Final Results
Headlam Group PLC
17 March 2008
17 March 2008
Preliminary Results for the Year Ended 31 December 2007
Headlam Group plc ('Headlam'), Europe's leading floorcoverings distributor,
announces its final results for the year ended 31 December 2007.
Financial highlights
2007 2006 Change
£000 £000
Revenue 544,718 509,899 +6.8%
Operating profit 46,013 43,941 +4.7%
Profit before tax 45,172 43,558 +3.7%
Basic earnings per share 37.1p 35.1p +5.7%
Dividend per share 23.10p 20.15p +14.6%
Key points
• UK revenues increase by 4.0% on a like for like basis
• Continental European revenues increase by 7.2% on a like for like basis
• Net revenues from UK acquisitions £11.8 million
• Further investment in facilities and acquisitions
• Proposed final dividend up 16.0% to 17.75p
Tony Brewer, Headlam's Group Chief Executive, said:
'We are pleased to report that 2007 proved to be another successful year. Each
of our five business sectors and eight product categories in the UK performed
positively and our businesses in Continental Europe maintained the trend of
continued improvement.
The group continues to invest in developing the infrastructure, to allow our
individual businesses to take advantage of market opportunities. With the
management teams of these businesses clearly focused on the objectives before
them, we are confident of achieving another year of growth.'
Enquiries:
Headlam Group plc
Tony Brewer, Group Chief Executive Tel: 01675 433000
Stephen Wilson, Group Finance Director
Chairman's Statement
I am pleased to report that 2007 proved to be another successful year. Each of
our five business sectors and eight product categories in the UK performed
positively and our businesses in Continental Europe maintained the trend of
continued improvement.
Revenue from the group's activities amounted to £544.7 million, an increase of
6.8% on last year and profit before tax increased by 3.7% to £45.2 million.
Earnings and dividend
Basic earnings per share increased by 5.7% from 35.1p to 37.1p. Adjusted for
the amortisation of intangibles, which amounted to £1.5 million in 2007 compared
with £0.7 million for the previous year, earnings increased by 7.6% from 35.6
pence to 38.3 pence.
As communicated last year, it is our intention to maintain a progressive
dividend increase in order to achieve a payout ratio of approximately 67% by the
end of 2009. We gave this commitment since we believe the cumulative effect of
increasing dividends is an important method by which we can enhance shareholder
returns.
Therefore, your board is recommending a final dividend of 17.75p per share, an
increase of 16.0% on last year. This increases the total dividend for the year
by 14.6% from 20.15p to 23.10p.
This year's proposal, which represents 16 years of continuous improvement, is
equivalent to a payout ratio of 62.3% (2006: 57.4%) compared with basic earnings
per share and places us ahead of our timetable.
If approved by shareholders at the forthcoming Annual General Meeting, the final
dividend will be paid on 1 July 2008 to shareholders on the register at 6 June
2008.
Strategy
The performance in 2007 has further enhanced our position as the leading
distributor of floorcoverings in the UK and Continental Europe. The group's
strategy remains unchanged and we will maintain our focus on the development of
our floorcovering business. We will continue to invest in the infrastructure of
the business to increase capacity and improve material handling techniques where
appropriate. In addition, we will evaluate and make acquisitions of
floorcovering businesses where we believe they can contribute to our strategic
position and enhance profitability, whether in the UK or Continental Europe.
Operations
Fundamental to our ongoing success is the relationship with the leading
worldwide flooring manufacturers, who in conjunction with our individual
management teams, continue to develop product for our respective markets. This
ensures that the independent flooring retailer and contractor are at the
forefront of all new floorcovering products.
The group's structure allows the individual management teams of 50 businesses in
the UK to operate autonomously and focus on their respective geographical and
product areas. Through a combined total of 364 external sales people, we
launched 3,715 new products into independent flooring retailers and contractors,
in conjunction with 794,000 new point of sale displays and sample books.
The management teams in our individual businesses are clearly measured and
incentivised on the performance of their specific responsibilities. Whilst
encouraging the autonomy of business operations, each team operates to a
strategy relevant to their businesses' own market position and complies with
consistent operational procedures and financial disciplines.
It is particularly encouraging that our three Continental European businesses in
France, Switzerland and the Netherlands have continued the trend of the last
three years and further increased revenue and profitability.
Employees
The autonomous nature of our business operations has allowed us to develop a
culture of individuality combined with the benefit of wide ranging opportunities
derived from a group structure. We have a policy of internal development and
promotion, wherever possible, providing our employees with a variety of options
to enhance their careers. Over a number of years, this has resulted in many
instances where employees have developed into senior sales and management roles.
We wish to thank all our management and employees for their contribution to the
group's ongoing success.
Purchase of Own Shares
During 2007, the board decided to commence a share buy-back programme, to return
cash to shareholders and improve balance sheet efficiency. Further to our
announcement on 25 May 2007 regarding the introduction of a share buy-back
programme, I can report that as at 31 December 2007, the company has acquired
3,838,006 shares at an average price of £5.65 per share.
As at 17 March 2008, a further 550,000 shares have been acquired at an average
price of £4.01 per share, bringing the total expenditure on the purchase of own
shares since May 2007 to £23.9 million.
Outlook
The group continues to invest in developing the infrastructure, to allow our
individual businesses to take advantage of market opportunities. With the
management teams of these businesses clearly focused on the objectives before
them, we are confident of achieving another year of growth.
Graham Waldron, Chairman
Chief Executive's Review
During 2007, the combined performance of our 50 UK businesses resulted in an
increase in revenue of 4.0% on a like for like basis and in total by 6.8%.
Another positive improvement in Continental Europe resulted in the revenue from
our businesses located in France, Switzerland and the Netherlands increasing on
a like for like basis by 7.2%.
Challenging market conditions, particularly in the UK, have required additional
effort and creativity from our management teams, sales representatives and staff
to ensure that by working closely with suppliers on product development and
launches, our customers, principally independent flooring retailers and
contractors, retain their market position and subsequent share.
Investment - Facilities
In December 2007, we completed the 20,000 square feet extension to the
distribution hub of Mercado in Leeds, increasing their total capacity to 205,000
square feet. We made a further investment in the infrastructure of Mercado with
the purchase, in February 2007, of an existing 17,000 square feet building in
Bristol to increase trans-shipping capacity. This building was subsequently
refurbished and became operational in September. These two investments have
increased the capacity and efficiency of Mercado's national operations.
The investment in the Bristol facility also created a service centre for
Richards, the regional commercial business, to extend its commercial product
offering and customer service in the southwest of England. In December 2007, we
purchased a 6,000 square feet building in Southampton, in order to establish a
service centre to enlarge the Richards commercial presence in the south of
England.
During 2007, we entered into leasehold agreements to provide two new service
centres for Faithfulls to increase its presence with flooring contractors
operating in London. The Dartford 5,000 square feet service centre opened in
November, followed by the Walthamstow 9,000 square feet service centre opening
in January 2008.
We currently have under construction, a new purpose-built freehold 42,000 square
feet distribution facility for MCD Wales in Bridgend, which will be operational
in the spring of 2008. This will enable MCD Wales to develop further its
residential and commercial business in South Wales and the southwest of England.
During July, we acquired the freehold interest in the property occupied by
Baileys, our regional multi-product business located in Plymouth. Planning
permission has been granted to extend the distribution centre which will be
completed by the end of 2008. This will allow Baileys to complement its
residential business by increasing significantly its commercial product offering
and service to flooring contractors in Devon and Cornwall.
Following the ongoing improvement in our European businesses, we have decided to
relocate our Lethem-Vergeer business in the Netherlands to a new purpose-built
freehold 65,000 square feet distribution facility, for which we are currently
awaiting the appropriate planning licence. We anticipate that this facility
will be operational in the spring of 2009.
It is the group's intention to continue the investment programme in new
purpose-built freehold distribution facilities enabling us to relocate a number
of our existing businesses and provide them with increased capacity and more
efficient handling techniques.
Investment - Acquisitions
The group has continued to acquire businesses where they can enhance our market
position and contribute to increased profitability, which has resulted in three
acquisitions during 2007.
At the end of March, we acquired 3D Flooring Supplies Limited, a distributor of
commercial flooring in South Wales and the southwest of England. 3D will
continue to operate from its locations in Cardiff, Swansea and Taunton.
During April, we acquired Florprotec Limited, a leading supplier throughout the
UK of floor protection products for the construction industry and refurbishment
projects. Florprotec now operates autonomously from the Tamworth distribution
centre.
In July, we acquired the trade and assets of Plantation Rug Company, a supplier
of rugs to independent retailers throughout the UK. Plantation operates
autonomously from our Stockport distribution centre and complements our existing
activities in rugs, principally through Crucial Trading and National Carpets.
UK operations
Our 50 businesses in the UK operating from 22 distribution centres and 9 service
centres are categorised into five separate sectors. Each sector reflects their
relevant geographical or product focus in the UK floorcovering market.
Regional multi-product: The 20 businesses create significant market presence
and represent 59% of UK revenue. They continue to offer a comprehensive
product range of both residential and commercial floorcovering and increased
their revenue by 3.0% during the year.
National multi-product: Mercado, with its extensive product offering of
residential and commercial floorcovering, increased its revenue by 2.2%. With
the benefit of investment and enhancements to the infrastructure, we are
confident of the continued development and growth of the Mercado businesses.
Regional commercial: This sector continues to prosper and now encompasses 15
operations, which are increasing their market presence through organic growth,
new service centres and acquisitions, growing their revenues collectively by
31.4%. With the recently acquired businesses and new service centres in
Bristol, Dartford, Walthamstow and Southampton, we would expect this sector to
significantly enlarge its market presence.
Residential specialist: Through product development and continued investment in
sales and marketing, our 13 businesses selling principally middle to premium end
carpet products, were able to increase their revenues by 12.7%. During 2007, we
reintroduced the carpet brands Mr Tomkinson and BMK, which, historically, are
well known with independent retailers. The acquisition of Plantation Rug
Company is an opportunity to expand our presence in the UK rug market.
Throughout the activities of these 13 specialist businesses, we anticipate
continued growth in medium to premium products.
Commercial specialist: The original three businesses all performed positively
during 2007 and with the additional contribution from Florprotec, this sector
increased revenues by 17.2%.
Suppliers
The managers of our 50 businesses in the UK and three businesses in Continental
Europe work closely with the leading worldwide manufacturers of floorcovering
products, to ensure that our businesses, and subsequently our customers, are at
the forefront of product into their respective markets.
Products
Each of our product categories showed growth during 2007. Whilst commercial
flooring grew at a faster rate than residential, market information would
suggest that we were able to increase our market share in both residential and
commercial flooring.
To assist this growth, the number of products launched and point of sale items
placed with customers were consistent with previous years.
Carpet revenues increased by 1.2%, through the launch of 2,654 new products,
which were supported by 604,000 point of sales items. Carpet, which continues
to be dominated by plain products in the UK, represents 47% of revenue. The
volume of cut lengths was consistent with previous years, with an increase in
the number of rolls sold, reflecting the activity of our individual sales teams
working to create additional demand in a challenging market.
Residential vinyl continues to be enhanced by improved manufacturing techniques,
enabling the realistic recreation of various types of natural flooring. With
the benefit of 727 new ranges marketed through 142,000 new display items, our
revenues increased by 3.3% with independent flooring retailers.
Wood and laminate products enjoyed another positive year, increasing revenue by
26.2% and now represent 6% of UK revenue. This reflected an improving product
offer in laminate flooring and an increase in sales of premium products,
engineered and solid wood.
Commercial Flooring grew by 17.2% due to positive market demand and investment
in new infrastructure and acquisitions. This has continued the increase in our
market share in commercial flooring, which now contributes 29% of our UK
revenues.
Customers
Our customers in the UK, who are principally independent flooring retailers and
contractors, placed 4,624,489 orders during 2007 compared with 4,422,454 in
2006.
The number of active accounts increased from 36,225 in 2006 to 39,033 in 2007,
which reflects that independent flooring retailers and contractors continue to
prosper.
Average debtor days increased slightly from 41.0 days to 41.9 days, due to the
increased contribution from the sales of commercial products to flooring
contractors. The total cost of doubtful debts as a percentage of revenue
reduced from 0.21% to 0.18%.
The increase in active accounts, reduction in doubtful debts and underlying
stability in debtor days, demonstrates the performance and strength of
independent flooring retailers and contractors.
Europe
The three businesses in Continental Europe again showed a positive performance,
culminating in return on sales increasing from 2.7% to 3.6%.
LMS in France benefitted from an improving market and through its infrastructure
of two principal distribution centres and 21 service centres, increased revenue
by 5.4%.
Belcolor in Switzerland invested in additional sales personnel, primarily
focused on commercial flooring and with an increased contribution from Parquet,
were able to increase their total revenue by 8.8%.
Lethem-Vergeer in the Netherlands delivered another positive performance,
principally in residential flooring and increased their revenue by 10.0%.
Outlook
The group's structure encourages individual businesses to take advantage of
market opportunities through the ongoing business development activities of our
management teams and sales representatives.
The first ten weeks of 2008 have shown a further positive trend in the UK and
Continental Europe and with our strategy of autonomous businesses, we are well
placed to achieve our objectives for the year.
Tony Brewer, Group Chief Executive
Financial review
Trading
Revenue
Group revenues increased during the year by 6.8% from £509.9 million to £544.7
million.
In the UK, which accounts for approximately 85% of group revenues, like for like
revenue increased by 4.0% from £433.5 million to £451.0 million. The
incremental benefit from Concept Flooring Supplies, a business acquired during
October 2006,combined with the acquisitions completed during 2007, contributed
a further £11.8 million.
On the Continent, which accounts for the remaining 15% of group revenues, our
three businesses collectively achieved a like for like improvement of 7.2% with
revenues increasing from £75.6 million to £81.0 million.
Gross margin
As already highlighted in the Chief Executive's Review, in the UK, orders
processed for rolls of residential carpet increased during the year compared
with the previous year and the rate of growth in our commercial business was
considerably ahead of the year on year revenue increases achieved elsewhere in
the group.
Since the gross margin achieved on these two product groups is less than the
group's overall margin, this change in product mix reduced gross margin by 30
basis points from 31.3% to 31.0%
Expenses
Distribution and administration expenses collectively represented 22.5% of
revenue, down marginally on last year's comparative of 22.6%. In absolute
terms, distribution expenses increased year on year by 7.5% mainly due to annual
pay awards coupled with an increase in the number of employees.
Administration expenses increased by 3.5% compared with 2006 principally due to
the higher level of intangible amortisation in 2007.
Financing costs
The increase during the year from £0.4 million to £0.8 million was attributable
to the additional cost associated with funding the group's share buy-back
programme. Subject to movements in interest rates and further buy-back
activity, we would expect this cost to increase to at least £1.6 million during
2008.
Taxation
The effective rate of taxation remained at 30.0% during the year and is a
reflection of the group's current mix of business. For 2008, it is anticipated
that the effective tax rate will fall to 28.5%.
Included in the 2007 UK Budget were proposed changes to the capital allowances
regime in respect of Industrial Buildings. The stated intention was to reduce
the allowances given from 4% straight line to 3% from April 2008, 2% from April
2009, 1% from April 2010 and finally to abolish Industrial Building Allowances
entirely from April 2011.
This particular change was not included in Finance Act 2007 and therefore the
effect has not been recognised in these financial statements. Should these
proposed changes become law, there is a possibility that the group's deferred
tax liability in respect of property, plant and equipment will increase by £7.8
million.
This change would also be reflected as part of the group's taxation charge in
the 2008 income statement and therefore, based on the number of shares in issue
at 31 December 2007, may give rise to an exceptional dilution in basic earnings
per share amounting to 9.4 pence.
Property valuation
On transition to IFRS, the group elected to restate the carrying value of its
freehold property to depreciated historical cost instead of using the previous
basis, which was cost or valuation.
However, when we changed the basis we decided to maintain our practice of a
triennial review of the portfolio's market value. This was completed as at 31
December 2007 and reveals that the market value, determined by reference to
existing use, exceeds depreciated historical cost by approximately £12.1
million.
This valuation excludes our freehold properties located on the Continent and all
UK properties that may be sold in the short term.
Cash flows and net funds
Cash generated from operating activities
Cash flow from operating activities before movement in working capital increased
by 6.7% during the year from £49.4 million to £52.7 million.
Investment in net working capital increased during the year by £8.3 million from
£1.7 million to £10.0 million. Inventory increased by £1.9 million underpinning
our continuing commitment to high service levels through the maintenance of
extensive product ranges.
The £6.4 million decrease in cash inflow arising from trade and other payables
occurred because of a small reduction in trade credit taken in some of our
businesses at the end of 2007 compared with the equivalent position at the end
of 2006.
Additional contributions to the defined benefit pension plan during the year
amounted to £1.1 million compared with £3.9 million during the previous year.
These movements combined with higher interest payments and a small increase in
trade and other receivables contributed to net cash from operating activities
declining from £30.1 million to £26.5 million.
Cash flows from investing and financing activities
Net cash outflows from investing activities totalled £11.3 million compared with
£10.4 million during 2006. Investment in property, plant and equipment amounted
to £11.0 million compared with £12.9 million for 2006. Unlike expenditure
patterns in previous years where typically a significant proportion of the
investment had been devoted to one project, this year's investment, as
highlighted in the Chief Executive's Review, has been aimed at a larger number
of relatively smaller projects.
We are reasonably confident that we will be able to commence development of a
new distribution facility for Faithfulls, our regional multi-product business
located in Hadleigh during the final quarter of 2008. The initiation of this
project combined with the completion of the Bridgend facility, the extension to
Plymouth, the relocation of our Dutch business and regular recurring investment
will give rise to total expenditure during 2008 amounting to £13.2 million.
During 2008, we are likely to dispose of two properties, the facilities formerly
occupied by Wilkies and currently occupied by MCD Wales for a combined total of
£3.2 million. These disposals will reduce our net investment in property,
plant and equipment to £10.0 million.
Expenditure on the three acquisitions completed during the year amounted to £3.2
million.
Net cash out flow from investing activities almost trebled this year increasing
from £14.9 million to £39.7 million. The cause and probably the most notable
feature of this year's cash flow was the expenditure incurred on the share
buy-back programme.
Changes in net funds
Group net funds decreased from £40.6 million to £16.7 million during the year as
detailed in the table below.
Acquisitions
At excluding At
1 January Cash cash and Translation 31 December
2007 flows overdrafts differences 2007
£000 £000 £000 £000 £000
Cash at bank and in hand 41,861 (25,313) - 257 16,805
Bank overdraft (1,010) 932 - (25) (103)
-------- -------- -------- -------- --------
40,851 (24,381) - 232 16,702
Debt due within one year - 246 (246) - -
Finance leases and simiar
hire purchase contracts (267) 363 (96) - -
-------- -------- -------- -------- --------
40,584 (23,772) (342) 232 16,702
-------- -------- -------- -------- --------
Employee benefits
During the year, the net deficit relating to the defined benefit pension plans,
as measured under IAS 19, decreased by £5.9 million from £17.2 million to £11.3
million. Whilst equity values have shown modest improvement during the year,
the principal driver contributing to the reduction is the increase in bond
yields.
The group continues to make additional contributions to the UK plan. During
2007, this amounted to £1.1 million and it is anticipated this will increase to
£1.5 million during 2008. However, the UK plan's actuary will undertake a
valuation of the scheme as at 31 March 2008 the outcome of which may affect the
size of these additional contributions.
Consolidated income statement
for the year ended 31 December 2007
Note 2007 2006
£000 £000
Revenue 1 544,718 509,899
Cost of sales (375,990) (350,506)
------ -------- --------
Gross profit 168,728 159,393
Distribution expenses (87,711) (81,623)
Administrative expenses (35,004) (33,829)
------ -------- --------
Operating profit 1 46,013 43,941
Financial income 6,321 4,926
Financial expenses (7,162) (5,309)
------ -------- --------
Net financing costs (841) (383)
------ -------- --------
Profit before tax 45,172 43,558
Taxation (13,534) (13,067)
------ -------- --------
Profit for the year attributable to the equity
shareholders 31,638 30,491
------ -------- --------
Dividend paid per share 3 20.15p 18.00p
Earnings per share
Basic 2 37.1p 35.1p
------ -------- --------
Diluted 2 36.8p 34.8p
------ -------- --------
All group operations during the financial years were continuing operations.
Consolidated statement of recognised income and expense
for the year ended 31 December 2007
2007 2006
£000 £000
Foreign exchange translation differences
arising on translation of overseas operations 1,090 (419)
Actuarial gains and losses on defined benefit
pension plans 5,000 (173)
-------- --------
Tax recognised on income and expenses
recognised directly in equity (1,660) 1,057
-------- --------
Net income recognised directly in equity 4,430 465
Profit for the year 31,638 30,491
-------- --------
Total recognised income and expense attributable to
the equity shareholders 36,068 30,956
-------- --------
Consolidated balance sheet
at 31 December 2007
Note 2007 2006
£000 £000
Non-current assets
Property, plant and equipment 92,097 85,032
Intangible assets 13,210 13,210
Deferred tax assets 5,942 9,182
------- -------- --------
111,249 107,424
------- -------- --------
Current Assets
Inventories 101,491 94,217
Trade and other receivables 100,830 91,284
Cash and cash equivalents 16,805 41,861
------- -------- --------
219,126 227,362
------- -------- --------
Total assets 1 330,375 334,786
------- -------- --------
Current liabilities
Bank overdraft (103) (1,010)
Other interest-bearing loans and - (267)
borrowings
Trade and other payables (154,320) (149,422)
Employee benefits (1,491) (1,102)
Income tax payable (10,747) (10,184)
------- -------- --------
(166,661) (161,985)
------- -------- --------
Non-current liabilities
Employee benefits (9,837) (16,124)
Deferred tax liabilities (3,836) (3,665)
------- -------- --------
(13,673) (19,789)
------- -------- --------
Total liabilities 1 (180,334) (181,774)
------- -------- --------
Net assets 150,041 153,012
------- -------- --------
Equity attributable to equity holders
of the parent
Share capital 4 4,268 4,354
Share premium 4 53,512 53,428
Other reserves 4 (11,042) (616)
Retained earnings 4 103,303 95,846
------- -------- --------
Total equity 150,041 153,012
------- -------- --------
Consolidated cash flow statement
for the year ended 31 December 2007
2007 2006
£000 £000
Cash flows from operating activities
Profit before tax for the year 45,172 43,558
Adjustments for:
Depreciation, amortisation and impairment 6,227 4,974
Financial income (6,321) (4,926)
Financial expense 7,162 5,309
(Profit)/loss on sale of property, plant and
equipment (18) 10
Equity settled share-based payment expenses 501 472
-------- --------
Operating profit before changes in working capital 52,723 49,397
Increase in trade and other receivables (6,849) (6,810)
Increase in inventories (4,781) (2,930)
Increase in trade and other payables 1,587 7,987
-------- --------
Cash generated from the operations 42,680 47,644
Interest paid (3,325) (2,023)
Tax paid (11,729) (11,622)
Additional contributions to defined benefit pension
plans (1,098) (3,927)
-------- --------
Net cash from operating activities 26,528 30,072
-------- --------
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 159 1,816
Interest received 2,757 2,001
Acquisition of subsidiaries, net of cash acquired (3,190) (1,369)
Acquisition of property, plant and equipment (10,980) (12,884)
-------- --------
Net cash from investing activities (11,254) (10,436)
-------- --------
Cash flows from financing activities
Proceeds from the issue of share capital 86 1,176
Proceeds from the issue of treasury shares 10 -
Payment to acquire own shares (21,687) -
Repayment of borrowings (246) -
Payment of finance lease liabilities (363) (497)
Dividends paid (17,455) (15,612)
-------- --------
Net cash from financing activities (39,655) (14,933)
-------- --------
Net (decrease)/increase in cash and cash equivalents (24,381) 4,703
Cash and cash equivalents at 1 January 40,851 36,193
Effect of exchange rate fluctuations of cash held 232 (45)
-------- --------
Cash and cash equivalents at 31 December 16,702 40,851
-------- --------
Notes
1. Segment reporting
The group's activities are wholly aligned to the sales, marketing, supply and
distribution of floorcovering products. These activities are carried out from
business centres located in both the UK and Continental Europe. The group's
internal management structure and financial reporting systems treat the UK and
Continental Europe as two separate segments because of the difference in reward
arising from these two markets and this forms the basis for the geographical
presentation of the primary segment information given below.
UK Continental Europe Total
2007 2006 2007 2006 2007 2006
£000 £000 £000 £000 £000 £000
Revenue
External sales 463,671 434,321 81,047 75,578 544,718 509,899
-------- -------- -------- -------- -------- --------
Result
Segment result 46,092 43,670 2,916 2,044 49,008 45,714
-------- -------- -------- --------
Unallocated
corporate expenses (2,995) (1,773)
-------- -------- -------- -------- -------- --------
Operating profit 46,013 43,941
Financial income 6,321 4,926
Financial expense (7,162) (5,309)
Taxation (13,534) (13,067)
-------- -------- -------- -------- -------- --------
Profit for the year 31,638 30,491
-------- -------- -------- -------- -------- --------
Other information
Segment assets 287,552 293,280 36,881 32,324 324,433 325,604
Unallocated assets 5,942 9,182
-------- -------- -------- -------- -------- --------
Consolidated total
assets 330,375 334,786
-------- -------- -------- -------- -------- --------
Segment
liabilities (135,868) (133,493) (18,555) (17,206) (154,423) (150,699)
Unallocated
liabilities (25,911) (31,075)
-------- -------- -------- -------- -------- --------
Consolidated total
liabilities (180,334) (181,774)
-------- -------- -------- -------- -------- --------
Capital expenditure 10,617 10,882 663 2,002 11,280 12,884
Depreciation 4,044 3,610 666 674 4,710 4,284
Amortisation 1,517 690 - - 1,517 690
Each segment is a continuing operation.
Unallocated assets comprise deferred tax assets. Unallocated liabilities
comprise income tax, deferred tax liabilities and employee benefits.
Management has access to information that provides details on sales and gross
margin by principal product group and across the five principal business sectors
which comprise Regional multi-product, National multi-product, Regional
commercial, Residential specialist and Commercial specialist. However, this
information is not provided as a secondary segment since the group's operations
are not managed by reference to these sub classifications and the presentation
would require an arbitrary allocation of overheads, assets and liabilities
undermining the presentations validity and usefulness.
Notes (continued)
2. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
2007 2006
£000 £000
Earnings
Earnings for the purposes of basic and diluted earnings
per share being profit attributable to equity holders
of the parent 31,638 30,491
---------- ----------
2007 2006
Number of shares
Issued ordinary shares at 1 January 87,079,521 86,512,854
Effect of share movement during the period (1,709,414) 416,237
----------- -----------
Weighted average number of ordinary shares for the
purposes of basic earnings per share 85,370,107 86,929,091
----------- -----------
Effect of diluted potential ordinary shares:
Weighted average number of ordinary shares at
31 December 85,370,107 86,929,091
Share options 2,114,930 2,046,461
Number of shares that would have been issued at
fair value (1,471,286) (1,422,270)
----------- -----------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 86,013,751 87,553,282
----------- ----------
3. Dividends
2007 2006
£000 £000
Interim dividend for 2006 of 4.85p paid 3 January 2007 4,218 -
Final dividend for 2006 of 15.30p paid 3 July 2007 13,237 -
Interim dividend for 2005 of 4.40p paid 3 January 2006 - 3,789
Final dividend for 2005 of 13.60p paid 3 July 2006 - 11,823
--------- ----------
17,455 15,612
--------- ----------
The final proposed dividend of 17.75p per share (2006: 15.30p per share) will
not be provided for until authorised by shareholders at the forthcoming Annual
General Meeting.
Interim dividends of 5.35p per share (2006: 4.85p per share) are provided for
when the dividend is paid.
The total value of dividends proposed but not recognised at 31 December 2007 is
£19,219,000 (2006: £17,455,000).
Notes (continued)
4. Capital and reserves
Share Share Capital Translation Treasury Retained Total
capital premium redemption reserve reserve earnings equity
reserve
£000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2006 4,326 52,280 - (577) - 79,798 135,827
Transfer between reserves - - - 380 - (380) -
Total recognised income and expense - - - (419) - 31,375 30,956
Equity-settled share based payment
transactions - - - - - 472 472
Share options exercised by employees 28 1,148 - - - - 1,176
Deferred tax on Schedule 23 share
options (pre Nov 2002) - - - - - 193 193
Dividends - - - - - 15,612) (15,612)
-------- -------- -------- -------- -------- -------- --------
Balance at 31 December 2006 4,354 53,428 - (616) - 95,846 153,012
-------- -------- -------- -------- -------- -------- --------
Balance at 1 January 2007 4,354 53,428 - (616) - 95,846 153,012
Total recognised income and expense - - - 1,090 - 34,978 36,068
Equity-settled share based payment
transactions - - - - - 501 501
Share options exercised by employees 2 84 - - 10 - 96
Cancellation of own shares (88) - 88 - - 10,073) (10,073)
Consideration for purchase of own
shares - - - - (11,614) - (11,614)
Deferred tax on Schedule 23 share
options (pre Nov 2002) - - - - - (494) (494)
Dividends - - - - - (17,455) (17,455)
-------- -------- -------- -------- -------- -------- --------
Balance at 31 December 2007 4,268 53,512 88 474 (11,604) 103,303 150,041
-------- -------- -------- -------- -------- -------- --------
The financial information set out above does not constitute the company's
statutory accounts for the years ended 31 December 2007 or 2006. Statutory
accounts for 2006 have been delivered to the registrar of companies, and those
for 2007 will be delivered in due course. The auditors have reported on those
accounts; their reports were (i) unqualified, (ii) did not include references to
any matters to which the auditors drew attention by way of emphasis without
qualifying their reports, and (iii) did not contain statements under section 237
(2) or (3) of the Companies Act 1985.
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