Continental Europe each operating under their own trade
brand and utilising their individual sales team which achieves a
greater reach into the customer base.
Each of the businesses is supported by the Company's centralised
and financial resources and extensive distribution network across
the UK and Continental Europe that comprises four distribution
hubs, 18 distribution centres, 60 trade counters and a corporate
showroom.
Chief Executive's Review
Financial and Operational Performance
The period represented further growth with total revenue for the
six months ended 30 June 2017 increasing by 4.0%, compared with the
same period in the prior year, to GBP341.9 million. On a constant
currency basis, total revenue increased by 2.6% to GBP337.2
million, with both the UK and Continental Europe delivering growth.
Total revenue for each of the residential and commercial sectors
showed a positive performance.
The total revenue split, on a constant currency basis, between
the residential and commercial sectors was broadly unchanged at
68.0% residential and 32.0% commercial (H1 2016: 67.4% residential;
32.6% commercial; FY 2016: 67.8% residential; 32.2%
commercial).
The UK accounted for 85.9% of total revenue (87.0% in constant
currency) with like-for-like revenue* growth of 2.1% (H1 2016:
3.4%) reflecting a positive performance from both the residential
and commercial sectors, up 2.8% and 0.5% respectively, with the
residential sector accounting for 70.5% of UK revenue (H1 2016:
70.1%).
Continental Europe, which accounted for 14.1% of total revenue
(13.0% in constant currency), showed like-for-like* revenue growth
of 3.0% (H 1 2016: 2.8%). The residential sector delivered strong
growth of 6.7% to account for 50.7% of revenue (H1 2016: 49.0%)
whilst the commercial sector declined by 0.5% as the positive
performance from both the Dutch and French businesses was offset by
the Swiss business.
In the UK, we implemented further price increases in January
2017 averaging approximately 3.0% across the majority of our
residential sector products purchased from Continental Europe.
These mirrored the cost increases levied by our suppliers as a
consequence of a continuing low Sterling exchange rate and the
upward movement in raw material prices. A further price increase
will be implemented in September 2017 to reflect continued supplier
price inflation.
Whilst demand for floorcoverings tends to be inelastic to price
increases, the benefit derived from these increases is limited in
duration due to the constant stream of new products entering the
market. This continuing development assists with the competitive
positioning of product and ultimately helps maintain affordability
in inflationary environments. As stated within our 2016 Annual
Report and Accounts, the Company's average order cut value for
residential carpet and residential vinyl was GBP127.44 and GBP68.03
respectively in 2016, representing a more affordable purchase than
other RMI (Repair, Maintenance & Improvement) expenditure.
During the period, there was a focus on delivering gross margin
enhancement, which resulted in gross margin increasing by 103 basis
points, compared with the same period in the prior year, to 31.06%.
This was achieved by reviewing and implementing improved
efficiencies across the Company, the more effective organisation
and streamlining of the Company's businesses' practices and
leveraging the existing distribution network. Initiatives
undertaken and ongoing include improving stock reordering and
management through a more automated process; a reduction in the
inventory aged profile; merging of financial and IT platforms in
nearby locations; de-duplication of inventory in locations in close
proximity; warehouse reconfiguration to improve capacity to support
growth; focus on higher margin and exclusive products; and the
elimination of inconsistent pricing practice coupled with the move
towards a more unitised pricing policy.
Distribution and administrative expenses increased by 6.8% to
GBP89.0 million (H1 2016: GBP83.3 million). The total increase
amounted to GBP5.7 million, of which a third (GBP1.9 million) was
incurred as a consequence of Sterling's depreciation and its effect
on the translation of overseas subsidiaries. A further GBP1.3
million of the total increase in expenses was as a result of the
trading expenses incurred by and intangibles write-off relating to
the customer relationships of the two businesses acquired in the
period, Mitchell Carpets Limited and McMillan Flooring Distributors
Limited. Personnel cost increases, coupled with the additional
expense of the delivery fleet, contributed a further GBP1.1 million
to the overall increase during the period. Due to the translation
effects and intangibles write-off, expenses for the period
expressed as a percentage of revenue were 26.0% compared with 25.4%
in the prior year.
Operating profit increased by 11.4% to GBP17.1 million, with
operating margin improving to 5.0% from 4.7% in the same period in
the prior year.
Movement in operating profit
GBP000
-------------------------------------- --------
Operating profit 2016 15,365
Gross margin improvement:
Volume benefit 3,705
Pricing benefit 3,374
Effect of acquisitions 383
7,462
Expenses increase:
Distribution (2,820)
Administration (2,481)
Effect of acquisitions (408)
Total increase (5,709)
Operating profit 2017 17,118
--------
Drop-through rate as a percentage of
incremental revenue 13.3%
--------------------------------------- --------
Profit before tax increased by 11.0% to GBP16.8 million and
basic earnings per share increased by 12.5% to 16.2p from 14.4p in
the same period in the prior year. Reflective of this financial
performance, and our progressive dividend policy, the Company is
increasing the 2017 interim dividend by the approximate equivalent
uplift in basic earnings per share to 7.55p per share (2016 interim
dividend: 6.70p per share), payable on 2 January 2018 to
shareholders on the shareholder register at 1 December 2017.
The movement in cash flow during the first six months of 2017
compared with 2016 amounted to a net outflow of GBP27.4
million.
2017 2016 Movement
GBP000 GBP000 GBP000
Cash flow from operating
activities:
Operating profit 17,118 15,365 1,753
Depreciation, amortisation
and impairment 3,203 2,389 814
Profit on sale of fixed
assets (44) (11) (33)
Equity settled share
based payments 517 714 (197)
20,794 18,457 2,337
Working capital (181) (11,767) 11,586
Cash generated from operations 20,613 6,690 13,923
Net interest (403) 25 (428)
Dividends (12,369) (10,096) (2,273)
Taxation (5,077) (4,306) (771)
Net capital expenditure (1,907) (1,419) (488)
Pensions (1,079) (1,121) 42
Acquisitions (1,942) - (1,942)
Issue of shares (579) 4 (583)
Movement in net debt 14,887 (5,000) 19,887
(8,469) (21,913) 13,444
Net increase/(decrease)
in cash and cash equivalents 12,144 (15,223) 27,367
--------- --------- ---------
The three principal contributors to the movement, in addition to
the positive cash flow movement from operating activities of GBP2.3
million, was a net reduction in working capital investment of
GBP11.6 million, incremental dividend payments totalling GBP2.3
million and a positive cash benefit arising from the movement in
net debt of GBP19.9 million.
The movement in working capital, whilst appearing significant,
was caused by the unusually high investment in the corresponding
period as a result of re-establishing a normalised working capital
position following the remarkably favourable working capital
reduction leading up to 31 December 2015. The movement in dividends
was as a consequence of the increased special dividend paid in
April 2017 against that of 2016, and the movement in debt was due
to the drawdown of GBP15.0 million on the term facility during the
period compared with a term facility repayment of GBP5.0 million
during the previous period. The acquisitions movement relates to
the two acquisitions completed in the period, Mitchell Carpets
Limited and McMillan Flooring Distributors Limited.
Net funds of GBP49.8 million as at 30 June 2017 reflected a
marked uplift compared with GBP33.9 million as at 30 June 2016
highlighting the cash generative nature of the Company. The
contraction in net funds from the year-end position (as at 31
December 2016: GBP52.6 million) is a typical feature of the
Company's first half cash flow profile.
At At
1 January Cash Translation 30 June
2017 flows differences 2017
GBP000 GBP000 GBP000 GBP000
--------------------- ----------- --------- -------------- ---------
Cash at bank and
in hand 59,343 12,140 83 71,566
Bank overdraft (4) 4 - -
59,339 12,144 83 71,566
Debt due within one
year (224) - (6) (230)
Debt due after one
year (6,493) (14,996) (74) (21,563)
52,622 (2,852) 3 49,773
--------------------- ----------- --------- -------------- ---------
Total bank facilities at 30 June 2017 amounted to GBP87.4
million, of which GBP33.0 million is repayable on demand and
GBP54.4 million relates to committed facilities, which expire on 14
December 2021.
Acquisitions and Expansion of the Network
The acquisition of Mitchell Carpets Limited and McMillan
Flooring Distributors Limited brought our number of businesses to
61 and established new locations in Poole and Edinburgh. The
acquisitions also added three trade counters to the UK network, and
following the opening of new trade counters in Darwen (Blackburn),
and Houten (the Netherlands), the Company now has 40 across the UK,
and 60 in total (FY 2015: 48; FY 2016: 55).
Trade counters have proven to be a cost-effective way to expand
the distribution network and customer base and improve the service
offering by increasing product availability and supporting the
increasing number of customer collections. We believe there is
further scope to expand the trade counter network with a further
two to three anticipated over the next year.
Our proposed plans for a new distribution centre in the Ipswich
area continue to be progressed with the preferred site remaining
the purpose-built distribution park allowing for a quicker build
and operational timeline than the initially considered site. We are
now focused on defining the optimum size and configuration of the
distribution centre which will rehouse the capacity constrained
Faithfulls Floorcovering business and potentially support other
businesses in the wider area to enhance their customer service
proposition. The current timeline should allow for the distribution
centre to be operational during H1 2019.
We continue to assess a good pipeline of potential acquisitions
with the objective of bringing strategic and/or geographic benefits
to the Company and expanding certain product lines.
People
In May 2017, we announced the appointment of Chris Payne as
Chief Financial Officer and Executive Director and look forward to
his joining the Company on 13 September 2017, his start date as
previously announced. Also during the period, Tony Judge, who has
worked at the Company for more than 24 years, was appointed to the
Board as Chief Operating Officer.
I would like to give my special thanks to all our employees for
their hard work and engagement, as without them our performance and
progress would not have been possible.
Current Trading and Outlook
The Company's performance is typically second half weighted. The
second half of 2016 accounted for 52.6% of total revenue and 60.4%
of profit before tax for the year, highlighting the
disproportionately positive impact that increased revenue and
operational gearing have on our profitability.
The summer period is traditionally the busiest period for the
Company's commercial sector due to annual summer refurbishment
projects, particularly in the educational sector. This spans an
approximate ten-week period during July to September, peaking in
August. We have continued to increase the number of customers we
have in this area during 2017, adding to a large repeat customer
base, and revenue is currently above the level of the comparable
period in the prior year.
Trading in the first few weeks of the second half is performing
to expectations with continued growth in the UK and Continental
Europe against the prior period, and the Company continues to trade
in-line with the Board's expectations for the full year.
It is particularly pleasing that our concerted efforts and
initiatives have resulted in further growth and, more importantly,
enhanced profitability for the period. Going forward we will look
to maintain the gross margin improvement through a more cohesive
approach across the Company whilst beginning to focus on further
improving the level of operating margin and, ultimately, returns to
shareholders.
Steve Wilson
Chief Executive
21 August 2017
The principal risks and uncertainties which could affect the
Company's future performance remain unchanged from those detailed
on pages 26 and 27 of the Company's Annual Report and Accounts for
the year ended 31 December 2016, to be found on the Company's
website, www.headlam.com.
*Like-for-like revenue is calculated based on constant currency
from activities and businesses that made a full contribution in
both the 2017 and 2016 periods and is adjusted for any variances in
working days
Statement of Directors' Responsibilities
The Directors' confirm that these condensed 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 set of
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 Headlam Group plc are listed in the Headlam
Group plc Annual Report and Accounts for the year ended 31 December
2016, and a list of Directors is maintained on the Headlam Group
plc website, www.headlam.com.
By order of the Board,
Dick Peters
Chairman
21 August 2017
Condensed Consolidated Interim Income Statement
Note Six months Six months
ended ended * Year ended
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Unaudited Unaudited Audited
Revenue 2 341,868 328,673 693,572
Cost of sales (235,694) (229,961) (481,068)
------------------------------------- ----- ----------- ----------- ---------------
Gross profit 106,174 98,712 212,504
Distribution expenses (65,201) (62,150) (127,982)
Administrative expenses (23,855) (21,197) (45,377)
Operating profit 2 17,118 15,365 39,145
Finance income 3 146 498 756
Finance expenses 3 (497) (752) (1,722)
------------------------------------- ----- ----------- ----------- ---------------
Net finance costs (351) (254) (966)
------------------------------------- ----- ----------- ----------- ---------------
Profit before tax 16,767 15,111 38,179
Taxation 4 (3,102) (3,022) (7,216)
------------------------------------- ----- ----------- ----------- ---------------
Profit for the period attributable
to the equity
shareholders 2 13,665 12,089 30,963
------------------------------------- ----- ----------- ----------- ---------------
Earnings per share
Basic 5 16.2p 14.4p 36.8p
------------------------------------- ----- ----------- ----------- ---------------
Diluted 5 16.1p 14.3p 36.6p
------------------------------------- ----- ----------- ----------- ---------------
Dividends
Interim dividend proposed in
relation to the period 6 7.55p 6.70p 6.70p
------------------------------------- ----- ----------- ----------- ---------------
Final dividend proposed in relation
to the financial year 6 - - 15.85p
------------------------------------- ----- ----------- ----------- ---------------
Special dividend proposed in
relation to the financial year 6 - - 8.00p
------------------------------------- ----- ----------- ----------- ---------------
All group operations during the financial periods were
continuing operations.
* Included within administrative expenses in the results for the
year ended 31 December 2016 are non-underlying items of
GBP1,927,000 that relate to non-recurring people costs paid out
during the year and the related tax of GBP385,000 on these costs,
details of which can be found in the Company's Annual Report and
Accounts for the year ended 31 December 2016.
Condensed Consolidated Interim Statement of Comprehensive
Income
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Unaudited Unaudited Audited
Profit for the period attributable to
the equity
shareholders 13,665 12,089 30,963
Other comprehensive income:
Items that will never be reclassified
to profit or loss
Re-measurement of defined benefit plans 1,868 908 (4,336)
Related tax (318) (61) 961
Impact of change in UK tax rates on deferred
tax - - (183)
---------------------------------------------- ----------- ----------- --------------
1,550 847 (3,558)
Items that are or may be reclassified
to profit or loss
Foreign exchange translation differences
arising on
translation of overseas operations 266 778 1,707
Effective portion of changes in fair
value of cash flow hedges (179) 362 572
Transfers to profit or loss on cash flow
hedges (49) 205 175
Related tax 39 (102) (148)
Impact of change in UK tax rates on deferred
tax - - (3)
---------------------------------------------- ----------- ----------- --------------
77 1,243 2,303
---------------------------------------------- ----------- ----------- --------------
Other comprehensive income/(expense)
for the period 1,627 2,090 (1,255)
Total comprehensive income attributable
to the equity shareholders for the period 15,292 14,179 29,708
---------------------------------------------- ----------- ----------- --------------
Condensed Consolidated Interim Statement of Financial
Position
Restated
At * At
30 June At 31 December
2017 30 June 2016
GBP000 2016 GBP000
GBP000
Unaudited Unaudited Audited
Assets
Non-current assets
Property, plant and equipment 102,744 104,163 102,934
Intangible assets 10,673 10,388 10,388
Deferred tax assets 920 372 1,138
--------------------------------- ---------- ---------- --------------
114,337 114,923 114,460
-------------------------------- ---------- ---------- --------------
Current assets
Inventories 129,709 127,051 126,037
Trade and other receivables 131,062 123,645 128,934
Cash and cash equivalents 71,566 49,298 59,343
332,337 299,994 314,314
-------------------------------- ---------- ---------- --------------
Total assets 446,674 414,917 428,774
--------------------------------- ---------- ---------- --------------
Liabilities
Current liabilities
Bank overdraft - (429) (4)
Other interest-bearing loans
and borrowings (230) (15,000) (224)
Trade and other payables (187,244) (170,974) (183,304)
Dividends payable (13,360) (12,368) -
Employee benefits (2,205) (2,135) (2,169)
Income tax payable (4,660) (5,640) (6,824)
(207,699) (206,546) (192,525)
-------------------------------- ---------- ---------- --------------
Non-current liabilities
Other interest-bearing loans
and borrowings (21,563) - (6,493)
Provisions (1,531) (1,087) (1,531)
Deferred tax liabilities (4,039) (4,533) (4,077)
Employee benefits (18,444) (15,301) (20,781)
(45,577) (20,921) (32,882)
-------------------------------- ---------- ---------- --------------
Total liabilities (253,276) (227,467) (225,407)
--------------------------------- ---------- ---------- --------------
Net assets 193,398 187,450 203,367
--------------------------------- ---------- ---------- --------------
Equity attributable to equity
holders
of the parent
Share capital 4,268 4,268 4,268
Share premium 53,512 53,512 53,512
Other reserves 2,845 1,076 2,272
Retained earnings 132,773 128,594 143,315
Total equity 193,398 187,450 203,367
--------------------------------- ---------- ---------- --------------
* The results for the six months ended 30 June 2016 have been
restated to reflect changes made at 31 December 2016 reported in
note 1 of the Company's Annual Report and Accounts for the year
ended 31 December 2016.
Condensed Consolidated Interim Statement of Changes in
Equity
Unaudited
Capital Cash flow
Share Share redemption Translation hedging Treasury Retained Total
capital premium reserve reserve reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at
1 January
2017 4,268 53,512 88 7,136 231 (5,183) 143,315 203,367
Profit for the
period
attributable
to
the equity
shareholders - - - - - - 13,665 13,665
Other
comprehensive
income - - - 266 (228) - 1,589 1,627
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Total
comprehensive
income for
the period - - - 266 (228) - 15,254 15,292
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Transactions
with
equity
shareholders,
recorded
directly
in equity
Share-based
payments - - - - - - 517 517
Share options
exercised
by employees - - - - - 1,172 (1,114) 58
Consideration
for
purchase of
own
shares - - - - - (637) - (637)
Current tax on
share
options - - - - - - 274 274
Deferred tax
on
share options - - - - - - 256 256
Dividends to
equity
holders - - - - - - (25,729) (25,729)
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Total
contributions
by and
distributions
to equity
shareholders - - - - - 535 (25,796) (25,261)
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Balance at
30 June 2017 4,268 53,512 88 7,402 3 (4,648) 132,773 193,398
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Condensed Consolidated Interim Statement of Changes in Equity
continued
Unaudited
Capital Cash flow Restated
Share Share redemption Translation hedging Treasury * * Total
capital premium reserve reserve reserve reserve Retained equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 earnings GBP000
GBP000
Balance at
1 January
2016 4,268 53,512 88 5,429 (516) (5,276) 137,603 195,108
Profit for the
period
attributable
to
the equity
shareholders - - - - - - 12,089 12,089
Other
comprehensive
income - - - 778 567 - 745 2,090
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Total
comprehensive
income for
the period - - - 778 567 - 12,834 14,179
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Transactions
with
equity
shareholders,
recorded
directly
in equity
Share-based
payments - - - - - - 714 714
Share options
exercised
by employees - - - - - 6 (2) 4
Current tax on
share
options - - - - - - 2 2
Deferred tax
on
share options - - - - - - (93) (93)
Dividends to
equity
holders - - - - - - (22,464) (22,464)
Total
contributions
by and
distributions
to equity
shareholders - - - - - 6 (21,843) (21,837)
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Balance at
30 June 2016 4,268 53,512 88 6,207 51 (5,270) 128,594 187,450
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
* The results for the six months ended 30 June 2016 have been
restated to reflect changes made at 31 December 2016 reported in
note 1 of the Company's Annual Report and Accounts for the year
ended 31 December 2016.
Condensed Consolidated Interim Statement of Changes in Equity
continued
Audited
Capital Cash flow
Share Share redemption Translation hedging Treasury Retained Total
capital premium reserve reserve reserve reserve earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at
1 January
2016 4,268 53,512 88 5,429 (516) (5,276) 137,603 195,108
Profit for the
period
attributable
to
the equity
shareholders - - - - - - 30,963 30,963
Other
comprehensive
income - - - 1,707 747 - (3,709) (1,255)
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Total
comprehensive
income for
the period - - - 1,707 747 - 27,254 29,708
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Transactions
with
equity
shareholders,
recorded
directly
in equity
Share-based
payments - - - - - - 1,239 1,239
Share options
exercised
by employees - - - - - 740 (317) 423
Consideration
for
purchase of
own
shares - - - - - (647) - (647)
Current tax on
share
options - - - - - - 21 21
Deferred tax
on
share options - - - - - - (21) (21)
Dividends to
equity
holders - - - - - - (22,464) (22,464)
Total
contributions
by and
distributions
to equity
shareholders - - - - - 93 (21,542) (21,449)
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Balance at
31 December
2016 4,268 53,512 88 7,136 231 (5,183) 143,315 203,367
--------------- ---------- ---------- ----------- ------------- ---------- ----------- ----------- -----------
Condensed Consolidated Interim Cash Flow Statements
Six months Six months Year ended
ended ended 31 December
30 June 2017 30 June 2016
GBP000 2016 GBP000
GBP000
Unaudited Unaudited Audited
Cash flows from operating activities
Profit before tax for the period 16,767 15,111 38,179
Adjustments for:
Depreciation, amortisation and impairment 3,203 2,389 5,276
Finance income (146) (498) (756)
Finance expense 497 752 1,722
Profit on sale of property, plant and
equipment (44) (11) (15)
Share-based payments 517 714 1,239
Operating profit before changes in
working capital and other payables 20,794 18,457 45,645
Change in inventories (2,613) (7,682) (5,895)
Change in trade and other receivables (3,585) (4,251) (6,467)
Change in trade and other payables 6,017 166 10,365
--------------------------------------------- -------------- ----------- -------------
Cash generated from the operations 20,613 6,690 43,648
Interest paid (545) (487) (1,133)
Tax paid (5,077) (4,306) (7,703)
Additional contributions to defined
benefit plan (1,079) (1,121) (2,171)
--------------------------------------------- -------------- ----------- -------------
Net cash flow from operating activities 13,912 776 32,641
--------------------------------------------- -------------- ----------- -------------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 162 37 401
Interest received 142 512 752
Acquisition of subsidiaries, net of (1,942) - -
cash acquired
Acquisition of property, plant and
equipment (2,069) (1,456) (2,963)
--------------------------------------------- -------------- ----------- -------------
Net cash flow from investing activities (3,707) (907) (1,810)
--------------------------------------------- -------------- ----------- -------------
Cash flows from financing activities
Proceeds from the issue of treasury
shares 58 4 423
Payment to acquire own shares (637) - (647)
Repayment of borrowings (113) (5,000) (20,000)
Drawdown of loans 15,000 - 6,456
Dividends paid (12,369) (10,096) (22,464)
--------------------------------------------- -------------- ----------- -------------
Net cash flow from financing activities 1,939 (15,092) (36,232)
--------------------------------------------- -------------- ----------- -------------
Net increase/(decrease) in cash and
cash equivalents 12,144 (15,223) (5,401)
Cash and cash equivalents at 1 January 59,339 63,932 63,932
Effect of exchange rate fluctuations
on cash held 83 160 808
--------------------------------------------- -------------- ----------- -------------
Cash and cash equivalents at end of
period 71,566 48,869 59,339
--------------------------------------------- -------------- ----------- -------------
Notes to the Condensed Consolidated Interim Financial
Statements
Unaudited
1 BASIS OF REPORTING
Reporting entity
Headlam Group plc, the 'company', is a company incorporated in
the UK. The Condensed Consolidated Interim Financial Statements
consolidate those of the company and its subsidiaries which
together are referred to as the 'group' as at and for the six
months ended 30 June 2017.
The Consolidated Financial Statements of the group as at and for
the year ended 31 December 2016 are available upon request from the
company's registered office or the website.
The comparative figures for the financial year ended 31 December
2016 are not the group's statutory accounts for that financial
year. Those accounts have been reported on by the group's auditor
and delivered to the registrar of companies. The report of the
auditor was (i) unqualified, (ii) did not include a reference to
any matters to which the auditors drew attention by way of emphasis
without qualifying their report, and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
These Condensed Consolidated Interim Financial Statements have
not been audited or reviewed by the auditor pursuant to the
Auditing Practices Board's Guidance on Financial Information.
Statement of compliance
These Condensed Consolidated Interim Financial Statements have
been prepared and approved by the directors in accordance with the
Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority and International Accounting Standard IAS 34 Interim
Financial Reporting as adopted by the EU. They do not include all
of the information required for full annual financial statements,
and should be read in conjunction with the Consolidated Financial
Statements of the group as at and for the year ended 31 December
2016.
These Condensed Consolidated Interim Financial Statements were
approved by the Board of Directors on 21 August 2017.
Significant accounting policies
As required by the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority, the condensed set of financial
statements has been prepared applying the accounting policies and
presentation that were applied in the preparation of the group's
published Consolidated Financial Statements for the year ended 31
December 2016, except as explained below.
Impacts of standards and interpretations in issue but not yet
effective
The following standards and interpretations, which were not
effective as at 30 June 2017 and have not been early adopted by the
group, will be adopted in future accounting periods:
-- International Financial Reporting Standard (IFRS) 15 'Revenue
from contracts with customers' (effective 1 January 2018)
-- International Financial Reporting Standard (IFRS) 9
'Financial instruments' (effective 1 January 2018)
-- International Financial Reporting Standard (IFRS) 16 'Leases' (effective 1 January 2019)
-- Clarification of Acceptable Methods of Depreciation and
Amortisation - Amendments to IAS 16 and IAS 38.
-- Equity Method in Separate Financial Statements - Amendments to IAS 27
-- Disclosure Initiative - Amendments to IAS 1
-- Annual Improvements to IFRSs - 2012 -2014 Cycle.
The directors have assessed the impact of IFRS 15 on the
financial statements of the Group and estimates show that adoption
on the 1 January 2018 will require a restatement of revenue
reported for 2017 of approximately GBP5 million due to customer
rebates currently reported in distribution costs.
The impact of IFRS 16 is also being evaluated and initial
estimates would see a leased asset of approximately GBP32 million
and a leasing liability of GBP32 million on the Statement of
Financial Position as at December 2016.
With the exception of IFRS 15 and IFRS 16 mentioned above, none
of the other standards listed are expected to have a material
impact on the Group.
Going concern
The group's business activities, together with the factors
likely to affect its future development, performance and position
are described in the Chief Executive's Review.
The Directors have reviewed current performance and forecasts,
combined with borrowing facilities and expenditure commitments,
including capital expenditure, pensions and proposed dividends.
After making enquiries, the Directors have a reasonable expectation
that the group has adequate financial resources to continue its
current operations, including contractual and commercial
commitments for the foreseeable future. For these reasons, the
going concern basis has been adopted in preparing the financial
statements.
Bank facilities at 30 June 2017
Committed credit Uncommitted credit
facilities facilities Total facilities
GBP million GBP million GBP million
Drawn funds 21.8 0.0 21.8
Undrawn funds 32.6 33.0 65.6
----------------- ------------------- -------------------
54.4 33.0 87.4
================= =================== ===================
Estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these Condensed Consolidated Interim Financial
Statements, the significant judgements made by management in
applying the group's accounting policies and key sources of
estimation uncertainty were the same as those that applied to the
Consolidated Financial Statements as at and for the year ended 31
December 2016.
Risks and uncertainties
The risk factors which could cause the group's results to differ
materially from expected results and the result of the Board's
review of those risks are set out in the Annual Report and Accounts
for the year ended 31 December 2016.
2 SEGMENT REPORTING
The group has 58 operating segments in the UK and three
operating segments in Continental Europe. Each segment represents
an individual trading operation and each operation is wholly
aligned to the sales, marketing, supply and distribution of
floorcovering products. The operating results of each operation are
regularly reviewed by the Chief Operating Decision Maker, which is
deemed to be the Chief Executive. Discrete financial information is
available for each segment and used by the Chief Executive to
assess performance and decide on resource allocation.
The operating segments have been aggregated to the extent that
they have similar economic characteristics, with relevance to
products and services, type and class of customer, methods of sale
and distribution and the regulatory environment in which they
operate. The group's internal management structure and financial
reporting systems differentiate the operating segments on the basis
of the differing economic characteristics in the UK and Continental
Europe and accordingly present these as two separate reportable
segments. This distinction is embedded in the construction of
operating reports reviewed by the Chief Executive, the Board and
the executive management team and forms the basis for the
presentation of operating segment information given below.
UK Continental Europe Total
Restated* 31 December Restated* 31 December Restated* 31
30 June 30 June 2016 30 June 30 June 2016 30 June 30 June December
2017 2016 GBP000 2017 2016 GBP000 2017 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
External
revenues 293,520 286,260 602,104 48,348 42,413 91,468 341,868 328,673 693,572
------------- ------------ ------------ ------------ ----------- ----------- ------------ ------------ ------------ ------------
Reportable
segment
operating
profit 18,019 15,504 40,944 723 528 793 18,742 16,032 41,737
------------- ------------ ------------ ------------ ----------- ----------- ------------ ------------ ------------ ------------
Reportable
segment
assets 269,148 252,399 263,968 44,937 39,710 44,516 314,085 292,109 308,484
Reportable
segment
liabilities (170,851) (156,387) (167,755) (17,924) (16,103) (23,801) (188,775) (172,490) (191,556)
------------- ------------ ------------ ------------ ----------- ----------- ------------ ------------ ------------ ------------
During the periods shown above there have been no inter-segment
revenues for the reportable segments (2016: GBPnil).
Reconciliations of reportable segment profit, assets and
liabilities and other material items:
31 December
30 June 30 June 2016
2017 2016 GBP000
GBP000 GBP000
Profit for the period
Total profit for reportable
segments 18,742 16,032 41,737
Non-underlying items - - (1,927)
Unallocated expense (1,624) (667) (665)
-------------------------------- ---------- ---------- ------------
Operating profit 17,118 15,365 39,145
Finance income 146 498 756
Finance expense (497) (752) (1,722)
-------------------------------- ---------- ---------- ------------
Profit before taxation 16,767 15,111 38,179
Taxation (3,102) (3,022) (7,216)
-------------------------------- ---------- ---------- ------------
Profit for the period 13,665 12,089 30,963
-------------------------------- ---------- ---------- ------------
* The results for the six months ended 30 June 2016 have been
restated to reflect changes made at 31 December 2016 reported in
note 1 of the group Annual Report and Accounts for the year ended
31 December 2016.
Restated 31 December
30 June * 2016
2017 30 June GBP000
GBP000 2016
GBP000
Assets
Total assets for reportable segments 314,085 292,109 308,484
Unallocated assets:
Properties, plant and equipment 90,447 91,637 90,981
Deferred tax assets 920 372 1,138
Cash and cash equivalents 41,219 30,747 28,171
Derivative assets 3 52 -
Total assets 446,674 414,917 428,774
--------------------------------------------- ----------- ----------- ------------
Liabilities
Total liabilities for reportable segments (188,775) (172,490) (191,556)
Unallocated liabilities:
Employee benefits (20,649) (17,436) (22,950)
Other interest-bearing loans
and borrowings (21,793) (15,000) -
Income tax payable (4,660) (5,640) (6,824)
Proposed dividend (13,360) (12,368) -
Deferred tax liabilities (4,039) (4,533) (4,077)
Total liabilities (253,276) (227,467) (225,407)
============================================= =========== =========== ============
Reportable
Continental segment Consolidated
UK Europe total Unallocated total
GBP000 GBP000 GBP000 GBP000 GBP000
Other material items 30
June 2017
Capital expenditure 1,561 375 1,936 133 2,069
Depreciation 1,015 368 1,383 1,020 2,403
Amortisation 800 - - - 800
Other material items 30
June 2016
Capital expenditure 991 412 1,403 53 1,456
Depreciation 1,108 276 1,384 1,005 2,389
Other material items 31
December 2016
Capital expenditure 1,808 872 2,680 283 2,963
Depreciation 2,388 732 3,120 2,156 5,276
Non-underlying items - - - 1,927 1,927
------------------------- ------- -------------- ----------- -------------- ---------------
* The results for the six months ended 30 June 2016 have been
restated to reflect changes made at 31 December 2016 reported in
note 1 of the group Annual Report and Accounts for the year ended
31 December 2016.
In the UK the group's freehold properties are held within
Headlam Group plc and a rent is charged to the operating segments
for the period of use. Therefore, the operating reports reviewed by
the Chief Executive show all the UK properties as unallocated and
the operating segments report a segment result that includes a
property rent. This is reflected in the above disclosure.
Each segment is a continuing operation.
The Chief Executive, the Board and the senior executive
management team have access to information that provides details on
revenue by principal product group for the two reportable segments,
as set out in the following table:
UK Continental Europe Total
31 31 December 31
30 June 30 June December 30 June 30 June 2016 30 June 30 June December
2017 2016 2016 2017 2016 GBP000 2017 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Revenue
Residential 207,173 200,610 422,048 24,519 20,777 46,337 231,692 221,387 468,385
Commercial 86,346 85,650 180,056 23,830 21,636 45,131 110,176 107,286 225,187
------------- --------- --------- --------- --------- ---------- ------------ ---------- ---------- ---------
293,519 286,260 602,104 48,349 42,413 91,468 341,868 328,673 693,572
------------- --------- --------- --------- --------- ---------- ------------ ---------- ---------- ---------
3 FINANCE INCOME AND EXPENSE
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Interest income:
Bank interest 113 243 756
Other 33 255 -
Finance income 146 498 756
--------------------------------------------- ----------- ----------- --------------
Interest expense:
Bank loans, overdrafts and other financial
expenses (262) (449) (1,062)
Net change in fair value of cash flow
hedges transferred from equity - (23) (23)
Net interest on defined benefit plan
obligation (235) (280) (566)
Other - - (71)
Finance expenses (497) (752) (1,722)
--------------------------------------------- ----------- ----------- --------------
4 TAXATION
The group's consolidated effective tax rate in respect of
continuing operations for the six months ended 30 June 2017 was
18.5% (for the six months ended 30 June 2016: 20%; for the year
ended 31 December 2016: 18.9%).
Reductions in the UK corporation tax rate from 20% to 19%
(effective from 1 April 2017) and to 18% (effective 1 April 2020)
were substantively enacted on 26 October 2015. A further reduction
to 17% (effective from 1 April 2020) was announced in the Budget on
16 March 2016 and substantively enacted on the 6 September 2016.
This will reduce the company's future current tax charge
accordingly. The deferred tax asset at 30 June 2017 has been
calculated based on the rate of 17% substantively enacted at the
balance sheet date as these balances will materially reverse after
1 April 2020.
5 EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share is
based on the following data:
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Earnings
Earnings for underlying basic and underlying
diluted earnings per share 13,665 12,089 32,505
Earnings for basic and diluted earnings
per share 13,665 12,089 30,963
---------------------------------------------- ------------- ------------- --------------
2017 2016 2016
Number of shares
Issued ordinary shares at end of period 85,363,743 85,363,743 85,363,743
Effect of shares held in treasury (1,233,853) (1,330,565) (1,330,339)
---------------------------------------------- ------------- ------------- --------------
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 84,129,890 84,033,178 84,033,404
---------------------------------------------- ------------- ------------- --------------
Effect of diluted potential ordinary
shares:
Weighted average number of ordinary
shares at period end 84,492,101 84,033,178 84,033,404
Dilutive effect of share options 367,677 617,808 458,697
---------------------------------------------- ------------- ------------- --------------
Weighted average number of ordinary
shares for the purposes of diluted earnings
per share 84,859,778 84,650,986 84,492,101
---------------------------------------------- ------------- ------------- --------------
6 DIVIDS
Six months Six months
ended ended Year ended
30 June 30 June 31 December
2017 2016 2016
GBP000 GBP000 GBP000
Interim dividend for 2016 of 6.70p paid 5,638 - -
3 January 2017
Special dividend for 2016 of 8.00p paid 6,731 - -
24 April 2017
Final dividend for 2016 of 15.85p proposed 13,360 - -
Interim dividend for 2015 of 6.00p paid
2 January 2016 - 5,048 5,048
Special dividend for 2015 of 6.00p paid
25 April 2016 - 5,048 5,048
Final dividend for 2015 of 14.70p proposed - 12,368 12,368
-------------------------------------------- ----------- ----------- --------------
25,729 22,464 22,464
-------------------------------------------- ----------- ----------- --------------
The proposed final dividend for 2016 of 15.85p per share was
authorised by shareholders at the Annual General Meeting on 25 May
2017 and paid on 3 July 2017. The proposed final dividend for 2015
of 14.70p per share was authorised by shareholders at the Annual
General Meeting on 20 May 2016 and paid on 1 July 2016.
The Board of Directors has declared an interim dividend for 2017
of 7.55p to be paid on 2 January 2018.
7 ACQUISITIONS
On 28 February 2017, a subsidiary company of Headlam Group plc
entered into an agreement to acquire Mitchell Carpets Limited. The
company is a distributor of floorcoverings in the south east of
England.
On 28 April 2017, a subsidiary company of Headlam Group plc
entered into an agreement to acquire the business and certain
assets of McMillan Flooring Distributors Limited. McMillan Flooring
Distributors Limited is a distributor of commercial floorcoverings
in Scotland.
Revenue for the calendar year 2016 was approximately GBP4.870
million for both acquisitions. Consideration at completion amounted
to GBP1.942 million, net of cash acquired with the businesses of
GBP0.809 million. Net assets acquired were GBP1.666 million
(including cash acquired), goodwill was GBP0.285 million and
customer relationships amounted to GBP0.8 million. The intangible
relating to customer relationships was written off in the first
half.
The disclosures required by IFRS 3 will be shown in the Annual
Report and Accounts for the Group for the year ended 31 December
2017.
8 FINANCIAL INSTRUMENTS
The fair value of the Group's financial assets and liabilities
as detailed below at 30 June 2017 were not materially different to
the carrying value.
The table below sets out the Group's accounting classification
of each class of financial assets and liabilities at 30 June
2017.
Other
derivatives Total
Available at fair Amortised carrying
for sale value cost value
GBP000 GBP000 GBP000 GBP000
Cash and cash equivalents - - 71,566 71,566
Borrowings due within one
year - - (230) (230)
Borrowings due after one year - - (21,563) (21,563)
Trade payables - - (143,690) (143,690)
Non-trade payables - - (28,163) (28,163)
Trade receivables - - 103,381 103,381
Other receivables - - 18,466) 18,466
Provisions - - (1,531) (1,531)
Derivative assets - 6 - 6
- 6 (1,764) (1,758)
--------------------------------------------- ------------- ------------ -----------
Financial instruments carried at fair value are categorised
according to their valuation method. The different levels have been
defined below:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly, as prices or indirectly, derived from prices.
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The Group has a diesel commodity swap used for hedging which was
fair valued in accordance with level 2 for the six months ended 30
June 2017 (30 June and 31 December 2016: level 2) and forward
currency contracts which were fair valued in accordance with level
2 (30 June and 31 December 2016: level 2).
Fair values
The carrying amounts shown in the Statement of Financial
Position for financial instruments are a reasonable approximation
of fair value.
Trade receivables, trade payables and cash and cash
equivalents
Fair values are assumed to approximate to cost due to the
short-term maturity of the instrument.
Borrowings, other financial assets and other financial
liabilities
Where available, market values have been used to determine fair
values. Where market values are not available, fair values have
been estimated by discounting expected future cash flows using
prevailing interest rate curves. Amounts denominated in foreign
currencies are valued at the exchange rate prevailing at the
Statement of Financial Position date.
9 CAPITAL COMMITMENTS
As at 30 June 2017, the group had contractual commitments
relating to the purchase of property, plant and equipment of
GBP291,000 (30 June 2016: GBP408,000, 31 December 2016:
GBP663,000).
10 RELATED PARTIES
The group has a related party relationship with its subsidiaries
and with its key management. There have been no changes to the
nature of related party transactions entered into since the last
annual report.
11 SUBSEQUENT EVENTS
Management have given due consideration to any events occurring
in the period from the reporting date to the date these Interim
Financial Statements were authorised for issue and have concluded
that there are no material adjusting or non-adjusting events to be
disclosed in these Interim Financial Statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR OKFDBABKDPFD
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